Patriot Coal Deal Reached, But Fight Still on Against Peabody Energy

Mike Elk

Thousands of UMWA members rally outside Peabody Energy's headquarters in St. Louis, in May 2013. (Photo from United Mine Workers of America)

On Fri­day, union min­ers at Patri­ot Coal in West Vir­ginia and Ken­tucky vot­ed 85 per­cent to 15 per­cent to approve a new con­tract, end­ing a chap­ter in a bit­ter fight that has stretched on for more than a year.

The dis­pute began in July of 2012 when Patri­ot Coal filed for bank­rupt­cy, but reached a head in May of this year, when a fed­er­al bank­rupt­cy judge released the com­pa­ny from its union con­tract with employ­ees and allowed Patri­ot to impose terms of employ­ment effec­tive July 1. The Unit­ed Mine Work­ers of Amer­i­ca (UMWA) — which rep­re­sents 1,800 Patri­ot work­ers along with more than 20,000 retirees and fam­i­ly mem­bers — began mak­ing prepa­ra­tions to strike. But in nego­ti­a­tions, the com­pa­ny and the union set­tled on a con­tract with terms more favor­able to the work­ers than those the judge allowed the com­pa­ny to impose.

Patri­ot had incen­tive to com­pro­mise: A strike by the UMWA could have sunk the strug­gling com­pa­ny, forc­ing Patri­ot sell off its assets one by one instead of re-emerg­ing from bank­rupt­cy intact.

Both sides applaud­ed the con­tract after Friday’s mem­ber ratification.

The mem­ber­ship has made it clear that they are will­ing to do their part to keep Patri­ot oper­at­ing, keep their jobs and ensure that thou­sands of retirees con­tin­ue get­ting the health­care they depend on and deserve,” UMWA Inter­na­tion­al Pres­i­dent Cecil E. Roberts said in a state­ment released Fri­day after the vote. This has been a dif­fi­cult and uncer­tain year for our mem­bers. But I believe that in the end, they under­stood that we had done a lot to improve what the judge had ordered. They also under­stood all that was at stake and resolved to move for­ward in a pos­i­tive way.”

Rat­i­fi­ca­tion of these agree­ments pro­vides labor sta­bil­i­ty and ensures cost sav­ings essen­tial to Patriot’s plan of reor­ga­ni­za­tion,” said Patri­ot Coal Pres­i­dent and Chief Exec­u­tive Offi­cer Ben­nett K. Hat­field in a state­ment. These agree­ments should set Patri­ot on a path to emerge from bank­rupt­cy by the end of 2013.”

Under the judge’s rul­ing, Patri­ot Coal could have imposed wage cuts of up to $7 an hour, but under the final agree­ment, it will cut wages by only $1 an hour. Start­ing in Jan­u­ary of 2015, work­ers will be eli­gi­ble for a $0.50 year­ly wage increase.

The deal main­tains work­ers’ den­tal, vision, life and acci­dent insur­ance plans, along with their right to bid for high­er-paid jobs based on senior­i­ty, all of which could have been cut under the bank­rupt­cy court’s rul­ing. These gains did not come with­out con­ces­sions, how­ev­er. Patri­ot elim­i­nat­ed sev­er­al paid hol­i­days and vaca­tion days for Patri­ot Coal work­ers and imposed a cap of $1,600 a year on out-of-pock­et med­ical cov­er­age and a cap of $800 on out-of-pock­et pre­scrip­tion drug coverage.

Per­haps the most con­tentious issue going into nego­ti­a­tions was the fate of retiree health­care and pen­sion ben­e­fits, a prob­lem that, accord­ing to the UMWA, goes back to the found­ing of Patri­ot Coal. Patri­ot was spun off from Peabody Ener­gy in 2007. The fol­low­ing year, the fledg­ling com­pa­ny pur­chased Mag­num Coal, a spin-off of Arch Coal. That mean that Patri­ot start­ed out with three times as many retirees, inher­it­ed from Arch and Peabody, than active employ­ees. The union claims that Patri­ot was cre­at­ed by Peabody and Arch to fail, in order to free them from more than $1 bil­lion in retiree pen­sion and health­care oblig­a­tions. After the bank­rupt­cy court stripped Patriot’s retirees of their pen­sions and health­care, the union sued Peabody and Arch on behalf of the 20,000 ben­e­fi­cia­ries and began a pub­lic cam­paign, includ­ing let­ter-writ­ing, adver­tis­ing buys and ral­lies out­side the bank­rupt­cy court in St Louis.

