EmpRel/Union Campaigns

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Chapter Seven

Union Avoidance: Rationale, Strategies, and Practices

Chapter 6 examined union organizing campaigns. The chapter covered the flow of events associated with a campaign, union strategies and tactics, management responses, the roles of the National Labor Relations Board (NLRB) and the National Mediation Board (NMB), and the factors influ- encing election outcomes. At several points, the chapter emphasized that, except in isolated instances, most employers strongly resist organizing drives.

In this chapter we explore in greater depth the reasons for employers’ resistance, strategies that a growing number of employers are using to create and maintain a “union-free” employment environment, tactics that they use to prevent union success in organizing, the role of decerti- fications in deunionizing partially unionized employers, and the effects of organizational and job structuring on limiting unionization within employers.

As you study this chapter, consider the following questions:

1. Are employers increasing or decreasing their opposition to unions in the current era? What evidence is there to support your position?

2. What are the economic effects of initial unionization on the employer? 3. What additional activities appear necessary for an employer to avoid

unionization? 4. If an employer faces an organizing campaign, what components and

process are included in a typical employer response? 5. What is a decertification election, and how does it differ from other

NLRB elections?

192 Labor Relations

HISTORICAL OVERVIEW

The business and labor history of the United States, going back to the Phil- adelphia Cordwainers, is replete with examples of employer resistance to unionization. The fundamental differences in philosophies, goals, and val- ues of capitalists and trade unionists make this resistance inevitable and make employer accommodation after unionization sometimes difficult.

Capitalistic and Trade Union Philosophies Capitalists (either entrepreneurs or investor-owned corporations) use their resources to create mechanisms (productive processes) that will enable them to develop and sell goods and services in the marketplace at prices great enough to yield a higher return than that from other alternative investments. Employees are hired to produce the output. Employees are generally free to leave at any time, and capitalists would like to have the freedom to hire or terminate them, individually or collectively, as neces- sary to achieve their business purposes. Capitalists assume the risk that they will not be able to realize a positive yield from their investments and ideas. If they fail, their investments will be diminished or lost. They also expect that if they are successful in the marketplace (i.e., their returns are greater than they might realize through riskless investment) they will be able to keep these returns as a reward for taking the risk.

Trade unionists believe that wealth is ultimately created by the workers who produce the products or deliver the services to the consumer. In cases where the firm is successful in the market (i.e., it makes a profit), unions attribute a large measure of the success to the efforts of employees. Their actions are seen as ultimately adding the value to the inputs that make the products and services attractive in the market. From a union perspective, these gains need to be shared with the employees. While employers would like complete freedom to hire, fire, and assign workers to jobs, unions see employees as becoming increasingly invested in their jobs with their employers. Job property rights are established over time and employ- ers should be constrained in the types of decisions they can make about employees as employees accrue seniority and firm-specific skills. Unions also believe that employees should have a role in determining the rules that will be used to decide how these gains will be distributed and how the workplace will be governed. Employees are seen as investing a substantial part of their lives in employment, often with a particular employer. As such, they are entitled to a role in determining how the social system in which they are involved should be operated.

Employer Resistance before World War II As noted in Chapter 2, employers engaged in a variety of strategies and tactics to avoid unionization or to reduce its power. They used security forces to police the workforce, forcibly kept out organizers, or ferreted

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 193

out internal union activists or sympathizers from the late 1800s to World War II. These types of tactics were particularly prevalent in steel and auto production plants.

Employer resistance was greatest and most successful where workers were essentially unskilled, where employers controlled entry to occu- pations, and where an employer was the dominant business in a given location. The organization of the workplace gave a great deal of power to foremen (supervisors) in the direction, control, and discipline of the workforce. The ability of an employee to retain a position depended to a large extent on whether he or she pleased the supervisor. This approach has been labeled the “drive system,” and it held sway in manufacturing for most of the first third of the 20th century. 1

During the 1920s and 1930s, employers implemented their own ver- sions of “community action” plans—the American Plan and the Mohawk Valley formula. Both of these sought to link labor unions with interests outside the community—especially with foreign ideologies. The Mohawk Valley formula, in particular, mobilized community leaders and police against organizing and strikes. Both plans stressed the need for workers to be able to refrain from joining unions and to be able to deal directly with their employers rather than through outside agents. Where unionization seemed unavoidable, employers worked with sympathetic employees to help establish so-called company unions that would not be affiliated with a larger international and would be less militant and more familiar and sympathetic with the employer’s situation. 2 The passage of the Wagner Act, however, made employee organizations that were established and assisted by employers illegal.

The Corporatist Period From the late 1940s through the middle to late 1970s, large U.S. employers and unions moved through a period during which unions were essen- tially conceded a permanent role in a tripartite employment environment involving employers, unions, and the government as reflected in public policy toward employment. Laws and regulations favored collective bar- gaining as the method for dealing with industrial disputes. Productivity rose at a steady rate, and wage increases could be financed without sub- stantial inflationary pressure until the late 1960s and 1970s.

However, the oil shocks of the 1970s and their effects on inflation, together with the beginnings of economic globalization, led employers to increasingly resist wage increases and additional unionization. At the

1 D. M. Gordon, “From the Drive System to the Capital-Labor Accord: Econometric Tests for the Transition between Productivity Regimes,” Industrial Relations, 36 (1997), pp. 125–159. 2 S. M. Jacoby, “Reckoning with Company Unions: The Case of Thompson Products, 1934–1964,” Industrial and Labor Relations Review, 43 (1989), pp. 19–40; and D. Nelson, “Managers and Nonunion Workers in the Rubber Industry: Union Avoidance Strategies in the 1930s,” Industrial and Labor Relations Review, 43 (1989), pp. 41–52.

194 Labor Relations

same time, the rate of productivity gains in the United States declined substantially, and the economies of Japan and Western Europe were begin- ning, for the first time, to outstrip major segments of U.S. manufacturers. Economic returns to shareholders had gone flat in the early 1970s, and the U.S. economy was stagnating in low productivity, inflation, and uncom- petitiveness in an increasingly global economy.

