Delivery Startup Loses Union Vote as Labor Edges Into Industry

Drivers at grocery delivery startup Imperfect Foods Inc. have voted to unionize, an apparent victory for organized labor as it steps up efforts to make inroads into California’s fast-growing startups. The company said it would challenge the results.

A group of Northern California Imperfect employees voted in favor of joining the United Food & Commercial Workers international union during a three-week election conducted by the U.S. National Labor Relations Board, which would establish organized labor’s first foothold at the growing company. Ballots were cast by mail and counted on April 14 by the agency. The union would represent about 80 employees.

Imperfect Foods said in an emailed statement Friday that it “believes that the results were materially impacted by the inability of certain drivers to timely obtain ballots. Because of this possible hindrance in the voting process, the company intends to challenge the results of the election.”

The vote was a narrow victory -- 28 in favor of unionizing versus 23 against. The company said it wants to “ensure all voices are heard and will continue to provide its drivers the competitive benefits, wages, and supportive working environment they deserve.”

The union “believes in the integrity of the results of the election” and is looking forward to collectively bargaining, said Jim Araby, strategic campaigns director for the Bay Area-based UFCW local that organized the workers.

Imperfect, which operates as a subscription service, appeals to environmentally conscious consumers by advertising that its business model reduces food waste by using produce and groceries that would otherwise be thrown out.

“This company is still growing,” said employee Chris Jasinski. “We frankly just want to make sure that we’re growing with it and that our needs and our agency isn’t left behind in the name of shareholder value.”

Safety Concerns

Workers started organizing last summer in hopes of addressing steep healthcare costs and safety concerns that stem from delivering as many as 120 heavy produce boxes per shift, according to employees.

Labor activism at startups has risen in profile in recent years as labor groups fight for a foothold amid an explosion of startups, from Uber Technologies Inc. to DoorDash Inc., that’s reshaping the American workplace. A contentious vote at an Inc. warehouse in Alabama resulted in a victory this month for the Seattle-based e-commerce giant and was watched worldwide.

Imperfect is part of a group of rapidly growing companies that is changing how Americans shop for groceries. The company announced a $95 million fundraising round in January, bringing its valuation to more than $700 million. It reported a revenue run rate of more than $500 million at the end of 2020, suggesting annual sales at that level if it can sustain that performance. At the time, it had more than 1,600 employees, Chief Executive Officer Philip Behn told Bloomberg, with plans to hire more in 2021.

Imperfect’s drivers were eligible to unionize because, unlike some competitors, the company classifies them as employees covered by federal workplace protections, rather than as independent contractors exempt from them.

Prop. 22

UFCW and other unions suffered a painful defeat last year when app-based delivery and transportation companies including DoorDash and Instacart bankrolled a successful $200 million campaign in California to pass Prop. 22, a ballot measure classifying their workers as contractors with a limited set of benefits, rather than employees.

After that measure passed, grocery giant Albertsons Cos. announced it was replacing non-union delivery drivers who’d been classified as employees with contract staff instead. The company said it offered drivers alternative roles. The UFCW has said the move caused hundreds of California drivers to be replaced by DoorDash gig workers. The threat of similar moves helped fuel a successful UFCW organizing effort among 250 delivery drivers at Albertson’s Safeway chain, who voted in January to unionize.

The union previously said Imperfect Foods’ success shows how companies can flourish while recognizing drivers as employees.

Grocery delivery has boomed in the pandemic, as consumers stay home and avoid crowded supermarkets. Instacart Inc., one of the biggest delivery companies, recently hit a $39 billion valuation. Imperfect competitors including Bay Area-based Good Eggs Inc., and specialty grocery Weee! Inc. have also announced big fundraising rounds recently, which they said they’ll use to continue to fuel expansion.

The UFCW said that Imperfect’s management and their consultants mounted a campaign against unionization that included daily mandatory meetings during two weeks in March, with some meetings lasting two hours. Company representatives told workers that organizing could lead to employees being replaced by outside contract staff, according to employees. Federal law allows companies to make predictions about negative consequences of unionizing, but not to threaten to punish them for doing so.

Imperfect’s move to challenge represents a change from the conciliatory tone it initially took following the vote. In an email to workers earlier this week, Chief Operations Officer Neil Neufeld said the company would “respect their decision” regarding unionization.

©2021 Bloomberg L.P.

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