Trader Joe's- Fattening The Bottom Line By Cheatin'... Everyone?

Workers too now?

I think of Trader Joe's as the big grocery story less than 5 minutes my house with good prices on organic blueberries, pomegranate seeds and boxes of 1.5 liter bottles of Fiji Water. Erewhon, where I do most of my grocery shopping, has a better selection of the healthy foods I want but is half an hour away and is slightly more expensive on most products. Founded in Pasadena in 1958 by Joe Coulombe, there are 398 Trader Joe's-- with over 20,000 employees-- scattered across the whole country. New stores are always opening; there are two more coming to Denver and Miami in the next few weeks.

In 2004, BusinessWeek wrote that "one place where TJ's has never stinted is with its employees. Besides above-union wages and generous bonuses (pay for entry-level part-timers starts at $8 to $12 an hour; first-year supervisors average more than $40,000 a year), TJ's contributes an additional 15.4% of each worker's gross pay into a company-funded retirement plan." A decade later supervisory crew members can start at $65–90,000/year and store managers earn in the six figures salaries. Pay for entry-level staffers varies between $10 and $20/hour.

I've been arguing with Trader Joe's for several years... because of the Fiji Water. Every time I buy a carton of Fiji, they take $1.20 from me-- 10 cents a bottle-- as a deposit. It's a state-mandated environmental initiative and I like it. Until a few years ago, I would return the plastic bottles and Trader Joe's would give me back the $1.20. Then they stopped. Oh, they still take the $1.20/case. They just don't redeem the $1.20. There's a loophole they cite. If there's a bottle return place within a few miles, they can force you to do your redeeming there. And there is one. Problem is that place is crooked and pays per pound, not per bottle. Their rate is about one cent per bottle, not 10 cents. I brought a carton of 12 empty Fiji Water bottles to them and they offered me ten cents for all 12, not the $1.20 I gave Trade Joe's. I've called various law enforcement agencies over the years and no one has been helpful. Trade Joe's must be making millions of dollars a year by keeping the deposits, no? And now, according to a report by HuffPo this week, Trader Joe's is about to stop providing healthcare for workers and dump them into ObamaCare.

After extending health care coverage to many of its part-time employees for years, Trader Joe's has told workers who log fewer than 30 hours a week that they will need to find insurance on the Obamacare exchanges next year, according to a confidential memo from the grocer's chief executive.

In the memo to staff dated Aug. 30, Trader Joe's CEO Dan Bane said the company will cut part-timers a check for $500 in January and help guide them toward finding a new plan under the Affordable Care Act. The company will continue to offer health coverage to workers who carry 30 hours or more on average.

The law mandates that companies with 50 employees or more offer coverage to such full-time employees, though the Obama administration has chosen to delay that rule for a year.

Trader Joe's has won kudos for offering its health care, dental and vision plans to part-time workers at a reasonable price-- a rarity in an industry known for low pay and scant benefits. But with low-wage workers eligible for tax subsidies to buy health insurance next year, the company has apparently calculated that offering medical coverage to part-timers who work 18 hours or more is no longer worth the cost.

"Depending on income you may earn outside of Trader Joe's"-- i.e., another job-- "we believe that with the $500 from Trader Joe's and the tax credits available under the ACA, many of you should be able to obtain health care coverage at very little if any net cost to you," Bane wrote in the memo.

...A current Trader Joe's worker described the coverage she'll likely lose as "one of the best parts about the job." (The employee requested anonymity since she isn't authorized to speak to the media.) She said she pays only $35 per paycheck, or $70 per month, for a plan that generally covers 80 percent of her medical costs, carries a reasonable $500 deductible and includes prescription drug coverage.

"There are several folks I work with who are there for the insurance as much as anything, mostly folks with young families," she said. "I can say that when I opened and read the letter yesterday my reaction was pure panic, followed quickly by anger."

The employee said she averages about 28 hours per week and worries she won't make the cutoff for company-based coverage. Whether workers hit the 30-hour threshold and become eligible for the company plan will be determined by their work schedules over the course of the next three months, the memo explains. For those who may be on the cusp, the memo left little hope that they can pack in extra hours to meet the requirement.

"It is important to note... we do not create our weekly schedules with healthcare eligibility in mind," Bane wrote. "Rather, we will continue to create weekly schedules that are solely focused on supporting the customer experience."

The worker, who took home less than $20,000 last year, might be able to find a similar plan at a comparable cost under Obamacare, judging from a subsidy calculator. But there's no guarantee, other than uncertainty.

"I still have so much anxiety over this, worrying will I have coverage, will it be equivalent, and how do I factor this into my budget," she said. "I'm a full-time student living alone. Everything in my budget is extremely tight. This is something that's throwing a wrench into everything."

While the stakes for workers aren't clear, the benefits to Trader Joe's under the new arrangement are obvious. The implementation of Obamacare provides an opportune moment for the company to get in line with less generous competitors, and the savings the company finds in dropping coverage for part-timers will almost certainly outstrip the $500 it will give employees to defray what they end up paying on the exchanges.

An earlier memo to staff in May sounded a rosier note on health coverage. Bane said the company had "made a decision to make minimal and only necessary changes to your costs" for health care until Obamacare regulations were finalized next year. He also noted that the company would give workers a 10 percent discount on their monthly coverage for the second half of the year.

He did, however, inform workers that corporate contributions to employee retirement accounts would be drastically scaled back, by a third for some and two-thirds for others. Bane argued that the company's "very generous" contribution rates had been too high for the industry.

Earlier today, we wrote about about the unprecedented growth of income and wealth disparity over the last few years-- since the Reagan Revolution really-- and this is how it happens: stealing deposits on bottles of Fiji and dumping workers onto public health insurance plans. Someone who is already stinking rich is getting a lot richer from both those policies.