Union-Free Employment Employers in newer or more rapidly growing industries such as informa- tion technology, financial products and services, discount retailing, and personal services either had never been unionized to any extent or were experiencing many new entrants who were not unionized. Employers in established industries like autos and steel were heavily unionized and faced substantial economic problems. New companies entering the steel industry, for example, created so-called mini-mills that could produce low-end commodity products at substantially cheaper prices with much lower investments and lower-wage nonunion employees.

To gain flexibility in the design of work and employee assignments, and to reduce wage levels, employers embarked on a variety of union-free strategies (detailed later in this chapter). These strategies were aimed at avoiding unionization in nonunion facilities and at reducing or eliminating unionization in the others. This approach represented a shift in manage- ment strategy from trying to secure the “best bargain” to practicing “union avoidance.” 3 The initiative was aided during the Reagan administration by a shift in public policy away from the corporatist approach and toward labor and management having greater freedom to use whatever legal tactics each wanted to use to achieve its objectives. Some argue that the scales were tipped to the extent that previously illegal tactics were either reinterpreted to be legal or overlooked as administrative oversight was reduced. 4

THE ECONOMIC RATIONALE

Chapter 1 noted that unions introduced voice and monopoly power into the workplace. For employers, the introduction of monopoly power leads to decreased profitability. As noted later in Chapter 9, unionized workers’ wages are significantly higher than those of nonunion workers in virtually every industry. The ability of unions to increase wages through monopoly power is one of the leading reasons that employers oppose unions. All else being equal, shareholder value declines since higher wages reduce profits, leading to lower share prices.

3 A. Freedman, Managing Labor Relations (New York: Conference Board, 1979). 4 W. B. Gould, IV, Agenda for Reform: The Future of Employment Relationships and the Law (Cambridge, MA: MIT Press, 1993), pp. 11–62.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 195

Infl exible Rules Chapter 10 will discuss how unionization changes the policies and prac- tices employers can use to promote, transfer, and lay off employees. Over time, various work rules and production standards are also established. These rules and standards have the potential to negatively influence pro- ductivity because they reduce the employer’s ability to include merit as a criterion in making personnel decisions and they reduce flexibility in adapting to change by applying restrictive work rules.

Profi tability Unionized firms are less profitable than nonunion firms and less profit- able subsequent to unionization. 5 Decreased profitability may occur as a result of employers’ extending negotiated wage and benefit increases to nonrepresented employees to avoid further unionization. While produc- tivity increases have been found following unionization for represented employees, this may not carry over to nonunion employees who also received increased pay. 6

Shareholder Value Shareholder returns are reduced following unionization. A study tracking organizing success after the passage of the Wagner Act in the 1930s found that organized firms had about a 20 percent lower rate of return to share- holders than did firms remaining nonunion. 7 Firms involved in organizing drives and whose securities are publicly traded experience a reduction in share prices when an election petition is filed, 8 a reduction of about 4 per- cent following a successful campaign, and a 1.3 percent reduction even if the union lost. 9 The latter probably occurs because, whether they win or lose, firms facing union activity increase wages more than those that don’t. 10 If unionization leads to lower shareholder returns, other things equal, as the agents of shareholders, top managers could be expected to try to reduce unionization in their firms, particularly if a substantial proportion of

5 R. B. Freeman and J. L. Medoff, What Do Unions Do? (New York: Basic Books, 1984), pp. 181–190. 6 B. E. Becker and C. A. Olson, “Unions and Firm Profits,” Industrial Relations, 31 (1992), pp. 395–415. 7 C. A. Olson and B. E. Becker, “The Effects of the NLRA on Stockholder Wealth in the 1930s,” Industrial and Labor Relations Review, 44 (1986), pp. 116–129. 8 S. G. Bronars and D. R. Deere, “Union Representation Elections and Firm Profitability,” Industrial Relations, 29 (1990), pp. 15–37. 9 R. S. Ruback and M. B. Zimmerman, “Unionization and Profitability: Evidence from the Capital Market,” Journal of Political Economy, 92 (1984), pp. 1134–1157. 10 R. B. Freeman and M. M. Kleiner, “Impact of New Unionization on Wages and Working Conditions,” Journal of Labor Economics, 8 (1990), pp. S8–S25.

196 Labor Relations

their compensation is in the form of stock options. 11 On the other hand, lower returns in unionized firms are accompanied by lower risk in that security prices are less volatile, perhaps reflecting increased risk sharing by employees through layoff procedures. 12

Company Investment Decisions Employers reduce their historical rates of investment in newly unionized facilities. The reduction is equal to what would occur if the corporate income tax rate were increased by 33 percent. 13 U.S. employers invest less in and are less likely to locate operations in developed economies that have high employment regulation or that impose terms of collective agree- ments negotiated elsewhere, or resist unionization more strongly than do firms that are headquartered in Europe or Japan. In Korea, compared to Korean-owned companies and compared to the United States, European- owned firms were significantly more likely to be unionized. In Taiwan, compared to U.S.-owned firms, being Japanese-owned was positively related to being unionized. 14

Industrial Structure Evidence suggests that productivity differences between union and nonunion employers are greatest in construction, where unionized workers have higher skills than nonunion workers. Relatively speak- ing, in service industries, unionized worker quality is lower than that of their nonunion counterparts. The service sector is expanding relative to the size of the manufacturing and construction sector. To the extent that lower unionized service worker quality translates into lower productiv- ity, greater resistance to unionization should be seen in the service sec- tor. Additionally, labor is a larger share of total costs in the service sector, so the effects of a given wage increase following unionization would have greater impact. The service sector ’s secular relative growth rate could be a primary contributor to the increased resistance of employers in general to union organizing.

11 This and other issues are discussed and analyzed in B. E. Becker and C. A. Olson, “Labor Relations and Firm Performance,” in M. M. Kleiner, R. N. Block, M. Roomkin, and S. W. Salsburg, eds., Human Resources and the Performance of the Firm (Madison, WI: Industrial Relations Research Association, 1987), pp. 43–86. 12 B. E. Becker and C. A. Olson, “Unionization and Shareholder Interests,” Industrial and Labor Relations Review, 42 (1989), pp. 246–261. 13 B. C. Fallick and K. A. Hassett, “Investment and Union Certification,” Journal of Labor Economics, 17 (1999), pp. 570–582. 14 P. Feuille, J. Lawler, J. Bae, and S. J. Chen, “Unionization Determinants of Multinational Firms,” Proceedings of the Industrial Relations Research Association, 51 (1999), pp. 101–109.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 197

UNION-FREE APPROACHES

A union-free organization is one that is entirely unorganized in its U.S. operations. Many companies fit this label, but among very large compa- nies, they are more likely to be in the financial services industry. Among firms with manufacturing operations, IBM and Hewlett-Packard are exam- ples of large firms without organized employees in the United States.

