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November 25, 2014

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GAMING & LABOR:

New blood helped Tropicana, union heal old wounds

Face to Face: Agreement at Last

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Beyond the Sun

No one would describe a relationship between unions and management as amorous, but on the Strip there’s at least an understanding, an industry standard that is mostly obliged.

Someone forgot to tell the new guy.

And that’s why labor negotiations between the Tropicana and the Culinary Union took more than a year to settle. The contract was finally ratified last week, after the new guy was pushed out of the way.

The union got what it wanted: the contract it had put on the table in May 2007.

The Tropicana owners, on the other hand, lost a property on the East Coast, a chief executive and a fight that it was a little foolish to have started in the first place.

“I think there was an acceptance that they had to move forward and turn the page,” Culinary Secretary-Treasurer D. Taylor said about the Tropicana’s finally agreeing to the deal.

There was no olive branch moment, but the drama that played out over the past year started to settle down as new management, with a friendlier attitude toward the union, took over the Tropicana this summer.

“There was certainly an indication from the company that they wanted to figure out an agreement that would work for us and work for them,” Taylor said. “It was a breath of fresh air.”

The pact was the final contract being negotiated to be nailed down by the Culinary along the Strip and downtown.

To understand why it took so long, it’s necessary to understand with whom the Culinary was dealing.

Columbia Sussex Corp., a nationwide midsized hotel operator with little experience in the gaming industry, stepped into the casino world in January 2007 when it took over Aztar Corp., owner of the Atlantic City and Vegas Tropicana properties.

The timing was inauspicious for Columbia’s union-averse owner and chief executive, Bill Yung — the Culinary Union’s contracts along the Strip were set to expire in June of that year.

Yung bought the threadbare Tropicana, which has lost the luster of its name, at a market-peak price of $2.8 billion and tried to implement the same bare-bones operation style and cost-cutting measures that had been successful for him at his other hotel properties.

But in doing so he ignored the labor playbook of the Strip, established by the Culinary Union almost 20 years ago with the relative cooperation of the major Strip players. (It was Steve Wynn, after all, who opened the door to a strong union presence by voluntarily allowing unions to skip the secret ballot and do card checks to unionize.)

At the negotiating table, the bargaining pattern is set by the first casino to sign a deal. The rest fall in line. So the Tropicana couldn’t expect to win a cheaper contract.

Because Wall Street prefers labor peace to unrest and uncertainty, analysts say it would have been better for the highly leveraged company to have a settled contract.

Yet Yung barreled ahead with his plan to trim costs, and his first move sparked the Culinary’s ire: staff layoffs.

And at the table, Yung showed himself as something of a lone wolf. While the other Strip properties with Culinary employees had agreed to similar contracts by September, the Tropicana rejected the union’s signature — and practically sacred — benefits: free health care and pensions.

The Culinary Union went on the attack. Its plan: Push the company to bankruptcy and get rid of Yung.

“The real story here is the workers, who put up with the worst working conditions, having the fortitude and tenacity to say we’re not going to be run out of here by someone who has come in from Kentucky to destroy our standard of living,” Taylor said.

Culinary used the clout of parent union Unite Here’s local in New Jersey to agitate state regulators to get Atlantic City Tropicana’s license pulled, triggering defaults on more than $2.5 billion of debt.

Under pressure Yung, who had been sole executive of the company, hired Scott Butera as casinos president in March. But Yung didn’t authorize Butera to settle with Culinary.

Chapter 11 came six months after the loss of the Atlantic City property, and the company’s bondholders eventually ousted Yung from operations of his family-owned company, dismissing him as chief executive in June and kicking him off the board of directors in July.

The bondholders, in no uncertain terms — in official court filings they called Yung an autocrat who had led the company to one disaster after another — said he stood in the way of the company’s recovery.

With Yung out of the way, Butera was ready to settle with Culinary.

And now Butera is focusing on resurrecting employee morale.

“Over half of the Tropicana’s employees are union,” Butera said. “They need to be in an environment where they are happy and energized. I think a lot of good things will come of this contract.”

Taylor says that under Butera, morale among Tropicana employees has markedly improved.

“He would eat in the employee cafeteria, whereas Bill Yung would come in like the Grim Reaper, cut workers, and nobody really knew him,” he said.

Nevada Gaming Commission Chairman Peter Bernhard said a settled labor contract was one factor considered in last week’s decision to approve the Tropicana’s new board.

The suitability of the board members, the ability to meet regulatory obligations and the financial viability of the company, of which employee morale is a component, were the main considerations, he said.

Restoring the Tropicana’s reputation is key for the company’s recovery, and peace with the union was a big first step.

Butera and Taylor knew each other from Atlantic City, where Butera worked for Donald Trump in restructuring his three businesses there. Those were among the few casinos that settled with the union in 2004 without a strike during an year of ugly negotiations.

The two respect each other and talk from time to time outside of the formal strictures of negotiations, Butera said.

With labor satisfied, Butera is focusing on refurbishing the Tropicana, once one of the jewels of the Strip. Among his cheerleaders: Taylor.

“We want the Tropicana to be successful,” Taylor said.

Sun Reporters Michael J. Mishak and Liz Benston contributed to this story.

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