Classification and Bargaining
MHR 6751, Labor Relations and Collective Bargaining 1
Course Learning Outcomes for Unit IV Upon completion of this unit, students should be able to:
5. Construct a labor agreement. 5.1 Determine upper and lower limits for management and the union. 5.2 Recognize the principles of good faith bargaining.
Reading Assignment Chapter 6: Negotiating the Labor Agreement
Unit Lesson Welcome to Unit IV and the halfway mark in our course! Hopefully you better understand the collective bargaining agreement process. There is still quite a bit more to learn. In Unit III, we established rules of engagement and the fact that both sides have agreed to those rules. They are our principles for bargaining in good faith. We both want to work towards a resolution of our differences, and we both want to come to an agreement that we can live with for the next three to five years. Some contracts can go longer but our last contract was for three years. Things changed significantly during that time so we’ll vote for another three-year contract this time to ensure this contract still meets our needs at the end of the three-year period. A collective bargaining agreement or contract is meant to change as the organization changes its goals and objectives, so a three-year time frame is very practical for both parties. Also, given the current state of the economy, in three years we can see significant changes, one way or the other, so it would be a good time to renegotiate. From the case study in Appendix A of our textbook, the union members initially wanted to ask for just a one year contract. They felt they had lost a lot in terms of wages during the last contract because the industry and the economy were distressed at the time. Now that the industry and the economy have picked up, the union members are seeking wage increases to get caught up with their industry counterparts. What will we negotiate? What are the upper and lower limits of our demands? What is the least we will accept (lower limits), and how far will we go to come to an agreement (the upper limits)? Going back to our divorce analogy, this is the time the exes put their demands on the table. I, as the ex-wife, list what I want in the divorce agreement, and my soon-to-be ex-spouse does the same. Because we have agreed to bargain in good faith, and I have done my homework in terms of what he can afford, what divorce settlements are averaging these days, and what I need to live comfortably, I place my highest offer for settlement first. The highest offer is the upper limits. This highest offer is what I would like to have, knowing my spouse and his team will want to negotiate it to other options. I know it is a high offer, so I am prepared to negotiate it down. I also know what I must have in order to support our two children comfortably. This would be the lower limit: what bottom line is necessary to meet expenses. Let’s go to the back to Appendix A and look at the last contract. The last contract between Harper Container Company (HC) and United Chemical and Plastics Union (UCPW) contained several articles addressing key areas: recognition, union security, management rights, no strikes, no lockouts, hours of work, grievance and arbitration procedures, seniority, wages and classifications, insurance, pension plans, holidays and miscellaneous days, vacation, sick leave, nondiscrimination, complete agreement, and the duration of the agreement. There will be little to negotiate around some of these articles: recognition, union security, seniority, complete agreement, and the duration of the agreement. That leaves us with fewer areas that will be the center of our attention during the negotiation process. Let’s take a look at the main articles that will receive the majority of our attention from both the union and management perspectives. These are the areas
UNIT IV STUDY GUIDE
Negotiating the Labor Agreement
MHR 6751, Labor Relations and Collective Bargaining 2
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we will want to establish in terms of the upper and lower limits based on the research we previously conducted while preparing for negotiations. We need to know how far we will go to reach an agreement in each of these areas. Management Rights This area spells out what management can and cannot do without union approval. Normally, it would not need much attention, but given that there is some tension, 50 outstanding non-financial grievances, and the fact that management must address the facilities upgrade, this area will need to be addressed. Hours of Work Currently, the union employees work a five-day week with eight-hour shifts Monday through Friday. Management is expecting to install some new automated molding machinery that will require the plant to operate seven days a week, 24 hours a day. The shift differential is 15 cents per hour, and the night shift differential is 25 cents per hour. The automated system, although requiring seven- versus five-days-a-week staffing, will also eliminate 30 piecework-molding jobs. The union is not aware of the plan to install and upgrade the machinery or that 30 jobs will be eliminated. This area will cause some concern because employees currently enjoy weekends off. Grievances and Arbitration Procedures There are 50 non-monetary grievances pending for settlement, so there may be room to review the process depending on whether or not