A study of large nonunion organizations identified two types of firms operating without unions—doctrinaire and philosophy-laden. A doctrinaire organization explicitly desires to operate without unions and implements human resource policies it believes will lead employees to resist them. Its human resource policies frequently mimic what unions have won in similar organizations through collective bargaining—for example, paying wages equal to or exceeding what unions have negoti- ated in that industry. 15 Thus, its practices are essentially a substitute for unionization. A philosophy-laden company has no unions, but the lack of organizing is because of the organization’s employee relations climate. Management engages in human resource practices it believes are right. 16 Many of these firms are included in lists of “most admired” employers or “best places to work.” They are essentially invulnerable to unionization because their employment practices are more attractive to their employ- ees than those unions typically advocate. The policies are evidently congruent with employee desires because union organizing activities in these firms are practically nonexistent. We will examine these two approaches and explore the human resource policies of each.

Environmental Factors Associated with Union Avoidance A variety of environmental factors are associated with union avoidance, some of which employers consider when making locational choices. Union penetration is highest in the Northeast and Midwest and lowest in the South and rural areas. Employers may locate in lightly unionized areas for two reasons. First, employers may believe employees in areas where unions have relatively little membership may be less willing to join unions. Mixed evidence exists on this point, as discussed in Chapters 1 and 6. Second, plants located in areas without unions don’t provide information to employees that would enable them to compare economic benefits provided by union and nonunion organizations; and, as a result, employees may not be motivated to organize for economic reasons. This

15 D. G. Taras, “Managerial Intentions and Wage Determination in the Canadian Petroleum Industry,” Industrial Relations, 36 (1997), pp. 178–205; see also W. Lewchuk and D. Wells, “When Corporations Substitute for Adversarial Unions: Labour Markets and Human Resource Management at Magna,” Relations Industrielles, 61 (2006), pp. 639–665. 16 F. K. Foulkes, Personnel Policies in Large Nonunion Companies (Englewood Cliffs, NJ: Prentice Hall, 1980), pp. 45–57.

198 Labor Relations

assumption rests on the belief that employees will choose local plants as a logical comparison, instead of other plants in the industry. However, the evidence suggests that organizing around justice, fairness, and dignity issues is more successful than organizing that emphasizes economics. 17

Employers may associate plant size as a factor to use in avoiding unions. Evidence on union election success, covered in Chapter 6, found that units with fewer than 100 employees were more vulnerable to unionization than larger units. While very large plants are more difficult to organize, employers may also believe that the type of human resource management they would prefer to implement is difficult to inculcate in a large plant. Thus, the trend appears to be toward locating plants in labor market areas that are able to support medium-size operations and planning that they will generally not exceed 500 employees unless returns to scale are large. One problem with smaller plants is that they may not be optimally pro- ductive given the appropriate capital-labor mix. 18 Plants also should not be smaller than 200 employees because a union can capitalize quickly on an issue in a smaller plant and because the plant population may be relatively homogeneous, enabling quicker and more nearly unanimous agreement among employees on whether to be represented.

Differences also exist among and within industries. Industries with a large proportion of white-collar workers, such as finance, are less likely to be unionized. But within industries, some firms have not been orga- nized, while others are completely unionized. In construction, relatively new organizations remain nonunion by guaranteeing employment dur- ing usual layoff periods and by implementing human resource policies on an organizationwide basis. Newly incorporated, technically oriented industries also have had a relatively low level of unionization, even when they have been located in traditionally highly unionized areas. Some of this is probably due to employment security resulting from rapid growth and abundant alternative employment opportunities, while other aspects of resistance to organization may be related to progressive employee relations policies and practices. Further many of these firms locate manu- facturing facilities offshore, in lower-wage areas far from their technical facilities, or they outsource production.

A Philosophy-Laden Approach to Employee Relations A model has been constructed to explain how a philosophy-laden approach to employee relations results in a variety of outcomes, one of which is the likely absence of a union. The model shows that environmental factors similar to those mentioned above may be involved in the location and

17 K. Bronfenbrenner, “The Role of Union Strategies in NLRB Certification Elections,” Industrial and Labor Relations Review, 50 (1997), pp. 195–212. 18 M. Milkman and M. Mitchell, “Union Influence on Plant Size,” Journal of Labor Research, 16 (1995), pp. 319–329.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 199

demographics of the organization’s establishments, the variety of substan- tive policies implemented, and company characteristics that promote the ability to achieve specific outcomes. These, in turn, lead to a particular cli- mate or culture. The by-products of this culture are a variety of behaviors and attitudes associated with a reluctance to join unions, an avoidance of industrial conflict, and a belief that the company is a good place to work. Figure 7.1 depicts this model, which will be explored in some detail in the following sections.

Wage Policies Large nonunion organizations generally try to lead the market in their pay levels. They try to anticipate what unions will gain at the bargaining table and provide pay increases equal to or exceeding that level, award- ing them before unions gain theirs. Nonunion organizations may also implement merit pay policies, using performance measures to differenti- ate pay increases. They communicate pay and benefit levels and prac- tices to employees. 19 More recently, companies may implement skill-based pay programs to support new organizational structures stressing team designs. Additionally, increasing numbers of companies are considering or implementing profit-sharing or gainsharing programs.

To accomplish these wage goals, an organization’s pay must compare favorably with others. 20 Location in a growing industry with relatively high profits or a position as market leader in the industry should enable an organization to maintain its ability to pay. In turn, a high-paying employer may have an advantage in recruiting and retaining high-quality employ- ees who are motivated to retain their high-paying jobs. 21

If a philosophy-laden organization considers employee preferences as it is expected to do, then benefit levels in nonunion employers should closely lead those in unionized employers because they might be expected to react quickly to changing needs associated with changing age and gen- der mixes in their workforces.

