The Mercury News is reporting tonight that its unionized employees voted 127-39 to approve an 18-month contract that calls for pay cuts, higher medical insurance premiums and less vacation for its members.

Pay will be reduced by 7 percent for the remainder of this year, and an additional 2 percent starting on Jan. 1, 2010. Employees also took a one-week unpaid furlough earlier this year. The company can require another five-day furlough in 2010.

The contract also allows the newspaper to move its copy editing and design operations to Walnut Creek, and finance and circulation to San Ramon.

The contract applies to members of the San Jose unit of the California Media Workers Guild, which represents newsroom, advertising, circulation, finance and janitorial workers.

On Tuesday, unionized newsroom employees at sister papers in the East Bay will vote on their first labor contract.