Daughters of Charity hit with pension lawsuit amid sale of six hospitals

California's largest healthcare workers' union is not taking the pending sale of Bay Area Catholic hospital system the Daughters of Charity lying down.

On Tuesday, the United Healthcare Workers West chapter of the Service Employees International Union (SEIU-UHW) announced a class-action lawsuit that claims the hospital system underfunded pension funds worth an estimated $700 million for thousands of employees and retirees of the Daughters of Charity's six hospitals in the state.

The move comes after the financially beleaguered Los Altos Hills-based nonprofit hospital system this month announced a planned sale to $2.5 billion Southern California hospital conglomerate Prime Healthcare Services for $300 million in cash and $450 million in other financial pledges.

A statement from the Daughters of Charity calls the lawsuit "nothing more than an unfortunate scare tactic by a union waging a corporate campaign against Prime Healthcare."

The statement adds that the hospital system expects the suit to be thrown out of court, in large part because Prime has agreed to take "100 percent responsibility for all pension obligations."

The "other financial pledges" part of the deal is the driver of the new labor lawsuit. Under the terms of the proposed sale — which still needs to be given the green light by regulators — Prime agreed to ""substantially protect" 7,600 jobs and assume $300 million in pension liabilities for 17,000 employees and retirees.

"I needed to know that the buyer is going to assume all of the responsibility," Daughters of Charity President and CEO Robert Issai told me, referring to the pensions, when the deal was announced. "Prime Healthcare did. They put their entire balance sheet behind it."

Lauren Hepler is the economic development reporter at the Silicon Valley Business Journal.