Nonwage Policies Unionized employers generally have lower turnover rates and higher rates of internal promotion and transfer than nonunion employers. If an employer sought to emulate the conditions employees desire, it would have a rationalized internal labor market with high levels of information on job opportunities available to employees.

19 Foulkes, Personnel Policies in Large Nonunion Companies, pp. 158–163. 20 Ibid., pp. 165–167. 21 J. Yellen, “Efficiency Wage Models of Unemployment,” American Economic Review, 74, no. 2 (1984), pp. 200–205.

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Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 201

Large nonunion firms generally have formalized job-posting systems, with clearly communicated and unambiguous promotion criteria that emphasize seniority and skills as well as development opportunities so that employees can develop the skills necessary to take advantage of open- ings that are likely to occur. 22

Philosophy-laden firms have generally taken a career-oriented approach toward employment. Full-time nonprobationary employees are assumed to be likely to spend their entire careers with the organization. Thus, non- union firms frequently require longer probationary periods or hire sub- stantial numbers of part-time employees to provide a buffer for permanent employees during periods of fluctuating product demand. 23 They also pro- vide substantial amounts of targeted training and development programs to continuously upgrade skills and prepare employees to perform well in expanded job roles.

Human Resource Expenditures In unionized employers, union representation and the negotiated contract take the place of many human resource programs devised by nonunion employers. Management has less need to attend closely to employee desires because doing so is the union’s responsibility and the contract spells out how employee relations will be handled. Staffing and develop- ment needs are handled through on-the-job training, and employees are retained through negotiated seniority clauses and the employees’ initial and continuing interest in being represented.

Nonunion employers have higher human resource expenditures, and more human resource workers are involved in employee relations. The employer must pay more attention to compensation because it usually tries to match or exceed what unions negotiate or to construct a particu- lar package to attract and retain employees. Development activities are emphasized. Supervisory support for problem solving is offered through the human resource department instead of the grievance system.

Employment Security Union members have the rules for determining their employment security spelled out in the contract. Almost always, increasing competitive-status seniority is associated with greater rights to continued employment in a present job or another job for which an employee is qualified. Recently, these rights have been of lower value where employers have opted to close entire facilities, but even there, entitlements to transfers and sever- ance pay are often spelled out in contracts and benefit levels increase with seniority.

22 Foulkes, Personnel Policies in Large Nonunion Companies, pp. 123–145. 23 Ibid., pp. 99–122.

202 Labor Relations

Employees in nonunion companies have their employment rights determined by their employers. Unless otherwise provided, it’s legally assumed an employee is hired at the will of the employer and can be terminated for a good reason, a bad reason, or no reason at all, as long as the termination is not for a reason prohibited by employment law. However, courts have increasingly narrowed employers’ rights to ter- minate at will, particularly where employers are judged to have acted in bad faith. 24 Even where employers have contracts with employees, and where a discharge could lead to a breach-of-contract suit, employers may be vulnerable to heavier tort damages for bad-faith behavior associated with a discharge. 25

In the reciprocal employment relationship, employees may come to feel that an implied contract exists between them and their employer. When employees invest in developing skills for their present employer and apply conscientious effort, they see themselves as producing benefits for the employer. In turn, employees may build expectations of long-term employment in return for effort and loyalty. 26

Nonunion employers use a variety of methods to enhance employment security for at least some employees. Given the need for flexibility in the workforce, more employers are subcontracting or allocating jobs that need relatively little training about the employer’s specific mode of operation to supplemental or complementary workforces of temporary employees. Frequently, these employees are hired on a contract basis for a particular term—usually a year or less. These employees are explicitly told they have no employment security guarantee beyond the period for which they are hired. When faced with a need for major employment reductions, employ- ers have increasingly implemented expanded separation incentives, rede- ployment to other facilities with or without retraining, training programs for new occupational assignments, expanded personal leaves, and work- sharing programs that involve cuts in salary and hours to save jobs or to provide incentives for those willing to terminate employment. 27

Employee “Voice” Systems Lower turnover in unionized situations (detailed in Chapter 10) might be related to the fact that union employees have an opportunity to voice their needs for change through the grievance and negotiation processes. Where

24 E. C. Wesman and D. C. Eischen, “Due Process,” in J. A. Fossum, ed., Employee and Labor Relations, SHRM-BNA Series, vol. 4 (Washington, DC: Bureau of National Affairs, 1990), p.117. 25 M. J. Keppler, “Nonunion Grievance Procedures: Union Avoidance Technique of Union Organizing Opportunity,” Labor Law Journal, 41 (1990), pp. 557–562. 26 J. A. Fossum, “Employee Relations,” in J. A. Fossum, ed., Employee and Labor Relations, SHRM-BNA Series, vol. 4 (Washington, DC: Bureau of National Affairs, 1990), pp. 12–14. 27 F. K. Foulkes, “Employment Security: Developments in the Nonunion Sector,” Proceedings of the Industrial Relations Research Association, 41 (1988), pp. 411–417.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 203

these mechanisms are absent, employees who desire change may be able to achieve it only by “voting with their feet.” 28

In unionized organizations, employees are able to exercise their voice on immediate issues through grievance procedures and on long-term issues through participation in negotiation committees. Employees who have the greatest disagreements with an organization’s operations might be expected to be most involved in union activities at the employer level.

In nonunion employers, employees have no contractual entitlement to redress grievances or to have a voice in how the organization should be run. Some nonunion organizations, particularly those with philoso- phy-laden backgrounds, have constructed elaborate systems that enable employees to voice complaints and get action on them. 29

A model system enables an employee to communicate directly with his or her company’s chief executive officer, who has a department that directly investigates causes of complaints and reports its findings. The employee’s superiors may be the focus of the investigation, but the employee is not identified, and no reprisals may be made against the person who filed the complaint. Exhibit 7.1 is a commentary on how one of these systems works.

28 A. O. Hirschman, Exit, Voice, and Loyalty (Cambridge, MA: Harvard University Press, 1970). 29 For an overview, see R. Bernbeim, Nonunion Complaint Systems: A Corporate Appraisal (New York: Conference Board, 1980).

