Labor relations

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INSTRUCTIONS

You are the Employee Relations Specialist for a national retail company with locations across the United States. The nearly 500 company employees are diverse in terms of age and demographic differences. Your primary work location is Southeast Pennsylvania. Recently, the employees in the mid-Atlantic region, managed by Kristopher Kolumbus, have expressed dissatisfaction with the work environment. There are approximately 125 employees in the mid-Atlantic region. Their specific concerns include receiving small pay raises for the past 2 – 3 years, limited employee benefits, lack of career mobility and progression, and heightened security controls implemented due to theft concerns. There has been recent talk among the employees about the possibility of unionization, and some workers have begun exploring options such as
United Food & Commercial Workers International Union
and the
Retail, Wholesale, and Department Store Union
. Before either of these unions will send an organizer to the organization, it wants to be sure that sufficient employees will back union representation. Some employees have started company-wide communication to increase interest in unionization.

As the Employee Relations Specialist, it is your responsibility to ensure that supervisors and managers follow the rules regarding a union organizing campaign. In response to this potential campaign, you decide to take some initial actions and prepare several documents to share with your boss, the Director of Human Resources:

· A summary email to the Director of Human Resources describing the issues and what actions you are taking (which include the below items)

· A one-page memo to all managers and supervisors indicating what they can and cannot do during any union organizing effort.

· An email to your human resource colleagues about actions the HR team should consider in response to some of the concerns raised by the Mid-Atlantic Region employees

· An outline for a meeting to be held between Human Resources and the organization’s leadership team regarding the organizing effort

Requirements include:

· Cover Page with Name, Date, and Title of Assignment

· Each of the 4 items indicated above (summary email, one-page memo, email to your human resource colleagues, and outline for a meeting)

· Headings to separate the sections of the paper

· A minimum of three sources (two must be from the course materials) for each response

· In-text citations in APA style

· Reference page using APA style

232

9

IMPASSE RESOLUTION

When labor and management fail to reach agreement on a labor contract through
a negotiated settlement, they may turn to a procedural technique to resolve the
impasse . This chapter, which covers issues in the middle (functional) level of
Figure 1.1 , describes various dispute resolution techniques, shows how these
techniques affect the negotiations process, and assesses how well the techniques
perform in settling impasses.

The chapter fi rst describes mediation, a process by which a third party tries to
lead labor and management to a negotiated settlement through improving com-
munication and making recommendations. The discussion then turns to fact
fi nding, a more constraining procedure in which the third party makes their
recommendations in a formal report. The next dispute procedure we consider is
interest arbitration, where the parties are constrained to adhere to the decision
of an arbitrator. 1

As with other aspects of collective bargaining, new techniques and roles are
emerging in the area of dispute resolution. Some mediators are now using interest-
based techniques to facilitate labor-management negotiations. These techniques
are consistent with the principles of interested-based bargaining (described in
Chapter 8 ). We will describe this approach and contrast it to the mediation of
more traditional negotiations. This chapter fi nishes by discussing how new third-
party roles are emerging to better respond to the environmental pressures that
the parties confront and to improve labor-management relations.

MEDIATION

Mediation is the most widely used type of third-party intervention in collective
bargaining. In mediation, a neutral party helps union and management negotiators
reach a labor agreement. A mediator has no power to impose a settlement. Instead,
he or she acts as a facilitator for the bargaining parties.

Dispute Resolution Procedures

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AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations
Account: s4264928.main.eds

Dispute Resolution Procedures 233

Mediators keep the parties talking, they carry messages between the parties,
and they make suggestions. Mediators must rely on persuasion and their com-
munication skills to convince the parties to reach a voluntary agreement. A
mediator ’ s power is limited by the fact that he or she is an invited guest; either
side can ask a mediator to leave.

The Federal Mediation and Conciliation Service

The National Labor Relations Act specifi es that the party proposing changes in
a contract (usually the union) must notify the Federal Mediation and Concili-
ation Service (FMCS) at least thirty days before the start of a strike. While the
law does not require the parties to use mediation if they reach an impasse,
the FMCS includes a staff of experienced mediators who are always ready to
assist the negotiating parties if they are invited to do so. Most states have state
mediation and conciliation agencies that also make mediators available to
negotiating parties. Both federal and state mediators are typically available free of
charge.

The FMCS, the U.S. secretary of labor, other members of the president ’ s
cabinet, or the president is sometimes brought into the mediation process in
important disputes or disputes that designated as national emergencies as defi ned
by Title II of the Taft-Hartley Act. Mediation also is frequently used in hospital
collective bargaining. The 1974 amendments to the NLRA, which extended the
act ’ s coverage to private, nonprofi t hospitals, specify that in those hospitals, mediation
has to take place before a legal strike can occur.

Mediation under the Railway Labor Act

The Railway Labor Act contains provisions for a mediation phase before a dispute
can go to the next step of the impasse process. The staff mediators of the National
Mediation Board, the administrative agency for the Railway Labor Act, serve as
mediators in bargaining that takes place under the coverage of the Railway Labor
Act.

Mediation in the Public Sector

Mediation is more commonly used in the public sector than in the private
sector. Almost all of the bargaining statutes that cover state and local government
employees call for mediation as the fi rst phase of the impasse resolution process.
In the state of New York, for example, on average, about 30 percent of all
public sector negotiations reach an impasse and required mediation. Other states
have reported somewhat lower rates of reliance on mediation, but all states
report rates that exceed the average the FMCS reported reports for the private
sector.

In the public sector, staff mediators are employed by the various state agencies
that administer the public employment bargaining statutes. In some states, mediation
is the province of ad hoc, part-time mediators. These ad hoc mediators generally
hold full-time posts as college professors, lawyers, or members of the clergy or
in some occupation related to labor-management relations.

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234 Part III. The Functional Level of Labor Relations

Types of Disputes That Can Be Settled by Mediation

Mediation is most successful in addressing confl icts that arise from poor com-
munication and misunderstandings that take place when one party or both parties
become overcommitted to their bargaining positions or because of a lack of
experience on the part of the negotiators. Mediation is least successful in resolving
confl icts caused by the economic context of the dispute, such as the employer ’ s
inability to pay or major differences in the parties’ expectations.

Where there is a wide divergence in the demands of labor and management,
the mediation process is limited because some form of outside pressure is necessary
to induce the parties to make major changes in their bottom-line positions. Thus,
the mediation process is best suited to helping the parties move marginally beyond
their initial positions. Only in conjunction with some external pressure can
mediation be expected to succeed in getting the parties to adjust their bottom
lines and reach agreement when a large gap exists between them.

Disputes that arise from of intraorganizational confl icts are also diffi cult to
resolve through mediation. Consider again the example of the teacher dispute
described in Box 8.1 , which involved major internal confl icts within a school
board ’ s management. In that case, one mediation session was held before the
internal split was resolved but little progress was made. After the session ended,
the mediator was informed that the superintendent was going to try to get the
board negotiator dismissed. For the next two months, an internal power struggle
ensued. The mediator kept in touch by telephone with all the parties, but no
formal mediation session took place until the superintendent emerged as the victor
of the internal battle and the board negotiator was replaced. Obviously, the
mediator in this case had to walk a fi ne line in trying to convince management
to resolve its internal confl icts so that negotiations could proceed.

The less the mediator becomes involved in trying to mediate disputes in one
of the parties’ organizations, the greater the likelihood that the mediator will be
accepted by both parties and the more open the parties will be to the mediator.
The diffi culty for mediators is that a failure to resolve this sort of internal dispute
can make it impossible to resolve the union-management dispute.

WHAT MEDIATORS DO

The ultimate objective of a mediator is to help the bargaining parties reach a
settlement. Yet there is more to mediation than the fi nal step that settles the
contract. Mediation follows a continuously narrowing course as the mediator
seeks to whittle away at the various issues in the dispute. Progress toward a settle-
ment is sometimes possible without necessarily completely resolving any of the
issues. In other words, progress has been made if the parties have succeeded in
narrowing their differences over the open issues.

Mediation is also a device designed to help the parties “come clean without
prejudice”—that is, to explore informally or off the record what would happen
if they were to move away from their bottom-line positions. Mediators commonly
undertake this exploratory effort to prevent the parties from miscalculating. Thus,

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Dispute Resolution Procedures 235

one major function of mediation is to allow informal bargaining to take place,
either directly between the parties or indirectly when both parties share confi dential
bargaining information with the mediator. 2

Mediators also try to prevent the parties from holding back information about
which concessions they are willing to make to avoid a strike in tripartite meetings.
It is by no means an easy task for a mediator to identify where the point of
resistance is for the parties, since in most instances negotiators are extremely wary
about sharing this information openly with a mediator. Instead, mediators must
guess at the parties’ positions from the statements they make and then try to get
the parties to put their best offer on the table.

What mediators do is infl uenced by whether the parties use traditional or
interest-based strategies in negotiations. When negotiators use interest-based
techniques, they expect mediators to be skilled facilitators of this type of process.
Mediators must be good at generating options through brainstorming and at
knowing when to suggest that negotiators form subcommittee or use some other
device for gathering additional information. They must also be able to offer
suggestions that are more than simple compromises of existing positions—mediators
must help invent new options that satisfy the interests of both parties. Most of
all, mediators need to watch for statements or actions by one party or the other
that might indicate that the process is reverting to traditional positional bargaining
and coach the parties about how to avoid this tendency. Finally, mediators must
also be skilled teachers of these new approaches to negotiations and must have a
keen sense of when to recommend that parties try interest-based techniques. This
must be done well before the start of a negotiations process since, as we indicated
in Chapter 8 , most negotiators need to be trained in these techniques before they
can use them successfully in actual bargaining.

The Traits of Successful Mediators

What are the traits of a good mediator? Perhaps the most critical requirement is
that the mediator be viewed as trustworthy by the parties. Because this type of
intervention is voluntary, no mediator can function well without the trust of the
parties.

Trustworthiness is also important because the mediator must obtain confi dential
bargaining information from the parties. If this information is used indiscriminately,
it could destroy a party ’ s bargaining strategy. Although trust can be achieved by
reputation, most experienced negotiators will be hesitant to divulge confi dential
bargaining information merely because the mediator has a good reputation. Thus,
the early stages of most mediation efforts (when the mediator is not personally
known to the parties) is often taken up with the mediator ’ s attempts to establish
his or her trustworthiness

Trust can be lost as the process unfolds. When this occurs, a mediator may
voluntarily withdraw from the case or the parties may seek other way of resolving
the dispute.

The litany of desirable mediator traits often reads like a modifi ed Boy or Girl
Scout oath: A good mediator is trustworthy, helpful, friendly, intelligent, funny,

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236 Part III. The Functional Level of Labor Relations

and knowledgeable about the substantive issues in question. Evidence suggests
that nothing substitutes for experience as a quality that helps a mediator gain the
trust of negotiators and in other ways promotes successful mediation. Mediation
is an art that one must learn by trial and error through on-the-job training.

THE DYNAMICS OF MEDIATION IN
TRADITIONAL BARGAINING

Mediation and the strategies of a mediator in a traditional bargaining process
often proceed through a cycle of different stages. 3

The Initial Stage: Gaining Trust

During the initial stages of mediation, the mediator is primarily concerned with
gaining the trust of the parties and identifying the issues in the dispute, the
emotional climate between the parties, and the distribution of power on each
negotiating team. During the initial stages of mediation, the role of the mediator
is to ask questions and listen. Normally the mediator will shuttle between the
two negotiating teams to explore issues. Separate sessions with the mediator also
give the parties an outlet for their pent-up emotions and frustrations.

In these stages the parties will often lash out at each other, exaggerate their
differences, and try to convince the mediator of their own rationality and the
unreasonableness of their opponent. It is in these early sessions that bonds of trust
and credibility can be established between the mediator and the parties.

In short, in the early stage of mediation the parties are testing the mediator.
Some of the same grandstanding that occurs in the early stages of the negotiating
cycle is repeated at this point in mediation for the benefi t of the newest entrant
into the process.

The biggest challenges for the mediator at this stage are (1) to accurately
diagnose the nature of the dispute and the obstacles to a settlement; and (2) to
get something started that will produce movement toward a fi nal resolution. The
mediator often hears from one party that “we made the last move, so the next
move is up to them,” only to proceed to the other side and hear the same thing.
The mediator cannot let either party ’ s hesitance to move fi rst halt the process
before it is given a chance. Neither party, in all likelihood, wants this to happen,
or the mediator would not have been called in the fi rst place.

The Middle Stage: Probing for Potential Compromises

Once the mediator overcomes this stalemate, the next step is to begin an exchange
of proposals and test for potential areas of compromise. At this point, it is crucial
that the mediator ’ s diagnosis of the underlying sources of confl ict is accurate.
The mediator is now beginning to intervene more actively by trying to establish
a framework for moving toward a settlement. If the mediator has misjudged the
underlying diffi culties and tries to push the parties toward a settlement prematurely
or in a way that does not overcome some of the major obstacles, his or her
credibility can be lost.

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Dispute Resolution Procedures 237

During this second stage of the mediation process, the mediator continues to
ask questions to identify the priorities and bottom-line positions of the two parties.
The mediator actively probes for possible acceptable solutions to the outstanding
issues. Once the parties have begun to discuss specifi c proposals, the mediator
attempts to determine whether their bottom-line positions are close enough. If
they are, then the mediator presses for modifi cations that would yield an
agreement.

The mediator ’ s ability to estimate the parties’ bottom-line positions is crucial
at this stage, as is the timing. When the mediator judges the bottom-line positions
to be close enough to push toward a settlement, he or she takes a more assertive
role. The mediator can suggest compromises, push the parties to make compromises
that they earlier stated they would be unwilling to make, and, in general, try to
close the gap between the parties. Engaging in such active tactics prematurely
(that is, when the parties are still too far apart) will damage the mediator ’ s credibility
and acceptability.

When conditions are not right for settlement, the mediator must hold back
from overly aggressive tactics. When the situation is ripe, however, the mediator
must take action or risk losing the opportunity to forge a settlement. The mediator ’ s
prior experience helps guide him or her in judging timing. At this point in the
process, the art element of mediation comes to the fore.

The Final Stage: The Push to Compromise

As the pressure to reach a settlement builds and the mediator senses that the time
for the fi nal push toward resolution is at hand, the mediator becomes more
aggressive. No longer passively listening to the parties’ arguments and rationaliza-
tions, the mediator tries to get the parties to face reality and adjust their expectations.
The mediator may push compromise solutions while at the same time being
careful to avoid becoming identifi ed with a specifi c settlement point.

Overidentifi cation with a solution that one or both party rejects can limit the
continued usefulness of the mediator. Thus, any compromises the mediator proposes
must be presented as merely recommendations.

The dynamics in each of the negotiating teams often change at this point as
well. Frequently, team members will differ on the substantive issues. The mediator
will often look to the professional negotiators on each team for help in dealing
with the more militant team members. Sometimes the reverse is true: the negotiator
will look to the mediator for help in calming a militant faction on the bargaining
team.

These fi nal-hour sessions often require that someone—the mediator, the profes-
sional negotiator, or both—convince the hard-liners that the best deal is at hand
and that the fi nal compromises necessary to reach a settlement should now be
made. Again, the parties’ confi dence in the mediator is critical to the success of
these fi nal dynamics.

Sometimes the mediator is called on in these fi nal stages to make what are
called mediator proposals. Mediator proposals are riskier and more formal ventures
than the many other suggestions a mediator makes during the course of an

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238 Part III. The Functional Level of Labor Relations

intervention. A mediator proposal is normally made only when both parties are
close to a settlement and the mediator believes that by making the proposal the
parties will come to agreement.

In some cases, the mediator may make a proposal that the parties have already
tacitly agreed to but for political or other reasons prefer not to offer themselves.
Some mediators believe that a proposal should never be made unless the mediator
is sure it will be acceptable to both parties.

The preceding description of the dynamics of mediation points out that mediators
must be aggressive in pushing the parties toward a settlement—when the climate,
the timing, and the pressures on the parties are right. The parties often prefer
aggressive mediators, and the aggressiveness of a mediator has been shown to be
related to the effectiveness of the mediation process. 4

Mediation in Interest-Based Bargaining

We have already noted that the role of the mediator in interest-based processes
takes on more of the role of an active facilitator, teacher, and coach than is the
case in a traditional bargaining process. The cycle of negotiations is likely to be
different as well, with less focus on the contract or the strike deadline as the
defi ning moment. Since it is necessary to train negotiators in this method, the
mediation process may begin well before the negotiations process starts. The
FMCS offers training in interest-based bargaining to parties as part of what it
refers to as “preventive mediation.”

In Box 9.1 , George Buckingham, one of the most experienced and successful
interest-based mediators in the FMCS, describes how and when he uses interest-
based techniques to facilitate the bargaining process.

BOX 9.1
How Interest-Based Mediation Works

Well before negotiations are scheduled to begin, I provide parties who
express an interest or who we believe might be good candidates for an
interest-based approach with a one-and-a-half-hour informational briefi ng.
We discuss factors to think about in deciding whether or not to use this
approach. In the process of this discussion, I probe to see if there are any
factors that would lead me to recommend against using the process, such
as no evidence of cooperation in the relationship or a history of contract
rejections by one side or the other.

If the parties agree to take the next step, we then hold a two-day required
training session for all members of the union and employer negotiating
committees. At the end of the training, we make a trilateral (union, employer,
and mediator) decision on whether or not to go forward with the process.

The next step is to hold a prenegotiations meeting to agree on two sets
of ground rules. The fi rst set are transitional ground rules that outline what

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Dispute Resolution Procedures 239

will happen if at some stage the interest-based process breaks down and the
parties need to return to a more traditional process. This serves as a “road
map” back to the traditional process and provides a safety valve for the
parties. The second set are process ground rules. Here we deal with rules
such as how we defi ne consensus decision making, how we will deal with
press releases, how and when information will be communicated to con-
stituents, and so on.

Then we are ready for an exchange of issues using an interest-based
format. This exchange takes the place of a traditional exchange of proposals,
or the laundry list of demands. Each issue is framed as a question that cannot
be answered in a yes or no fashion. For example, an issue might be framed
as: “How can we accommodate employee needs to have greater time off
for funerals and handle staffi ng needs effectively?” We also agree at this
stage on the order we will take up issues and on any information that needs
to be obtained in order to discuss them. Bargaining dates are set at this
time, after giving adequate consideration to the time needed to collect the
necessary data.

For the actual bargaining, we commit to participating in the fi rst two
sessions or until the fi rst issue is settled, to returning when the economic
issues are taken up, and to being present as the process is coming to an end.

What do I do in these sessions? My basic role is to facilitate the process,
to keep the process on a problem-solving track, and to make sure they lay
out all the issues and problems and don ’ t stray into a general discussion
mode that will take them back to traditional positional bargaining. If, in
the rare instance, I feel the need to make a substantive suggestion, I indicate
that I am stepping out of my facilitating role to do so.

One of the hardest tasks the parties have is to agree on standards for
evaluating options. I suggest three simple standards, but the parties are
encouraged to develop their own as well. The three I use are: (1) Can we
do it? (2) Does it convey benefi ts (related to their interests)? (3) Is it acceptable
to the constituents?

The parties take up noneconomic issues fi rst. Then, in perhaps about 35
to 40 percent of the cases, I fi nd us using more traditional approaches to
resolve the deep-gut economic issues. But even here, when the interest-based
process has been successful on the earlier issues, we generally fi nd more of
a problem-solving focus and willingness to listen to each other that is often
absent in the fi nal stages of a traditional negotiation. The parties are more
apt to stay in an interest-based bargaining frame of mind.

Two big differences in my experience with this approach are that the
contract deadline and the strike threat are not major factors. In only three
out of 60 cases I ’ ve mediated in this way has a strike notice been issued,
and then it was done to satisfy constituency needs rather than as a serious
threat across the table. The overwhelming majority of cases have settled
prior to the contract expiration date, while some have gone beyond the

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240 Part III. The Functional Level of Labor Relations

When is this approach likely to be most successful? FMCS commissioner
Buckingham suggests that it is most likely to succeed in one of two situations:
(1) when the parties already have other elements of a cooperative relationship in
place and want to take the next step by carrying problem solving into the bargaining
process; or (2) when there will be serious adverse consequences if the parties
don ’ t solve a set of problems they face. In either case, the key is to have some
strong motivating factor that helps keep the process on course when the going
gets tough.

THE POTENTIAL TENSION BETWEEN WHAT IS
RIGHT AND WHAT WILL BRING A SETTLEMENT

In theory, a mediator is not supposed to be concerned with the substance of the
outcome. Instead, the traditional view is that mediation works because the job
of the mediator is simply to bring the parties to agreement. Yet there are times
when mediators have trouble accepting this principle. Consider, for example, the
mediator in the case described in Box 9.2 . Here, the mediator could not let his
personal views of management ’ s negotiating style get in the way of a settlement.

All mediators must struggle from time to time with the moral question of how
far to compromise their personal values or perceptions of equity in attempting
to fashion a contract settlement. The traditional answer to this question has been
that the mediator ’ s primary responsibility is to help the parties reach an agreement
and to keep his or her values and preferences, or the values and preferences of
the larger society, out of the process. According to this view, the mediator should
not attempt to create a settlement that would be most consistent with the public
interest. The traditional view is that the way the mediator can best represent the
public interest is by helping prevent or ending an impasse. 5

The moral dilemma is even more diffi cult to resolve if questions of individual
rights are part of the settlement package one of the parties prefers. Mediators will
continue to struggle with this moral dilemma and decide how high a priority
they are willing to put on the singular goal of achieving a settlement. 6

expiration with no serious repercussions. In only one occasion did I hold
a mediation session beyond 8 p.m.

I like to use two criteria to judge whether the interest-based approach
has been successful. The fi rst is whether the parties use it again the next
time. About 80 percent do so. The second is whether the number of relation-
ship or noneconomic issues brought to negotiations decrease the second
time around. If interest-based bargaining is able to really solve problems,
the number of “relationship” or noneconomic” issues should go down.

Source : Interview with FMCS commissioner George Buckingham, July 1997.

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Dispute Resolution Procedures 241

BOX 9.2
Report of a Frustrated Mediator

This dispute was resolved after one long night of mediation. The parties
had been negotiating for over a year. A fact-fi nding report had been issued,
and considerable progress had been made on economic issues. The major
remaining unresolved issue was whether these employees [janitors, bus
drivers, and cafeteria workers in a school district] would have binding
grievance arbitration in their contract. . . . It was clear that the [school] board
was adamantly opposed to binding arbitration. . . . The [mediation] process
was made more frustrating by the condescending attitude that the district
administrators took toward the members of the bargaining unit. Unfortunately,
my role at this fi nal step of the process was simply to get the union negotiators
to face the reality that there was no way they could get an agreement
containing binding arbitration. . . .

If I had let my own feelings toward the board negotiating team surface
during mediation, the process would have not only broken down but it
would have been even harder for the parties to put this long and frustrating
case behind them. Consequently, one walks away from this type of dispute
with a lot of pent-up anger and frustration.

Some mediators, especially those who favor the use of interest-based techniques,
reject the traditional view. Instead, they argue that an effective mediator will help
the parties articulate their basic interests and then help steer the process to results
that best serve their interests. In this view, the substantive terms of the settlement
are as important to the success of mediation as a settlement is.

FACT FINDING

When fact fi nding takes place, a third party (a fact fi nder) is called in to study
the issues that are in dispute between labor and management negotiators who
have reached an impasse in their negotiations. After gathering facts, the fact fi nder
then makes a report or an announcement that may be made public. The fact
fi nder ’ s report often includes recommendations about what the fact fi nder believes
is an appropriate settlement of the impasse. Fact-fi nding is premised on the hope
that the recommendations and a neutral report will bring suffi cient pressure to
bear on the parties to induce them to accept the recommendations of the fact
fi nder or to use them as the basis for a negotiated settlement.

Fact fi nding is rarely used in the private sector (like mediation, the NLRA
does not require it), but it is commonly used in the public sector. 7 Fact fi nding
also has been frequently used in negotiations that are covered under the Railway
Labor Act (the Railroad Mediation Board can call for it). The national emergency

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242 Part III. The Functional Level of Labor Relations

dispute procedures of the NLRA also authorize fact fi nding as part of the process
by which the president can call into action an emergency impasse resolution board.

A Case of Fact Finding

The following describes the use of fact fi nding in a dispute between a teachers’
union and a school district.

A neutral [person] fi rst attempted to mediate the dispute but was discouraged by the
professional negotiators for each side. They explained that they knew what their
differences were and that if it was up to them alone they could settle the dispute
without the help of a neutral party. The problems were that the school board was
unwilling to accept what both negotiators agreed was a reasonable salary settlement
and one faction in the union was unwilling to compromise on a contract-language
issue. The mediator therefore agreed to proceed directly to fact fi nding. In the course
of the hearing, the two negotiators presented their cases in ways that made it clear to
the fact fi nder what they would agree to and thus what they wanted the fact fi nder
to recommend. The fact fi nder ’ s recommendations closely followed these tacit admissions.
Both negotiators used the “neutral ’ s recommendations” in selling the tacit agreement
to their constituents.

INTEREST ARBITRATION

Interest arbitration involves the use of a third party (an arbitrator) who is
empowered to impose a settlement in a contract dispute. In interest arbitration,
the arbitrator sets the terms of the contract. Thus, interest arbitration is different
from grievance (or rights) arbitration, in which an arbitrator is used to settle a
dispute during the term or about the implementation of an existing contract (see
Chapter 12 ).

Interest arbitration is not used very often in the private sector in the United
States. The few exceptions in the private sector have been major league baseball
(see Box 9.3 ), national emergency disputes under the Taft-Hartley or Railway
Labor Acts or cases where the parties voluntarily submitted their disputes to
arbitration. Interest arbitration has been used more frequently to settle impasses
in public sector bargaining.

The NLRA gives labor and management the right to strike over impasses and
this leads to limited use of interest arbitration. Many proponents of collective
bargaining in the private sector have long argued that the right to strike (and
thus the absence of interest arbitration) was essential for the preservation of free
collective bargaining .

As one scholar put it over 35 years ago:

In the case against compulsory arbitration there are distinguished prosecutors galore,
and the catalog of inevitable disasters runs the gamut from simple bad decisions to
dislocation of the economic foundations of free enterprise. The division is not liberal/
conservative, nor labor/management—there is no division. All the principal authorities
are in agreement. 8

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Dispute Resolution Procedures 243

BOX 9.3
Major League Baseball Salary Arbitration Procedure

Eligibility

Any Player or Club may submit to salary arbitration with the consent of
the other party. However, a player [with] between three and six years of
Major League service may submit to salary arbitration without the consent
of the other party.

Selection of Arbitrator

The Players Association and the Player Relations Committee shall annually
select the arbitrators.

Procedure

Within three days of salary arbitration submission, the Players Association
and the Players Relations Committee exchange salary fi gures. The Player
has the option of withdrawing within 7 days of the receipt of the Club ’ s
salary fi gure. And in the event the Club or Player reach a salary agreement
before the arbitrator reaches his decision, the matter shall be withdrawn
from arbitration.

Timetable and Decision

The Player and the Club submit the salary fi gures to the arbitrator at the
hearing. The arbitration hearing is held as soon as possible after submission and
scheduled between February 1 and February 20. The arbitrator may render his
decision on the day of the hearing, and shall make every effort to decide no
later than 24 hours following the close of the hearing. Finally, the arbitrator
is limited to awarding only one or the other of the two fi gures submitted.

Conduct of Hearings

Each party is limited to one hour for initial presentation and a half-hour
for rebuttal and submission. There are no continuances or adjournments.

Criteria

The criteria used in determining the Player ’ s worth include the quality of
the Player ’ s contribution to his Club during the past season (including his
overall performance, special qualities of leadership and public appeal), the
length and consistency of his career contribution, the record of the Player ’ s
past compensation, comparative baseball salaries, the existence of any physical
or mental defects on the part of the Player, and the recent performance
record of the Club. In addition, any evidence relevant to these criteria may
be submitted as evidence.

Source : Basic Agreement between the American and National League of Professional
Baseball Clubs and the Major League Baseball Players Association, January 1, 1986.

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244 Part III. The Functional Level of Labor Relations

In this view, interest arbitration should be limited to cases of dire national
emergency or to disputes in which the parties themselves decide it is in their
interest to submit their dispute to a procedural substitute for a strike.

The Use of Interest Arbitration in the Public Sector

As the demand for public sector bargaining became more vocal in the late 1960s
and early 1970s policy makers had to make a diffi cult choice: unions were calling
for collective bargaining rights, while elected offi cials were reluctant to grant
public employees the right to strike. Because both unions and management had
little experience with interest arbitration and doubted its effectiveness, most states
initially turned to fact fi nding as a compromise between the right to strike and
interest arbitration. By the late 1970s, about half the states that had endorsed
collective bargaining for public employees turned to some form of arbitration for
resolving disputes between city governments and their police and fi refi ghters.

Since interest arbitration has been used primarily in the public sector, the public
sector record reveals how well it works. This record is discussed below along
with occasional references to experience with arbitration in the private sector.

Types of Interest Arbitration

There are many different forms of interest arbitration. One key difference is
whether the procedure is voluntary or compulsory. Voluntary arbitration is a
dispute resolution system in which the parties agree to submit their differences
to arbitration. Compulsory arbitration is a system in which law requires the
parties to submit their unresolved differences to arbitration if they cannot reach
a negotiated settlement on their own.

Another important distinction is the difference between conventional arbitration
and fi nal-offer arbitration. Conventional arbitration (which can be either
voluntary or compulsory) is a dispute resolution process in which the arbitrator
is free to fashion any award he or she deems appropriate. Although the conventional
arbitration award may be a compromise between the proposals of the employer
and those of the union, the arbitrator is also free to accept either party ’ s proposals
or, for that matter, to go below the employer ’ s offer or above the union ’ s offer
(although that rarely happens).

Terminology Used in Final-Offer Interest Arbitration

In fi nal-offer arbitration , the arbitrator must choose either the employer ’ s
proposal or the union ’ s; the arbitrator may not fashion his or her own compromise.
As a further distinction, fi nal-offer arbitration may be handled on a total package
basis—that is, the arbitrator must choose the complete offer of the employer or
the complete offer of the union on all issues. Final-offer arbitration can also be
handled on an issue-by-issue basis. The arbitrator, for example, might choose the
employer ’ s wage offer, the union ’ s offer on health insurance, and the employer ’ s
offer on vacation days. 9

There is yet another complication. The arbitrator can be an individual or a
panel of individuals. Panels can either be composed of all neutrals or they can be

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Dispute Resolution Procedures 245

tripartite. Tripartite panels are composed of one or more representatives of the
employer, one or more representatives of the union, and one or more neutrals.

Debates over the Performance and Effects of
Interest Arbitration

What does the use of interest arbitration do to the parties’ ability to negotiate
on their own? What kinds of settlements do arbitrators impose and how do the
arbitrators’ settlements compare with the settlements labor and management reach
on their own? Does interest arbitration prevent strikes? These questions are part
of the controversy that surrounds the use of interest arbitration. The evidence
on these issues is only summarized here because public sector experience with
interest arbitration is examined in detail in Chapter 13 .

Interest arbitration in the public sector has had a better record of preventing
strikes than fact fi nding or bargaining without any impasse procedure has. Although
no dispute resolution procedure, including interest arbitration, can prevent all
strikes, interest arbitration appears to reduce the probability of strikes more than
fact fi nding does.

To date there is little evidence that interest arbitration has been overused where
it is available. The vast majority of disputes tend to be settled without resort to
interest arbitration. Even in states where that have used interest arbitration for
thirty years, the rate of cases going to interest arbitration rarely exceeds 25 percent. 10

The evidence of the effect of arbitration on contract terms is that arbitrators
tend to impose settlements that are not very different from the settlements that
parties who bargain reach where arbitration is not available as an impasse resolution
procedure. The use of interest arbitration across a state to settle public sector
disputes does appear to narrow the range of settlements by eliminating extremely
high and extremely low settlements. The effect of interest arbitration on contract
terms such as wage levels appears to be modest. Where an effect has been measured,
arbitration tends to lead to wage levels that are 5–10 percent higher than wages
in jurisdictions where arbitration is not available.

Voluntary Interest Arbitration in the Private Sector

Voluntary interest arbitration schemes have been used in the private sector in
electrical construction, large construction projects (such as the Cape Canaveral
space center and the Alaska pipeline project), and newspapers.

The only signifi cant private sector use of interest arbitration now occurs in
major league baseball. As noted earlier, major league players and baseball club
owners have negotiated a master collective bargaining agreement for thirty years.
That master contract stipulates that the salaries of individual players are determined
through negotiations between each player and his respective club owner.

As Box 9.3 shows, the master agreement requires that a player ’ s salary be set
by an arbitrator if an impasse is reached between the player and the club owner
in salary negotiations. The arbitrator is restricted to choosing the fi nal offer of the
player or the fi nal offer of the owner. The terms and conditions of employment
for baseball players other than salary are not subject to interest arbitration. Club

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246 Part III. The Functional Level of Labor Relations

owners became very dissatisfi ed with the use of arbitration in the 1990s and tried
to eliminate it in negotiations and during the strike of 1994, but they were not
successful on this point. Instead, the parties modifi ed the procedure by agreeing to
phase in the use of three neutral arbitrators per case rather than a single arbitrator.

Voluntary interest arbitration has also been used on an ad hoc basis as a confl ict
resolution device of last resort. From time to time diffi cult strikes, such as disputes
between the United States Postal Service and postal worker unions, have been
resolved with an agreement to arbitrate (see Chapter 8 ).

BOX 9.4
Interest Arbitration in the California Agriculture Industry

As one of the most essential industries in California, the agriculture industry
had been under intense pressure to fi nd a solution to a subpar collective
bargaining system. Because of this, in 2002, the California legislature passed
a law that created mandatory interest arbitration for cases where employers
and unions in the agricultural industry were unable to come to a consensus
while bargaining for an initial collective bargaining agreement. The law
was quickly subject to legal challenge, although the courts ultimately denied
the challenge.

Hess Collection Winery, an agricultural employer in the Napa Valley,
fi led an appeal claiming that the legislature had no authority to pass a law
mandating interest arbitration. In fact, it went as far as to say that mandating
interest arbitration only in the agricultural sector of the state ’ s economy
seriously violated equal protection guarantees in the state constitution. As
a result of this appeal, the law was brought to the California Court of
Appeals.

On July 5, 2006, because of the need to effi ciently reach an agreement
in collective bargaining contracts in the industry and because the statute
only applies to the initial bargaining offer, the California Court of Appeals
upheld the previous decision and deemed mandatory interest arbitration
lawful because the court believed it to be constitutionally accurate. Justice
Richard Sims of the appeals court stated that the law “bears a rational and
conceivable relationship to a legitimate state purpose,” and as such, it passes
the constitutionality test and should therefore be allowed. Sims went on to
say that “agricultural employees are in an especially unequal bargaining
position with respect to their employers and that their health, safety, and
welfare require special protection.” Therefore, Judge Sims concluded that
extra security must be awarded to them and the law mandating interest
arbitration would help “protect the industry by promoting stability in
agricultural employment.”

Source : “California Court Upholds Constitutionality of State ’ s Mandatory Interest
Arbitration Law,” Daily Labor Report , July 7, 2006, AA-1.

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Dispute Resolution Procedures 247

In voluntary interest arbitration schemes, the parties normally limit the
discretion of the arbitrator. In baseball, the arbitrator rules only on player salary
(although other parts of the master baseball contract are subject to grievance
arbitration).

The key to the negotiation of voluntary interest arbitration plans is that both
parties must perceive benefi ts in agreeing to set aside the right to strike. Labor
and management generally voluntarily accept interest arbitration only when strike
costs are high.

The Structure and Process of Interest Arbitration

A wide array of choices is available for designing the structure of interest arbitration
systems. These structural options determine the nature of the decision-making
process in interest arbitration in important ways. In fact, the structure the parties
choose is a refl ection of their fundamental views on the appropriate functions of
an interest arbitration system. This section describes two types of decision-making
processes in interest arbitration and suggests how these are infl uenced by the
structural design of the system.

A Combined Mediation-Arbitration Approach

The two decision-making processes available are (1) a mediation-arbitration process;
and (2) a judicial decision-making process. Advocates of the mediation-arbitration
process view interest arbitration as an extension of the collective bargaining process
in which the neutral arbitrator seeks to shape an award that is acceptable to the
parties. Mediation-arbitration places a premium on using the interest arbitration
proceeding as a forum for continued negotiations or mediation, albeit with the
arbitrator holding the ultimate authority to decide on the contract.

Those who advocate the mediation-arbitration approach claim that no system
of interest arbitration can hope to survive for long unless it produces outcomes
that are acceptable to the parties.

A Judicial Approach

The countervailing view of interest arbitration holds that the arbitrator should
focus on the “facts” of the case. In this judicial approach, the arbitrator adheres
strictly to predetermined criteria and is not infl uenced by the bargaining power
or preferences of the parties.

NONTRADITIONAL DISPUTE RESOLUTION

The need for skilled third parties in confl ict resolution and problem solving is
not limited to the formal negotiations process. Indeed, in recent years a variety
of new dispute resolution roles have emerged in settings where labor and
management have been attempting to achieve fundamental changes in their bargain-
ing relationships.

For example, neutrals, for example, are increasingly being called on to chair
or facilitate labor-management committees, to serve as consultants to labor and

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248 Part III. The Functional Level of Labor Relations

management in quality-of-working-life programs, to facilitate the joint planning
or joint design of a new plant or work system, or to work on other experimental
projects designed to solve long-standing problems in a bargaining relationship.
All of these roles require the skills of a labor mediator. In addition, these roles
differ from traditional mediation or arbitration roles in several important ways.

First, most require that problems be addressed on an ongoing basis. 11 Often
this requires that the parties fi rst undergo a team-building effort to change their
attitudes and to increase the level of trust they have in each other.

Second, these third parties must have specialized knowledge of the substantive
problems the parties face. The third party is expected to be a consultant who
brings technical expertise to discussions of the problem and is sensitive to the
needs of both labor and management.

Third, the time horizon of the process tends to be very long. Whereas the
traditional mediator is mainly concerned with achieving a settlement of the
immediate impasse, third parties involved in these new roles must focus on the
effects of any decision on the quality of the longer-term relationship.

The behavior of the parties to these new processes is also signifi cantly different
from traditional labor-management behavior. For example, to be successful,
long-term problem solving requires the parties to share information more readily
than they do in traditional collective bargaining.

In response to this growing demand, the FMCS has increased its emphasis on
what it calls “preventive mediation”; that is, programs designed to train the parties
in state-of-the-art labor-management practices or to facilitate more directly efforts
to improve relations in particular industries or particular companies and unions.

At the same time, however, the parties may still need to turn to the traditional
mediation and arbitration processes. In short, both effective confl ict resolution
and longer-term problem solving are critical to the success of contemporary
collective bargaining relationships.

KEY ORGANIZATIONS AND AGENCIES INVOLVED IN
IMPASSE RESOLUTION

The key organizations and agencies that are involved in the resolution of impasses
are summarized below.

American Arbitration Association (AAA): A private nonprofi t organization that
facilitates the process of arbitration. The AAA maintains lists of arbitrators and makes
facilities available that can be used for arbitration hearings. The AAA offers seminars
to train young arbitrators and to keep experienced arbitrators informed about emerging
developments. Much of the arbitration work AAA perform arbitrators is grievance
arbitration, but AAA arbitrators also become involved in interest arbitration.

Federal Mediation and Conciliation Service (FMCS): An agency of the federal
government mandated by the National Labor Relations Act. The NLRA requires
labor and management to notify the FMCS at least thirty days before a strike. The
FMCS includes a staff of 250 mediators who offer their services to labor and management
involved in impasses.

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Dispute Resolution Procedures 249

National Academy of Arbitrators (NAA): A professional society of experienced
arbitrators. Most of the cases NAA arbitrators hear are grievance arbitrations, although
NAA members are also involved in interest arbitration.

National Mediation Board (NMB): An administrative agency created by the
Railway Labor Act. One of the functions of the board is to mediate disputes between
labor and management that arise in the transportation industries covered by the Railway
Labor Act.

State mediation and conciliation agencies: A variety of agencies exist at the
state level to facilitate the mediation of labor impasses. In states that grant public
employees bargaining rights, a separate agency concerned with public sector bargaining
impasses frequently exists. In New York, for example, the Public Employment Relations
Board (PERB) provides mediation assistance among its many functions.

Summary

This chapter described the three major impasse resolution procedures—mediation,
fact fi nding, and interest arbitration. The use of these procedures has varied
extensively. Mediation has been commonly used in both the private and public
sectors. Fact fi nding and interest arbitration, in contrast, have been used in the
public sector with only a few exceptions.

The procedures also vary in the degree to which they constrain the actions of
labor and management. At one extreme is mediation, where the parties can, and
sometimes do, dismiss the mediator or ignore the advice given. At the other
extreme is binding interest arbitration, where the parties must follow the decision
of the arbitrator.

The purpose of any impasse resolution procedure is to help the parties achieve
a contract settlement that both labor and management fi nd acceptable and that
helps sustain a successful labor-management relationship. Good mediators, fact
fi nders, and arbitrators understand the issues that divide labor and management
and have the ability to offer creative solutions to these problems.

Discussion Questions

1. Describe the objectives of mediation.
2. What are the three stages that typically occur in a mediation?
3. Discuss some of the criticisms of interest arbitration.
4. Contrast mediation-arbitration and judicial arbitration.

Related Web Sites

Federal Mediation and Conciliation Service (FMCS):
http://www.fmcs.gov

National Mediation Board (NMB):
http://www.usa.gov/federal-agencies/national-mediation-board

Alternative Dispute Resolution Forum:
https://www.adrforum.com/

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250 Part III. The Functional Level of Labor Relations

Suggested Supplemental Readings

Cullen , Donald E. National Emergency Disputes . Ithaca, N.Y. : New York State School of
Industrial and Labor Relations, Cornell University , 1968 .

Goldberg , Stephen B. , Eric D. Green , and Frank E. A. Sander . Dispute Resolution . Boston :
Little, Brown , 1985 .

Kolb , Deborah . The Mediators . Cambridge, Mass. : MIT Press , 1982 .
Pruitt , Dean G. , and Jeffrey Z. Rubin . Social Confl ict: Escalation, Stalemate, and Settlement . New

York : Random House , 1986 .
Rubin , Jeffrey Z. Dynamics of Third-Party Intervention . New York : Praeger , 1981 .

Notes

1. The parties are constrained to adhere to the decision in a binding arbitration procedure. As
discussed below, occasionally parties will choose nonbinding arbitration.

2. Carl M. Steven, Strategy and Collective Bargaining Negotiation (New York: McGraw-Hill, 1963),
142–146.

3. For analysis of mediation strategies, see Kenneth Kressel, Mediation: An Exploratory Survey
(Albany, N.Y.: Association of Labor Mediation Agencies, 1972); and Deborah Kolb, The Mediators
(Cambridge, Mass.: MIT Press, 1982).

4. One study shows a positive effect for mediator aggressiveness and noted that the more intense
or diffi cult the dispute, the more aggressive the mediator tended to be. See Paul F. Gerhart and
John E. Drotning, “Dispute Settlement and the Intensity of the Mediator,” Industrial Relations 19,
no. 3 (1980): 352–59.

5. Eva Robbins, A Guide for Labor Mediators (Honolulu: Industrial Relations Center, University
of Hawaii, 1976).

6. For a good discussion of this dilemma, see William E. Simkin, Mediation and the Dynamics of
Collective Bargaining (Washington, D.C.: Bureau of National Affairs, 1971), 34–40.

7. Fact fi nding is the most common form of dispute resolution for occupations other than police
and fi refi ghters in the public sector (for these two occupations, interest arbitration is most common).

8. Orme Phelps, “Compulsory Arbitration: Some Perspectives,” Industrial and Labor Relations
Review 18 (October 1964): 8.

9. Some fi nal-offer procedures allow the arbitrator to choose the recommendation of a fact fi nder
involved in an earlier step of the process.

10. Mark Thompson and James Cairnie, “Compulsory Arbitration: The Case of British Columbia
Teachers,” Industrial and Labor Relations Review 27 (October 1973): 3–17.

11. Stephen B. Goldberg, Jeanne M. Brett, and William Ury, “A Study in Metamediation,”
unpublished manuscript, School of Law, Northwestern University, Evanston, Illinois, 1987.

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292

12

BASIC PRINCIPLES

This chapter focuses on the resolution of the confl icts between managers and
employees that commonly arise in the workplace. In unionized settings, this
involves resolving confl icts about contract administration below the level of formal
contract negotiations.

Collective bargaining agreements in the United States are elaborate and detailed
documents. The existence of such extensive labor contracts led to the need for
an orderly way for settling confl icts over interpretations of contract language.

The principle that “management acts and the union reacts” or, put another
way, “it is management ’ s job to manage and the union ’ s job to grieve” is engrained
in U.S. collective bargaining. This has led to a reliance on grievance and arbitration
procedures as mechanisms to resolve confl icts that arise at in unionized workplaces.
The bulk of this chapter discusses how grievance and arbitration procedures
operate.

In nonunion settings, the employer must consider how to resolve the workplace
confl icts that will inevitably occur. In recent years, employers of nonunion
workplaces have increasingly adopted various mechanisms for resolving disputes,
improving communication, and solving problems. Growing concern about the
impact of employment litigation is a major reason for the development of nonunion
dispute resolution. Such lawsuits have helped inspire the controversial expansion
of mandatory arbitration procedures for resolving legal claims. Thus, this chapter
also examines nonunion dispute resolution procedures and the debates over their
role in industrial relations.

THE GRIEVANCE PROCEDURE

The grievance procedure specifi es a series of steps that are to be taken to resolve
a worker ’ s complaint that management has not followed the terms of the collective
bargaining agreement. The steps found in a typical procedure are outlined in Box

Confl ict Resolution at the Workplace

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Account: s4264928.main.eds

Confl ict Resolution at the Workplace 293

BOX 12.1
Steps in a Typical Grievance Procedure

Step 1
The union steward and the employee discuss the problem informally with

the employee ’ s supervisor.
The union steward and the employee decide if the problem has been resolved

or, if not resolved, whether a contract violation has occurred and whether
to proceed with a formal grievance.

Step 2
The grievance is put in writing and submitted to the designated line

manager.
The union steward and a management representative meet and discuss the

grievance.
Management ’ s response is put in writing. A member of the industrial relations

staff may be consulted at this stage.
Step 3

The grievance is appealed to top-line management and industrial relations
staff representatives, who meet with higher-level local or national union
offi cers to discuss the grievance and attempt to negotiate a resolution.

Management ’ s response is put in writing.
Step 4

The grievance is appealed to arbitration for a fi nal and binding decision by
a neutral labor arbitrator.

12.1 . Each succeeding step in the decision-making process involves a higher level
of the union and management organizations. The fi nal step in almost all grievance
procedures in unionized settings involves a hearing of the dispute and a fi nal
binding judgment by an arbitrator.

Most often the grievance procedure comes into play when an employee has
a complaint about the actions of a supervisor. Below we trace how an employee
complaint makes its way through the typical grievance procedure.

Step 1: Step 1 of the procedure outlined in Box 12.1 gives the employee and
his or her supervisor the opportunity to resolve the employee ’ s complaint
by talking about the problem. The supervisor might be unaware that there
is a problem and oral discussion might quickly resolve the issue. At this
point, the employee ’ s union steward might help the employee as he or she
brings the issue to the attention of the supervisor.

Step 2: If the grievance (complaint) is not resolved in these discussions, the
employee can choose to drop the matter or proceed to step 2, where the
grievance is put in writing. In step 2, the union steward meets with a

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294 Part IV. The Workplace Level of Labor Relations

management representative and management eventually writes a response.
The process of putting the grievance and management ’ s response in writing
gives the parties the opportunity to formally make their cases, and this often
serves to clarify exactly what is in dispute. At this step, many grievances are
resolved or the grieving party drops his or her complaint.

Step 3: Step 3 in the grievance procedure involves top-line management,
industrial relations staff, local union offi cers, and possibly national union
staff. The involvement of higher-level union and management staff consumes
valuable time and resources, and for this reason a union ’ s decision to press
a grievance to the third step is not usually taken lightly.

Step 4: If the grievance has not been resolved at earlier steps, it can be appealed
to arbitration for a binding decision in step 4. It is the union and not the
employee that decides whether to appeal a grievance to arbitration. Court
decisions gave unions this power on the grounds that it is the union that
creates and “owns” the grievance procedure.

Reasons Why Grievances Are Filed

Employees commonly fi le a grievance when they think management is not fairly
living up to the collective bargaining agreement. The grievance procedure provides
a mechanism for workers to air their displeasure with management ’ s actions, to
change management ’ s behavior, or to receive some form of compensation for
management ’ s actions.

Disagreements about employee discipline are a common source of grievances.
Collective bargaining agreements commonly give management the right to discipline
employees. Contracts often outline certain actions that can lead to discipline,
such as repeated absenteeism or failure to follow a direct order from a supervisor.
An employee might fi le a grievance against a disciplinary action taken by manage-
ment either because the employee contests management ’ s claim that the employee
did something wrong or because the employee believes that the disciplinary action
that was imposed was too harsh for whatever mistake the employee made.

When labor and management negotiate the collective bargaining contract, they
try to cover the major issues and write language that will guide future behavior.
However, the contract does not specify what is to happen under all circumstances.
It would be impossible and too costly for negotiators to write contractual language
that covers any but the most common events. Thus, the parties also turn to the
grievance procedure as a way of resolving issues that the labor contract does not
cover explicitly.

Many collective bargaining agreements, for example, specify that supervisors
are not allowed to perform work that is commonly performed by someone in
the bargaining unit. Unions favor this clause as a way of keeping jobs for union
members and to prevent management from circumventing the terms of the contract
by moving work out of the bargaining unit. When new technology is introduced
at a plant, it often changes the duties workers perform and adds new types of
work. Is the new work still in the bargaining unit or can it be performed by a
supervisor? It would be extremely cumbersome for labor and management to

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Confl ict Resolution at the Workplace 295

include language in the labor agreement specifying in detail what is to happen
in every such case. Instead, the parties use the grievance procedure to resolve
disputes that arise over this issue.

In addition, things frequently happen that were never anticipated by the parties
when they were negotiating the labor agreement. What form of compensation,
for example, should workers receive if they are sent home after a power outage
forces the closing of a plant in the middle of the day? Should employees be paid
for a full day ’ s work in such a case? Should the amount of compensation vary,
depending on how much of the day the employees worked before being sent
home? When the labor contract does not include language that covers this type
of occurrence and employees are upset by the compensation management decides
to provide, the employees might turn to the grievance procedure to settle the
matter.

Filing grievances can also serve other purposes. Employees may fi le grievances
as a way of demonstrating their concern about issues that are not addressed in
the collective bargaining agreement. For example, employees might be concerned
about workplace injuries such as repetitive strain injuries from the way they have
to perform their jobs and may express their concern by fi ling grievances over the
issue. In these sorts of cases, the grievance procedure can serve the valuable
function of warning management about problems that might otherwise be ignored.

Employees and their union also might use the grievance procedure as a tactical
pressure device. Filing grievances over an issue can serve, for example, to rally
employee interest in bringing the issue to the bargaining table in the next contract
renewal negotiation. In this sort of case, the union may know that fi ling grievances
will not lead to immediate changes in management ’ s behavior. However, grievances
will put pressure on management and thereby increase the union ’ s bargaining
leverage.

THE HISTORICAL EVOLUTION OF GRIEVANCE
ARBITRATION

Arbitration is the common device stipulated in labor contracts to resolve grievances
that are not settled in earlier steps (see step 4 in Box 12.1 ). Arbitration is a
quasi-judicial procedure in which a third party settles a dispute by issuing a binding
judgment. The use of arbitration to settle grievances that arise during the term
of a collective bargaining is referred to as grievance (or rights) arbitration.

Arbitration developed early in the U.S. industrial relations system. Arbitration
of minor disputes over the interpretation of agreements, for example, was mentioned
in the United States Industrial Commission Report of 1902. 1 Before World
War II, grievance procedures ending in binding arbitration were common in the
clothing and anthracite coal mining industries.

The Spread of Arbitration

It took the strong advocacy of the national War Labor Board (WLB) during
World War II for grievance arbitration to become a common practice across

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296 Part IV. The Workplace Level of Labor Relations

unionized industries. In many of the thousands of disputes it handled, the board
encouraged the parties to include an arbitration clause in their bargaining agreement,
and in some cases the board required it. Arbitration served as an alternative to
strikes and other types of industrial action for resolving workplace confl icts. This
was an important consideration in the context of a wartime economy where
work stoppages were particularly costly.

The Taft-Hartley Act of 1947 encourage the use of grievance arbitration.
Section 203(d) of the act states: “Final adjustment by a method agreed upon by
the parties is hereby declared to be the desirable method for settlement of grievance
disputes arising out of the application or interpretation of an existing collective
bargaining agreement.” The courts interpreted this provision as indicating that
public policy supported grievance arbitration, which was the most common settle-
ment method parties agreed to use.

Court Encouragement of Arbitration

A series of Supreme Court decisions known as the Steelworkers’ trilogy encour-
aged the use of arbitration and insulated many arbitration awards from judicial
review. These cases also gave grievance arbitration a protected status. 2

The Steelworkers’ trilogy decisions from 1960 are summarized in Box 12.2 .
These three decisions stated that

(1) the courts should rule only on whether a dispute can be arbitrated, they
should resolve any doubts about such questions by ruling in favor of arbitration,
and they should not consider the merits of a grievance when deciding whether
a case can be arbitrated;

(2) the parties should view arbitration as the quid pro quo for giving up the
right to strike and except for issues that are specifi cally excluded from the arbitration
clause, all disputes arising out of contract administration should be resolved by
arbitration; and

(3) the courts should not review the substantive merits of an arbitration decision
but should confi ne their review to whether due process procedures were followed
or whether the arbitrator exceeded his or her authority.

Judicial Deference to Arbitration

The Steelworkers’ trilogy cases established the principle that the courts would
not review disputes that were arbitrable. Subsequent Supreme Court decisions
continued that basic principle and added some modifi cations (see Box 12.2 ). In
the Collyer decision of 1971, for example, the Court deferred to an arbitrator to
decide whether an employer had violated the obligation to bargain in good faith
when the employer unilaterally changed certain wage rates and job duties. This
ruling gave an arbitrator the responsibility of ruling on an unfair labor practice
issue. In the Olin decision of 1984, the courts substantially broadened the unfair
labor practice issues that arbitrators would decide (also see the United Technologies
decision of 1984). Some of the other court cases summarized in Box 12.2 affected
aspects of arbitration that do not involve judicial deference to arbitration.

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Confl ict Resolution at the Workplace 297

BOX 12.2
Key Court and Administrative Decisions that Affect the
Conduct of Grievance Arbitration

Year Case Decision

1957 Textile Workers v. Lincoln Mills Courts may enforce arbitration awards.
1960 “Steelworkers’ trilogy”:

1. Steelworkers v. American
Manufacturing Co. , 363 U.S.
564 (1960)

Courts should determine only arbitrability,
i.e., whether the issue is covered by the
contract, and should not decide the merits of
a case. When arbitrability is in doubt, the
case should be sent to arbitration.

2. Steelworkers v. Warrior Gulf
and Navigation Co. , 363 U.S.
574 (1960)

Disputes over contract terms are assumed
to be arbitrable unless they are specifi cally
excluded. The courts view arbitration
as the quid pro quo for giving up the
right to strike during the term of the
contract.

3. Steelworkers v. Enterprise
Wheel and Car Corp. , 363
U.S. 593 (1960)

Courts should not review the substantive
merits of the arbitrator ’ s decision as long as
the arbitrator ’ s award is based on the content
of the agreement.

1970 Boys Markets, Inc . v. Retail
Clerks, Local 770 , 389 U.S.
235 (1970)

Courts may issue an injunction against
a union that forces it to refrain from
violating a no-strike clause or when an issue
is covered by an arbitration clause in the
contract.

1971 Collyer Insulated Wire and Local
Union 1098 , 192 NLRB
837 (1971)

The NLRB will defer to arbitration disputes
when the issue could be decided either
through arbitration (because it is covered by
a clause in the bargaining agreement) or by
an NLRB ruling (because the grievance
alleges an unfair labor practice).

1976 Hines v. Anchor Motor Freight,
Inc. , 424 U.S. 554 (1976),
preceded by several other
key cases, especially Steele v.
Louisville & Nashville R.R.,
323 U.S. 192 (1944) and
Vaca v. Sipes , 386 U.S. 171
(1967)

The courts should not sustain an arbitration
award when the union has violated its duty
to represent the grievant fairly. Federal
courts will decide suits of this nature.

1983 Bowen v. United States Postal
Service , 103 U.S. (1983)

A union may be held liable for a portion of an
award to an employee if the union has
violated its duty of fair representation.

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298 Part IV. The Workplace Level of Labor Relations

Year Case Decision

1984 Olin Corporation , 268 NLRB
86 (1984)

This NLRB decision expanded the Collyer
doctrine of deferral to arbitration of disputes
involving unfair labor practices. The NLRB
will defer to an arbitrator ’ s decision unless
the arbitrator ’ s award is “clearly repugnant”
to the law. The NLRB retained the right to
decide whether an arbitrator adequately
considered the facts that would constitute an
unfair labor practice.

1984 United Technologies , 268 NLRB
83 (1984)

This NLRB decision further expanded the
Collyer doctrine of deferral to arbitration of
disputes that are brought to the board before
arbitration that involve statutory rights and
are covered by a collective bargaining
contract.

1991 Gilmer v. Interstate/Johnson Lane
Corp. , 500 U.S. 20 (1991)

Statutory claims can be arbitrated without
resort to the judicial forum. Arbitration of a
statutory claim, however, does not forgo the
substantive rights afforded by the statute.

2001 Circuit City Stores v. Adams ,
532 U.S. 105 (2001)

The court ruled that according to the Federal
Arbitration Act, employment disputes must
be settled exclusively by fi nal and binding
arbitration if so dictated by the employment
contract. Only interstate transportation
workers are excluded.

2002 Equal Employment Opportunity
Commission v. Waffl e House,
Inc. , 534 U.S. 279 (2002)

Limits the decision in Circuit City . The court
ruled that the EEOC still has the right to
pursue judicial relief for victims of
employment discrimination, even if the
individuals signed an agreement to settle all
disputes through binding arbitration with the
employer.

2009 14 Penn Plaza v. Pyett , 556
U.S. 247 (2009)

The court ruled that a union-negotiated
arbitration clause in a collective bargaining
agreement can require individual employees
to send statutory employment rights claims
to arbitration instead of going to court.

2011 AT&T Mobility v. Concepcion ,
563 U.S. 333 (2011)

The court ruled that waivers of the right to
bring a class action contained in an
arbitration agreement are enforceable.

2012 D. R. Horton, Inc. , 357 NLRB
184 (2012)

The NLRB ruled that class-action waivers in
employment arbitration agreements violate
the right of employees to engage in
concerted activity’ under section 7 of the
NLRA.

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Confl ict Resolution at the Workplace 299

Over time, grievance arbitration procedures have evolved from a clinical approach
to a more judicial approach. The WLB had advocated the clinical approach, and
this approach was frequently used during the early postwar years. 3 The clinical
approach emphasizes mediation of disputes, informal procedures, and arbitrator
discretion in helping the parties develop a working relationship and consistent
policies for interpreting and administering a contract.

In the 1950s, as the environment for collective bargaining became more structured
and a body of past precedents grew, the arbitrator ’ s scope of discretion narrowed.
Both unions and management began to demand a more judicial approach to
arbitration. The judicial approach is more formal and legalistic. The clinical
model of arbitration may have fi lled a void in an otherwise unstructured environ-
ment, but as the parties formalized their internal policies, they turned to arbitrators
only in disputes where their differences were clearly defi ned by the contract and
the precedents that had arisen.

Thus, although modern grievance arbitration is still considerably more informal
than court proceedings, it has come to rely on the use of formal rules of evidence,
the examination and cross-examination of witnesses, submission of written briefs
and post-hearing briefs, and written transcripts. The heavy formality of the grievance
arbitration procedure has led some parties recently to search for alternative dispute-
resolution procedures, a subject we discuss in more detail later in this chapter
and in the next chapter.

THE FUNCTIONS OF GRIEVANCE PROCEDURES
AND ARBITRATION

Grievance and arbitration procedures serve the needs of three separate
constituencies—labor, management, and society.

Employee Interest in Due Process and Fairness

The grievance and arbitration procedures serve the interests of workers by delivering
industrial justice and by protecting workers who use the procedure from recrimina-
tion for having exercised their rights. When workers lose confi dence in the
effi cacy of these procedures, they may turn to other potentially more costly and
disruptive mechanisms to provide due process. Thus, management often agrees
to grievance and arbitration procedures to provide employees with due process
because of the potential high costs of the alternatives.

