Collective Bargaining
When a union has been legally certified, it assumes the role of official bargaining agent for the workers whom it represents. Collective bargaining is an ongoing process involving both the drafting and the administering of the terms of a labor contract.
Reaching Agreement on Contract Terms
The collective bargaining process begins when the union is recognized as the exclusive negotiator for its members. The bargaining cycle itself begins when union leaders meet with management representatives to agree on a contract. By law, both parties must sit down at the bargaining table and negotiate in good faith.
When each side has presented its demands, sessions focus on identifying the bargaining zone. The process is shown in Figure AIV.4. For example, although an employer may initially offer no pay raise, it may expect to grant a raise of up to 6 percent. Likewise, the union may initially demand a 10-percent pay raise while expecting to accept a raise as low as 4 percent. The bargaining zone, then, is a raise between 4 and 6 percent. Ideally, some compromise is reached between these levels and the new agreement submitted for a ratification vote by union membership.
Figure AIV.4
The Bargaining Zone
Sometimes, this process goes quite smoothly. At other times, however, the two sides cannot—or will not—agree. The speed and ease with which such an impasse is resolved depend in part on the nature of the contract issues, the willingness of each side to use certain tactics, and the prospects for mediation or arbitration.
Contract Issues
The labor contract itself can address an array of different issues. Most of these concern demands that unions make on behalf of their members. In this section, we will survey the categories of issues that are typically most important to union negotiators: compensation, benefits, and job security. Although few issues covered in a labor contract are company sponsored, we will also describe the kinds of management rights that are negotiated in most bargaining agreements.
First, note that bargaining items generally fall into two categories:
Mandatory items are matters over which both parties must negotiate if either wants to. This category includes wages, working hours, and benefits.
Permissive items may be negotiated if both parties agree. A union demand for veto power over the promotion of managerial personnel would be a permissive bargaining item.
Illegal items may not be brought to the table by either party. A management demand for a nonstrike clause, for example, would be an illegal item.
Compensation
The most common issue is compensation. One aspect of compensation is current wages. Obviously, unions generally want their employees to earn higher wages and try to convince management to raise hourly wages for all or some employees.
Of equal concern to unions is future compensation, wage rates to be paid during subsequent years of the contract. One common tool for securing wage increases is a cost-of-living adjustment (COLA). Most COLA clauses tie future raises to the consumer price index, a government statistic that reflects changes in consumer purchasing power. The premise is that as the CPI increases by a specified amount during a given period of time, wages will automatically be increased. Almost half of all labor contracts today include COLA clauses.
Wage reopener clauses are now included in almost 10 percent of all labor contracts. Such a clause allows wage rates to be negotiated at preset times during the life of the contract. For example, a union might be uncomfortable with a long-term contract based solely on COLA wage increases. A long-term agreement might be more acceptable, however, if management agrees to renegotiate wages every two years.
Benefits
Employee benefits are also an important component in most labor contracts. Unions typically want employers to pay all or most of the costs of insurance for employees. Other benefits commonly addressed during negotiations include retirement benefits, paid holidays, and working conditions.
Job Security
Nevertheless, the UAW’s top priority in its most recent negotiations with U.S. automakers has been job security, an increasingly important agenda item in many bargaining sessions today. In some cases, demands for job security entail the promise that a company not move to another location. In others, the contract may dictate that if the workforce is reduced, seniority will be used to determine which employees lose their jobs.
Other Union Issues
Other possible issues might include such things as working hours, overtime policies, rest period arrangements, differential pay plans for shift employees, the use of temporary workers, grievance procedures, and allowable union activities (dues collection, union bulletin boards, and so forth).
Management Rights
Management wants as much control as possible over hiring policies, work assignments, and so forth. Unions, meanwhile, often try to limit management rights by specifying hiring, assignment, and other policies. At a Chrysler plant in Detroit, for example, one recent contract stipulated that three workers were needed to change fuses in robotic equipment, a machinist to open the robotic fuse panel, an electrician to actually change the fuse, and a supervisor to oversee the process. As in this case, contracts often bar workers in one job category from performing work that falls in the domain of another. Unions try to secure jobs by defining as many different categories as possible (the Chrysler plant had more than 100). Of course, management resists the practice, which limits flexibility and makes it difficult to reassign workers.
When Bargaining Fails
An impasse occurs when, after a series of bargaining sessions, management and labor have failed to agree on a new contract or a contract to replace an agreement that is about to expire. Although it is generally agreed that both parties suffer when an impasse is reached and action is taken, each side can use several tactics to support its cause until the impasse is resolved.
Union Tactics
When their demands are not met, unions may bring a variety of tactics to the bargaining table. Chief among these is the strike, which may be supported by pickets, boycotts, or both.
The Strike
A strike occurs when employees temporarily walk off the job and refuse to work. Most strikes in the United States are economic strikes, triggered by stalemates over mandatory bargaining items, including such noneconomic issues as working hours. For example, the Teamsters union struck United Parcel Service (UPS) a few years ago over several noneconomic issues. Specifically, the union wanted the firm to transform many of its temporary and part-time jobs into permanent and full-time jobs. Strikers returned to work only when UPS agreed to create 10,000 new jobs. The Teamsters also struck Union Pacific Corp. in 2013. And union members at the Lockheed-Martin plant in Fort Worth, Texas, staged a two-week strike in 2014. Reflected the president of the union local: “I think our people gained a lot of respect for taking a stand. We had a good strike.”
