An unfavorable economic climate and declining revenues were not the only factors involved in Mory’s abrupt December closure. High labor costs — especially hefty benefit packages paid to unionized workers — also played a significant role, an aspect of the iconic eating club’s troubles that officials had not previously discussed publicly, a club official said this week.
“Very expensive” labor costs, coupled with other external economic factors, made it impossible for Mory’s to break even, said Christopher Getman ’64, president of the Mory’s Board of Governors. Getman said he hopes to reach an agreement with the union to reduce these costs, which included compensation packages for the club’s management as well as wages and benefits for members of the worker union, UNITE HERE Local 217, as part of a larger business plan to reopen the restaurant in the fall.
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“The labor costs were onerous,” Getman said in an interview. “My suspicion is it would be hard for us to open under exactly the same circumstances by which we retired.”
According to tax forms, the 160-year-old institution paid over $850,000 in labor costs in 2007, up from about $820,000 in 2006. Getman pointed to insurance benefits such as health care and dental care insurance as the major culprits behind the steep costs.
In mid-December, as Mory’s struggled to stay afloat financially, the club’s management asked union employees to vote on eight concessions to their union contract, which will expire in 2011, said Leonard Nalencz, the state director for Local 217.
At that meeting, the approximately two dozen employees present approved only two of the concessions, Nalencz said. These measures included a freeze on all of Mory’s contributions to their pension plans in 2009 as well as the removal of three cashier positions. The three workers who had those positions have been offered other jobs at the restaurant, Nalencz said.
Nalencz said an attorney from the New Haven-based law firm that has been representing Mory’s, Wiggin and Dana LLP, estimated that the two concessions would have saved Mory’s a little more than $100,000 in labor costs this year.
But a few days after the employee meeting, Mory’s announced that it would be shutting its doors for an indefinite time period in order to rethink its operating policies and membership recruitment. While the club fired all management staff except controller Robin Soltesz, the union employees were put on temporary layoff, much to the surprise of some of them. When the club reopens, they will be able to assume positions with comparable seniority and benefits, Getman said.
As the Board of Governors tries to solicit funding and put together a business plan that will allow the club to reopen, representatives from Mory’s and the union have been staying in touch about the club’s financial status. “We had a chat with them after we closed,” Getman said of the discussions. “And we’ll have more chats with them.”
But one union member said he thinks the concessions already made by the union are unfair. “By making these demands, … [Mory’s management is] taking too much away from us,” said Lucas Vicente, a cook and the union’s chief steward at Mory’s. “It is not our fault that we have to give these benefits for them to stay open.”
After the Board of Governors informed employees of the closure in December, Vicente said, the entire staff went up to the club’s President’s Room to say their goodbyes.
“We have been there for a long time and we are more than friends,” said Vicente, who said he is not currently employed. “We are more like family, and hopefully we will get back together again someday.”
“But then again,” he added, “we don’t know if we are going to get together again.”
Both Getman and Nalencz said the relationship between the restaurant and union has been amiable. The Local 217 union has represented Mory’s cooks, waiters, pantry workers and dishwashers since the 1970s.
“We had a very good relationship with our workers,” Getman said. “We felt, to put it delicately, that they were well-compensated.”
But Nalencz stressed that the cost-cutting required to keep Mory’s profitable must come not only from belt-tightening of union benefits, but also from increases in membership fees and other structural changes in the club’s management.