the 50 grievances can be settled during the negotiations and if 50 is an average number or an unusual number. Often, as a contract runs out, grievances increase, so it would be good to review the history of grievances—especially when the last contract ended—to see if there is a pattern or if the process is a problem. Wages and Classifications Wages are the main concern for the union. During the last contract, the union did not seek an industry average wage increase due to the distressed economy. As a result, the union members are earning less than their industry counterparts. A concern that makes this issue even hotter is the fact that management has received a five percent increase every year across the board. Management, on the other hand, wants to see a four percent cut in labor costs the first two years of the contract and a five percent cut in the third year. Wages will be a volatile topic for this collective bargaining agreement. Insurance Currently, the employees have a no-deductible or no co-pay healthcare benefit that costs $3,500 annually per employee. The cost of this benefit is expected to increase 10% annually for the next three years. The union members want to see a dental plan, day care center agreement, and a prescription drug plan added to the current healthcare plan. Management and the union both realize healthcare costs have increased for everyone. What is of concern for this contract is the division of costs for health insurance benefits. Pension Plan Currently, the contract calls for the company to contribute $20 a month per year of service into a retirement plan. The union members would like to see that amount increased. Holidays and Miscellaneous Days HCC performs scheduled maintenance during the week of July 4th and the week of Thanksgiving, which cuts out two holidays for union members. The union will seek to move the maintenance down time away from the two holidays because the union employees are currently not paid for them. The union will also ask to increase the holidays by two eight-hour days. From a management perspective, overtime premium costs are calculated by 10% of the total annual labor costs; therefore, each holiday or miscellaneous day added will increase annual premium costs by one percentage point. Naturally, management is interested in decreasing labor costs as mentioned earlier.
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Vacation The union will propose a reduction in the longevity requirements for vacation weeks so the union employees can get more vacation time sooner. Sick Leave The union wants a change to the sick leave policy so that leave can be accumulated. By cutting sick time each year on December 31 versus carrying it over to the next year, a company can save millions of dollars in unused sick time. This means that if an employee is sick in January he or she would need to apply for advance sick time. Strike and/or Lockout The union members have voted, and they agree to go on strike if the company does not reach an agreement soon. Management can also elect to lock out the union members if the negotiation process is not productive. As you may recall, the current contract expired two months ago, so it is important to both parties to reach an agreement soon. Management does not want a work stoppage because it will severely damage the company’s reputation as a firm dedicated to prompt delivery of quality products, and it will damage their customer relations. Management estimates that, for each strike, lockout, or unfair labor practice, the gross sales percentage change for all future years will be reduced by one percent and materials costs will rise by an additional one percent per year. Facilities Upgrade An upgrade in facilities is required to meet customer demands for higher product quality, to comply with mandated environmental regulations, and to reduce production costs. HCC must spend $2 million within the next three years to upgrade their equipment, so management has prepared three options to review with the union. The different options will affect the ability to accommodate other increases. This area is not an option in terms of making the upgrades, but how fast the upgrades are made is up for discussion. Office Staff The union wants to extend the bargaining agreement to cover the HCC office staff. The staff is willing to seek representation by a separate union if not covered in this contract. Management will then again have to bargain with a union if the HCC staff are not addressed, and it will increase costs by including the staff. Shareholder Concerns HCC has set a goal to increase the dividend yield per share to five percent in three years. As is evident, there are areas of interest by both parties, and each party needs to establish priorities and limits. For example, to include the dental, day care, and prescription drug plan, the union members might be willing to accept a deductible or co-pay. Each area needs to be studied and researched so that each side can reach an agreement that meets their needs. Each area needs options and counter options. Each side has a final option: strike or lockout. However, those options are costly for everyone and should be avoided if at all possible. In the next unit, we will look at these issues as they relate to the challenges for union and employers in the modern workplace and the market factors that influence employee benefit negations.