Labor Relations and Collective Bargaining

By Bernardin, J.H.

Edited by Paul Ducham


The national labor relations act (NLRA), also known as The Wagner Act, became law during the great depression of 1935. The NLRA formally recognized private-sector workers’ rights to organize and bargain collectively with representatives of their own choosing. To enforce that right, the NLRA described what constituted unfair labor practices by employers. Prohibited activities included forbidding employers from (1) interfering with employee representation and collective bargaining rights; (2) dominating or interfering with the affairs of unions; (3) discriminating in regard to hiring, retention, or any employment condition against workers who engage in union activity or who file unfair labor practice charges; and (4) not bargaining in good faith with employee representatives. Further, the NLRA established the National Labor Relations Board (NLRB) to enforce the Wagner Act and to conduct representation elections. Essentially, the goal of the NLRB is to regulate the processes of organizing and collective bargaining, not necessarily the outcomes. As an independent federal agency (see www.nlrb. gov), the two primary functions of the NLRB are (1) to prevent and correct unfair labor practices and (2) to administer certification and decertification elections to determine whether workers choose to be represented.

  When an unfair labor practice (ULP) charge is filed, a field office conducts an investigation to determine whether there is reasonable cause to believe the NLRA was violated. If the Regional Director determines that the charge lacks merit, it is dismissed. A dismissal may be appealed to the General Counsel’s office of the NLRB. If the Regional Director finds reasonable cause to believe a violation of the law has been committed, that office of the NLRB seeks a voluntary settlement to remedy the alleged violations. If the settlement efforts fail, a formal complaint is issued and the case goes to a hearing before an NLRB judge. The judge issues a written decision that may be appealed to the five-member NLR Board in Washington for a final agency determination. The Board’s decision is subject to review in a U.S. Court of Appeals.

  About 30,000 ULPs are filed each year, and about one-third are found to have merit. Over 90 percent are settled. The NLRA also empowers the NLRB to petition a federal district court for an injunction to temporarily prevent unfair labor practices by employers or unions and to restore the status quo, pending the full review of the case by the Board. The NLRA also requires the Board to seek a temporary federal court injunction against certain forms of union misconduct, principally involving “secondary boycotts” and certain forms of picketing.

  Some academic experts maintain that many of the most recent NLRB rulings are contrary to the goals of the NLRA. For example, the NLRB overturned a Clinton-era ruling that gave nonunion employees the right to have a colleague accompany them to an investigative or disciplinary ruling involving a colleague (known as the Weingarten rule). The NLRB reversed a 1990s ruling granting graduate students the right to unionize. The NLRB also ruled that a company claiming “financial distress” did not have to share financial information with the union during contract negotiations and that unions did not have the right to use company e-mail for union organizing.

  There is no question that the NLRA has been interpreted at least to some extent based on the political leanings of the decision makers, either NLRB members or judges. A classic example may be the 2008 Supreme Court ruling in Chamber of Commerce v. Brown. The democratic-leaning California legislature passed a pro-union law prohibiting companies receiving more than $10,000 of state funds from using those funds to “assist, promote or deter union organizing.” The U.S. Supreme Court found the California law to be in violation of the NLRA and rejected the law. It is possible that a future pro-union piece of federal legislature could amend the NLRA to make such state laws in compliance.

President Obama supports a major piece of labor legislation that could have a big impact on union organizing. Unions strongly support an amendment to the NLRA called the Employee Free Choice Act (EFCA), which has three important provisions: (1) The EFCA would allow certification of a union as the bargaining representative of a unit of employees if the NLRB found that a majority of those employees have signed authorization cards designating the union as its bargaining representative. A company has the legal ability to allow its workers to have union representation (without going through the NLRB) if a majority of potential members support Unionization. The EFCA would make this recognition mandatory, taking away a company’s ability to force a majority of potential members to go through the NLRB Election process. (2) The EFCA would declare that if an employer and a union are engaged in bargaining for their first contract and are unable to reach an agreement within 90 days, either party may refer the dispute to the Federal Mediation and Conciliation Service (FMCS) for mediation. If the FMCS was then unable to bring the parties to agreement after 30 days of mediation, the dispute would be referred to arbitration, and the results of the arbitration would be binding on the parties for two years. (3) Violations of the National Labor Relations Act would now face civil fines of up to $20,000 per violation against employers found to have willfully or repeatedly violated employees’ rights during an organizing campaign or first-contract drive, and the amount an employer is required to pay when an employee is discharged or discriminated against during an organizing campaign or first-contract drive would increase to “three times back pay.” The EFCA, with perhaps some changes from the description above, may already be the law of the land as you read this.


The Taft-Hartley Act of 1947, an amendment to the NLRA, was designed to limit the power of unions by regulating labor activities allowed under the NLRA. Labor called this amendment to the NLRA the “slave labor bill.” Taft-Hartley amended the NLRA by describing what constituted unfair labor practices by unions and (1) restricted use of the strike, including granting the president of the United States the power to issue an injunction against a strike; (2) restricted unions from interfering with workers’ right to organize; and (3) prohibited union discrimination against workers who did not want to participate in union activities, including strikes.