Employer Interest in Labor Peace

Employers are attracted to the grievance and arbitration procedures because they
reduce the likelihood that disputes that occur during the term of a labor contract
will lead to stoppages in production. In exchange for accepting third-party arbitration
of grievances, management commonly gains union acceptance of a clause that
eliminates the union ’ s right to strike over an issue that is covered by the grievance
and arbitration clause. The labor contract between General Motors and the UAW,
for example, contains the following language:

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300 Part IV. The Workplace Level of Labor Relations

During the life of this agreement, the Union will not cause or permit its members to
cause, nor will any member of the Union take part in any sit-down, stay-in or
slow-down, in any plant of the Corporation, or any curtailment of work or restriction
of production or interference with the production of the Corporation. The Union
will not cause or permit its members to cause nor will any member of the Union take
part in any strike or stoppage of any of the Corporation ’ s operations or picket any of
the Corporation ’ s plants or premises until all of the bargaining procedure as outlined
in this Agreement has been exhausted, and in no case on which the Arbitrator shall
have ruled. 4

The strong support of the Supreme Court for arbitration in the Steelworkers’
trilogy was based in part on the fact that management ’ s agreement to arbitrate
grievances is typically the quid pro quo for a union ’ s agreement to include a
no-strike clause in contracts.

Some labor agreements exclude particular issues from arbitration and instead
allow the union to strike over unresolved grievances about these issues. Production
standards (rules governing the pace of work) and health and safety issues are
sometimes designated as nonarbitrable. For example, when issues involve health
or safety, it may be impractical to require employees to follow management ’ s
orders and then wait for arbitration to settle disputes over the appropriateness
and fairness of those orders. Thus, some contracts allow workers to strike over
health and safety issues.

Joint Interests in Continuity and Consistency

Another function the grievance and arbitration procedures serves is that it addresses
the common interests of labor and management. As Neil Chamberlain and James
Kuhn have noted, labor and management have a mutual interest in achieving
continuity and consistency in the application of a collective bargaining agreement.
They both also benefi t from procedures that allow them to be fl exible as they
address unforeseen developments and meet the unique needs of different groups
and individuals. 5

Finding the appropriate balance between uniformity and fl exibility is a key
challenge in administering the employment relationship. It is a particular challenge
for grievance procedures and arbitration.

Society ’ s Interests in Industrial Peace and
Workplace Democracy

Grievance and arbitration procedures serve the interests of society by preserving
industrial peace during the term of the contract, by keeping industrial disputes
out of the courts or regulatory agencies, and by ensuring that unions and employers
comply with public policies governing employment. As we will show, this set
of public functions is becoming increasingly complex.

As the Supreme Court articulated in the Steelworkers trilogy of cases, collective
bargaining between labor and management establishes a form of democratic
governance of the workplace. In this vision of workplace democracy, arbitration
of grievances by neutral labor arbitrators serves a function similar to that of the

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Confl ict Resolution at the Workplace 301

courts in providing independent adjudication of legal disputes. As Justice Douglas
argued, “The grievance machinery under a collective bargaining agreement is at
the very heart of the system of industrial self-government. Arbitration is the means
of solving the unforeseeable by molding a system of private law for all the problems
which may arise and to provide for their solution in a way which will generally
accord with the variant needs and desires of the parties.” 6

HOW ARBITRATION WORKS

Grievance arbitration systems have several core components. The specifi c design
and operation of these components varies across collective bargaining agreements,
but the basic role of the key components is similar.

The Components of Arbitration

The core of the arbitration procedure is a hearing in which the labor and manage-
ment representatives present their positions on the issue in dispute to an arbitrator.
These representatives are often lawyers, but others also act as representatives in
arbitration, particularly on the union side. At some point after this hearing, the
arbitrator announces a judgment on the issue. This decision is binding on the
parties. Before or after the hearing, the parties sometimes submit briefs to the
arbitrator. Thus, arbitration has three components: prehearing briefs , the hearing,
and the arbitrator ’ s decision .

Prehearing Briefs

Management and union representatives can submit prehearing briefs to the
arbitrator. In these briefs, the parties can present their views of the issues
and describe the evidence that supports their position. Briefs vary in length;
sometimes they are long documents that are similar to legal briefs presented in
legal cases.

In some cases, the parties jointly present prehearing stipulations to the arbitrator.
A stipulation is an agreement between the parties about one or more of the
facts or issues in dispute. For example, the parties might stipulate that an
employee was absent from work, but ask the arbitrator to decide what was the
appropriate penalty for being absent. Briefs and stipulations can make it easier for
the parties in the arbitration hearing to quickly focus on the evidence and issues
in dispute.

The Arbitration Hearing

In the arbitration hearing, the parties present their positions and evidence
to support their cases. Hearings usually start with opening statements by union
and management representatives. In disciplinary cases, management will commonly
be asked to present their statement fi rst.

Union and management representatives then present evidence to support their
cases. Such evidence might include witnesses who observed particular events. If
an employee is charged with committing an act that violates company policy,

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302 Part IV. The Workplace Level of Labor Relations

such as hitting a supervisor, for instance, management might call as a witness
someone who saw the worker and supervisor interacting. Unlike what happens
in court hearings, there are no rules that exclude certain types of evidence in
arbitration. However, the arbitrator will use his or her judgment about how
much weight to give the evidence. For example, an arbitrator will generally give
much greater weight to a fi rsthand account of an incident from a witness who
saw what happened than to a secondhand account.

Evidence that documents past behavior by the employee or the company is
critical in many arbitration hearings. The customs of a company and past practices
in the plant are important criteria as an arbitrator makes a decision.

The hearing will typically end with closing statements by each side in which
they summarize the key aspects of their case and their supporting evidence. The
testimony given will sometimes lead union or management representatives to
alter their arguments during the course of the hearing. Thus, it is not unusual
for the parties’ closing statements to focus on issues and evidence that differ
substantially from the issues they raised in their opening statements.

The hearing does not bring the presentation of evidence and arguments to
a close. The parties can present their views in a post-hearing brief, and they
often do this in cases in which the issues in dispute are highly technical or
complicated. Although the use of prehearing and post-hearing briefs may help
the arbitrator resolve complex issues, they also add to the length and cost of
arbitration.

The Arbitration Award

The arbitrator ’ s decision, which is commonly known as the arbitration award
is announced sometime after the hearing. Some labor contracts stipulate time
limits for these awards. The arbitrator ’ s award can be written or oral, depending
on the language in the labor agreement and the preferences of the arbitrator.
Although arbitrators tend to follow similar procedures and look at similar kinds
of evidence, the preferences of individual arbitrators often play an important role
in shaping their awards.

In the award, the arbitrator commonly states the issues and facts in the case.
The arbitrator also summarizes the contentions and claims the parties have made
in the hearing or in briefs. The arbitrator might discuss the merits of each side ’ s
evidence and claims. Of course, the most important part of the award is the
section that outlines the judgment the arbitrator has reached on the dispute. The
arbitrator can uphold or deny the grievance and has substantial discretion in
fashioning a remedy to the dispute.

In a grievance case in which a fi rm has discharged an employee, for example,
the arbitrator can deny the grievance and allow the discharge to stand or he or
she can uphold the grievance and order the employer to reinstate the employee.
If reinstatement is ordered, the arbitrator can order the company to pay the
employee the full wages that have been lost due to the discharge. The arbitrator
also could fashion a compromise settlement to such a case by ordering reinstatement
but not ordering any back pay. Or he or she might order some other remedy.

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Confl ict Resolution at the Workplace 303

The grievance-arbitration procedure gives arbitrators substantial discretion to
fashion any remedy he or she believes is appropriate.

Arbitrators commonly see their task as resolving the grievance. They do not
commonly add substantial punitive penalties to their decisions. Thus, in the
hypothetical discharge case mentioned above, the best the employee could do is
gain back the job, any back pay, and any lost rights (such as seniority lost while
on discharge). The arbitrator would not assess a large punitive monetary penalty
against the employer.

The Arbitrator ’ s Decision Criteria

What does an arbitrator consider when deciding how to rule in a case? The next
section outlines the criteria arbitrators commonly use in discipline and discharge
cases. We use discipline and discharge as examples in part because these are
frequent and important sources of grievances.

Discipline for Just Cause

Most labor agreements contain a clause stating that management has the right
to discipline or dismiss employees only for just cause . Grievances over disciplinary
actions and dismissals arise so frequently in part because labor agreements rarely
defi ne just cause precisely.

In a discipline case, the arbitrator must fi rst decide if the employee actually
did the act that management claims violates the labor agreement. If the arbitrator
is convinced that the act did not occur, the grievance is upheld. In a case in
which management alleges that an employee hit a supervisor, for example, the
arbitrator would rely on available evidence (possibly the testimony of eyewitnesses)
to determine if the employee did willfully hit the supervisor. If the arbitrator
concludes that the act did occur, he or she must then decide if this act was a
violation of the labor agreement.

Progressive Discipline

If the arbitrator concludes that the act did occur and that it violated the labor
agreement, he or she must then decide whether the discipline the company
imposed is appropriate. Arbitrators commonly require management to impose
progressive discipline, in which the penalties increase in a stepwise fashion if
there are repeated offenses. If an employee is absent one time after years of faithful
service to the company, for example, an arbitrator is unlikely to uphold a penalty
of discharge. Arbitrators allow severe disciplinary penalties for repeated absences,
however, and want those penalties to increase as the number of absences mount.
Corrective discipline is the underlying principle; that is, discipline should do
more than punish. Arbitrators commonly require management to take steps to
assist employees in correcting their actions and performance. The common steps
in progressive discipline are issuing an oral warning, suspending the employee
for some period of time, and then discharging the employee. Needless to say,
when the offense the employee committed is severe, for example destroying
major company property, the arbitrator might uphold immediate discharge.

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304 Part IV. The Workplace Level of Labor Relations

The Importance of Past Practice

Arbitrators commonly rely heavily on the custom and past practice of manage-
ment policy as a guide as they make decisions about grievance cases. If in the
past employees in a fi rm have customarily been suspended for one week for their
third unexcused absence, for example, an arbitrator would not allow a different
disciplinary penalty for another employee for a similar offense unless there were
extenuating circumstances. As a result, in most arbitration hearings, union and
management representatives present their views about what past practice has been
for related cases. If a similar case has not arisen in the same fi rm, the parties (or
the arbitrator) might turn to customary practice in another fi rm or industry to
justify their actions.

The Impact of Public Policy Considerations in Arbitration

The role of the arbitrator is to interpret and decide grievances based on the
collective bargaining agreement. The arbitrator ’ s authority comes from the
agreement, and to the degree that his or her decision is based on factors that go
beyond the terms of the agreement, the decision lacks this authority, which then
means that it is not binding on the parties. At the same time, the expansion of
employment laws since the 1960s has raised concerns about whether grievance
and arbitration procedures should be responsive to the public policies that govern
employee rights. Of chief concern is whether arbitration should be used to resolve
claims of discrimination based on the protection of Title VII of the Civil Rights
Act or whether those claims should be left to the courts to resolve. The same
concern arises in claims that involve alleged violations of federal and state laws
about safety and health, wages and hours, pensions, disability benefi ts, workers’
compensation, unemployment compensation, and many other regulations that
may overlap or even confl ict with the provisions of the collective bargaining
agreement.

The arbitration community is divided over the issue of whether arbitrators
should consider the requirements of federal and state laws when deciding grievances
or instead confi ne their decisions to interpretations of the rights accorded by the
bargaining agreement. Those who advocate that arbitrators should stick to the
bargaining agreement do so because they fear that considerations of public policy
will increase judicial scrutiny of arbitration decisions and that arbitrators may
make erroneous interpretations of such laws. They believe that arbitration has
been widely accepted as an institution by the parties and that the Supreme Court
assigned it a protected status in the Steelworkers’ trilogy precisely because arbitrators
limit their decisions to issues in which they have special expertise. Thus, advocates
of minimal reference to federal and state laws are ready to trade off a reduced
scope of jurisdiction in arbitration for protection of the status and autonomy that
the highest court in the land has afforded labor arbitration since 1960.

Those who argue that arbitrators should play a more active role in resolving
claims that involve public laws do so with full awareness that the arbitrator ’ s role
would shift from serving primarily the interests of the parties toward serving
public policies. The central arguments in favor of this new role are that arbitration

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Confl ict Resolution at the Workplace 305

is still cheaper, faster, and more effi cient than the already overloaded judicial
system. In this new role, it is argued, arbitration would remain a useful procedure
for resolving disputes that arise under collective bargaining.

Who Are the Arbitrators?

The people who serve as arbitrators usually have some expertise in labor relations
and the particularities of the industry in which the case arises. Some labor agree-
ments provide for permanent arbitrators (“umpires”) who are designated to handle
all or some fraction of the grievances that arise during the term of a contract.
The American Arbitration Association (AAA) is a private organization that parties
often use to facilitate the process of arbitration. The AAA maintains an active list
of arbitrators and can provide rooms for holding hearings. A labor contract might
stipulate that parties should turn to the AAA for a list of fi ve arbitrators and then
allow each side to take turns crossing off names from the list to generate a decision
about which arbitrator will hear a particular case.

Some arbitrators work at arbitration as a full-time occupation. There are also
many part-time arbitrators who are also industrial relations or law school professors.
Box 12.3 , provided by renowned arbitrator Arnold Zack, describes who the
arbitrators are and how someone can become an arbitrator.

BOX 12.3
Who Are Arbitrators and How Can I Become One?

Virtually every collective bargaining agreement contains provisions for
arbitration to resolve workplace disputes. The union agrees to continue to
work while the case is being processed and the employer agrees to comply
with the arbitrator ’ s decision including remedy to make whole if such a
remedy is awarded. Such agreements also provide the procedures for selecting
arbitrators, usually by agreeing on a single arbitrator or a revolving panel
for the life of the parties’ agreement or by using the procedures of the
American Arbitration Association or the Federal Mediation and Conciliation
Service (FMCS) if the parties are unable to agree on an arbitrator for a
pending case.

Although several thousand individual arbitrators exist in the United States,
most arbitration is done by the 600 members of the National Academy of
Arbitrators (NAA), who are admitted to the academy after they have heard
at least fi fty cases in a fi ve-year period. Concern over getting a decision
that might make the employee whole and that conforms to the terms of
the contract often leads disputants to wait many months for their preferred
choice among the more seasoned arbitrators instead of trying newer, less
experienced arbitrators. This makes it challenging for new entrants to gain
experience and accounts for the rising average age of NAA arbitrators,
which is now in the mid-60s.

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306 Part IV. The Workplace Level of Labor Relations

While it is said that 90 percent of the cases are heard by 10 percent of
the arbitrators, new people are always breaking into the fi eld. Parties want
arbitrators with mature judgment and experience in labor-management
relations that is not easy to acquire without working on the union or
management side. But it is often diffi cult for partisans to gain acceptability
unless they have somehow purged themselves of alleged bias by spending
some time working in a neutral occupation, such as in academia or working
for a neutral government agency. Some newer arbitrators have come into
the fi eld by serving as interns with established arbitrators or from careers
in government labor management agencies or as teachers of law, labor
relations, economics, and psychology. Arbitration can hardly be an entry-level
occupation for one ’ s career choice. Rather, becoming an arbitrator is more
a later-in-life happening as a reward for a career of fairness in whatever role
an individual plays in the labor-management fi eld. If you want to be an
arbitrator, don ’ t give up your day job!

Source : Arnold Zack, arbitrator and former president, National Academy of
Arbitrators

The Union ’ s Decision to Go to Arbitration

It is not a simple matter for a union to decide whether to press a grievance to
arbitration. Arbitration is costly. A union might decide to drop a grievance if it
believes the case is not winnable. Or a union might drop a grievance even though
it thinks it can win the case if it concludes that the issue in dispute is insignifi cant
and not worth the effort. A union might also decide not to bring a grievance to
arbitration if it believes the issue is very important and should be brought up at
the next contract negotiations. In this situation, the union might fear that winning
the case in arbitration would diffuse the employee ’ s concern and remove leverage
it needs to press its case in negotiations.

Conversely, a union might decide to proceed to arbitration even if it believes
the case is not winnable if union offi cers feel an obligation to the grievant (maybe
because the grievant has loyally supported the union over the years) and cannot
convince the employee to drop the issue. The union may also feel pressure to
proceed to arbitration because of fear that the employee will fi le a legal claim
contesting the union ’ s decision not to go to arbitration. The union owes a legal
duty of fair representation to the individual employee as it makes the decision
of whether to proceed to arbitration.

The Duty of Fair Representation

In 1944, the Supreme Court held that in return for the right of exclusive rep-
resentation, the union has the duty to represent all members of the bargaining
unit “without hostile discrimination, fairly, impartially, and in good faith.” 7 Since
then, the union ’ s duty of fair representation has become an important issue.

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Confl ict Resolution at the Workplace 307

Four related developments brought the issue of fair representation to the fore:

1. The stringency of the standards the courts use to judge whether an employee
has been fairly represented by the union.

2. The willingness of individual workers to bring claims against unions for
failure to represent them fairly.

3. The increase in the number of court cases that deal with this issue.
4. The resulting reluctance of unions to drop grievances of questionable

merit for fear that they will be sued for failure to represent the grievant
fairly.

The U.S. Supreme Court has defi ned the duty of fair representation in a way
that prohibits “arbitrarily ignoring a meritorious grievance or processing it in a
perfunctory manner”; fraud, deceit, or bad-faith conduct in the handling of a
grievance; and refusal to handle a grievance because of personal hostility toward
the grievant. 8

In Hines v. Anchor Motor Freight, Inc. (1976; see Box 12.2 ), the court ruled that
both the employer and the union were to blame for failure to handle an employee
representation case fairly. 9 The case involved an employee whose discharge had
been upheld in arbitration. After the arbitration award was rendered, new evidence
was discovered that proved that the employee was not guilty of the offense. Both
parties were charged with failure to fully investigate the facts of the case in the
original procedure.

In Bowen v. United States Postal Service (1983), the Supreme Court went one
step further; it made a union and a company both liable for back pay in a case
in which an employee was reinstated after the union refused to take the case to
arbitration. 10 The result was that the union was required to pay part of the
employee ’ s lost wages even though it was the employer ’ s wrongful decision that
had led to the employee being out of work.

Unfortunately, these various judicial efforts to clarify and specify the standards
to be applied in cases involving the duty of fair representation have not yielded
unambiguous criteria for evaluating a union ’ s performance. Although individual
employees may sometimes feel that their union is not handling their grievances
appropriately, there is also a danger that the threat of a lawsuit based on duty of
fair representation may lead the union to take weak cases to arbitration instead
of dropping the appeals. Taking unmeritorious cases to arbitration creates additional
costs for the union and ultimately for individual union members because it is
their dues that give the union the resources to pay for arbitration hearings.

THE CONNECTIONS BETWEEN GRIEVANCE
PROCEDURES AND OTHER ASPECTS OF THE
LABOR-MANAGEMENT RELATIONSHIP

In many ways, the operation of the grievance procedure is closely linked to other
aspects of the labor-management relationship. The next section considers some
of these linkages.

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308 Part IV. The Workplace Level of Labor Relations

The Impact of Trust on Contract Bargaining and Contract
Administration

The administration of a collective bargaining agreement does not operate in isolation
from the events that take place in the negotiations process. The behavior and
attitudes of the parties during negotiations typically carry over into the administration
of the contract. This is not surprising because the same factors that increase the
level of confl ict and reduce the ability of the parties to settle without an impasse
in negotiations also increase the level of antagonistic behavior during the administra-
tion of the contract.

The level of trust between the parties often carries over directly from contract
administration to contract negotiations. When a large backlog of unresolved
grievances piles up and adds to a hostile atmosphere between the parties during the
term of the agreement, the negotiations process becomes a convenient forum for
venting these hostilities. Similarly, when the grievance procedure or an arbitration
decision has failed to resolve a problem, one party or the other can be expected
to place a demand on the negotiation table to remedy the situation. On the
other hand, vague or inconsistent language that was negotiated in a climate of
distrust is likely to set the stage for confl ict during the administration of the
agreement.

Researchers have found that cooperative attitudes between union and manage-
ment offi cials increase the likelihood that grievances will be settled at the lower
steps in the procedure. 11 Data from the auto industry show a positive correlation
between the rate of grievances fi led and two indicators of the intensity of confl ict
in local contract bargaining: the number of issues introduced during the negotiations
and the length of time it takes to reach a contract settlement. 12

A comparative study of the dynamics of grievance settlements in two auto
plants further illustrates this point. In the plant that exhibited a highly adversarial
relationship, grievance rates and rates of appeal to higher steps in the procedure
followed the cycle of bargaining. That is, the union in this plant would save up
grievances and fi le them just before the start of contract negotiations to use this
stockpile as a lever in negotiations and to rally the rank and fi le in support of the
union ’ s contract demands. In contrast, no such politicization of the grievance
process occurred in a comparable auto plant that had a history of cooperative
labor-management relations. 13

James Kuhn has found that a lot of bargaining commonly occurs at the work
group level outside the formal grievance procedure. Kuhn found that work groups
can engage in fractional bargaining —that is, informal bargaining with the
supervisor to modify or even to ignore provisions of the agreement that do not
suit the group ’ s particular needs. 14

Midterm or Continuous Bargaining

The average length of collective bargaining contracts appears to be increasing in
the United States. Federal Mediation and Conciliation Service data suggest that
the duration of nearly 40 percent of new agreements is more than three years.
Making this practice work, however, requires some means of addressing issues

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Confl ict Resolution at the Workplace 309

that arise during the term of the agreement. Several ways of doing so, in addition
to the grievance procedure, have been developed.

One long-standing practice is for labor and management negotiators to meet
periodically to explore issues and reach informal agreements that are perhaps
codifi ed as letters that supplement the bargaining agreement. These letters are in
effect binding commitments—they can be enforced through the grievance procedure,
but they are meant to be somewhat less permanent than formal contract language.
In some cases, the parties clarify how specifi c contract provisions will be interpreted
or applied to different groups. Another practice, known as continuous bargaining
is becoming more common, in which teams of company and union representatives
engaging in bargaining over issues that come up during the term of the contract
rather than waiting for the existing contract to expire. The advantage of this
approach is that it can establish clear guidelines for when issues are dealt with,
the potential range of issues, and the scope of authority or discretion for dealing
with issues that come up during a long-term contract. It also provides protection
against erosion of contract provisions by individual supervisors or groups who
see some contract provisions as a constraint in their ability to address problems
with production or service delivery. Instead of trying to get around the contract,
parties can bring these problems to the mid-term or continuous bargaining forum.

Many labor and management leaders now use the interest-based principles used
in contract negotiations to address problems that arise during the term of a
collective bargaining agreement. This usually involves setting up some type of
subcommittee or task force to study a problem and recommend a solution. More
and more, the administration of labor agreements is blending with these and other
problem-solving processes and the various types of employee and union-management
participatory processes that we discussed more fully in Chapter 11 .

The Limits of Arbitration: Confl icts over
Technological Change

Although arbitration is effective in resolving many workplace confl icts, technological
change can produce problems that are diffi cult to resolve through the traditional
arbitration mechanism. Changes in technology can render previous unit determina-
tion decisions obsolete by modifying how the work is performed, raising the
question of whether the new jobs created should be excluded from the existing
unit. Computer-aided design (CAD) is one example of such a technological
change. CAD can transfer drafting, model making, and other similar jobs from
their traditional place in blue-collar production and maintenance units to the
purview of design or manufacturing engineers. These engineers have traditionally
been nonunion or have been members of a separate engineers’ union and bargaining
unit. In the aerospace industry, for instance, confl ict has arisen over whether
members of the machinists’ union or members of the professional engineers’
union should be given the work of maintaining the thousands of computers
aerospace companies use.

Box 12.4 describes another technology-related dispute that was ultimately
resolved by an arbitrator. In this case, robots took over some of the tasks traditionally

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310 Part IV. The Workplace Level of Labor Relations

BOX 12.4
Arbitrating Cases involving Technological Change

The Issue

Did the company violate the collective bargaining agreement when it assigned
certain machining and fi xturing work on robotics to nonbargaining unit
personnel? If so, what shall be the remedy?

The Facts

The grievant and other bargaining unit personnel did fi xturing work on
production technology referred to as Robot No. 1. They did similar work
for a while on Robots No. 2 and No. 3, but then this assignment stopped
in 1984. In December 1983, the company formed a new department called
Advanced Automation and Technology, and the fi xturing work, what the
company calls “development work,” was given to nonbargaining-unit
engineering personnel assigned to the new department.

The Arbitrator ’ s Discussion

In establishing the Advanced Automation and Technology Department, the
company made a major change that affects the allocation of work that
previously had been done by tool room personnel. . . . In a world of changing
technology and methods, specifi c duties and responsibilities may shift within
an organization. The issue in this case arises because of a shift from earlier
technology (that is rather standard and can be adapted in a straightforward
manner by bargaining-unit personnel) to new technology that requires
considerable experimentation by engineers and technicians.

And so we have a situation where an organizational change has shifted
the function of preparing production technology, but it is not clear whether
the new skills and duties that are involved belong in the bargaining unit or
elsewhere in the organization. Given the grey area that is involved in this
dispute, it would be desirable for the parties to establish principles to guide
the allocation of work.

The Arbitrator ’ s Decision

Given the fact that the union has not established conclusively that fi xturing
work for robotic technology belongs to the bargaining unit, it was not a
violation of the collective bargaining agreement when the company assigned
certain machining and fi xturing work to nonbargaining-unit personnel.

Nonetheless, given that the establishment of the Advanced Automation
and Technology Department represented a major decision with important
consequences for the bargaining unit, . . . the parties are directed to negotiate
in good faith over the effects of this change.

Source : Arbitration award of Robert B. McKersie in the case of Northrup Corporation
and United Auto Workers Local 1596, 1 July 1986. Adapted and used with permission
of the arbitrator.

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Confl ict Resolution at the Workplace 311

performed by blue-collar workers. The issue was in part about who should be
given the job of bringing the robots on line and adapting their specifi cations so
they could perform specifi c jobs.

This example illustrates an important feature of the structure of bargaining in
the United States. Because so much rests on the defi nition of the boundaries of
bargaining units, many fi ne legal distinctions have been drawn over the years.
Labor and management often rely on these legalistic rulings by the NLRB or by
arbitrators to modify the boundary of a bargaining unit to fi t changing technologies
or changing company practices.

As new technologies and new ways of organizing work are adopted, these
issues will become more common. The parties will need to fi nd better ways of
resolving the issues than through arbitration or NLRB precedents. As the arbitrator
quoted in Box 12.4 observed, it is generally preferable for the parties to develop
their own principles for handling these issues as they arise than to rely on an
arbitrator to devise a viable solution after the fact.

The Japanese labor relations system and some European systems may be better
suited to responding to changing technologies than the U.S. system because they
include both blue- and white-collar workers in the same union and in the same
election or bargaining units (see Chapter 15 ). In Japan, for example, enterprise
unions represent all blue- and white-collar workers in a single fi rm. In Germany,
most industrial unions include both the blue- and the white-collar workers employed
in a company and in an industry. In Great Britain, on the other hand, a tradition
of separate blue- and white-collar unions and a greater reliance on craft unions
makes this problem potentially more troublesome than it is in our country. These
issues are important because labor relations systems that make fi ne distinctions
among election and bargaining units may be more likely than others to face
diffi culty in adapting to the new technologies now spreading across industries.

EVALUATING THE PERFORMANCE OF THE
GRIEVANCE SYSTEM

Just as one important measure of the effectiveness of the negotiations process is
whether the parties can avoid strikes and impasses, an important criterion for
evaluating grievance and arbitration procedures is whether the parties can avoid
a heavy caseload. The advantages of settling disputes informally or at the step
closest to the site where the problems arise are great.

In fact, although the United States has a tradition of very formal grievance
systems in unionized settings, informal practices have emerged at the workplace.
Most employee complaints are resolved informally before they become formal
grievances. A study by Lewin and Peterson, for example, found that between 16
and 40 percent of the employees in the unionized workplaces they studied reported
having discussed with their supervisors (and resolved) a problem about their
contractual rights. 15

However, a low grievance rate may be attributable to the fact that a union is
not aggressively enforcing the terms of a contract. For this reason, evaluation of

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312 Part IV. The Workplace Level of Labor Relations

the use of the grievance procedure should be accompanied by consideration of
the reasons for low use.

Time and Costs of Settling Grievances

Two criteria that are commonly used to evaluate grievance procedures are the
time it takes to settle claims and the costs associated with processing claims through
to arbitration. The original purpose in developing the procedures was to fi nd an
expeditious and inexpensive substitute for court procedures. Although the grievance
process is still shorter than litigation, the time required to resolve a grievance
through arbitration has become substantial. In 2005, the average period between
the request for an arbitrator and an award being issued was 401 days for arbitrations
administered by the FMCS. 16 To this period must be added an average of 163
days between the initial fi ling of a grievance and a request for arbitration. Although
the average length of employment litigation cases is longer, averaging two to
three years, the idea of arbitration as a simple, expeditious procedure for resolving
workplace disputes is being lost when grievances take over a year to be decided.

Similarly, the cost of arbitration can be substantial, even though it is generally
cheaper than litigation. In 2013, the average total cost of hiring an arbitrator from
the FMCS arbitrator list was $4,911.86, based on an average daily fee of $1,023.62
plus expenses and an average of four days for the hearing plus writing the award. 17
Yet hiring an arbitrator is usually only one aspect of the entire cost of resolving
a grievance-arbitration case. According to the National Labor Management
Association, when a union undertakes all of the steps in a discharge arbitration
case, it must account for the grievance process; staff time; the cost of a transcript,
hotels, and study time; and the arbitrator ’ s fee. The increasingly common use of
lawyers as representatives at arbitration, particularly on the management side,
further increases the cost of arbitration. The modern grievance procedure may
not be providing inexpensive due process, as it was intended to. At the same
time, court litigation to resolve an employment-related dispute can be extremely
expensive and is impractical for unions that have budget limitations.

The Effects of Arbitration Decisions

Another important way of evaluating grievance and arbitration procedures is what
happens after an arbitrator has reinstated a discharged employee. If the grievance
procedure is effective in carrying out industrial justice, a worker who has been
unjustly discharged should be able to return to work and both perform well in
the job and progress satisfactorily within the company.

The procedure itself, however, may work against these results in several ways.
First, the delays involved in processing a case through arbitration may lead a grievant
who has been discharged to seek alternative employment. Some reinstated employees
therefore do not return to their former jobs. Second, reinstated employees are
put back on their jobs frequently against the will of their employers, often to the
dismay of their immediate supervisors, and sometimes to the dissatisfaction of their
fellow workers. Some reinstated workers face hostility on their return to work.
Even if management, supervisors, and fellow workers make a good-faith effort
to treat the reinstated employee fairly, the employee may distrust their intentions

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Confl ict Resolution at the Workplace 313

or lack the confi dence to perform effectively. Some studies have found that
employees who have been reinstated do not fi t back into the workplace well. 18

One study showed that grievants in four fi rms later received lower job per-
formance ratings, had lower probabilities of promotion, and were more likely to
experience voluntary or involuntary turnover than employees who had not used
the grievance procedure. In addition, the study found that grievants who had
appealed their cases to the higher steps of the procedure later had more negative
performance and promotion experiences than those who had settled at the lower
steps. And employees who had won their grievances—that is, whose grievances
were found to be meritorious by either management or an arbitrator—had lower
subsequent performance ratings than those whose grievances had been denied by
management or an arbitrator. The same negative profi le of aftereffects fi t the
supervisors of grievance fi lers. Supervisors of grievance fi lers received lower
performance ratings, were less likely to get promoted, and were more likely to
experience involuntary turnover than supervisors in a comparison group. This
study suggests that grievance fi lers and their supervisors face considerable risk of
retribution for using the procedure. 19

An obvious implication of this evidence is that both management and union
representatives need to pay careful attention to what happens after a grievance is
resolved.

Even in the face of the problem of retribution, the grievance procedures serve
an important function as a common law of the shop. Management and union
representatives often learn from grievance settlements and arbitration awards the
appropriate interpretation of contract clauses and then adapt their behavior
accordingly. 20

In sum, the grievance and arbitration processes can have positive effects in
which the parties learn a better way of administering a contract or they can have
negative effects that involve retribution. Much depends on whether management
and labor representatives are committed to the goals the process was designed to
foster.

ALTERNATIVES TO THE GRIEVANCE PROCEDURE IN
THE UNION SECTOR

The costs and delays associated with the grievance procedure and arbitration have
led labor and management to develop innovative procedures designed to reduce
excessive delays and costs. Among these alternatives are several minor modifi cations
of existing practices, such as keeping grievances oral as far into the procedure as
possible to promote informal resolution, tightening time allowances at various
steps of the procedure, and agreeing that oral settlements or settlements at inter-
mediate steps of the procedure will not serve in any way as precedents.

Expedited Arbitration

Expedited arbitration is a type of grievance arbitration in which the parties
agree to speed the resolution of disputes. Expedited procedures bypass steps in
the normal grievance procedure and impose tight time limits. The specifi c features

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314 Part IV. The Workplace Level of Labor Relations

of expedited arbitration vary between contracts, but the following are some
common components:

Pre-hearing suggestions include (1) appointing a panel of arbitrators for the length of
the contract rather than working through a new list of arbitrators each time an arbitration
is scheduled; (2) appointing a permanent umpire [arbitrator] for a specifi c amount of
time (one year of the life of the agreement, for example); (3) using pre-hearing briefs
as a basis for stipulating facts and educating the arbitrator. Hearings may be expedited
by substituting tape recordings for transcripts. Post-hearing expedition includes (1)
setting a deadline for the award to be returned to the parties; (2) reducing or eliminating
the number of citings for the arbitrator to research; and (3) setting a maximum on
the length of one page for the award or establishing the maximum amount to be paid
for the decision ahead of time. 21

Labor, management, and arbitrators report positive results from expedited
arbitration procedures. A six-year review of the expedited arbitration procedure
of the Steelworkers basic steel industry system found that:

1. Oral resolution cut the cost of the average grievance arbitration case.
2. More than half the grievances were resolved before arbitration.
3. The awards almost always conformed to the time limits specifi ed.
4. The procedure has spread to other Steelworkers contracts in the aluminum,

can, copper, and metals industries. 22

Expedited arbitration appears to be one viable strategy for reducing the costs
and delays involved in many routine cases.

Grievance Mediation

Another innovation that has gained in popularity as a faster and less expensive
alternative to arbitration is grievance mediation . In this procedure, a neutral
third party is asked to mediate a dispute. The process is typically highly informal
and does not involve written transcripts, briefs, attorneys, or written opinions.
Rather, the mediator meets with the union and management and then often
conducts a series of separate meetings with each party to discern any underlying
reasons for the grievance and the possible points of compromise. The hope is
that the mediator will be able to mediate settlements in many of the disputes and
thereby reduce the frequency of arbitration. Although the decision of the mediator
is not binding on the parties, one study found that 89 percent of grievance
meditations are settled without the need for arbitration. 23

A pioneering effort to use mediation to resolve grievances before they go to
arbitration was developed and applied in the coal industry by William Ury, Jeanne
Brett, and Stephen Goldberg. 24 These authors calculated that the average cost per
arbitration case in the industry in 1985 was $1,300, whereas the average cost per
mediation case was $309—a savings of roughly $1,000 per case. In addition, over
a fi ve-year period, the average time lapse between a request for mediation and
the resolution of the case was nineteen days, considerably less time than the
average of fi fty-two days required to schedule an arbitration hearing and receive

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Confl ict Resolution at the Workplace 315

a written award. But even further testimony to the value of grievance mediation
can be found in the high levels of satisfaction with the procedure that management,
union representatives, and the miners who took part in it reported. 25

Although research supports the effectiveness of grievance mediation in resolving
grievances quickly and at a low cost, estimates suggest only about 3 percent of
all contracts contain a mediation step in the grievance procedure. In a review of
developments in this area, Peter Feuille argues that the reason for the lack of
greater adoption of grievance mediation is the relative strength and robustness of
the traditional grievance and arbitration process. 26 Indeed, the relative stability
and enduring structure of grievance and arbitration procedures in unionized
settings is a striking feature of U.S. labor relations, given the many sweeping
changes that have occurred in other areas in recent years.

CONFLICT RESOLUTION IN NONUNION SETTINGS

The absence of a union does not eliminate the need for confl ict resolution systems
in the workplace. Nonunion employers also often fi nd the need to perform this
generic industrial relations function. Over recent decades, many employers have
instituted complaint or appeal systems and other communication and confl ict
resolution procedures for their nonunion employees. These systems and procedures
are often the only direct recourse available to nonunion employees who feel they
have been treated unfairly in the workplace. However, they are also often less
consistent mechanisms for ensuring fair treatment and employee voice than union
grievance procedures.

Reasons for Adopting Nonunion Grievance Procedures

As discussed earlier, in virtually all unionized settings, grievance procedures are
established to enforce jointly negotiated collective bargaining agreements with
the strong encouragement of labor law statutes and court decisions. In contrast,
in nonunion settings, management has the sole discretion to decide whether to
establish a formal dispute resolution procedure. However, in practice, many
employers choose to establish formal grievance procedures for complaints by
nonunion employees. There are three major categories of reasons why employers
chose to do so.

First, employers may adopt nonunion grievance procedures as part of a manage-
ment strategy to improve the performance of a work force. The absence of a
union does not eliminate the need for confl ict resolution systems in the workplace.
According to Albert Hirschman ’ s theory, employees who have no effective means
to voice their discontent with any inequities they perceive may simply choose
to leave the company. 27 Such turnover can be very costly for employers, particularly
for those following strategies such as the human resource management pattern
discussed in Chapter 5 , which involve high levels of investment in the skills,
training, and capability of their employees. To the degree that confl ict resolution
systems can reduce such costly turnover, there will be an incentive for employers
to adopt them.

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316 Part IV. The Workplace Level of Labor Relations

Second, employers may adopt nonunion grievance procedures as part of union
avoidance strategies. The introduction of a union grievance procedure that allows
a union to enforce the terms of a collective bargaining agreement and provides
employees with due process is one of the major benefi ts of unionization that
unions can offer during organizing campaigns. Research has shown that arguments
based on justice and fairness are particularly effective during organizing campaigns.
Employers who can provide employees with effective nonunion grievance
procedures may reduce the desire for union representation and limit the strength
of these arguments in an organizing campaign.

Third, employers may adopt nonunion grievance procedures to reduce the
risk of litigation from employees. As we discussed in Chapter 3 , with the expansion
of employment laws in recent decades, there has been a growth in the number
of lawsuits fi led by employees and an increase in the damages awarded against
employers. Nonunion confl ict resolution systems can help reduce the risk of litigation
for employers by resolving workplace disputes before they turn into lawsuits.
Effective grievance procedures may also help reduce the danger of lawsuits by
allowing employers to identify managers who are engaging in improper or illegal
actions toward employees more quickly and take appropriate corrective measures.
Lastly, as will be discussed below, adoption of nonunion arbitration procedures
can enable employers to avoid lawsuits entirely and substitute an arbitral forum
for litigation to resolve disputes involving employment law.

Types of Nonunion Grievance Procedures

There is wide variation in the incidence and structure of nonunion dispute resolution
procedures. While at least half of nonunion fi rms have formal grievance procedures,
many continue to lack any procedures for resolving employee complaints or
appeals. Among fi rms that have adopted nonunion procedures, the structure of
these procedures varies widely.

The most basic type of procedure is the “open door” policy, under which
employees are simply invited to bring their complaint or concern to a manager
who will attempt to resolve it. More formal nonunion procedures for review of
employee grievances often specify the person (often a supervisor or lower-level
manager) to whom complaints can be brought and the person(s) (generally a
higher-level manager) to whom the employee can appeal if they are unsatisfi ed
with the initial manager ’ s decision. More sophisticated systems like this may
involve a committee or board of senior-level managers who will review and
decide the merits of an employee ’ s grievance and give the employee an opportunity
to present his or her grievance in a more formal hearing. A common feature of
these types of procedures, however, is that a manager or managers are the fi nal
decision makers, not a third-party neutral, as in union arbitration procedures.

Some nonunion fi rms have begun to adopt nonunion grievance procedures
that feature nonmanagers as decision makers. Among these types of procedures
are peer-review panels, which use fellow employees as decision makers, and
nonunion arbitration procedures, which use third-party neutral arbitrators. Both
of these types of procedures will be discussed further below.

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Confl ict Resolution at the Workplace 317

Data from the telecommunications industry reveals that dispute resolution
procedures appeared with the following frequency in nonunion establishments:
no formal procedure (49.5 percent); basic nonunion procedure (20.3 percent);
management appeals board (10.8 percent); and peer review and/or binding arbitra-
tion (19.3 percent). 28

In addition to these formal procedures for appealing grievances, some employers
have instituted alternative processes for resolving workplace confl ict, including
ombudsman offi ces, internal or external mediation, “speak up” programs, employee
counseling services, and attitude surveys and related communications programs.

Ombudsman offi ces are an interesting alternative to traditional grievance
procedures. The ombudsman is an individual a company employs to help resolve
problems, complaints, or confl icts between or among employees, supervisors, and
managers. Within the typical structure, the ombudsman reports directly to the
offi ce of the chief executive or to the head of the human resource management
department. This is done to remove him or her from the general management
chain of command. Since the ombudsman ’ s mandate is more open-ended than
the mandate for a grievance procedure, ombudsmen play a more varied role in
resolving confl icts and often handle a broader range of issues than do arbitrators
in the typical grievance procedure. Box 12.5 lists a range of functions the typical
ombudsman might perform. The fl exibility and informality with which the
ombudsman can approach this role is one of its distinct advantages. 29

Integrated Confl ict Management Systems

In recent years, a trend has emerged toward the introduction of integrated confl ict
management systems. An integrated confl ict management system uses a systematic
approach to preventing, managing, and resolving confl ict that focuses on the
causes of confl ict. The key features of an integrated confl ict management system
are provided in Box 12.6 .

Many factors are contributing to the development of sophisticated confl ict
resolution procedures. Complaints by employees against supervisors, peer disputes,
complaints that some part of a company is providing poor service, and disagreements
among work groups or teams are some of the reasons why organizations feel the
need for systematic approaches to confl ict resolution. In addition, disputes in the
workplace now include complex problems related to matters such as intellectual
property, sexual harassment, and confl icts of interest.

Why Nonunion Employees Desire Complaint Procedures

Employees in nonunion fi rms seek complaint procedures in part because they
want a mechanism they can use to challenge discharge decisions. The employment-
at-will doctrine that is used in the United States when there is no collective
bargaining agreement stipulates that both the employee and employer are free to
end the employment relationship at any time, for any reason, and without liability,
provided that the termination does not violate any laws.

As we discussed in Chapter 3 , in recent years a number of state courts have
allowed legal claims based on exceptions to the employment-at-will doctrine.

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318 Part IV. The Workplace Level of Labor Relations

BOX 12.5
Functions of an Ombudsman

• To give a personal and confi dential hearing, to defuse rage, to provide a
caring presence to those in grief about a dispute.

• To provide (and sometimes to receive) information on a one-to-one basis.
• To counsel people (confi dentially) on how to help themselves by helping

develop new options, by problem solving, by role playing.
• To conciliate (that is, to go between parties without bringing them face to

face).
• To mediate by bringing parties together face to face.
• To investigate formally or informally, with or without presenting

recommendations.
• To arbitrate or adjudicate, although this is a rare function.
• To facilitate systems or procedural changes by recommending “generic”

solutions, by providing upward feedback, by writing internal memos, by
“management consulting” with institutions, by public reports, by recom-
mendations to legislatures, and by supporting education and training.

The classic language describing most ombuds practitioners is “They may
not make, or change, or set aside any law or policy or management decision;
theirs is the power of reason and persuasion.”

Source : Mary P. Rowe, “Notes on the Ombudsman in the United States, 1986,”
Cambridge: Massachusetts Institute of Technology, 1986.

Yet even with the gradual expansion of nonunion complaint procedures and the
courts’ loosening of the employment-at-will doctrine, there is much controversy
about whether unorganized employees have an appropriate amount of due process.
The importance of this as a public policy issue continues to grow as the percentage
of the work force represented by unions declines.

Differences between Union and Nonunion Grievance
Procedures

There are important general differences between the procedures for resolving
workplace confl icts in union and nonunion workplaces. First, grievance procedures
in unionized workplaces are created and operate under rules established in collective
bargaining agreements jointly negotiated by the union and management. Nonunion
grievance procedures are designed and adopted by management and apply work
rules that an employer unilaterally makes. Second, whereas the union represents
the employee in a union grievance procedure, the employee typically must represent
him or herself under a nonunion grievance procedure. While a unionized employee
may in some situations disagree with how the union handles his or her grievance,

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Confl ict Resolution at the Workplace 319

BOX 12.6
Integrated Confl ict Management Systems

An integrated confl ict management system does the following:

• Encourages employees and managers to voice concerns and constructive
dissent early

• Integrates a collaborative problem-solving approach into the culture of the
company, encouraging direct negotiation between those involved in a dispute

• Provides options for all types of problems for all people in the workplace
• Coordinates a web of options and structures enabling problem solving across

areas and functions
• Aligns two confl ict management practices with each other and with the

mission, vision, and values of the company, thereby contributing signifi cantly
to internal culture transformation

• Is understandable to all
• Is fl exible and use friendly

Source : “Designing Integrated Confl ict Management Systems: Guidelines for Practitioners
and Decision Makers in Organizations,” report prepared by the Society of Professionals
in Dispute Resolution ADR in the Workplace Initiative, Institute for Confl ict Resolution,
ILR, Cornell University, 2002.

the nonunion employee acting on his or her own typically has no expertise in
grievance handling and does not have the negotiating power that union representa-
tion could have provided. Third, in most nonunion grievance procedures, it is
management that makes the decisions, in contrast to what happens in union
grievance procedures, where the arbitrator as a neutral third party makes the fi nal
decision. Although in recent years some nonunion grievance procedures have
included nonmanagerial decision makers such as arbitrators or peer employees,
these types of procedures are found in a small minority of nonunion workplaces.
These differences mean that the due process protections for employees in typical
nonunion grievance procedures are substantially more limited than those in union
grievance procedures.

Impact of Nonunion Grievance Procedures

It has long been recognized that employees are much less likely to use grievance
procedures in nonunion than union workplaces. However, employees may be
more willing to use nonunion grievance procedures that have some due process
protections. A study of employee usage of grievance procedures in the telecom-
munications industry found that rates of usage varied with the type of procedure.
Grievance rates are often measured as the number of grievances fi led annually
per 100 workers. Looking just at grievances about discipline decisions, in unionized
workplaces there was an average grievance rate of 5.3 for each 100 workers,

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320 Part IV. The Workplace Level of Labor Relations

whereas in workplaces with nonunion grievance procedures the average grievance
rate was 2.0 per 100 workers. In the nonunion workplaces, grievance rates were
much higher when the procedure included nonmanagerial decision makers: 2.9
per 100 workers for procedures that included peer review and 3.2 per 100 workers
for procedures that included arbitration compared to only 1.3 per 100 workers
for procedures that used only managers as decision makers. 30

Critics of nonunion grievance systems argue that an important reason why
employees make less use of such procedures is that they fear reprisals. A study
by David Lewin of the performance of grievance procedures in three high-
technology nonunion fi rms provides some support for these claims. 31 Lewin found
that compared to employees who did not fi le grievances, grievance fi lers (and
their supervisors) had lower performance ratings, lower promotion rates, and
higher rates of turnover in the year after their use of the procedure. Survey
responses from two of the fi rms indicated that approximately one-third of those
who did not fi le grievances chose not to do so because they either feared reprisals
or believed there was little chance their appeal would be successful. Thus, it
appears the grievants in these nonunion fi rms exercised their right to use these
procedures at considerable risk. If this pattern is at all representative of experiences
in other fi rms, it supports some of the critics’ arguments.

Peer Review and Union Avoidance

Confl ict resolution systems in nonunion settings may serve important functions
for both employees and employers. These procedures can be constructive additions
to a modern industrial relations system, but they can also give management a
way to control the work force and avoid a union.

Evidence shows that a number of fi rms have adopted peer review, a particular
kind of complaint-resolution procedure, because they found that it was an effective
substitute for a union. 32 In peer review procedures, review panels or boards are
established to hear employee grievances and make decisions about their merits.

In a peer review procedure, the majority of the members of the panel are peer
employees of the grievant. This process “creates two important advantages for
the use of peer review panels as union substitution mechanisms. First, because a
majority of the fi nal decision makers in the procedure are no longer members of
management, the panels promise greater neutrality in decision making. Second,
because employees are involved in the procedure, there is some substitution for
the representational function of the union in the workplace—albeit only a partial
substitute, given that the panel members are not actually presenting the grievance
on behalf of the employee.” 33

The history of nonunion grievance procedures has taken an ironic twist: what
started as a unique and highly acclaimed innovation designed to deliver due
process to employees has been transformed into an employer strategy for reducing
employees’ chances of achieving union representation and acquiring a truly
independent grievance procedure. Thus, like many other human resource manage-
ment innovations that are driven at least in part by union avoidance motives,
nonunion confl ict resolution systems are a double-edged sword.

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Confl ict Resolution at the Workplace 321

Nonunion Arbitration and Employment Laws

Use of arbitration as a fi nal step has long been a key feature of union grievance
procedures. By contrast, until recently use of arbitration in nonunion grievance
procedures was much rarer. This changed in the 1990s as employers began adopting
arbitration procedures as an alternative to litigation through the courts as a way
resolving employees’ claims based on employment laws.

Employment litigation costs increased dramatically in the 1960s, 1970s, and
1980s with the passage of various laws that protected workers, a shift in some
state courts toward recognition of some common-law protections against wrongful
dismissal, and occasional high damage awards to plaintiffs in disputes over dis-
crimination and other claims. This produced a strong desire by fi rms to reduce
litigation costs and avoid court actions where possible.

The impetus for the use of arbitration as a mechanism to avoid the risks and
costs of litigation came from a shift in the courts toward favoring arbitration as
an alternative way of resolving claims based on employment statutes. In its 1991
decision in Gilmer v. Interstate/Johnson Lane (1991), the U.S. Supreme Court ruled
that a dispute based on a statutory employment right was subject to arbitration.
Expanding upon the Gilmer decision, courts have ruled that disputes involving a
wide variety of employment rights, including cases involving discrimination based
on race, sex, age, and disability, are subject to the arbitration clauses in the
employment contracts of nonunion employers. In 2001, the Supreme Court
reaffi rmed its support for arbitration with its ruling in Circuit City v. Adams , which
upheld the enforceability of an arbitration agreement that Circuit City required
its employees to sign.

Employers that adopt arbitration procedures to resolve potential employment
law claims typically require employees to sign an agreement that they will arbitrate
potential legal claims against the employer as a mandatory condition of employment.
The potential employee can choose not to sign the arbitration agreement, but
the employer will then no longer offer the potential employee a job. For this
reason, these procedures are often referred to as “mandatory arbitration.” These
contracts are generally enforced by the courts, much as “take-it-or-leave-it”
contracts are enforced in many other areas (e.g., contracts with rental car companies
or apartment lease contracts).

In Equal Employment Opportunity Commission (EEOC) v. Waffl e House, Inc.
(2002), the Supreme Court limited the applicability of the Circuit City decision.
The Court ruled that the EEOC has the right to pursue judicial relief for a
victim of employment discrimination even when the individual has signed a
binding arbitration agreement with his or her employer. The EEOC can still seek
relief such as back pay, reinstatement, and damages for victims of employment
discrimination. Even after this ruling, the Gilmer and Circuit City decisions still
limit an employee ’ s ability to dispute unfair work rules and treatment in the courts.
Unless the EEOC pursues discrimination-related cases on behalf of employees,
which it has the resources to do in around only 1 or 2 percent of all cases,
employees can be forced to resolve an employment rights complaint through
arbitration.

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322 Part IV. The Workplace Level of Labor Relations

Mandatory arbitration spread rapidly in the wake of the Gilmer and Circuit City
decisions. Mandatory arbitration was very rare before the 1990s, but estimates
suggest that by the mid-2010s around a quarter or more of workplaces had
mandatory arbitration procedures in place. 34 The practical signifi cance of the
enforcement of mandatory arbitration clauses is that they divert employment
rights disputes, including discrimination cases, into an employer-designed arbitration
procedure. As a result, there has been much debate about the fairness of mandatory
arbitration procedures and various proposals have been made to increase their
due process protections.

Debates over Mandatory Arbitration

Advocates of mandatory arbitration argue that it provides a faster, more effi cient
mechanism for resolving employment law claims. They point to the lengthy
delays and high costs of litigating employment claims through the courts and
argue that arbitration provides a better, more accessible mechanism for resolving
these claims for both employers and employees. Comparisons fi nd that while the
average employment discrimination case takes 709 days to be resolved in the
federal court system, similar cases take an average of 361 days to resolve in arbitra-
tion. 35 Advocates argue that the simplifi ed procedures of arbitration are more
appropriate for resolving routine employment law disputes and that they retain
enough due process protections to ensure protection of the employee ’ s statutory
rights. 36

Critics of mandatory arbitration argue that employers have too much control
in such procedures, that they suffer from potentially biased arbitrators, and that
they move the adjudication of public employment law claims from the public
forum of the courts to a private forum. Since employers are the ones who design
mandatory arbitration procedures and since they offer them to potential employees
on a take-it-or-leave-it basis, critics worry that such procedures will include
features that systematically bias them in favor of the employer, such as rules
concerning who can serve as the arbitrator, limitations on access to the information
needed to resolve the claim, and restrictions on how the employee can present
his or her claim. In a colorful analogy, Katherine Stone described mandatory
arbitration agreements as a modern version of the yellow-dog contracts that many
employers required workers to sign promising that they would not join a union
until the practice was outlawed in the Norris-LaGuardia Act of 1932. 37

Another major concern of critics is that employers will have a systematic
advantage in arbitration because arbitrators will tend to favor the employer in
the hope of being selected to decide future claims. A study of employment arbitration
decisions found that where the employer had multiple cases before the same
arbitrator, the employer ’ s chances of winning the case increased by 6.2 percent
for each additional case the employer had with the same arbitrator. 38

Due Process Models and Controversies

While controversies and debates over the enforcement of mandatory arbitration
procedures continue, there have also been efforts to establish models of which

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Confl ict Resolution at the Workplace 323

due process protections should be included in arbitration procedures used to
resolve statutory claims. In 1994, the U.S. Department of Labor ’ s Commission
on the Future of Worker-Management Relations (the Dunlop Commission)
proposed a set of seven standards of fairness in nonunion arbitration:

a) A neutral arbitrator who knows the laws in question and understands the
concerns of the parties;

b) A fair and simple method by which the employee can secure the necessary
information to present the claim;

c) A fair method of cost-sharing between the employer and employee to ensure
affordable access to the system;

d) The right to independent representation if the employee wants it;
e) A range of remedies equal to those available through litigation;
f) A written opinion by the arbitrator explaining the rationale for the result;

and
g) Suffi cient judicial review to ensure that the result is consistent with the

governing laws. 39

In 1995, a task force established by the American Bar Association ’ s labor and
employment law section, which included representatives from both employer
and employee groups, developed a similar but more detailed Due Process Protocol
for arbitration procedures to resolve statutory claims. Subsequently, the American
Arbitration Association (AAA) announced that it would follow procedures based
on the recommendations contained in the Due Process Protocol in any employment
arbitration cases it administers. 40 This is important because many employers decide
that instead of developing an arbitration procedure entirely on their own, they
will contract with the AAA to provide the arbitrators and run the arbitration
hearings under its rules.

Research indicates that even when mandatory employment arbitration is
conducted under rules such as the AAA procedures, which provide more substantial
due process provisions than is the case in employer-crafted procedures, employee
outcomes from arbitration are less favorable than they are in litigation. A study
of employment arbitration cases found that the average amount award to employees
across all cases (including wins and losses) was $23,548 (in 2005 dollars). By
contrast, using the same measure, average employee recoveries in studies of federal
court case outcomes was $143,497 and in state courts $328,008. 41 Complex
research issues are involved when comparing arbitration and litigation outcomes,
but these broad comparisons suggest that employees recover much greater amounts
in the courts. This gives employers a powerful incentive to adopt mandatory
employment arbitration procedures.

The most recent controversy relating to mandatory arbitration is the inclusion
of class-action waivers in arbitration agreements. In AT&T v. Concepcion (2011), 42
the Supreme Court ruled that an arbitration clause could require that any case
be brought individually, effectively barring the plaintiff from participating in a
class action. Although this case dealt with a consumer claim, it has also been
applied in employment cases. This ruling give employers a way to use employment

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324 Part IV. The Workplace Level of Labor Relations

contracts to protect themselves from class actions if they include a class-action
waiver in the arbitration agreement they require their employees to sign.

There is currently uncertainty about the effect of class-action waivers in employ-
ment arbitration agreements due to an NLRB decision in the case of D. R.
Horton, Inc. (2012). 43 Under section 7 of the NLRA, employees have the right
to engage in concerted action for mutual aid and protection. In its D. R. Horton
decision, the NLRB held that the employment arbitration agreement the employer
had required had violated the employees’ right to engage in concerted action by
fi ling a class action and that because of this, the class-action waiver was unenforce-
able. Subsequent circuit court decisions have split on whether to accept the
NLRB ’ s interpretation that the employees’ section 7 rights preclude enforcement
of class-action waivers. It is likely that a Supreme Court ruling will be necessary
to resolve this confl ict. This case illustrates how issues of labor relations are
increasingly spilling over into the realm of nonunion employment relations and
employment laws.

Summary

Grievance procedures historically have been the centerpiece of the day-to-day
administration of the collective bargaining agreement. The grievance procedure
provides a mechanism for settling disputes that arise during the term of a collective
bargaining agreement. The grievance procedure typically includes steps involving
successively higher-level union and management offi cials. The union has the right
to decide if it wishes to push an unsettled grievance to a higher step.

The grievance procedure has been hailed as one of the most innovative features
of the U.S. industrial relations system. The centrality of the role it played in the
past is attributable in part to the understanding that it was management ’ s job to
manage and the union ’ s job to grieve.

Collective bargaining agreements in the United States are elaborate documents
that often include highly detailed job descriptions. The existence of such elaborate
labor contracts contributed to the need for an orderly way of settling confl icts
over interpretations of contract language.

Binding arbitration by a third party is the common device used as the fi nal
step of grievance procedures. Arbitrators commonly consider past practice at the
workplace, the intent of the parties during contract negotiations, and fairness
when they fashion awards. In discipline cases, arbitrators generally require progressive
and corrective discipline.

The centrality of formal grievance and arbitration procedures is now being
challenged by recent developments. The combination of a need for greater adapt-
ability and competitive pressures has led some unions and managements to simplify
how confl icts are settled. The expansion of workers’ involvement in business and
strategic decisions has led labor and management to rely less on the grievance
procedure to solve problems. An effective industrial relations system in union
settings now must be more than simply a grievance procedure. To keep in step
with the times, the system must combine the strengths of a well-functioning

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Confl ict Resolution at the Workplace 325

grievance procedure with mechanisms for solving problems informally and for
improving communication.

Confl ict resolution procedures are also important in the nonunion workplace.
Employers are motivated to adopt them for a number of reasons, including
reducing turnover, avoiding unions, and avoiding litigation. Nonunion confl ict
resolution procedures come in a greater variety of forms than union grievance
procedures. Some include structures such as peer review panels and ombudsman
offi ces.

Mandatory arbitration of employment claims is a growing and controversial
practice in the nonunion workplace. Mandatory arbitration agreements that
employers impose as a condition of employment effectively bar employees from
going to court and require them to arbitrate all disputes with the employer, even
claims under statutes such as Title VII of the Civil Rights Act.

Advocates argue that arbitration of employment disputes is faster, cheaper, and
more accessible for employees. Critics note that mandatory arbitration is unilaterally
imposed by employers and often lacks due process protections. they point to
empirical evidence that it produces worse outcomes for employees than litigation
and is plagued by problems such as bias in favor of employers when the employer
uses the same arbitrator repeatedly. Recent concerns have focused on the enforce-
ability of class-action waivers in mandatory arbitration agreements.

Discussion Questions

1. Describe the typical steps followed in a grievance case.
2. Name the groups the grievance process meets the needs of and discuss how

the grievance arbitration procedures help meet their respective needs.
3. What are some of the alternatives to the grievance arbitration process in

unionized workplaces?
4. What are some of the techniques nonunion fi rms use to resolve confl ict?
5. Describe the debates concerning whether nonunion arbitration procedures

should be used to resolve disputes about employment laws.

