The Story Behind Our Struggle for Fairness
FairPoint hat

Photo by Gretchen Conant

On April 1, 2008, FairPoint Communications, Inc. acquired Verizon’s Northern New England operations, more than quintupling FairPoint’s size, and adding complex new operations to the company’s traditional rural and small-town clients. Just 18 months later, on October 26, 2009, FairPoint filed for Chapter 11 bankruptcy, confirming employees’ worst fears about the merger.

In 2011, a judge approved a reorganization and FairPoint emerged from bankruptcy, but the turmoil wiped out previous stockholders who were replaced by the company’s senior creditors, including hedge funds and others who purchased “distressed debt” at a discount, then converted the debt into a controlling stake in the company.

Before bankruptcy, FairPoint had almost half a million shareholders. Today, FairPoint has only 191 shareholders and the top five control 54.1 percent of its outstanding shares. Four of the five are hedge funds.

During public hearings FairPoint executives promised to create at least 675 jobs in Maine, New Hampshire, and Vermont. Instead, FairPoint has cut its overall workforce by almost 22 percent since the merger, from 4,071 in December 2008 to 3,182 as of September 2013. A recent headline gets to the heart of the situation:

Remember FairPoint’s Verizon Deal Job Promises?

Neither Does FairPoint.

In addition to cutting jobs in Northern New England, the company has outsourced jobs in violation of promises it made to communities and its workers. On November 12, 2013, a panel of judges for the U.S. Court of Appeals for the First Circuit in Boston affirmed two earlier rulings that found the company wrongfully transferred jobs to contractors in Canada and New York in 2009 and 2010 in violation of its collective bargaining agreement with the International Brotherhood of Electrical Workers (IBEW).

About two-thirds of FairPoint’s almost 3,200 workers are covered by collective bargaining agreements as members of the IBEW and the Communications Workers of America (CWA). Their current contract expires on August 2, 2014.

The stakes in negotiations between FairPoint and its employees could not be higher. Workers are fighting for pensions, healthcare, and fair compensation. At the same time, Wall Street analysts agree that the outcome of negotiations are crucial if FairPoint is going to reach “a more shareholder-friendly capital structure” that could pave the way for another sale, payment of dividends to investors, or both.

Clouds-line worker with truck

Photo by Gretchen Conant

It appears that FairPoint’s current investors are only interested in reaping a windfall from the company and that they will take the money and run as soon as the stock price rises sufficiently or a bidder emerges who will meet their price. Unlike FairPoint’s three thousand employees, these investors have no loyalty to Northern New England communities or the employees of FairPoint.

To reach a contract that is fair to workers and helps the company prosper in the future will take considerable creativity, time, and effort.

Management has so far refused to commit to a date for commencing negotiations.

As part of FairPoint’s bankruptcy reorganization, an important new initiative became part of the collective bargaining agreement: the Joint Committee on Operational Savings. In forming this committee, the bankruptcy judge recognized the value of collaboration between management and employees in order to identify cost savings.After encouraging initial meetings, FairPoint replaced its key labor relations executive and effectively shut down the committee.

Despite repeated union requests to reconvene this court-mandated effort, FairPoint has refused to meet with the unions to engage in a constructive dialog. And industry analysts point to company preparations for a “significant work stoppage,” including training managers, presumably to replace union members.

According to one telecom analyst, FairPoint “has done an industry-leading job of stabilizing revenues over the past two quarters.” But with the company’s return to stability, executives are under increasing pressure from investors to return cash to shareholders in the form of dividends. If the contract negotiations in 2014 lead to improved cost structures, FairPoint could see an increase in profit margins. And with better profit margins, the company “represents a compelling M&A [merger and acquisition] opportunity.”

FairPoint’s executives now find themselves at a crossroads:

  • Predatory financial professionals at the hedge funds are pressing for cost-cutting measures, including lower wages and fewer benefits for workers. They want bigger dividends for shareholders and increased value for the company, which may lead to another ill-advised merger or sale.
  • FairPoint’s workers, represented by the IBEW and CWA, want to maintain good jobs and benefits, which contribute to sustainable, prosperous communities.

The choice for FairPoint management is clear:

Follow the Dictates of Wall Street

or Support Good Jobs and Strong Communities in Northern New England