THE OPEN-DOOR POLICY The Open-Door Policy is deeply ingrained in [the company’s] history. This policy is a reflection of our belief in respect for the individual. It is also based on the principle that every person has a right to appeal the actions of those who are immediately over him in authority. It provides a procedure for assuring fair and individual treat- ment for every employee.

Should you have a problem which you believe the company can help solve, discuss it with your immediate manager or your location’s person- nel manager or, in the field, with the manager of your location. You will find that a frank talk with your manager is usually the easiest and most effective way to deal with the problem.

Second, if the matter is still not resolved, or is of such a nature you prefer not to discuss it with your immediate manager or location person- nel manager, you should go to your local gen- eral manager, regional manager, president or general manager of your division or subsidiary, whichever is appropriate.

Third, if you feel that you have not received a satisfactory answer, you may cover the matter by mail, or personally, with the Chairman of the Board.

Source: Fred K. Foulkes, Personnel Policies in Large Nonunion Companies (Englewood Cliffs, NJ: Prentice Hall, 1980), p. 300.

Exhibit 7.1

204 Labor Relations

To reduce potential employee cynicism about management’s commit- ment to neutral grievance procedures, IBM operates a system that allows employees with complaints to have direct anonymous access to high-level management. When complaints are received, investigations are required, and the remedial action to be taken, if any, is communicated back to the grievant. Follow-up is monitored by high-level management.

These so-called open-door policies vary substantially in their real access to higher-level managers—in terms of the types of complaints or questions that can be taken up and also the degree to which employees must first contact lower-level supervisors and managers before higher- level managers will review a complaint. 30

Another innovative approach is creating an employee review board to act as an impartial group to resolve outstanding grievances. Where this approach is used, a review board of randomly chosen employees or per- sons at the same relative organizational level as the grievant hears the evi- dence and renders a binding decision for the employer and the grievant.

Employees may have concerns about due process. For due process to operate, a procedure must necessarily include an objective investigator and decision maker who has the power to make a binding decision for both an employee and the employer. 31 Unless the employee believes the employer’s procedures allow a valid appeal, the employee may prefer to take an employment grievance to court as a tort issue. 32 Nonunion proce- dures in the public sector are relatively similar to union grievance proce- dures. Peer review panels are sometimes included. Their effectiveness is related to employees’ use of them, training in their operation, assistance by management in processing complaints and obtaining information for grievants, full and fair hearings, and an explanation of the decision. 33

Some large nonunion organizations also periodically conduct attitude surveys for early identification of potentially troublesome areas. Such problem areas might include certain employee groups or certain employee relations policies such as advancement, pay, or development opportuni- ties. Given that attitudes may be precursors of subsequent behaviors, the diagnosis of potential problems allows management to conduct remedial activities to eliminate potential areas of contention.

Grievance procedures introduce justice systems to the workplace. Justice can be defined in several ways: distributive (methods used to decide rela- tive shares of an outcome), procedural (methods used to determine how

30 D. M. McCabe, “Corporate Nonunion Grievance Procedures: Open Door Policies—A Procedural Analysis,” Labor Law Journal, 41 (1990), pp. 551–556. 31 D. W. Ewing, Justice on the Job: Resolving Grievances in the Nonunion Workplace (Boston: Harvard University Press, 1989). 32 Keppler, “Nonunion Grievance Procedures.” 33 G. W. Bohlander and K. Behringer, “Public Sector Nonunion Complaint Procedures: Current Research,” Labor Law Journal, 41 (1990), pp. 563–567.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 205

decisions are reached), and interactional (methods used to communicate). Perceptions of organizational justice are influenced by all three, but pro- cedural justice is the strongest, followed by interactional and distributive. Employee input in the process and independence of decision makers are important components of all three justice types. 34

In some organizations, supervisors and managers are evaluated by their subordinates as well as by other performance indicators. They are expected to maintain a work environment leading to positive employee attitudes as measured by periodic surveys. When attitude surveys point out a problem, they may be required to devise action plans to eliminate difficulties.

Nonunion employers that operate in competitive environments are par- ticularly interested in managing conflicts in their organizations. A conflict that leads to a dispute or the possible violation of an employment law or regulation will occupy considerable management time and incur expense and uncertainty until a settlement is reached. Litigation consumes resources and polarizes positions within the organization. Increasingly, employers are developing preventive methods to diagnose potential employment disputes at an early point and to train employees and supervisors to rec- ognize and avoid situations that create unnecessary disputes. 35

About half of nonunion firms have grievance procedures. These firms have higher proportions of managers and professional employees, are larger, value human resource management, do not have unionized employ- ees, and are not in a high-technology industry. Some grievance procedures include binding arbitration if a grievance is unresolved. Characteristics associated with third-party resolution include union avoidance strategies, being a smaller firm, low assets per employee, not being in manufacturing, and being a high-tech firm. 36

Where nonunion grievance procedures exist, rates are higher when peer review and/or nonunion arbitration is used for deciding cases. If manag- ers are included in the final phase of the resolution process, grievance rates are lower, probably due to cynicism regarding the fairness of the process. Grievance rates are lower in team-based and high-performance work organizations. 37

34 D. Blancero, “Nonunion Grievance Systems: Perceptions of Fairness,” Proceedings of the Industrial Relations Research Association, 44 (1992), pp. 458–464. 35 D. B. Lipsky and R. L. Seeber, “Dispute Resolution in the Changing Workplace,” Proceedings of the Industrial Relations Research Association, 54 (2004), pp. 30–40. 36 J. T. Delaney and P. Feuille, “The Determinants of Nonunion Grievance and Arbitration Procedures,” Proceedings of the Industrial Relations Research Association, 44 (1992), pp. 529–538. 37 A. J. S. Colvin, “The Dual Transformation of Workplace Dispute Resolution,” Industrial Relations, 43 (2003), pp. 712–735.

206 Labor Relations

Other Innovative Techniques Some organizations have begun to hold mass meetings between employ- ees and top-management officials to get a sense of possible problems. One approach involves meetings between top managers and groups of lower- level employees to present current problems. This “deep-sensing” approach may give top managers a better reading on the pulse of employee morale, and employees in turn might expect more action on their problems.

