Case Study

MHR 6751, Labor Relations and Collective Bargaining 1

Course Learning Outcomes for Unit VI Upon completion of this unit, students should be able to:

2. Examine the challenges for unions and employers on the modern workplace. 2.1 Determine the need for an investigation, the type of evidence needed, and the essential

conditions of an investigation.

9. Analyze mediation and arbitration. 9.1 Determine the steps in the grievance process.

Reading Assignment Chapter 10: Contract Administration Chapter 11: Labor and Employment Arbitration

Unit Lesson Welcome to Unit VI! In this unit, we will look at negotiations that are not going as we would have hoped. In the last unit, we looked at some challenges organizations face when negotiating with unions over wages and benefits. Issues such as the economy, trends, politics, and availability can affect wages, benefits, and even the types of benefits an organization can offer. The union may or may not understand this, so management must prepare properly and show the union representatives—who, in turn, can show the union membership—what is available and affordable for the organization. Let’s look at our case again: Harper Container Company (HCC) and United Chemical and Plastics Workers (UCPW). The union has both single-issue items and multiyear issues to negotiate. Single-issue items are what the union is bringing to the table this year that were not in the last contract. For example, the union wants to see the life insurance benefit increased. Other single-item issues that will need to be negotiated include the establishment of a dental insurance program, a day care program, a prescription drug card program, and agreement to the proposed health maintenance organization (HMO) plan. Still, other single- issue items include acceptance of the work schedule change to continuous operations, the percentage of grievances to be settled in the union’s favor, agreement to give prior notification to lay off employees, an agreement to retrain and retain displaced workers, an agreement for no wage reduction for displaced employees, the length of the bargaining agreement, the adoption of the office staff as part of the bargaining unit, the reduction in the years needed to earn additional vacation weeks, and vacation weeks moved to avoid maintenance periods. All these items can be negotiated with management but need the majority vote by the union membership for approval. Let’s look at each of the items individually. In terms of the life insurance plan, the current health care benefits package includes group life insurance. Management will insist that it is necessary to change to an HMO plan to control healthcare costs, but the HMO plan does not have a life insurance plan. To add life insurance coverage to the proposed HMO plan would be an additional $280 per person per year. The decision here is who will pay the additional cost. Should management absorb the cost, should the employees bear it, or should the cost be divided between the two? The same decisions will need to be made regarding establishing a dental insurance program, day care, and a prescription drug card program. These benefits are not part of the HMO plan, and the union would like them added. The dental program costs $240 per person. Day care for children and elderly parents at an off-site facility is $100 per person per year and the prescription drug card program is $360 per year per person. The union membership is looking at a $980 per person per year increase in costs to accept the HMO versus keeping the same coverage and adding these benefits. The problem with the same coverage ($3500

UNIT VI STUDY GUIDE

The Challenges of Unions

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per employee per year) is that it is projected to increase 10% each year whereas the HMO plan will only increase three percent per year. Management will insist on the switch to the HMO. How they can leverage this decision in their favor will depend on who will be paying the $980 per person to add the other benefits. Multi-year items for the union to negotiate include the annual percentage increase in wages, cents per hour in evening and night shift differentials ($0.15 and $0.25 currently), total annual holidays (six currently), percentage of base wage to a retirement fund (currently three percent), supplemental unemployment benefits plan (SUB) payment to employee (70% currently), and per-hour amount contributed to SUB fund by HCC (0.05% currently). Of course, if the single-item issues are approved, the portion paid by HCC could also be part of the multi-year items to negotiate. The biggest item to be negotiated will be wages. Wage increases negotiated under the last contract did not