Related Websites

Federal Mediation and Conciliation Service:
http://www.fmcs.gov

American Arbitration Association:
http://www.adr.org

Suggested Readings

Elkouri , Frank , and Edna Asper Elkouri . How Arbitration Works . 7th ed . Washington, D.C. :
Bureau of National Affairs , 2012 .

Lipsky , David , Ronald Seeber , and Richard Fincher . Emerging Systems for Managing Workplace
Confl ict . San Francisco : Jossey-Bass , 2003 .

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326 Part IV. The Workplace Level of Labor Relations

Kuhn , James W. Bargaining and Grievance Settlement . New York : Columbia University Press ,
1961 .

Lewin , David , and Richard Peterson . The Modern Grievance Procedure in the American Economy .
New York : Quorum Books , 1988 .

McKelvey , Jean T. , ed . The Changing Law of Fair Representation . Ithaca, N.Y. : ILR Press ,
1985 .

Notes

1. United States Industrial Commission, Final Report of the Industrial Commission (Washington:
Government Printing Offi ce, 1902).

2. For a more thorough review of the development of grievance arbitration, see Robben W.
Fleming, The Labor Arbitration Process (Urbana: University of Illinois Press, 1964).

3. Charles C. Killingsworth and Saul Wallen, “Constraint and Variety in Arbitration Systems,”
in Labor Arbitration-Perspectives and Problems: Proceedings of the National Academy of Arbitrators, 1964
(Washington, D.C.: Bureau of National Affairs, 1965), 56–81.

4. Agreement between General Motors Corporation and the UAW, October 8, 1987 (N.p.: n.p., 1987),
93–94.

5. Neil W. Chamberlain and James W. Kuhn, Collective Bargaining , 3rd ed. (New York: McGraw-
Hill, 1986), 151–153.

6. United Steelworkers of America v. Warrior and Gulf Navigation , 363 U.S. 547 at 581 (1960).
7. Steele v. Louisville & Nashville R.R. Co. , 323 U.S. 192 (1944).
8. Vaca v. Sipes , 386 U.S. 171 (1967).
9. Hines v. Anchor Motor Freight, Inc. , 424 U.S. 554 (1976).
10. Bowen v. United States Postal Service , 103 U.S. (1983).
11. James T. Turner and James W. Robinson, “A Pilot Study of the Validity of Grievance Settle-

ment Rates as a Predictor of Union Management Relationships,” Journal of Industrial Relations 14
(September 1972): 314–322.

12. Harry C. Katz, Thomas A. Kochan, and Kenneth R. Gobeille, “Industrial Relations Performance,
Economic Performance, and QWL Programs: An Interplant Analysis,” Industrial and Labor Relations
Review 37 (October 1983): 8–9.

13. Nancy R. Mower, “The Labor-Management Relationship and Its Effects on Quality of Work
Life” (M.S. thesis, Massachusetts Institute of Technology, 1982).

14. James W. Kuhn, Bargaining in Grievance Settlement (New York: Columbia University Press,
1961).

15. David Lewin and Richard Peterson, The Modern Grievance Procedure in the United States (New
York: Quorum Books, 1988).

16. Federal Mediation and Conciliation Service, Arbitration Statistics, Fiscal Year 2005,
www.fmcs.gov .

17. Federal Mediation and Conciliation Service, Arbitration Statistics, Fiscal Year 2013,
www.fmcs.gov .

18. Arthur M. Ross, “The Arbitration of Discharge Cases: What Happens After Reinstatement?”
in Critical Issues in Arbitration: Proceedings of the Tenth Annual Meeting of the National Academy of Arbitrators
(Washington, D.C.: Bureau of National Affairs, 1957), 21–56; Robert C. Rodgers, I. B. Helburn,
and John E. Hunter, “The Relationship of Seniority to Job Performance Following Reinstatement,”
Academy of Management Journal 29 (March 1986): 101–114.

19. Lewin and Peterson, The Modern Grievance Procedure in the United States.
20. Thomas R. Knight, “Feedback and Grievance Resolution,” Industrial and Labor Relations

Review 39 (July 1986): 585–598.
21. Nancy Kaufman, “The Idea of Expedited Arbitration Two Decades Later,” Arbitration Journal

(September 1991): 34–38.
22. John Zalusky, “Arbitration: Updating a Vital Process,” American Federationist 83 (November

1976): 4.

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Confl ict Resolution at the Workplace 327

23. Jeanne M. Brett and Stephen B. Goldberg, “Grievance Mediation in the Coal Industry: A
Field Experiment,” Industrial and Labor Relations Review 37, no. 1 (1983): 49–69.

24. William L. Ury, Jeanne M. Brett, and Stephen B. Goldberg, Getting Disputes Resolved: Designing
Systems to Cut the Costs of Confl ict (San Francisco: Jossey-Bass, 1988).

25. Stephen B. Goldberg, “The Mediation of Grievances under a Collective Bargaining Contract:
An Alternative to Arbitration,” Northwestern University Law Review 77 (October 1982): 270–315.

26. Peter Feuille, “Grievance Mediation,” in Employment Dispute Resolution and Worker Rights in
the Changing Workplace , ed. Adrienne E. Eaton and Jeffrey H. Keefe (Champaign-Urbana, Ill.:
Industrial Relations Research Association, 1999): 187–217.

27. Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations,
and States (Cambridge, Mass.: Harvard University Press, 1971).

28. Alexander J. S. Colvin, Citizens and Citadels: Dispute Resolution and the Governance of Employment
Relations (PhD diss., Cornell University, 1999).

29. David Lewin, “Workplace Dispute Resolution,” in The Human Resource Management Handbook,
Part II , ed. D. Lewin, D. J. B. Mitchell, and M. A. Zaidi (Greenwich, Conn.: JAI Press, 1997),
197–218.

30. Alexander J. S. Colvin, “The Dual Transformation of Workplace Dispute Resolution,”
Industrial Relations 42 (October 2003): 712–735.

31. David Lewin, “Confl ict Resolution in High Technology Firms,” in Human Resource Management
in High Technology , ed. Archie Kleingartner and Cara Anderson (Lexington, Mass.: Lexington Books,
1987).

32. Alexander J. S. Colvin, “Institutional Pressures, Human Resource Strategies and the Rise of
Nonunion Grievance Procedures,” Industrial and Labor Relations Review 56 (April 2003): 375–392.

33. Ibid., 380.
34. Alexander J. S. Colvin and Mark Gough, “Individual Employment Rights Arbitration in the

United States: Actors and Outcomes,” ILR Review 68, no. 5 (2015): 1019–1042.
35. Alexander J. S. Colvin, “An Empirical Study of Employment Arbitration: Case Outcomes

and Processes,” Journal of Empirical Legal Studies 8, no. 1 (2011): 1–23.
36. Samuel Estreicker, “Saturns for Rickshaws: The Stakes in the Debate over Predispute Employ-

ment Arbitration Agreements,” Ohio State Journal on Dispute Resolution 16 (2001): 559–570.
37. Katherine V. W. Stone, “Mandatory Arbitration of Individual Employment Rights: The

Yellow Dog Contract of the 1990 ’ s,” Denver University Law Review 73 (1996): 1017–1050.
38. Colvin and Gough, “Individual Employment Rights Arbitration in the United States.”
39. Commission on the Future of Worker-Management Relations (The Dunlop Commission),

Report and Recommendations (Washington, D.C.: U.S. Department of Labor, 1994).
40. “Revised AAA Arbitration Procedures Refl ect Due Process Task Force Scheme,” Daily Labor

Report , May 28, 1996.
41. Colvin, “An Empirical Study of Employment Arbitration.”
42. 563 U.S. 333 (2011).
43. 357 NLRB No. 184 (2012).

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157

7

UNION ORGANIZING

Chapters 7, 8 , 9 , and 10 examine the middle (functional) level of labor relations
activity. The focus in this chapter is the processes that create, or organizes labor
into, new unions and the bargaining structures that determine which employees
are covered by a collective bargaining contract.

In some ways, the representation election is the most important step in collective
bargaining: if unorganized workers vote not to be represented by a union, collective
bargaining cannot proceed. In contrast, positive expression of worker interest in
representation opens the way for subsequent bargaining.

Various factors in the external environment shape the power and preferences
of the parties in the organizing process. The law, for example, plays a prominent
role in union-organizing drives and representation elections. Environmental factors
also exert an important infl uence on the determination of the formal bargaining
structures a union and management will use in the bargaining process. Strike
leverage and the economic environment, for example, are prominent not only
because of their effects on organizing success but also because they shape the
parties’ preferences for particular bargaining structures.

Negotiations cannot take place until a bargaining representative has been duly
certifi ed as the exclusive representative of the employees. Normally, this requires
that a union win a representation election (although an employer may voluntarily
recognize a union if the union can demonstrate that it represents a majority of
the employees involved). 1 The events and regulations that surround representation
elections are described below.

The Organizing Process

The key steps in the organizing and representation election process are described
in Box 7.1 . Note that before the NLRB will schedule an election, at least 30
percent of the election unit must have signed an authorization card indicating
they would like an election to be held. In actual practice, most unions will not
request an election unless they have already signed up a signifi cant majority of
potential voters.

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158 Part III. The Functional Level of Labor Relations

BOX 7.1
Steps in Organizing a Union and Holding a Representation
Election

1. Interested employees seek out a union to learn their rights and gain help in
organizing, or a union seeks out a group of employees in order to explain
their rights to them and explore their interest in organizing.

2. The union builds support for organizing among the employees and solicits
their signatures on authorization cards.

3. When suffi cient cards are signed to indicate substantial employee support,
the union asks for recognition as the bargaining agent for the employees. If
at least 30 percent of the employees have signed cards, the union can petition
for an NLRB certifi cation election. If over 50 percent of the employees
have signed cards, the union can ask the employer for recognition, or, if
this is refused and serious unfair labor practices are committed by the employer,
the union can ask the NLRB for certifi cation. If the employer does not
voluntarily recognize the union, either party can petition for an NLRB
certifi cation election to determine whether the union has majority support.

4. The NLRB investigates to determine whether an election should be held.
The board considers whether it has jurisdiction, whether there is suffi cient
interest among the workers, and whether there is already a bargaining agent,
and whether an election has been held in the past twelve months. Most
important, the NLRB determines the appropriate bargaining unit.

5. If the NLRB fi nds that the conditions for an election have been met, it
orders that one be held. Procedures of varying formality are used, depending
on the level of disagreement between the parties. Expedited procedures can
be used if the union has engaged in picketing to organize workers or to
obtain union recognition from the employer.

6. Once an election date is set, campaigning on both sides intensifi es. Restrictions
apply to both union and management behavior during this period. This is
because both sides need to maintain laboratory conditions; that is, an environ-
ment in which workers can make free, uncoerced choices.

7. Representatives of the NLRB conduct an election by secret ballot. The
union, management, or the NLRB can challenge an individual ’ s right to
vote. For example, a claim might be made that an employee does not work
within the designated bargaining unit or that he or she is a supervisor and
thus is excluded from coverage. If there are more than two choices on the
ballot and no option receives a majority vote, a runoff election will be held
between the two choices that received the most votes.

8. If the union wins the election, then, after any objections or appeals, the
NLRB certifi es the union as the exclusive bargaining agent for the employees.
The employer has the obligation to begin negotiating a fi rst contract. If the
employer wins the election, there can be no further election for twelve
months.

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Union Organizing and Bargaining Structures 159

Why Workers Might Want Union Representation

To understand how the organizing process works, it is useful to fi rst ask why an
individual might seek union representation. Evidence shows that for workers to
express a preference for unionizing, they must (1) be deeply dissatisfi ed with their
current job and employment conditions; (2) believe that unionization can be
helpful in improving those job conditions; and (3) be willing to overcome the
generally negative stereotype of unions in the U.S. population.

Workers might turn to unions because of their concerns with employment
conditions or because they are unsatisfi ed with the process by which decisions
are made at their workplace. Thus, workers might, for example, vote in favor of
the union in the hope that subsequent contractual negotiations will improve
wages. Or a worker might be angered by a recent managerial decision, such as
a layoff or a disappointing performance appraisal . In these cases, the worker
might turn to the union with the hope that the union will either improve future
management decisions or, at a minimum, give employees a greater voice in future
decision making.

The evidence Richard Freeman and Joel Rogers collected on why employees
vote in favor of union representation is provided in Box 7.2 . Their survey evidence
shows that a very signifi cant factor in employees’ decision to unionize is their
confi dence and trust in management and employees’ feelings about whether they
are being treated fairly by management.

Union Campaign Practices

Unions commonly rely on organizers to rally employee support during election
campaigns. These organizers often include paid full-time staff from existing unions
who travel from campaign to campaign. The union also often enlists some of the
work force to assist as organizers. Organizers and union supporters use a variety
of mechanisms to promote a pro-union message. They often hold group meetings

BOX 7.2
Employee Motives for Voting to Unionize

Nonunion employees are more likely to say they would vote for a union
when they also say that:

1. Relations between employees and management are bad.
2. They do not trust management.
3. They believe that management shows little concern for employees.
4. They dislike their job.
5. They are dissatisfi ed with their infl uence and with the workplace.
6. They believe management is unwilling to share power.

Source : Survey evidence reported in Richard B. Freeman and Joel Rogers, What Do
Workers Want? (Ithaca, N.Y.: Cornell University Press, 1999).

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160 Part III. The Functional Level of Labor Relations

after work hours in a local church or community meeting room. Union supporters
who have the opportunity to move around the work site often spread the message
during work hours. 2

Management ’ s Campaign Practices

Management is rarely a passive observer in the election process. Managers often
try to design personnel and other corporate policies far in advance of any repre-
sentation election to dissuade employees from favoring union representation.
These tactics can be as important to the election outcome as the tactics management
might use during an election campaign.

Common strategies managers use before the onset of organizing campaigns to
reduce the incentive to unionize include most, if not all, of the following:

1. Wages and fringe benefi ts equal to or greater than those paid to comparable
workers in the local labor market.

2. A high rate of investment per worker in such employee programs as training
and career development.

3. Extensive efforts to stabilize employment and avoid layoffs as much as
possible.

4. Advanced systems of communications and information sharing in the company.
5. Informal mechanisms for or encouragement of participation in decision

making about the way work is to be performed.
6. Development of a psychological climate that fosters and rewards loyalty and

commitment to the company.
7. Rational administration of wages and salaries, performance appraisal, and

promotion systems that reward merit but also recognize seniority.
8. A nonunion grievance procedure (usually without binding arbitration).
9. Locating new production or service facilities in southern states or rural areas

or areas that are only sparsely unionized.

Management does not always have the will or foresight to put all these policies
in place, and election campaigns can arise even when some of them are in place.
When managers face a representation election, they typically will attempt to
convince employees to vote against union representation. They will call meetings
with employees (these might be individual or group meetings) to make their case.
Under the NLRA, management is allowed to hold these meetings on company
time and in company facilities (the law allows captive-audience speeches up to
twenty-four hours before the vote). During such a meeting, a management
spokesperson (such as the company president) might remind the employees of
the direct costs of union membership (dues) or the potential losses in income to
employees during any strikes that ensue.

Under the NLRA, employers may not threaten to punish workers if they join
or vote for a union. The NLRA also forbids employers from making promises
to workers that might encourage them to reject the union. But an employer may
make a prediction about the future if the prediction is based on fact. An employer
may say that workers could be laid off if the union wins the election and successfully

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Union Organizing and Bargaining Structures 161

negotiates for a 50-cent raise, provided the employer has the evidence that a
50-cent raise would lead to layoffs.

The NLRA gives the NLRB two ways to require an employer to recognize
and bargain with a union if it fi nds that an employer has committed egregious
violations of the labor law during a representation campaign. One option is to
issue a direct order certifying the union as the bargaining agent and requiring the
employer to bargain with it, and the other is to go directly to a federal court to
obtain an injunction requiring the employer to stop its illegal actions and to
bargain with the union. In recent years, the NLRB has made greater use of the
court injunction option because it takes less time to implement. Box 7.3 describes
a recent case where the Board acted directly by issuing a bargaining order.

The Election Unit

The election unit is the group of employees that the NLRB (or the appropriate
state agency with jurisdiction over the employees involved) determines is covered
under the appropriate statute and is eligible to vote in the representation election.

BOX 7.3
A Rare Case Where the NLRB Ordered Union Recognition

Although the NLRB rarely exercises its authority to order management to
recognize a union, this does sometimes happen in the face of egregious
employer violations of the nation ’ s labor laws. A case occurred at a New
York branch of Hogan Transports Company, which provides trucking
services exclusively for the Save-A-Lot supermarket chain. The Teamsters
union began attempting to unionize the employees in June 2013. The union
alleged that the employer had committed several violations of fair labor
practices after the petition for an election, including threats of job loss,
coercive pay raises, and a biased termination.

The NLRB issued a bargaining order in this case by ruling that while
the violations did not constitute “exceptional” or “outrageous” violations
(two criteria that justify issuing a bargaining order), the employer ’ s actions
met the third criteria of signifi cantly diminishing the chance that a fair
election could take place. In the Hogan Transports case, supervisors held
multiple captive-audience meetings at which they claimed to have received
strong indications from their sole supplier, Save-A-Lot, that it might terminate
its contract if the shop unionized. This claim was uncorroborated in the
investigation. Also, Hogan Transports put a pay raise into effect when it
learned of the union campaign, with no evidence that this would have
happened if no election was to be held. Finally, a vocally pro-union employee
was terminated under suspicious conditions.

Source : Hogan Transports, Inc., 363 NLRB No. 196 (May 19, 2016)

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162 Part III. The Functional Level of Labor Relations

Two main decisions must be made to defi ne the appropriate election unit.
First, the range of employees to be included must be decided. This may involve
choosing between a craft election unit structure (covering only workers in a
single occupation), an industrial election unit structure (for example, all the
blue-collar production and maintenance workers in a plant), or between
employees at one plant or location and employees at multiple plants or job
sites. Second, the issue of who functions as a supervisor or manager must be
decided, because since the passage in 1947 of the Taft-Hartley amendments to the
National Labor Relations Act, supervisors have been excluded from coverage of
the act.

The Scope of the Unit—The NLRB ’ s Criteria

Since the composition of the electorate can infl uence the outcome of the
election, the scope of the election unit is often a hotly contested issue. The union
typically will seek an election unit that maximizes its ability to win the election
and the employer will seek a unit that minimizes the union ’ s chances of winning.
The NLRA states that the fundamental objective in choosing an election unit
should be to ensure that employees have “the full freedom in exercising the rights
guaranteed by this act.”

The NLRB and the state and local boards normally consider the following
general criteria in deciding on the appropriate election unit:

1. The community of interests among the employees
2. The potential effects of alternative units on stability in the labor-management

relationship
3. The need to provide suffi cient freedom of choice to professional and skilled

employees
4. The history of bargaining or the employer ’ s decision-making structure with

similar units

This fourth criterion is useful in resolving disputes between the parties over
whether certain employees should be excluded because they perform supervisory
or managerial functions.

Whether craft workers are put into the same election unit as production workers
in the same plant (or company) is a diffi cult part of the process of determining
an election unit. Although Section 9(b)(2) of the Taft-Hartley Act was designed
to limit the NLRB ’ s ability to put craft workers into industrial election units,
the board has consistently rejected petitions to exclude craft workers from the
large industrial units. Indeed, the board has argued that the interdependence
between craft workers and production workers warrants a single comprehensive
unit.

The NLRB has been somewhat more willing to grant professional employees
a separate bargaining unit. Section 9(b) of Taft-Hartley prohibits the NLRB from
including professional employees in a bargaining unit with nonprofessional employees
unless the professionals decide by a majority vote to be included in a larger, more
comprehensive unit.

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Union Organizing and Bargaining Structures 163

Union Organizing Success Rates

In 2015, labor unions won 69.5 percent (1,128 out of 1,628) of the representation
elections conducted. 3 This fi gure declined steadily from the 1960s to the mid-1990s
but has risen steadily since then. However, the number of workers organized
through the election process continues to be very small relative to the size of the
nonunion labor force. In any given year since at least the 1990s, unions have
organized less new members than the number of new entrants to the labor force.
In 2015, unions organized some 61,650 workers through NLRB elections, down
slightly from 64,000 in the previous year. In 2015, unions won 73 percent of
elections held for units of less than 50 employees, compared to a win rate of 61
percent for units with 50–99 employees and 58 percent in units with 100–499
employees. 4 In large multi-establishment companies, unions have had trouble
even securing enough signed authorization cards to certify to the NLRB that an
election should be held. 5 These data make it clear that unions are not going to
reverse their long-term decline by using the established procedures of the NLRA
unless they make efforts to substantially increase the number of organizing drives
they conduct.

Union involvement in representation elections and win rates in those elections
vary somewhat by union. The Teamsters are the most active union in representation
elections. They participated in 384 representation elections in 2015, accounting
for approximately 20 percent of all NLRB representation elections. The union
involved in the second highest number of representation elections was the SEIU,
with 152 elections in 2015. SEIU, the Laborers International Union of North
America and the International Association of Machinists and Aerospace Workers
were the most successful unions in representation elections; each won about
three-fourths of NLRB elections in which they participated.

At the same time, the low level of recent union organizing success and the
fact that only 11 percent of the work force is now unionized should not be taken
to mean that only a small fraction of the American work force desires union
representation. 6 The most complete survey of how workers would respond to
union organizing efforts on their jobs and how they would expect their employer
to respond was carried out in the mid-1990s by Professors Richard Freeman and
Joel Rogers. The results showed that a sizable number of nonunion employees
desire union representation. Just under one-third of nonunion private sector
employees indicated that they would vote for union representation if given the
chance to do so. That was essentially the same percentage who gave this response
in the fi rst national survey of this kind in 1976.

More recent polls (the most recent was in 2004) indicate interest in union
representation has increased to just under 50 percent of the nonunion workers
who participated in nationally representative surveys. Thus, the interest of nonunion
workers in joining a union has increased substantially over the past several decades
even as union membership has decreased, leading Freeman and Rogers and others
to conclude that there is a large representation gap in the United States.

In response to declining unionization, American unions have adopted new
organizing strategies (described later in this chapter). One aspect of the new

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164 Part III. The Functional Level of Labor Relations

organizing approaches of American unions is intensifi ed efforts to organize profes-
sional employees. As Box 7.4 describes, this includes organizing campaigns among
university professors and graduate assistants.

Even if a union wins a majority vote in a representation election, this does
not ensure that a fi rst contract will be negotiated. The NLRA requires that
employers (and the union) bargain in good faith, but the law does not require
that the parties reach agreement. In fact, fi rst contracts are won in only about
two-thirds of newly designated units.

Does the Election Campaign Infl uence How
Workers Vote?

Research has shown that workers tend to become less inclined to vote for union
representation when an election is delayed. 7 Studies also show that illegal employer
behavior during the election campaign (a signal of aggressive employer opposition
to bargaining) further reduces the probability that a fi rst contract will be settled. 8
The effects of employer resistance is quite substantial; as we noted in Chapter 6 ,
the most comprehensive study of this issue found that only about 10 percent of
bargaining units where a majority of workers sign authorization cards are successful
in achieving a fi rst contract if the employer resists to the point that an unfair
labor practice charge is fi led. 9 Evidence also shows that fi rms with previously
poor worker-supervisor relations and low wages are more likely to commit violations
of fair labor practices during election campaigns. 10

The results of these studies further reinforce a conclusion most unions have
come to: investments in organizing through the procedures the NLRA has
established have to be made very carefully, given the low probability of success
and the high costs involved. Most union leaders today look for other ways to
gain neutrality from employers in organizing or fi nd ways to attract members
without having to use these processes. The evidence also indicates why most
labor law and policy experts recognize that this feature of labor law is in need
of fundamental reform. We will discuss options for reform in Chapter 16 .

In 2015, the NLRB announced some changes in how it would administer
representation election processes and adjudicate claims that an employer or union
was violating the rules governing these processes. Specifi cally, it indicated that it
would speed up the process by no longer hearing evidence on unfair labor practice
charges until after the election, by requiring employers to provide unions with
the e-mail addresses of those eligible to vote (in the past, only mailing addresses
were required), and requiring employers to post notices of the right of workers
to form a union. These new administrative processes have been in effect only a
short time and it is too early to tell whether they will make any difference in the
outcomes of elections.

Union Decertifi cation

Unions lose members through decertifi cation elections . The 1947 Taft-Hartley
amendments to the NLRA prescribed the election procedures for decertifying a
union.

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Union Organizing and Bargaining Structures 165

BOX 7.4
The Unionization of University Professors and Graduate
Students

Working in higher education has become increasingly precarious as universities
have shifted from staffi ng full-time, tenure-track professors to relying sig-
nifi cantly more on part-time adjunct professors and graduate assistants. Though
these changes have made unionization necessary by lowering the standards
of working conditions, they have also created greater opportunity for successful
unionization efforts.

This apparent paradox can be resolved by looking at one of the major
historic roadblocks to university unionization. In 1980, a conservative Supreme
Court ruled in NLRB v. Yeshiva University that tenure-track professors in
private universities were ineligible for unionization because they had signifi cant
managerial authority in the university. However, the growth of the admin-
istrative bureaucracy that enabled the transition to a contingent work force
led the NLRB to decide in 2014 that “colleges and universities are increasingly
run by administrators” and that therefore professors are for the most part
nonsupervisory employees.

While the NLRB has recently begun to open the door for unionization
for private institutions, professors in public universities not covered by the
board ’ s jurisdiction have, as with other industries, unionized at a far more
rapid pace than their counterparts in private universities. Of the estimated
386,000 unionized university faculty in the United States, 344,762 work
in public universities.

Those who have been most affected by the changes in academia are the
ones who have fought the hardest for unionization. Graduate, teaching,
and research assistants have borne an increased workload as universities staff
less full-time professors. These educators also face bleaker job prospects after
earning their degree. Their efforts were stunted in 2004, when the NLRB
ruled in a case concerning Brown University students that because graduate
students were “primarily students,” they were ineligible for unionization.
However, an NLRB ruling in August 2016 in favor of Columbia University
students has practically overturned the 2004 ruling by stating that despite
their broader relationship with the university, graduate students are still
protected under the NLRA and can form a union based on the work they
perform under the direction of the school. This may prove to be a watershed
event in the struggle for university student unions.

Source : Noam Scheiber, “Grad Students Win Right to Unionize in an Ivy League Case,”
New York Times , August 23, 2016; and David Ludwig, “Why Graduate Students of
America Are Uniting,” The Atlantic , April 15, 2015.

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166 Part III. The Functional Level of Labor Relations

The decertifi cation elections held since Taft-Hartley have been far fewer than
the representation elections, but in recent years their number has been increasing
and unions have been losing an increasing percentage of these contests. The fi rst
year after Taft-Hartley passed, for example, 97 decertifi cation elections were
held, or only 3 percent of the 3,822 representation elections held that year. That
ratio held steady throughout the 1950s and 1960s but began creeping upward in
the 1970s. In 2015, 185 decertifi cation elections were held and unions retained
representation rights in 72 (or 39 percent) of them. 11

Most union members appear to be satisfi ed with their unions and union leaders.
A recent survey fi nds that union members are generally very satisfi ed with their
personal experiences with the unions at their workplaces. Survey data shows that
90 percent of union members would vote to keep their union if given the chance
to directly vote on the issue.

THE DEBATE OVER LABOR LAW REFORM

The diffi culties workers and unions have experienced in navigating through the
representation process in the face of employer resistance has led to much debate
over whether the endorsement of collective bargaining that the NLRA provided
is being fulfi lled. Remember that the original objective of the law was to ensure
that employees would be able to exercise free choice regarding union representation,
untrammeled by an employer ’ s (or a union ’ s) false promises or false information,
threats of reprisals or promises of benefi ts, or misuse of economic power. To
reach this objective, the NLRB (and most state labor boards) attempted to establish
laboratory conditions for the election process. The notion was that workers
should be free to judge whether they wanted union representation in an environ-
ment free of coercion and misinformation.

Advocates of labor law reform often argue that the penalties imposed on
employers who commit unlawful acts during an election campaign are too weak.
They also claim that the procedures for remedying unfair labor practices and or
holding representation elections are too protracted and that too often employers
merely move or close operations as part of union avoidance strategies. As we will
discuss in more detail in Chapter 16 , a major congressional debate over labor law
reform occurred in 1977 and 1978. The labor law reform bills introduced then
would have imposed harsher penalties on labor law violators, required stricter
time limits on the election process, and provided stronger remedies for victims
of unfair labor practices. The bills were not passed (one bill passed the House of
Representatives but died in a fi libuster in the Senate in 1978). In 1991, Congress
debated labor law amendments that would limit the ability of employers to hire
permanent replacements during a strike. In 1994, a presidential commission, the
so-called Dunlop Commission, recommended several changes in labor laws
and the application of laws to overcome delays and other tactics employers have
been using to oppose union organizing. However, in the end, the Dunlop Com-
mission ’ s recommendations were ignored. In 2009, after the election of Barack
Obama, the labor movement mounted another effort to reform labor law with

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Union Organizing and Bargaining Structures 167

the Employee Free Choice bill. That bill stated that a union could be certifi ed
if it could demonstrate that a majority of eligible workers had signed cards
authorizing the union to represent them (instead of requiring an election),
strengthened the penalties for violating the law, and provided for arbitration of
the fi rst contract if the parties were not successful in negotiating an agreement.
This bill passed in the House of Representatives but again could not overcome
a fi libuster in the Senate. These efforts and what they imply for the future of
labor law reform will be discussed again in Chapter 16 . For now, it is suffi cient
to note that the debate continues over the performance of the nation ’ s labor
policies.

Box 7.5 summarizes some the recommendations advocates of labor law reform
have made with little success. In the absence of legal reforms, many unionists
and analysts suggest that aggressive employer union avoidance has become more
common in recent years. This has led union activists to increase union organizing
efforts and to turn to nontraditional union organizing tactics.

BOX 7.5
Selected Proposals for Reforming Representation Processes

1. Require employers to recognize a union when a majority of workers have
signed cards authorizing the union to serve as their bargaining
representative.

2. Give unions the right of access to employees for campaign purposes equal
to the access employers have.

3. Stop attempting to regulate statements employers or unions make as part of
election campaigns.

4. Speed up the enforcement of current rules governing elections and strengthen
the penalties imposed on violators of the law by
a. making it easier to obtain or requiring court injunctions to stop and/or

remedy serious violations of the law, such as discriminatory discharges
during campaigns;

b. deferring hearings and decisions on unfair labor practice claims until after
an election is held;*

c. reinstating employees quickly, in time to allow union supporters to return
to employment before the campaign is over and the vote is held;

d. allowing employees or the union to sue for civil damages in cases where
an employer willfully violates of an employee ’ s rights; and

e. lifting the constraint on the amount of the settlement an employee can
receive in cases where employer conduct exhibits a consistent pattern of
illegal behavior.**

5. Conduct speedy elections, with a very short time allowed for campaigning.*

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168 Part III. The Functional Level of Labor Relations

6. Strengthen the ability of a union to strike to achieve a fi rst contract by
eliminating the ability of an employer to permanently replace strikers and
by allowing other workers to boycott the goods of an employer involved
in a strike.

7. Require arbitration of fi rst contracts if an impasse occurs.

*The NRLB took steps in this direction in 2015 with administrative rule changes.
**Under current law, a court can only award a settlement equal to the wages lost by
an employee since the time of discharge.
Sources : Paul C. Weiler, “Milestone or Millstone: The Wagner Act at Fifty,” in Arbitration
1985: Law and Practice , ed. Walter J. Gershenfeld (Washington, D.C.: Bureau of National
Affairs, 1986), 37–67; and Charles J. Morris, American Labor Policy: A Critical Appraisal
of the National Labor Relations Act (Washington, D.C.: Bureau of National Affairs, 1987).

Nontraditional Union Organizing Tactics Such as
Corporate Campaigns

Given the great diffi culties they have faced using traditional election campaign
tactics, several unions have adopted more aggressive corporate campaigns and
other tactics designed to increase the chances of organizing new workers. Corporate
campaigns involve a variety of efforts to bring public, fi nancial, or political pressures
to bear on top management.

The fi rst large-scale corporate campaign was carried out against the J. P. Stevens
Company in the late 1970s. The Amalgamated Clothing and Textile Workers
Union (ACTWU) waged a successful national boycott of Stevens products,
threatened to withdraw the union pension funds from banks that had offi cers on
Stevens ’ s board, and, eventually, after almost a decade of effort, negotiated its
fi rst contract with the company. Since then, similar efforts have been mounted
in attempts to organize the operations of nursing homes, hospitals, and a variety
of other private sector fi rms. 12

Most of the union corporate campaigns have been accompanied by strategies
designed to infl uence the employer involved in the election indirectly by putting
pressure on individuals or other fi rms that do business with or have interlocking
directorates with it. These efforts attest to the unfairness labor leaders perceive
and the frustrations they have experienced with the election process as it has been
administered by the NLRB.

Since the late 1980s, the SEIU has led a campaign to organize janitors in several
regions of the country using nontraditional tactics that in some cases seek to go
outside the NLRA and NLRB procedures to gain union representation. Its Justice
for Janitors campaign tries to organize on a multiemployer (regional) basis and
often avoids normal NLRB-style representation elections by inducing employers
to voluntarily recognize the union. The janitors’ campaign often puts pressure
on the primary employers that typically rely on subcontractors to provide janitorial
services in their buildings, such as Apple (see Box 7.6 ). The Justice for Janitors

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Union Organizing and Bargaining Structures 169

BOX 7.6
The Justice for Janitors Campaign

In 1985, the Service Employee International Union (SEIU) launched its
Justice for Janitors campaign in response to a strike by cleaning workers at
Mellon Bank in Pittsburgh. The nationwide campaign to organize cleaning
service workers targeted high-profi le companies that contract out their
cleaning services to nonunion cleaning companies. The SEIU targeted the
large fi rms that use these nonunion cleaning companies rather than targeting
the nonunion employers directly because it claims that the large fi rms set
the standard for wages in the industry by determining the amount of money
paid to the contractors. The union claimed that the nonunion cleaning
companies committed frequent wage and hour violations and gave poor
wages and benefi ts (an estimated $12,000 a year with no health care benefi ts).
The same type of campaign that began in Pittsburgh has now been used in
other cities.

In its Justice for Janitors campaigns the SEIU has used tactics such as
picketing, demonstrations, coalitions with commercial groups, and negative
publicity about the corporations that exploit cleaning workers to put pressure
on both the large fi rms and the nonunion cleaning companies. The campaign
targeted large companies such as Apple, Hewlett-Packard, and Toyota.

However, in the spring of 1997, SEIU president Andrew Stern publicly
acknowledged that the noisy demonstrations, traffi c tie-ups, and civil disobedi-
ence against Washington, D.C., employers had produced too much antago-
nism. He pledged to end the strikes and pickets and the involvement of
third parties in the dispute. Stern also emphasized that while it was necessary
to change tactics, the union ’ s goal continued to be the achievement of
decent working conditions for janitors.

In the 1990s and 2000s, SEIU successfully organized the cleaning industries
in many major cities, using less dramatic tactics. Then, beginning in 2014,
possibly spurred by the Occupy Wall Street movement, the SEIU funded
major walkouts in the fast-food industries of several large cities, beginning
with Fast Food Forward in New York. These movements coalesced under
the banner of the motto Fight for $15 and used many of the strategies that
Justice for Janitors had proved to be viable.

The SEIU received some criticism from members who felt that it was
using valuable resources to help a nonunionized work force, but the rapid
success of the movement eventually led to widespread praise. Many states
and major cities responded to the civil disobedience and lobbying by passing
new minimum wage increases. This nationwide success may be somewhat
attributable to the attention given to the movement by two major Democratic
candidates for the presidency in the 2016 election.

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170 Part III. The Functional Level of Labor Relations

The movement has also given back, in a way, to its roots. In June 2016,
janitors in Denver successfully negotiated for a wage increase to $15 an
hour. This is at least in part a result of the fact that the Fight for $15
campaign has normalized this previously unattainable fi gure. With these
campaigns, the SEIU has proven that a broad-based approach can be effective
in changing industry practices and that despite the waning infl uence of
unions, they need not tread lightly to be successful.

Sources : “100,000 Janitors Covered in the SEIU Pacts Bargained During 2000 in Two
Dozen Cities,” Daily Labor Report , November 28, 2000, C-1.; Kelsey Ray, “Denver
Janitors Sign ‘Historic’ $15 Minimum Wage Agreement,” Colorado Independent, June
30, 2016; Josh Eidelson, “The Lessons Unions Learned from the ‘Justice for Janitors’
Protests,” Bloomberg Politics , June 16, 2015.; Steven Greenhouse, “Fast-Food Workers
Seeking $15 Wage Are Planning Civil Disobedience,” New York Times, September 1,
2014.

campaign also tries to make alliances with community groups such as churches
to gain public support for union-organizing efforts.

The AFL-CIO Organizing Institute and the AFL-CIO
Organizing Department

The AFL-CIO has long admitted that unions have diffi culty organizing workers.
In response, it created the AFL-CIO Organizing Institute . The Organizing
Institute focuses exclusively on organizing and providing programs that train new
organizers. The AFL-CIO gave its Organizing Department a sizable budget and
the task of extending the types of activities that the Organizing Institute begins.
In addition to recruiting and training new organizers, the Organizing Department
provides affi liated unions with strategic planning and analysis for organizing
campaigns. The AFL-CIO ’ s Union Summer program funds college interns engaged
in summer union-organizing projects.

The Rank-and-File Organizing Approach

In recent years, unions have focused on reaching workers by employing young,
well-educated organizers and reaching out to engage the support of community
groups such as churches, immigrant groups, and other social activist organizations.
This approach to organizing is called the rank-and-fi le style and contrasts with
the top-down, traditional organizing style that relied on appointed organizers and
formal communication strategies. Rank-and-fi le organizing also tries to modernize
and broaden the issues that attract employees to unions by addressing child care,
equal pay, and other issues that are of concern to the current work force. Research
conducted by Kate Bronfenbrenner suggests that this rank-and-fi le method of
union organizing has been more successful than traditional methods in the private
sector. 13

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Union Organizing and Bargaining Structures 171

Employer Neutrality during Representation Elections

In recent years, some unions have negotiated rules governing the organizing of
new bargaining units with an employer. 14 Often included in such language is the
employer ’ s agreement to remain neutral during the organizing process. In the
agreements of the Communications Workers of America (CWA), the United
Auto Workers (UAW), and the United Steelworkers (USW), for example, neutrality
is defi ned as “neither helping nor hindering” the union ’ s organizing effort, but
the contracts allow managers to communicate “facts” to workers, in some cases
only in response to inquiries. A different approach is language that makes clear
that the employer will not communicate opposition to union representation. 15
In a few cases, employers have gone so far as to agree to inform employees that
management welcomes union representation.

Union leaders argue that management should give unions the opportunity to
represent employees in new establishments of the company they work for. In
some cases, management has agreed and has accepted unions in new establishments
if the union demonstrates fl exibility and a commitment to labor-management
cooperation .

One of the key strategic choices management faces is whether to contest
unionism during a representation election or to voluntarily recognize the union
in return for a more cooperative union-management relationship. Recent experience
suggests that the parties can create a more positive working relationship by avoiding
hostility during a campaign election and thus start the union-management relation-
ship off on a good footing. Unions have pushed management in recent years to
use card check recognition, discussed more fully below, which goes even further
than neutrality in assisting union organizing.

Voluntary Recognition

The NLRA allows employers to voluntarily recognize a union. The law, of
course, also allows employers to remain neutral during a representation election
campaign. In the 1940s and 1950s, it was not uncommon for employers to either
adopt voluntary recognition or maintain employer neutrality during election
campaigns. Employers’ voluntary recognition of a union and employer neutrality
in representation elections have declined since the 1940s and 1950s. Nonetheless,
there are some important exceptions to this trend.

The Southwest Airlines Case

Southwest Airlines was fi rst formed as a regional carrier in Texas. Its founder
and CEO until his retirement in 2002, Herb Kelleher, viewed cooperative and
fl exible relations with the work force as a key competitive advantage for a service-
oriented business. He did not oppose unionization at Southwest, and today it is
one of the most highly unionized airlines in the country. The strategy has paid
off well for Southwest over the years. It has grown to become the fourth largest
carrier in terms of numbers of employees, it has been the most consistently
profi table airline in the industry, and it has consistently ranked at or near the top

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172 Part III. The Functional Level of Labor Relations

of the industry in customer satisfaction. Part of Southwest ’ s success has been
attributed to fl exible labor contracts, cooperative relationships, and the high levels
of coordination achieved among workers doing different jobs. 16 Yet in recent
years relations between Southwest and its unions have become more strained as
its labor costs have risen to among the highest in the airline industry.

Another interesting case involving employer neutrality is the UAW ’ s experience
in attempting to organize Volkswagen ’ s assembly plant in Tennessee. First it
attempted to get the German company to be neutral in the organizing effort. To
do so, the UAW enlisted the support of IG Metall, the union that represents
workers at the parent company in Germany. While the UAW got a formal
commitment from Volkswagen that it would be neutral as part of an agreement
to set up a German-style works council if the union won the election in the
Tennessee plant, organizers experienced strong opposition from elected offi cials
in Tennessee and lost the representation election in a close vote. Subsequently,
the UAW has organized a unit of skilled trades workers in the plant (see chapter
8 for further discussion of this case).

In recent years, facing increased employer hostility in representation elections
and declining rates of success in those elections, unions have increasingly turned
to card check recognition procedures to gain recognition. Often an employer ’ s
pledge to remain neutral during any organizing drive is included with card check
recognition. Unions have had mixed success with those procedures.

A few of the large telecommunication fi rms that used to be a part of the Bell
System have accepted voluntary card check recognition procedures in recent
years. What makes these cases so interesting is the fact that the employers were
willing to agree to these policies regarding organizing because the unions that
represent telecommunications employees, the CWA and the International Brother-
hood of Electrical Workers (IBEW), agreed in exchange to support mergers or
regulatory policies that management favored. 17

One place where card check recognition led to signifi cant organizing was at
SBC Telecommunications. (Since the merger of SBC and AT&T, the relevant
operations are now part of the new AT&T.) In August 2005, the CWA obtained
a national card check and neutrality agreement from Cingular Wireless. Cingular
agreed to recognize the union if more than 50 percent of the bargaining unit
signed authorization cards. As a result, the CWA organized nearly all of AT&T ’ s
customer service representatives and technicians.

However, not all neutrality and card check agreements lead to successful union
organizing. For example, in August 2000, Verizon Communications signed a
four-year contract with the IBEW and the CWA in which it agreed to card
check recognition so long as 55 percent of the bargaining unit supported union
representation. Four years after the agreement was signed, the contract expired
with no more workers represented than when it began. 18 According to the CWA,
although Verizon agreed to be neutral during organization drives, the company
went to great lengths to keep workers from being organized. The CWA claimed
that during the same year Verizon signed the contract, it prevented unions from
distributing cards in a timely fashion by taking much longer to classify precise

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Union Organizing and Bargaining Structures 173

bargaining units than was necessary. The union also argued that the company
rejected the union ’ s presentation of the correct number of authorization cards
and fi led a lawsuit in an attempt to prevent the union from being recognized.
In Chapter 8 , we discuss in more detail how the CWA fi nally won a fi rst contract
that covered customer service workers in a handful of Verizon stores in New
York City as an outgrowth of a strike in 2016.

OPTIONS FOR UNION RENEWAL

The limited success unions have achieved in reversing membership declines through
conventional organizing strategies has led some both inside and outside the labor
movement to urge unions to experiment with alternative approaches to recruiting,
organizing, and retaining workers. Some of the alternative renewal strategies
various unions are using include:

• Organizing without relying on NLRB election procedures. Some unions
have used their leverage in collective bargaining to gain neutrality and card
check recognition agreements for new groups of employees, as discussed
above and in Box 7.7 .

• Using corporate campaigns and political infl uence with government regulatory
bodies to neutralize employer opposition in organizing campaigns. The United
Steelworkers and the CWA have used this approach with particular effective-
ness. 19 The SEIU successfully used innovative grassroots organizing and political
lobbying in the process of organizing 75,000 home health care workers in
California.

• Creating coalitions with community groups to build support for organizing
efforts. The best-known and most successful example of this is the SEIU ’ s
Justice for Janitors campaign (described above and in Box 7.8 ), which gained
bargaining recognition for offi ce building owners and cleaning contractors
in a number of cities.

• Recruiting individuals as “associate members” even if it is not possible to
obtain exclusive representation status or a collective bargaining agreement.
Teachers’ unions have used this approach for many years, and more recently
unions such as the CWA have used it to establish and support temporary
workers at Microsoft and employees at IBM.

Other ideas being debated in the labor movement include fi nding ways to do
more to retain members once they are organized, even when they move across
jobs. This would require unions to provide a range of labor market, continuous
education, and training services to workers to support their movement from one
job to another. Another idea is organizing and providing services to members
via the Internet. A third idea is to target young people as potential members by
providing career counseling and job-fi nding services and access to portable fringe
benefi ts. All these efforts are a response to data that shows that many workers
move in and out of union status over the course of their careers. If workers could
be recruited into unions at the start of their careers and given reasons to retain

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174 Part III. The Functional Level of Labor Relations

BOX 7.7
Are Neutrality Agreements Legal?

One might not expect that a neutrality agreement would be a controversial
issue. On the face of it, the employer is simply agreeing to remain neutral
while employees decide for themselves whether they wish to form a union.
However, these agreements have received scrutiny when they include certain
provisions that might resemble a collective bargaining agreement prior to
union certifi cation.

A recent case that demonstrated this controversy is the NLRB ’ s Dana
Corporation decision. The UAW and the Dana Corporation, an automo-
bile parts manufacturer, reached a neutrality agreement that consisted of
principles that both parties agreed to adhere to if the union was certifi ed
and negotiations began. Unions and employers who support these types
of neutrality agreements claim that they foster a positive relationship from
the start of negotiations.

Opponents, including right-to-work politicians and activists, claim that
such deals are a violation of section 302 of the Taft-Hartley Act, which
makes it a crime for an employer “to pay, lend, or deliver, or agree to pay,
lend, or deliver, any money or other thing of value” to a union seeking to
represent its employees. The intent of this provision is to prevent unions
from extorting employers and employers from bribing union offi cials.

The NLRB decided in 2010 that the agreement did not constitute extortion
or bribery and therefore did not violate the Taft-Hartley Act. The Board
did not dictate any specifi c test, but explained in its reasoning that a fi nal
collective bargaining agreement would still require “substantial” negotiation,
and that the agreement represented simply a framework for bargaining. The
Court acknowledged the benefi ts of such a framework, and recognized the
employer ’ s right to “engage in at least some preliminary substantive decisions
with a union.” However, there remains some disagreement on this issue
between different Circuit Courts, meaning that perhaps a Supreme Court
decision will ultimately be necessary to resolve the issue.

Source : “Parties Weigh in on NLRB Case Involving Neutrality Agreement between
Dana, UAW,” Daily Labor Report , June 21, 2006, C-1; 356 NLRB No. 49, Dana
Corporation and International Union, United Automobile, Aerospace, and Agricultural–
CIO and Gary L. Smeltzer Jr. and Joseph Montague and Kenneth A. Gray.

their membership as they move through their working years, both the recruitment
and turnover problems could be addressed at the same time. There is likely to be
considerable experimentation with these alternative strategies in the years ahead.

Expanding the Defi nition of Unions

Some nonunion organizations provide some (but not all) of the functions of
traditional unions. This too is an area of considerable experimentation. The largest

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Union Organizing and Bargaining Structures 175

BOX 7.8
The Coalition of Immokalee Workers

The Coalition of Immokalee Workers (CIW) is a community-based labor
organization that represents low-wage immigrant farmworkers on tomato
farms in Florida. As unions do, the organization strives to protect its members’
well-being and increase their wages. However, how it does this is quite
different from the traditional union approach. The most important aspect
of the organization ’ s approach is that the way it incorporates appeals to the
social responsibility principles of highly visible food retailers in order to
pressure these companies to agree to better wages and working conditions.
The CIW began this endeavor with its Campaign for Fair Food in 2001.
The campaign reached out to many different religious groups and to students
and young people, both locally and nationally, to educate them about the
ongoing exploitation of farm workers. The main goal of this effort was to
motivate consumers to bring pressure on large corporations to take measures
that would put an end to such exploitation instead of merely using the
labor power of the workers they employed. These efforts resulted in agree-
ments with major companies such as Walmart, McDonalds, Whole Foods,
Burger King, Trader Joe ’ s, and Chipotle.

Building on these successes, the CIW launched the Fair Food Program
(FFP) in 2011. It was based on the partnership that had been established
between farm workers, farm owners, and corporations. The agreements
among participants in this program state that buyers will buy Florida tomatoes
only from farmers who have complied with the standards of the FFP. In
addition, the buyers pay a Fair Food Program premium that is passed on
to the workers as a bonus. The CIW holds education sessions at which
workers teach other workers the new labor standards mandated by the Fair
Food Code of Conduct. These standards are enforced by a third party, the
Fair Food Standards Council, which regularly audits farms and continuously
investigates complaints to fi nd solutions, much the way unions have third-
party arbitrators.

This approach to labor organizing has been lauded as the way forward
for labor organizations and is credited with partially reviving the labor
movement. The Coalition of Immokalee Workers has received national
and international recognition, winning awards such as the 2015 Presidential
Medal for Extraordinary Efforts to Combat Human Traffi cking and the
2012 Natural Resources Defense Council ’ s Food Justice Award. The
Washington Post hailed its model of organizing as “one of the great human
rights success stories of our time.”

Sources : Coalition of Immokalee Workers website, http://www.ciw-online.org ; and
Michael Husebo, “Labor Agency Beyond the Union: The Coalition of Immokalee
Workers and Faith-Based Community,” MS thesis, Georgia State University, http://
scholarworks.gsu.edu/cgi/viewcontent.cgi?article = 1033&context = geosciences_theses .

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176 Part III. The Functional Level of Labor Relations

such organization, the Freelancers Union, began recruiting independent contract
professionals in the media and graphic arts industries in New York City in 1995. 20
It provides health benefi ts, networking opportunities, and related services to
250,000 media workers and focuses on the needs of these highly mobile profes-
sionals who are not covered under the National Labor Relations Act because
they are independent contractors and not employees.

The Restaurant Opportunities Centers (ROC) takes another approach. 21 It
seeks to organize employees of restaurants by asking customers to inquire about
the working conditions of the employees who serve them and about the restaurant ’ s
sustainability practices in an attempt to connect employee issues with environmental
concerns. In this way, the ROC seeks to build a coalition between customers
and employees by using methods similar those used by various services such as
Zagats to rate the quality of restaurants. It is interesting to note that the ROC
does not want to be considered a union since it does not want to be constrained
by the organizing and bargaining rules and limits the NLRA mandates. Ironically,
it is the restaurant industry association that is trying to convince the NLRB and
the courts to defi ne the ROC as a union so it can limit its tactics. It particularly
wants to disallow use of consumer boycotts.

Another organization that builds coalitions with food advocacy groups is the
Coalition of Immokalee Workers. They also have negotiated with the food retailers
that buy the products they harvest for the farmers that employ them and in doing
so have been able to upgrade their wages and working conditions (see Box 7.8 ).

The largest new form of union membership is provided by Working America,
an arm of the AFL-CIO that recruits individuals in local communities to join
it to share political information and to mobilize support for worker-friendly
candidates local and national elections. Working America was created under the
leadership of Karen Nussbaum, the former president of 9 to 5, an organization
of working women. It now has grown to a membership of over 3 million. 22 As
is the case with the members of the ROC and the Freelancers Union, Working
America members are not counted in the offi cial statistics of union membership
because they do not negotiate collective bargaining agreements. These groups
may, however, signal new forms of union-supported or quasi-union advocacy
networks.

The number of such advocacy networks appears to be increasing across the
country. Some of them are using social media and related information technologies
to recruit, share information with, and build networks among professionals and
independent contractors. One such organization is SherpaShare, a third-party
provider of information for Uber, Lyft, and their drivers. 23 Since Uber and Lyft
insist that their drivers are independent contractors and not employees, the drivers
are not covered under the NLRA. However, this is a contested issue that has
been the subject of class actions, at least one community-level ordinance (in
Seattle) that states that these drivers are employees and are eligible for union
representation, and another voluntary agreement that allows Uber drivers in New
York City to be represented by the International Association of Machinists and
Aerospace Workers as a drivers’ guild (see Box 7.9 ).

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Union Organizing and Bargaining Structures 177

BOX 7.9
Uber Drivers’ Organizing Efforts

When several dozen workers in Tampa, Florida, logged off an app for an
hour every week in January 2016, it may not have looked much like a
traditional strike, but they were arguably at the forefront of labor ’ s next
frontier. The workers were drivers for Uber, an app-based driving service,
and they were protesting the company ’ s recent fare cut in Tampa. People
working through Uber and other companies like it have increasingly been
looking to collective action as a means of protecting their interests in the
“gig economy.”

The “gig economy” is the term used for the evolving sector of jobs
wherein non-employee workers freelance their labor through large app-based
companies. Controversies have arisen as these companies have gained more
market power and have begun to impose restrictions on workers that lead
to circumstances more closely resembling an employment relationship. For
instance, Uber drivers cannot set their own fares, they must conform to
standards the company sets, and Uber uses user ratings as a justifi cation for
terminating them.

The logouts in Tampa occurred only a month after a unanimous vote
by the Seattle City Council to allow Uber drivers and drivers in other
app-based taxi services to form unions. The campaign to pass this ordinance
was supported by the App-Based Drivers Association, an affi liate of the
Teamsters Union. Uber has faced legal challenges elsewhere, including in
California, where the California Labor Commission ruled that such drivers
ought to be classifi ed as employees and that as such, each California Uber
driver was owed over $4,000 in missing wages. The drivers followed up
with a class action suit against Uber, which remains unresolved. Similar
legal challenges have been raised across the country, though none have
been as successful yet.

Following the success of recent lawsuits and organizing drives, Uber
responded to driver unrest in the important hub of New York City by
coordinating with the International Association of Machinists and Aerospace
Workers to create the Independent Drivers Guild. While this guild is not
quite a union with inherent bargaining rights, it will function as a forum
where drivers can voice concerns, receive discounted benefi ts, and coordinate
appeals in cases of dismissal. The guild follows the model of Sara Horowitz ’ s
Freelancers Union, which has expressed its support for the drivers. This
move by Uber illustrates the success of both unions and independent
organizations that have pressured the company to respect the rights of its
drivers.

Source : Nick Wingfi eld and Mike Isaac, “Seattle Will Allow Uber and Lyft Drivers to
Form Unions,” New York Times , December 14, 2015; and Paul Martyn, “Contingent
Labor: Getting the Gig Economy Right,” Forbes , February 2, 2016.

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178 Part III. The Functional Level of Labor Relations

Other groups are providing information and services to unorganized groups
that are similar to the services unions provide. One organization, Co-workers.
org , helps workers organize surveys and petitions to employers to address specifi c
workplace grievances. 24 Another group, The Workers’ Lab, serves as a start-up
incubator for entrepreneurs seeking to develop new models of representation for
unorganized workers and contractors. 25 As David Rolf, president of the SEIU
Local 775 in Seattle and one of the originators of the Workers’ Lab states, the
challenge for these new efforts is threefold: (1) to demonstrate that they can
provide workers with bargaining power; (2) to grow to a scale large enough to
have a signifi cant impact; and (3) to devise a business model that will make them
sustainable without outside funding from foundations or other subsidies .

Another form of representation is found in the various caucus or network
groups that have been established in many companies to support African American,
women ’ s, gay-lesbian, and other identity groups. Many professional associations
also represent their members through lobbying efforts and sometimes in more
informal interactions with employers. Prime examples are the bar associations
that lawyers join and branches of the American Medical Association and the more
specialized doctor ’ s groups that are springing up around the country to represent
medical residents seeking to reduce their hours of work (see Box 6.1 ).

Very few of these groups have formal collective bargaining rights as defi ned
and protected under the National Labor Relations Act, but they do offer their
members services and in some cases a form of voice at their workplaces. Whether
these new types of groups and organizations will change conceptions of what a
union is or whether their members should be counted as union members are
open questions.

BARGAINING STRUCTURE

Once unionization occurs, whether through an election or some other procedure,
bargaining over a contract begins. Bargaining structure refers to the scope of the
employees and employers who are covered or affected by the bargaining agreement.

Labor and management do not necessarily bargain contracts that cover only
election units. For example, the employees in the various work sites of one
employer represented by a union may wish to join together to negotiate a common
contract that covers the whole company. In the auto, rubber, and other industries
where industrial unions exist, there are companywide collective bargaining agree-
ments. In addition, employees represented by the same union in multiple companies
may prefer to band together and try to negotiate a common contract covering
all the companies. This occurs in the coal, construction, and trucking industries.
Such company or industrywide bargaining may not develop if the employees (or
unions) prefer to bargain in a more decentralized manner and maintain plant-level
or company-level bargaining.

Employee and union preferences are not the only determinants of the bargaining
structure, however. Before we trace some of the determinants of bargaining
structure, we need some defi nitions.

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Union Organizing and Bargaining Structures 179

Defi nitions of Bargaining Structure

A formal bargaining structure is defi ned as the bargaining unit or the negotiation
unit—that is, the employees and employers who are legally bound by the terms
of an agreement. The informal bargaining structure is defi ned as the employees
or employers who are affected by the results of a negotiated settlement, through
pattern bargaining or some other nonbinding process.

There is no exact estimate of the number of bargaining units in the United
States. Each year, however, the Federal Mediation and Conciliation Service gets
approximately 20,000 notices that a bargaining unit will be negotiating a new
agreement. (These notifi cations are required for a union to engage in a lawful
strike, so nearly all unions covered under the National Labor Relations Act fi le
them). FMCS data from 2012 to 2015 suggests that approximately 60,000 bargaining
units are covered under the NLRA at any given time. Another estimated several
hundred are covered under the Railway Labor Act that governs bargaining in
the railroad and airline industry. There are no reliable estimates of the number
of public sector contracts, but given the decentralized nature of bargaining in
local governments, the number is likely at least equal to or more than the number
in the private sector.

The Predominance of Decentralized Bargaining
Structures in the United States

Compared to the bargaining structures in other countries, the United States has
a highly decentralized bargaining structure. In many European countries,
such as Germany and Sweden, many labor contracts cover entire industries or
broad regions (see Chapter 15 ). In recent years, however, many European employers
have been arguing for greater decentralization of bargaining to allow individual
fi rms the latitude to adjust to their particular economic circumstances. Many U.S.
employers are pressing for even further decentralization of the formal and informal
structures of bargaining in this country.

Types of Bargaining Units

Bargaining structures have two primary characteristics. The fi rst is the scope of
employee or union interests a unit represents. There are three types: narrow craft,
broad industrial, and multi-skill. The second primary characteristic is the scope of
employer interests represented in the unit. These can be multiemployer (centralized),
single-employer—multi-plant, or single-employer—single plant (decentralized).

Table 7.1 illustrates this classifi cation of bargaining structures. For instance, in
a single-employer—multiplant environment, a narrow bargaining unit might
include only craft or professional employees in one occupational class. Police,
fi refi ghters, railroad workers, teachers, and airline pilots are examples of occupations
typically represented in narrow craft bargaining units. At the other end of the
spectrum are the broad bargaining units that might include all the production
and skilled employees in a fi rm. Industrial unions bargain contracts that cover
broad employee units in the auto, steel, farm equipment, state government, and
textile industries.

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180 Part III. The Functional Level of Labor Relations

Table 7.1 Types and examples of bargaining structures

Employee interests
covered

Employer interests covered

Multiemployer (centralized)
Single employer:
Multiplant

Single employer: Single
plant (decentralized)

Craft (narrow) Construction trades
Interstate trucking
Longshoring
Hospital association

Airline
Teacher
Police
Firefi ghters
Railroad

Craft union in small
manufacturing plant

Hospital

Industrial or
multiskill
(broad)

Coal mining (underground)
Basic steel (pre-1986)

Hotel association

Automobile
Steel (post-1986)
Farm equipment
State government
Textile

Industrial union in small
manufacturing plant

There are also intermediate cases in which more than one but not all of the
various union-represented employees in a fi rm bargain in the same unit. A
manufacturing plant where workers in several crafts bargain together would be
such a case.

The columns of Table 7.1 depict the degree of centralization of employer
interests in the bargaining unit. A unit that represents only one plant is an example
of the most decentralized bargaining unit. An example of this would be a union
that negotiates a contract for the electrical (or production) workers in one plant.