Another approach, called vertical staff meetings , includes about a dozen employees from various levels who are picked at random to meet with the division’s president at a monthly meeting. The president follows up on the problems disclosed by the attendees and reports to the participants. 38

Employer/Employee Committees Employers have formed various types of management-employee com- mittees. Quality circles are one example. Others involve employees’ making recommendations to management regarding hiring, personnel assignments, hours, terms and conditions of employment, and other similar issues, which are the subject of collective bargaining in unionized employers.

The Taft-Hartley Act forbids dominance of a labor organization by an employer. The Electromation decision narrows an employer’s ability to broadly ask employees to consider employment issues. 39 Involvement of employees in nonmandatory bargaining issues is unlikely to lead to suc- cessful charges of employer dominance.

Employee participation in some of these committees may be similar to collecting attitude survey data from a sample of the plant population and using these data as a representation of overall employee attitude. It also enables both groups to enrich their understanding of what each perceives as problems in the workplace and their causes.

In Canada, company unions are permitted, and there has been a long history of nonunion employee representation in Imperial Oil. The Joint Industrial Council (JIC) in Imperial dealt with a variety of workplace issues, including wages and benefits. However, when employee JIC mem- bers perceived they were losing influence in decision making on employ- ment issues, they organized a union with the former JIC representatives as

38 For additional perspectives on employee voice, see T. A. Mahoney and M. R. Watson, “Evolving Modes of Work Force Governance: An Evaluation,” in B. E. Kaufman and M. M. Kleiner, eds., Employee Representation: Alternatives and Future Directions (Madison, WI: Industrial Relations Research Association, 1993), pp. 135–168. For an overview of research on nonunion grievance procedures, see R. B. Peterson, “The Union and Nonunion Grievance System,” in D. Lewin, O. S. Mitchell, and P. D. Sherer, eds., Research Frontiers in Industrial Relations and Human Resources (Madison, WI: Industrial Relations Research Association, 1992), pp. 131–162. 39 Electromation, Inc., 309 NLRB No. 163 (1992).

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 207

the new union’s officers. 40 Canadian firms with nonunion representation plans that stray far from offering union-type wages and benefits usually end up becoming organized. 41

Prior to being banned by the Wagner Act, a number of company unions were created, mostly during the 1920s. These were formed with the assis- tance of management and were operated at the enterprise level. Their outlawing by the Wagner Act was related to the conclusion that they lacked independence and had a compromised ability to represent worker interests. A recent analysis of company unions suggests, however, that they often enhance worker outcomes and generally benefit both employ- ees and employers. 42

Developing Practices in Nonunion Employee Relations Increasingly, companies have explicit union avoidance policies and tailor human resource practices to support these goals. Several areas in which there are differences between companies with an explicit union avoid- ance policy and those without one include providing more information to employees regarding their work group’s productivity; more work- group discussion of quality or productivity issues; more encouragement of participation mechanisms, such as quality circles and autonomous work teams; work sharing in preference to layoffs; and the development and operation of formal complaint systems. 43 Table 7.1 shows the number of positive responses toward a variety of human resource practices among a sample of large employers.

Besides their differences in communication and participation, new non- union and traditional unionized employers differ in the way the work- place is organized. To increase flexibility, employers have substantially reduced the number of job classifications. In many situations, employees are organized into teams, and the team is responsible not only for produc- tion but also for maintenance of its equipment. The team may have only one or two different jobs, which are defined on the basis of skill level rather than the functional specialty of the job holder. 44

40 D. G. Taras and J. Copping, “The Transition from Formal Nonunion Representation to Unionization: A Contemporary Case,” Industrial and Labor Relations Review, 52 (1998), pp. 22–44. 41 D. G. Taras, “Evolution of Nonunion Employee Representation in Canada,” Journal of Labor Research, 20 (1999), pp. 31–52. 42 B. E. Kaufman, “The Case for the Company Union,” Labor History, 41 (2000), pp. 321–350. 43 A. Freedman, The New Look in Wage Policy and Employee Relations (New York: Conference Board, 1985), pp. 16–20. 44 T. A. Kochan, H. C. Katz, and R. B. McKersie, The Transformation of American Industrial Relations (New York: Basic Books, 1986), pp. 81–108.

208 Labor Relations

PREVENTIVE PROGRAMS

In an effort to avoid being organized, employers design programs aimed at influencing employees to identify with management and the goals and culture of the organization, controlling contextual attributes that unions typically argue they can improve, and monitoring attitudes and behav- iors of employees to gain early evidence of any changes or situations that might encourage organizing. 45 Table 7.2 lists several initiatives manage- ment implements in each of these areas.

Some of the activities under contextual control and monitoring may be traded off or be used with increased emphasis. For example, inten- sive employee screening may be implemented to reduce the need for later surveillance and to create a workforce with more company-oriented

45 J. J. Lawler, Unionization and Deunionization: Strategies, Tactics, and Outcomes (Columbia: University of South Carolina Press, 1990), pp. 118–128.

Number of Companies in Which:

Managers Are Encouraged to Develop Practice Company Initiative or Sustain Exists

Information-related: Employees are given information about competitive or economic conditions of plant or business 431 Employees track their group’s quality or productivity performance 264* Participation-related: Employee participation programs (quality circles, quality-of-work-life programs) 364* Autonomous work teams 107* Employees meet in small work groups to discuss production or quality 340* Compensation-related: Profit-sharing, gainsharing, or bonus programs for nonexempt employees 191 Employees receive productivity or other gainsharing bonuses 121 “Payment for knowledge” compensation systems 107 All-salaried compensation systems 173 Miscellaneous: Formal complaint or grievance system 378* Work sharing instead of layoffs 176* Flextime or other flexible work schedules 162

*Statistically significant relationship with a company preference for union avoidance, at .05 or better.

TABLE 7.1 Company Practices among Nonunion Employees

Source: A. Freedman, The New Look in Wage Policy and Employee Relations (New York: Conference Board, 1985), p. 17. Reprinted by permission of the Conference Board Review.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 209

attitudes. 46 Some activities within contextual control may also be exchanged. For example, high wages and good fringe benefits vary depending on the locations being compared. If labor costs are an issue, the firm may decide to locate in a lower-wage area and then pay at rates exceeding the competition. In any case, implementing these activities requires a more intensive employee relations/human resource manage- ment effort than it would in a unionized setting. The employer needs to determine that the long-term benefits exceed the costs.

