Natalya Gracheva Is Giving McDonald's Heartburn

The Associated Press, 23 June 1999


A security guard at the company's "McComplex" factory outside Moscow, Gracheva wants to form a trade union. The company has blocked her efforts. The struggle is tarnishing the once-golden reputation of a pioneer among foreign companies in Russia, and observers warn its fallout could stain other multinationals here, too.

On Wednesday, a Moscow court opened hearings for a former McDonald's worker who says he was fired because of his union activity. The company says he was drunk on the job.

Gracheva and several other workers accuse McDonald's of intimidation and maintain it is illegal for the company to stop them from establishing a union. McDonald's denies mistreating employees and says it is obeying Russian labor laws.

"I've always thought it was a good company. I never expected them to react so strongly," Gracheva said Wednesday. Her main demands are pay raises and more rest periods.

Gracheva started working for McDonald's in 1990, and once voluntarily recruited friends to join the company because of its generous benefits and progressive, decidedly non-Soviet management style.

Times have changed. Russia's economic meltdown last year forced McDonald's, like virtually every company in Russia, to trim some fat and rethink management plans.

Some employees were laid off. Inflation and devaluation have whittled down salaries. Gracheva's monthly salary was 2,500 rubles a year ago, or $416 at the time. It's now 3,000 rubles a month, but that's worth only $122.

McDonald's customers praise the restaurant for keeping prices low despite the economic crisis. A Big Mac now costs about 30 rubles, equivalent to $1.25, much less in dollar terms than a year ago.

McDonald's paved the way for foreign investors in Russia, opening its first restaurant in the Soviet-era Moscow of 1990. That restaurant is now the world's busiest, serving 20,000 customers a day.

From the start, hiring was highly selective, and employees were compensated with good salaries, free meals and summer camps for their children.

The company opened its own factory to ensure quality amid the political and economic turmoil that has rocked Russia through the 1990s. It now has 47 outlets and nearly 7,000 employees, almost all Russians.

Gracheva and a dozen other employees started talking about a union in November.

McDonald's Russia, as the McDonald's joint venture in Russia is known, responded by forming a company-supervised "workers' council" to address complaints. Hundreds of employees signed a document saying they didn't want a union.

Gracheva and other workers trying to organize say the workers' council has not responded to their basic pleas. Instead, she said, the company has revoked their bonuses and rearranged their schedules so they cannot hold meetings.

The company chairman, Glen Steeves, issued a statement this week saying: "McDonald's Russia categorically denies any allegations related to the mistreatment of our employees. We respect the wishes of our employees and continue to abide by local labor laws."

The head of the International Labor Organization's Moscow office, Frank Hoffer, said he was surprised at McDonald's stance.

"McDonald's has been extremely successful in Russia by having good cooperation with the Russians and by taking their interests seriously," he said. "If McDonald's continues this resistance ... that would set a bad example and have very serious repercussions for Western companies."

The union fight could also fuel nationalist anger against the West, which many poor Russians blame for their post-Soviet troubles.

Some Russian labor leaders have warned that the battle will prompt them to push for tougher laws protecting workers outside a union.

Russian labor legislation -- which draws strongly on Soviet-era laws -- provides strong protection for union members, though in practice many of those laws are ignored.

Most Russian employers are struggling financially and cannot pay workers on time. Employees are often sent on indefinite unpaid leave for months at a time.

Against that backdrop, Gracheva admits her job is enviable. "At least I still know I'll get paid," she said.

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