A highly centralized bargaining structure covers all the work sites of
companies with the same collective bargaining agreement. Although multiemployer
bargaining units are relatively rare in the United States, some do exist. In the
trucking industry, for example, multiple intercity and interstate trucking companies
have bargained a single contract (the National Master Freight Agreement) with
the Teamsters union to cover their unionized drivers. The coal industry has long
had a master agreement with the United Mine Workers that covers the unionized
mine workers in coal companies that were members of the Bituminous Coal
Operators Association. These multiemployer units are also found in the construction,
longshoring, hotel, and (in some cities) hospital industries. In all of these cases,
an employer association represents management at the bargaining table. These
centralized agreements might cover multiple different employers in a given locality
(such as all of the private hospitals in New York City that were members of the
New York Voluntary Hospitals Association) or in an industry. Professional sports
teams and unions also have this type of industrywide structure that bargains with
a management association that represents the owners of the various teams.

An example of the intermediate case of employer centralization is when a
single contract covers multiple work sites of one employer. The automobile,
steel, and farm equipment industries and many state governments use this inter-
mediate bargaining structure. In these cases, employers with more than one plant
negotiate a single contract that covers employees in multiple work sites as opposed

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Union Organizing and Bargaining Structures 181

to having a separate contract for each site. Typically, these company agreements
are supplemented with local agreements that cover the working conditions that
are specifi c to a given site.

Another intermediate employer case occurs in public school districts, where a
single agreement typically covers all the unionized teachers across the various
schools in the district. Police and fi refi ghters also commonly have one contract
that covers the various stations or districts in a city.

Determinants of Bargaining Structures

Bargaining leverage, public policies, and organizational factors are the major
elements that affect the degree of centralization in bargaining structures. How
each of these factors infl uences bargaining structure is examined below.

Bargaining Leverage

Unions can increase their bargaining leverage if they organize a large share of
the product market; for example, employers that compete to make or sell the
same products. One of the primary mechanisms for ensuring that workers don ’ t
compete with each other over differences in wages (often referred to as “taking
wages out of competition”) is to expand the bargaining structure to cover all
employers making the same products .

This process is well illustrated by John R. Commons ’ s account of early unionism
among Philadelphia shoemakers. Commons described how in the absence of
broad and aggressive unionism, shoemakers were harmfully affected by the expansion
of the shoe market (the product market) that had developed in the early 1800s
because of improved transportation. 26 As it became possible for nonunion shoemakers
outside the Philadelphia area to transport their products into the Philadelphia
market and sell them at a low price, the bargaining power of the unionized
shoemakers in Philadelphia was weakened. It therefore became important for the
Philadelphia shoemakers to organize their fellow shoemakers from the surrounding
areas and to see them covered under the same wage agreement to equalize and
raise the price of labor.

Unions that represent construction workers, for example, have a strong incentive
to equalize the wage costs among competitive bidders on the same product. Thus,
in the construction industry, unions prefer to bargain with the multiple employers
who are involved in a specifi c construction project. For example, where builders
across a city bid for the contract to build an offi ce building, the union representing
carpenters in that city will try to bargain in a structure that includes the contractors
across the city.

Employers Prefer Centralized Bargaining Structures in Some Cases

It should not be inferred that unions always gain (and employers always lose)
a tactical advantage in larger or more centralized bargaining structures. Employers
in the service industries (such as hotels, restaurants, laundries, and local truck
haulers) have sometimes found it to their advantage to form associations and to
bargain in multiemployer units.

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182 Part III. The Functional Level of Labor Relations

For instance, consolidating the bargaining function allows employers to avoid
being whipsawed by local union leaders. Union whipsawing occurs when a
union negotiates a bargain at one plant or company and then puts pressure on
the next plant or company to equal or surpass the contract terms just negotiated
at the fi rst site. The unions in the airline industry used the whipsawing strategy
until the late 1970s. By consolidating the bargaining structure, however, employers
can sometimes reduce the possibility of union whipsawing.

Centralized Bargaining Can Stabilize Competition

In some cases, a centralized bargaining structure can serve the interests of an
employer by stabilizing competition. Employers in small fi rms in a highly competitive
industry may fi nd it to their advantage to bargain centrally with a union because
it can reduce the union ’ s ability to whipsaw them. If a strike occurs, the centralized
bargaining structure also ensures that no single employer can gain an advantage
because all the fi rms are shut down simultaneously.

The benefi t an employer gains from centralized bargaining is well illustrated
by the apparel industry. Employers have come to depend on the stability the
apparel unions have historically provided in their highly competitive industry.
Labor costs are a signifi cant component of total costs to the many small fi rms in
the industry, and employers whose workers are unionized are receptive to the
wage standardization unions impose. Wage standardization ensures that competition
across fi rms does not depend on the ability of a fi rm to obtain low labor costs.
UNITE HERE, a union that represents hotel and apparel workers, for example,
likes the centralized bargaining structure because this structure helps it take wages
out of competition in local areas.

Public Policies

Another crucial determinant of bargaining unit structures is the structure of
the election unit that the NLRB determines in a representation election. If the
NLRB certifi es that the proper election unit is an industrial unit, for example,
this precludes a craft bargaining structure.

The infl uence of the NLRB is well illustrated by events at General Electric
(GE). During the 1960s, the unions representing GE workers attempted to engage
in coalition bargaining but met with strong resistance from the company. Coalition
bargaining would have meant that multiple unions representing GE employees
would have sat at the negotiating table even when the contract with only one
union was under discussion. The NLRB resolved this confl ict when it ruled that
unions could engage in coalition bargaining with GE. Other infl uential board
decisions have been made that limit an employer ’ s ability to withdraw from a
multiemployer bargaining unit until an impasse has been reached.

Some have argued that the NLRB has exhibited a strong preference for larger
bargaining units and thus has aided in the trend toward greater centralization.
George W. Brooks was one of the most articulate critics of the board ’ s preference
for large production and maintenance bargaining units and against craft autonomy. 27
He argued that the preference for centralization reduced employees’ freedom to

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Union Organizing and Bargaining Structures 183

choose among alternative unions and made it impossible for individual members
to effectively infl uence the direction of their unions. This, he believed, produced
undemocratic and unresponsive unions.

Organizational Factors

The organizational structures of employers have also generated pressures to
broaden the bargaining unit. In particular, the growth of large corporations and
the centralization of managerial decision making have led unions to seek centralized
bargaining structures. A fundamental principle underlying their efforts is that in
many cases unions will benefi t if the structure of bargaining is coterminous with
the level at which critical management decisions are made. That is, when manage-
ment is making most industrial relations decisions at the company level, then
unions would often prefer to have bargaining occur at this level as well.

Evolving Bargaining Structure in the Telephone Industry

The telephone industry illustrates how management ’ s organizational structure
has infl uenced bargaining structure as the industry has evolved over many years.
The gradual centralization of managerial decision-making power at AT&T that
occurred from the 1940s through the 1970s led, fi rst, to the merger of many of
the independent unions of telephone workers into the Communications Workers
of America (CWA), a national union, and then to the development of a centralized,
nationwide contract and bargaining structure. 28

After World War II, AT&T centralized its labor relations policy making in its
corporate headquarters in New York. In the 1950s and 1960s, however, the
CWA still bargained separately with each state affi liate of the Bell System. Con-
sequently, throughout the 1960s the union sought to bring about a more centralized
or national bargaining arrangement. Although the CWA succeeded in negotiating
a national contract in 1974, the breakup of the Bell System into regional telephone
companies in 1984 forced the union to return to a decentralized bargaining in
its negotiations with the new regional telephone companies. But even after the
breakup, because AT&T remained a company of national scope with a centralized
management, bargaining involving AT&T employees remained centralized at the
national level. Most of the newer entrants to the telecommunications industry
such as Sprint and Comcast have remained nonunion, and some former Bell
companies such as Verizon have avoided unions in their newer cellular divisions.
Today, not only is bargaining once again decentralized to the level of individual
fi rms, but also union contracts cover only a portion of the industry and in some
cases only a declining portion of employees in a fi rm. We will return to the
Verizon example in Chapter 8 .

The Infl uence of Diverse Labor and Management Interests

In order to participate in centralized bargaining, local union offi cials or managers
must give up some of their independent authority and abide by centralized
decisions. Needless to say, local unionists and managers are not always eager to
limit their own authority even when doing so may lead to a greater good for

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184 Part III. The Functional Level of Labor Relations

the whole organization. Having to conform to the wishes of a centralized authority
is less painful where there are common goals. Thus, another factor that infl uences
the emergence of centralized bargaining structures is the extent of diversity in
the objectives of local unions or individual companies and the degree to which
traditions exist that generate loyalty or rivalry among these units. Box 7.10 discusses
how a diversity of interests and other factors were overcome at Kaiser Permanente
where an interesting coordinated national bargaining structure was created.

BOX 7.10
Creating a National Bargaining Structure at Kaiser Permanente

After forming a partnership with Kaiser Permanente (KP), the coalition of
eight international and twenty-fi ve local unions faced the question of what
structure to propose in collective bargaining negotiations. In the past, each
local had negotiated a separate agreement. Since the various local unions
had gained experience working together in negotiating the initial partnership
agreement with KP, their inclination was to have the local unions negotiate
together and create a single national agreement with supplements that dealt
with specifi c local issues. But KP offi cials were strongly opposed to this,
fearing that a single common contract deadline would greatly increase union
bargaining power because of the threat of a system-wide work stoppage.

A joint task force was created to explore whether a new approach could
be developed. The initial idea that the union coalition favored and the task
force proposed was that the coalition negotiate a master national agreement.
When the coalition fi rst proposed this idea to KP management in 1999,
KP rejected it. Two of the concerns of KP management were that units
located in labor market areas outside California would be unable to pay a
national rate that was higher than existing rates in their region and that
negotiating a master agreement would create considerable vulnerability to
a system-wide strike. Since existing local agreements had different expiration
dates, management felt safeguarded from the possibility of a major strike
across the system.

After considerable discussion of these issues, facilitator John Stepp worked
with both KP leaders and with the union leadership to fashion an alternative
approach with various “gates” that the parties would move through before
negotiating a national agreement. Either side could exit the process as it
passed through these gates if they felt it was not moving in a constructive
direction.

One important “gate” was agreement in principle that local labor market
rates would continue to govern negotiations. Another critical step involved
training potential participants in national and local negotiations in the concepts
and skills of interest-based negotiations (IBN). Another key “gate” was that
either party could pull out of the process at any point. (As it turned out,

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Union Organizing and Bargaining Structures 185

neither party found it necessary to exercise this option.) KP and the union
coalition eventually agreed to a revised proposal that called for extensive
use of IBN problem-solving principles and the necessary training to prepare
the parties for this very complicated process; a single integrated national
negotiation that would allow local agreements to retain their respective
deadlines (thereby addressing one of management ’ s fears of a common
expiration date); and a series of decentralized task forces that would focus
on particular issues.

Seven bargaining task groups were established to address (1) wages, (2)
benefi ts, (3) work-life balance, (4) performance and work force development,
(5) quality and service, (6) employee health and safety, and (7) work organiza-
tion and innovation. Each group engaged in an interest-based process of
joint study, problem solving, and negotiations. These task groups reported
their recommendations to a centralized Common Issues Committee co-chaired
by union and management chief negotiators. In addition to negotiating a
national agreement, new local agreements were to be bargained, even though
most of the existing local agreements were not approaching their expiration
dates. The Common Issues Committee sorted through the recommendations
of the bargaining task groups and identifi ed those that needed to be forwarded
to local tables and those that would be applied uniformly across the system
and therefore needed to be negotiated centrally by the Common Issues
Committee. In the end, over 400 union and management negotiators were
trained in IBN and participated in these negotiations. An agreement was
reached in nine months and was ratifi ed by over 80 percent of the rank
and fi le.

Source : Robert B. McKersie, Susan Eaton, and Thomas A. Kochan, “Interest Based
Bargaining at Kaiser Permanente,” unpublished manuscript, MIT Sloan School of
Management, 2002.

Resolving Different Issues at Different Bargaining Levels

Even in centralized bargaining structures, many issues are negotiated on a local
basis. That is, in most cases the master agreement that is negotiated at the centralized
level covers only broad issues that are universal in scope, such as wage rates and
fringe benefi ts. Issues that are specifi c to a company or a plant, such as safety and
health conditions, seniority provisions, production standards, shift changes, and
overtime distribution, are often left to more decentralized levels of the bargaining
structure.

James W. Kuhn has shown that the structure of bargaining extends even farther
down to the level of the department or informal work group, where individual
supervisors and work groups often negotiate unwritten side agreements or in fact
ignore certain provisions of the contract. He called this activity fractional
bargaining . 29 One of the most important developments in recent years has been
the shift in bargaining down to lower levels.

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186 Part III. The Functional Level of Labor Relations

Pattern Bargaining

Pattern bargaining is an informal way of spreading the terms and conditions of
employment that have been negotiated in one formal bargaining structure to
another. It is an informal substitute for centralized bargaining that seeks to take
wages out of competition.

Students of collective bargaining fi rst began noticing the importance of pattern
bargaining after World War II. The War Labor Board (WLB) had encouraged
the development of pattern settlements in two ways: fi rst, by attempting to fashion
a national wage policy, and second, by making the comparison between proposed
wage settlements and other industry, area, and national settlements a prime criterion
for deciding wage disputes.

The WLB was not the only source of pattern bargaining. Even before centralized
bargaining appeared, and in some cases before unions even existed, steel companies,
among other concentrated industries, tended to adjust their wages in tandem by
following the lead of a principal fi rm, the U.S. Steel Corporation (now USX). 30
Once fi rms began following patterns in their pricing policies, it was only natural
that unions began seeking patterns in negotiated agreements covering these fi rms.

Patterns within a Firm

Employees who work in the same fi rm typically are very aware of what other
employees in the fi rm are receiving in the way of pay or fringe benefi ts and are
very jealous of any differences that emerge. The practice of internal promotion
(and other features of an internal labor market) within a fi rm serves to heighten
such comparisons. Pattern bargaining follows when one negotiation closely follows
the terms set in another negotiation. This is most common across the blue-collar
employees of the same fi rm, but it can also occur where unions represent both
blue- and white-collar employees.

One of the most complicated labor relations issues arises when two unionized
fi rms merge and need to integrate their compensation, seniority, and related
contract provisions. The airline industry has had considerable experience with
this process because of the mergers that have taken place among major airlines
in recent years. Integrating pilot contracts is especially complicated because fi rm-
specifi c seniority determines not only compensation but also rules about layoffs
and fl ight and aircraft assignments. Often this process has ended up in arbitration.
In some cases, such as the merger of US Airways and America West and then
the merger of US Airways and American Airlines, the process takes long enough
that unions from three or more airlines become involved.

The Trend toward Greater Decentralization in the
Structure of Bargaining

In the 1980s, some bargaining units began to decentralize their structures. The
steel industry is an illustration. At the beginning of the 1970s, the ten largest steel
companies negotiated as a group (although each company signed a separate contract).
But by 1982, the number of companies that participated in the industry association
had shrunk to eight. By 1986, the association had disbanded and bargaining with

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Union Organizing and Bargaining Structures 187

the remaining fi rms began to take place on a company-by-company basis. Although
the settlements that resulted after 1986 carried through many of the common
features of the earlier ones, signifi cant variations across the agreements were
introduced: in wages, fringe benefi ts, profi t sharing , work rules, and the extent
of employee participation in management decision making.

Since the mid-1980s, the number of fi rms in the coal and trucking industries
has declined substantially. In addition, there have been major declines in the
number of workers covered by multiemployer or industrywide contracts in these
industries. Some of the decentralization in bargaining structures has been caused
by industry deregulation. By far the most signifi cant effects of government policy
on bargaining structures have come in recent years from the deregulation of
product markets in trucking, airlines, and communications. In all of these cases,
deregulation has opened the industry to pay wages and benefi ts below the
unionized rates in the industry and has put pressures on unionized fi rms to seek
labor contract terms in ways that will match the practices of the new competitors.
As a result, fi rms in all three of these industries have attempted to decentralize
their bargaining structures and gain more fl exibility to compete with new, often
lower-paying, companies that are entering the industry. As mentioned earlier, in
trucking, before the industry was deregulated in 1980, the Teamsters had negotiated
a national master freight agreement that covered intercity and interstate truck
drivers. All the major trucking companies that hauled freight between cities and
states or across the country were covered by this single national contract.

After deregulation, however, there was an infl ux of new nonunion fi rms and
small independent contractors in the full-truckload portion of the industry. In
addition, intense price competition emerged among the fi rms that remained highly
unionized (essentially the “less than truckload” businesses that required large
networks of terminals). The net result of these pressures was considerable decen-
tralization in the bargaining structure. Several full-truckload companies broke out
of the master freight structure and negotiated separate contracts with different
wage payment and pension arrangements. At its peak, the Teamsters’ National
Master Freight Agreement covered over 800 companies and 450,000 workers.
By 2016, this number had shrunk to less than a dozen companies.

In the airline industry, deregulation had the effect of weakening the pattern
bargaining that had previously characterized negotiations with American, United,
Northwest, and other major airlines. Under increased competitive pressure, pattern
bargaining gave way to a more varied pattern of company-specifi c adjustments,
including two-tiered wage agreements (that is, wage settlements that lowered
the starting pay rates of future hires), changes in hours worked, wage cuts,
profi t-sharing plans, and employee memberships on company boards of
directors. 31

Summary

This chapter discussed union organizing and bargaining structures. These two
central issues emerge early in the bargaining process. Union organizing determines

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188 Part III. The Functional Level of Labor Relations

whether there will be bargaining in the fi rst place, then the attention of the parties
turns to the structure of bargaining.

An organizing campaign is initiated by union organizers, who typically include
some full-time paid organizers and shop-fl oor employees. To receive authorization
from the NLRB for a representation election, 30 percent of the election unit
must sign authorization cards. Management typically launches a countercampaign
in which it tries to convince employees not to vote for union representation.
The NLRB regulates conduct during this organizing campaign by limiting union
access to the work force and use of private meetings with workers (so-called
captive-audience speeches) . There has been much debate in recent years over
whether the NLRB has effectively maintained laboratory conditions in election
campaigns.

The NLRB plays an important role in the decisions that are made about the
appropriate election unit. The board takes into account both the degree to which
employees have common interests and the administrative concerns of management.
There is much strategic interplay in this process as the union and management
try to shape an election unit in ways that increase the likelihood each will win
the eventual election. Unions have not fared particularly well in their organizing
efforts since the early 1980s. Management has developed personnel policies designed
to weaken the appeal of unions and has conducted aggressive countercampaigns
against unionization. But unions have not been passive either; they have turned
to corporate campaigns and other new organizing tactics.

Bargaining structure determines which unionized employees are covered by
a collective bargaining agreement. The two key dimensions are the scope of
employee interests covered—whether craft or industrial—and the degree of cen-
tralization in fi rm coverage—which range from single-plant to multiple-company
agreements.

Compared with bargaining structures that exist in other countries, bargaining
structures in United States are relatively decentralized. Since the 1980s, previously
centralized bargaining structures in trucking, steel, coal, and many other industries
have either fragmented or collapsed.

Understanding the consequences of successful union organizing and the role
the structure of bargaining plays requires a more detailed account of how collective
bargaining agreements are negotiated. The next chapter turns to that issue.

Discussion Questions

1. Briefl y describe the organizing process.
2. What are some common strategies management uses to keep unions out of

the company?
3. Defi ne what the term bargaining structures means and discuss some of the

determining factors of bargaining structures.
4. What is pattern bargaining and how does it affect informal bargaining

structures?

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Union Organizing and Bargaining Structures 189

5. Why has collective bargaining in some fi rms and industries in the United
States become more decentralized in recent years?

6. Explain what the term representation gap means.

Related Web Sites

Justice for Janitors:
http://socialjusticehistory.org/projects/justiceforjanitors/timeline

Graduate student organizing at Columbia University:
http://www.columbiagradunion.org/

Suggested Readings

Bronfenbrenner , Kate , Richard W. Hurd , and Ronald L. Seeber , eds . Organizing to Win: New
Research on Union Strategies . Ithaca, N.Y. : ILR Press , 1998 .

Freeman , Richard B. , and Joel Rogers . What Do Workers Want? Ithaca, N.Y. : Cornell University
Press , 1999 .

Turner , Lowell , Harry C. Katz , and Richard W. Hurd , eds . Rekindling the Movement: Labor ’ s
Quest for Relevance in the 21st Century . Ithaca, N.Y. : ILR Press , 2001 .

Notes

1. It is also possible for the NLRB to order an employer to bargain with a union as a remedy
for a representation election that involves extensive unfair labor practices on the part of the employer.
The NLRB has not issued this sort of “bargaining order” very often.

2. The NLRB can eliminate this practice if it interferes with the operation of the business.
3. “NLRB Conducted More Elections in 2015 but Percentage of Union Wins Held Steady,”

Daily Labor Report, March 1, 2015.
4. Ibid.
5. Research also has shown that national union characteristics play a role in success in union

certifi cation elections. More specifi cally, larger unions with greater internal democracy, less centralized
bargaining, and lower strike activity have greater success in organizing both blue- and white-collar
workers than other unions do. See Cheryl L. Maranto and Jack Fiorito, “The Effect of Union
Characteristics on the Outcome of NLRB Certifi cation Elections,” Industrial and Labor Relations
Review 40 (January 1987): 225–240.

6. A 1997 survey found that 47 percent of nonunion workers expressed a desire to join a union.
See Seymour Martin Lipset and Noah M. Meltz, “Canadian and American Attitudes toward Work
and Institutions,” Perspectives on Work 1, no. 3 (1998): 14–19.

7. Myron Roomkin and Hervey Juris, “Unions in the Traditional Sectors: Mid-Life Passage of
the Labor Movement,” in Proceedings of the Industrial Relations Research Association, December 28–39,
1977 , ed. Barbara D. Dennis (Madison, Wisc.: Industrial Relations Research Association, 1978),
212–222.

8. William N. Cooke, Union Organizing and Public Policy: Failure to Secure First Contracts (Kalamazoo,
Mich.: W. E. Upjohn Institute for Employment Research, 1985).

9. John Paul Ferguson, “Eyes of the Needle,” Industrial and Labor Relations Review 62 (January
2008): 3–21.

10. Richard B. Freeman and Morris M. Kleiner, “Employer Behavior in the Face of Union
Organizing Drives,” Industrial and Labor Relations Review 43 (April 1990): 351–365.

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190 Part III. The Functional Level of Labor Relations

11. “NLRB Conducted More Elections in 2015 but Percentage of Union Wins Held
Steady.”

12. A list of corporate campaigns and analysis of their success is provided in Paul Jarley and Cheryl
Maranto, “Union Corporate Campaigns: An Assessment,” Industrial and Labor Relations Review 43
(July 1990): 505–524.

13. Kate Bronfenbrenner, “The Role of Union Strategies in NLRB Certifi cation Elections,”
Industrial and Labor Relations Review 50 (January 1997): 195–212.

14. Adrienne E. Eaton and Jill Kriesky, “Union Organizing under Neutrality and Card Check
Agreements,” Industrial and Labor Relations Review 55 (October 2001): 42.

15. Ibid., p. 47.
16. Jody Hoffer Gittell, The Southwest Airlines Way (New York: McGraw Hill, 2004).
17. Harry C. Katz, Rosemary Batt, and Jeffrey H. Keefe, “The Revitalization of the CWA:

Integrating Collective Bargaining, Political Action, and Organizing,” Industrial and Labor Relations
Review 56 (July 2003): 573–589.

18. “AFL-CIO Strategic Campaign to Boost Organizing at Comcast, Verizon Wireless,” Daily
Labor Report , March 5, 2004, A-12; “CWA Organizes More than 11,000 Workers at Former AT&T
Wireless under Cingular Pact,” Daily Labor Report , November, 28, 2005, A-8; “Verizon Neutrality
Pact with CWA, IBEW Expires after Four Years; No Units Organized,” Daily Labor Report , August
24, 2004, A-12.

19. Ibid.
20. Freelancers Union, https://www.freelancersunion.org/ .
21. Restaurant Opportunities Center United, http://rocunited.org/ .
22. “About,” Working America , http://www.workingamerica.org/membership/about .
23. SherpaShare, https://www.sherpashare.com/ .
24. Coworker.org , https://www.coworker.org/ .
25. The Workers Lab, http://theworkerslab.com/ .
26. John R. Commons, “American Shoemakers, 1648–1895: A Sketch of Industrial Evolution,”

Quarterly Journal of Economics 25 (November 1919), reprinted and revised in A Documentary
History of American Society , vol. 3, ed. John R. Commons (New York: Russell and Russell, 1958),
18–58.

27. George W. Brooks, “Stability versus Employee Free Choice,” Cornell Law Review 61 (March
1976): 344–367.

28. Jeffrey Keefe and Rosemary Batt, “Telecommunications Services: Union-Management Relations
in an Era of Industry Re-Consolidation,” in Collective Bargaining: Current Developments and Future
Challenges , ed. P. Clark, J. Delaney, and A. Frost (Champaign, Ill.: Industrial Relations Research
Association, 2003).

29. James W. Kuhn, Bargaining and Grievance Settlements (New York: Columbia University Press,
1962).

30. George Seltzer, “Pattern Bargaining and the United Steelworkers,” Journal of Political Economy
59 (August 1951): 322.

31. Peter Cappelli, “Competitive Pressures and Labor Relations in the Airline Industry,” Industrial
Relations 24 (September 1985): 316–338.

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Module 4: Labor Relations in a Global

Environment

Topics

1. Unions, the Global Economy, and Free Trade
2. Labor Relations and Multinational Corporations
3. The Labor Relations Environment in Foreign Countries

1. Unions, the Global Economy, and Free Trade

Today international trade and global economic activity are enormous. In recent years, the focus

has shifted from the national economy to a more global perspective. Many developing nations

are experiencing newfound prosperity, and U.S. firms are rapidly expanding their overseas

markets. However, the net benefits of globalization have been uneven. Many American jobs have

been lost. Among the hardest hit have been industries with a strong union presence—steel,

automobiles, textiles, and consumer electronics. An estimated 17 million American workers have

been displaced since the early 1980s. About one-third of these jobs were in manufacturing.

The AFL-CIO has begun to recognize that unions must broaden their perspective. They can no

longer concern themselves exclusively with U.S.-based corporations and the domestic economy.

If unions are to survive and prosper, they must incorporate a more global perspective. Speaking

at a gathering of worldwide trade unions in 2001, AFL-CIO President John Sweeney stated:

[t]he global economy that corporations have forged can only be tamed by the international

solidarity of working families everywhere…[w]e must commit to pressuring our governments to

champion the cause of building enforceable workers’ rights into the rules of the global market.

(Sweeney, 2006)

Sweeney and other union leaders acknowledge the benefits of expanding global trade. They also

point out that these new economic realities come with some costs. To fuel their growing

economies, countries are sometimes forced to compete among themselves to attract investment

capital. This competition does not always translate into higher wages or an enhanced standard of

living. In fact, in some instances, competition for new plants and new investment may actually

drive down wages. Organized labor also believes that expanding global competition can erode

workers’ rights, threatening important job protections.

Pros and Cons of the Global Economy

The pros and cons of the expanding global economy are hotly debated. Some economists agree

with the concerns expressed by the AFL-CIO. Unquestionably, global enterprises and keen

competition for investment capital have taken on added importance in recent years. As countries

scramble for limited capital and investments in new plants and equipment, the effect may be

downward pressure on both wages and environmental standards.

Protections for workers (wage-and-hour laws, safety statutes, fair-employment laws, and job

security) may follow the same downward path. Other experts sharply disagree. They argue that

employers are less concerned with maintaining low wage levels and more concerned with

identifying a productive workforce and a good infrastructure to support their business. For

example, high-technology companies need to maintain close ties with universities as a ready

source of intellectual capital. Finally, supporters of globalization point out that many MNCs have

actually raised the labor standards and improved employee working conditions in countries

where they have opened production facilities.

Free Trade Agreements

Another dramatic change has been the recent proliferation of free trade agreements.

Increasingly nations are forming pacts to reduce trade barriers and encourage the free movement

of goods and services across their national borders. Perhaps the best-known regional trade

agreement is the North American Free Trade Agreement (NAFTA). The net effects of this and

similar agreements are hotly debated. Consumers have clearly benefited because of lower prices

and increased selection, and U.S. exports to Canada and Mexico have increased substantially

since the 1993 enactment of NAFTA. However, over the same period, the United States has

experienced a substantial decrease in manufacturing jobs.

Thus, the overall effects have been uneven. Looking at free trade on a global rather than a

regional basis, it is clear that virtually any product can be manufactured more cheaply in China

than it can in higher-wage countries of North America and western Europe. Enhanced trade with

China has generated a selection of reasonably priced consumer goods for the American market.

However, the migration of manufacturing capacity to Asia poses a direct threat to American jobs,

both union and nonunion.

Organized labor has taken a strong stand against the expansion of free trade pacts. Indeed, the

AFL-CIO has launched protests at several trade conferences aimed at reducing trade and tariff

barriers. Union concerns extend beyond the mere loss of jobs. Unions also see free trade

agreements as responsible for an overall deterioration in worker rights. Fundamental worker

rights were addressed in one of the supplemental agreements to NAFTA, the so-called North

American Agreement on Labor Cooperation (NAALC). Through the NAALC, Canada, Mexico,

and the United States adopted a statement of principles. These include a shared commitment to

enforce 11 basic worker rights, including protection for the right to strike, prohibitions against

child labor, and appropriate compensation for occupational injuries.

Like NAFTA itself, NAALC has yielded mixed results. The agreement fails to provide specific

remedies where a worker’s rights have been violated. In addition, there are no simple

mechanisms to sanction governments that do not adhere to the letter or spirit of the agreement.

The procedures to address infractions are cumbersome. However, labor and human rights groups

have used NAALC as a basis to convene conferences and studies on worker rights and have

raised public awareness of the problem. When claims of abuses have surfaced, NAALC

members have sought to avoid public airing of the accusations, which has resulted in the

informal resolution of many worker complaints.

2. Labor Relations and Multinational Corporations

In addition to contending with the overall expansion in world trade and the growth in free trade

agreements, unions must also contend with the growth of multinational corporations (MNCs).

Corporations that produce and market goods across national borders and maintain a presence in

several countries are not new. Many large U.S. corporations sought to tap foreign markets as

early as the 1950s. In addition, the notion of moving a portion of manufacturing operations

abroad is hardly a new concept. Nevertheless, some of these enterprises have grown enormous in

size and impressive in their influence. Some authors have pointed out that the annual revenues of

Wal-Mart stores, which operate in a multitude of countries, are about same as the gross national

product of Austria. Other examples of very large MNCs are Exxon Mobil, an integrated producer

and marketer of energy products, and General Motors, which manufactures cars and trucks in

locations as diverse as Brazil and Australia.

American unions have not kept pace with the explosive growth of these behemoth enterprises.

For example, when Japanese or European auto manufacturers opened U.S. assembly plants,

unions used the same organizing tactics traditionally used with U.S.-based manufacturers. They

also appealed to the workers’ sense of patriotism and directed negative publicity toward these

offshore companies.

The companies responded with a blend of traditional American tactics as well as approaches

from their home countries. For example, Japanese firms do not hesitate to hire labor lawyers and

consultants to help them remain union free. In addition, they have emphasized trust between

managers and employees, restricted executive “perks,” and encouraged work teams. This positive

approach to human resources management combined with traditional American tactics has

created additional challenges for unions. Union efforts to organize these foreign manufacturers

operating on U.S. soil have been no more successful than when unions try to organize domestic

corporations. In both arenas, they are winning around 50 percent of all secret-ballot elections

conducted by the NLRB.

MNCs present additional challenges for unions. Strikes may be less effective. The purpose of a

strike is to place economic pressure on the enterprise. The union does so by denying the

employer its labor source in hopes of choking off production. The notion is to starve the

enterprise of its revenue source until it succumbs to the union’s demands. But an MNC can often

divert production to an alternative overseas location or obtain goods from one of its outlying

manufacturing facilities. In fact, unions perceive that MNCs are actually on the offensive against

organized labor, insisting upon cuts in employee benefits or demanding more favorable work

rules. Some of these companies simply say to the union, “if you don’t give us the concessions we

want, we will move our facilities overseas or send a portion of our work to an alternative

facility.”

Bargaining in a transnational setting also requires unions to overcome a number of obstacles. For

example, labor relations laws and collective bargaining structures vary from country to country.

Indeed, trade unions themselves often have difficulty collaborating across national borders.

Local union leaders are reluctant to share authority with foreign counterparts. In addition,

American unions are often uncomfortable with the socialist or communist political affiliations of

overseas unions. Finally, MNCs have generally resisted any sort of centralized or transnational

bargaining. Most experts agree that this attitude will change only if unions can surmount some of

the other issues just mentioned.

3. The Labor Relations Environment in Foreign Countries

As with residents of other countries, those of us in the United States tend to view other countries

in terms of our own culture, practices, and patterns of living. However, our system of labor

relations is unique. No other country has a system that operates in quite the same manner. The

major features of a nation’s labor relations system can be evaluated by examining three key

dimensions: (1) union density, (2) recognition procedures, and (3) bargaining structures.

Union Density

Union membership is in sharp decline in the United States. With the exception of unions

representing public employees (state, county, municipal, federal, and so forth), major U.S.

unions have been losing members for more than 20 years. Recent data from the Bureau of Labor

Statistics show that only about 12 percent of American workers belong to unions. In contrast,

several northern European countries boast unionization rates exceeding 80 percent. That is nearly

seven times greater than membership in the United States. Even in neighboring Canada and

Mexico, more than 20 percent of active workers belong to unions, a rate nearly double the U.S.

rate. Membership is on the rise in both countries (Holley, 2005, p. 682; Baltimore Sun, 2007, p.

6E).

Recognition Procedures

Under U.S. labor laws, employers may insist upon a secret-ballot election as a precondition to

recognizing and dealing with a labor organization. In addition, employers are permitted to

conduct sophisticated campaigns to convince employees to vote “no union.” This is not the case

in many other countries. Employers are generally more accepting of unions in Canada, for

example, and are less likely to engage in antiunion tactics.

Card checks are a widely accepted means to gain union recognition in Canada. This method

denies employers the opportunity to conduct protracted antiunion campaigns. Canadian labor

laws themselves are more restrictive concerning permissible antiunion campaign tactics. Mexico

permits the closed shop, a practice that is illegal in most U.S. industries. This system requires

than an individual join a union before he or she is hired. Mexican unions may also insist upon the

termination of an individual who refuses to maintain union membership and pay required dues.

Bargaining Structures

The relationship between an employer and a union in the United States is based on the concept of

exclusivity—the basic notion that if the employer must deal with a union, it need only deal with

a single union as the representative of a given group of employees. In Great Britain, exclusivity

is not the prevailing model. Most bargaining does not take place at the company level.

Agreements are forged between large multiemployer associations and union umbrella

organizations. A manufacturing company might have ongoing relationships with as many as six

or seven different unions. In sharp contrast to the United States, there are no national labor laws

compelling negotiations or the resolution of employee grievances. Although deeply entrenched

in the national culture, Great Britain’s collective bargaining system is purely voluntary in nature.

Germany has 16 major national unions. However, the most important collective bargaining

agreements are not negotiated at the national or plant level. Instead regional agreements are the

most important. Companies and unions within a specific geographic area of the country reach

agreements applicable to all employees within the region. Also typical of the European model,

the government is a much more active and visible participant in the labor relations process.

Senior government officials will often intercede directly in collective bargaining and may play a

vital role in brokering a final agreement.

In both Europe and Latin America, labor unions and political parties are intimately intertwined.

Union members depend upon sympathetic politicians to support laws protecting employee rights

and enhancing benefits. In turn, politicians look to the unions for political and financial support.

Nowhere are unions more visible than in Great Britain. There, organized labor has its own highly

influential political party, the Labour Party. Recently, the British government has been led by

prime ministers from the Labour Party, and the government has enacted legislation making it

easier for unions to organize new groups of employees.

Module 4 Self-Assessment Questions

Please go to My Tools > Self Assessments > to complete this self assessment.

References

Holley, W. H., Jr. (2005). The labor relations process (8th ed.). Mason, OH: Southwestern.

Sweeney, John. (September 9, 2006). Labor unions and globalization. [Online]. University of

Iowa Center for International Finance and Development. Available:

www.uiowa.edu/ifdebook/issues/globalization/reading table/labor.shtml

Union membership declines. (2007, January 26). The Baltimore Sun, p. 6E.

89

4

A CONCEPTUAL FRAMEWORK FOR ANALYZING THE
LABOR RELATIONS ENVIRONMENT

This chapter moves horizontally across the three-tiered framework by examining
how the external environment in which labor relations develop infl uences the
bargaining process and bargaining outcomes at the functional level. The discussion
focuses on fi ve key aspects of the external environment: the economic, public policy,
demographic, social, and technological contexts of the bargaining relationship.

The external environment affects the bargaining power of labor and management,
which determines bargaining outcomes. A union, for example, will be better able
to gain a high wage and other favorable contract terms when it has relatively
high bargaining power. It is often something in the external environment that
determines whether a union has a lot of bargaining power in one situation and
little power in another. Thus, we start this chapter with a discussion of how the
external environment infl uences bargaining power and the bargaining process.
For instance, we trace how a low unemployment rate (an aspect of the economic
environment) strengthens workers’ ability to hold out while on strike and thereby
gives a union greater bargaining power.

The role of environmental factors is well illustrated by the response of labor
and management to heightened international competition and continuing corporate
restructuring . A conceptual framework is necessary for understanding how the
external environment affected collective bargaining in recent years and in other
periods.

This book uses John Dunlop ’ s division of the labor relations environment into
three main infl uences: (1) the economic context, (2) the technological context,
and (3) the locus of power in the larger society. 1 In addition, this book considers
the infl uence of the social context and the demographic context. The
underlying theme is that labor and management can infl uence the environment
and the environment also infl uences them.

On the one hand, the external environment supplies both incentives and
constraints upon labor and management as they work to meet their bargaining

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AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations
Account: s4264928.main.eds

90 Part I. Introduction

goals. Thus, it is important to consider how the environment shapes the power
of the bargaining parties. On the other hand, the parties to collective bargaining
also seek to mold their environment to better serve their needs. Thus, environmental
infl uences are not entirely outside human control.

For example, since the 1920s, many employers in the textile, apparel, and other
small, soft-goods industries have migrated from the Northeast to the South, partly
(if not primarily) to take advantage of a more favorable economic environment
(such as lower labor costs).

More recently, many U.S. manufacturing fi rms have opened production facilities
overseas or established joint ventures with foreign producers, thereby contributing
to an economic environment of sluggish employment growth in the United States
in their industries. In this way, these fi rms have directly shaped the U.S. economic
environment for collective bargaining.

The ability of involved parties to infl uence their environment is even more
pronounced in the case of public policy because, quite simply, organized labor
and management are the prime lobbyists who infl uence the public policies that
regulate their own behavior. Consequently, in the long run the environment is
to some extent infl uenced by the bargaining parties. Only in the short run should
the environment be viewed as external and relatively fi xed.

BARGAINING POWER

The external environment affects the bargaining power of labor and management.
Three aspects of bargaining power come into play: the total power, the relative
power, and the political power of labor and management. Total power concerns
the total profi ts available to labor and management. The greater the profi t is, the
more is available for labor and management to divide up. Both labor and manage-
ment prefer situations with greater total power. Relative power has to do with
the relative strength of labor or management; in other words, the ability of either
side to gain a larger share of a given amount of profi t. In contrast to preference
of both sides for greater total power, the interests of labor and management
confl ict with regard to relative power. Political power concerns the ability of
labor or management to infl uence governmental actions—the public policies
governments adopt that infl uence labor relations or the actions governments take
as employers.

The Determinants of the Total Power of Labor
and Management

The total power in a given bargaining situation is heavily infl uenced by two
factors: the degree of competition an employer faces and the state of the economy.
The degree of competition is affected by the amount of competition an employer
faces from domestic and international competitors. Firms that face few competitors
and thereby exert market power earn greater profi ts and have more resources for
labor and management to divide up. In the most concentrated industries, a fi rm
will be a monopoly and will earn monopoly profi ts. In this case the total power

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Role of the Labor Relations Environment 91

of labor and management is at its maximum and bargaining is made easier by the
fact that both high wages and high profi ts can be funded out of the fi rm ’ s
monopoly profi ts.

The state of the economy infl uences total power by affecting the level of
demand (i.e., sales) and profi ts. Both labor and management prefer less competition
and a strong economy.

The Determinants of the Relative Bargaining Power of
Labor and Management

The relative bargaining power a union enjoys is heavily infl uenced by its and its
members’ abilities to withdraw their labor, usually (though not always) through
a strike. Workers are more likely to win higher wages and other gains when they
are willing and able to sustain a strike. In addition, once a strike has begun, it is
more likely to succeed when the costs of the strike to the employer are greater.
Thus, an employer ’ s relative bargaining power is heavily infl uenced by its ability
to withstand a strike. The simplest measure of relative bargaining power is the
amount of strike leverage each party holds.

Workers can also withdraw their labor through more informal actions, such
as working to rule (following rules strictly rather than pursuing effective work
practices), the “blue fl u” (large-scale worker absenteeism), and other means of
slowing production. The discussion that follows focuses on the effects of strikes
that involve workers who fully withdraw their labor. However, many of the
points raised below carry over to less extreme forms of labor withdrawal.

How Strike Leverage Infl uences Relative
Bargaining Power

The relative degree to which workers and an employer are willing and able to
sustain a strike is their strike leverage. To measure each party ’ s strike leverage,
one needs to know what costs a strike would impose on each party and what
alternative income sources are available to each party to offset any income losses
a strike will bring. The discussions of the environmental contexts that follow help
us understand what determines strike leverage.

THE ECONOMIC CONTEXT

Economic factors critically infl uence both total and relative bargaining power.
Economic factors can be separated into those at the macrolevel (across the economy)
and those at the microlevel (relevant only to a specifi c bargaining relationship).

Microeconomic Infl uences on Total Bargaining Power

Microeconomic factors infl uence the total bargaining power of an employer
or a union through the effects competitive conditions exert on a fi rm. The greater
the market power of a fi rm (i.e., the less competition it faces in the markets in
which it competes), the greater will be the profi ts that fi rm earns. When profi ts
are greater, there are more resources for the parties to divide based on their relative

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92 Part I. Introduction

power. A fi rm ’ s market power is affected by the degree of domestic and international
competition it faces.

Labor and management have a common interest that affects total power. Both
sides want the company to have market power (if other factors are held constant
that affect the relative power of labor and management). The existence of this
potential common interest explains why unions sometimes join with management
to push for government regulations that will increase the market power of their
company. For example, the United Steelworkers union frequently joined with
steel companies to lobby the federal government to restrict steel imports and to
impose higher tariffs on steel importation.

MICROECONOMIC INFLUENCES ON RELATIVE
BARGAINING POWER

Microeconomic factors are market forces that shape the amount of monopoly
power a fi rm has. They include the number of competitors in an industry and
the ease with which new fi rms can enter an industry. These microeconomic
factors infl uence the relative bargaining power of labor and management through
the ways they affect the parties’ strike leverage and the elasticity of demand
for labor (the wage-employment trade-off ).

Management ’ s Strike Leverage

The more an employer is willing and able to sustain a strike, the more likely a
union will be to settle a strike before achieving all of its goals. Employee strike
leverage derives from the how much a strike infl uences fi rm profi ts. The greater
the profi ts a fi rm loses during a strike, the more ready it will be to give in to
labor ’ s demands. During a strike, a fi rm ’ s profi ts are shaped by a strike ’ s effects
on production and sales. Figure 4.1 diagrams the principal determinants of an
employer ’ s strike leverage: the ability of workers to harm production, sales, and

PRODUCTION SALES PROFITS

Essentiality of striking
workers

Availability of substitute
workers

Alternative production
sites

Capital and other
continuing costs

Availability of inventories
Effects of the strike on

competitors

Figure 4.1. Determinants of management ’ s strike leverage

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Role of the Labor Relations Environment 93

profi ts and the ability of management to fi nd alternative ways to maintain produc-
tion, sales, and profi ts.

The effects of a strike on production: Once a strike has begun, the fi rst indicator of workers’
bargaining power is the degree to which the strike has impaired production and/or
service. Workers who succeed in halting production because there are no readily
available labor substitutes—supervisors, employees in another plant, strikebreakers, or
automated equipment—have substantial strike leverage and bargaining power. In other
words, these workers are essential to the production process. Craft workers, who are
typically very diffi cult to replace because of their skills, often have signifi cant strike
leverage. For example, the high skill levels of electricians and repair machinists help
explain why they earn so much more than production workers in the auto, steel, and
textile industries.

The effects of a strike on sales: The power of a striking work group is tempered,
however, if the halt in production does not lead to a reduction in sales. Employers
can sever or at least weaken the link between production and sales if inventories are
high or if alternative sites can be used to produce what normally would be produced
at the site of the strike. Whether alternative production is available is infl uenced by
the bargaining structure (whether the other sites are covered by the same union or
contract) and by the extent to which other workers at other sites join or support the
strike.

The effects of a strike on profi ts: Finally, even if a strike stops production and sales, the
fi rm may not necessarily experience a serious decline in profi ts. For example, fi rms
with relatively high ongoing capital or interest expenses have a harder time withstanding
a loss of income caused by a strike. This helps explain why construction workers, who
can temporarily halt costly construction projects, have so much bargaining power. In
contrast, fi rms facing a strike that also shuts down all the competitors’ operations have
an easier time withstanding strikes because their lost sales and profi ts may be largely
postponed rather than permanently forgone. Firms that have substantial savings or
alternative income sources (such as from other lines of business) can more easily absorb
the costs of a strike. Later sections of this chapter discuss how the recent growth in
employers’ nonunion operations has improved their strike leverage through this channel.

The Strike Leverage of Unions

Consider the other side—the strike leverage of unions. A union ’ s strike leverage
is determined by the ability and willingness of the work force to stay out on
strike. The longer workers are willing and able to stay on strike, the greater the
bargaining power of the union representing those workers will be and the more
likely the union will be to win favorable employment terms from an employer,
assuming that other factors are held constant.

Alternative sources of worker income: The willingness of workers to stay out on strike is
heavily infl uenced by the degree to which alternative sources of income are available
to the striking work force. Obviously, workers in unions that offer ample strike benefi ts
can better afford to stay out on strike than those in other unions can. Likewise, when
workers can more readily fi nd temporary or part-time work that supplements union
strike benefi ts or when they have accumulated substantial savings or assets, they are
more able to sustain a strike action.

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94 Part I. Introduction

Worker solidarity: Another set of factors that infl uences the strike leverage of workers
beyond the microeconomic environment is the attitude of union members. Workers’
feelings of solidarity with one another infl uence whether picket lines will be honored
and pent-up frustrations about the conditions that precipitate a strike will infl uence
workers’ willingness to stay out. In brief, strikes are highly emotional undertakings
that depend on numerous factors, not simply the microeconomic environment.

The U.S. airline industry provides a good illustration of how microeconomic
factors affect bargaining power. In recent years (see Box 4.1 ), union power in
this industry has been increased by a wave of mergers among the major airlines.
This has led to better collective bargaining outcomes for airline employees.

The Wage-Employment Trade-Off

Higher wages often bring cuts in employment. Thus, unions may in some cases
choose not to raise wages as much as they could. This is called the wage-
employment trade-off.

The key point is that there are employment effects from wage increases. Unions
sometimes take these employment effects into consideration and moderate their
wage demands. For example, unionized apparel workers received only modest

BOX 4.1
Airline Industry Consolidation Leads to Increases in Airline
Union Power and Employee Pay

A good example of how employees and unions benefi t from industry
concentration (i.e., a microeconomic factor) is provided by the U.S. airline
industry. At a recent meeting of airline company and union-side attorneys,
it was noted that the recent merger wave among airlines would likely lead
to better collective bargaining outcomes for airline unions and employees.
An attorney who represents several airline unions summed it up by pointing
out that airline consolidation gave the four remaining national carriers
(American, United, Southwest, and Delta) more “pricing power” over their
customers, which enabled them to boost profi ts and raised employees’
expectations for wage increases and benefi t improvements. Recent contract
settlements have validated this observation. For example, on November 20,
2015, United Airlines and the Air Line Pilots Association (ALPA) agreed
to a two-year contract extension that gave pilots a 13 percent pay increase
in 2016, followed by annual increases of 3 percent and 2 percent. These
increases raised the hourly base pay of United pilots above what pilots at
American and Delta airlines earn.

Sources : Larry Swisher, “Post-Merger Airlines Size Ups Pressure on Contract Talks,”
Daily Labor Report , March 11, 2016, C-1; and Michael Sasso, “United Deal Said to
Boost Pilot Pay in Bid for Labor Peace,” Daily Labor Report , November 25, 2015, A-5.

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Role of the Labor Relations Environment 95

wage increases in their collective bargaining agreements in recent years, in part
because they feared that any higher wage payments would cause apparel fi rms to
more aggressively shift production offshore or outsource production domestically
to nonunion plants or fi rms. This trade-off between wages and employment is
another important microeconomic infl uence on bargaining power and outcomes.

Marshall ’ s Four Basic Conditions

Unions are more likely to consider the employment effects that result from a
wage increase when these effects are greater. Marshall ’ s conditions explain why
a wage increase leads to large reductions in employment in one situation and to
only small reductions in employment in another is explained.

In his seminal analysis of the relative bargaining power of labor and management,
Alfred Marshall argued that unions are most powerful when the demand for
labor is highly inelastic —that is, when increases in wages will not result in
signifi cant reductions in employment in the unionized sector. 2 Marshall proposed
four basic conditions under which the demand for union labor would be inelastic:
(1) when labor cannot be easily replaced in the production process by other
workers or machines; (2) when the demand for the fi nal product is not sensitive
to changes in the price of the product; (3) when the supply of nonlabor factors
of production is not sensitive to changes in the price of the product; and (4)
when the ratio of labor costs to total costs is small. 3 Let us address each of these
conditions in turn.

The diffi culty of replacing workers: The fi rst condition, the degree to which workers are
diffi cult to replace , depends on the production technology. The more diffi cult it is to
replace workers with machines or other workers, the less apt the workers will be to
fear they will be displaced.

Unions can try to limit how easily management can introduce new technology by
raising the costs of substituting other factors of production for union labor, but they
face a dilemma when they consider that strategy. Although collectively bargained
constraints on technological change may keep unions from losing employment, slowing
the rate of technological change may also constrain the rate of productivity growth,
limiting the long-run potential for wage increases.

The demand for the product: Workers face less of an employment decline from raising
wages if the demand for the product produced by these workers is not sensitive to
the price of the product. This sensitivity (what economists call the elasticity of product
demand ) is a second key condition Marshall identifi ed. This condition is somewhat
different from the other three in that it is infl uenced by consumer preferences and
not by the actions of the fi rm or the union. The elasticity of product demand depends
on the willingness of consumers to substitute other products.

A modern-day illustration of this principle is the threat imports pose to union power.
Lower-priced imports become more attractive to domestic consumers when wages
and prices in the domestic unionized economy increase. The auto, apparel, steel, and
electrical appliance industries are all recent cases in point.

The supply of other production inputs: Marshall ’ s third condition is the responsiveness
of the price of other inputs in the production process to the demand for those inputs
(what economists call the elasticity of supply of other factors of production ). When an

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96 Part I. Introduction

employer turns to alternative inputs so it can employ less union labor, unions will be
better able to push up wages (with less fear of employment cutbacks) if the price of
other inputs rises a lot as their use increases. Thus, the more inelastic the supply curve
for alternative inputs is, the greater union power is. Whereas Marshall ’ s fi rst condition
concerns the degree to which it is technologically feasible to substitute machines or other
factors of production for unionized labor, his third condition has to do with how
costly production inputs are that can be used as alternatives to union labor.

Labor ’ s share of total costs: Marshall ’ s fourth condition is that unions are more powerful
when labor costs are only a small proportion of total costs. This condition has often
been restated as the importance of being unimportant . An employer is less likely to resist
union pressure if a given wage increase affects only a very small proportion of the
total cost of the product. Thus, a small craft unit, such as the skilled maintenance
employees in a plant, is often less likely to meet management resistance to its wage
demands than a broad bargaining unit that represents all production and maintenance
employees would. 4

Bargaining in the public sector demonstrates the diffi culties unions experience when
labor costs constitute a large proportion of total production costs. Labor costs for local
government often account for between 60 and 70 percent of the budget, and in some
jurisdictions the labor costs for occupations such as fi refi ghting run as high as 90
percent of the budget. When local government offi cials seek to control total budget
costs, they take a very hard line in collective bargaining because the wages and salaries
of public employees are their largest controllable cost.

Do Unions and Workers Care about the
Wage-Employment Trade-Off?

All of Marshall ’ s conditions are based on the assumption that workers and unions
are concerned about the employment effects of wage increases. When union
members are willing to accept a slow rate of growth in employment or a decline
in the number of union jobs as a trade-off for higher wages, the sources of power
discussed above are less important.

Perhaps the classic example of a union that ignored the employment effects
resulting from wage increases was the United Mine Workers of America (UMW)
in the 1940s. UMW president John L. Lewis demanded high wage increases
while giving employers a free hand to invest in labor-saving technology. The
result was that although mine workers’ wages increased, employment in the
industry declined sharply throughout the 1940s and into the 1950s. 5 Despite this
decline, the union ’ s leaders did not soften their demands for higher wages.

Labor relations scholars have long debated the role the wage-employment
trade-off actually plays in collective bargaining. Arthur Ross argued that political
factors rather than employment consequences shape the wage policies of unions.
Ross also claimed that workers’ wage demands are heavily infl uenced by the
comparisons they make with the wages of other workers or unions (what he
called “orbits of coercive comparisons”), a practice that gives union leaders some
leeway in defi ning their wage goals. 6 John Dunlop had a very different view of
union wage policy. He claimed that unions do consider the employment conse-
quences of their wage demands and that they may even try to maximize the
employer ’ s payroll. 7

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Role of the Labor Relations Environment 97

Concessionary bargaining from the 1980s on offers evidence that unions and
workers do consider the employment effects of higher wages, particularly when
higher wages might lead to a plant closing. Yet as Ross asserted, political factors
played an important role in shaping whether and to what extent employment
was a concern in wage bargaining. The willingness of workers to accept concessions
and what they won in exchange for those concessions was affected by many
factors, including business and union strategies.

MACROECONOMIC INFLUENCES ON TOTAL AND
RELATIVE BARGAINING POWER

Economists refer to unemployment and the growth in national product or
productivity as macroeconomic factors. The overall state of the economy affects
bargaining power through a variety of channels. A fi rm is likely to be earning
higher profi ts (greater total power) when the economy is strong and demand is
growing. Both sides prefer periods of economic growth because these periods
can sustain high wages and profi ts.

A union ’ s strike leverage depends in part on the availability of jobs—both for
the striking workers and for their spouses or other family members who might
help support the strikers. The higher the unemployment rate, the less likely
striking workers or family members will be to fi nd substitute employment and
the more likely it is that a striking worker ’ s other family members will be on
layoff. Thus, during the upswing of a business cycle (as the unemployment rate
declines), unions generally gain strike leverage. Conversely, during periods of
increasing unemployment, the relative power of unions declines. The factors at
work here include the need of striking workers for alternative income sources
and the vulnerability of employers to strikes when product demand is high.
During periods of slack demand, employers may, in fact, welcome a strike because
they can then lower their inventories and use the strike as a substitute for layoffs.

Wage Flexibility over the Business Cycle

The connection between macroeconomic conditions and bargaining power is
supported by evidence that the rate of wage increases in the economy responds
to the business cycle. Wages rise more quickly when the economy is growing
and they increase more slowly (or fall) when macroeconomic activity is
sluggish.

However, declines in product demand and increases in unemployment have
been shown to have a weaker downward effect on collectively bargained wage
increases than on wage increases in the nonunion sector. 8 Unions tend to aggres-
sively resist wage cutting, and it is harder for union employers to cut wages or
moderate the pace of wage increases during recessionary periods than it is for
nonunion employers. The fact that union wage rates are often set in multiyear
agreements (labor contracts in trucking and the auto industry, for example, have
traditionally been for three years) makes union wages less responsive than nonunion
wages to changing economic conditions.

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98 Part I. Introduction

POLITICAL POWER

The bargaining power of labor and management is infl uenced by their respective
political power through a variety of channels. As mentioned above, one illustration
of how politics matters is through the infl uence of public policies on the mac-
roeconomic policies that affect the total and relative power of labor and management.
Yet, as discussed in chapter 3 , the legal system and public policies critically shape
labor relations. The political power of labor and management matters because
that power infl uences the laws and public policies that regulate labor relations.

Public policies also directly affect income through social welfare policies such as
the minimum wage and social security pensions. This is another channel through
which political power affects the bargaining power of labor and management.
Political power also infl uences employment terms and conditions through its
effects on the roles federal, state, and local governments play as employers (see
Chapter 13 ). However, in the United States, the government does not exert
substantial direct effects on employment terms and conditions in the private sector,
especially when compared to the role of government in many other countries
(see Chapter 15 ).

THE LEGAL AND PUBLIC POLICY CONTEXT

Law and public policy infl uence the legal standing of unions, the bargaining
power of unions, and employment conditions. This section describes specifi cally
how laws do this.

The Legality of Unionism and Union Activity

Public policy determines how easy it is for unions to form and sustain themselves.
Imagine what would happen in a country where unionism was deemed to be
illegal and workers were sent to jail if they tried to form unions or to conduct
strikes. One would expect that under such a public policy there would be few
unions and that organized representatives of workers would be able to do very
little. What would be the long-term consequences of such policies, and would
such a regime be sustainable?

If unions and union activity were outlawed, one would expect workers to
have little infl uence that could provide a counterbalance to other powerful social
forces. What happened in Poland, however, reveals that such a system can lead
to confl ict between workers and the government. The Solidarity union led a
successful challenge to the Communist government in Poland. Unions were later
active in the overthrow of governments in other Eastern European countries and
in the former Soviet Union countries. Unionism in this region of the world thus
promoted more than just the improvement of the working conditions of Polish
workers. Events there and in other parts of the former Communist bloc remind
us of the role unions can play as a democratic force in society.

Banning unions is one extreme. Legally requiring union membership is the
other extreme role that public policy may play. No democratic government has
chosen to follow this course. Instead, public policies about unionism in the United
States and other democratic countries have taken a middle course. Considerable

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Role of the Labor Relations Environment 99

variation exists among democratic countries regarding the regulations about which
workers can join unions and how they can do so. In many countries, the regulation
of unions has changed much over the last twenty-fi ve years.

The NLRA ’ s Effects on Bargaining Power

The NLRA and state statutes governing public and agricultural employees in the
United States do more than just give unions the right to exist. These acts infl uence
the processes and outcomes of collective bargaining through their regulation of
the actions of workers, unions, and employers during collective bargaining. For
example, the NLRA grants unions the right to strike and obligates employers to
bargain in good faith. Without these policies, the bargaining power of unions
might be severely weakened.

The NLRA infl uences the bargaining power of workers and employers in
many ways. For instance, as discussed in Chapter 3 , the Taft-Hartley amendments
to the original NLRA made it illegal for supervisors to join unions that represent
production workers. 9 In taking away the protection of the law, this amendment
led to the demise of the numerous foreman unions that had formed.

The Effects of Direct Regulation of Employment
Conditions

In the United States, certain employment conditions are regulated in more direct
ways than collective bargaining is. Federal laws regulation overtime hours,
unemployment insurance, pensions, and many other issues. These regulations are
clearly important because they set employment terms. They also are important
because of their indirect effects on bargaining power. For instance, the fact that
workers in some states can collect unemployment insurance while they are on
strike makes those workers more able to sustain strike action and increase their
bargaining power than workers in states without this policy. 10 Unions in the
United States and other countries support legislated minimum wages and minimum
standards for other employment conditions. In recent years, unions in the United
States have been strong supporters of campaigns to raise the minimum wage and
campaigns for a “living wage” (see Chapter 6 ).

An Illustration of Government Employment Regulation:
Pensions

Pensions provide an example of how government has infl uenced employment
conditions. The Employee Retirement Income Security Act (ERISA) of
1974 has had profound effects on pensions. The act (1) specifi es minimum standards
for vesting of pension contributions; (2) requires more detailed reporting and
disclosure of information about the plan to both employees and the government;
(3) requires that all future liabilities be fully funded on an annual basis and all
past unfunded liabilities be amortized; and (4) establishes an insurance protection
program for workers affected by plan terminations. The costs of the termination
insurance are met by a tax on existing plans.

