USW Says Esmark-Essar Agreements are a Violation of Labor Contract
05/19/2008 - The United Steelworkers asserts that Esmark’s agreements with Essar Steel Holdings are in direct violation of its collective bargaining agreement with the union.
In a letter to Esmark, Inc., the United Steelworkers (USW) has asserted that the company’s agreements with Essar Steel Holdings Limited are in direct violation of its collective bargaining agreement with the union. In the letter, the USW issued a demand that the company repudiate the agreements that it recently entered into with Essar.
Referring to Esmark’s recently announced agreements with Essar, the USW noted the inclusion of a clause that would obligate Esmark to pay Essar a $20.5 million break fee and various other payments in the event the company agrees to sell itself to another entity.
The USW contends that by entering into the memorandum and closing on related financing without first providing the Steelworkers with appropriate notice and an opportunity to bring forward an alternative proposal, Esmark has breached the legal protections granted by its Right to Bid Clause. The union also indicated that it believes that Essar was complicit with this breach.
“The USW's rights under the Right to Bid clause clearly prohibit the company from entering into these agreements, and we will take whatever action is necessary to protect these rights," said David McCall, Director of USW District 1, which covers Ohio where many of the Esmark plants are located. "We used our contractual protections to prevent CSN from taking over Wheeling Pitt, which opened the door for Esmark to acquire the company. You would think they would have learned something from that transaction."
The USW has told the company that it will use its rights under another section of the USW labor agreement—the Successorship Clause—to block the Essar deal. Under the Successorship Clause, Esmark and Essar cannot close the proposed transaction until Essar has entered into a collective bargaining agreement with the USW.