In the agree­ment with UMWA, Patri­ot Coal resolved the pen­sion issue by choos­ing to con­tin­ue pay­ing into the exist­ing mul­ti­em­ploy­er pen­sion plan. It will cov­er retired work­ers and their fam­i­ly mem­bers, as well as cur­rent work­ers hired before Jan­u­ary 1, 2012. But work­ers hired after that date will be put into a new 401(k) rather than the guar­an­teed pen­sion plan.

On the issue of retiree health­care, Patri­ot agreed to make an ini­tial con­tri­bu­tion of $15 mil­lion to help fund a new Vol­un­tary Employ­ee Ben­e­fits Asso­ci­a­tion (VEBA) plan to pro­vide health­care for its 20,000 retirees and fam­i­ly mem­bers. Patri­ot will also pay a $0.20 roy­al­ty fee per ton of coal mined. Last­ly, Patri­ot Coal has agreed to give the UMWA a 35 per­cent stake in the com­pa­ny that the union can sell off in order to fund the VEBA once Patri­ot emerges from bank­rupt­cy. That offer pro­vid­ed addi­tion­al incen­tive for the union to reach an agree­ment rather than strik­ing and risk­ing Patriot’s dissolution.

If the com­pa­ny liq­ui­dates, [our stake] is worth noth­ing. I have to report to you that we do not have the resources in the VEBA to guar­an­tee retiree health­care for­ev­er,” said UMWA Pres­i­dent Cecil Roberts in a 28 minute long Youtube address explain­ing the ten­ta­tive deal to mem­bers before the Fri­day vote. The only way we can do that is to con­tin­ue our legal and pub­lic cam­paign against Peabody and Arch and get leg­is­la­tion passed in Con­gress to extend the Coal Act to those affect­ed by this bankruptcy.”

In addi­tion to suing Peabody and Arch, the UMWA is push­ing leg­is­la­tion that would extend fed­er­al pro­tec­tions from the 1992 COAL Act to min­ers who retired after 1992 and trans­fer unused funds from the fed­er­al Aban­doned Mine Land funds to the UMWA pen­sion fund for retirees.

Notably, as part of the con­tract deal, Patri­ot Coal will give $2 mil­lion dol­lars to the Unit­ed Mine Work­ers of Amer­i­ca to con­tin­ue their legal fight against Peabody and Arch to recoup mon­ey for the retiree health­care and ben­e­fit funds.

The fight is most def­i­nite­ly still on to keep pres­sure on Peabody,” says UMWA Com­mu­ni­ca­tions Direc­tor Phil Smith. We’ll be back in St. Louis on the 27th and after. We are work­ing on new TV spots, new print ads and new approach­es to high­light Peabody’s (and Arch’s) respon­si­bil­i­ties here.”

You know, as I sat lis­ten­ing to [UMWA Sec­re­tary-Trea­sur­er] Dan Kane explain­ing the pro­pos­al yes­ter­day I could not help think­ing that when Arch and Peabody investors sat in a board room in 05 or 06, con­spir­ing to elim­i­nate all of their union mines east of the Mis­sis­sip­pi Riv­er, they unwit­ting­ly invoked the law of unin­tend­ed con­se­quences,” says retired coal min­er Lar­ry MIller. We are coal min­ers and as such we are used to being hand­ed junk and mak­ing it work under adverse con­di­tions. So, when Cecil [Roberts] was hand­ed this piece of junk judge’s order, he and Dan and many oth­ers went to work to Franken­stein a deal to save our union; it will work.”

Mike Elk wrote for In These Times and its labor blog, Work­ing In These Times, from 2010 to 2014. He is cur­rent­ly a labor reporter at Politico.
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