Amid the thousands of layoffs taking place in the pharmaceutical industry, a relatively rare battle is brewing in Berkeley, California. Some 400 unionized employees of a Bayer plant are bracing for contract talks amid fears they will encounter the same fate as workers at a nearby plant that is being closed because work is being shifted to a contract manufacturer.
The episode apparently marks one of the few remaining instances in which workers at a US pharma facility hope to exercise some union muscle to preserve their jobs. Union clout in the pharmaceutical industry has dwindled as manufacturing has shifted overseas and plants have been closed as part of numerous large-scale restructurings in recent years. However, unions still hold some sway in Europe (read here and here).
In Berkeley, the contract with Bayer expired in July and employees want the drugmaker to maintain a commitment made two years ago in which taxpayer subsidies were offered in exchange for providing jobs at this plant and the other in Emeryville, where 540 jobs will be eliminated. That plant was responsible for making the Betaseron multiple sclerosis drug (background here).
Among the benefits Bayer
received from is eligible to receive from the Oakland Enterprise Zone is $37,770 or more per employee in state tax credits, over five years, for hiring employees who meet certain criteria; sales tax credits on purchases of $20 million per year of qualified machinery and machinery parts; up to 100 percent Net Operating Loss (NOL) carry-forward; NOL may be carried forward 15 years; upfront expensing of certain depreciable property; and the ability to apply tax credits to future tax years, according to the International Longshore and Warehouse Union, Local 6. [UPDATE: A Bayer spokesman says the drugmaker has received $182,000 in sales tax credits for 2009 and that he will provide a 2010 figure.]
To what extent employee concerns about a wholesale job loss are valid is unclear. The drugmaker has indicated some workers from the Emeryville facility may be offered employment at the Berkeley location, since it is undergoing a $100 million upgrade to boost capacity for Kogenate, a treatment for hemophilia. However, ILWU spokesman Craig Merrilees says the employees are concerned, because Bayer has failed to offer reassurance.
“It’s entirely possible (that the Berkeley jobs are in jeopardy). Bayer may still decide to outsource portions of the production process. It’s one of the legitimate concerns the employees have,” he tell us. “Bayer has said they are not willing to give any guarantees of any kinds that these jobs will remain here. Two years ago, they threatened to move a portion of the operation at Berkeley to a CMO in the Northeast and it was that threat that prompted the shower of tax breaks from local officials. And the possibility that could happen again has made the workers concerned that history could repeat itself.”
UPDATE as of 12 noon ET: A Bayer spokesman sent us a statement saying the drugmaker offered a 3.1 percent wage increase, which means the average employee making $28.80 per hour would earn over $19,000 in cumulative base wages over a four-year period from 2011 through 2015. Bayer also says an initial offer was revised to provide the same fixed health care contribution rate that has been in place since 2005.
The drugmaker argues ILWU has not taken this offer to its members, but the ILWU spokesman says the membership recently rejected what he called a “very similar” offer. “The money received today just doesn’t cut it when they could ship jobs overseas,” he says. “Offering more money without job security is seen by the workers as an illusion. Job security is paramount.”
The drugmaker also maintains that $10 million in tax subsidies were dwarfed by annual taxes paid to the region, which were $23 million last year, and that Bayer never promised that its investment will result in additional jobs. However, its $100 million investment in the plant generated 242,200 in contractor work hours (you can read more here in an ‘impact statement’ Bayer sent us).
The drugmaker does seem prepared to shift the jobs. “While Bayer is working earnestly to bring the negotiations to a close and reach a mutually acceptable proposal, we are poised to move our business to contingency operations if necessary,” the Bayer statement continues. “We have a robust contingency plan that will allow us to continue our production operations.” Although the Bayer spokesman maintains the contingency refers to coping with any work disruption and outsourcing is not planned. The drugmaker, he adds, is unwilling to guarantee job security during the life of the contract.