The major policy problem ERISA created is the potential risk to the government
that occurs when major multiemployer plans are terminated. Box 4.2 provides

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100 Part I. Introduction

BOX 4.2
Troubles Facing a Large Multiemployer Pension Plan and the
Infl uence of Recent Federal Legislation

In January 2016, a New Jersey–based Teamsters local pension fund became
the third multiemployer pension plan to apply for Treasury Department
approval of benefi t suspensions. The massive Central States Pension Fund
became the fi rst multiemployer plan to fi le for a rescue under the Multi-
employer Pension Reform Act (MPRA) when it fi led its application with
the Treasury Department in September 2015. The MPRA, enacted in 2014,
is a federal law designed to help fi nancially troubled multiemployer plans
avert insolvency by suspending the accrued benefi ts of plan participants.
Supporters of the MPRA had successfully argued that without the law,
some pension plans would become insolvent and the obligations of such
funds would then transfer to the Pension Benefi t Guaranty Corporation, a
federal agency established to support pension funding, and possibly bankrupt
that corporation.

Critics of the MPRA claimed that it allowed profi table companies to
escape pension obligations. CNN reported the case of a retired UPS driver
who was told that his Central States Pension Fund benefi ts would decline
from $2,903 to $1,462 a month due to cuts allowed under the MPRA. It
was noted that although UPS has earned high profi ts, it was able to withdraw
from the Central States Pension Fund in 2008 (with a payment of $6.1
billion). UPS set up its own pensions fund, but it did not include retirees.
Retirees’ pensions continued to be covered by Central States. However,
the Central States Fund has struggled in recent years to meet its obligations
to UPS and other workers under the pressure of an aging work force
(currently there are fi ve retirees for every active worker).

The MPRA gives the U.S. Treasury Department the authority to decide
if benefi t cuts are fair. The U.S. Treasury used that authority to review a
proposed rescue plan and its associated benefi t cuts with the help of Ken
Feinberg, a renowned mediator. Following Feinberg ’ s recommendation,
the Treasury Department rejected the proposed rescue plan in May 2016,
asserting that the proposed benefi t cuts were too extreme for some benefi ciaries
and that even if the proposed cuts were imposed, they would not assure
the solvency of the beleaguered pension fund. Congress did not pass legislation
that would have provided an alternative to the plan Feinberg rejected. In
the absence of an acceptable funding rescue plan, the future of the Central
States Fund is uncertain, as is the question of whether it will be able to
meet its pension obligations.

Source : David Brandolph, “Third Multiemployer Plan Files Rescue Proposal,”
Daily Labor Report , January 26, 2016, A-9; Katie Lobosco, “Why 8,737 UPS Retirees
Are Bracing for Pension Cuts,” CNN Money , October 27, 2015, http://money
.cnn.com/2015/10/27/retirement/ups-pension-cuts-central-states/ ; and David B.
Brandolph, “Treasury Rejects Central States Pension Rescue Plan,” Daily Labor Report ,
May 6, 2016, A-8.

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Role of the Labor Relations Environment 101

an account of the controversy surrounding a proposed and then rejected rescue
plan for the Central States multiemployer pension fund. As you will see, the
rescue plan was infl uenced by recent laws that allowed pension funds to lower
retiree benefi ts under certain circumstances.

ERISA is an example of government efforts to regulate pensions, a key employ-
ment condition. It also illustrates the diffi culties the federal government has faced
in its work to ensure that workers consistently receive fair treatment with regard
to pensions.

The Role of Trade Policy

Trade policy is another way that public policies infl uence the economic environ-
ment. Debates about recent proposals to further liberalize trade policies illustrate
the controversy surrounding these matters. President Obama ’ s support for free
trade sparked heated debates over trade policy as the nation faced large trade
defi cits and a loss of employment in the industries most threatened by foreign
competition and imports (see Box 14.4 ).

The Labor Movement ’ s Criticism of the NLRA

Union leaders frustrated with declining union membership and new organizing
diffi culties have begun to question the value of the NLRA. Labor leaders (and
others) argue that NLRA decisions and representation elections take place only
after enormous delays, caused in part by the lack of commitment to the original
purposes of the NLRA. These leaders allege that such delays are the result of
employer practices such as fi ling numerous challenges and requests for postponement
and that these practices thwart the original intent of the NLRA that timely and
fair elections take place. These critics argue that NLRB enforcement procedures
operate to the advantage of management and against the original purposes of the
law.

Labor leaders blame their lack of success in organizing on weaknesses in the
NLRA and management ’ s stepped-up union-avoidance tactics. They now debate
which would be better for unions and workers: making major changes in the
NLRA or eliminating it completely. 11 Adding complexity to this debate is the
fact that in some cases, U.S. unions have clearly benefi ted from the NLRA and
its administration by the NLRB.

THE DEMOGRAPHIC CONTEXT

The changing nature of the labor force has also caused many to ask whether
collective bargaining is obsolete. It is thus important to examine the nature of
those changes and to explore their implications for collective bargaining.

Changes in the demographic characteristics of workers and jobs will infl uence
the needs and expectations of workers. These, in turn, may affect an individual ’ s
interest in union membership or willingness to stay out on strike.

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102 Part I. Introduction

Labor Force Trends

Since World War II, the U.S. labor force has grown at an unprecedented rate,
largely as a result of the postwar baby boom. However, the labor force grew
more slowly in the 1990s than it had in the previous two decades as a result of
a decline in the birth rate.

This and several other factors is leading to profound changes in the composition
of the labor force in the United States. In 2012, Generation X (those born from
1965 to 1980) surpassed the Baby Boomer Generation (those born from 1946 to
1964) as the largest segment of the labor force. Only three years later, in 2015,
the Millennial generation (born from 1981 to 1997) overtook the Gen Xers. The
Millennials are expected to represent an even larger share of the work force in
the years to come as the 40 percent who are still in school begin to move into
the work force.

Will these demographic shifts affect labor relations in the United States? Some
analysts speculate that because they will have come of age in a time of precipitous
decline for unionism, Millennials will be skeptical of collective bargaining. However,
there have been some signs that they may be embracing collective action in the
workplace. A highly public vote to authorize a union by the Millennial workers
at Gawker , a new-media outlet, was soon followed by a vote for authorization
at Salon.com , another such site. These events indicate an enthusiasm for unionism
among some younger workers.

The Millennials may face divergent pressures. It is forecast that half of
them will earn a college degree. 12 Those without higher education will face an
increasingly precarious labor market in which full-time jobs will become less
common and part-time and more contingent work will increase. Those with a
college degree will enter a highly competitive labor market in which they may
be expected to change jobs frequently, a trend that may make traditional union
organizing even more diffi cult. The gap that is widening in wages between
workers with college degrees and workers with no college degrees will also likely
exacerbate income inequality and perhaps also income differentials by race unless
the current tendency for African Americans to attend college less frequently than
whites is reversed.

Any look at the changing work force of the United States must consider the
impact of immigration. Particularly signifi cant is the rising number of unauthorized
immigrants who are working in the country. In 1990, the number of unauthorized
immigrants living in the United States was 3.5 million. That number increased
steadily until 2008, when it leveled off at about 11 million. 13

A majority of immigrants are of working age, and indeed their entrance has
provided a partial solution to the problem of an ageing work force. It is estimated
that unauthorized immigrants account for 5.1 percent of the labor force. Most
labor organizations in the country are attempting to reach out to these workers,
abandoning the nativist tendencies of the past. This outreach is diffi cult, however,
partly because many immigrants work in the agricultural sector, which the NLRA
does not protect.

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Role of the Labor Relations Environment 103

IS THE U.S. ECONOMY DEINDUSTRIALIZING?

The increase in the number and share of service and part-time jobs has spurred
an intense debate. Barry Bluestone and Bennett Harrison claim that the growth
in these jobs signals a decline in the manufacturing base of the U.S. economy
(they call the process deindustrialization ). They further argue that these shifts
in job composition go hand in hand with increasing inequality in the income
distribution. The better-paying jobs such as skilled trades, steel, and auto production
jobs, they claim, are disappearing and are being replaced by lower-paying service
jobs. 14 The spread of corporate downsizing led Bennett Harrison to conclude
that American corporations are becoming “lean and mean.” These developments
may have contributed to the growing income inequality that is occurring in the
United States.

On the other side of the debate are analysts such as Robert Lawrence who
hold that the growth in the number of service and part-time jobs has been a
response to the availability and desire of workers who want those jobs and have
the right skills for them. 15 These observers see this as a sign of health in the U.S.
economy and compare the job growth in the United States in recent years to
the sluggish employment growth in Europe over the same period. 16 There is also
a middle position in this debate: some say that deindustrialization is not happening
but at the same time point to many persistent problems in the U.S. labor market. 17

The issues at stake in this debate are of enormous importance. If one decides
that the labor market is relatively healthy, there is little reason to seek government
policies to alter the outcomes in that labor market, but if one believes that the
labor market is in trouble, there is every reason to seek federal policies to redress
an imbalance. Furthermore, any answer to the questions of whether deindustrializa-
tion or income inequality are taking place will affect government policy toward
collective bargaining and many other labor market institutions.

The shift to a larger service sector and more part-time and home-based employ-
ment has two indisputable implications for collective bargaining and union
organizing. First, since part-time workers have looser attachments to a single
employer than others (they are often employed only temporarily), union organizing
among them is more diffi cult and probably requires nontraditional techniques. It
is not surprising that the labor movement has vigorously opposed the growth of
temporary and home-based work. It is unlikely, however, that labor ’ s opposition
will have any effect on the growth in these types of employment relationships.
Thus, if unions are to organize these workers, they will need to develop policies
and strategies that are tailored to their particular needs. One strategy that unions
have discussed is providing associate member status or individual forms of rep-
resentation to these workers. 18 Other solutions may be developed outside the
United States, since the growth in temporary, part-time, and home-based work
is a problem labor movements all over the globe are facing.

Second, the ease with which striking service workers can be replaced makes
it diffi cult for unions to acquire bargaining leverage through strikes in those

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104 Part I. Introduction

sectors. Several unions that represent service workers have been experimenting
with strategies for broadening support for their demands through community
groups such as churches. Service unions also have been experimenting with
working to rule and other strategies that can increase leverage against employers
without taking strike action.

THE DEMOGRAPHIC PROFILE OF
UNION MEMBERS

The average union member is more apt to be working in industries, occupations,
and regions in which the demand for labor is either declining or is growing at a
slower pace than elsewhere in the economy. In addition, women, whose labor
force participation is increasing rapidly, are underrepresented in the unionized
sector.

These developments pose many challenges for unions. The traditional constituency
of unions—male, blue-collar, manufacturing, mining, construction, and transporta-
tion workers living in the Northeast or North Central regions—is declining in
signifi cance. Current union members are on average older and less well educated
than the new entrants to the labor force. Unions may have diffi culty adjusting
to the demands of a younger, more vocal constituency.

Demographic Challenges for Unions

Demographic diversity can affect union policies. Once people join unions, they
tend to try to shape union policies to refl ect their own preferences. This process
of political representation becomes troublesome to unions when members’ views
change rapidly. The very purpose of a union is to pursue the common goals of
its members through the exercise of collective power. Thus, the more rapid the
demography changes and the more heterogeneous the union constituency becomes,
the greater the potential for internal confl ict and the more diffi culty the union
will have in trying to establish bargaining priorities.

New union members sometimes have a diffi cult time creating an effective
political base. This is a problem that sometimes confronts newly hired, younger
workers as they try to infl uence the existing, often older, union leadership.
Women, racial and ethnic minorities, and any other new group that moves into
union jobs faces the same challenge. Until these groups can establish an effective
political base and pressure union leaders, it is not likely that unions will give their
needs as high a priority as they might desire.

In short, the demographic context of union membership affects collective
bargaining, the attitudes union members have toward their jobs, and the skills
workers bring to the job. If unions do not successfully organize the new members
of the work force, their membership will decline even further. If unions do
succeed at organizing the new workers, they will face pressures for change—both
within their organizations and at the bargaining table. In any event, it is clear
that any analysis of collective bargaining must account for the demography of
the labor force.

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Role of the Labor Relations Environment 105

THE SOCIAL CONTEXT

How does the American public see the union movement? Is society supportive
of or hostile to unions? These are aspects of the social context that can affect
industrial relations.

Polls that include questions about unions reveal fl uctuations over time in the
public ’ s image of unions. Gallup polls, for example, show a decline in the share
of the population that approves of labor unions since the high in 1965 of 71
percent. However, public support for unions has improved in recent years. The
percentage of the public that approves of labor unions, according to the Gallup
Poll, increased to 58 percent in 2015 (see Box 4.3 ). Gallup polls also show that
when asked where their sympathies were in recent labor disputes, more of the
public was sympathetic to unions than to companies. Gallup polls also show that
the public views big business as a bigger threat to the country in the future than
unions.

BOX 4.3
Public Approval of Labor Unions—Evidence from Polls

Recent Gallup polls had identifi ed the following public attitudes toward
unions:

1. Do you approve or disapprove of labor unions?
58% Approve
36% Disapprove
7% No opinion

2. Would you, personally, like to see unions in the United State have more
infl uence than they have today, the same amount as today, or less infl uence
that they have today?
37% More infl uence
24% Same amount
35% Less infl uence
4% No opinion

3. In your opinion, which of the following will be the biggest threat to the
country in the future—big business, big labor, or big government?
27% Big business
8% Big labor
61% Big government
4% No opinion

Sources : Data for Questions 1 and 2 are from a Gallup poll conducted in August 2015.
Data for Question 3 are from a Gallup poll conducted in December 2005. Lydia Saad,
“Americans Support for Labor Unions Continues to Recover,” Gallup Organization,
August 2015 www.gallup.com/poll/184622/americans-support-labor-unions-continues-
recover.aspx .

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106 Part I. Introduction

At the same time, responses to other questions regularly asked in the Gallup
and other polls reveals that the level of public confi dence in organized labor (and
big business) are consistently and substantially lower than public confi dence in
the military, churches and religion, the Supreme Court, and public schools. But
although it is skeptical about union leaders, the American public has continued
to express strong approval of the functions unions perform in representing worker
interests. Polls show, for example, that a majority of the population approves of
unions in general and believes in the right of workers to join unions of their
own choosing. 19 Thus, the majority of Americans apparently accept the legitimacy
of unions as a means for protecting the economic and job-related interests of
workers.

American workers also seem to have a dual image of trade unions. On the
one hand, the majority of workers see unions as big, powerful institutions that
have signifi cant infl uence in political decision making and with elected offi cials
and over employers and union members. The majority also take a skeptical view
of union leaders’ personal motivations. On the other hand, an equally large
majority of workers see unions as helpful or instrumental in improving the working
lives of their members. Evidently, then, most U.S. workers are skeptical about
the political activities of trade unions but accept their collective bargaining
activities.

THE TECHNOLOGICAL CONTEXT

Technological change played a major role in workers’ early efforts to unionize.
It also is clear that our economy is in the midst of technological changes that
will have huge effects on future employment conditions. Yet many people still
disagree about how and why technology infl uenced early unionization and what
current technological changes imply for the future of labor relations.

The Historical Debate over the Infl uence of Technology:
Commons versus Marx

Both Karl Marx and John R. Commons believed that workers were spurred to
join unions by technological change, the shift from craft systems of production
to the hiring of wage labor, and the rise of the modern factory system. But they
disagreed sharply over exactly why changes in technology and the organization
of work had that effect.

For Marx, the critical event in industrialization was the chasm that capitalist
methods of production opened between workers and the owners of the means
of production. That chasm, according to Marx, would inevitably result in a
worsening of working conditions, a sharp decline in corporate profi ts, and the
emergence of a revolutionary class consciousness among workers. Followers of
Marx argue that the loss of control that workers experienced as a result of the
shift in production methods and ownership is what led them to form unions. To
those observers, collective bargaining was, and is, a continuing battle between
workers and managers over control of the production process. Harry Braverman

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Role of the Labor Relations Environment 107

built on this argument and claimed that technological change typically leads to
a lowering of the skills required in jobs (deskilling) as part of this battle for
control. 20

Commons, in contrast, observed that the shift in production methods was itself
a product of an expansion of the market brought about by urbanization and new
transportation methods. For Commons, as the market expanded and the ownership
of production changed, workers came up against a host of competitive menaces
such as prison labor or child labor. Workers then turned to unions to protect
themselves and to improve their standard of living. Commons and his students,
such as Selig Perlman, argued that unions and workers sought income security
and job security rather than control of the production process. 21 Thus, although
Marx and Commons differed sharply in their interpretations of unions’ objectives,
both saw the rise of capitalism as the spur to unionization.

For Clark Kerr, John Dunlop, Frederick Harbison, and Charles Myers, it was
the process of industrialization and not capitalism per se that led to changes in
the relationship between workers and employers that, in turn, led to unionization. 22
They argued that modern technology produced a need for rules that governed
relations between workers and employers. Collective bargaining and contractually
negotiated rules were a logical way to formalize and structure the rules required
in modern industry. Within this framework, specifi c technological changes are
important for collective bargaining because they bring changes in the relative
bargaining power of management or labor. In this regard, the industrialization
thesis is closer to Commons ’ s ideas than to those of Marx.

The Infl uence of Microelectronic Technology
on Skill Levels

The recent expansion in the use of microelectronic technology has reignited
the debate over the effects of technological change and the possibility that the
economy will become stuck in a perpetual state of high unemployment. To
some, this technology can open the way to less hierarchical work that requires
higher skill levels and leads to further growth in real incomes. To others, the
new technology is being used to wrest control away from the work force and
to deskill workers now just as new technology allegedly was used in the past. 23
To still others, the inevitable consequence of the microelectronic revolution is
high unemployment.

Skeptics who doubt the positive role of new technology see little evidence of
a shift away from the hierarchical forms of work organization. In fact, these
modern proponents of the deskilling thesis argue that much of the concessionary
bargaining in recent years has demonstrated the efforts of management to increase
the pace of work and use new technology to weaken workers’ bargaining leverage
and skills. The deskilling thesis proponents also predict that new technology will
lead to signifi cant employment displacement and unemployment.

Some behavioral scientists believe that new technologies serve to “unfreeze”
existing practices and introduce a variety of options for reconfi guring the organiza-
tion of work, career ladders, compensation criteria, and other aspects of the

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108 Part I. Introduction

employment relationship. 24 In this view, technology has no single effect on skills
or worker power. Instead, its effects depend on the choices decision makers make
and the way the new technology is implemented.

RECENT ENVIRONMENTAL PRESSURES ON
COLLECTIVE BARGAINING

In the face of the slow but steady economic growth in the United States as the
economy recovered from the 2008–2009 fi nancial crisis, a few unions, such as
the autoworkers and airline pilots, were able to achieve solid collective bargaining
gains. Nevertheless, changes in the external environment put unions at a distinct
disadvantage in terms of their bargaining leverage with management. Corporate
restructuring and the availability of outsourcing and nonunion alternatives continue
to put pressure on unions, and increasing globalization heightened those pressures.

Pressure from Nonunion Competition

Unions face competition from the growing numbers of domestic nonunion fi rms.
In industries such as construction, trucking, textiles, and mining, the share of
nonunion production has increased substantially. Even in traditional strongholds
of unionism such as steel and autos, nonunion fi rms are entering the industry.
Nonunion competition has become an even greater threat as employers have
become more willing and more able to shift production to nonunion sites during
strikes. As a result, unions have become less able to take wages out of competi-
tion and their bargaining power has declined signifi cantly.

Heightened International Competition

The growing penetration of imports in several key manufacturing industries and
the large trade defi cit carried the issue of the international economy straight to
collective bargaining agendas. Foreign workers have become a major competitive
threat to organized labor in the United States because it is very diffi cult for unions
to take wages out of competition when goods and investments move easily across
national and international borders. Perhaps the growth of the multinational
companies is the modern-day equivalent of the competitive menaces the Philadelphia
shoemakers faced.

Image Problems of Unions

Economic pressures are only part of the story, however. The labor movement
encountered a public that is often skeptical about the value of unions and worker
solidarity. Fellow workers often crossed the picket lines of strikers, and union
members found less support for strikes in the broader community. From the
1990s, when unions sought recourse through the NLRB or the courts to block
management practices such as the movement of operations to other sites or the
abrogation of collective bargaining contracts during bankruptcy reorganization,
they received little help.

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Role of the Labor Relations Environment 109

Signs of Innovation in the Labor Movement

The economy, public policy, ideology, and demography had all taken a turn that
would hamper the efforts of organized labor. And yet, in the face of all these
environmental pressures, the union movement was exhibiting some signs of
innovation and adaptation. There has been a broadening of the bargaining agenda
and increased union involvement in managerial decision making at some workplaces
and union coordination with various rights groups who are seeking reductions
in income inequality and an improvement in employment terms for those at the
lower end of the earning distribution (see Chapter 6 ). Moreover, the labor move-
ment has been engaged in serious soul-searching since the fi rst decade of the new
century that has led to a variety of union revitalization measures.

Summary

This chapter examined how the external environment infl uences the bargaining
process. The fi ve key aspects of the environment are economic, public policy,
demographic, social, and technological factors.

Important economic factors include those that operate at the fi rm level (the
microeconomic infl uences) and the state of the labor market and the overall
economy (the macroeconomic infl uences). The economic environment is most
important through the effects it exerts on the bargaining power of labor and
management. Bargaining power is heavily infl uenced by strike leverage and the
extent to which an increase in wages leads to a decline in employment (the
wage-employment trade-off).

Public policy shapes the rights of the parties and the procedures used in collective
bargaining. There has long been a strong preference in the United States for labor
laws that give employees, unions, and management the right to directly shape
employment terms with limited interference from the government. The most
important labor law in the United States is the National Labor Relations Act and
its amendments. In addition, some federal laws directly infl uence employment
conditions such as pensions and equal employment opportunity rights, although
we have relatively less government regulation of employment than other countries
do.

Major demographic issues include the increased labor force participation of
women that has occurred since World War II. The labor force is becoming more
diverse and unions face the challenge of altering their policies to increase their
appeal to new workers, many of whom work in the service sector.

The public continues to express support for the general purposes unions serve.
When asked about union leaders or their willingness to join unions, however,
the public ’ s responses are less favorable.

Technology infl uences employment levels and bargaining leverage. In recent
years, there has been much debate about how technology is affecting the skill
levels of workers. On the shop fl oor, labor relations play an important role in
shaping how well new technology is implemented.

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110 Part I. Introduction

How well collective bargaining serves the interests of labor and management
often depends on its ability to adapt to changes in the external environment.
Economic pressures on the U.S. collective bargaining system have steadily increased
in tandem with the expansion in international trade. There are also pressures
from the other key environmental dimensions. To help build a better understanding
of how collective bargaining could respond to these environmental challenges,
the next chapters examine how collective bargaining works.

Discussion Questions

1. Defi ne bargaining power and strike leverage.
2. Several microeconomic factors play a part in the strike leverage of both

unions and employers. Briefl y describe some of these factors.
3. Describe some of the ways the National Labor Relations Act infl uences the

bargaining power of labor and management.
4. Briefl y discuss some of the recent demographic trends in the work force.
5. Is the labor law framework that was adopted in the 1930s still

appropriate?
6. What changes in the industrial environment have placed unions at a disad-

vantage in terms of bargaining power in recent years in most industries?

Related Web Sites

United Mine Workers (UMW):

Pension Benefi t Guaranty Corporation:
http://www.pbgc.gov

Suggested Supplemental Readings

Blauner , Robert . Alienation and Freedom . Chicago : University of Chicago Press , 1964 .
Brynjolfsson , Erik , and Andrew McAfee . The Second Machine Age . New York : Norton , 2014 .
Ehrenberg , Ronald G. , and Robert S. Smith . Modern Labor Economics . 8th ed . Reading, Mass. :

Addison-Wesley , 2003 .
Harrison , Bennett . Lean and Mean: The Changing Landscape of Corporate Power in the Age of

Flexibility . New York : Basic Books , 1994 .
Osterman , Paul . Securing Prosperity: The American Labor Market—How It Has Changed and What

to Do about It . Princeton, N.J. : Princeton University Press , 1999 .

Notes

1. John T. Dunlop, Industrial Relations Systems (New York: Holt and Company, 1958).
2. Elasticity of demand refers to the slope of the demand curve for labor. The more inelastic the

demand, the more vertical the demand curve and the less responsive the demand for labor to any
change in the price of labor. A perfectly elastic demand curve would be horizontal. Alfred Marshall,
Principles of Economics , 8th ed. (New York: Macmillan, 1920), 383–386.

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Role of the Labor Relations Environment 111

3. Others have pointed out that for a low labor cost ratio to act as a source of power, as Marshall
hypothesized, the elasticity of demand for the fi nal product must be greater than the elasticity of
substitution of nonlabor inputs in the production process. See Richard B. Freeman, Labor Economics ,
2nd ed. (Englewood Cliffs, N.J.: Prentice Hall, 1979), 67–71.

4. A small bargaining unit can be affected by employers who consider the “spillover” effects of
a settlement that is negotiated with one small unit on the rest of the fi rm ’ s work force.

5. Even if the union had tried to infl uence employment levels, it might not have been successful
in the face of technological change in the industry.

6. Arthur M. Ross, Trade Union Wage Policy (Berkeley: University of California Press, 1948).
7. John T. Dunlop, Wage Determination under Trade Unions (New York: Macmillan, 1944).
8. Daniel J. B. Mitchell, Unions, Wages, and Infl ation (Washington, D.C.: Brookings Institution,

1980), 113–162.
9. Although the Taft-Hartley amendments do allow management to voluntarily bargain with a

union that represents supervisors, such bargaining is extremely rare.
10. The effects of public policies on strike leverage are discussed in Robert Hutchens, Robert

B. Lipsky, and Robert N. Stern, Strikes and Subsidies: The Infl uence of Government on Strike Activity
(Kalamazoo, Mich.: W. E. Upjohn Institute for Employment Research, 1989).

11. “AFL-CIO Will Oppose Collyer Nomination as Board Counsel,” Daily Labor Report 9 (May
1984): A-4.

12. Jonathan Timm, “Can Millennials Save Unions?” The Atlantic , September 7, 2015, http://
www.theatlantic.com/business/archive/2015/09/millennials-unions/401918/ ; Richard Fry, “Millennials
Surpass Gen Xers as the Largest Generation in U.S. labor Force,” Pew Research Center , May 11,
2015, http://www.pewresearch.org/fact-tank/2015/05/11/millennials-surpass-gen-xers-as-the-largest
-generation-in-u-s-labor-force/ .

13. Jens Manuel Krogstad, Jeffery S. Passel, and D’Vera Cohn, “5 Facts about Illegal Immigration
in the U.S.,” Pew Research Center , November 17, 2015, http://www.pewresearch.org/
fact-tank/2015/11/19/5-facts-about-illegal-immigration-in-the-u-s/ .

14. Barry Bluestone and Bennett Harrison, The Deindustrialization of America (New York: Basic
Books, 1982).

15. Robert Z. Lawrence, Can America Compete? (Washington, D.C.: Brookings Institution, 1985).
16. See, for example, Neal Rosenthal, “The Shrinking Middle Class: Myth or Reality?” Monthly

Labor Review , March 1985, 3–10.
17. See, for example, Paul Osterman, Employment Futures (New York: Oxford University Press,

1988).
18. AFL-CIO Committee on the Evolution of Work, The Changing Situation of Workers and Their

Unions (Washington, D.C.: AFL-CIO, 1985).
19. Daniel B. Cornfi eld, “Shifts in Public Approval of Labor Unions in the United States,

1936–1999,” Gallup , September 2, 1999, http://www.gallup.com/poll/24937/shifts-public-approval-
labor-unions-united-states-19361999.aspx .

20. Harry Braverman, Labor and Monopoly Capital (New York: Monthly Review Press, 1984).
21. Selig Perlman, A Theory of the Labor Movement (1928; repr., Philadelphia: Porcupine Press,

1979).
22. Clark Kerr, John T. Dunlop, Frederick Harbison, and Charles A. Myers, Industrialism and

Industrial Man (Cambridge, Mass.: Harvard University Press, 1960).
23. David F. Noble, Forces of Production (New York: Oxford University Press, 1986); Harley

Shaiken, Work Transformed (New York: Holt, Rinehart & Winston, 1984).
24. Erik Brynjolfsson and Andrew McAfee, The Second Machine Age (New York: Norton, 2014);

Barry Wilkinson, The Shopfl oor Politics of New Technology (London: Heinemann Educational Books,
1983).

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191

8

THE COMPLEX DYNAMICS OF NEGOTIATIONS

Chapter 8 examines the process by which unions and employers negotiate collective
bargaining agreements, continuing the analysis of the middle (functional) level
of labor relations activity. It includes an examination of the dynamics of negotiations
and the factors that lead to strikes.

Negotiations and strikes are the most visible parts of a collective bargaining
system. The pressures of a contract deadline and perhaps the threat of a strike
focus attention and clarify how important each party feels about critical issues
and about the need to either alter or preserve current practices. From time to
time, negotiations may produce strikes. But negotiations are not independent of
activities that occur over time at the workplace or at the strategic levels of the
bargaining relationship. The strategies and tactics each side uses in negotiations
are likely to refl ect the level of trust labor and management representatives have
for each other at the outset of negotiations, and the results of negotiations will
in turn affect the trust that carries over to the relationship of the parties during
the term of the agreement. Thus, negotiations are a pivotal event that may
reinforce or change the future relations of labor and management.

As we will see, many of the parties to collective bargaining today are attempting
to bring a new approach to negotiations, often labeled interest-based bargaining
or mutual-gains bargaining. 1 The new approaches seek to move away from more
traditional positional bargaining as a way of increasing the potential for solving
problems during negotiations. Thus, the negotiations process involves making
choices over how to bargain and tactical decisions about how to conduct negotia-
tions to best represent the parties’ separate and joint interests.

This chapter uses the framework developed by Richard Walton and Robert
McKersie to compare and contrast these two approaches to negotiations. 2 The
Walton and McKersie framework is particularly useful for identifying the wide
variety of pressures on and competing interests of the negotiators during the
negotiations process.

The Negotiations Process and Strikes

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AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations
Account: s4264928.main.eds

192 Part III. The Functional Level of Labor Relations

THE FOUR SUBPROCESSES OF NEGOTIATIONS

Although Walton and McKersie originally developed their framework to describe
and analyze the traditional positional approach to bargaining that was quite common
in the 1950s and 1960s, their work also served as the theoretical basis for interest-
based techniques that were developed in the 1980s. We will summarize their
framework fi rst and then discuss how the dynamics of bargaining varies depending
on the approach taken. Walton and McKersie argued that there are four sub-
processes of bargaining in the negotiation of any collective bargaining agreement:
distributive bargaining, integrative bargaining, intraorganizational bargaining, and
attitudinal structuring. Each subprocess is analyzed below, as are the interrelations
between the various subprocesses.

Distributive Bargaining

Distributive bargaining involves the aspects of negotiations in which one
side ’ s gain is the other side ’ s loss. Distributive bargaining is win-or-lose, or
zero-sum, bargaining. Examples of issues that most often are distributive in
nature include wage rates and fringe benefi ts. Labor gains more income from a
higher wage, while management gives up some profi t to pay the higher
wage. 3 Similarly, workers lose when a fringe benefi t (e.g., paid vacation time) is
reduced, while management gains higher profi ts with the reduction of paid vacation
time.

These issues lead to confl icts across the bargaining table. Determination of how
distributive issues are resolved involves the exercise of bargaining power. The
union, for example, tries to convince management to agree to its request for a
higher wage by threatening to strike if management does not give in to this
demand. Meanwhile, management may threaten the union with a lockout to be
followed by the hiring of replacement workers or with a plant closing if a strike
were to occur and might also point out to the union that a wage increase would
entail additional costs to the work force in the form of reductions in the number
of employees. Thus, the components of bargaining power, strike leverage, and
elasticity of demand for labor are the critical determinants of how distributive
confl icts are resolved.

Distributive issues are at the center of the negotiation of a collective bargaining
agreement, since disagreement about the distribution of labor ’ s product is at the
core of labor-management relations. Nevertheless, it would be a mistake to lose
sight of the fact that there are other dimensions to bargaining.

Integrative Bargaining

Integrative bargaining issues and processes are those in which a solution provides
gains to both labor and management, leading to joint gain, or win-win bargaining.
Labor and management both gain when they resolve problems that are impeding
productivity and a company ’ s performance. If the productivity of the fi rm increases,
the employees can benefi t in the form of higher compensation or shorter work
hours while the fi rm can benefi t in the form of greater profi ts.

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The Negotiations Process and Strikes 193

Numerous issues at the workplace create opportunities for integrative gains.
Work is rarely performed in the most productive way possible: cumbersome
practices and outdated work rules often stand in the way of peak performance.
Labor and management thus can improve the performance of a fi rm by addressing
such practices and changing job classifi cations or seniority rules or in other ways
creating procedures that promote high performance.

The introduction of new technology often creates an opportunity for integrative
gains. The effective use of new technology can increase productivity, which can
then provide rewards to both employees and the fi rm. Yet merely introducing
new technology on the shop fl oor or in the offi ce does not necessarily lead to
productivity increases. Typically, technology works best when it is accompanied
by changes in work practices: the number of employees might have to be reduced,
training programs might be necessary, and job assignments might need to be
adjusted. Integrative bargaining entails the negotiations about how and to what
extent productivity-enhancing work rule changes are made as a new technology
is introduced.

Why is it that the parties do not automatically make integrative changes, since
such changes hold the possibility of joint gain? In other words, why is integrative
bargaining so diffi cult? The answer to this question touches on one of the key
issues in industrial relations.

Why Integrative Bargaining Can Be So Diffi cult

Integrative bargaining is an ever-present and sometimes diffi cult component of
the negotiations process for several reasons. For one thing, although integrative
issues contain the possibility of joint gains for both sides, it is also true that both
parties are confronted with the question of how to divide up any joint gain. In
effect, any integrative bargain also prompts distributive bargaining, and the diffi culty
in resolving the distributive issue can make integrative bargaining diffi cult.

Consider, for example, what happens when a new profi t sharing plan is introduced
at a work site. If it is effectively introduced, the new plan offers the possibility
of joint gains in income to both employees and the fi rm if the new plan stimulates
the adoption of more effi cient work practices. Yet the parties involved cannot
escape the fact that if productivity goes up when a profi t sharing plan is implemented,
decisions must be made about how the increased income that technology makes
possible will be divided. Thus, every integrative bargain prompts a distributive
discussion. It can be diffi cult for the bargaining parties to agree on how to resolve
the distributive issue (how to share the integrative gain). Thus, integrative solutions
are sometimes blocked by labor and management ’ s disagreement over how they
would divide up the gains that result from problem resolution.

Integrative Bargaining and Distributive Bargaining Involve
Different Tactics

Integrative bargaining also can become diffi cult when the parties send confusing
signals and mixed messages to each other. This confusion springs from the fact
that integrative bargaining and distributive bargaining involve very different tactics

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194 Part III. The Functional Level of Labor Relations

and negotiating styles. Table 8.1 lists the different tactics used in distributive and
integrative bargaining.

Because distributive bargaining concerns issues for which one side ’ s gain is the
other side ’ s loss, negotiators often use specifi c tactics to increase their chances of
doing well. They may overstate demands, withhold information, or project a
stern and tough image. In contrast, effective integrative bargaining, involves
identifying and solving problems. The tactics that are typically effective in this
approach include the open exchange of information, listening to multiple voices,
and sharing information. Distributive and integrative bargaining styles contrast
sharply with each other.

The problem for both labor and management is that it is diffi cult to effectively
use both distributive bargaining and integrative bargaining in the same negotiations.
One side might settle into a distributive bargaining mode just at the moment
when the other side is ready for integrative problem solving. And when the latter
party confronts hard distributive tactics, it might become discouraged about the
possibility of integrative bargaining, making it diffi cult for such bargaining ever
to occur.

Another reason why integrative bargaining can be diffi cult is that the problems
that impede productivity are not always obvious to the two parties, even when
they agree about how to divide up the possible joint gains. The confl icts in these
two bargaining styles makes negotiations hard enough, but there are two other
subprocesses in the bargaining process to add to the mix.

Intraorganizational Bargaining

Intraorganizational bargaining occurs when there are different goals or prefer-
ences within either side, either the union or management. Intraorganizational
bargaining arises when the members of the union (or the union negotiating

Table 8.1 Tactics of distributive bargaining and integrative bargaining

Distributive tactics Integrative tactics

Issues Many issues Specifi c concerns
Positions Overstate real position at outset

Make demands
Focus on objectives
No fi nal positions

Use of
information

Information is power
Hold it close
Use selectively

Share information openly
Treat information as data

Communication
process

Controlled
Single spokesperson
Use of private caucuses to air

internal differences and discuss
responses

Open
Multiple voices
Use of subcommittees

Interpersonal
style

Hard bargaining
Focused on own goals and interests
Short run; not concerned about

long-term relations
Low trust

Problem solving
Concern for mutual goals
Concerned about long-term relations
High trust

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The Negotiations Process and Strikes 195

team) have different priorities about what the union should strive for during
negotiations. Senior union members may prefer that the union focus its negotiating
strategy around attainment of better pensions, whereas younger union members
may prefer wage increases. Or the craft workers in the union might be in favor
of restricting the use of outside contractors to maintain machinery in the plant,
whereas production workers might be concerned with having safer conditions
on the line.

Management may also have different preferences or opinions about what is
feasible in negotiations. Corporate management, for example, may favor strict
adherence to the seniority policies used in other plants of the company, whereas
local plant managers may prefer to negotiate for a seniority procedure that has
never been tried elsewhere in the company.

Intraorganizational confl ict also can occur when one or both of the parties
bring insuffi cient decision-making authority to the bargaining table. Nothing is
more frustrating to negotiators than to realize that they are engaging in surface
bargaining —that is, bargaining with a representative who lacks the authority
necessary to make commitments that will stick in his or her organization. For
example, on either the management or union side a person who knows or has
the authority to revise their respective side ’ s maximum offer (or maximum conces-
sion) may not be present at the bargaining table. When a negotiator has inadequate
decision-making power or authority, the probability of an impasse or a strike
increases because the opponent may to a strike to force the real decision makers
to the bargaining table. This source of impasse is especially prevalent in the public
sector or the quasi-public sector, such as not-for-profi t hospitals.

Consider, for example, the severe intraorganizational confl ict that appeared in
the dispute between a teachers’ union and a public school district that is described
in Box 8.1 . This impasse was caused primarily by intramanagement confl icts. The
union ’ s only recourse was to call an impasse, bring in a mediator, and put pressure
on the school board to resolve its internal differences and get on with the
negotiations.

This example illustrates that intraorganizational confl icts are not solely a union
phenomenon. It is true that the organizational structure of unions makes it more
diffi cult for them than for most managements to resolve internal power struggles.
However, in fi rms where the locus of decision-making power is unclear or widely
dispersed in management, open confl icts are likely to occur and carry over into
the negotiations process.

Intraorganizational confl ict is common in the public sector because of its complex
decision-making structures and numerous political constituencies. Another likely
environment for intramanagement confl icts is multiemployer bargaining structures
in industries where there is wide variation in the goals or fi nancial status of the
employers.

Attitudinal Structuring

Negotiations often involve a lot of uncertainty. Uncertainty arises from the dif-
fi culties the parties face in anticipating how much strike power they have and
the complications involved in interpreting each other ’ s intentions.

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196 Part III. The Functional Level of Labor Relations

BOX 8.1
Intraorganizational Confl ict in a School District

Three years before the negotiations in question began, the teachers had
engaged in a bitter strike. The school board president and two other members
of the current board had been members of the board at the time of that
strike and still bore extreme hostility toward the teachers. The attitudes of
the other four members of the board were less antagonistic attitudes toward
the teachers.

The board ’ s professional negotiator was also a carryover from the strike.
The relationship between him and the union was one of mutual and extreme
distrust and antagonism. Thus, as the new negotiations got under way, the
board and the teachers were still locked in a hostile relationship.

Shortly before negotiations began, the board hired a new superintendent
of schools. Repelled by the animosity between the teachers and the board,
he sought to take a more conciliatory stance toward the union. Before long,
bitter confrontations had developed between the board ’ s negotiator and the
new superintendent.

During the summer months, the superintendent held informal talks with
the union president and together they worked out a tentative agreement
on a contract settlement, subject to the approval of the board and the union
membership. The board refused to approve the agreement, partly because
of objections the board ’ s negotiator made. Throughout the course of the
negotiations, the superintendent tried to persuade the board to dismiss the
negotiator.

Because these events transpired over several months, the teachers pressured
their union leaders to call an impasse and began to engage in slowdowns
and other forms of job actions short of a strike. During the months that
the superintendent and the school board ’ s negotiator were at loggerheads,
each arranged separate meetings with union representatives, one trying to
work through a mediator and the other trying to keep the mediator out of
the process. Meanwhile, both the superintendent and union leaders were
lobbying members of the board to obtain the swing vote necessary to win
the power struggle.

Obviously, no progress was made in negotiations until the internal dispute
was resolved. The superintendent ultimately emerged as the victor in the
power struggle and the board dismissed its negotiator. The superintendent
then brought in a new management negotiator with whom he could work,
and a contract was successfully negotiated.

Source : One of the authors observed the events described in this box in the negotiations
in a public school district in the northeastern United States.

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The Negotiations Process and Strikes 197

Negotiations also can be extremely emotional. The stakes involved are usually
high, and the tactics often used in traditional negotiations—threats, bluffs, grand-
standing for one ’ s constituents, exaggerated anger—are hardly conducive to building
rapport among the parties to the process. Add to these the fact that any single
round of negotiations typically is part of a larger and longer-term power struggle
between parties separated by an inherent confl ict of interests. One can readily
see why hostile attitudes can, and sometimes do, develop in a bargaining relationship
and why they can constrain effective negotiations.

Consequently, attitudinal structuring (the degree of trust each side feels or
develops toward the other side) is another subprocess in bargaining. If labor and
management have a high degree of trust in one another, then it should be easier
for the parties to engage in integrative bargaining, since trust can make it easier
to identify problems and solutions. In contrast, interpersonal mistrust can make
it diffi cult to move from initial bargaining positions to compromise settlements.
Mistrust hampers communications between the parties and can lead both parties
to hold back on concessions they might otherwise be willing to make. Obviously,
intense hostility can get in the way of serious discussion of the substantive merits
of the issues.

Labor and management can try to build trust by meeting prior to or during
negotiations in forums that facilitate an open exchange of views and concerns. If
union leaders and managers are working together to build trust, share information,
develop employee participation processes, and consult on critical issues on an
ongoing basis, the trust that develops from these activities may carry over to the
negotiations process. Alternatively, actions that demonstrate a lack of trust to the
rank and fi le, union leaders, or managers during the term of a contract will likely
carry over to infl uence negotiations as well.

Personality traits of negotiators also play a role in building trust. Some personality
traits, such as excessive authoritarianism, have been found to hinder the compromise
that is necessary to bring about negotiated settlements. 4 A recent study showed,
for example, that the negotiators’ “perspective-taking ability,” that is, their ability
to see the other party ’ s point of view, increases the likelihood of a negotiated
agreement. 5 Those who are philosophically opposed to unions, however, or those
who are opposed to the role managers play in a capitalistic society may see bargaining
issues as matters of great principle and thus fi nd compromise diffi cult. Acceptance
of the legitimacy of the other side ’ s point of view can facilitate confl ict resolution.
The absence of such acceptance in negotiations increases the probability of an
impasse.

MANAGEMENT ’ S OBJECTIVES IN NEGOTIATIONS

The formation of management ’ s wage objectives (or targets) is a critical part
of the negotiations process. Negotiators often have limits for bargaining, or the
bottom-line terms they would accept short of taking a strike. The development
of these wage targets is the heart of the internal management planning process
that takes place before or during the early stages of negotiations.

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198 Part III. The Functional Level of Labor Relations

While wages are important to management, they are not the only critical issue
a labor agreement addresses. However, how management creates targets for other
bargaining issues occurs is not very different from the process it uses to create
wage targets. Thus, the discussion that follows has general applicability.

Since top management is responsible for approving or authorizing any wage
target in bargaining, the negotiating team must recommend targets that refl ect
top management ’ s goals for the organization. If the negotiating team recommends
a wage target that is too high, top management might reject the recommendations
and the negotiating team would lose infl uence. On the other hand, these targets
play a pivotal role in the negotiations process once they are established because
they indicate the negotiator ’ s latitude for compromise.

Thus, the labor relations staff needs to develop bargaining targets that are
realistic and achievable. The range of criteria that go into this decision-making
process are discussed below. Management also must take the union ’ s preferences
into account when setting targets for bargaining. Unless management is powerful
enough to totally dominate bargaining, the management team must consider how
acceptable its wage offer will be to the union.

THE UNION ’ S TARGETS

Unions will usually establish their own targets for wage bargaining. In setting
those limits, union leaders employ two basic criteria for evaluating a proposed
settlement: (1) the potential effects of the settlement on the real wages of the
membership (the wage adjustment minus any increase in the cost of living); and
(2) a comparison between the proposed settlement and settlements with other
bargaining units or with other employees.

Comparisons with other units are important to unions for both economic and
political reasons. Remember, the union ’ s economic goal is to take wages out of
competition. This leads unions to favor wage increases that maintain pattern
bargaining. Union leaders also face pressure from their members to compare their
negotiating proposals with the settlements other unions have achieved with the
settlements achieved by other unions. 6 Rank-and-fi le union members often evaluate
their leaders by comparing their own settlement to settlements achieved by leaders
of other unions or granted by other employers.

Comparisons are especially relevant when one or more rival unions might
potentially challenge another union for the right to represent a group of employees.
This has been an important consideration in bargaining among mechanics in the
airline industry in recent years. Two different unions, the International Association
of Machinists (IAM) and the Aircraft Mechanics Fraternal Association (AMFA),
have been competing to represent these employees at various airlines.

A union will try to induce a company to accept a higher fi gure than it might
otherwise do in the wage-setting portion of bargaining. A union ’ s bargaining
power will determine the extent to which management takes the union ’ s preferences
into account.

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The Negotiations Process and Strikes 199

Local Labor Market Comparisons

One factor an employer considers when setting its wage targets is the prevailing
wage level in the local labor market. If the employer ignored the local labor
market and allowed wages inside the fi rm to fall lower than wages at the other
employment sites, high employee turnover might follow. Low wages also might
produce a dissatisfi ed work force and diffi culty in recruiting workers with the
skills needed to perform a job effectively. Conversely, setting wages too high
relative to the local labor market invites an excess of qualifi ed job applicants and
unnecessary costs.

This does not mean that the employer will try to pay the lowest wage possible
that will attract workers to a given job. In the context of the local labor market,
the employer must choose the quality of employees it wishes to hire. It must
decide if increasing the wage level will attract employees of suffi ciently high
quality and whether it will decrease indirect personnel costs (such as training,
turnover, and supervision).

Labor market comparisons are more likely to be used in bargaining relationships
where the union is weak. Where unions are strong, they will use their bargaining
power to do better than the local labor market and gain what they consider to
be a fair wage.

Product Market Factors

Product market comparisons play an increasingly important role in management
decision making. The ability of current or potentially new competitors to compete
on the basis of lower labor costs has been the dominant factor in management ’ s
drive to hold down or reduce wages, particularly the wages of employees in
entry-level and low-skill jobs. Threatening to outsource such work has also
been an important part of management ’ s approach to negotiations in recent
years.

The Firm ’ s Ability to Pay

The effects of wage adjustments on the profi ts of the fi rm also infl uence manage-
ment ’ s wage target. Employers in the process of setting a target wage examine
their ability to pay wage increases.

A union generally is reluctant to give a fi rm a lower settlement on ability-to-pay
grounds unless the fi rm can demonstrate that a serious economic crisis would
result otherwise. Union leaders and union members often must be convinced
that their wage proposal would lead to considerable employment loss before they
will agree to a lower settlement. For example, in 1979, it took the threat of
bankruptcy plus government pressure to convince the UAW to agree to give
Chrysler wage concessions below the level that had been set by pattern bargaining
in the auto industry. Ability-to-pay considerations have become more important
in recent years. In response to heightened competitive pressures, management
has preferred to shift away from externally driven wage criteria in favor of criteria
that connect wages more closely to the performance of a fi rm or its workers.

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200 Part III. The Functional Level of Labor Relations

Thus, management has tried to shift away from factors such as wages in the
industry or increases in the cost of living and toward the fi rm ’ s ability to pay.

Internal Comparisons

Every negotiation is carefully watched by a fi rm ’ s other employees. Management
must consider how a wage settlement might infl uence the expectations and
demands of other employees in the fi rm regardless of whether those employees
are represented by unions. Management, for example, often considers whether
wage increases for unionized hourly workers will lead to pay increases for supervisors
and other white-collar employees outside the bargaining unit. One reason manage-
ment give pay increases to white-collar employees is such increases weaken these
employees’ potential attraction to unionization.

The Dynamics of Management ’ s Decision-Making Process

So far we have painted a rather static picture of management ’ s decision making.
Yet the actual process of decision making over the course of a bargaining cycle
(from the pre-negotiation planning stage to the signing of the fi nal agreement)
is a dynamic one. The process is replete with ambiguities over who has the
authority to set policies, confl icts among decision makers over the appropriate
weight to be attached to different goals, and power struggles among competing
decision makers.

The process by which management establishes bargaining strategies involves
extensive intraorganizational bargaining that is every bit as intense as the bargaining
between the union and management. Because the successful resolution of internal
differences is a prerequisite to a smoothly functioning bargaining process, it is
important to understand how fi rms prepare for negotiations.

To provide a more complete picture of how management prepares for collective
bargaining, Box 8.2 describes a typical case. This fi rm is preparing to negotiate
a contract with the major bargaining unit in its largest manufacturing facility.
The contract traditionally sets the pattern for the economic settlements with
several smaller units at other locations.

Before negotiations (or very early in negotiations), the labor relations staff tries
to predict as closely as possible what it will take to get a settlement. But ultimately
the staff is ready at all times to revise its estimates based on new or better information
about the union ’ s position as the negotiations proceed.

The case in Box 8.2 illustrates the diversity of interests that exists in the different
levels of any modern company. It shows that the development of a company
strategy for negotiations is a highly political process, one in which the different
goals of various groups must ultimately be accommodated. Although the labor
relations staff serves as a key participant in the development of the strategy, the
concerns of operating management, fi nancial staff, and other interest groups in
the corporation are also integral to any fi nal decision.

It is interesting to examine how preparations for traditional negotiations compare
to preparation for an interest-based bargaining process. Box 8.3 draws on the
experiences of the same fi rm as it prepared for a recent round of interest-based

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The Negotiations Process and Strikes 201

BOX 8.2
Management ’ s Preparations for Negotiations in a Typical Firm

Stage One: Input from the Plants

The fi rst step in the process of preparing for negotiations takes place at the
plant level. 7 The plant labor relations staff holds meetings with plant supervisors
to discuss problems they have experienced in administering the existing
contract. From these discussions, the staff compiles a list of suggested contract
changes. At the same time, the staff also conducts a systematic review of
the grievances that have arisen under the current contract and collects
information on local labor market conditions and on the wages in other
fi rms in the community.

The staff then holds a meeting with the plant manager, who raises the
industrial relations problems the company has confronted in the plant. The
concerns of management are classifi ed into two groups: contractual problems
and problems that should be addressed outside the negotiating process.
In addition, the staff asks the plant manager to rank suggested contract
changes based on their potential for making a signifi cant improvement in
plant operations.

Stage Two: Input from Higher Levels of the Firm

Next, a series of meetings is held at the division level that involves the
division labor relations staff, operations managers at the division level, and
the corporate labor relations director and staff. From time to time, outside
industrial relations consultants sit in on these division-level meetings. Here
the concerns of the various plants are evaluated against two criteria: (1) the
operational benefi ts expected from proposed contract changes; and (2) the
likelihood that the desired changes can be achieved in the negotiations
process.

The corporate labor relations staff plays a vital role in these division-level
discussions, since the expected benefi ts of different contractual changes can
be a matter of dispute across the various plants. In addition, the division
labor relations staff is responsible for carefully examining the contract language
that exists in the various local agreements for inconsistencies or problems
that could be removed by clauses that refl ect corporate labor relations
preferences. Sometimes the plant labor relations representatives object to
changes suggested at the division level because they do not correspond to
the priorities of the plant offi cials and because the existing “discrepancies”
may be serving a useful purpose in the plant.

The corporate labor relations staff works closely with the vice-president
for fi nance to develop wage targets. Information on plant labor costs,
corporate earnings, and the long-term fi nancial prospects of the company
and the industry are built into the wage target the corporate staff ultimately
recommends.

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202 Part III. The Functional Level of Labor Relations

Stage Three: Input from Research

A research subgroup in the labor relations staff of the company also conducts
background research that is used in management ’ s preparations for negotiations.
At least a year and a half before the opening of formal negotiations, the
research staff begins to prepare the background information necessary for
developing the company ’ s proposals.

The researchers use a database on the demographic characteristics of
employees and analyze personnel statistics such as turnover, absentee, and
grievance rates. They also monitor internal union developments, specifi cally
resolutions the union has passed at its conventions, union publications, and
union leaders’ statements about the upcoming negotiations. In addition, they
survey plant managers for their views on their relations with the union and
the problems they would like to see addressed in the negotiations. The staff
also consults plant labor relations staff members to obtain their suggestions.
This fi rm probably invests more resources and assigns more authority for
bargaining preparation to its research staff than do most other corporations.

The research staff is ultimately responsible for putting together a summary
report that goes to the vice-president of industrial relations and the corporate
director of compensation. These executives then work with the manager
of the research and planning department to develop targets for bargaining.

Stage Four: Final Preparations

The fi nal step in management ’ s preparation for negotiations is a meeting
that includes the corporate labor relations staff, the chief executive offi cer,
and the board of directors. At this meeting, the corporate labor relations
director presents the proposed wage targets and other proposed contract
changes for board approval and states the reasons for seeking the proposed
changes. Sometimes this meeting does not take place until after the fi rst
negotiations session with the union. The industrial relations director might
prefer to wait until then because it may be useful to hear from the union
before he or she makes a fi nal recommendation to top management. This
helps the industrial relations director identify the relative importance the
union is likely to give to pay issues and the intensity of the union ’ s concern
about other areas of the contract.

One labor relations director described to us how he presents his recom-
mendation to top management in this way:

I always number my proposed target settlements as proposed settlement target
number 1. Someone once asked me what that meant. I said that this is what I
think it will take to get a settlement but I number it because I may have to
come back to you at some point with my proposed settlement number 2 or
even my proposed settlement number 3, et cetera.

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The Negotiations Process and Strikes 203

BOX 8.3
Preparing for Interest-Based Bargaining: One Management-Side
Bargainer ’ s Account

The shift to a new approach to negotiations was a gradual and natural
outgrowth of our employee involvement (EI) process. We took some steps
in this direction in negotiations 10 years ago and more in our most recent
round of bargaining. All of us—union and management representatives—have
been training in the EI problem-solving tools and we essentially asked each
other: Why can ’ t we apply them in negotiations?

As in the past, we would keep a list of issues and problems that came up
during the term of the agreement in a fi le and start preparations by reviewing
this list and interviewing plant managers for their concerns. But this time,
when we brought this material together and met with the top division
executives, the director of industrial relations said he didn ’ t want to take a
laundry list of issues into negotiations only to discard some or many of
them. Instead, he asked his colleagues: “What are your critical problems?
What are their root causes? What are the costs involved? If we can agree
on these things, then let ’ s go into negotiations and fi x them.”

Paring the list down and agreeing on what we needed to achieve to solve
our problems (which were severe at that particular time) involved tough
internal discussions and negotiations. Eventually, the chief executive offi cer
had to decide on a couple of key points since these could conceivably affect
the long-term future of the operations and, if we took the hardest line
being advocated by some managers, would jeopardize the future of the
labor-management relationship.

As a result, we brought about eight or nine issues to the table and the
union only brought 15 or 16. In the past we would have both had a lot
more.

We had much smaller bargaining committees than in the past as well.
We had one representative each from legal, fi nance, manufacturing, and
labor relations, along with the industrial relations director who chaired the
committee.

We set up a big round table for bargaining, in a room complete with
fl ip charts and all the other supports needed for brainstorming and problem
solving. In the actual negotiations, from time to time we brought in specialists
with expertise on particular issues such as the way the transfer language in
the contract actually worked. Instead of simply exchanging proposals and
working from each other ’ s lists, we scheduled times to take up issues and
problems. When we did so, we asked: Why is that a problem? Who ’ s
affected? What might we do about it? How would it affect things? Can we
live with the solutions proposed?

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204 Part III. The Functional Level of Labor Relations

We still had discipline at the table. We had chief spokespersons. In fact,
we got very upset and disappointed when at one point the process broke
down. When we started talking about overtime, we had already done some
joint staff work looking at some pilot programs we had started in a couple
of settings to let the union handle how overtime is distributed. This is
always a big problem and headache for management, and [it is] a costly
issue. The staff had pretty much agreed privately to extend the pilot approach
to the whole bargaining unit, but when the issue came up for discussion,
the manufacturing representative on our team said: “We ’ d never agree to
that!” We read him the riot act later in private for springing this on us, but
it essentially killed discussion of this issue, and we never did get the job
done on this issue.

As we got into the tough economic issues, bargaining took on more
traditional features. These were very tough and the union leaders needed
to be able to demonstrate to their constituents [that] they squeezed us as
hard as they could to get the best deal possible. We understood this.

Still, there was better communications, and we never worked past 8 p.m.

bargaining. While much of the background research and information gathering
is similar, some of this is done jointly with the union. In this case, the problem-
solving processes that had been put in place in the company-union relationship
at the workplace provided the foundation for taking a problem-solving approach
to negotiations.

UNIONS’ AND WORKERS’ PREPARATIONS FOR
NEGOTIATIONS

This section reviews the common procedures unions and workers follow during
the negotiation of a collective bargaining contract. This material parallels the
discussion of the procedures used by management in preparing for negotiations
described above.

The Role of the Union Negotiating Committee

The union is represented by a negotiating committee in negotiations with manage-
ment. The makeup of the union negotiating committee varies across unions,
although it typically includes some union offi cers, support staff (such as members
of the local or the national union ’ s research staff or both), and elected worker
representatives. Often the leaders of the union ’ s negotiating committee are the
highest elected offi cers of the union that is covered by the collective bargaining
agreement under negotiation. Some unions, such as local construction, hotel and
restaurant, or trucking unions, tend to rely on hired business agents to lead their
negotiations.

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The Negotiations Process and Strikes 205

The negotiating committee will meet several times before the start of negotia-
tions to formulate the union ’ s list of demands and to begin to establish expecta-
tions about what the union can win in negotiations. Before these meetings,
the negotiating committee will solicit demands from union members, either
directly through meetings called to discuss the upcoming negotiations or through
polls. In the UAW, for example, elected representatives from the local unions
meet in a convention and vote on bargaining resolutions during preparations for
companywide bargaining. The UAW leadership also consults union members
during the negotiation of plant contracts that supplement the companywide
agreements.

A union negotiating committee typically also receives information and
advice from the national union ’ s research staff during its preparations for
bargaining. The information provided frequently covers the fi nancial perfor-
mance of the company, forecasts the future performance of the company and
the economy, and summarizes recent settlements in other unions or the pay
improvements unorganized workers in the same city, fi rm, or industry have
received.

Some unions, such as the Air Line Pilots Association (ALPA), do extensive
research and analysis of economic developments in their industry and of the
fi nancial situation of each company. Prior to entering negotiations, the ALPA
research staff conducts extensive briefi ngs with the bargaining committee of an
airline and in some cases, such as at Continental Airlines, meets with company
representatives to compare fi nancial data and analysis. It is not uncommon for
union and company research staff to share information with each other if for no
other reason than to avoid debates over some of the basic facts each side needs
to prepare their team for negotiations.

Many unions now use surveys, focus groups, and/or direct interviews with
rank-and-fi le members to gather information about their concerns and their priorities
for negotiations. This serves as a two-way communications process. It both provides
data on the priorities of rank-and-fi le members and begins to engage the rank
and fi le in the negotiations process by informing them of some of the issues that
may come up.

Acquisition of Strike Authorization If an Impasse
Is Reached

If the union comes to an impasse with management during the negotiations and
is considering going on strike over unresolved disputes, two steps occur. In local
contract negotiations, the union ’ s constitution typically requires the local to seek
strike authorization from the national union. Strike approval is an important
process because, among other things, it enables striking workers to receive strike
benefi ts from the national union ’ s strike fund.

A union considering a strike will also typically poll its members. The strike
vote serves a dual purpose: it tells the union leadership whether the union ’ s
members support such an action and it helps rally the workers around the purpose
of the strike.

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206 Part III. The Functional Level of Labor Relations

Contract Ratifi cation

When an agreement is reached between the union ’ s negotiating committee and
management ’ s representatives, the union proceeds through its contract ratifi cation
procedures. Here there is much variation in the exact procedures unions use.
The fi rst step some unions take is to send a proposed agreement to a council
made up of lower-level union offi cers. This council includes local union offi cers
when a companywide agreement is negotiated (as in the steel and auto industries).
Union constitutions typically also require that the workers covered by a negotiated
agreement vote on any proposed settlement.

