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Are private equity-owned companies receiving federal funds union busting?

June 3, 2024

In early February, a Minneapolis Star Tribune article investigated the sudden closure of two Z Video Relay Service (ZVRS) call centers dedicated to providing American Sign Language translation services to the deaf and hard of hearing to ensure access to services such as “911 operators, doctors, attorneys, court officials, teachers, bosses, family and friends.”

ZVRS is owned by the private equity firm Kinderhook Industries through a continuation fund where the lead investor is private equity firm Carlyle’s subsidiary AlpInvest. In 2017, ZVRS acquired Purple Communications, forming the larger firm, ZP Better Together.

The article quotes employees who claim that the call centers were being closed after management found out that they were meeting with the Communication Workers of America (CWA), a labor union, and shortly after many workers refused to sign a mandatory arbitration agreement. The company cited different reasons for the closing, including “profitability.”

However, these closings came less than four months after the Federal Communications Commission increased the rates paid to companies like ZVRS that provide VRS services by approximately 50%.

“Until [January 2024] ZVRS was actively hiring in Minnesota and asking workers to run overtime shifts to help shorten wait times, workers said. ‘They were encouraging people to join the work-from-home program,’ said Rosa Linda Estrada-Alvarez, who worked for ZVRS for eight years. Estrada-Alvarez told the Star Tribune. ‘There was talk of them opening up another office here.’”

The layoffs were “an absolute shock,” added Estrada-Alvarez. Shutting Minnesota’s two call centers will be “not just be hard for the interpreting community, it will be hard on the deaf community.”

“ZP Better Together’s private equity owners appear to be continuing Purple Communications’ track record of union busting with their closure of two call centers in Minnesota in January as interpreters were seeking to meet with union organizers,” said Richard Lanigan, President of the Office and Professional Employees International Union (OPEIU). “Our survey of ASL interpreters has found wide dissatisfaction with the wages and working conditions that ZP provides to its employees and contractors and a strong desire for a union. It is critical that private equity firms hold their investments accountable and not obstruct workers’ inherent right to join a union.”

Labor issues at ZVRS

In the four years before Kinderhook acquired Purple, the company settled at least 21 unfair labor practice charges, according to a review of National Labor Relations Board (NLRB) data by PESP. In an NLRB decision issued in September 2020, the Board found significant violations of federal law and ordered Purple Communications and its “successor and joint employer” ZVRS to cease and desist from dozens of behaviors, as well as affirmatively take significant actions to guarantee employees’ right to freedom of association.

According to the Minneapolis Star Tribune, “In September 2023, a ZVRS subsidiary, Purple Communications, settled a class-action lawsuit filed by California workers alleging wage theft[ ] . . . The company agreed to pay $320,000 without admitting wrongdoing.” In March 2023, ZVRS settled a California lawsuit with $127,000 in backpay to employees and in November 2022, the company settled a claim in which an employee alleged sexual harassment and retaliation.

Current employees report ongoing fear of retaliation for any efforts to improve working conditions through unionization, citing the Minnesota closures, according to worker interviews with the Office and Professional Employees International Union, which is organizing ASL interpreters.

VRS Services and Federal Funds

As private equity firms Kinderhook and Carlyle/AlpInvest reap benefits from the Biden administration’s FCC policies that dramatically increase the rates paid to ZP Better Together and its peers, the White House is making more efforts to ensure that asset owners with private equity investments can guarantee workers at private equity owned firms improved labor rights.

In April, the White House “convened asset owners representing over $1 trillion in public and pension fund capital who have committed to strong labor standards in their private equity investments” and “launched an initiative to promote strong labor commitments among funds, assets managers, and companies.”

“These principles include guaranteeing the free and fair choice to join a union, freedom of association and the recognition of the rights to collectively bargain, equal opportunity, a safe and healthy workplace, and the elimination of forced and compulsory labor, including child labor.

Additionally, in line with fiduciary duty, investors will encourage their portfolio companies to remain neutral when workers seek to exercise the freedom to join together in a union; and when applicable, enter into neutrality agreements with labor organizations that include voluntary or card-check recognition, reasonable timelines to first contract, and a commitment to non-interference in union organizing.”

Multiple pension funds represented at the White House meeting have investments in either Kinderhook, Carlyle, or AlpInvest.

Investors and government regulators should review these investments

The Private Equity Stakeholder Project has reached out to Kinderhook and Carlyle/AlpInvest multiple times regarding these issues, but neither firm has responded. Both private equity firms should show that they support freedom of association by reopening the Minnesota call centers and rehiring the laid off employees, and by meeting with OPEIU and taking a firm public stance of neutrality that respects their employees’ decisions to organize and collectively bargain.

Investors with Kinderhook and Carlyle/AlpInvest should communicate with the private equity firms to ensure their investments are not being used to violate workers’ right to freedom of association.

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