Poultry Processors Accused of Fixing Worker Wages

BALTIMORE (CN) — Perdue, Tyson, Pilgrim’s Pride and 15 other poultry-processing giants were hit with federal class action accusing the companies of conspiring to suppress wages.

Filed in Baltimore — near Perdue’s headquarters of Salisbury, Maryland — the Aug. 30 complaint describes a series of secret meetings a Florida resort beginning in 2009 where top executives of the companies that together control 90% of the U.S. chicken market agreed on wage rates for thousands of processing employees, many of them immigrants, who hang live chickens, eviscerate and debone them, and maintain the machinery in hundreds of factories across the country.

“These ‘off the books’ meetings between senior executives of the Defendant Processors responsible for determining the compensation of Class Members involved such brazen wage-fixing that at least one Defendant Processor recently stopped attending,” the complaint states.

Represented by Matthew Handley of the Washington law firm Handley, Farah & Anderson, the workers brought their suit three months after the Justice Department intervened in another court case where chicken purchaser Maplevale Farm accuses the nation’s top poultry processors of fixing prices, lowering production and sharing data. The government requested a six-month break in the case to protect what it described as a grand jury investigation. Last week’s suit from workers represents the vertical-integration trifecta, with the processors accused now of conspiring to control the prices of virtually all inputs and outputs.

A spokeswoman for Tyson said she could not comment on pending litigation. “We do not believe this suit has any merit,” she said in an email. “Our compensation philosophy is to pay fair and in some cases above average wages to our plant Associates.”

The complaint says the conspiracy started in 2008 with Tyson sharing proprietary wage information with other processors through Agri Stats, an Indiana-based data company with which Tyson had previously ceased doing business.

Workers note that Pilgrim’s Pride went bankrupt that December, triggering a focus on cost management across the industry, and then the human resources committees of the two leading trade groups for chicken processors — the National Chicken Council and the U.S. Poultry & Egg Association — merged in April 2009 to form the Joint Poultry Industry Human Resources Council.

While the council is not a party to the workers’ suit, Indiana-based Agri Stats is named as a defendant, as is the management-consultant company WMS. Neither company returned a request for comment, nor did representatives for the United Food and Commercial Workers.

The complaint says top chicken officials held their secret wage meetings at the Hilton Sandestin Resort Hotel & Spa in Destin, Florida.

“These meetings often occurred around the same time as the U.S. Poultry & Egg Association’s annual Human Resources Seminar … [but] were not part of the association’s published schedule or any other association’s published schedule,” the complaint states. “According to a former employee of Perdue, the meetings were ‘off the books’ because of the confidential nature of the communications.”

At these meetings, the executives allegedly engaged in roundtable wage-fixing discussions after sharing comprehensive surveys prepared by WMS and Agri Stats on wages and benefits.

The complaint says the three largest processors took turns paying for the annual wage survey, and that any processor that deviated from the conspiracy by making a wage increase not agreed upon in the meeting would face rebuke from the others. 

In 2018, according to the complaint, one senior executive from Tyson told someone in that the Florida meetings “were so inappropriate and improper that that the company would no longer attend them.”

Contending that the companies would have competed for workers by raising pay had the conspiracy not been in place, the complaint notes that “each defendant processor owns and operates a chicken processing plant that is within 28 miles of a competitor’s processing plant, meaning that many workers could easily switch to rival chicken processing plants offering better compensation in a competitive market.”

As an example of illegal wage suppression, the workers point to the request that a Pilgrim’s chicken processing plant in Mayfield, Kentucky, made in fall 2017 for the pay rates of plant workers from competitor chicken processing plants.

“A rival Tyson chicken processing plant in nearby Union City, Tennessee, was planning to expand its ‘live hang’ operation,” the complaint states. “As a result, a plant manager at Pilgrim’s Mayfield plant reached out to a counterpart at Tyson’s Union City plant and obtained future pay rates for processing line positions at the newly expanded plant. During the same time period, another manager at Pilgrim’s Mayfield plant contacted a counterpart at a nearby Perdue processing plant in Bowling Green, Kentucky and obtained that rival plant’s pay rates for processing line workers. These and other pay rates obtained from competing plants were compiled into a single document and transmitted to senior executives at Pilgrim’s corporate headquarters.”

National Chicken Council data shows that the retail price of a broiler chicken increased just 5% from $1.78 per pound to $1.87 during the time period covered by the complaint.

This increase is significantly below the rate of inflation. During the same time period, pork increased from $2.92 to $3.74 (28%), and beef went from $4.26 to $5.92 (38%).

Profit margins in the chicken industry increased from the low single digits to the low teens during the period the lawsuit says, citing a 2017 Bloomberg article.

“There is no plausible, non-conspiratorial justification for Defendant Processors, with Agri Stats’ agreement and participation, to have secretly shared, on a monthly basis, highly confidential and proprietary information about their current compensation to chicken processing plant workers, as broken down by worker position,” the complaint says. “In a competitive market, such proprietary, competitively sensitive information would remain a closely guarded secret.”

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