There are some notable exceptions to the normal pattern of union members
voting on proposed contracts. But in the usual case, workers must approve contract
settlements, often by majority vote. This sort of voting is an example of participatory
democracy in this critical aspect of union decision making.

The Role of Union Leaders in Shaping Strategies

The actual bargaining demands of unions refl ect more than just an averaging of
their members’ preferences. Several factors combine to produce the complex
process by which union leaders arrive at their bargaining objectives.

First, in addition to considering the preferences of their members, union leaders
must evaluate how likely it is that objectives can be attained. Unrealistic goals
must be discarded during pre-negotiation planning sessions or early on in
negotiations.

Second, union leaders must take into account the varying political infl uence
of subgroups within the union. Older or more skilled workers, for example, may
be more politically infl uential than other members. Thus, the objectives leaders
ultimately select may refl ect some workers’ goals more than others.

Third, union leaders must also be concerned about the long-term survival of
the union and must take steps to preserve those interests. However, there is always
the risk that union leaders will emphasize union security at the expense of
member preferences.

Finally, a central job for union leaders, like all leaders, is to lead! Union leaders
must weigh strategic options, make decisions, and secure the ongoing support of
their members for the decisions they make.

One of the keys to union leadership is effective internal communication. Union
leaders need regular upward communication from the rank and fi le and from
local union offi cers. Effective union leadership also requires that decision makers
communicate their activities and decisions back to the members. Unions use such
techniques as opinion surveys, satellite hookups, television advertising, and the
Internet to communicate with their members. Indeed, the Internet is becoming
a key resource in bargaining today. Union leaders are learning that they must
develop the skill to use this tool to communicate with members, for it is certain
that rival groups in the union will have those skills. In one case, ALPA found
that the tentative wage agreement it had reached with Delta Airlines was criticized
on a rival group ’ s website before the union team could even describe its terms
to union members! Thus, the means of communication in unions and the role

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The Negotiations Process and Strikes 207

of communications in negotiations in general are changing rapidly in the age of
the Internet.

THE CYCLE OF TRADITIONAL NEGOTIATIONS

Negotiations often proceed through a cycle in which the four subprocesses of
bargaining emerge and interrelate. 8 A typical cycle for a traditional negotiations
process is described below.

The Early Stages

In the initial stage of a traditional negotiation, the parties present their opening
proposals. This stage often involves a larger number of people than will be involved
in the negotiations of the fi nal agreement. The union, for example, may bring
in representatives from various interest groups and several levels of the union
hierarchy. These people participate in developing the initial proposals and later
become involved in securing ratifi cation of any agreement. The involvement of
all these different representatives can smooth the process of intraorganizational
bargaining in the union.

The union then presents proposals that cover the entire range of its concerns.
Some of the proposals will be of critical importance and will be at the heart of
the discussions as the strike deadline approaches. Some are important but may
be traded off at the last minute. Some may be translated into more specifi c
demands at a later stage of bargaining or may be issues to which the union will
assign a high priority in some future round of negotiations. Other issues are of
low priority and will be dropped as negotiations proceed into the serious decision-
making stages.

The Presentation of a Laundry List

The union ’ s presentation of a laundry list of issues serves several purposes. It
allows union leaders to recognize different interest groups by at least mentioning
their proposals. Some unrealistic demands will be aired, the problems underlying
these demands can be explored, and the employer can then reject these demands.
This process takes the pressure off union offi cers who might otherwise appear to
have arbitrarily nixed some group ’ s pet proposal. In a laundry list, either side also
could introduce issues that it hopes will be pursued in future negotiations.

Presenting a long list of proposals and infl ated demands as a fi rst step might
also be a useful way to camoufl age the real priorities of the union. Or a long list
of proposals could be helpful in integrative bargaining by facilitating trades across
issues.

Behavior of the Employer in the Early Phase

The behavior of employers at the outset of bargaining varies considerably. Some
employers will present a set of proposals to counterbalance the union demands.
Other employers will receive the union demands and promise a response at a
future negotiating session. Many management representatives prefer to delay

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208 Part III. The Functional Level of Labor Relations

making any specifi c proposal on wages or other economic issues until well into
the negotiations process. Because the wage issue can be emotional and divisive,
management often tries to resolve nonwage issues fi rst.

Management may also initially try to camoufl age its bottom-line position, and
it, too, may have unresolved internal differences at the start of negotiations. In
some fi rms, a decision on the bottom line is not made until after the union offers
its initial proposals and gives some preliminary indication of its priorities.

In the early stages, the speakers for each side will argue strongly and often
emotionally for the objectives of their constituents to determine how strongly
the opponent feels about the issues at stake. It should be no surprise that these
initial stages are the forum for a good deal of grandstanding by both parties. Such
grandstanding may also be a part of intraorganizational bargaining.

The Middle Stages of Negotiations

The middle stages of negotiations involve more serious consideration of various
proposals. The most important tasks performed in the middle stages of bargaining
are (1) developing an estimate of the relative priorities the other side attaches to
the outstanding issues; (2) estimating the likelihood that an agreement can be
reached without a strike; and (3) signaling to the other side which issues might
be the subject of compromise at a later stage of the process.

Often the parties choose to divide the issues into economic and noneconomic
issues. Separating issues into these categories may facilitate problem resolution
and integrative bargaining. During these intermediate stages, any obstacles to a
settlement may begin to surface.

The Final Stages of Negotiations

The fi nal stages of bargaining begin as the strike deadline approaches. At this
point, the process both heats up and speeds up. Off-the-record discussions of the
issues may take place between two individuals or small groups of representatives
from both sides, perhaps with a mediator present. These discussions serve several
purposes: they help representatives save face with their constituents, they allow
each party to more fully clarify their positions, and they enable both sides to
explore possible compromises. At this point the negotiators have a better idea of
their opponent ’ s bottom-line positions and they may have private discussions
over what it will take to reach a settlement. In these fi nal stages before a strike
deadline, each party is seeking to convince the other of the credibility of its threat
to strike or lockout. Each side also is trying to get the other side to change its
bottom line to prevent a strike, and each party is trying to accurately predict the
other side ’ s real positions on the issues to avoid backing into an unnecessary
strike. At this stage, therefore, usually only a small number of decision makers is
involved in the process.

Even if the key bargainers may agree on how a bargaining settlement could
be reached, agreement is not yet assured. If the negotiators are unable to sell a
settlement to their constituents, the agreement might still not be reached without
reaching an impasse (see Chapter 9 ).

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The Negotiations Process and Strikes 209

INTEREST-BASED BARGAINING: AN ALTERNATIVE
TO TRADITIONAL NEGOTIATIONS

The traditional approach to negotiations has often been criticized for its limited
potential for solving problems. Critics view the dominance of distributive issues
and tactics, the tendency of both sides to overstate demands, and the tactical use
and withholding of information as ways that traditional bargaining reinforces
rather than overcomes adversarial tendencies in labor-management relations. As
an alternative, some researchers and a growing number of practitioners have
suggested using interest-based or mutual-gains bargaining techniques.

Interest-based bargaining is essentially an effort to use integrative bargaining
principles from the Walton and McKersie model in the negotiations process. This
approach to bargaining was fi rst popularized by Fisher and Ury ’ s best-selling book
on negotiations, Getting to Yes. In interest-based bargaining, parties are encouraged
and trained to (1) focus on their underlying interests; (2) generate options for
satisfying these interests; (3) work together to gather data and share the information
they need to evaluate options; (4) evaluate the options against criteria that refl ect
their interests; and (5) choose options that maximize their mutual interests.

Consider how using these principles alters the typical negotiations process
described above. Instead of each party beginning bargaining with a laundry list
of infl ated demands, each party separately produces a list of problems that need
to be addressed in negotiations to address their core interests. In some cases, the
parties may even frame the problems jointly by building on the reports of labor-
management committees set up to collect data and study vexing problems
such as safety and health hazards, the costs of quality of health insurance, and so
forth. A subcommittee might then be formed to collect the additional information
needed to generate options that the full negotiating teams can consider. Ideally,
options are generated through brainstorming (a free-fl owing discussion in which
members of a group are encouraged to generate ideas without committing themselves
to a fi xed position and without criticizing the ideas others suggest). Analysis of
the root causes of problems and extensive data sharing are also encouraged at this
pre-bargaining or early stage of the negotiations process. As bargaining proceeds
to a decision-making phase, each bargaining team develops standards or criteria
to evaluate options. The goal then is to choose options that do the best job of
serving the interests of both parties.

In theory, an interest-based process does not differentiate between distributive
and integrative issues. Instead, by focusing on basic interests and problems that lie
in the way of achieving those interests, the parties attempt to use problem-solving
or integrative strategies to address the full range of concerns each party brings to
the table. However, experience has shown that some issues are harder to resolve
through pure interest-based techniques, since they do involve clear trade-offs.
When such situations arise in interest-based negotiations, the parties may resort
to more traditional tactics and thus mix the two approaches to negotiations.

Interest-based bargaining requires a high level of trust among the negotiators
and between the negotiators and their principals and constituents. Thus, it is

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210 Part III. The Functional Level of Labor Relations

diffi cult to make this process work when there are signifi cant intraorganizational
confl icts in one party or the other. How management bargainers in one company
prepared for an interest-based approach to bargaining is described in Box 8.3 .

When should the parties consider using interest-based techniques and how
should negotiators go about trying them out? Most experts agree that both
negotiating teams need to be trained in these techniques well in advance of the
start of negotiations. Some further recommend that in order to overcome con-
stituents’ suspicion, rank-and-fi le union members and managers who are not on
the negotiating team should participate in the training, in gathering data, and in
the deliberations of subcommittees. Often a specially trained facilitator (as opposed
to a traditional mediator) is also brought in to coach and assist the parties in
interest-based negotiations.

While the record of interest-based bargaining to date is still modest and some
cases of failure have been reported, it is clear that the growing complexity of the
problems labor and management face are pressuring them to fi nd better ways to
produce “win-win,” or mutual gains, solutions.

STRIKES

In recent years, the number of strikes have declined; they occur in only about 5
percent of all labor-management negotiations. But in many negotiations, the threat
of a strike continues to play a key role in motivating the parties to move toward
an agreement. We explore the role of the strike and the strike threat in this
section.

How the Strike Threat Infl uences Negotiated Settlements

In negotiations, the bargaining parties are unlikely to settle on terms that differ
substantially from whatever terms they think would settle a strike if one were to
occur. Consequently, strikes are an important determinant of both parties’ bargaining
power.

During negotiations, both labor and management negotiators formulate expecta-
tions about what might happen if the negotiations were to reach an impasse and
a strike were to follow. At the same time, both sides have a strong incentive to
avoid a strike because both sides lose income during a strike.

During a strike, workers give up wages. They try to make up for those lost
earnings by possibly taking a short-time job. Workers also turn to union strike
benefi ts, the earnings of a spouse, or savings to support themselves and their
families during a strike.

Firms lose profi ts during a strike. They try to decrease the amount of profi ts
lost through tactics such as bringing in replacement workers for the strikers,
making sales out of any available inventories, or shifting production to an alternative
site. The fi rm relies on assets or the earnings from other lines of business to meet
any fi nancial obligations (such as equipment expenses) during a strike. In service
businesses such as airlines, where business lost during a strike cannot be made up
through selling inventory or post-strike deliveries, strikes are especially costly.

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The Negotiations Process and Strikes 211

This is one reason why more extensive efforts are made to avoid strikes in these
settings, as we will see when we discuss dispute resolution procedures and proposals
for reform in the airline industry in the next chapter.

The Hicks Model of Strikes

The material below examines the role the strike threat plays in the negotiations
process and identifi es the factors that lead to strikes. John R. Hicks developed a
very insightful model for analyzing the role strike leverage plays in shaping negotiated
outcomes. 9 Figure 8.1 diagrams the Hicks model of strikes. To simplify the
discussion, assume that the parties are negotiating only over wages (or assume
that all items in dispute can be reduced to monetary terms and represented by a
simple wage).

In the Hicks model, bargainers form an expectation of what they would eventually
agree to if there was a strike. In case A in Figure 8.1 , both parties expect that if
there is a strike it will be ended with a wage settlement of w(es). If a strike occurs,
however, both labor and management will absorb income losses during the strike.
Workers will forgo earnings during the strike and management will lose profi ts
because production has stopped.

Because they are aware of these potential income losses, the parties should be
able to fi nd a negotiated wage settlement during the negotiations that they prefer
over the wage settlement they would end up with at the end of a strike, w(es).

The income that management would lose during a strike would amount to an
hourly wage cost to management of w(m). Because management expects a strike
to end with a wage of w(es), they should be willing during negotiations to agree
to a wage as high as the expected strike outcome plus the cost to management
of the potential strike, or w(es) + w(m) .

Labor in this case also expects a strike to end with a wage of w(es). The income
workers would lose during a strike would amount to an hourly wage cost to
labor of w(u). Therefore, during negotiations, the workers should be willing to

Expected strike wage
plus cost of strike to

management

Expected strike wage
minus cost of strike to

union

Expected strike wage

Contract zone

Union’s expected strike wage

Union’s expected strike wage
minus cost of strike to union

Management’s expected strike wage
plus cost of strike to management
Management’s expected strike wage

w(es) + w(m) w(esu)

w(es)

w

w(es) – w(u)

w(esu) – w(u)

w(esm) + w(m)

w(esm)

CASE A: A LARGE CONTRACT ZONE CASE B: NO CONTRACT ZONE

Figure 8.1. The Hicks model of strikes

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212 Part III. The Functional Level of Labor Relations

accept a wage as low as the expected strike outcome minus the hourly cost of
the strike to labor, or w(es) − w(u) .

The difference between what management is willing to accept during negotiations
and what labor is willing to accept during negotiations creates a contract zone
of potential settlements. Both sides should prefer to reach settlements in the
contract zone during negotiations rather than going on strike and ending up with
the strike wage outcome and income losses during the strike.

It is, of course, possible that there is no contract zone. Case B in Figure 8.1
diagrams such a situation. In this case, management expects a very low wage if
a strike were to occur w(esm), while the union expects a very high wage if a
strike were to occur w(esu). Even in the face of the expected strike costs, w(m)
and w(u), there is no contract zone because w(esuyes) − w(u) is greater than
w(esm) + w(m) .

The important point that Hicks noted is that in this framework, there is no
contract zone only if the parties have very different expectations of the strike
outcome. The fact is that there is some true strike outcome. When the expectations
of both labor and management diverge from the strike outcome, one or both of
the parties makes miscalculations in their prediction of the strike outcome.
When there is no contract zone, one or both of the parties must be excessively
optimistic about what it thinks will settle a strike.

Hicks concluded that strikes occur only when one or both sides have miscal-
culated. The key point is that since a strike imposes costs on both sides, it should
be less attractive than a negotiated settlement.

Strikes can occur even when there is a contract zone, but in the Hicks framework
this also requires miscalculation. Hicks argued that there may be situations where
the settlement the parties anticipate is not located in the zone, even though a
contract zone exists. This occurs because the parties are unable to fi nd the negotiated
settlements they both would prefer over the strike outcome, because of bluffi ng
or intransigence.

In the Hicks model, negotiators have great latitude to further the interests of
their side. It is in management ’ s interest to reach a settlement at the lowest wage
in the contract zone, and it is in labor ’ s interest to reach the highest wage settlement
in the contract zone.

In addition, during negotiations it is in each side ’ s interest to attempt to change
the other side ’ s expectation of the strike outcome. Management would like to
convince labor that the potential strike outcome is a very low wage, and labor
has an interest in convincing management that the potential strike outcome is a
very high wage. The risk the parties face is that in their efforts to change the
other side ’ s expectation of the potential strike outcome, they might engage in
tactics (such as bluffi ng or threats) that result in miscalculations, a strike, and the
loss of income.

Some of the Sources of Miscalculation

Negotiators may have expectations of the potential strike outcome that are different
from those of their constituents. Orley Ashenfelter and George Johnson posited

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The Negotiations Process and Strikes 213

that strikes occur because union members have unrealistic expectations. 10 They
argued that both management and union leaders have accurate expectations of
the strike outcome, but union members are overly optimistic about what can be
achieved in a strike. Under these conditions, strikes are a device to lower union
members’ expectations. Although it is diffi cult to justify why union members
alone have unrealistic expectations, the Ashenfelter and Johnson framework
highlights that strikes may occur when union members and leaders have diverging
expectations of the strike outcome.

Hicks ’ s model is a very useful starting point for analyzing the negotiations
process. Building on his approach requires an understanding of the factors that
infl uence the willingness and ability of either side to engage in a strike. These
factors determine the wage the parties expect they will end up with at the end
of a strike. The Hicks framework also suggests the need to uncover the factors
that lead either side to be overly optimistic about a potential strike outcome or
to miscalculate in other ways during negotiations.

The Behavioral Model of Strikes

Behavioral factors such as the degree to which labor is integrated into the sur-
rounding community may be one source of miscalculation that leads to strikes.
In a classic study, Clark Kerr and Abraham Siegel analyzed strike data across
countries and industries and found that strike rates were consistently higher in
certain industries such as mining and longshoring. 11 The authors proposed that
behavioral factors peculiar to certain industries were at least partly responsible for
the higher strike rates. This is known as the behavioral model of strikes.
Workers in longshoring and mining often have their own subculture, they are
distant from major population centers, and their work involves harsh physical
labor. Kerr and Siegel argued that workers in these industries are comparatively
poorly integrated into society and express their frustrations and isolation by
instigating relatively frequent strikes.

In Hicks ’ s terminology, Kerr and Siegel identifi ed a set of factors—social and
geographic isolation—that contribute to the likelihood of miscalculation in bargain-
ing. Kerr and Siegel also emphasized that strike occurrence may have very little
to do with the issues on the bargaining table.

Militancy as a Cause of Strikes

Strikes also may occur as a result of the militancy of a work force or a union.
Marxist theorists have noted that there is a strong statistical association between
strike frequency rates and the business cycle. Over time (and across countries),
strikes tend to occur more frequently during business upturns. This association
is diffi cult to explain with the Hicks model, which predicts that wage settlements
should be higher during business upturns, but not strike frequency. 12

Marxist theorists argue that the fact that strikes occur more frequently when
the economy is strong demonstrates that confl ict is a product of the bargaining
power of labor. This bargaining power model of strikes focuses on the fact
that strikes are typically initiated by the union and the work force. Thus, during

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214 Part III. The Functional Level of Labor Relations

periods when the union ’ s bargaining power is relatively weak, the union is less
likely to press its demands and is less likely to resort to a strike when seeking
more favorable contract terms.

The bargaining power thesis also recognizes that strikes are frequently initiated
by workers on the shop fl oor who are upset by management ’ s actions or by
offi cial union policy (these sorts of strikes often would be categorized as unauthor-
ized, or wildcat, strikes). Workers are less likely to engage in this sort of shop-fl oor
action when labor markets are slack and workers worry about the possibility of
layoff.

Negotiations involve many issues, what will actually occur in a strike is highly
uncertain, and labor negotiations typically occur repeatedly between the same
parties. These factors make it extremely diffi cult to predict the settlement point
or the causes of an impasse in any given negotiations.

STRIKE ACTIVITY

Strikes occur infrequently. The total work time lost due to strikes has averaged
well below one-half of 1 percent per year. In 2015, there were twelve major
work stoppages each involving 1,000 or more workers. Historically, strike rates
have been higher than this in the United States. For instance, in 1971 there were
298 major work stoppages that involved a total of 2.5 million workers. 13 The
low frequency of strikes is consistent with Hick ’ s prediction that both parties
usually have strong incentives to avoid strikes. It also appears that the ability of
unions to engage in a strike has declined in recent years as a result of increased
international and domestic competition and decreasing union coverage in and
across industries, lending support to the bargaining power thesis noted above.

Whereas strikes in other periods seemed to provide a positive return to union
members, strikes in recent years have frequently appeared to be defensive weapons
that unions fi ghting for their continued existence use only as a last resort. The
strikes that did take place were often more hostile, violent, and emotional than
the earlier strikes. Since the strikes were so bitter, they entailed greater costs to
both sides, and, consequently, both labor and management had incentives to
avoid their occurrence.

Many strikes in recent years occurred when labor and management could not
agree on how to respond to the increasing cost of health care benefi ts. Many
fi rms were seeking concessions in contract negotiations that would either require
increased employee payments to cover health care cost increases or reductions in
health care benefi ts. Box 8.4 describes how health care benefi t modifi cations have
become a central issue at GE for both union and nonunion employees.

Another issue that has become extremely contentious in recent collective
bargaining is the outsourcing of work. A recent strike at Verizon Communications
(see Box 8.5 ) received a lot of attention because the unions at Verizon appear
to have made gains in limiting management ’ s ability to outsource work.

Even though the strike weapon has had reduced potency for many unions in
recent years, some unions (and employees) retained sizable strike leverage. The

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The Negotiations Process and Strikes 215

BOX 8.4
Health Care Benefi ts Are a Central Issue in Labor Relations at
General Electric

Health care benefi ts for current and retired workers have been a central
issue in recent labor relations at General Electric (GE). Events at GE are
representative of the central role that issues related to health care have played
in some labor-management relationships.

At the start of recent negotiations, GE requested signifi cant reductions
in the health benefi ts its current unionized workers would receive. For a
while, it looked as though this demand would lead to a strike. These
negotiations involved unions that represent some of GE ’ s U.S. employees
(the United Electrical, Radio and Machine Workers of America [UE], the
International Union of Electronic, Electrical, Salaried, Machine, and Furniture
Workers–Communications Workers of America [IUE-CWA], the United
Auto Workers [UAW], the International Association of Machinists and
Aerospace Workers [IAM], and the International Brotherhood of Electrical
Workers [IBEW]). However, the parties compromised and on June 30,
2015, a four-year contract was ratifi ed with the UE and IUE-CWA, the
unions that represent 12,780 GE employees. The new contract includes
modest increases in employee premiums for health insurance, but over its
four-year period, it provides about $15,000 more in compensation. Similar
terms were later accepted in negotiations involving the other unions that
represented other GE workers.

The new contracts did not, however, settle all disputes at GE concerning
health care benefi ts. A federal district court decision issued on June 5, 2015,
ruled that disgruntled GE non-union retirees (former executives and other
white-collar employees) can proceed with claims that GE misled them about
their post-retirement health benefi ts, which are slated to end in 2015. The
retirees allege that GE ’ s summary of its health plan in 2012 misleadingly
stated that the company “expects and intends” that retiree benefi ts would
continue indefi nitely.

The leadership of the UE and others initially praised the four-year agree-
ments mentioned above for protecting post-65 health care benefi ts for
unionized GE retirees. But in July 2015, GE announced that it would
unilaterally terminate health care benefi ts to former production workers
and their spouses older than 65 who were eligible for Medicare. In response,
a coalition of nine unions fi led a class-action suit seeking to reverse the
cancellation of these health care benefi ts. The unions claimed that these
benefi ts were vested and that GE ’ s termination of the benefi ts violated the
collective bargaining agreements GE had with its unions.

Sources : Rhonda Smith, “UE, IUE-CWA Ratify Four-Year Contracts with General
Electric for 12,780,” Daily Labor Report , July 1, 2015, A-10; “General Electric Can ’ t
Dodge Allegations of Improperly Axing Retiree Health Benefi ts,” Daily Labor Report ,
June 8, 2015, A-3; and Carmen Castro-Pagan, “GE Hit with Class Action for Lifetime
Health Benefi ts,” Daily Labor Report , November 13, 2015, A-10.

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216 Part III. The Functional Level of Labor Relations

BOX 8.5
Long Strike Ends at Verizon with Claims of Union Gains

According to the U.S. Bureau of Labor Statistics, 47,000 workers went out
on strike in 2015 in the United States. This puts into perspective the
magnitude of the 2016 strike at Verizon Communications, in which 40,000
workers (mostly customer service workers and technicians) participated in
a strike that lasted six-and-a-half weeks. This strike was also noteworthy
because the unions at Verizon made several important gains. This contrasts
with the experiences of most striking workers since the mid-1990s.

The strike was organized by the two major unions that represent Verizon
employees, the Communications Workers of America and the International
Brotherhood of Electrical Workers. The strike followed months of contentious
negotiations. Verizon ’ s current business model creates inherent diffi culties
for its unionized workers. The company still maintains a large landline
network, which is installed and serviced by unionized employees, while
continually expanding its wireless services, which are serviced by nonunionized
employees. Much of the company ’ s growth and current profi ts derive from
its wireless business. The union members in the shrinking landline segment
are threatened by Verizon ’ s perpetual efforts to decrease labor costs in the
landline segment and focus its investments on the more profi table wireless
services.

This tension framed the major disputes in contract negotiations. Although
there were some disagreements about pension caps and health care coverage,
the key source of the impasse was the company ’ s insistence on decreasing
the proportion of customer service calls that would be handled by unionized
employees. (Verizon outsources a signifi cant proportion of its customer
service calls.) Obviously, this presented a major threat to union workers’
job security.

Despite Verizon ’ s initial claim that the strike would not affect its revenue
signifi cantly, their chief fi nancial offi cer later admitted that the strike had
led to a decreased capacity to provide installations, which in turn impeded
company growth and lowered profi ts. The size of the strike, both in terms
of numbers and national economic impact, prompted both the U.S. secretary
of labor and the Federal Mediation and Conciliation Service to become
involved.

Many observers felt that the settlement provided clear wins for the unions.
The settlement included a higher wage increase (10 percent over four years)
than the 6.5 percent increase Verizon had initially offered; the company
withdrew its demand that it be allowed to cap pensions; and it withdrew
a proposal to allow it to relocate employees anywhere on the grid for a
period of two years. In return, the unions accepted the restructuring of
some of the provisions in their health care plan. A compromise that benefi ted
both sides was reached regarding the major issue, the redirecting of customer

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The Negotiations Process and Strikes 217

service calls. The company could redirect a greater proportion of the calls
away from the initial region, but only to other unionized employees elsewhere
on the grid, instead of to nonunionized workers in or out of the country.
The union ’ s position was that as long as the work was being done by its
members somewhere, they had no complaint, while the company claimed
that this change allowed for greater effi ciency.

Another key union gain in the settlement was contract terms for seventy
retail wireless workers in a handful of stores who more than a year earlier
had voted for union representation. These are the fi rst Verizon customer
service workers to gain the benefi t of a union contract, something Verizon
wireless managers had been aggressively trying to prevent for years (see
Chapter 6 ). It remains to be seen if this will lead to greater union success
at organizing workers in other parts of Verizon ’ s wireless business and, more
generally, whether the Verizon strike settlement will inspire other workers
to be more aggressive in negotiations and during strikes.

Sources : Noam Scheiber, “Verizon Strike to End as Both Sides Claim Victories on Key
Points ,” New York Times , May 30 2016, http://www.nytimes.com/2016/05/31/business/
verizon-reaches-tentative-deal-with-unions-to-end-strike.html ; United States Department
of Labor, “Work Stoppages Summary,” Bureau of Labor Statistics, February 10, 2016,
https://www.bls.gov/news.release/wkstp.nr0.htm .

players in the major sports in the United States (football, baseball, basketball, and
hockey) are represented by unions, and, as Box 8.6 describes, there have been
frequent strikes over the last twenty-fi ve years when negotiators for those unions
and the respective leagues have reached impasse. It is not exactly clear why strikes
are such a frequent occurrence in sports collective bargaining. Perhaps it is because
players have high strike leverage that derives from the fact that there are no
substitutes for superstar players. If this is the explanation for the high strike rate,
then it provides an illustration of the militancy theory of strikes discussed above.
Or perhaps strikes are so common in sports because both the team owners and
the players are so inexperienced in labor relations and there is so much intraor-
ganizational disagreement (between stars and utility players on the player side and
between rich and fi nancially strapped teams on the owner side) that miscalculation
if frequent during bargaining. If the latter explains the high strike rate, then it
supports the miscalculation theory of strikes discussed above.

Collective bargaining in baseball is noteworthy because it is the union that has
pushed for increased reliance on the market to set players’ salaries, while team
owners want greater revenue sharing between teams (to promote competitive
balance) and limited player movement (to limit players’ salaries). For example,
baseball players won free agency in 1975 through a decision of a grievance
arbitrator, which helped produce a sharp rise in players’ salaries. See Box 9.3 for

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218 Part III. The Functional Level of Labor Relations

BOX 8.6
Frequent Strikes in Professional Sports

There have been frequent strikes when representatives of U.S. players and
owners have reached an impasse in their collective bargaining over the last
twenty-fi ve years. For example, a National Basketball Association (NBA)
players’ strike in the fall of 1998 led to the cancellation of much of their
season as players and owners squared off in a prolonged dispute that centered
on the terms of the NBA ’ s free agency system and how the two sides would
divide the increasing revenue of the NBA.

Strikes can be initiated by management in sports, just as in other sectors.
This sort of impasse is referred to as a lockout. A lockout occurred in the
National Hockey League (NHL) that led to the cancellation of the 2004–2005
NHL season. The NHL players and team owners disagreed about how to
set players’ salaries. NHL hockey fi nally resumed in the 2005–2006 season
after a salary cap and other new procedures were added to the NHL ’ s
collective bargaining agreement.

Collective bargaining in sports hasn ’ t always led to a strike. For example,
in August 2002, baseball players and team owners settled contract negotiations
without resorting to a strike. Apparently, both players and owners feared
that a strike at that point would particularly upset fans and potentially lead
to long-term damage to the game (and their own incomes). Fans had a
strong negative reaction to the 1994 baseball strike, which had led to the
cancellation of that year ’ s World Series, and in 2002 both labor and manage-
ment feared even greater damaging effects if another strike occurred.

Sources : Robert C. Berry, William B. Gould, and Paul D. Staudohar, Labor Relations in
Professional Sports (Dover, Mass.: Auburn House, 1986); Alex Remington, “Lockouts,
Strikes and Labor Politics in Professional Sports,” Footnote 1 , June 5, 2013, http://
footnote1.com/lockouts-strikes-and-labor-politics-in-pro-sports/ .

a description of the salary arbitration procedure now used to set baseball players’
salaries.

Professional sports is an example of a sector where, perhaps surprisingly, collective
bargaining is playing an increasingly visible role because of the publicity surrounding
player conduct. In recent years, there has been much controversy surrounding
the penalties assessed on players, including some long suspensions, in response to
accusations that the players were using banned performance-enhancing drugs or
were perpetrators of domestic violence. Box 8.7 describes the central role of the
grievance procedure that is included in the various sports league ’ s collective bargain-
ing agreements in recent cases where league commissioners have punished various
players.

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The Negotiations Process and Strikes 219

BOX 8.7
The Role of Collective Bargaining in Settling Disputes about
Drug Use and Personal Conduct in Professional Sports

In some ways, the collective bargaining agreements that regulate all four
major sports in the United States (football, baseball, basketball, and hockey)
are similar to other labor agreements: they cover the same issues of wages,
benefi ts, and work rules. However, because of the celebrity status of athletes
and other factors, sports bargaining agreements feature personal conduct and
drug abuse policies that are paired with interesting enforcement mechanisms.

To understand how these policies are implemented, it is important to
understand the structure of professional sports leagues in the United States.
Each individual team, which employs and pays its players, is part of a
respective league and is subject to league rules and discipline. Typically,
owners or team representatives vote on or in other ways have infl uence on
the policies the league adopts. However, personal conduct matters and the
specifi c disciplinary actions taken against players are determined by the
commissioner of each league, who serves at the pleasure of the owners.

Each of the four major sports leagues in the United States have detailed
drug policies. These cover both recreational drugs and performance-enhancing
drugs. For example, as of 2015, Major League Baseball had recognized and
banned seventy-four performance-enhancing substances. The league and
players’ associations often have similar views on the regulation of performance-
enhancing drugs and about the regulation of other drugs. They also agree
about penalties for players who perpetrate domestic violence. Thus, there is
a lot of common ground in the positions of players and the leagues. In the
NFL in 2015, for example, forty-nine players were suspended for violating
the drug policy. The suspensions ranged from a single game to the entire
season based on the number of times players had failed drug tests in the past.

The leagues’ personal conduct policies are far less structured. The leagues
have a long list of many types of personal conduct violations. Players who
violate these rules create a lot more news and negative publicity than other
employees would. Several major events in the last few years have generated
national news and outrage. This was caused both by the events themselves
and the responses of the leagues.

In most cases, there are no specifi c guidelines regarding the appropriate
penalties for specifi c events, so it typically the commissioner ’ s discretion
determines the penalty. In 2015, eleven NFL players were suspended because
they had violated the league ’ s personal conduct policy. The suspensions
ranged from one game to six, which is almost half a season. Probably the
most publicized case was a domestic violence complaint against former
Texas Ravens running back Ray Rice. Rice allegedly knocked his wife
unconscious in a casino elevator and was eventually brought before the
commissioner. He was suspended for the fi rst two games of the season.

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220 Part III. The Functional Level of Labor Relations

Then a video of the incident surfaced and caused national outrage over
what now seemed like a lax penalty. The league responded by suspending
Rice indefi nitely, but Rice argued that he had been punished twice for the
same incident, which isn ’ t allowed under the NFL ’ s agreement. Eventually,
the Rice suspension was amended to a year, but no team has signed the
former all-pro since the incident.

Players often appeal both drug and personal conduction violations through
the grievance procedure in their collective bargaining agreements. The
players can use the legal system to appeal disciplinary actions. Perhaps the
most controversial court involvement in a player suspension is the recent
case involving New England Patriot quarterback Tom Brady. This case,
which concerns accusations that Brady knew about and/or obstructed an
investigation into a plot to defl ate footballs used in the 2015 American
Football Conference championship game, illustrates the critical role the
specifi c language in a collective bargaining agreement can play. In this case,
the language in the parties’ collective bargaining agreement proved decisive,
and a three-judge panel of the United States Court of Appeals upheld NFL
Commissioner Goodell ’ s four-game suspension of Brady in a decision issued
on April 25, 2015. The Second Circuit Court of Appeals affi rmed that
Goodell had broad discretion to suspend players according to the collective
bargaining agreement with the players’ union.

Interestingly, in their decision, the judges admitted that they did not
consider the underlying facts of the case, including the science of football
defl ation, but instead looked solely at whether Goodell, as arbitrator, had acted
in the spirit of the collective bargaining agreement. The court concluded,
“We hold that the commissioner properly exercised this broad discretion
under the collective bargaining agreement and that his procedural rulings
were properly grounded in that agreement and did not deprive Brady of
fundamental fairness.”

The judges went on to say that despite the protestations of Brady and
the NFL Players Association, Goodell was merely acting on the powers the
league and the union had agreed to in their labor contracts, the latest of
which was signed in 2011. The judges acknowledged that the management-
union pact in which the person who penalizes players (the league commis-
sioner) also listens to appeals of those penalties might be unconventional,
but they would not get in the way of a long-standing and transparent
contract. The court stated, “In their collective bargaining agreement, the
players and the league mutually decided many years ago that the commissioner
should investigate possible rule violations, should impose appropriate sanctions,
and may preside at arbitrations challenging his discipline.”

Sources : Ken Belson, “N.F.L. Wins Appeal, and Tom Brady Has Little Recourse,” New
York Times , April 25, 2016, http://www.nytimes.com/2016/04/26/sports/tom-brady-
defl ategate-new-england-patriots-suspension-reinstated.html?emc = eta1 .

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The Negotiations Process and Strikes 221

The Role of Replacements for Striking Workers

One of the most controversial strike issues is whether a fi rm will hire temporary
or permanent replacements when workers go on strike. Under U.S. labor law,
management has the right to hire temporary replacements and can hire permanent
replacements if it notifi es the union and the newly hired employees that it is
doing so. The threat of hiring permanent replacements, therefore, is often taken
as a signal of management ’ s intent to bargain hard and even to eliminate the
union if it goes on strike.

Alternative Collective Strike-Like Actions

As the traditional strike leverage of unions has declined as management has
threatened to use permanent replacements, outsourcing, or other tactics, unions
in recent years have more frequently used other forms of collective action to
increase their bargaining leverage. The sickout by Detroit public school teachers
described in Box 8.8 is one example of this sort of strike-like action.

THE ROLE OF MANAGEMENT AND UNION
STRATEGIES ON NEGOTIATIONS

Management strategies have a major effect on the negotiations process and on
the likelihood of a strike. For one thing, management ’ s investment and product
decisions affect its bargaining power and negotiations strategies. For example,
whether management chooses a low-cost, high-volume product strategy instead
of a high-quality, high-innovation strategy shapes the extent to which the employer
is concerned with lowering wage costs. In addition, a company ’ s human resource
strategy affects negotiations, particularly in terms of how that strategy affects the
attitudes of employees.

Union strategies also affect the course of collective bargaining. Whether and
how a union seeks support from community groups or other unions in an effort
to pressure a particular employer often become critical issues in labor
negotiations.

The recent evolution of collective bargaining in three cases—auto company-
UAW, Boeing-IAM, and U.S. postal service (USPS) bargaining with the three
unions that represent its employees—illustrate the dynamics of bargaining.

Negotiations between Auto Companies and the UAW

In the fall of 2015, the UAW reached contract settlements with each of the Big
Three auto companies (GM, Ford, and Fiat-owned Chrysler) where the union
represents all blue-collar workers. The three contracts gave contract gains to the
UAW that refl ected both economic recovery in the auto industry and the effects
of that recovery on the union ’ s bargaining power. The 2015 contracts also refl ect
the strategic decision of the UAW to use their renewed strength to reverse some
of the effects of concessions the union had made during the 2008 fi nancial crisis.
A key feature of the 2015–2019 collective bargaining agreements is that they
provided substantial wage increases to lower-tier (“in-progression”) workers and

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222 Part III. The Functional Level of Labor Relations

BOX 8.8
Mass Sickout by Teachers Closes Detroit Public Schools

Most of Detroit ’ s public schools (64 out of 100 schools in the city) closed
on January 11, 2015, in the face of a “sickout” by teachers who protested
what they called unsafe, crumbling, vermin-infested, and inadequately staffed
buildings and the failure of state lawmakers to agree on a plan to rescue a
system teetering on the edge of insolvency. Because of the school closings,
31,000 of the 46,000 students in the district missed a day of instruction,
which cost the district more than $1 million in state funding based on
attendance.

The Detroit school district is beleaguered. It consistently has had the
lowest test scores among large school districts in the United States. The
district has lost more than two-thirds of its enrollment in fi ve years, which
has led to the closing of many of its schools. The district has been running
large defi cits, including $1.3 billion in unfunded retiree benefi ts and hundreds
of millions of dollars in other obligations.

Before the strike, teachers had been staging periodic smaller-scale sickouts
for a month. The sickouts, which the Detroit Federation of Teachers did
not endorse, were organized by Steve Conn, who was ousted in August
2015 as president of the union but still has an ardent following in the union.
Mr. Conn had been an activist in the union at odds with other union
leaders—and the district administration—until February 2015, when teachers
elected him president. Seven months later, the union ’ s executive board
removed him over charges of misconduct.

Events in the Detroit public schools illustrate the important role that a
collective pressure tactic can play. The political infi ghting in the teachers’
union also illustrates intra-organizational differences.

Source : Richard Perez-Pena, “ ‘Sickout’ by Detroit Teachers Closes Most Public Schools,”
New York Times , January 11, 2016, https://www.nytimes.com/2016/01/12/us/sickout-
by-detroit-teachers-closes-most-public-schools.html .

wage increases to upper-tier (“traditional”) autoworkers. To understand the strategic
choices the UAW made and the how recent increases in the union ’ s bargaining
power contributed to these recent contract gains, it is helpful to review the prior
diffi culties of labor and management in the auto industry.

The bargaining power of the UAW declined sharply beginning in the 1980s
due in part to the growing proportion of U.S. auto production that was taking
place in nonunion “transplants” (assembly plants in the United States owned by
foreign-based auto companies). Transplant workers produced over 40 percent of
cars and trucks assembled in the United States. Although the UAW has launched
various organizing drives in unorganized transplants in recent years, none of these

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The Negotiations Process and Strikes 223

drives has been successful. The UAW ’ s efforts to organize the Volkswagen plant
in Tennessee have been particularly noteworthy. The UAW launched extensive
efforts to organize that plant with the support of Volkswagen management, which
declared that it was neutral toward union organizing. To the union ’ s disappoint-
ment, a majority of workers did not vote in favor of union representation, although
the union continues to try to organize the plant.

The UAW ’ s bargaining power had also been negatively affected by the fact
that imported cars and trucks had captured a growing share of vehicle sales.
Imports accounted for a growing share of the U.S. market, rising from a postwar
low of 5 percent in 1955. The proportion of imports surged in the 1980s, then
declined in the 1990s as Japanese, Korean, and German companies increased their
North American production capacity. Then the import share rose again, and it
is now more than 50 percent.

As import and transplant vehicle sales increased, the total bargaining power of
labor and management at the Big Three auto companies decreased. In addition,
the relative bargaining power of the UAW was weakened by the ease by which
the companies could move production offshore and the erosion of strike leverage
due to excessive production capacity during the industry ’ s periodic sharp cyclical
downturns.

The fringe benefi t package in the Big Three–UAW collective bargaining contracts
came under particular pressure as the popular press and corporate managers criticized
the “legacy costs” associated with pensions and retiree health. These costs were
high in part due to the large number of retirees relative to the number of active
workers, given the decreases that had occurred in the size of the Big Three work
forces. The legacy costs in the U.S. auto industry were identifi ed as the key
source of the competitive cost disadvantage the Big Three faced vis-à-vis the
transplant companies. The latter were advantaged by more limited benefi t plans,
younger current work forces, and very few retirees.

Economic pressures on labor and management at the Big Three became especially
severe during the 2008 fi nancial crisis as sales and then production of autos
plummeted. By June 2009, two of the Big Three American car manufacturers
(GM and Chrysler) had fi led for bankruptcy and had emerged as new companies
with signifi cant government ownership. Shortly thereafter, Fiat became a co-owner
of Chrysler. Ford managed to avoid similar bankruptcy and government ownership
only because it had arranged large private loans before the fi nancial collapse.
Under pressure from the U.S. government to bring labor costs to the lower levels
found in the transplants and fearing the potential liquidation of GM and Chrysler,
the UAW agreed to unprecedented concessions. These concessions included a
lower wage for new hires ($14 per hour compared to the $28 per hour received
by previously hired UAW workers).

When labor and management entered company-level collective bargaining in
the fall of 2015, the economic environment had rebounded and auto sales and
company profi ts were up. The fall 2015 contracts refl ected the corresponding
increases in labor and management ’ s total power and auto management ’ s desire
to avoid potentially disruptive and costly strikes. The 2015 contracts stipulated

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224 Part III. The Functional Level of Labor Relations

that over an eight-year period, the hourly wage of lower-tier workers would
increase from $19 to $29, which was close to the $32 hourly wage “traditional”
workers earned. And although the fringe benefi ts package for lower-tier workers
was worth signifi cantly less than the benefi ts traditional workers received (whose
benefi t package costs the companies $25 per hour and includes “30 and out”
defi ned benefi t pensions), the 2015 contracts also improved the health care and
other benefi ts lower-tier workers received. The lower-tier work force now amounts
to 45 percent, 20 percent and 28 percent, respectively, of the Chrysler, GM and
Ford work forces. Other provisions of the 2015 contracts that helped win the
support of upper-tier workers were base wage increase of 3 percent in both the
fi rst and third years of the new contracts and 4 percent lump sum bonuses in the
second and fourth years of the contracts. In addition, sizeable “signing bonuses”
were gained ($8,000 per worker at GM) and there were also improvements in
various fringe benefi ts for traditional workers.

Although UAW members and leaders were very pleased with the gains won
in their 2015 contracts, they continued to be disturbed by the amount of work
moving out of the United States to countries that had lower labor costs. (The
fact that the 2015 contract gains gave the Big Three increased incentives for such
movement is an illustration of the wage-employment trade-off.) See Box 8.9 for
a discussion of the UAW ’ s complaints about the movement of work abroad.

Labor Relations Involving the Boeing Corporation
and the IAM

Labor relations at The Boeing Company are interesting because Boeing has been
so economically successful and because for many years the company ’ s white- and
blue-collar work forces used collective bargaining to share in Boeing ’ s success.
At the same time, there has been much recent acrimony in Boeing ’ s labor-
management relationship and strategic maneuvers by Boeing management that
might eventually severely reduce the bargaining power of the unions that represent
Boeing ’ s employees.

Boeing manufactures commercial aircraft including wide-body planes such as
the Dreamliner, the 747, and the new 777. Boeing has 45 percent of the world ’ s
commercial jet market and is a sizeable defense contractor. Its only signifi cant
competitor in the commercial wide-body plane market is Airbus, a European-based
consortium. The production of wide-body planes is highly profi table and contributes
much to Boeing ’ s stature as the largest exporting company in the United States
by dollar volume. Much of Boeing ’ s wide-body plane production is concentrated
in the Seattle metropolitan area, where machinists represented by the IAW
manufacture key parts and assemble planes. Unusually for a U.S. private sector
employer, many of Boeing ’ s professional employees—engineers and middle-level
managers—are represented by a union, the Society of Professional Engineering
Employees in Aerospace (SPEEA).

Over the years, both blue- and white-collar employees at Boeing have used
collective bargaining to gain favorable wages and a variety of fringe benefi ts.
These gains illustrate the unions’ relative power (due in large part to its strike

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The Negotiations Process and Strikes 225

BOX 8.9
UAW President Complains about Work Leaving the United
States

Three months after the United Auto Workers ratifi ed new four-year agree-
ments with Detroit-area automakers in early 2016, UAW president Dennis
Williams accused the auto companies of shifting signifi cant car production
to low-wage countries such as Mexico and China. The new agreements,
discussed above in the text, provided substantial wage increases, particularly
to newly hired auto workers in the United States, but also allowed the auto
companies to move production.

Williams believes that the companies are making ample profi ts from auto
production in the United States. However, he says, “The fact of the matter
is, companies continue to run to low-wage countries.” In 2016, Fiat Chrysler
announced that it will stop making its Dodge Dart compact and Chrysler
200 in the United States and Ford said that it will stop building its Focus
compact in Michigan and move that work to Mexico. (Mexican autoworkers
earned $8.24 an hour in 2013, compared with the $37.62 U.S. autoworkers
earned that same year.) Williams also complained about GM ’ s announcement
that it intends to import the Buick Envision SUV from China. (Williams
said that union members have nicknamed that vehicle the “Invasion.”) He
also argued that the carmakers should be loyal American taxpayers because
the U.S. government had bailed out GM and Chrysler in 2009 (see text
above).

However, the auto companies have continued to make sizeable investments
outside the United States. In April 2016, Ford announced that it would
invest $1.6 billion in a new small-car factory in Mexico, which drew
additional criticism from the president of the UAW. Ford noted in response
that it has been manufacturing cars in Mexico since 1925 and that from
2011 to 2015, it had invested more than $10 billion in the United States
and added 25,000 jobs in the United States.

Source : David Welch, “UAW President Bemoans Work Moving to Mexico,” Daily
Labor Report , February 5, 2016, A-3; Keith Naughton, “Ford Plan for Mexico Plant
Draws Trump-Like Barb from UAW,” Daily Labor Report , April 5, 2016, A-7.

leverage) and the high total power it derives from Boeing ’ s strong market positon
and solid profi ts. Frequent strikes have occurred over the past twenty-fi ve years
as part of contract negotiations at Boeing, including a 58-day strike in 2008.

In the winter of 2011 , after Boeing and the IAM had reached an impasse in
their negotiation of a new multiyear contract covering Seattle-area work, IAM
members rejected a proposed settlement. After the national offi ces of the IAM
intervened and ordered a second vote, Boeing workers voted to accept a new

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226 Part III. The Functional Level of Labor Relations

four-year contract. Although the company had all along agreed to provide sizeable
wage increases and lump-sum signing bonuses, many Boeing workers apparently
were upset that the company was demanding that the company ’ s defi ned benefi t
pension plan be replaced with a defi ned contribution plan. As discussed in Chapter
8, in recent years many unions have grudgingly accepted such a switch, but
Boeing workers were emboldened by the company ’ s fi nancial strength and their
bargaining leverage.

The contract terms that workers eventually accepted included Boeing ’ s com-
mitment to produce a future generation of wide-body planes, the 777, in the
Seattle area. Apparently, this guarantee of future investments and the implied
employment that would follow helped mollify enough workers to generate a
majority vote in favor of the revised offer. Perhaps, in addition, Boeing workers
worried that a continuing contract impasse might lead Boeing to accelerate the
development of production capacity at the nonunion Boeing plant in Charleston,
North Carolina, or at other nonunion U.S. or international sites.

Labor relations were infl amed again in May 2014 when a top Boeing executive
essentially said that unless workers at Boeing ’ s Seattle plants reduced their propensity
to strike, Boeing would move its production to other parts of the United States
and the world. The NLRB general counsel began an investigation when the
IAM fi led an unfair labor practice complaint over that statement that claimed
that it was inconsistent with the right to strike enshrined in the NLRA. Eventually,
the IAM dropped its NLRB complaint after Boeing management agreed to make
various investments in Seattle-area plants.

In 2009, to expand its production capacity so it could meet a large back order
for its popular Dreamliner wide-body plane and to gain greater relative power
in their labor negotiations, Boeing transformed a former small-scale airline parts
plant into a Dreamliner assembly complex in Charleston, South Carolina. Although
the IAM has tried to organize that plant, to date they have not succeeded, and
in April 2015, it called off a scheduled representation election, apparently because
of weak employee support for unionization.

In March 2016, Boeing announced plans to cut 4,000 jobs from its commercial
airplanes division as part of an effort to reduce costs in the face of intense competi-
tion from the Airbus Group, which also manufactures wide-body airplanes. Boeing
earned a record $96 billion in 2015, but that fi gure was a 13 percent decrease
from earnings of the previous year. Although the company was employing 161,400
employees at the end of 2015, the size of its work force had decreased for the
third consecutive year. 14

Labor Relations at the U.S. Postal Service

Labor relations at the United States Postal Service (USPS) are an interesting case
not only because of the large number of employees affected but also because the
postal service is an industry facing massive technological change and intense
competition. The 500,000 employees who work for the USPS are represented
by four unions—the American Postal Workers Union (APWU), the National
Association of Letter Carriers (NALC), the National Rural Letter Carriers

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The Negotiations Process and Strikes 227

Association (NRLCA), and the National Postal Mail Handlers Union (NPMHU).
In addition to representing the individuals who sort and deliver the mail, these
unions represent clerks, mechanics, vehicle drivers, custodians, and some
administrators.

The Internet has led to major shifts in the demand for postal services. On the
one hand, the Internet has led to declines in the volume of regular (fi rst class)
mail, which has led to sharp declines in USPS revenue. At the same time, the
increased commerce that is taking place over the Internet has increased the volume
of package deliveries, although a host of private companies, such as UPS, FedEx,
and DHL, compete with the USPS for this package business.

The USPS is also undergoing a regulatory transition as it is being transformed
from a public enterprise, which had been heavily regulated by the U.S. Congress,
to a quasi-private enterprise, which is now expected to survive without government
subsidies. Yet Congress still regulates key aspects of USPS business such as the
price of stamps and the commitment to delivery service in costly rural areas. The
fi nancial pressure that has followed this regulatory shift has led the management
of the USPS to look for ways to cut operational costs and to seek concessions
from the unions who represent postal workers.

The USPS bargains using standard-looking collective bargaining agreements
with the various unions, but it does so under rules that Congress has set that
make strikes illegal and state that if the parties reach impasse in contract negotiations
either side can request binding arbitration. In recent years, the parties have often
made use of binding interest arbitration to set new contract terms. In the 2011
round of collective bargaining, the APWU and the USPS negotiated a four-and-
a-half-year contract. However, the other unions and the USPS went to impasse
and chose to make use of binding arbitration. The arbitrators (a three-person
panel) then issued awards that closely followed the terms of the 2011–2016
APWU-USPS contract. Interestingly, the 2011 arbitration award for the NRLC
also introduced a lower (by 10 percent) starting wage for new hires and lowered
(by 20 percent) the starting wage of so-called noncareer part-time employees.

In the next bargaining round, in July 2016, an arbitrator set the terms of the
APWU ’ s 2015–2018 contract after that union had negotiated to impasse with
the USPS. This 40-month agreement provided a base pay increase of 3.8 percent
and continued a no-layoff provision for career employees. Infl uenced by the
USPS ’ s demand, the arbitrator gradually reduced the USPS share of employee
health insurance premiums (by 1 percent per year, from 75 percent to 73 percent).
The arbitrator made clear in his 50-page arbitration award that he was heavily
infl uenced by the principle of pay comparability and by the collective bargaining
agreement the NRLCA and the USPS negotiated in 2015.

Political lobbying also plays a critical role on postal service business strategies
and labor relations. For example, the four postal unions have periodically lobbied
Congress in an effort to block USPS proposals to close some post offi ces and
eliminate Saturday delivery of fi rst-class mail. Meanwhile, the four unions and
the USPS have made joint efforts to get Congress to relax current rules that
require the current funding of the health care costs of future retirees. 15

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228 Part III. The Functional Level of Labor Relations

CULTURAL ISSUES IN NEGOTIATIONS

Given the increased internationalization of the U.S. economy and the heightened
role multinational corporations play, it is important to consider the role of cultural
differences in negotiations. Cultural differences can affect the course of negotiations
and can make settlement more diffi cult when people from different parts of the
world negotiate with each other. One study found that agreements took longer
and were less likely to be reached when Chinese and Americans negotiated with
each other than when the negotiating pairs came from the same country. Chinese
negotiators tended to put a higher emphasis on process considerations and preferred
to allocate more time to building relationships with their negotiating counterparts,
whereas American negotiators wanted to move more quickly to discussion of the
substantive issues involved. Paying attention to these cultural differences and their
effects on negotiating style is critical to the success of cross-cultural negotiations. 16

Jeanne Brett provides a comprehensive assessment of the role cultural issues
can play in negotiations. 17 Below we provide a summary of the fi ndings in Brett ’ s
research on negotiating globally.

It is fi rst important to defi ne culture. Culture is the distinct character of a social
group that emerges from the patterned ways people in that group interact socially.

It is valuable to have a “cultural interpreter,” someone who not only knows
the language but also can interpret the body language and the strategic behavior
being exhibited across the negotiating table. The presence of such a person can
help negotiators avoid mistakes and correctly interpret the behavior and signals
of their negotiating partners. A cultural expert can also help negotiators understand
the cultural context of the negotiation, for example, the institutional environment
in which the negotiation is embedded.

One key thing to avoid is confusing a cultural prototype (a central tendency)
with a cultural stereotype (the idea that everyone in a culture is the same; that
there is no distribution around the mean). This is inappropriate because there is
always variation in a culture.

Two key elements of cultures that are particularly important for negotiations
are the degree to which a culture values collectivism over individualism and the
degree to which a culture values egalitarianism over hierarchy. In individualist
cultures, social, economic, and legal institutions promote the autonomy of individu-
als, reward individual accomplishment, and protect individual rights. In collective
cultures, institutions promote the interdependency of individuals with the others
in their families, fi rms, and communities by emphasizing social obligations. In a
collectivist culture, individual accomplishment refl ects back on others with whom
the individual is interdependent. Legal institutions support collective interests
above individual interests.

When a negotiator comes from a culture that highly values individualism, that
may affect his or her interests, goals, and strategic choices. For example, indi-
vidualistic cultures promote and condone self-interest, which may be refl ected
in a negotiator ’ s preference for confrontation and/or face saving. In hierarchical
cultures, social status determines social power and social power generally transfers

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The Negotiations Process and Strikes 229

across situations. For example, in hierarchical cultures, social inferiors are expected
to defer to social superiors, who have an obligation to look out for the well-being
of lower-status parties. No such obligations exist in egalitarian cultures. In egalitarian
cultures, social boundaries are more permeable and social status may be both
short-lived and variable across situations.

Western cultures, especially Northern European nations, tend to be egalitarian.
As you move south from North America to Central and South America, culture
tends to be more hierarchical. Asian cultures are usually classifi ed as hierarchical.

Norms (i.e., standards of appropriate behavior) regarding directness or indirectness
of communication are also important when negotiating globally. When people
communicate indirectly, for example, the same words take on different meanings
depending on the context in which they are spoken. Cultures favoring indirect
communication tend to be collectivist in nature. People in direct-communication
cultures, in contrast, understand each other because they share a vocabulary.
Direct-communication cultures also tend to be individualistic.

Research does not support the idea that negotiators from some cultures primarily
use integrative strategies and those in other cultures primarily use distributive
strategies. Research also shows that there is a substantial variation in cultures in
the ability to use integrative strategies.

Summary

The structures and processes of negotiations vary considerably across countries,
refl ecting differences in the stage of development of labor law, the ideologies and
strategies of employers and labor organizations, shifting bargaining power, and
national cultures and institutions. While most well-developed labor relations
systems seek to regularize negotiations processes as a way of limiting strike activity,
breakdowns in negotiations still generate strikes from time to time.

Once it is clear that a negotiations process is called for, the parties need to
develop skills and abilities to adapt negotiations practices as conditions change
over time. These skills and abilities include:

• Separating distributive (confl icting) issues from integrative issues (those where
the parties share common goals) and using modern negotiations tools to
avoid miscalculating each other ’ s bottom lines on distributive issues and
missing opportunities to pursue their shared interests in integrative issues.

• Building positive, constructive relationships with counterpart negotiators to
generate trust in each other ’ s statements as negotiations proceed toward either
an agreement or an impasse.

• Adapting the structure of bargaining as competitive conditions and or the
mix of employers or unions change over time.

• Exploring new ways to negotiate, such as using interest-based bargaining
processes or using other ways of improving problem solving in negotiations.

• Building ongoing processes for implementing and administering agreements
reached in negotiations and for resolving disputes during the term of the
agreement.

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230 Part III. The Functional Level of Labor Relations

• Recognizing and appropriately adapting to any cultural issues that might be
prevalent in a negotiation.

In summary, negotiations processes are the central activity at what we refer to
as the middle tier of the three-tiered labor relations framework introduced in
Chapter 1 . They need to be supported and complemented by effective mediation
and arbitration or other dispute resolution processes, topics we turn to in the
next chapter.

Discussion Questions

1. Describe the four subprocesses of negotiations according to Walton and
McKersie.

2. What are the key aspects of the three stages of a typical negotiations cycle?
3. Describe the Hicks model of strikes.
4. Describe how management strategy infl uenced the course of a recent negotia-

tion or strike.
5. How do traditional bargaining and interest-based bargaining differ?

Related Web Sites

Boeing workers:
www.boeingworkers.com

UAW auto bargaining:

USPS labor relations:
https://about.usps.com/manuals/elm/html/elmapdx_009.htm

Suggested Supplemental Readings

Clark , Paul , Ann Frost , and Howard Stranger , eds . Contemporary Collective Bargaining in the
Private Sector . Champaign, Ill. : Industrial Relations Research Association , 2013 .

Fisher , Roger , and William Ury . Getting to Yes: Negotiating Agreement without Giving In . New
York : Penguin Books , 1981 .

Rosenblum , Jonathan D. Copper Crucible: How the Arizona Miners’ Strike of 1983 Recast Labor-
Management Relations in America . Ithaca, N.Y. : ILR Press , 1995 .

Walton , Richard E. , and Robert B. McKersie . A Behavioral Theory of Labor Negotiations . New
York : McGraw-Hill , 1965 .

Walton , Richard E. , Joel Cutcher-Gershenfeld , and Robert B. McKersie . Strategic Negotiations:
A Theory of Change in Labor-Management Relations . Boston : Harvard Business School Press ,
1994 .

Notes

1. See Edward Cohen-Rosenthal and Cynthia Burton, Mutual Gains: A Guide to Union-Management
Cooperation (Boston: Pitman, 1987); Roger Fisher and William Ury, Getting to Yes (Boston: Houghton

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The Negotiations Process and Strikes 231

Miffl in, 1981); and Richard E. Walton, Joel Cutcher-Gershenfeld, and Robert B. McKersie, Strategic
Negotiations: A Theory of Change in Labor-Management Relations (Boston: Harvard Business School
Press, 1994).

2. Richard E. Walton and Robert McKersie, A Behavioral Theory of Labor Negotiations (New York:
McGraw-Hill, 1965).

3. It is, of course, possible that there is some joint gain associated with a higher wage rate if labor
productivity increases when wages are raised. This might result from the greater motivation workers
feel when their pay goes up or from the fact that the fi rm can recruit better-qualifi ed workers when
it offers a higher wage. We ignore such considerations in the text discussion.

4. For evidence on the role of personality traits in bargaining, see Jeffrey Z. Rubin and Bert T.
Brown, The Social Psychology of Bargaining and Negotiations (New York: Academic Press, 1975),
1583–1596; and Max Bazerman, Judgement in Managerial Decision Making (New York: John Wiley,
1986).

