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Fighting Back

Sodexo's racketeering lawsuit against the Service Employees International Union claims the union has undertaken a "campaign of extortion" designed to steer business away from the company and harm its reputation. The case is an example of the level labor-relations issues can sink to -- and a reminder to HR leaders of the importance of helping their companies avoid such costly litigation.

Thursday, March 31, 2011
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A complaint filed by Sodexo USA under the Racketeering Influenced and Corrupt Organizations Act is the latest development in an ongoing battle between the company and the Service Employees International Union, which has seen both organizations use strong language and take bold, public actions against the other.

SEIU has alleged that Sodexo has interfered with workers' rights to unionize.

The March 17 RICO complaint, filed in federal court in the Eastern District of Virginia, accuses the SEIU of "blackmail, vandalism, trespass, harassment, and lobbying law violations designed to steer business away from Sodexo USA and harm the company," according to a statement issued by Sodexo.

The SEIU has staged a number of anti-Sodexo protests, including an April 2010 demonstration that ended with SEIU President Andy Stern and actor Danny Glover, among others, being led away in handcuffs from Sodexo headquarters.

The SEIU has also filed at least a dozen unfair-labor-practice charges against the company, including a complaint that Sodexo's director of human resources and three other Sodexo supervisors "threatened and interrogated" workers in Columbus, Ohio, over protected union activity.

Five of the charges brought against Sodexo are pending before the National Labor Relations Board. The company has settled the charges in the remaining seven cases.

The Gaithersburg, Md.-based provider of integrated food and facilities management services has accused the labor union, which represents nearly 2 million workers in the United States, Canada and Puerto Rico, of utilizing "extortionate threats" and a "barrage of unlawful tactics" as part of a "campaign of extortion" targeting Sodexo.

The suit, which seeks an injunction against the SEIU and its local unions and executives as well as monetary damages, alleges that, in face to face meetings, the SEIU threatened Sodexo executives that it would harm Sodexo's U.S. business unless the organization "gave in to the union."

The complaint accuses the SEIU of carrying out its threats through behavior such as throwing plastic roaches into food served by Sodexo at a high-profile event; scaring hospital patients by insinuating that Sodexo USA food contained bugs, rat droppings, mold and flies; lying as a way to interfere with Sodexo USA business; and violating lobbying laws to steer business away from Sodexo USA, even at the risk of costing Sodexo USA employees their jobs.

"This is about protecting the company's business and the rights of our employees to vote freely about union representation," said Robert Stern, senior vice president and general counsel for Sodexo USA, in the statement.

"We work constructively with unions every day, but the SEIU has crossed the line by breaking the law. We will not tolerate the SEIU's tactics any longer. Their campaign jeopardizes our company and our employees' jobs, and ultimately would rob our employees of their right to vote," he said.

The SEIU has responded to the lawsuit, describing the complaint as "bogus litigation meant to deprive workers of the right to bargain collectively with their employers," according to a statement released by the organization. "It is not about which union represents Sodexo workers, but about whether Sodexo workers can bargain collectively at all."

Regardless of how the lawsuit plays out, there are lessons for other employers -- and HR leaders -- to learn from this case, says Michael Pepperman, partner in the labor relations and employment law department of Philadelphia-based Obermayer, Rebmann, Maxwell and Hippel.

"Nobody wants to be in a situation where the allegations that were made [against Sodexo] are present in your company," Pepperman says. "But sometimes it's unavoidable if you have an acrimonious relationship with a union organization or if they have an acrimonious relationship with you.

"For the HR professional, you just have to be aware that certain conduct, including threats of violence, intimidation and other underlying, unlawful acts, could give rise to enough evidence that a RICO case could be filed," he says.

An HR leader who feels that labor officials are acting "outside the lines," should immediately document such conduct and report it to the organization's leadership, he says.

"HR should bring that to the attention of the CEO, president, or whoever he or she reports to, and should also be aware that law enforcement or legal counsel may need to be called in," Pepperman says. "If I had a client who told me they were being intimidated or threatened by a labor official, I may shoot a letter to the union's counsel, to make them aware of it."

Historically, corporate lawsuits filed under the RICO Act "have generally not been successful," says Michael Lotito, a partner in the San Francisco office of Jackson Lewis.

Many cases brought by companies under the RICO Act have been dismissed, "because companies are oftentimes told that, because of the sophistication of the union, claims of defamation will probably be pre-empted under the National Labor Relations Act," he says.

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Still, such complaints will likely continue to be drafted, for public relations purposes at least as much as legal reasons, he adds.

"Oftentimes, companies are advised that their only other option is bringing a RICO case," Lotito says. "The company will use the allegations in the lawsuit to demonstrate to third-party stakeholders -- civil rights groups, church ministry groups, shareholders, clients and prospective clients, community activists -- as well as employees and boards of directors, that the union has engaged in these attacks against the company."

Lawsuits are expensive and time-consuming, of course, and no company wishes to find itself locked in costly litigation, Lotito adds. The HR executive, along with other senior leaders, must do all they can to help ensure union disputes never reach that stage.

An integral part of any company's pre-emptive strategy is a vulnerability assessment -- an analysis that should be conducted before a union launches a corporate campaign, "so there can be reasonable reflection and good, sound decision-making based upon corporate values," Lotito says.

Those assessments should be designed to identify areas within the company that a labor organization could use in its union-organizing campaign, he says. It should also analyze the corporate structure with an eye toward vulnerability issues.

"Many complex organizations function as silos," Lotito says. "In any organization, there are one or more weak silos. Those silos tend to function within their expertise, and they don't want anyone else within the organization to see where they have warts. So they tend to cover them up. The union will find those warts and exploit them."

"The [purpose of] a vulnerability assessment is to identify the warts right away. The only way the corporation can do this is through the C-suite telling all of the different silos that they're going to have to cooperate with each other through some kind of task force -- which HR should take a leadership role in putting together -- and force all the elements to speak to each other."

Facilitating higher levels of communication throughout the organization, and raising the C-suite's awareness of potential union disputes, is ultimately the HR executive's primary role regarding labor relations issues, Lotito says.

"This is all about strategy," he says. "This is all about the essential identification of the organization, and preventing the union from creating that definition, when you have the opportunity to define yourself and, through your actions, demonstrate that you are indeed a good corporate citizen that a union would never want to take on."

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