keep pace with the rise in industry wages. HCC employees now earn far less than their counterparts at other firms in the industry due to three years of less than industry-average wage increases under the previous contract. The union’s initial wage demand will reflect its intent to recover these losses and to ensure that its members’ wages do not again fall behind industry averages. Since management received a wage increase of five percent per year during the last three years, it will be a challenge for management to deny a wage increase. The issue will be how much of an increase and over what period of time. Although not much has been said about the shift differentials, it may be an issue when the company moves to a 24-hour continuous operation seven days a week. The union employees are used to having Saturdays and Sundays off. Now, some employees will be required to work those days as part of their weekly schedule. The union is also asking for an increase in the retirement plan. Currently, HCC pays three percent of the base salary. This item can be negotiated because the union is not pushing as hard for it as it is for the general wage increase. The union will demand a six-month notice prior to making a work process change or reduction in manning. Also, they want to ensure that the employees whose jobs are altered due to a work process change or manning reduction will be trained for another position and will not be laid off. They also want the displaced person’s salary to remain the same. This area will be a problem since management intends to upgrade the current equipment, which will displace 30 of the highest paid union employees. Management and the union will need to negotiate the salary change, if any, and retention of the employees. Remember: Management is looking for a reduction in the labor force by approximately five percent each year. One example is the current retirement or termination rate. Perhaps that is close to five percent and thus is not as large an issue for this contract. Typically, an organization does give notice of a job change—although six months may be an excessive notification. Then again, it will take some time to get the equipment in, and since this contract is being negotiated now, the union will be well aware that the company is required to upgrade the current equipment to meet federally mandated environmental standards. Federal mandates are not optional if an organization wants to stay in business. The union also wants sick leave accumulated for those employees who suffer catastrophic personal injuries or illnesses. This benefit can get very expensive for an organization, so management will want to negotiate. Management may suggest an alternative to this option, such as a sick bank where employees can donate their current leave time to others. A sick bank would not cost any more money than management is paying now for sick time, and a sick bank would allow employees the opportunity to take needed time off for catastrophic illnesses. For example, if an employee had to go through chemotherapy and did not have leave time, other employees could donate their sick leave so that the employee could be off work for chemotherapy and still get paid. Another issue of concern is 50 non-monetary individual grievances pending resolution. This high number shows that either the process for grievances is slow and cumbersome or management is not interested in resolving individual concerns. It is hard to say without knowing what the 50 grievances are about. The union will ask for a blanket approval in its favor. We know the cases do not involve money, so if they are not serious, maybe management could trade this item for another. Because there are so many outstanding cases, the management team would want to look at the grievance process and see if it can be tweaked, and, if so, perhaps that too could be part of the final collective bargaining agreement. Obviously, there are several issues to be negotiated between management and the union. Both sides have options in terms of forcing an agreement. The union membership can strike, and management can enforce a lockout. However, these are last resorts and should only be considered when the negotiation process has

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stalled. Strikes and lockouts have negative consequences for both sides. Aside from the obvious financial consequences, strikes and lockouts damage the relationship between the two parties. Distrust will develop, which will make negotiations in the future much more challenging. HCC and UCPW already have a strained relationship because the union membership has fallen prey to rumors and gossip. They fear the worst (a company shut down or company move overseas) and are prepared to strike to get what they want. The union representatives will speak for the membership and will most likely be antagonistic during the process. This creates a challenge for the management team who wants to see a contract signed. The best course of action is to put all cards on the table and trade off items that have a lesser importance than others. Perhaps management could trade the 50 outstanding grievances for acceptance of the HMO. The negotiation process should involve both give and take. Each side gives a little to get acceptance on those items most important to them. In the end, both sides have a contract they can live with. Union and management want to avoid reaching an impasse, going to strike, or enforcing a lockout. These options have negative connotations and can severely damage the relationship between management and the union membership. This damage will ultimately affect the employees, the company, and the community. Going back to our divorce analogy, when two people end in a bitter divorce, many others can get hurt in the process, including families, friends, neighbors, and communities. It is far better to work together to give and take than to demand and not budge. In the next unit, we will look at the end of the negotiation process and why people join unions.