5. Margaret A. Neale and Max H. Bazerman, “The Role of Perspective-Taking Ability in
Negotiating under Different Forms of Arbitration,” Industrial and Labor Relations Review 36 (April
1983): 378–388.

6. Arthur M. Ross, Trade Union Wage Policy (Berkeley: University of California Press, 1948),
45–74.

7. This case is a real fi rm we encountered in our fi eld work. The fi rm preferred not to be identifi ed
by name.

8. This cycle is discussed in Carl M. Stevens, Strategy and Collective Bargaining Negotiations, (New
York: McGraw-Hill, 1963), 41–46.

9. John R. Hicks, The Theory of Wages (New York: Macmillan, 1932), chapter 2 .
10. Orley Ashenfelter and George E. Johnson, “Bargaining Theory, Trade Unions, and Industrial

Strike Activity,” American Economic Review 59 (March 1969): 35–49.
11. Clark Kerr and Abraham Siegel, “The Inter-Industry Propensity to Strike,” in Industrial

Confl ict, ed. Arthur Kornhauser, Robert Dubin, and Arthur M. Ross (New York: McGraw-Hill,
1954), 189–212.

12. Economists have also constructed models that involve “asymmetric information” to explain
strike occurrence. These models rely on the notion that management knows the profi tability of the
fi rm, whereas the union must guess profi tability and use wage offers to get the fi rm to reveal its
true profi tability. See, for example, Joseph S. Tracy, “An Investigation into the Determinants of
U.S. Strike Activity,” American Economic Review 76 (June 1986): 423–436.

13. Bureau of Labor Statistics, U.S. Department of Labor, “Major Work Stoppages in 2015,”
News Release USDL-16-0272, February 10, 2016, Table 1, https://www.bls.gov/news.release/
pdf/wkstp.pdf .

14. Paul Shukovsky, “IAM Members Approve by Wide Margin Contract with Boeing Offering
Job Security,” Daily Labor Report , December 8, 2011, A-1, Paul Shukovsky, “IAM Members Agree
to End Pensions to Ensure Boeing Doesn ’ t Move Jobs Away,” Daily Labor Report , January 6, 2014,
AA-1; Julie Johnson and Tyrone Richardson, “Boeing to Cut 4,000 Jobs from Commercial Airplane
Unit,” Daily Labor Report , March 30, 2016, A-5.

15. “APWU Members Vote to Ratify Contract; Will Raise Wages by 3.5% over Term,” Daily
Labor Report , May 11, 2011, A-11; Louise C. LaBrecque, “Arbitration Panel Issues 4.5 Year Contract
Covering U.S. Postal Service, Letter Carriers,” Daily Labor Report , January 17, 2013, A-5; “We
Have a New Contract,” APWU news article 140–2016, July 8, 2016, www.apwu.org/news/web-
news-article/we-have-new-union-contract .

16. Anne Liu, Leigh, Ray Friedman, Bruce Barry, Michel Gelfand, and Zhi-Xue Zhang, “The
Dynamics of Consensus Building in Intracultural and Intercultural Negotiations,” Administrative
Science Quarterly 57 no. 2 (2012): 269–304.

17. Jeanne Brett, Negotiating Globally , 2nd ed. (New York: John Wiley and Sons, 2007).

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356

14

THE CHALLENGE OF GLOBALIZATION

The globalization of markets for products, fi nancing, and labor has made it easier
for companies to produce many of the goods and services they sell wherever in
the world the right skills can be found at the lowest cost. The desire to sell
products worldwide has also created incentives for fi rms to have a presence in
multiple countries. These developments have made labor relations in many industries
global in scope. Globalization is of particular importance in the United States
and in other high-wage advanced industrial economies.

Globalization poses signifi cant challenges to labor relations practices. Until
fairly recently, the laws, markets, institutions, norms, and practices of labor relations
developed on a national basis. Globalization has weakened (though not eliminated)
the role of national systems of labor relations and has given rise to new institutions,
structures, and processes for dealing with all of the labor relations functions we
discussed in prior chapters.

In this chapter, we will discuss these new arrangements and the challenges
globalization poses to labor relations. We will use the framework we laid out in
chapter 1 for analyzing labor relations around the world.

THE EFFECTS OF EXPANDING MARKETS

A key argument John R. Commons, one of the early theorists in labor relations,
put forward was that as the markets for product and labor expanded in scope,
unions and other institutions also needed to expand if they were to “take wages
out of competition” by organizing workers to fi t the scope of the product and
labor markets in which they worked. 1 Failure to match the institutions and policies
to the scope of the market, Commons argued, would reduce the bargaining
power of workers and put downward pressures on wages, what some now call
a “race to the bottom.” Firms would move work to lower-wage regions and
workers willing to work for lower-than-normal wages would migrate to take

Global Pressures: Multinational
Employers, International Unionism,
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AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations
Account: s4264928.main.eds

Global Pressures 357

those jobs. As discussed in this chapter, Commons ’ s predictions have proven
accurate.

Another change in the external environment—advances in communications
technologies—promoted the globalization of employment, especially in sectors
where services are provided. Answering phones in call centers, editing, accounting,
tax preparation, radiology (X-ray reading), legal research, and document manage-
ment, are among the many services that are now provided to U.S. consumers by
workers around the world.

Demographic trends also support the globalization of work. Transitioning
economies have added a signifi cant number of workers to the global labor force
in recent years, adding further competition for available work and putting greater
pressure on higher-wage economies.

The Globalization of Business Strategies

Business competition is now playing out on a global basis as fi rms have become
multinational. A multinational corporation (MNC) engages in economic activity
in more than one country. Over the last sixty years, U.S.-based multinational
fi rms have expanded greatly, to the point that they now have a major infl uence
on world commerce and the conduct of labor relations in many countries.

Every MNC must make strategic choices about where to locate different parts
of their production chain. This brings into play the role of business strategies as
a key factor that shapes labor relations in developing countries. One key variable
that infl uences the business strategy of an MNC is the wage levels at various
potential production sites and in various countries. Although access to resources
and markets also infl uence business strategies, the expansion of trade has led to
a steady movement of manufacturing and service work from higher-wage countries
to lower-wage countries and regions. Box 14.1 illustrates the evolving business
strategy of Nike, a U.S.–based fi rm and one of the early fi rms to globalize its
production of apparel and athletic equipment. 2

The Nike story told in Box 14.1 is similar to that of many other MNCs that
are household names, such as Apple, General Electric, and General Motors. These
fi rms sell products that can be easily transported globally and/or that sell to global
markets have global supply chains . The development of global supply chains
offers economic development and business opportunities to developing countries
and to other companies that supply parts or carry out manufacturing on a contract
basis for the household-name fi rms. Countries around the globe (and individual
fi rms) compete for contracts from MNCs and the jobs that go with them by
offering the lowest cost consistent with quality and delivery requirements. The
effect of this is that competition in labor relations has become globalized.

The Pressure of Diversity on MNCs

Workers in various countries often view work differently, attach different meanings
to work, and place different demands on their unions than is the case in the
United States. 3 The management of an MNC thus must develop new skills to
operate effectively in different cultural, legal, and institutional environments.

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358 Part V. Special Topics

BOX 14.1
Nike ’ s Global Business Model

Nike started operating as a company in 1964. In the early years, its business
model called for the design and marketing of its products to take place in
the United States and manufacturing to take place abroad. First it located
manufacturing in Japan. As Japan ’ s labor costs rose and Nike ’ s business
expanded, the company moved production to Korea and later to lower-cost
countries such as Indonesia, Vietnam, China, and parts of Latin America.

Nike did not own or manage the factories that produced its products.
Instead, it contracted with supplier companies located in these various
countries. In doing so, Nike developed global supply chains. In 2016, Nike
supplied products from 600 contractors in 46 different countries around the
world.

Source : http://about.nike.com/ .

Of course, management in any fi rm faces some diversity in the demographic
and racial composition of their work force and in their workers’ cultures and
attitudes toward work. Some workers are concerned most about their pensions,
while others may be most concerned about their current income and pay little
attention to deferred compensation. Some workers have strong work ethics and
would like to work on their own, while others may need constant supervision.
The extent of cultural diversity increases, however, as a company crosses national
boundaries. For example, compensation policies that work in one country may
be inappropriate in another. Or communication and motivation techniques that
succeed in one culture will fail in another.

There is also wide diversity among countries in the legal regulation of labor
relations and employment conditions and the institutions that shape labor relations
(see Chapter 15 ). In some countries, for example, national laws recognize the
right of workers to form unions and to strike; in other countries unions are
outlawed or are dominated by the government. In some countries, the national
government extensively regulates employment conditions. The ideology and form
of labor movements also differs markedly across countries, as does the structure
of unions.

Multinational Firms and the Centralization of Labor
Relations

MNCs face control and coordination problems because of the wide diversity in
the culture, law, and institutions of countries. The key decision they face in
different countries is how much to centralize the management of labor relations.
At one extreme, labor relations management can be centralized in the corporate
offi ces of the MNC. Alternatively, a company can use local management in each

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Global Pressures 359

country in which it operates to independently direct labor relations. Management ’ s
problem is how to pursue companywide objectives through labor relations policies
in the face of all the diversity that arises across the MNC.

From the 1950s to 2000, MNCs responded to this problem by allowing a high
degree of local control (decentralization) in labor relations. Analysts of MNCs,
in fact, generally conclude that their administration of labor relations is more
decentralized than other management functions such as fi nance or marketing. 4
Managers of MNCs found that there were substantial benefi ts to be gained from
decentralizing labor relations. These benefi ts include the ability to respond fl exibly
to diversity. Local managers in each country could fashion labor relations policies
that fi t with local conditions and events.

Since 2000, however, MNCs have begun to centralize their control and
administration of labor relations. Although centralization of a corporate function
has the advantage of providing consistency and economies of scale, diversity in
local laws, culture, and union politics made centralization ineffective in the past.

Why have MNCs switched to more centralized control? The explanation
appears to lie in the fact that the expansion of trade and the reduced infl uence
and greater standardization of local conditions have led MNCs to prefer more
centralization in their production strategies. The emergence of ever more global
fi rms leads management to strive to integrate their internal operations and policies
more fully. If production across national boundaries is integrated, for example,
it makes less sense for the MNC to maintain wide variation in labor relations
policies. The opening of trade through mechanisms such as the European Union ,
the North American Free Trade Agreement, and other regional trading blocs
provides additional reasons for MNCs to globalize their labor relations policies.

This trend illustrates an important theme in the recent development of corporate
culture, namely, that managements are increasingly striving to link labor relations
more closely to business strategy. Increased globalization induces MNCs to develop
particular business strategies and then align their production and labor relations
systems with those strategies. While this is not very different from the dynamics
at work in domestic fi rms, labor relations managers in MNCs face a particularly
complex dilemma: globalization has increased the premium on coordination and
centralization, but the cultures, laws, and institutions in the countries they operate
in are very diverse.

The literature on human resources for MNCs provides theories about what
happens when MNCs confront national institutions (i.e., laws and public policies).
Some of the literature suggests that multinational corporations must bend to
accommodate national (and in some cases local) institutional constraints and/or
pressures. Instead of MNCs bringing standardization in workplace practices across
countries, it is the MNCs that must bend and modify their practices to fi t institutional
constraints and pressures. There is evidence that the intersection of MNCs and
country-specifi c institutions leads to hybridization —organizational forms and
practices that are blends between the home-country practices of the MNC and
the practices that are common in the country where the MNC is operating. At
the same time, however, studies of the labor relations practices of MNCs consistently

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360 Part V. Special Topics

reveal a tendency for MNCs to preserve a strong role for home country practices
regarding matters such as pay, career development, and communications with
employees. 5

The Globalization of Labor Relations and Human
Resource Management: The Case of Colgate-Palmolive

Colgate-Palmolive (C-P) is a U.S.-based multinational consumer products fi rm
that has over 100 manufacturing facilities in thirty countries. It serves as a good
case study of how a large MNC has restructured its global labor relations activities
in recent years.

The sales and fi nancial performance of C-P has been quite strong since
1990. A key to the company ’ s success is that it has intensifi ed its globalization.
International sales now contribute most of the company ’ s profi ts. C-P has
also focused its manufacturing and marketing operations in particular regions in
response to the regional trade pacts that have been made in recent years and to
other pacts that are expected in the near future in regions such as Latin America
and Asia.

Regional trade pacts have helped spur a movement in C-P toward regional
“centers of excellence” through the consolidation of manufacturing. The company
has moved away from its past practice of having multiple plants in a region (and,
in some cases, in a country) that produce the same product. Technological
improvements have made it possible to for C-P produce greater volumes in a
single plant, and labor relations policies in the countries where C-P operates
make three-shift-a-day, seven day-a-week production possible.

C-P also moved toward a simplifi ed global supply chain (i.e., more global
sourcing and fewer preferred suppliers) and less product variety across countries.
The latter move has been associated with moves toward making C-P products
more similar around the globe to take advantage of scales of economy in production
and standardization of its marketing. In addition, the ease with which consumer
information now moves across countries is leading C-P to seek greater central
control of how its products are marketed. These factors are all leading to greater
regional and global coordination of production control, marketing, and other
business operations of C-P.

Human resource and labor relations decision making was traditionally decentral-
ized at C-P; most decisions were made by facility managers or factory managers
in facilities. In this traditional way of operating, country-level presidents and
directors of manufacturing at C-P got involved in facility issues only when there
was a crisis. A small corporate staff (a vice-president of human resources and a
vice-president of labor relations) at the company ’ s corporate headquarters in New
York City provided strategic guidance to country- and facility-level managers on
labor relations and human resource matters, but often they became involved in
plant-level labor relations matters only when a new labor agreement was being
negotiated or when a strike or some other emergency was occurring. Even then,
their input was only advisory. On an everyday basis, local managers controlled
the labor relations function.

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Global Pressures 361

In the mid-1990s, corporate managers decided in the mid-1990s that the
company needed to move away from this extreme form of decentralization in
its labor relations function because of the increased need for coordination across
C-P given the increasing role of its global supply chain. In addition, the integration
of trade and the creation of centers of manufacturing excellence led the company
to consolidate is production system. It accomplished this by closing a number of
facilities and expanding output fl ows through increased mechanization and full-day
and full-week operations in the plants that remained. One consequence of this
production consolidation and increased trade fl ows was that a labor disruption at
a center of excellence would now cause greater harm to the company ’ s sales and
profi ts. Corporate managers wanted to have more control during labor disruptions
and to engage regional human resource and labor relations managers in efforts
to minimize their occurrence and effects when disruptions did occur.

A mixture of union and non-union plants evolved at C-P, with much of the
growth occurring in non-union plants. However, since 2000, a disproportionate
amount of consolidation has been occurring in unionized facilities, in part because
the unionized plants tend to be older plants.

Since 2000, in an effort to gain more coordination and more consistency across
the company and greater interaction between human resource and labor relations
managers and those involved in operations, C-P has created (or expanded) regional
human resource offi ces and gave these offi ces more direct involvement in plant-
level labor relations activities. To improve the quality of human resource and
labor relations, C-P launched a series of regional workshops that involved the
company ’ s top manufacturing and human resource and labor relations staffs. The
goals of these workshops were 1) to increase the regional focus across the company ’ s
operations; 2) to increase coordination between manufacturing and human resource
(and industrial relations) staff across the company (these various groups had rarely
met together in focused meetings in the past); and 3) to teach a standard and
strategic approach to the annual setting of key work-rule and operations objectives
in all (unionized and non-union) facilities.

Middle and shop-fl oor managers at C-P are now expected to convey the
company ’ s labor relations goals and methods to employees and to implement
C-P ’ s global human resource and labor relations policies. This is accompanied
by training for workers that focuses on instilling an appreciation for the increased
need for adaptive change in the workplace.

C-P business units are now required to use a standardized “strategic labor
relations process” to guide the preparation for, process of, and evaluation of
collective negotiations (in unionized settings) and employee relations objectives
(in non-union settings). The process includes a country-level planning meeting
to set labor objectives, submission of those objectives for division approval, a
strategically oriented negotiations process accompanied by an appropriate com-
munications strategy, and subsequent evaluation of the overall process. Bargaining
objectives, which typically involve work rules and work processes, and compensation
objectives are identifi ed and then the parties are expected to consider how these
objectives support each another. This process takes place under the guidance of

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362 Part V. Special Topics

a corporate global labor relations strategy that top manufacturing and human
resource managers develop. A key outcome of this process is that various human
resource performance metrics are now collected and compared across plants. The
hope is that this data and comparisons of plant performance will infl uence the
objectives that are set in the strategic labor relations process that guides labor
negotiations and the formation of employee relations objectives.

Additional steps have been taken in other parts of C-P ’ s human resource and
labor relations division to stimulate more regional and global coordination of its
operations. For example, the company introduced software for handling employee
personnel records that gives employees an easy way to monitor and make changes
in their personnel profi le (e.g., when their family status changes because of events
such as marriage or the birth of a child). It also created centralized call centers
to handle employee requests. The move to shared information services was facilitated
by the growing similarity in the nature of the business and technologies in the
company ’ s various business units, spurred in large part by the increased role of
the company ’ s global supply chain.

At the central corporate, country, and plant levels of C-P, there is now increased
attention to work conditions throughout the company ’ s global supply chain.
The company makes a regular corporate audit of labor practices, including the
monitoring of pay levels and work time and efforts to eliminate child labor. This
audit is held at all of C-P ’ s supplier plants and the plants the company directly
operates.

The Impact of Globalization on the Management of Labor
Relations Processes

For all organizations, globalization is raising a series of questions and challenges
related to how labor relations are managed across global suppliers and those who
contract with multinational fi rms:

• Which employer is responsible for labor practices in global supply operations,
the MNC or the local supplier?

• Should an MNC have an explicit global labor strategy? If yes, what should
it be and how should it be monitored and enforced?

• What standards should govern labor practices in an MNC ’ s global supply
chain, given the great variation in content and the level at which standards
are set for issues such as minimum wages, overtime, and child labor regulations?
How should MNCs deal with the great variation in the quality of enforcement
of labor and employment laws across transitioning economies?

• Who, if anyone, represents workers in global supply chains? Unions are
largely organized at the national level and have not expanded to serve workers
across national boundaries and the level of unionization is very low in many
transitioning economies (see Chapter 15 ).

• What are the consequences of globalization for labor relations? Is the “race
to the bottom” that lowers the standards of living in higher wage countries
and holds down wages and working conditions in low-wage countries inevitable

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Global Pressures 363

or does globalization support economic development, employment growth,
and improved pay and other employment terms in transitioning nations?

MANAGING THE POLICIES AND LABOR PRACTICES
OF GLOBAL SUPPLY CHAINS

The Nike company offers one example of how an MNC has dealt with these
key issues. Initially, Nike, like many other MNCs, argued that labor practices
among its global suppliers were not its responsibility. As worker activists brought
media attention the presence of child labor and unsafe working conditions in
companies in Nike ’ s supply chain, the company experience increasing pressure
to question and ultimately to revise its view. By the mid-1990s, Nike leaders
observed that there was a direct correlation between the growing number of
media accounts of poor labor practices and conditions in its supply chain and the
company ’ s falling stock price. In 1998, Nike ’ s CEO Phil Knight famously said
he was tired of the fact that “Nike ’ s products have become synonymous with
slave wages, forced overtime, and arbitrary abuse.” 6

Nike changed its policies and practices and became an early leader by establishing
an internal Corporate Social Responsibility Unit. It charged this new unit to
create a code of conduct that the company would use to monitor and evaluate
labor practices in its supply chain and eventually to make public where its products
are made and the extent to which its suppliers are meeting the standards in its
code of conduct. Box 14.2 lists the practices covered in Nike ’ s code of conduct.
While other large MNCs have followed a similar path, unfortunately, all too
often it has taken a tragic accident to motivate companies to do so. Apple ’ s largest
manufacturer in China, Foxconn, experienced suicides and considerable unrest
in its factories before Apple began to actively monitor and seek to improve
operations in its supply chain. The most visible and largest tragedy to date was
the collapse of an apparel factory in Bangladesh in 2013, which led to the death
of more than 1,100 workers, most of whom were female.

Monitoring Codes of Conduct

Once a company creates a code of conduct, it must decide how to monitor and
enforce it. Should the company do it itself, using audit teams staffed by members
of their social responsibility units? Should it hire and pay directly an accounting
fi rm to audit labor practices? Should it work with and allow NGOs to do the
auditing? Should it audit operations on an unannounced basis or tell suppliers in
advance when audits will be done? Should it coordinate its audits with other
MNCs that purchase goods from a given supplier to avoid having multiple fi rms
using different standards and auditing operations multiple times? What standards
should apply—ones that are consistent with the host country ’ s laws, norms, and
competitive wage rates or company-wide standards?

Some MNCs, such as Walmart, have sought to avoid working with nongov-
ernmental organizations (NGOs) and instead hire consultants and professional
engineering fi rms to monitor suppliers. Others use a mix of internal auditors,

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364 Part V. Special Topics

BOX 14.2
Nike ’ s Code of Conduct

Employment is voluntary

• The contractor does not use forced labor, including prison labor, indentured
labor, bonded labor or other forms of forced labor. The contractor is responsible
for employment eligibility fees of foreign workers, including recruitment
fees.

Employees are age 16 or older

• Contractor ’ s employees are at least age 16 or over the age for completion of
compulsory education or country legal working age, whichever is higher.
Employees under 18 are not employed in hazardous conditions.

Contractor does not discriminate

• Contractor ’ s employees are not subject to discrimination in employment,
including hiring, compensation, promotion or discipline, on the basis of
gender, race, religion, age, disability, sexual orientation, pregnancy, marital
status, nationality, political opinion, trade union affi liation, social or ethnic
origin or any other status protected by country law.

Freedom of association and collective bargaining are respected

• To the extent permitted by the laws of the manufacturing country, the
contractor respects the right of its employees to freedom of association and
collective bargaining. This includes the right to form and join trade unions
and other worker organizations of their own choosing without harassment,
interference or retaliation.

Compensation is timely paid

• Contractor ’ s employees are timely paid at least the minimum wage required
by country law and provided legally mandated benefi ts, including holidays
and leaves, and statutory severance when employment ends. There are no
disciplinary deductions from pay.

Harassment and abuse are not tolerated

• Contractor ’ s employees are treated with respect and dignity. Employees are
not subject to physical, sexual, psychological or verbal harassment or abuse.

Working hours are not excessive

• Contractor ’ s employees do not work in excess of 60 hours per week, or the
regular and overtime hours allowed by the laws of the manufacturing country,
whichever is less. Any overtime hours are consensual and compensated at a

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Global Pressures 365

premium rate. Employees are allowed at least 24 consecutive hours’ rest in
every seven-day period.

Regular employment is provided

• Work is performed on the basis of a recognized employment relationship
established through country law and practice. The contractor does not use
any form of home working arrangement for the production of Nike-branded
or affi liate product.

The workplace is healthy and safe

• The contractor provides a safe, hygienic and healthy workplace setting and
takes necessary steps to prevent accidents and injury arising out of, linked
with or occurring in the course of work or as a result of the operation of
contractor ’ s facilities. The contractor has systems to detect, avoid and respond
to potential risks to the safety and health of all employees.

Environmental impact is minimized

• The contractor protects human health and the environment by meeting
applicable regulatory requirements including air emissions, solid/hazardous
waste and water discharge. The contractor adopts reasonable measures to
mitigate negative operational impacts on the environmental and strives to
continuously improve environmental performance.

The code is fully implemented

• As a condition of doing business with Nike, the contractor shall implement
and integrate this Code and accompanying Code Leadership Standards and
applicable laws into its business and submit to verifi cation and monitoring.
The contractor shall post this Code, in the language(s) of its employees, in
all major workspaces, train employees on their rights and obligations as defi ned
by this Code and applicable country law; and ensure the compliance of any
sub-contractors producing Nike branded or affi liate products.

Source : “Nike, Inc., Code of Conduct,” August 2010, accessed at http://about.nike.com/
pages/transform-manufacturing on January 17, 2017. See also Nike ’ s Corporate Respon-
sibility Report: http://about.nike.com/pages/transform-manufacturing .

consultants, and NGOs. Still others work with global labor organizations to
perform auditing and training functions. We will discuss the roles NGOs play in
these processes in more detail later in this chapter.

The effectiveness of corporate audits is one of the most hotly debated issues
in the fi eld of labor relations today. The results of the best research on this topic
indicate that on a scale of 0 to 100, the average compliance rate tends to peak
slightly above 50 percent. In addition, few plants appear to be on a path of

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366 Part V. Special Topics

continuous improvement toward 100 percent compliance. Instead, over time,
plants are as likely to exhibit declines in compliance scores.

Some plants do better than others on a consistent basis. Plants located in
countries with strong laws governing labor and other business practices tend to
have higher compliance scores. So do plants with longer-term contracts with
MNCs and plants where there is more management interaction and sharing
of expertise about best practices in lean manufacturing and advanced human
resource management systems. 7 However, the fact that periodic audit inspections
of building safety do not ensure that workplaces are truly safe is well illustrated
by the examples a New York Times account gives of the steps managers at numerous
garment factories have taken to avoid or manipulate the inspection/audit process
(see Box 14.3 ).

BOX 14.3
Fast and Flawed Inspections of Factories Abroad

Inspectors came and went from a Walmart-certifi ed factory in Guangdong
Province in China, approving its production of more than $2 million in
specialty items that would land on Walmart ’ s shelves in time for
Christmas.

But unknown to the inspectors, none of the playful items, including
reindeer suits and Mrs. Claus dresses for dogs, that were supplied to Walmart
had been manufactured at the factory. Instead, Chinese workers sewed the
goods—which had been ordered by the Quaker Pet Group, a company
based in New Jersey—at a rogue factory that had not gone through the
certifi cation process set by Walmart for labor, worker safety or quality,
according to documents and interviews with offi cials involved.

To receive approval for shipment to Walmart, a Quaker [Pet Group]
subcontractor just moved the items over to the approved factory, where
they were presented to inspectors as though they had been stitched together
there and never left the premises.

Soon after the merchandise reached Walmart stores, it began falling apart.
Fifteen hundred miles to the west, the Rosita Knitwear factory in north-

western Bangladesh—which made sweaters for companies across Europe—
passed an inspection audit with high grades. A team of four monitors gave
the factory hundreds of approving check marks. In all 12 major categories,
including working hours, compensation, management practices and health
and safety, the factory received the top grade of “good.” “Working
Conditions—No complaints from the workers,” the auditors wrote.

In February 2012, 10 months after that inspection, Rosita ’ s workers
rampaged through the factory, vandalizing its machinery and accusing
management of reneging on promised raises, bonuses and overtime pay.

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Global Pressures 367

Some claimed that they had been sexually harassed or beaten by guards.
Not a hint of those grievances was reported in the audit. …

An extensive examination by The New York Times reveals how the
inspection system intended to protect workers and ensure manufacturing
quality is riddled with fl aws. The inspections are often so superfi cial that
they omit the most fundamental workplace safeguards like fi re escapes. And
even when inspectors are tough, factory managers fi nd ways to trick them
and hide serious violations, like child labor or locked exit doors. Dangerous
conditions cited in the audits frequently take months to correct, often with
little enforcement or follow-through to guarantee compliance.

Supply chain experts and monitors say that far too often, factory managers
play cat-and-mouse games with inspectors because they are desperate to
avoid a failing grade and the loss of a lucrative stream of orders.

The experts provided real-life examples. To avoid appearing illegally
overcrowded, one factory moved many machines into trucks parked outside
during an inspection, a monitor said. Whenever inspectors showed up at
certain plants in China, the loudspeakers began playing a certain song to
signal that underage workers should run out the back door, according to
several monitors. During inspections in India, some factories displayed
elaborate charts detailing health and safety procedures that, like stage props,
were transferred from one factory to another, another monitor said. …

Mr. [Auret] van Heerden [president of the Fair Labor Association] said,
“You can never visit facilities often enough to make sure they stay compliant—
you ’ ll never have enough inspectors to do that. What really keeps factories
compliant is when workers have a voice and they can speak out when
something isn ’ t right.”

Source : Extracted from Stephanie Clifford and Steven Greenhouse, “Fast and Flawed
Inspections of Factories Abroad,” New York Times . September 3, 2013, http://
www.nytimes.com/2013/09/02/business/global/superfi cial-visits-and-trickery-undermine-
foreign-factory-inspections.html .

Evidence shows that while codes of conduct have helped improve standards,
they cannot, on their own, serve as a comprehensive strategy for achieving
compliance or sustained improvements in labor standards in transitioning countries.
There is evidence that countries with stronger labor laws and good enforcement
practices have better rates of compliance with established labor standards. Research
also suggests that combining the monitoring and auditing of labor conditions
with advice and training for management on state-of-the-art lean manufacturing
and human resource practices generates further improvements. The ILO ’ s Better
Factories Cambodia program suggests that a heavy infusion of incentives (lower
tariffs or other trade restrictions), government and international pressures, and
support for workplace-based unions can also have positive effects.

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368 Part V. Special Topics

The evidence that corporate codes of conduct lead to positive (but limited)
results has led to active debates over what else needs to be done to improve labor
conditions in global supply chains. 8 Meetings of the multiple stakeholders
involved—MNCs, NGOs, unions, government offi cials, representatives from the
International Labour Organization (ILO), and academics—have been held at
various universities to seek consensus on how to improve the monitoring of and
compliance with codes of conduct, but to date no clear consensus has emerged.
One big problem is that a root source of pressures to violate labor standards is
the purchasing and sourcing staff of MNCs. Pressures to deliver products that
have short life cycles (e.g., a popular style of shirts, shoes, etc. or the newest iPad
or similar electronic device) quickly reverberate down through the supply chain
to contractors, who conclude that they have no choice but to pressure their work
force to meet the schedule. Not surprisingly, work hour rules—standards about
overtime, maximum hours, meal and rest breaks, days off, etc.—are among the
most frequently violated features of codes of conduct.

INTERNATIONAL (FREE) TRADE AGREEMENTS

International trade has been expanded in recent years through the negotiation of
various trade agreements. Our review of several of those agreements focuses on
the concerns about labor rights and labor conditions that surfaced during debates
about these agreements and the provisions in them to address those concerns.
We focus on the three trade agreements the United States has made with Canada
and Mexico, Jordan, and Colombia. For a discussion of the important infl uence
of international labor law, see Chapter 3 .

NAFTA

The North American Free Trade Agreement (NAFTA) between Canada,
the United States, and Mexico took effect in January 1994. It removed tariffs
and other trade barriers among the three countries over a fi fteen-year period.
Both the passage and the continuing effects of NAFTA have been extremely
controversial. The agreement has been widely criticized by labor unions who
claim that Mexico ’ s low wages are the reason many U.S. fi rms have relocated
south of the border. Environmentalists worry that companies fl ee south so they
can take advantage of weak pollution controls and lax enforcement of environmental
regulations. The American business community and many economists, on the
other side of this debate, support NAFTA on the grounds that it brings gains
through trade to all three countries. This is the reason Presidents George W.
Bush, Clinton, and Obama gave for their support for this international policy.
NAFTA supporters claim that it will help integrate Mexico more fully into the
world economy and thereby address Mexico ’ s social problems and their spillover
effects in the United States (such as high immigration and the drug trade). To
address its critics, side agreements were added to NAFTA concerning the environ-
ment and labor rights. The labor side agreements create national administrative

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Global Pressures 369

offi ces that are authorized to investigate public charges that one of the NAFTA
countries is not enforcing its own labor laws.

The U.S.-Jordan Trade Agreement

In the U.S-Jordan Free Trade Agreement (2001), both countries committed to
“reducing barriers for services, providing cutting-edge protection for intellectual
property, ensuring regulatory transparency, and requiring effective labor and
environmental enforcement.” 9 The effects of this treaty in Jordan were signifi cant
because U.S. companies such as Walmart and Target quickly established factories
in Jordan and in the fi rst year of the trade agreement Jordan increased its exports
by 213 percent.

The U.S-Jordan Free Trade Agreement was the fi rst such agreement between
the United States and a foreign country that included labor provisions in the text
of the agreement. Both countries agreed to comply with the ILO ’ s Declaration
on Fundamental Principles and Rights at Work and to enforce their own domestic
labor laws. 10 In addition, the agreement established dispute resolution procedures
and trade sanctions to be used if either country was seen as violating its domestic
labor laws.

However, although the labor and environmentalist communities hailed these
provisions, the U.S government ’ s policies regarding its enforcement of labor laws
became much more pro-business when George W. Bush became president. In
2001, U.S Trade Representative Robert Zoellick and the Jordanian ambassador
to the United States announced that both the U.S and Jordan had agreed not to
resort to trade sanctions and that neither country would use the dispute resolution
enforcement procedures outlined in the free trade agreement if doing so would
lead to blocking trade. Consequently, the labor provisions that had been hailed
as revolutionary in this free trade agreement were not applied as had been hoped. 11
In addition, after the free trade agreement came into force in 2001, Jordan passed
the Public Assemblies Law and other legislation that limited freedom of association
and collective bargaining.

In 2006, a representative of the National Labor Committee (an NGO) testifi ed
to Congress that labor laws were not being enforced in Jordan and provided
evidence that the Jordanian garment industry had sweatshops where workers
worked twenty-hour days, were not paid consistently, and were emotionally and
physically abused and that such shops hired migrant workers from China, Sri Lanka,
and Bangladesh who were being forced to work as de facto involuntary servants.

The U.S.-Colombia Trade Agreement

The U.S-Colombia Trade Promotion Agreement (CTPA) was implemented in
2012. 12 The agreement states that both the U.S and Colombia will continue to
maintain in domestic law the right to freedom of association (i.e., the right of
workers to form and join a union) and the right of workers to engage in collective
bargaining. In addition, both sides promised that they would eliminate all forms
of forced labor and child labor.

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370 Part V. Special Topics

Observers claim that as has been the case in Jordan and Mexico, the labor
rights provisions in the Colombia trade pact have proven to be ineffective. Allega-
tions have surfaced that since 2010, 104 labor and human rights activists have
been murdered in Colombia. In addition, the Congressional Monitoring Group
on Labor Rights has provided extensive documentation showing that the right
to organize and engage in collective bargaining is being curtailed and undermined
in Colombia. 13

The Controversy Surrounding Trade Agreements

These three trade agreements make it clear that there is a great deal of controversy
about to the real impacts of trade agreements on workers’ rights and work condi-
tions. Defenders of those agreements argue that trade does ultimately lead to
higher rates of economic growth in transitioning economies and improvements,
albeit gradual, in wages and work conditions. Critics, on the other hand, claim
that trade pacts encourage MNCs to leave countries where wages and work
conditions are better. Critics also allege that any growth in employment largely
occurs in low-wage sectors, often at the expense of indigenous (and frequently
more craft-oriented) production. These debates have contributed to a reluctance
to approve the Trans-Pacifi c Partnership that has surfaced in the U.S. Congress
(see Box 14.4 ).

BOX 14.4
The Debate Surrounding the Trans-Pacifi c Partnership Trade
Agreement

The Trans-Pacifi c Partnership Agreement (TPP) is a trade agreement that
was signed on February 4th, 2016, by twelve Pacifi c Rim countries, including
the United States. The Offi ce of the United States Trade Representative
has stated that the agreement will “promote economic growth; support the
creation and retention of jobs; enhance innovation, productivity and com-
petitiveness; raise living standards; reduce poverty in our countries; and
promote transparency, good governance, and enhanced labor and environ-
mental protections.” The TPP includes provisions that will eliminate or
substantially reduce tariff and nontariff barriers in essentially all trade in
goods and services, including barriers to investment in goods and services.
It will also facilitate the development of production and supply chains,
promote innovation, and ensure that economies of all levels of development
can participate in trade.

Supporters of the TPP in the United States claim that it will bring about
an increase in U.S.-produced exports produced and increased support for
well-paying U.S. jobs that will strengthen the middle class. Although President
Obama has been a fi rm advocate of the agreement, it has been opposed by

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Global Pressures 371

many Democrats. In addition to dissent from high-ranking political fi gures,
there has been a signifi cant amount of union opposition to the TPP. One
of the main reasons for the opposition is due to fear that liberalization of
trade will increase competition between U.S. labor and labor in low-wage
countries that are a part of the agreement. Pacifi c Rim countries include
Vietnam, Mexico, Chile, Peru, Brunei, and Malaysia.

Union leaders believe that the increase in competition that will result
from the TPP will lead to signifi cant losses of U.S. jobs because of outsourcing
and lower wages for those who are able to keep their domestic jobs. Critics
of the TPP also do not believe that the agreement has adequate protections
for workers in the lower-income countries that are parties to the agreement.
For example, independent labor unions are not permitted in Vietnam; only
unions affi liated with the Communist Party are recognized. Brunei has
outlawed strikes and refuses to recognize collective bargaining.

U.S. unions argue that the Obama administration has made concessions
on labor rights issues in order to get transitioning countries to accept the
agreement, despite the statement of the United States Trade Representative
that the agreement promotes “enhanced labor protections.” Unions believe
that what little labor protection provisions the agreement does have are
nullifi ed by inadequate enforcement mechanisms. Critics of the TPP claim
that worker protection effectively is left to the discretion of the individual
countries, which will likely do little to change their current practices.

In order for the United States to ratify the TPP, Congress would have
had to pass a bill to implement the agreement. In early 2017, newly elected
President Trump signed a statement formally abandoning the TPP.

Sources : Offi ce of the United States Trade Representative, “Summary of the Trans-Pacifi c
Partnership Agreement,” October 2015, https://ustr.gov/about-us/policy-offi ces/press-
offi ce/press-releases/2015/october/summary-trans-pacifi c-partnership ; Ben Penn, Len
Bracken, and Rosella Brevetti, “Some See TPP Trade Deal as Harmful to Workers,”
Daily Labor Report , October 5, 2015, C-1, Kevin Granville, “What is TPP? Behind the
Trade Deal that Died,” New York Times , January 23, 2017, https://www.nytimes.com/
interactive/2016/business/tpp-explained-what-is-trans-pacifi c-partnership.html .

LABOR ’ S RESPONSES TO THE POWER ADVANTAGE
OF MULTINATIONAL CORPORATIONS

The expansion of economic activity across national boundaries puts workers and
unions at a disadvantage in terms of bargaining power. Multinational operation
allows management to shift production and capital across national borders and
raises the competitive pressures facing the work force. Imagine, for example, the
pressures high-paid U.S. (and Western European) workers face when MNCs
operating in their countries can shift production to countries where workers
receive hourly wages that are a small fraction of those U.S. and European workers

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372 Part V. Special Topics

earn and where environmental and other social regulations are weaker. Unionists
refer to this as social dumping . When management is struck by workers in
their operations in one country, it has a bargaining power advantage if it can
turn to production facilities or substitute workers in other countries.

In theory, one way a union could counter the advantages management gains
from a company ’ s expansion of its production locations would be to expand its
own jurisdiction to make it coextensive with the boundaries of the MNC. Unions
in the United States (and in a number of other advanced industrialized countries)
have expanded their jurisdiction by shifting from local or regional organizing to
become national in scope as the product markets companies serve also became
national. If this were to happen on a large scale, the resulting multinational
unions would be better able to remove competition across workers in the different
locations where MNCs operate. This section examines how successful unions
have been at becoming multinational.

Even though there are some examples of multinational unions, or at least the
coordination of policies of national unions, this has not happened very often. Let
us consider why this is so and then look at some counterexamples.

Diffi culties Unions Face When Operating Multinationally

Unions have found it diffi cult to become multinational because of the wide
diversity that exists across countries in culture, law, and institutions. It is diffi cult
enough for a union operating in one country to maintain cohesion and solidarity
across its members. When the economic and cultural differences, communication
diffi culties, and fears that exist across workers in different countries are added on
top of the normal problems unions face, maintaining solidarity becomes a nearly
insurmountable problem.

Consider the problems that multinational operation in both transitioning countries
and highly industrialized countries creates for union solidarity. Workers in a
transitioning economy , who earn low wages and face few employment alterna-
tives, are generally very reluctant to support the bargaining demands of their
high-wage counterparts in advanced industrialized nations. There are strong
incentives for the workers in these two countries to view each other as competitors
for jobs.

Also, imagine how hard it is for a union to communicate to its members if
those members speak a variety of languages. Then imagine the diffi culty a mul-
tinational union would face as it tried to obtain and convey the information
union members would need as they entered a bargaining process. Here is another
area where management in MNCs has an advantage over unions. The managers
of an MNC typically have a lot of awareness of company objectives and worldwide
activities, whereas workers and unions are often hard pressed to gain information
about such activities.

The merger of independent unions across national borders has not been a
solution to multinational pressures. It is diffi cult enough to merge unions even
in a single country, where there are strong advantages to be gained in bargaining
power. Even greater impediments would exist if a merger were to involve two

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Global Pressures 373

unions based in different countries that represent workers at the same MNC. It
is most unlikely that the structure of two unions that might consider merging
would be similar, even if the workers were employed by the same fi rm. Similar
problems would exist even if these unions wanted to merely coordinate their
bargaining demands.

Yet even given these diffi culties, examples of cross-national union solidarity
and support can occur short of mergers or coordinated bargaining. We examine
efforts to build cross-national union solidarity below.

Cross-border union strategies have taken many different forms. The strategies
for Thai garment workers, German metalworkers, and U.S. retail workers must
be different. Industry, company, union structure, political traditions, ideology,
levels of bargaining power, and differing sets of goals all affect how cross-border
union activities are structured.

The Role of International Trade Secretariats

Some international trade secretariats provide information to member unions
and coordinate activities across national borders. These autonomous agencies
cover particular industries or groups of industries. The International Metalworkers
Federation, one of the most active of these secretariats, includes members from
both newly industrializing and highly industrialized nations. Among its many
activities, it issues research reports to its members.

Many of the secretariats have a close working relationship with the International
Federation of Free Trade Unions (ICFTU), which includes affi liated unions that
represent 48 million workers around the world. The ICFTU excludes Communist
unions. The World Federation of Trade Unions (WFTU), a federation of only
Communist unions, in the 1960s represented 134 million workers. After the
breakup of the Soviet Union, the role of the WFTU declined precipitously.
While the global expansion of trade is leading unions around the world to
communicate more extensively with their counterparts in other countries, the
infl uence of trade secretariats has been modest in part due to political differences
across the unions that are members of these union federations .

Cross-Border Union Alliances

Some unions have attempted to overcome diffi culties with communications and
political differences and have extended their reach globally either on their own
or by forming alliances across national unions. Airline pilots have the most fully
established international body. The International Federation of Airline Pilots
Associations is composed of 100 national-level pilot unions/associations with a
combined membership of approximately 100,000 pilots (see Box 14.5 ).

Cross-National Union Strategies and Pressure
Campaigns

Similar cross-border networks or formal agreements to coordinate when needed
have occurred in other industries as well. One prominent example was formed
in 2008 when the North American–based United Steelworkers and the United

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374 Part V. Special Topics

BOX 14.5
The International Federation of Airline Pilots Associations
(IFALPA)

The mission of IFALPA is to be the global voice of professional pilots by
providing representation, services and support in order to promote the
highest level of aviation safety worldwide.

This goal is realized through our core function which is to represent our
members by:

Interacting with international organizations to achieve the highest level of aviation
safety.

Developing common policies and positions and promoting the adoption of
such policies by ICAO, regulatory authorities and the State of each Member
Association.

Promoting and enhancing the role and status of professional pilots in ensuring
the safety of the aircraft and well-being of passengers and goods entrusted
to their care.

Promoting a viable and expanding air transport industry.
Providing training and education for the benefi t of professional pilots.
Providing Member Associations with services as needed.
Assisting in the organizational development of Member Associations.
Supporting Member Associations by providing expertise in the areas of Technical,

Safety, Regulation and Industrial issues.
Facilitating the exchange of information and the co-ordination of activities

amongst Member Associations and Pilot Alliances through various forums
such as Conference, Regional Meetings and Standing Committees.

Source : IFALPA, “Mission Statement,” http://www.ifalpa.org/about-us/mission-statement
.html .

Kingdom–based UNITE joined forces. Box 14.6 summarizes the goals of their
joint effort, called Workers Uniting. To date, these unions have supported each
other in strikes involving companies that have operations in Britain and North
America.

Comprehensive Union Pressure Campaigns

Unions that use a mixture of research, rank-and-fi le activism, boycotts, and
political leverage to put pressure on a company globally have developed more
comprehensive campaigns since the late 1980s. These campaigns often target a
single employer where workers have gone on strike, have been locked out, or
are engaged in an organizing drive. Such campaigns use in-depth research to

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Global Pressures 375

BOX 14.6
Workers Uniting: A Global Union

Workers Unite brings together Unite, the biggest union in the UK and
Ireland, with the United Steelworkers, the largest industrial union in North
America. Here are four reasons why this partnership is said to be critical
by Workers Uniting.

1. The economy is globalizing. From Brussels to Beijing, decisions about our
economy are increasingly made far from home. A global union can provide
us a voice in those decisions.

2. Politics is globalizing. Right wing politicians are using the same vicious
tactics to undermine our livelihoods in the UK as they are in the U.S. and
Canada. A global union can help us support progressive politics on both
sides of the Atlantic.

3. Our employers are globalizing. A couple decades ago, only a few of
our employers operated in more than one country. Now, nearly all of them
do. A global union can help us stand up to our employers wherever they
operate.

4. The movement is globalizing. Whether it ’ s standing up for fair trade or
fi ghting back against bank bailouts, progressive groups are mobilizing and
uniting everywhere. A global union can help us join them in the fi ght for
a better world.

Source : http://www.workersuniting.org/ .

identify vulnerabilities in the company ’ s global operations. Comprehensive union
campaigns build coalitions with other unions, communities, and NGOs around
the world to target the company ’ s image, its suppliers, or its customers globally
to pressure the company into improving labor conditions.

The 1986 Shell Oil boycott was one of the earliest truly global comprehensive
campaigns. Using the consumer boycott as its central tactic, the Shell campaign
linked anti-apartheid activists, trade unionists, civil rights activists, politicians,
church activists, and consumers in a global divestment campaign. In North America,
the United Steelworkers have used these types of campaigns to take on global
multinational companies such as BASF, Ravenswood, Bridgestone/Firestone, and
Goodyear to end strikes, lockouts, and support collective bargaining campaigns.
This approach is not limited to North American unions. Central American banana
workers, European dockworkers, and Taiwanese telecom workers have all used
cross-border campaigns since the late 1980s.

While many campaigns have been successful, this type of global coordination
and comprehensive campaigning requires large amounts of resources, funding,
and long-term trust between unions. MNCs have threatened unions with lawsuits

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376 Part V. Special Topics

for engaging in these types of campaigns, and weak transnational labor standards
have made it diffi cult for unions to enforce gains that have been made.

Cross-Border Union Networks

Union networks are groups of unions at a shared multinational employer that
come together to create a transnational union structure with the goals of sharing
information, coordinating activity, and bargaining with an employer on a trans-
national level. Networks fi rst appeared in the 1970s. Global union federations
have promoted them as a way for unions to overcome the imbalance in bargaining
power with multinational employers. Networks create long-term relationships
between unions that have made it possible for them to share information about
a common employer, to act as infrastructure during cross-border campaigns, and
to act as decision-making bodies that can bargain with employers on a transnational
level.

Dozens of networks have been established in the auto, chemicals, food, and
service industries. Some networks such as those created by unionized workers at
Carrefour and Arcelor have been able to sign agreements with employers on a
transnational level. Examples include international framework agreements
that establish basic health and safety conditions and independent monitoring.
Others such as unions at Volkswagen and Mercedes have created European-style
works councils that meet annually with company management to discuss working
conditions and compliance with basic ILO conventions. Finally, others such as
unions at Gerdau and Sodexo have used networks to create global comprehensive
campaigns. Unions in Brazil have used networking as a strategy to coordinate
bargaining nationally and to establish transnational links with unions in a company ’ s
home country.

However, challenges remain as differences in national labor laws, language and
communication issues, and weak transnational legal regulations have hampered
attempts to build long-term union structures such as networks.

Campaigns against Sweatshops in the Garment Industry

In the 1970s, sweatshops as a form of garment production reappeared in Latin
America, the Caribbean Basin, Southeast Asia, and Southern California. Nations
reeling from debt crises and structural adjustment programs had turned to
export processing zones (EPZs) for growth strategies. EPZs are tax-free industrial
havens for MNCs where they can assemble low-value products such as gar-
ments, textiles, electronics, and toys and can employ a low-wage, mainly female
work force. Aided by free trade agreements and a system of subcontracting and
global production, sweatshops became the symbol of high fashion apparel lines
in the developed world and the face of a race to the bottom for transitioning
countries.

Workers, mainly young women, organizing in places such as Guatemala, Sri
Lanka, Thailand, and Haiti have used global solidarity campaigns as means of
winning improvements in individual garment factories and as a way to increase
pressure for industry- and retailer-wide codes of conduct. These campaigns bring

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Global Pressures 377

together a unique set of actors that includes garment workers and unions, trans-
national NGOs, labor union allies, consumer activists, and North American
university students in advanced industrial economies.

Two factors are unique to organizing in the garment industry. First, many of
the products produced in the apparel factories of Latin American and South Asia
are sold to consumers in North America and Western Europe. This created an
opportunity for garment workers to make alliances with unions and consumer
groups in advanced industrial countries by bringing to light to their working
conditions. Second, many of the factories in newly industrializing countries are
actually subcontractors for large, well-known brand names such as Benetton,
Disney, and Reebok that are headquartered in advanced industrial countries.
Because of the disparity between the high cost of luxury apparel in the advanced
industrial countries and the poor working conditions of workers in the transitioning
countries, the campaigns of garment workers have often relied on publicity
campaigns linking well-known retailers such as the Gap and Walmart to poor
working conditions in transitioning countries as a way to improve working
conditions in garment factories.

In addition, because athletic companies such as Adidas and Nike have large
contracts with universities, U.S. college students have become key supporters of
these campaigns through groups such as United Students Against Sweatshops .

Some unions have promoted international framework agreements (IFAs)
as effective and participatory structures. IFAs are multilateral agreements between
a corporation and a union, usually one of the global union federations , to
ensure equal standards across a fi rm at a global level. IFAs establish core labor
standards such as the abolition of child labor, nondiscrimination, and freedom of
association. They attempt to cover all employees, including workers who are
subcontracted or are employed by subsidiaries and suppliers of the fi rm and are
designed to establish an institutionalized relationship with the fi rm at the headquarters
level that ensures some form of monitoring and a process for improving working
conditions. Unionized workers have had some success in getting MNCs to sign
IFAs, but they are voluntary and are diffi cult to enforce due to a weak regulatory
environment transnationally.

THE ROLE OF NGOS

NGOs are now playing active roles in identifying abuses, lobbying for improved
standards and improved enforcement practices, and in some case actively representing
workers and/or auditing labor conditions in supplier operations. Some NGOs
are funded by employers and some are funded independently by private foundations,
individual donations, or labor unions. Some choose to work at arm ’ s length with
MNCs and some choose to work in collaboration with them. Many NGOs use
both tactics. Various meetings of multiple stakeholders have been held to bring
NGOs, unions, MNCs, and international organizations such as the ILO and the
World Bank together to try to learn from their experiences to date and from the
research that has been done on global labor standards. However, diversity of

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378 Part V. Special Topics

practices remains the norm. (See Box 14.7 for examples of different NGO
activities).

The Worker Rights Consortium

The Worker Rights Consortium (WRC), one of the most active of these NGOs,
has been involved in efforts to improve labor conditions at Foxconn in China,
at apparel factories in Bangladesh, and at Nike plants in various countries. The
history and role of the WRC is described in detail in Box 14.8 .

BOX 14.7
Examples of Labor NGOs and What They Do

Name Activities

Fair Labor Association
www.fairlabor.org

Monitors factories independently and reviews company audits
Certifi es compliance with codes of conduct
Reports on results of audits in participating companies
Governed by Board of Industry that consists of

representatives from industry, NGOs, and universities
Social Accountability

International
www.sa8000.org

Certifi es that manufacturers are in compliance with Social
Accountability International labor standards

Trains auditors
Provides self-assessment software for supply chains with

recommendations for how to improve performance
Lists factories that have achieved SA8000 certifi cation
Governed by mix of industry, NGO, and legal specialists

Worker Rights
Consortium

www.workersrights.org

Investigates conditions in factories that sell licensed apparel to
universities

Publishes periodic reports on factory conditions in different
countries

Maintains public database of factories that supply goods to
universities

Governed by a board that consists of university, student, and
other independent worker rights advocates and experts

United Students Against
Sweatshops

www.usas.org

Campaigns against abuses of workers’ rights in factories that
supply apparel licensed by universities

Advocates for fair working conditions for university
employees

Led by student representatives from participating universities
China Labor Bulletin
www.clb.org.hk/en/

Provides legal assistance to workers and labor organizations
in China

Conducts research on labor conditions in China
Maintains website on strikes and collective bargaining in

China
Led by professional staff; founded by worker rights advocate

Han Dongfang

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Global Pressures 379

BOX 14.8
Policing Worker ’ s Rights in the Global Economy: The Worker
Rights Consortium

The Worker Rights Consortium (WRC), a nonprofi t organization started
by United Students Against Sweatshops in consultation with workers and
labor rights experts, has become a watchdog for international sweatshop
labor. The WRC was started to help enforce the manufacturing codes of
conduct adopted by colleges and universities. These codes ensure that factories
that produce clothing and other goods bearing college and university names
respect the rights of their workers.

The WRC has pressured universities to end contracts with companies
that do not comply with labor standards. For example, in March 2000,
Brown University terminated its contract with Nike Inc., because of Brown ’ s
requirement that Nike comply with the university ’ s licensing requirements
and with a monitoring system that is part of the WRC process. In its
defense, Nike said it had “serious concerns about the code and monitoring
system included under the WRC” and that “the only effective way to make
progress in improving factory conditions around the world is to have all
stakeholders at the table.” Nike claimed that the WRC was excluding
industries that it should be working with.

The WRC at times has clashed with the Fair Labor Association (FLA),
an independent group formed by the Clinton administration in 1999 to
monitor the labor standards of overseas apparel manufacturers that sell their
products to the United States. The FLA grew out of the Apparel Industry
Partnership, a group of apparel manufacturers, consumer groups, and labor
and human rights organizations President Clinton brought to the White
House in 1996. By 2000, over 100 colleges and universities had associated
with the FLA so that they could be assured that clothing with their logos
was not made in sweatshops. However, the WRC has criticized the FLA
for being an industry-controlled monitoring system that only covers up
sweatshop abuses. The WRC supported a nine-day sit-in at the University
of Pennsylvania to protest the university ’ s association with the FLA.

Since 2000, however, the WRC and FLA have begun to forge a working
relationship, including working together on various monitoring projects.
The WRC ’ s membership now includes more than 100 colleges and
universities.

Sources : “Nike Terminates Contract with Brown after University Seeks Compliance
with Code,” Daily Labor Report , April 4, 2000, A-2; “Temple University Reviews
Membership in ‘Fair Labor’ Apparel Monitoring Group,” Daily Labor Report , February
22, 2000, A-5.

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380 Part V. Special Topics

THE NEGOTIATION OF GLOBAL STANDARDS

The challenge of creating negotiations structures, processes, and ongoing relationships
in global operations has generated several different approaches. The most basic
approach is to promote union representation on the shop fl oor of supplier operations
by providing technical assistance to unions in transitioning countries. The ILO
provides this type of technical assistance. In Cambodia, the ILO has developed
a particularly extensive program called Better Factories Cambodia that provides
training, dispute resolution, and monitoring of supplier operations. It also educates
workers about best practices for unions and collective negotiations and labor
standards. Reports on the program are quite positive, unions representing a
majority of workers in some apparel plants in Cambodia. In addition, compliance
with labor standards in the ILO ’ s code of conduct range from 70 and 95 percent.
However, reports continue of collusion and corruption among some employers
and union leaders. This program has been sustained for over a decade in large
part because of the continued support of the ILO and the Cambodian government.
An independent evaluation of the ILO program has shown that the garment
industry has continued to grow in Cambodia since the program was put in place
and that fi rms that complied with the employment standards the program monitors
are more likely to survive over time than those that did not initially comply. 14

While the Cambodian example is encouraging, it has yet to be replicated in
other newly industrializing countries with low rates of unionization rates remain
quite low. In such countries, the challenges of maintaining stable unions in
industries and in companies are quite high.

In some ways, NGOs conduct activities that are similar to what unions do.
Some NGOs have led efforts to publicize abuses of labor standards. Some have
negotiated with companies to upgrade health and safety and pay levels in specifi c
countries. Others have created sophisticated software programs that help fi rms
evaluate the state of labor practices in their supply chains and provide advice
about how to improve them. Other NGOs, such as United Students Against
Sweatshops, have used consumer boycotts and lawsuits against highly visible
companies the produce brand-name products, such as Adidas and Nike, to pressure
them to end labor abuses among their contractors.

NGOs that Do Unionlike Activities

Some NGOs include the direct negotiation of wages and improvements in other
work conditions in their activities. Three prominent examples are found in India.
We present them below as examples of the expanding role of NGOs are playing
around the world in directly representing and bargaining for low-wage workers.

In India, as in most transitioning economies, NGOs perform some the tasks
that unions in advanced industrial countries perform. One such organization is
the internationally acclaimed Self-Employed Women ’ s Association (SEWA). 15
Founded in 1972 by Nobel Peace Prize nominee Ela Bhatt, SEWA represents
poor self-employed women in rural areas of India who are earn money through
their own labor and small businesses. In 2008, the membership of SEWA reached

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Global Pressures 381

over 960,000. Dr. Bhatt ’ s main goals for SEWA include organizing women
workers for full-time employment and improving the compensation and benefi ts
the women workers receive for that work. SEWA also lobbies state governments
and the Indian national government to increase funding for health insurance and
for child care centers run by the association ’ s workers’ cooperatives. SEWA also
lobbies for more access to capital through credit with fi nancial institutions,
microloans, and lower interest rates for fi rst-time borrowers.

Another highly signifi cant NGO/union in India is the Kagad Kach Patra
Kashtakari Panchayat (KKPKP). KKPKP represents waste pickers, waste collectors,
and informal recyclers, all of whom are part of the informal sector of rural India. 16
A key aspect of KKPKP ’ s role is politically lobbying. KKPKP lobbies local
municipalities and state governments to increase grants to its credit cooperative,
which offers loans to members and provides a social security fund so waste
collectors have retirement funds. KKPKP also helps members negotiate and bargain
with local municipalities and private fi rms that hire waste collectors. It also supports
members who cannot reach an agreement with employers. For example, in April
2013, the KKPKP engaged in a sit-in strike in the city of Pune to protest the
low wages waste collectors received. 17

These are just two examples of the many NGOs in India that have taken on
important union-like roles. These organizations represent workers in negotiations
with government agencies as well as private sector employers. Almost 60 percent
of the Indian labor market consists of rural workers, many of whom labor in the
informal sector. These NGO/unions help promote the emergence of an Indian
middle class through advocacy, negotiations, protests, and political lobbying.

Summary

This chapter began with the hypothesis of John R. Commons that it would be
diffi cult to take wages out of competition by organizing the entire product and
labor market in a global economy. He argued without unions as a source of
power, a race to the bottom on wages and other working conditions would
result, and his hypothesis turned out to be correct.

U.S.-based MNCs have benefi ted from much globalization, including gaining
access to cheap labor and benefi ting from the effi ciencies global supply chains
make possible. The internationalization of production has created changes that
have given MNCs more bargaining power by increasing their strike leverage and
their access to cheap labor and as a result of the fact that MNCs can easily shift
production across national borders when facing militant labor in any one country.
To date, no single institutional response or alternative source of power has been
successful in counterbalancing this shift in power. Media exposure has been the
most effective way of putting pressure on MNCs to upgrade standards in their
supply chains. However, this method has proven to be successful only in short
episodes and has not led to sustained institutional change. While media reports
of tragedies or abusive work conditions create a fl urry of corrective activity, they
tend to lose momentum fairly quickly as media coverage fades.

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382 Part V. Special Topics

Consumers in general have not responded in consistent ways or demanded
data on labor standards or avoided products of companies with reported labor
standards problems. However, led by students who have organized on college
campuses, successful consumer campaigns have been mounted that require MNCs
that sell licensed athletic and sportswear bearing university logos to comply with
NGO specifi ed labor standards.

Evidence shows that corporate codes of conduct lead to the positive (but
limited) results. This has led to active debates over what else needs to be done
to improve labor conditions in global supply chains.

In addition, a number of cross-national union efforts have emerged, some of
which involve international networks of unions and workers. Other union campaigns
have linked with NGOs to make use of consumer and political pressure. It seems
to be the case that achieving and sustaining acceptable work conditions in supply
chains of MNCs will require a combination of efforts from management, labor,
NGOs, and governments, perhaps eventually reinforced by consumer purchasing
behavior.

