The Paducah Sun
The Paducah Sun
Paducah, Kentucky
Tuesday, February 04, 2003

The USEC unioin strikes

By Joe Walker jwalker@paducahsun.com--270.575.8650

The leader of the Paducah nuclear workers' union says members are striking because they think it's unfair for highly paid USEC managers to ask blue-collar employees to bear substantially more company costs.

"It appears as if USEC wants to save money to try to fund some of their possible ventures," said Leon Owens, president of Local 5-550 of Paper, Allied-Industrial, Chemical and Energy Workers (PACE) International. "But they're wanting to transfer costs onto the shoulders of the employees. That's just not acceptable from this union's standpoint."

Owens said the USEC corporate payroll is led by Chief Executive Officer William "Nick" Timbers' roughly $2.5 million in salary, bonuses and stock options. But even senior plant managers make "in the six-figure range," he said.

"It's very easy for an individual who's making six figures to say that the pension that's provided to the workers at the plant is adequate," Owens said. "It's also easy to say for an individual who receives a one-time, lump-sum bonus that equates to what a worker would have to work for an entire year to receive."

Using the union pension formula, earning $100,000 a year would yield a "very adequate monthly rate" of pension for managers, but not for wage earners, he said.

All plant employees, including PACE workers, received a performance bonus Friday equal to 3.5 percent of their last six months’ earnings. Pointing to managerial bonuses of at least $35,000, Owens said, "The bargaining unit members do not share that type of compensation."

USEC spokeswoman Elizabeth Stuckle said USEC officers "are significant shareholders in the company whose interests are directly tied to the performance of the company stock." For example, 65 percent of Timbers' total compensation is at risk and the value of a large part of that compensation is determined by the price of USEC stock, she said.

"Officer compensation is deliberately designed and approved by the board of directors to be in line with compensation of other similar-sized companies," Stuckle said. "The board of directors is composed solely of outside directors."

She said Mercer Human Resources, a leading compensation consulting firm, conducts research and advises the USEC board on employee compensation levels in peer group industries. The USEC incentive program makes up "a significant portion of the total compensation for its officers," and is based on individual performance as well as company performance, Stuckle said.

USEC negotiators refused PACE's request to increase the average pension by about $250 a month, saying it compares well to similar industries and, unlike some plans, has built-in increases as workers’ wages increase. They said a 30-year employee with full pension would have gotten 18.1 percent more at the end of the proposed contract than under the one that just expired.

The union countered that the plant is unique and hazardous, so workers are deserving of added pension.

The pension fund was transferred from the Department of Energy to USEC when the firm was privatized. Not increasing pension payouts gives USEC more discretionary cash in advance of needing $1.5 billion to pay for a commercial gas centrifuge plant that will replace the Paducah plant by the end of the decade, Owens said.

"The only thing they have to account for is present and future retirees from an actuarial standpoint," he said. "The excess amount that might be in the fund itself is discretionary."

Enron and other corporate scandals of the past two years have shown what can happen to workers' retirement money, Owens said. "We're not saying that USEC would do that, but anything is possible, especially when you're trying to convince an investor that you have capital and the company is viable, but you need someone who has deep pockets."

Stuckle said Owens' concerns are unfounded. Federal laws require that surplus pension assets be considered "plan assets," so until all pension obligations have been satisfied, that money must be used exclusively for retirees, she said. "The assets may not be diverted, either directly or indirectly, to the plan sponsor."

Under the Internal Revenue Code, USEC would be subject to excise taxes and penalties for using pension assets for company purposes, she said.

Other issues leading to the strike:

Medical costs — The union strongly opposed USEC's proposal to raise employees’ share of health insurance premiums from 10 percent to 12 percent this year and to 19 percent by 2007. Newly hired people would have started at 19 percent.

USEC said employees’ cost share would rise 1 percent to 2 percent a year for five years, or about $228 this year and $318 in 2004. The company also offered a $250 lump-sum payment in each of those years to offset the increase. The net result would have been employees’ paying about $23 less this year and $68 more in 2004, USEC said, adding that the national average for chemical and nuclear workers' share of insurance costs is 22 percent to 24 percent.

Owens said that with strong help from the union to maintain costs, the USEC self-insurance plan has been satisfactory for the last seven years, and for two years actually reimbursed workers, based on maintaining plan and hospital rates. He said plant workers also deserve not to have their share of health insurance costs increase because they work hazardous jobs.

Strikers will be covered through February, but after that, it's possible that USEC will cut off insurance, Owens said. If that happens, PACE will ensure that the sickest workers and dependents will get medical help through the union and "other concerned and interested individuals," he said.

Wages — The USEC offer called for wage increases of 1.7 percent this year, followed by 3 percent to 3.3 percent during each of the next four years. The company said union workers received a 3.4 percent wage increase six months ago.

USEC says the wages are "consistent with the national average," but Owens disagrees, saying the wage increase would have been "just minimally above the inflation level" over the next five years. A PACE union at the closed Mound nuclear plant in Miamisburg, Ohio, just reached a four-year, tentative agreement with the Department of Energy, including a 3.5 percent annual wage increase, 10 percent pension hike and 10 percent cap on employees' share of health insurance costs, he said.

"With that in mind, this union feels that its demands are not unreasonable," Owens said.

The last strike, in 1979 when Union Carbide Corp. was running the plant, lasted a month. Owens said the union is exploring other legal options "as part of an overall settlement to return to work" that might provide some compensation to members if this work stoppage is prolonged. The union currently provides minimal weekly benefits for people who picket, "but nothing close" to workers' normal wages, he said.

Contract term — USEC offered a five-year contract expiring Jan. 31, 2007. It would have replaced the last contract, which expired at 7 a.m. Friday. It was retroactive for 18 months to allow USEC to resolve several key economic issues. Owens said the union wanted to go back to the July 31 expiration date now that the issues have been resolved.