Still, there are far fewer strikes today than there were in previous years. For example, there were 222 strikes in the United States in 1960 involving a total of 896,000 workers. In 1970, 2,468,000 workers took part in 381 strikes. But in 1990, there were only 44 strikes involving 185,000 workers. Since 1990, the largest number of major strikes in one year was 45 in 1994. There were only 15 major strikes in 2016.4 The largest of these occurred when 40,000 Verizon workers walked off their jobs for six weeks until new contract terms were reached.
Not all strikes are legal. Sympathy strikes (also called secondary strikes), which occur when one union strikes in sympathy with action initiated by another, may violate the sympathetic union’s contract. Wildcat strikes, strikes unauthorized by the union that occur during the life of a contract, deprive strikers of their status as employees and thus of the protection of the national labor law.
Other Labor Actions
To support a strike, a union faced with an impasse has recourse to additional legal activities:
In picketing, workers stand or march at the entrance to the employer’s facility with signs explaining their reasons for striking.
A boycott occurs when union members agree not to buy the products of a targeted employer. Workers may also urge consumers to boycott the firm’s products.
Another alternative to striking is a work slowdown. Instead of striking, workers perform their jobs but at a much slower pace than normal. A variation is the sickout, during which large numbers of workers call in sick. Pilots at American Airlines engaged in a massive “sickout” a few years ago, causing the airline to cancel thousands of flights before a judge ordered them back to work.5
Management Tactics
Like workers, management can respond forcefully to an impasse:
Lockouts occur when employers deny employees access to the workplace. Lockouts are illegal if they are used as offensive weapons to give management a bargaining advantage. However, they are legal if management has a legitimate business need (for instance, avoiding a buildup of perishable inventory). Although rare today, ABC once locked out its off-camera employees because they staged an unannounced one-day strike during a critical broadcasting period.6 Likewise, NFL players were locked out during contract negotiations in 2011 and the referees were locked out during contract negotiations in 2012.
A firm can also hire temporary or permanent replacements called strikebreakers. (The NFL employed temporary referees during the 2012 lockout.) However, the law forbids the permanent replacement of workers who strike because of unfair practices. In some cases, an employer can also obtain legal injunctions that either prohibit workers from striking or prohibit a union from interfering with its efforts to use replacement workers.
Mediation and Arbitration
Rather than wield these often unpleasant weapons against one another, labor and management can agree to call in a third party to help resolve the dispute:
In mediation, the neutral third party (the mediator) can advise, but cannot impose a settlement on the other parties.
In voluntary arbitration, the neutral third party (the arbitrator) dictates a settlement between the two sides, who have agreed to submit to outside judgment.
In some cases, arbitration is legally required to settle bargaining disputes. Compulsory arbitration is used to settle disputes between the government and public employees such as firefighters and police officers.
Administering a Labor Agreement
Once a labor agreement has been reached, its details are written into the form of a contract legally enforceable in the courts. Labor contracts almost always have precise agreements as to how the agreement will be enforced. In some cases, of course, enforcement is quite clear. If the two sides agree that the company will increase wages by 2 percent per year over the next three years according to a prescribed schedule, then there is little opportunity for disagreement. Wage increases can be mathematically calculated and union members will see the effects in their paychecks. But other provisions may be much more prone to misinterpretation and different perceptions.
Suppose, for example, that a labor contract specifies the process for allocating overtime assignments. Such strategies are often complex, and the employer may have to take into account a variety of factors, such as seniority, previous overtime allocations, the hours or days in which the overtime work is needed, and so forth. Now suppose that a factory supervisor is trying to follow the labor contract and offers overtime to a specific employee. This employee, however, indicates that before accepting, it may be necessary to check with his or her spouse to make sure that child care responsibilities can be rearranged. The supervisor, however, may feel the pressure of a deadline and award the overtime opportunity to a second employee. If the first employee objects to this course of action, then he or she may file a complaint with the union.
When such differences of opinion arise, the union member takes the complaint to the shop steward. The shop steward may advise the employee that the supervisor handled things properly, but there are other appeal mechanisms, and the employee, even if refuted by the shop steward, still has channels for appeal.
Of course, if the shop steward agrees with the employee, the shop steward may follow prescribed methods for pursuing the complaint. The prescribed methods might include talking with the supervisor to get the other side of the story and then provide for lines of appeal on up the hierarchy of both the union and the company. In some cases, mediation or arbitration may be called into play, as may other efforts to resolve the dispute. The overtime, for example, may be reassigned to the first employee. Or the overtime may remain with the second employee while the first employee is also paid.
Let’s return for a moment to the agreement reached by the Teamsters and United Parcel Service that we described previously. After the agreement was reached, the union became concerned that UPS was not moving quickly enough to create the new jobs to which it had agreed two years earlier. The union submitted its complaint to arbitration and won. UPS was given a specific timetable for adding the new jobs as agreed.7
Endnotes
1 Lipsky, David, and Donn, Clifford. Collective Bargaining in American Industry (Lexington, MA: Lexington Books, 1981). See also John Fossumcite Labor Relations: Development, Structure, Process, 12th Ed. (Homewood, Illinois, Irwin Management, 2016).
2 Koenig, David. “Labor Unions Say Recent Victories Signal a Comeback,” Associated Press news release published in The Bryan-College Station Eagle, June 11, 2013, pp. E1, E6.
3 Dwyer, Paula. “Hoffa at Halftime,” Business Week, June 26, 2000, pp. 156–160.
4 https://www.bls.gov/wsp/, accessed on May 21, 2017.
5 Amour, Stephanie. “Will Fine Divide or Solidify Pilots?” USA Today, February 15, 1999, p. 1B.
6 Amour, Stephanie. “ABC Locks Out Striking Employees,” USA Today, November 3, 1998, p. B1.
7 Dwyer, Paula. “Hoffa at Halftime,” pp. 156–160.