Discussion Questions

1. Why do international production opportunities and international trade
generally advantage multinational corporations and disadvantage union in
terms of bargaining power?

2. In the past, what factors led most multinational corporations to prefer
to structure their internal labor relations function in a decentralized
manner, leaving most control over labor relations issues to local plant
managers?

3. What recent factors/trends are leading many multinational fi rms to move
toward more central coordination of their internal labor relations
function?

4. Why is it so diffi cult for unions to forge cross-national alliances and launch
successful cross-national pressure or bargaining campaigns?

5. Describe some of the steps you would take as the head of labor relations
in a large multinational fi rm to make sure that work conditions are fair and
respectable in your fi rm ’ s global supply chain.

Related Web Sites

ILO on Export Processing Zones:
http://www.ilo.org/actrav/areas/WCMS_DOC_ATR_ARE_EPZ_EN/lang–en/
index.htm

Better Factories Cambodia:
http://betterfactories.org/

Nike Code of Conduct and Corporate Social Responsibility:
http://about.nike.com/pages/transform-manufacturing

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Global Pressures 383

Suggested Supplemental Readings

Bronfenbrenner , Kate , ed . 2007 . Global Unions: Challenging Transnational Capital Through Cross-
Border Campaigns . Ithaca, N.Y. : ILR Press .

Multinational Companies in Cross-National Perspective: Integration, Differentiation, and the Interactions
between MNCs and Nation States . Special issue , ILR Review 66 , no. 3 ( 2013 ).

Locke , Richard M. 2013 . The Promise and Limits of Private Power . Cambridge : Cambridge
University Press .

Posthuma , Anne , and Dev Nathan eds . 2010 . Labour in Global Production Networks in India .
New Delhi : Oxford University Press .

Notes

1. John R. Commons, “American Shoemakers 1648–1895: A Sketch of Industrial Relations.”
Quarterly Journal of Economics , 24 no. 1 (1909): 39–98. See also Lloyd Ulman, The Rise of the National
Trade Union (Cambridge, Mass.: Harvard University Press, 1958).

2. For more on the history of Nike and evidence of labor conditions in global supply chains, see
Richard Locke, The Promise and Limits of Private Power (Cambridge: Cambridge University Press,
2013). The material in this chapter draws heavily on this book and on the larger MIT-Stanford
University Just Supply Chain research project.

3. See Jan Katz, “Cultural Issues in International Business,” in Handbook of International Business ,
ed. Walter Ingo (New York: Wiley, 1988): 11-1–11-17.

4. For recent research on how MNCs internally structure and operate their labor relations function,
see Multinational Companies in Cross-National Perspective: Integration, Differentiation, and the Interactions
between MNCs and Nation States. Special issue, ILR Review 66, no. 3 (2013).

5. Ibid.
6. Quoted in Locke, The Promise and Limits of Private Power , 49.
7. Ibid., 47–77.
8. See, for example, the Forum on this topic in The Boston Review 38 (May/June 2013): 12–29.
9. Pablo L. Gradi, “Trade Agreements and Their Relation to Labour Standards,” Issue Paper no.

3, November 2009, International Centre for Trade and Sustainable Development, http://ictsd.org/
downloads/2011/12/trade-agreements-and-their-relation-to-labour-standards.pdf .

10. Eli Kirschner, “Fast Track Authority and Its Implications for Labor Protection in Free Trade
Agreements,” Cornell International Law Journal 44, no. 2 (2011): 386–415.

11. Justice for All: The Struggle for Worker Rights in Jordan (Washington, D.C.: Solidarity Center,
2005), http://www.solidaritycenter.org/wp-content/uploads/2014/12/Jordan-JFA.pdf .

12. Offi ce of the United States Trade Representative, “U.S.-Colombia Trade Agreement,” https://
ustr.gov/uscolombiatpa .

13. “The U.S.-Colombia Labor Action Plan: Failing on the Ground,” 2013. A Staff Report,
Committee on Education and Workforce Democrats, U.S. House of Representatives, October.
http://democrats.edworkforce.house.gov/sites/democrats.edworkforce.house.gov/fi les/documents/
Colombia%20trip%20report%20-%2010.29.13%20-%20formatted%20-%20FINAL.pdf .

14. Drusilla Brown, Rajeev Dehejia, and Raymond Robertson, “Is There an Effi ciency Case for
International Labor Standards?” working paper, Tufts University, 2013. See also Kingdom of Cambodia,
International Labour Organization, and Better Factories Cambodia, “Thirtieth Synthesis Report on
Working Conditions in Cambodia ’ s Garment Sector,” July 2013, http://betterfactories.org/?p = 6706 .

15. “About Us,” Self-Employed Women ’ s Association , http://www.sewa.org/About_Us_History.asp .
16. “About Us,” Global Alliance of Waste Pickers , http://globalrec.org/who-we-are/ .
17. Leslie Vryenhoek, “KKPKP ’ s Six-Day Protest Wins a Promise from Municipality,” WIEGO , April 11,

2013, http://www.inclusivecities.org/blog/kkpkps-six-day-protest-wins-a-promise-from-municipality/ .

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384

15

INSIGHTS GAINED FROM COMPARATIVE
LABOR RELATIONS

One way to gain perspective on the labor relations system in your home country
is to compare it with systems in other countries. The U.S. labor relations system
is unique in many ways. The United States, for example, has one of the lowest
rates of unionization of any advanced democratic economy, and its rate of unioniza-
tion has fallen faster in the past 30 years than that of any other industrialized
country in the world. Management in the United States opposes unions more
strongly than managers in most other countries, and unions in the United States
are less closely tied to political parties than their counterparts are in Europe,
Australia, and many newly industrialized countries.

Other differences between labor relations in the United States and labor relations
elsewhere are noted throughout this chapter. A comparative look at what happens
in other countries makes is possible to assess whether any features of the labor
relations systems in other countries should be imported to the United States. This
question is now on the minds of many U.S. labor relations practitioners.

The three-tiered framework needs to be supplemented to take account of the
important roles that governments, international agencies, and NGOs play in
industrial relations in countries other than the United States (see Figure 15.1 ). A
comparative assessment of labor relations also should take account of the substantial
differences that exist across countries in their laws, political systems, and history.
The diversity in labor relations practices around the globe is so great that it is
not possible to present even a cursory examination of all of them. As a framework
for an international perspective, then, this chapter examines in detail the key
features of the labor relations systems in Germany and Japan as examples of
advanced industrialized countries and in China, India, South Africa, and Brazil
as examples of transitioning economies. 1

AN OVERVIEW OF HOW LABOR, MANAGEMENT,
AND GOVERNMENTS INTERACT

Regardless of where a country is on a spectrum of industrialization, labor, manage-
ment, and government engage in complex interactions that strongly infl uence

Labor Relations in Other Countries

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AN: 1589152 ; Harry C. Katz, Thomas A. Kochan, Alexander J. S. Colvin.; An Introduction to U.S. Collective Bargaining and Labor Relations
Account: s4264928.main.eds

Labor Relations in Other Countries 385

the evolution of labor relations. For example, unions and other workers’ movements
in some countries have aligned with a political party or are the core constituents
of a labor party that is active in mainstream politics. In this chapter, we will
discuss some cases where unions are aligned with the governing leaders or a
governing party. Another way unions and workers have infl uenced governments
is through their involvement in protests or other political actions that are part of
democratization campaigns or movements. Some of these efforts to promote
democracy have succeeded and have led to major political transformations.

On the other hand, governments in some countries have acted to sharply curtail
trade union activities and power. Governments have done so either by outlawing
union activities or by directly intervening to stop a strike or a union organizing
effort. In some countries unions are allowed, but governments control them or
sharply constrain what they can do. We describe some of those cases. It is important
to differentiate between trade unions that are independent and those that are
dominated by a government.

Governments also critically affect labor relations in companies and sectors that
a government owns or runs. Historically, nationalization of telecommunications,
airlines, or banking industries or resource extraction enterprises, for example, has
infl uenced the labor relations and employment conditions in those companies
and sectors. Governments also have signifi cant infl uence on labor relations through
regulations, in particular through laws that regulate the right to strike and other
union activities.

INTERNATIONAL
AGENCIES

EXTERNAL
ENVIRONMENT

NEGOTIATIONS
OUTCOMES

GOVERNMENT
ACTIONS AND

POLICIES NGOs

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Union strategies
and

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Work Organization
Employee motivation and

participation
Conflict resolution

Management
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structures

Figure 15.1. The three-tiered approach to the study of comparative labor relations

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386 Part V. Special Topics

Management and the interest groups that represent employers are also often
active participants in political processes in many countries that are striving to
promote their interests. For example, in some countries the business community
is strongly aligned with a particular political party or is part of a governing
coalition. Management can use its infl uence to promote the labor laws or the
tax, trade, and other economic policies it favors.

An Example of How a National Government Has Shaped
Labor Relations: China

The role of national governments in labor relations varies greatly. China is an
example of a country where the national government and the Communist Party
played a central role in the past in the functioning of the economic system and
of employment relations. However, the roles of the national government and the
Communist Party have evolved as a result of the introduction of economic reforms
that led to a greater role for market forces, as Box 15.1 describes.

BOX 15.1
China: The Evolving Role of the Government and the
Communist Party

Before market-oriented economic reforms, China had a planned economy
in which the national government was the single employer. In the planned
economy, the government set up detailed national and fi rm-level plans that
included production and wage levels. Communist Party secretaries were
the primary fi gures in enterprises; they helped maintain the infl uence and
political power of the Communist Party and oversaw economic and social
activities in enterprises. In this system, since the Communist Party (and the
national government) claimed to represent the interests of the working class,
there was no representative role for trade unions.

Economic reforms introduced from the 1980s on led the national govern-
ment and the Communist Party to gradually withdraw from the micromanage-
ment of workplaces. This is particularly true for the private sector, where
employers were given autonomy in business operations and employment,
albeit within the constraints provided by laws. In state enterprises, management
no longer needs to fulfi ll political functions for the government. However,
the government still has considerable infl uence in state enterprises, particularly
through its appointment of top managers. These appointed managers still
hold the status of Communist Party offi cials and can be transferred to other
Communist Party or government posts at any time.

In addition, the national government in China continues to act as a
regulator, arbitrator and mediator, and inspector in the employment system.

Source : MingWei Liu, “China,” in Comparative Employment Relations in the Global Economy ,
ed. C. Frege and J. Kelly (New York: Routledge, 2013), 324–347.

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Labor Relations in Other Countries 387

THE ROLE THAT LABOR HAS PLAYED IN
DEMOCRATIZATION

Since World War II, the labor movement has played key roles in introducing or
deepening democracy in a number of transitioning countries. Events in South
Africa and Korea are described in Boxes 15.2 and 15.3 below. A common theme
in these and other countries is that the labor movement and unions often have
aligned with student groups and other active members of civil society to increase

BOX 15.2
The Role Unions and Labor Protests Played in Bringing an End
to Apartheid in South Africa

Apartheid was a racial segregation system enforced by the South African
government from 1948 to 1994. Under apartheid, the rights of black and
mixed-race South Africans were severely restricted. The National Party
controlled the economic and social systems of South Africa during the
apartheid period.

The African National Congress (ANC), founded in 1912, was a major
force of opposition to the apartheid system. Throughout the fi rst forty years
of resistance, the ANC focused on using legal tactics and nonviolent direct
action as its method of protest. However, the perseverance of apartheid
even in the face of these tactics led the ANC to shift to advocating violent
resistance activities, such as bombing government facilities, so long as the
tactics avoided civilian deaths. Then labor protests emerged as a key challenge
to apartheid; black trade unions and eventually trade unions that organized
white workers led these protests.

During apartheid, the government sought cheap labor on mines and
farms, which led to the formation of a migrant labor system among the
black population and a set of laws that reserved specifi c, separate job sets
for different racial populations. In response to such legislation, unions such
as the South African Congress of Trade Unions (SACTU) emerged in the
1960s, only to be brutally oppressed by the state. However, in the late
1960s, leaders of the black consciousness movement, who realized the
potential of union activity, joined with unions to take more aggressive
actions to try to end apartheid.

A key turning point came in 1973 at a large industrial complex in Durban,
South Africa. On January 9, all 2,000 workers at the Coronation Brick and
Tile plant in the Durban complex went on strike, demanding wage increases
and presenting an elected committee to negotiate with management. The
resulting wage settlement spurred widespread union activity throughout the
city of Durban and then in many other parts of South Africa. Transport,
and then municipal, workers followed suit and within one month, 30,000

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388 Part V. Special Topics

workers in Durban were on strike. The apartheid system, which depended
upon black labor to keep its economy running, was facing for a serious
challenge to its continuation the fi rst time.

The Durban-inspired strike wave led to the establishment of several large
trade union federations, including the Federation of South African Trade
Unions (FOSATU) and the Congress of South African Trade Unions
(COSATU). Subsequent strikes organized by these federations led the South
African government to launch investigations of wage levels and to eventually
pass amendments to the Labor Relations Act that established unfair labor
practices and permitted black trade unions to form legally.

Critically, the base of worker militancy was in the manufacturing, com-
merce, construction, transport, and communication sectors. In contrast to
the mining industry, which corralled migrant workers into residential
compounds, these sectors were the most feasible to organize because the
rising cost of white labor meant that mining employers were increasingly
dependent upon the employment of Africans. Industries in the manufacturing
and service sectors were the highest paid in the economy, refl ecting the
developing power and strategic location of black semi-skilled workers.
Meanwhile, the newly emerging democratic trade unions premised their
initial growth on the organization of African labor.

Although the new unions faced severe repression and were always chal-
lenged by the that fact that a mass of surplus labor existed because of an
endemically high level of unemployment among black workers, they managed
to survive, grow, formalize, make wage gains, and erode the foundations
of workplace despotism.

The apartheid regime faced a severe challenge to its authority in 1973,
when the United Nations General Assembly denounced apartheid, which
was followed by the UN Security Council ’ s vote to impose an embargo
on the sale of arms to South Africa in 1976. Facing growing international
pressure, the National Party instituted several reforms, and in 1994, a new
constitution was adopted that enfranchised blacks and other nonwhite racial
groups through democratic elections. A key step in the fi nal end of apartheid
was the release of Nelson Mandela, a leader of the anti-apartheid movement,
from prison. Mandela became the head of the fi rst post-apartheid democrati-
cally elected government. Although he had been imprisoned for twenty-seven
years, he was able to live a long and highly infl uential life (he died at age
94 in 2013).

Although many factors contributed to the ending of apartheid, it is clear
that unions and labor protests contributed much to this transformation.

Source : Lester Kurtz, “The Anti-Apartheid Struggle in South Africa (1912–1992),”
International Center on Nonviolent Confl ict, June 2010, http://www.nonviolent-
confl ict.org/index.php/movements-and-campaigns/movements-and-campaigns-summarie
s?sobi2Task = sobi2Details&sobi2Id = 29 .

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Labor Relations in Other Countries 389

BOX 15.3
The Role of Korean Unions in Democratization and Political
Change

The post–World War II history of Korea was marked by authoritarian rule
by governments in league with the military. Violent political protests erupted
periodically to challenge that rule. Labor unions have played leading roles
in those political protests. In 1960, trade unions played a leading part in
the violent protests that culminated in the fall of the Syngman Rhee govern-
ment. In 1980, violent protests again swept the country as workers demanded
workers’ and union rights and improved wages and working conditions. In
1987, after Roh Tae-Woo, the ruling Democratic Justice Party ’ s presidential
candidate (and eventual victor in a subsequent election), pledged his support
for popular elections to determine a new president of the Republic of
Korea, a democratization movement began. The subsequent democratization
process unleashed popular protests and demands, particularly within the
trade union movement.

A massive strike wave followed, along with a rapid rise in union member-
ship and an explosion in wage levels. On May 2, 1990, for example, there
were violent protests in the port city of Ulsan when 30,000 workers from
affi liated Hyundai companies held rallies at work sites to protest a massive
police raid on strikers at the Hyundai Heavy Industries Company.

Worker protests were in part directed at existing trade unions and union
leaders. An array of unions was affi liated with the Korean Federation of
Trade Unions, and protesting workers opposed the complicity that had
existed between these unions and the government and employers. Workers
not only demanded higher wages and better working conditions but also
sought procedures that would allow unions that were independent from
government and managerial dominance.

The protest wave cooled down in the early 1990s, but another wave of
labor protest occurred in early 1997, spurred by government efforts to
change Korea ’ s labor laws to introduce more fl exibility into the labor market
and address problems that had begun to surface in Korea related to com-
petitiveness in the global market.

Labor protests erupted in January 1997 after a secret session of the National
Assembly proposed a harsh bill that among other things would make it
easier for fi rms to lay off employees. A three-week wave of strikes followed
that focused on the large fi rms, including the Hyundai Motor Car Company.
The strike wave was followed by months of negotiations, often behind the
scenes, that led to a new labor law bill that was adopted in March 1997
with the support of the opposition and government political parties. In
recent years, changes in labor laws in Korea have included the legalization
of collective negotiations for public school teachers and the creation of an

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390 Part V. Special Topics

unemployment fund. The number of irregular and nonstandard workers
has increased in Korea in recent years. While the labor movement has not
been happy about all of these developments, unions have tried to infl uence
events through democratic political channels.

Sources : Wonduck Lee and Joohee Lee, “Will the Model of Uncoordinated Decentralization
Persist?” in The New Structure of Labor Relations: Tripartism and Decentralization , ed. Harry
C. Katz, Wonduck Lee, and Joohee Lee (Ithaca, N.Y.: ILR Press, 2003), 43–65; Byoung-
Hoon Lee, “Employment Relations in South Korea,” in International & Comparative
Employment Relations: Globalization and Change , 6th ed . , ed. Greg J. Bamber, Russell D.
Lansbury, Nick Wailes, and Chris F. Wright (Australia: Allen & Unwin, 2016), 266–290.

democratization. In the case of South Africa, this led to the end of apartheid.
This leads many to question what will happen if union membership continues
to decline, possibly to the point that the political infl uence of unions is greatly
weakened. What forces or social groups, if any, will replace the positive contribution
unions make as defenders and proponents of democracy?

BRIEF DESCRIPTIONS OF THE LABOR RELATIONS
SYSTEMS AND KEY CONTEMPORARY ISSUES IN
GERMANY, JAPAN, BRAZIL, CHINA, INDIA, AND
SOUTH AFRICA

The sections that follow provide brief descriptions of the key features of the labor
relations systems in Germany, Japan, Brazil, China, India, and South Africa and
highlight the key issues that have surfaced in each of those countries. Readers
can fi nd more complete descriptions of the systems and contemporary issues in
the sources provided at the end of this chapter. 2

We fi rst focus on Germany and Japan, as these are two highly advanced
industrial economies with labor relations systems that differ greatly from each
other and from the system in the United States.

LABOR RELATIONS IN GERMANY

The distinguishing feature of labor relations in Germany is the presence of
codetermination , which enables elected employee representatives to participate
in decisions of fi rms related to business and human resources. 3 Codetermination
procedures are mandated by German federal law and apply to all companies in
the country regardless of whether employees in those companies belong to unions.

Codetermination

There are two key parts to German codetermination: the presence of employee
representatives on works councils and company boards. Codetermination gives

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Labor Relations in Other Countries 391

employees a form of representation that parallels union representation. Although
codetermination and collective bargaining procedures are formally distinct forms
of worker representation, there are many close connections between the operation
of these two channels of representation and the individuals involved in each.

Employee Representatives on Supervisory Boards

German federal law mandates that employees elect representatives to the supervisory
boards of all German companies. The number of representatives employees
elect to a supervisory board varies by the size of the fi rm and by industry (special
provisions cover the coal and steel industries). To understand the implications of
these procedures, it is helpful to examine the structure of German company boards.

German fi rms have a two-tiered board structure. The supervisory board
( Aufsichtsrat ) is the higher-ranked board and is responsible for monitoring managerial
promotions and performance and appointing top managers. The lower managing
board ( Vorstund ) runs the fi rm on a day-to-day basis and implements most decisions
of management.

Employee representatives to the supervisory board are elected from the ranks
of blue- and white-collar employees with each category of employee guaranteed
proportional representation. The law also reserves two or three of the supervisory
board seats for union delegates, depending on the size of the board. In impasse
situations, the chair of the supervisory board (who is nominated by shareholders)
can vote to break the tie. Employee representatives on the supervisory board
often run on slates associated with particular unions and are often active in unions.
They are frequently union offi cials.

The consequences of employee representation on supervisory boards varies
across companies and is sometimes hard to detect. Some analysts claim that
employee board representation has provided a major contribution to the low
strike frequency that has been characteristic of the German labor relations system
since World War II.

Works Councils

The works councils mandated by federal law for all private enterprises with more
than fi ve employees are the second major component of the German codetermina-
tion structure. Works councils have many rights to information, consultation,
and codetermination. The 1972 Works Constitution Act, for example, stated that
works councils can be involved in resolving confl icts related to the following issues:

Discipline
Daily working hours and breaks
Temporary short-time or overtime work
Piece rates for jobs
Pay systems
Suggestion schemes
Holiday schedules
How employee performance is monitored

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392 Part V. Special Topics

Safety regulations
Company welfare services
Administration of employee housing

Works councils also codetermine any changes in the pace of work or the work
environment. The law requires that works councils and employers negotiate how
change happens whenever any major changes take place in how a company
operates. When management wants to lay off employees, it must negotiate with
the works council and reach an agreement (specifi ed in a “social plan”) on the
factors that determine who gets laid off and the compensation arrangements for
those who are laid off.

Members of works councils are elected by all employees in a fi rm regardless
of union affi liation. However, works council members usually cooperate closely
with union offi cers or hold union offi ce themselves. Works councils cannot call
a strike, but they can sue management in a case of a breach of contractual rights.

Union Representation and Structure

Unions also play an important role in the German labor relations system. Unions
represent 25 percent of the German work force, but nearly 80 percent of the
German work force is covered by collective bargaining agreements due to the
legal extension of major collective bargaining agreements. 4 After German reunifi ca-
tion in 1990, unions based in the former West Germany extended their jurisdiction
to the former East Germany. While economic transformations and the bankruptcy
of many fi rms has weakened unions in the eastern parts of unifi ed Germany,
unions have played a key role in the restructuring of this region.

German unions provide representation during the negotiation of collective
bargaining agreements that set pay increases and other employment terms. Unions
also typically are actively involved in the codetermination processes, in some cases
through the union activists or offi cers that serve either as employee representatives
on a supervisory board or as works councilors.

German unions also are generally active in political and social issues. The largest
federation of German unions, the Deutscher Gewerkschaftsbund (DGB), is closely
aligned to the Social Democratic Party. 5

Collective Bargaining in Germany

Collective bargaining in Germany is generally highly centralized. Most collective
agreements are reached at the industry or regional level. The most important
unions in the private sector represent workers in one or more industries. IG
Metall, for example, represents workers in the metalworking industries. In 2001,
a superunion, ver.di, which represents workers throughout the service sector,
was formed through the amalgamation of a number of private and public sector
unions (see Box 15.4 ).

German labor law does not give unions exclusive representation rights. More
than one union can (and often does) represent employees at a work site, even
among employees who perform similar jobs.

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Labor Relations in Other Countries 393

Employers are commonly represented by employer associations organized by
industry or in regional collective bargaining. 6 Once an agreement is reached
between a union and an industry association over wages and other basic employment
terms, these terms are extended by law to other employees and fi rms in that
industry. Distinctions between unionized and nonunionized workers are not
allowed in collective bargaining agreements.

Often collective what are called ordinary bargaining agreements last only one
year and include pay in their terms. These ordinary agreements are signed under
framework agreements that last for a number of years. Plant-level negotiations
between a works council and management typically supplement the industry
agreements.

BOX 15.4
German Service Unions Merge to Create ver.di, a Union with
Three Million Members

On March 17, 2001, more than 1,000 delegates from Germany ’ s fi ve service
sector unions voted to dissolve the structures in their respective organizations
and merge into one of the world ’ s largest labor organizations. The new
organization, which has a total membership of three million, is called the
United Services Producers, or ver.di (short for Vereinte Dienstleistungs-
gewerkschaft). Ver.di consists of workers from the Public Services and
Transportation Union (ÖTV), German Salaried Employees Union (DAG),
German Postal Employees Union (DPG), Trade, Banking, and Insurance
Union (HBV), and Media Union (IG Medien).

The founders of ver.di hoped that the merger would create a united
front to combat new problems the labor movement faces in Germany. Their
goal was for ver.di to create a stronger position for combating problems
such as declining union membership levels and rising unemployment rates.
The new superunion also sought to counteract the growing lobbying efforts
of business interests that want to restructure employment markets and weaken
the role of unions.

Ver.di has had limited success in achieving its ambitious goals. It has not
been able to reverse the spread of privatization and concession bargaining
in the public sector. Furthermore, young workers have exhibited reluctance
to join ver.di (or other German unions) at the rates their parents did, and
the political infl uence of ver.di has not increased to the degree its founders
had hoped.

Sources : “Merger of German Labor Groups Would Create World ’ s Largest Union,”
Daily Labor Report , December 29, 2000, A-3; “Merger of German Service Unions
Creates 3-Million Member Union,” Daily Labor Report , March 20, 2001, A-4.

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394 Part V. Special Topics

Since 2000, there has been some movement toward more decentralized collective
bargaining in Germany. This has happened, for example, when fi rms in the
eastern region have refused to honor terms in an industry-level collective bargaining
agreement. Even in the western region, there has also been a growing tendency
toward fi rm-level deviations (“concessions”) in fi rms that face job losses and
threatened closure. However, even in the face of these pressures, the German
collective bargaining system remains relatively centralized.

Vocational and Apprenticeship Training

A very strong vocational and apprenticeship training system supports relations
between labor and management in Germany. Young people must choose among
three educational tracks around age 16: a college-bound program, an apprenticeship
vocational school program, or a general education program.

Two-thirds of high school graduates who do not go on to college enter the
labor force as graduates of a vocational educational program. The apprenticeship
programs in vocational schools are overseen by a joint business-labor group that
sets the qualifi cations for each occupational program. This system of training and
certifi cation provides German employers with a highly skilled labor force and is
often cited as one of the key sources of Germany ’ s economic success.

In summary, the German model of labor relations stresses formal, legally mandated
structures for worker representation and training. These include codetermination,
employee representatives on company boards, works councils, apprenticeship
training, and collective bargaining terms that apply across all the fi rms in an
industry. Through these formal structures, German unions and employers have
achieved high levels of wages and social benefi ts, strong productivity performance,
fl exibility in the use of human resources, and low rates of strike activity.

Although the modernization of eastern Germany has been very costly and led
to high unemployment, it is noteworthy that this transition occurred without
signifi cant opposition from either management or labor. This too attests to the high
level of acceptance of unions and the codetermination system in German society.

LABOR RELATIONS IN JAPAN

Japan has a distinctive labor relations system that has several key features. Some
of these key features are also found in other Asian countries.

Enterprise Unionism

The distinguishing feature of Japanese labor relations is the central role of enterprise
unions. 7 Enterprise unions in Japan represent both the white- and blue-collar
employees of a fi rm, regardless of occupation. They also include management
staff. Of the fi rm ’ s full-time employees, only the higher-level managers do not
belong to the enterprise unions. Thus, supervisors and line workers belong to
the same enterprise union, and supervisors often play a very active role in union
affairs. New hires (other than managers) automatically become union members
and pay dues to the enterprise union.

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Labor Relations in Other Countries 395

Union Federations and Employer Federations

Enterprise unions commonly are associated with industry union federations, which
are, in turn, affi liated with union confederations. 8 Employers commonly belong
to employer federations . Both union and employer federations provide advice
and engage in political lobbying but do not become directly involved in enterprise-
level collective bargaining.

Although industrial, craft, or general unions are rare in Japan, some important
exceptions do exist. In addition, while most collective bargaining occurs at the
enterprise level (between an enterprise union and the management of a fi rm),
industry-level collective bargaining does occur in private railways, bus services,
textiles, and some other cases.

The Lifetime Employment Principle

Japanese fi rms, particularly large ones, tend to hire new employees upon their
graduation from school (high school graduation for blue-collar workers and
university graduation for managers), and employees stay employed with that fi rm
until they reach retirement age. This is lifetime employment. To avoid laying
off “permanent” employees during business downturns, Japanese fi rms transfer
workers across work areas and sometimes into training. If a large fi rm faces
extreme fi nancial diffi culties, it might also shift some of its work force to other
fi rms in its trading group. Trading groups are fi rms linked together through
common owners or through close business connections. These employees are in
effect loaned across companies and return to their original fi rm if it recovers.

The internal movement of permanent employees within and across fi rms is
facilitated by the fact that workers receive extensive training and often rotate
across jobs in a work area (or across work areas) during their work careers. This,
like many of the other industrial relations practices in Japan, leads employees to
strongly identify their personal interests with those of the company they work for.

Japanese fi rms can fulfi ll their promise to avoid laying off permanent employees
because they also employ large numbers of workers on a part-time or temporary
basis. These workers are not included in the lifetime employment system.

In addition, workers retire relatively early in Japanese fi rms. In the past, the
average retirement age was 55; today it has risen to a mean of 64 in the face of
declines in the number of new workers entering the Japanese work force.

Many employees who are promoted to supervisory and/or management positions
were previously union members and some were union leaders. The movement
between union and management careers can go both ways. When conducting
an interview with a vice-president of the Honda Motor Workers Union a few
years ago, one of the authors was surprised to discover that this person had at
one point been a manager at Honda. After serving in a management personnel
job, he decided to run for union offi ce. This practice is not uncommon in
Japan. 9

Lifetime employment is not guaranteed through a clause in a contract or any
other binding agreement between Japanese fi rms and their workers or unions.
Rather, fi rms promise to try to avoid layoffs. Firms do lay off workers when they

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396 Part V. Special Topics

experience extreme fi nancial pressures, however. This informal arrangement is
typical of Japanese industrial relations. Few of the distinguishing features of the
Japanese system are the products of legal requirements or of formal contracts.
Instead, Japanese practices are shaped heavily by norms and customs that have
built up over the years.

The enterprise union system is typical of large fi rms in Japan; by some estimates,
it covers one-third of the Japanese work force. This system is found to a lesser
extent in small and medium-sized fi rms that often serve as suppliers or subcontractors
to large fi rms. 10 In these smaller fi rms, wages are typically 15 to 30 percent lower
and there is less employment security. There is also evidence that although the
lifetime employment system has been declining in importance as workers have
begun to move to other fi rms more frequently, Japan continues to exhibit distinctive
employment security practices. 11

Pay Determination in Japan

Most pay agreements are set in annual negotiations that occur between a fi rm
and an enterprise union. Many pay negotiations occur in the spring as part of
the annual national spring wage offensive ( Shunt ō ). In this offensive, enterprise
unions and managements consider the guidelines their respective union and
employer associations have issued and give special attention to wage settlements
reached in negotiations at a handful of key fi rms.

Workers typically are paid on a salary basis. They also commonly receive
annual bonuses that are on the order of fi ve months’ salary, although the exact
size of the annual bonus varies somewhat in response to the fi rm ’ s fi nancial
performance and management ’ s assessment of the performance of individual
workers.

Workers’ pay grades are heavily infl uenced by seniority with the fi rm. The
combination of seniority-based pay and the lifetime employment system produces
a pay system in which age plays a heavy role. Thus, workers who perform identical
jobs can receive pay rates that vary signifi cantly as a function of their age and
how their performance is evaluated.

Performance Appraisal

Another important feature of Japanese labor relations is frequent performance
appraisals for blue-collar workers receive (many workers are assessed twice a year).
In a given year, a worker who receives a top performance evaluation can receive
up to a 10 percent larger pay increase than a worker who receives a poor per-
formance appraisal. Over a worker ’ s career, these appraisal-based pay differences
can add up and produce sizable differences in pay levels across employees. A
worker ’ s promotion and career path is also heavily infl uenced by the cumulative
effects of performance appraisals.

In the United States, in contrast, while many nonunion fi rms regularly appraise
the performance of their employees, it is rare for blue-collar workers to undergo
performance appraisals in traditional unionized settings.

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Labor Relations in Other Countries 397

Broad Job Defi nitions

Jobs in Japan tend to be defi ned relatively broadly on the shop fl oor, even for
blue-collar workers. Broad job defi nitions go along with the practice of rotating
workers across tasks and substantial training for the work force. In addition, the
strong links between pay rates and the age and performance of each worker
decrease the role of job task in determination of pay. Some analysts argue that
the breadth of job defi nitions contributes signifi cantly to the fl exibility of the
Japanese production system. 12

The Role of Consultation in Japanese Labor Relations

The labor relations system in Japan relies heavily on informal consultation
between labor and management to settle disputes. Grievance and arbitration
procedures are often included in enterprise-level collective bargaining agreements,
but these procedures are rarely used. Instead, grievances are typically settled
through consultation at the work shop level. In addition, consultation over broader
issues commonly occurs in labor-management committees that operate at the
plant and company level. Workers also have input into shop fl oor production
issues through the quality circles that often meet regularly. 13

Union strength in these labor-management discussions is directly related to
their membership and independence from management infl uence. One of the
troubling issues confronting Japanese unions is declining membership. Union
density in Japan stood at around 35 percent of the labor force from the early
1950s on through 1973. Since then, union membership (as a percentage of the
work force) has fallen to 18 percent as of 2014. 14 Some analysts wonder if this
decline is an inevitable product of enterprise unionism.

Debates continue about the extent to which enterprise unions are truly inde-
pendent from management infl uence. This arises as an issue not only because of
the enterprise nature of union structure but also because of the heavy role played
by labor-management consultation in the Japanese system. Critics see in this
consultation the co-optation of independent unionism, whereas others see an
industrial relations system that successfully mediates confl ict as it provides gains
in the form of high levels of employee commitment, economic growth, pay, and
employment security.

LABOR RELATIONS IN TRANSITIONING COUNTRIES

The next sections briefl y review labor relations in four transitioning countries. Each
of these countries has a large gross national product and developments in them
well illustrate the issues that have been surfacing in other transitioning economies.
Even though China, India, Brazil, and South Africa have achieved advanced levels
of economic development and industrialization, their labor relations practices and
procedures are more recent in origin and are in many ways in a state of fl ux.

We account for particular factors that play critical roles in these countries. For
example, we take account of the fact that labor relations are much more political

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398 Part V. Special Topics

in transitional economies than they are in advanced industrialized countries. We
also look at the past role of state-dominated unions in transitional economies and
the recent increased importance of independent unions that have emerged as
alternatives to state-dominated unions in many of these countries. These independent
unions tend to promote collective bargaining at the company or workplace level.

A key issue that underpins labor, management, and government interactions
in transitional economies is the fact that questions of how to create and sustain
more democratic and stable labor relations are a major political and economic
issues. While in some countries unions have been dominated by governments or
sharply limited in their infl uence, history suggests that outlawing truly independent
unions (i.e., unions free from the dominance of governments or employers) does
not eliminate labor confl ict; rather, in some ways such a move only postpones
and intensifi es it. In the end, all countries are forced to wrestle with how to
structure labor relations in a way that provides workers with enough representation
to satisfy them while also maintaining social stability and economic growth.

The informal sector is also much more prevalent in transitional economies.
In the informal sector, where formal collective negotiations may be absent. Col-
lective forms of representation and collective methods of confl ict resolution also
are more varied in transitional economies, not only because they sometimes
include works councils but also because concerns about labor rights have led to
the involvement of various NGOs and other interest groups in workplace matters
(see Chapter 14 ).

Brazil

The end of a military dictatorship and the enactment of a new constitution in
1988 ushered in the contemporary era in Brazilian employment relations. 15 The
key change in Brazilian labor relations was that the state no longer signifi cantly
intervened in the internal affairs of unions, as it had in the past.

Following the return to democracy after 1988, the new constitution of Brazil
and the labor code gave private sector and public sector workers the right to
form trade unions (except for members of the military, uniformed police, fi refi ghters,
and some other state employees). Public sector workers could organize and strike
(with certain limitations). Reform of the labor code gave job security to union
leaders, reduced the maximum work week, increased overtime pay, and added
profi t-sharing provisions to the human resource practices of companies. After the
constitutional reforms, there was growth in the number of union members, most
of whom were civil servants who had previously been prohibited from forming
unions. This growth in membership was accompanied by dramatic growth in the
number of unions, creating increasing fragmentation in the union movement.

However, core aspects of the traditional Brazilian labor relations system remained
unchanged and continue to this day. These include a limit on union formation
to one union per economic activity per territorial unit and a union tax that all
workers in unionized economic or sectoral categories (e.g., metalworkers, chemical
workers) must pay regardless of whether they are union members. A portion of
this union tax is paid to union federations and confederations.

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Labor Relations in Other Countries 399

Trade unions in Brazil have maintained their membership strength over the last
decades and have increased their political infl uence through the Workers’ Party.
The rate of unionization has held steady at around 18–21 percent of the work
force. Approximately twice this proportion of workers is covered by collective
bargaining agreements. While the rate of unionization overall has remained steady,
the rate of unionization in the manufacturing sector has been in decline. In
contrast, public sector unionism has increased since the enactment of the 1988
constitution, which granted public sector employees unionization rights. However,
the number of national trade union centers has increased, as has the number of
small unions and unions that are outside the purview of the country ’ s main labor
confederation. This has contributed to the fragmentation of the labor movement.

In addition to these general trends, the neoliberal reforms that began in the
1990s, notably privatization and the removal of obstacles to free trade, have
transformed and weakened the Brazilian labor movement. Increased market
liberalization and industrial restructuring have dramatically affected the geography
of industrial production in Brazil. Many major new plants that were built in the
1990s and early 2000s were situated outside the core industrial district of greater
São Paulo, in regions where unions were weaker and wages were lower.

China

China ’ s economic reforms, now in their fourth decade, have transformed the
country from a planned economy to a mixed economy with elements of both
market mechanisms and central planning. 16 While market mechanisms have become
increasingly important in allocating resources, the state still plays a critical role in
coordinating the economy, and its role has become even stronger since the 2008
global fi nancial crisis.

Market-oriented reforms have signifi cantly changed China ’ s employment
structure. While agricultural employment has declined signifi cantly, employment
in the industry and service sectors has sharply increased. Employment in state-
owned enterprises has dropped from 60.4 percent of total formal employment in
1978 to 14.5 percent in 2010, whereas employment in the private sector, including
private-owned companies, foreign-invested companies, and township and village
companies, has rapidly increased. 17

Along with the change in the structure of employment, there has been a
transformation of labor relations in China. Under the planned economy, the
Chinese labor relations system was extremely rigid and centralized. In general,
workers in state-owned enterprises and collective-owned enterprises enjoyed
lifetime employment, egalitarian wages, and cradle-to-grave welfare that included
free housing, medical benefi ts, and pensions. Over the last three decades, however,
the so-called iron rice bowl has gradually been smashed. First, there has been a
change from lifetime employment to contract-based employment. In addition,
management has autonomy in making hiring and fi ring decisions, although legal
procedures must be followed and there are still signifi cant limits on the ability of
management to make large-scale dismissals in state-owned enterprises. Second,
the state-administered reward system has been moving toward giving management

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400 Part V. Special Topics

full autonomy to make decisions about wages. Although the state still intends to
infl uence wage levels and growth at the macroeconomic level and in state-owned
enterprises, this infl uence has been declining. Third, contributory social insurance
schemes such as pensions, medical insurance, unemployment insurance, work
injury insurance, and maternity insurance and housing funds have been introduced
to replace the former cradle-to-grave welfare system. However, these benefi t
schemes have been introduced to varying degrees across sectors and regions and
a huge number of workers—especially migrant workers—do not receive social
benefi ts.

The All-China Federation of Trade Unions (ACFTU) is the only offi cial
union in China. Its pyramidal top-down structure consists of three tiers: the
national, regional, and primary levels. At the bottom level, primary unions are
organized at the company level. Regional-level unions are set up along industrial
lines and within geographical boundaries with a structure parallel to that of the
government administration. Trade unions at all levels are under the leadership
of the Communist Party. This structure has remained largely unchanged since
the 1950s. The ACFTU represents the interests of both the state and labor. At
the workplace, unions perform two functions: they promote production and deal
with social welfare issues.

The Chinese system of resolving labor disputes is characterized by mediation,
arbitration, and two trials. When a labor dispute arises, the parties may bring the
case to the company ’ s labor dispute mediation committee. The second stage is
arbitration, which is mandatory before the case can go before a court. If either
party is dissatisfi ed with the arbitral award, they may enter the third stage and
bring the case to a court. However, for certain types of cases (e.g., claims for
small amounts of unpaid wages), the arbitral awards are fi nal and binding. If either
party is dissatisfi ed with the court verdict, they may appeal to a higher court,
whose verdict is fi nal.

India

India has long had an interventionist state. This is codifi ed in the key labor
relations law in India, the Industrial Disputes Act of 1947. Under this law the
state can prohibit even a legal strike and refer any industrial dispute to compulsory
arbitration or adjudication without the consent of the employers or unions.
However, following a balance-of-payment crisis in 1991, the government of India
embarked upon economic reforms that shifted the focus in national economic
policies from import substitution (replacing foreign imports with domestic produc-
tion) to a focus on exports. 18 In the 1990s, the policies of liberalization, privatization,
and globalization marked a new era for India, which since then has had an
inward-looking socialist-style economy based on a strategy of import substitution.
This shift in economic policies has been successful.

The trade union movement in India is highly fragmented. Until the 1980s,
most trade unions in India were affi liated with a political party through a national
federation.

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Labor Relations in Other Countries 401

There are about 400 million workers in the Indian labor market. Of these,
only about 7 percent are employed in the formal sector. The remaining 93 percent
are employed in agriculture or in small and medium-size enterprises in the informal
sector of the economy. Historically, politically affi liated unions have shown little
or no interest in organizing workers in the informal sector and have concentrated
on organizing and representing workers in the formal sector in both the public
and private sectors. In recent years, many workers in the informal sector or those
employed as casual and contract workers in the formal sector have formed their
own politically independent unions, sometimes with the help of NGOs. KKPKP
is an example of such a union (see Chapter 14 ).

Of the total labor force of around 400 million, about 28 million Indian workers
are employed in the public sector and are covered by various pay commissions
that decide on their wage levels. The government-appointed commissions hear
representations from employer associations and trade unions. Thus, negotiations
over wages in the public sector in India takes place within the limits and terms
set by the pay awards sanctioned by the pay commissions.

South Africa

The early history of labor relations in South Africa was heavily infl uenced by the
apartheid system that kept blacks and those of mixed race politically disenfranchised
and out of skilled and higher-paying jobs. 19 By 1994, however, the democratic
union movement had established itself as a major force in the labor relations
system in South Africa. COSATU, which had fi fteen affi liate unions in the
mid-1990s, was by far the largest union confederation. Three other union con-
federations represent a mix of white-collar unions, white unions, and craft unions
and account for most of the remainder of trade union membership.

The Labor Relations Act of 1995 (LRA), sought to replace the adversarial
culture that had characterized labor relations with codetermination between
employers and employees. This law has fi ve key features. First, it brought all
employees into a single system which created bargaining councils, where collective
bargaining takes place. Critically, this enabled unions to have a say in work
conditions across an entire industry, even covering employers with whom unions
had no formal recognition agreement and/or in factories where a union had only
a small presence. Importantly, the LRA extended the right to participate in bargain-
ing councils to farm, domestic, and public employees, workers who had been
excluded from the previous system of industrial councils.

Second, the LRA promoted collective bargaining by guaranteeing the right to
organize to unions. It also gave unions access to employer premises, gave them
the right to hold meetings, and allowed them to have closed shops (compulsory
union membership agreements) under certain conditions. It also compelled employers
to disclose information relevant to collective bargaining to unions that represent
the majority of workers in a workplace. The law also protected the right of
employees to strike, to picket, and to engage in sympathy strikes, although it also
introduced compulsory procedures and timetables for dispute resolution.

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402 Part V. Special Topics

Management in South Africa increasingly favors decentralized bargaining. The
growth of informal employment has also served to undermine various councils
and contributed to decentralization in bargaining.

Events at the platinum mines in Marikana in 2012, when police opened fi re
on striking miners, killing thirty-four and wounding seventy, well illustrate many
of the tensions in the South African labor relations system. The unoffi cial strike
at the Lonmin mine in Marikana involved some 3,000 workers. Workers had
demanded a pay increase of up to 50 percent, well in excess of an existing
agreement between COSATU ’ s National Union of Mineworkers (NUM) and
Lonmin. This demand was refl ective of a far more general sense of worker discontent
with wages and working conditions across the entire platinum mining belt.

Crucially, it appears that the NUM had lost the confi dence of its workers,
who had repudiated the union representatives who had been sent to negotiate
with them to return to work. The leadership of the Association of Mineworkers
and Construction Union (AMCU), a breakaway union from the NUM that the
employer did not recognize, stepped in and replaced the NUM offi cials as the
workers’ representatives. The volatility of the situation, which was compounded
by violence against those who wanted to work and against NUM offi cials, was
ratcheted up by the initial refusal of the employer, the NUM, and the government
to talk to AMCU, arguing that it lacked formal status.

Ultimately, however, in the aftermath of the shooting, the impasse gave way
to concession. Eventually, six weeks after it had begun, the strike was brought to
a close when Lonmin conceded a hefty 22 percent pay increase after negotiations
that involved both the AMCU and the NUM. However, this failed to prevent
labor unrest from spreading rapidly, and employers, unions, and the govern-
ment scrambled to control strikes that were occurring across the entire mining
sector.

These events in the platinum mining sector represent a major challenge to the
South African labor relations system. First, they indicated the development of a
yawning gap between miners and the leadership of the NUM. Workers accused
NUM offi cials were accused of living comfortably while union members suffered.
Second, they exposed an increasing gap between workers and the African National
Congress. Workers accuse ANC leaders accused of siding with management and
not attending to the needs of their core constituency. Third, they raised major
questions about the role of the police, who were widely accused of reverting to
apartheid-style reliance upon brute violence on behalf of the state. Finally, they
posed serious problems for employers, who were ambivalent about the outcome
of the strike.

THE IMPORTANCE OF THE PUBLIC SECTOR

The public sector in many advanced and transitional economies typically accounts
for a signifi cant share of the formal sector. In addition, public sector employees
in these economies often are represented by unions. Public sector employers also
generally follow the bureaucratic employment pattern (described in Chapter 5 ),

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Labor Relations in Other Countries 403

which is characterized by formal rules, structured pay and complaint procedures,
and a relatively high degree of employment security.

However, since 2007 there has been a signifi cant amount of privatization or
“de-nationalization” that has shifted formerly public (i.e., “state”) enterprises into
the private sector or at least made those enterprises semi-private. This has led to
signifi cant changes in employment practices that include signifi cant downsizing
and the introduction of more market- and individualistic-type practices such as
pay for performance. Workers who have jobs that were previously in the public
sector have faced the insecurities more typical of the private sector. And since
2007, especially in transitional economies, public employees have faced or been
threatened with even more drastic erosions of their wages, pensions, and other
benefi ts and a further lessening of job security as part of structural adjustment
policies.

AUSTERITY CRISES AND THEIR IMPACT ON LABOR
RIGHTS AND CONDITIONS

A number of transitional economies have faced an economic crisis since 2007.
In some instances such a crisis occurs at the time of a more widespread fi nancial
crisis across a region or even across the entire globe. These crises typically are
precipitated when a country is unable to pay back loans from international agencies
and external private banks and as a result, the country teeters on the brink of
bankruptcy. In addition, in a number of countries, the unemployment rate and
food prices rose sharply after 2007. International fi nancial agencies such as the
International Monetary Fund and the World Bank then become involved in the
crisis by tying new loans to austerity measures that typically include large cutbacks
in government spending, increases in taxes, wage cuts, and privatization of state-
owned enterprises. These and other reforms that international fi nancial agencies
insist upon as a condition for making new loans to a country experiencing
economic crisis are referred to as structural adjustment.

Structural adjustment reforms they critically affect economic conditions; have
severe consequences for the population, especially public employees, and have
wider economic and social consequences. There are deep debates about structural
adjustment, including about what caused the particular economic and fi nancial
crisis in the fi rst place, whether the austerity measures the international fi nancial
agencies insist upon are effective or self-defeating, and whether it is fair or
appropriate that public employees bear a heavy burden as part of a structural
adjustment plan.

The Recent Austerity Crisis in Greece and Its
Consequences for Labor Relations

After the 2008 global fi nancial crisis, Greece was nearing bankruptcy and economic
collapse. The so-called troika—the International Monetary Fund, the European
Central Bank, and the European Commission—imposed harsh conditions of
austerity on Greece as a condition of a bailout from the European Union. Among

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404 Part V. Special Topics

other measures, these demands included a restructuring of Greece ’ s labor relations
system.

Since the early 1990s, the Greek labor relations system had operated as a
top-down hierarchy of collective bargaining. At the top level, national labor and
employer groups, aided by the government, bargained for a national agreement
that set a minimum wage fl oor and other basic standards for employment. At the
next level were many multiemployer industrial agreements. The government
reserved the right to extend coverage of these agreements to employers as it
deemed appropriate. Thus, in addition to the national agreement, about 65 percent
of workers were covered under multiemployer collective bargaining agreements.
At the next level, individual employers could bargain with union organizations
to build upon the national negotiations. The system was hierarchical because
collective bargaining at any level could build upon a deal established at a higher
level but could not legally set a wage below the fl oor set by an agreement at a
higher tier.

The troika determined that a lack of competitiveness was the underlying issue
causing Greek ’ s economic crisis. It pressured the Greek government to restructure
the labor relations regime. From 2010 to 2012, Greece passed several laws that
restricted collective bargaining rights. Instead of being determined by the national
collective bargaining agreement, the national minimum wage is now set by law.
The national agreement also no longer covers employers who are not members
of the employer associations involved in the negotiations. Nonunion employee
groups, or “associations of persons,” can now enter into agreements with employers.

Clearly, these changes have signifi cantly weakened the bargaining power of
unions in the country. Allowing employers to opt out of the national- and
industrial-level agreements and enabling them to negotiate with smaller “associations
of persons” rapidly decentralized the once highly centralized labor relations system.
In just three years, the number of industry-level negotiations fell from 65 to 14.
The result of this decentralization, unsurprisingly, has been a reduction in wages.
The national minimum wage, which is now set by the legislature rather than by
a collective bargaining agreement, has been cut by 22 percent (32 percent for
those under 25 years old). 20

Protests and Strikes over Austerity in Greece

Unions and citizens have engaged in protests and strikes (including a general
strike) against the Greek austerity plans to no avail. Their protests were strengthened
by accusations that bond holders and other creditors did not absorb much of a
penalty as a result of the austerity plans and that instead, Greek citizens and public
employees bore the bulk of the costs the austerity plans imposed.

The severity of the economic decline that followed the austerity plans imposed
in Greece added evidence to support arguments that the austerity measures were
not only too extreme, they were actually self-defeating. Opponents of the austerity
plan proposed a renegotiation of bond holdings (essentially a managed default)
that would make banks that had fueled the speculative boom that preceded (and

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Labor Relations in Other Countries 405

possibly caused) Greece ’ s fi nancial crisis responsible for more of the cost of the
adjustment process.

THE CONTRIBUTION OF LABOR RELATIONS
TO ECONOMIC PERFORMANCE IN
COMPARATIVE PERSPECTIVE

There are long-standing debates about whether any economic system outperforms
other systems and about what contribution labor relations makes to economic
performance. These debates ebb and fl ow with the ups and downs of the economic
fortunes of various countries. In the 1980s, refl ecting Japan ’ s strong economic
and export growth, some analysts heralded the Japanese economic system. Others
claimed that the Japanese labor relations system played a key role in Japan ’ s
economic success by stimulating employee loyalty and problem solving. The
German economic and labor relations system also received much praise in the
1980s, on the grounds that the codetermination system facilitated confl ict resolution
and the development of skills.

In the 1990s, this debate shifted in response to strong economic performance,
particularly price stability and employment growth, in the United States. The U.S.
economic system then began to receive praise for its fl exibility and promotion of
entrepreneurialism. As the unemployment rate dropped to historic lows in the
late 1990s, some analysts claimed that traditional internal labor markets had been
replaced by “boundaryless” careers (i.e., frequent job changes). 21 In addition,
the tightening of labor markets led to accelerated wage growth, particularly
among highly skilled employees such as software programmers and high-tech
engineers.

This debate shifted once again in recent years, given the relatively weak economic
recovery from the 2008–2009 fi nancial crisis that occurred in Europe, especially
when compared to the U.S. recovery. Once again arguments are being made
that a U.S.-style market system is superior to other systems. However, the increased
income inequality that has emerged in the United States has led others to question
the virtues of the U.S. economic and labor relations systems.

Summary

Around the world, there are substantial differences in the way labor relations are
practiced. In the United States, collective bargaining is relatively decentralized
and written collective bargaining agreements play a central role. The U.S. collective
bargaining system is also noteworthy for its heavy reliance on grievance and
arbitration procedures.

In Germany, by contrast, codetermination procedures are central. Both unions
and works councils provide representation for employees. Collective bargaining
in Germany usually occurs on a regional or industry basis and produces annual
labor agreements.

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406 Part V. Special Topics

In Japan, enterprise unions are dominant. These unions represent both blue- and
white-collar employees in a fi rm. Disputes tend to be settled and information
exchanged through a variety of consultative procedures. Worker seniority and
the economic performance of the fi rm infl uence worker earnings, and annual
bonuses are an important share of worker compensation.

The labor relations systems in transitional countries have some common features
such as a large role for the informal sector and labor movements that often have
strong ties to political parties. However, there are distinctive features in the systems
of each transitional country, such as the traditional heavy reliance on an “iron
rice bowl mentality” in China and the legacy of apartheid in South Africa.

However, there are some common trends in transitional countries. In most of
the countries mentioned in this chapter, there is movement toward more decentral-
ized collective bargaining and ominous declines in the strength of the labor
movement.

Interest in international comparisons of management and labor practices is
currently at an all-time high, spurred in part by the expansion of multinational
fi rms and regional trading blocs. The process of collective bargaining and the
determinants of bargaining power do not change fundamentally as a fi rm becomes
multinational. However, the bargaining leverage of unions is generally weakened
as fi rms expand production across country borders. It remains to be seen how
well high-wage countries will be able to protect their high employment standards
in the face of heightened international trade.

All countries must wrestle with the issue of how to structure labor relations.
While collective bargaining and unions fl ourished in the past, the pressures of
globalization are raising questions about the future viability of these institutions.
However, countries that lack stable labor relations due to government suppression
of a country ’ s labor movement must face the fact that free and independent labor
movements have been central to the development of democracy throughout
history.

Discussion Questions

1. Briefl y describe how codetermination works in Germany.
2. Describe three signifi cant ways industrial relations in Japan differ from labor

relations in the United States.
3. What role did unions play in the end of apartheid in South Africa? What

are the public policy implications of the links between unions and democ-
ratization in both transitioning and fully industrialized countries?

4. What conclusions do you draw regarding whether labor relations practices
and system features infl uence a country ’ s overall economic performance?

Related Web Sites

ILO Legal Database on Industrial Relations (ILRlex):
http://www.ilo.org/global/docs/WCMS_507552/lang–en/index.htm

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Labor Relations in Other Countries 407

ACFTU organizational structure:
http://en.acftu.org/28590/201408/11/140811135244209.shtml

German Trade Union Confederation (DGB):
http://en.dgb.de

Suggested Supplemental Readings

Anner , Mark . Solidarity Transformed: Labor ’ s Responses to Globalization and Crisis in Latin America .
Ithaca, N.Y. : ILR Press , 2011 .

Bamber , Greg J. , Russell D. Lansbury , Nick Wailes , and Chris F. Wright , eds . International &
Comparative Employment Relations: National Regulation, Global Changes . 6th ed . Los Angeles :
Sage , 2016 .

Frege , Carola , and John Kelly eds ., Comparative Employment Relations in the Global Economy .
New York : Routledge , 2013 .

Katz , Harry C. , Thomas A. Kochan , and Alexander J. S. Colvin . Labor Relations in a Globalizing
World . Ithaca, N.Y. : ILR Press , 2015 .

Notes

1. Throughout this chapter, we refer to Germany, even though some of the history recounted
refers to the history of West Germany. After the unifi cation of Germany, the national laws of West
Germany were extended to what was previously East Germany, including laws about industrial
relations. Unifi cation brought substantial changes to labor relations practices and institutions in what
was formerly East Germany.

2. Discussion of the various labor laws that exist in transitioning countries is found in Harry C.
Katz, Thomas A. Kochan, and Alexander J. S. Colvin, Labor Relations in a Globalizing World (Ithaca,
N.Y.: ILR Press, 2015): Chapter 3 .

3. This section draws heavily from Berndt Keller and Anja Kirsch, “Industrial Relations in
Germany,” in International & Comparative Employment Relations: National Regulation, Global Changes ,
6th ed., ed. Greg Bamber, Russell D. Lansbury, Nick Wailes, and Chris F. Wright (Los Angeles:
Sage, 2015), 179–207.

4. Greg J. Bamber, Russell D. Lansbury, Nick Wailes, and Chris Wright report on union membership
as a proportion of the work force and collective bargaining coverage in a number of countries
in Figure 1.1 , “Comparative Union Density and Collective Bargaining Coverage,” in “Introduction,”
in International & Comparative Employment Relations: National Regulation, Global Changes , 6th ed.,
ed. Greg Bamber, Russell D. Lansbury, Nick Wailes, and Chris F. Wright (Los Angeles: Sage,
2015), 7.

5. The DGB had seventeen eight affi liated unions with 6 million members in 2011. See DGB:
German Trade Union Confederation, http://en.dgb.de .

6. The Confederation of German Employers’ Associations (BDA) is the employer
counterpart to the DGB. It includes forty-six branch employer federations that engage in
collective bargaining. One important exception is the negotiation of a companywide collective
bargaining agreement at Volkswagen. This is because of the special fi nancial and legal status of
Volkswagen.

7. Enterprise unions are 94.9 percent of all trade unions in Japan and represent 85.6 percent of
organized employees.

8. In 1982, labor federations in the private sector joined together to form Zenminrokyo (the
Japanese Private Sector Trade Union Council). In 1989, most private and public sector unions
became affi liated with the new Rengo (Japanese Trade Union Confederation). See Labor-Management
Relations in Japan (Tokyo: Japan Institute of Labor, 1990), 19, Figure 2.

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408 Part V. Special Topics

9. It remains to be seen if this sort of career movement continues in the future. It may not, due
to the professionalization of managerial training and career development.

10. The modern-day extension of the traditional zaibatsu system often links large and small fi rms
in close business relations. For example, upon their retirement from the large “parent” fi rm, senior
executives often move on to serve as executives of one of the smaller fi rms in the same group.

11. Sanford M. Jacoby, The Embedded Corporation: Governance and Employment Relations in Japan
and the United States (Princeton, N.J.: Princeton University Press, 2007).

12. See Michael J. Piore and Charles F. Sabel, The Second Industrial Divide (New York: Basic
Books, 1984).

13. An informative account of life on the shop fl oor in Japan is provided in Robert E. Cole,
Japanese Blue Collar (Berkeley: University of California Press, 1971).

14. “Trade Union Density,” OECD.Stat, https://stats.oecd.org/Index.aspx?DataSetCode = UN_DEN .
15. This section draws heavily from Mark Anner and João Paulo Cândia Veiga, “Brazil,” in

Comparative Employment Relations in the Global Economy , ed. Carola Frege and John Kelley (New
York: Routledge, 2013).

16. This section draws heavily from Mingwei Liu, “China,” in Comparative Employment Relations
in the Global Economy , ed. Carola Frege and John Kelley (New York: Routledge, 2013), 324–347.

17. Ibid.
18. This section draws heavily from Vidu Badigannavar, “India,” in Comparative Employment

Relations in the Global Economy , ed. Carola Frege and John Kelley (New York: Routledge, 2013),
305–323.

19. This section draws heavily from Roger Southall, “South Africa,” in Comparative Employment
Relations in the Global Economy , ed. Carola Frege and John Kelley (New York: Routledge, 2013),
348–366.

20. “Workplace Representation,” worker-participation.eu: A Service of the European Trade Union
Institute , 2015, http://www.worker-participation.eu/National-Industrial-Relations/Across-Europe/
Workplace-Representation2 .

21. Anda Stamati, “Greece: Impact of the Crisis on Industrial Relations,” EuroFound: European
Foundation for the Improvement of Living and Working Conditions , June 17, 2013, http://
www.eurofound.europa.eu/observatories/eurwork/comparative-information/national-contributions/
greece/greece-impact-of-the-crisis-on-industrial-relations .

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