MANAGEMENT CAMPAIGN TACTICS IN REPRESENTATION ELECTIONS

Campaign tactics depend to an extent on the size and sophistication of the employer. Smaller employers or units based in more remote locations often rely on labor relations consultants or attorneys to assist in organiz- ing and implementing the campaign. As we noted in Chapter 6, the use of consultants has a negative effect on union success rates. As in preventive

46 G. M. Saltzman, “Job Applicant Screening by a Japanese Transplant: A Union-Avoidance Tactic,” Industrial and Labor Relations Review, 49 (1995), pp. 88–104.

Objective Employer Activities

Influence Orientation programs Quality circles (especially blue collar)

MBO (management by objectives) (especially for white-collar and professional employees) Information sharing Attitude surveys Structuring of group interaction Empathetic management style

Contextual control Plant location Small plant size Outsourcing and use of flexible employment arrangements Employee screening Supervisor selection and training Influential HRM department Desirable working conditions High wages, good fringe benefits Job security Career advancement opportunities Grievance program Restrictions on workplace solicitations by union supporters

Monitoring Attitude surveys Surveillance Reports from operatives and management loyalists Review of employee complaints Review of personnel records

TABLE 7.2 Employer Influence, Contextual Control, and Monitoring Tactics

Source: Adapted from J. J. Lawler, Unionization and Deunionization: Strategies, Tactics, and Outcomes (Columbia: University of South Carolina Press, 1990), pp. 120–121.

210 Labor Relations

processes, employers may implement a variety of influence, contextual control, and monitoring activities to reduce the chances of the organiz- ing union’s gaining recognition. 47 Table 7.3 lists the activities frequently used by employers. Table 7.4 shows the frequency of a variety of common employer campaign themes that were used in a sample of 201 elections.

Management often uses a variety of consultants in opposing unioniza- tion once an organizing campaign begins. Consultants may include attor- neys, campaign advisers, advocates of positive labor relations, security services that provide investigation resources, trade and industry associa- tions that provide expertise gained from previous campaigns, advocacy groups that oppose unions in general, and educational institutions that might provide union avoidance information. 48

Several tactics, such as improving wages, hours, and terms and con- ditions of employment or treating union supporters in a discriminatory manner, are unfair labor practices (ULPs). Evidence indicates that an aggressive campaign that includes unfair labor practices is associated with management victories. 49 Since the costs of committing an unfair labor practice are very low for employers relative to the costs of unions winning

47 Lawler, Unionization and Deunionization, pp. 139–160. 48 Ibid., p. 90. 49 W. T. Dickens, “The Effect of Company Campaigns on Certification Elections: Law and Reality Once Again,” Industrial and Labor Relations Review, 36 (1983), pp. 560–575.

Objective Employer Activities

Influence Captive audience speeches Small-group and individual meetings Letters, posters, handbills, and other written communications Threats and/or inducements Films, slide shows

Contextual control External: Use of regulatory agency procedures

Election delays Linkages with community institutions (banks, police, newspapers, churches, etc.)

Intraunit: Supervisor training

Discriminatory treatment of union supporters Short-term improvement in wages and working conditions Establish or support employee anti-union committee Refuse workplace access to union organizers Restrict workplace solicitations by union supporters Excelsior-list misreporting Neutrality agreements

Monitoring Attitude surveys Surveillance Interrogation Reports from operatives and management loyalists

TABLE 7.3 Employer Election Campaign Tactics

Source: Adapted from J. J. Lawler, Unionization and Deunionization: Strategies, Tactics, and Outcomes (Columbia: University of South Carolina Press, 1990), pp. 141–142.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 211

elections, this actually reinforces employer choices to commit them. Exten- sive advice on how to conduct a legal campaign in opposition to a union is readily available. 50

The lower an employer’s wage is relative to others in its industry, the greater management’s resistance will be. Employer resistance increases more rapidly with differentials than do employee desires for unioniza- tion. 51 An active union avoidance strategy for new facilities decreases the likelihood of organizing from about 15 percent to 1 percent. 52

DECERTIFICATIONS

Once certified, unions face periodic risks in continuing as the bargaining agent. A majority may vote to oust the union after the election bar ends if no contract is in effect. Decertification occurs more often in small units that lack local leadership and have low member involvement in union

50 See, for example, M. A. Spognardi, “Conducting a Successful Union-Free Campaign: A Primer (Part I),” Employee Relations Law Journal, 24, no. 2 (1998), pp. 35–52; and Part II, 24, no. 3 (1998), pp. 31–55. 51 R. B. Freeman, “The Effect of the Union Wage Differential on Management Opposition and Union Organizing Success,” American Economic Review, 76, no. 2 (1986), pp. 92–96. 52 T. A. Kochan, R. B. McKersie, and J. Chalykoff, “The Effects of Corporate Strategy and Workplace Innovations on Union Representation,” Industrial and Labor Relations Review, 39 (1986), pp. 487–501; see also J. J. Lawler and R. West, “Impact of Union-Avoidance Strategy in Representation Elections,” Industrial Relations, 24 (1985), pp. 406–420.

Campaign Theme Frequency (%)

Bargaining impact themes 66 Strikes may occur 40 High union dues 33 Potential for fines and assessments by the union 24 Unions cannot guarantee any changes 14 Possible plant closing 14 Bargaining may actually reduce wages, benefits, etc. 5 Antiunion themes 35 Union will interfere with good worker-management relations 7 Union dominated by outsiders 13 Union has failed elsewhere 6 Union is corrupt 9 Union is radical or leftist 6 Union will subject workers to rules 6 Unionism is inconsistent with employee and community values 1 Pro-company themes 20 Management is a friend to workers 7 Workers already enjoy high wages and/or good working conditions 9 Give company another chance 8

TABLE 7.4 Relative Frequencies of Common Employer Campaign Themes

Source: Adapted from J. J. Lawler, Unionization and Deunionization: Strategies, Tactics, and Outcomes (Columbia: University of South Carolina Press, 1990), p. 149.

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activities, a higher frequency of strikes, a high turnover of represented employees, low union density in the industry, and affiliation with a large national union. 53

Since the 1950s and 1960s, decertification elections have increased from 5 percent of all elections to between 12 and 25 percent. Decertifications are strongly related to macroeconomic measures, institutional changes reflected in increasing ULPs, relative reductions in social spending as unemployment increases, and a Republican administration in office. 54

JOB STRUCTURING

Employers and unions may be involved in a continual battle about whether jobs fall within the jurisdiction of the bargaining unit or not. At the time that an election is held, the NLRB defines what jobs and what employees are within the bargaining unit. As noted, the law requires that professionals affirmatively agree to be part of a bargaining unit before they can be included. If the nature of the work design is changed radically and skill requirements are increased, the employer may argue that the jobs required to perform the work are no longer a part of the bargaining unit as it was defined at election time. If, at the same time, low-skilled jobs are outsourced, the bargaining unit is gradually hollowed out by job design changes, and bargaining power is lost. Exhibit 7.2 contains information regarding job jurisdiction demands made by the Communications Workers of America (CWA) during its 2000 negotiations with Verizon that resulted in a lengthy strike.

Summary Differences between capitalistic and trade union philosophies related to the operation of the workplace cause inevitable conflicts. Employers have long resisted attempts to unionize, with industrial-type unions having lit- tle success in organizing workers until passage of the Wagner Act. Follow- ing a “corporatist” period of about 30 years after World War II, in which management generally conceded a legitimate role for labor, employers took a harder line against organizing and bargaining beginning in the late 1970s. Currently, many employers have a union-free employment goal and implement strategies to avoid new organization and to eliminate current unionization in their firms.

Unionization has a variety of economic effects on employers. In general, productivity of unionized workers is higher than that of nonunion work- ers in manufacturing and construction but not in the service sector. Union

53 See J. C. Anderson, G. Busman, and C. A. O’Reilly III, “What Factors Influence the Outcome of Union Decertification Elections?” Monthly Labor Review, 102, no. 11 (1979), pp. 23–31; and D. A. Ahlburg and J. B. Dworkin, “The Influence of Macroeconomic Variables on the Probability of Union Decertification,” Journal of Labor Research, 5 (1984), pp. 13–28. 54 E. A. Nilsson, “The Growth of Union Decertification: A Test of Two Nonnested Theories,” Industrial Relations, 36 (1997), pp. 324–348.

Chapter 7 Union Avoidance: Rationale, Strategies, and Practices 213

members earn a substantial pay premium. Where unions have negotiated wage and benefit improvements, employers generally pass these along to unorganized workers as well. Thus, the cost of unionization is not fully related to unionized workers only. Studies of stock price changes associated with unionization and deunionization generally find that share prices fall at a higher-than-expected rate when unionization or attempts to unionize occur.

Employers implement a variety of practices in an attempt to remain union-free. Employers adopting a philosophy-laden approach create an employment relationship that fits a particular culture and manner of treating employees. As a result, employees see their situations as being, in most respects, as good as or better than what they would be able to negotiate if they were represented. In other, more traditional approaches, employers may purposely implement a set of employment practices that closely mimic a unionized environment, thereby reducing the likelihood that issues would arise to lead to unionization.

Some of the areas on which nonunion employers focus in their avoid- ance of unionization include plant location decisions, wage and benefit policies, staffing practices, and employee grievance systems.

Preventive programs involve attitude surveys, surveillance, employee communications, and supervisor training. If an organizing attempt takes place, intensive communications, hiring consultants, and procedural delays are often implemented. If the union wins recognition, the employer may take an intransigent approach to bargaining an initial contract.

Decertifications are an increasing proportion of NLRB-conducted elec- tions. These must be initiated by employees during a period in which a contract is not in effect.

CWA POSITION ON JOB SECURITY IN BELL ATLANTIC/VERIZON BARGAINING (2000) CWA wants limitations on the movement of work as Bell Atlantic consolidates its merger with GTE. This would extend the assurances we won in negotiations when Bell Atlantic merged with Nynex.

CWA is fighting for real, enforceable limits on subcontracting. Far from using subcontracting to give it flexibility to handle booming business needs from time to time, Verizon’s subcontract- ing of work is widespread and constant.

CWA is seeking to bolster organizing rights for the company’s growing and nonunion wire- less operation. CWA’s goal is to help raise job standards for these workers and increase the opportunity for workers through Verizon to be able to transfer into new areas of the company. Verizon Wireless is the only major wireless oper- ation in the telecommunications industry where such organizing rights language hasn’t yet been negotiated.

Source: www.cwa-union.org/telecombarg/verizon/ issues.asp, August 29, 2000.

Exhibit 7.2

214 Labor Relations

1. Is the increasing resistance of employers to unionization a new phe- nomenon or simply a return to the historic relationship that has existed between unions and managements in the United States?

2. Would you expect a stronger anti-union response from an employer in manufacturing or an employer in a service industry?

3. In today’s increasingly competitive employment environment, would you expect to find many (or any) employers taking a philosophy-laden approach?

4. Should public policy change in some way so that unions that win rep- resentation rights have a guarantee that they will be able to negotiate a first contract?

Discussion Questions

Key Terms Company union, 193 Doctrinaire organization, 197

Philosophy-laden, 197 Open-door policies, 204

GMFC is planning to expand its U.S. oper- ations by building a new plant that will employ about 500 production workers. This new plant will manufacture motorized recre- ational equipment, including all-terrain vehi- cles, personal watercraft, and snowmobiles. The equipment will assemble mechanical components produced in other GMFC opera- tions or purchased from suppliers. The new plant will fabricate fiberglass body parts and complete the final assembly process.

GMFC would like to operate the new plant union-free. It’s likely that the United

Automobile Workers (UAW), and perhaps other internationals, will attempt to organize the workforce within a year after start-up. You are a member of a planning committee for the new plant. Your primary area of responsibil- ity involves issues related to potential union- ization and labor costs. What advice would you provide to the company on size, loca- tion, staffing, wages and benefits, and other employee relations issues that would help GMFC keep the new plant union-free and competitive?

Case: Locating the New Recreational Vehicle Plant