  The Taft-Hartley Act provided states with the option of enacting right-to-work legislation. Right-to-work laws declare that union security agreements that require membership as a condition of employment are illegal. As of 2009, 22 states have enacted right-to-work laws. To aid in the peaceful settlement of contractual disputes, the Federal Mediation and Conciliation Service (FMCS) was established and provided emergency dispute provisions for the settlement of strikes affecting national health and safety (see www. Thus, the Taft-Hartley Act further restricted union activity. One purpose of the FMCS is to provide trained representatives to assist in labor negotiations (see


In the late 1950s, the U.S. Senate held hearings investigating and exposing union corruption that ultimately resulted in the 1959 Landrum-Griffin Act. Designed to protect workers from their unions, Landrum-Griffin, also an amendment to the NLRA, provided for the employee “bill of rights,” union filing of annual financial statements with the Department of Labor, and the requirement that unions hold national and local officer elections every five years and three years, respectively. The main purpose of Landrum-Griffin was to allow for the monitoring of the internal activity of unions. Union officials were now accountable for union spending, union elections, and other activities.

The Railway Labor Act of 1926 

The Railway Labor Act was jointly crafted by both labor and management in the railroad industry. Airline workers became covered in 1935. The focus of the law is upon avoiding prolonged strikes whenever possible. In recent years, negotiations in the airline industry have been quite protracted, spanning over several years. On the other hand, strikes have been averted for the most part. The President does have the right to intervene to preclude a strike.

The Civil Service Reform Act (CSRA) of 1978

While similar to the NLRA in its provisions but applicable only to federal employees, the CSRA prohibits wage negotiations (they’re set by Congress) and strikes. The CSRA also established the Federal Labor Relations Authority (FLRA) as an independent agency within the executive branch of the government. The FLRA has authority similar to the NLRB. (See The FLRA regulates the conduct of collection bargaining related to the federal government.


The process of organizing workers can be lengthy although the proposed EFCA could expedite this process. Typically, and following the NLRA, the steps are as follows:

1. Either Union Membership is solicited by the employees who contact a union or a union might conduct an organizing drive.

2. At least 30 percent of employees must sign authorization cards that stipulate that a particular union should be their representative in negotiating with the employer (see Figure 13-4 for an example).

3. The NLRB is petitioned to conduct an election.

. Assuming the authorization cards are in order, the NLRB sets a date for the election.

5. A secret ballot representative certification (RC) election is held, which requires that a majority of eligible voting workers accept the union.

The process of gathering authorizing cards and the eligibility of those who sign them can be challenged (and often is). For example, the NLRB made a controversial ruling in Oakwood Healthcare that “charge” nurses are “supervisors” based on their interpretation that employers can label workers as supervisors if these workers assign another employee to another location to work at a certain time or to perform a significant task. These supervisors are thus not eligible to be represented by a union of registered nurses under NLRA. The ruling will probably be challenged all the way to the Supreme Court.

The goal of the NLRB is to maintain an environment in which workers can make an uncoerced decision regarding the certification election. Figure 13-5 presents an example of an NLRB election notice.

  Many unions now use the Internet to conduct the authorization step (for an example, try although an NLRB ruling allows an employer to bar employees from using company e-mail for organizing efforts. In general, an employer may lawfully maintain a rule banning all nonwork-related solicitations—including messages about unionization—from its computer system as long as it does not enforce the rule in a discriminatory manner.

  Many employers do not get very involved in union prevention activities until step 2 because they are often not aware of the union organizing efforts until this step has been reached. Regardless, managers should have a thorough understanding as to what behaviors are lawful and unlawful under the NLRA.

  If a majority vote is received for the union, the NLRB certifies the union and the union is then recognized as the exclusive bargaining unit for the workers. The union then enters negotiations with the employer. If a majority do not accept the union, another certification election cannot be held for 12 months. Even after a union is certified negotiations often break down. A high percentage of certified unions never obtain a contract.

Employers also get involved after a union vote and may work toward a representation decertification (RD), which also is conducted by the NLRB at least 12 months after a certification vote. While the petition for an RD must be made by the rank-and-file workers, management also is allowed, in the rare case of union misconduct, to initiate a decertification drive. Usually, decertification elections are specifically barred when a labor contract is in effect. The number of NLRB elections declined in 2007 to 1,502 and lower than the rate in 2006. Unions won over 60 percent of the votes in 2007. There were 329 decertification elections in 2007. Unions prevailed in 37 percent of them.

  Traditionally, unions organize workers through campaigns. Bottom-up campaigns begin when workers become dissatisfied with some aspect of their work and contact a union to request organization. Top-down campaigns are initiated by the union as part of a strategy to increase their representation in the area or industry. In order to gain worker support unions employ a variety of tactics, including worker-to-worker campaigns, increasing internal pressure tactics, and community involvement. Their goal is to help build a sense of injustice and a belief that the union can effectively remedy the wrong. As a part of their organizing strategy, union organizers often use “salting” where union sympathizers gain employment in nonunion firms for the purpose of organizing. While employers have argued that “salts” obtained employment under false pretenses, the Supreme Court held in Town & Country Electric v. NLRB that as long as the “salts” did the work for which they were hired, employers violated the NLRA if they took actiond against them.

  Management typically counters the union campaigns with a campaign of their own. They can communicate with the workers citing the harmful effects of unions and hold “captive audience meeting” where workers must listen to management discuss their reasons for not wanting a union. In regulating the campaign process, the goal of the NLRB is to promote an environment in which workers feel free to vote their conscience whether or not it is for or against unions. By law, workers should not be subject to threats or intimidation from either the union or management. Management violations include promising wages or firing workers for union activity. In recent years, management has often employed consultants who specialize in refuting the claims of union organizers as well as more aggressive management tactics. Often the result is management violating the NLRA and engaging in such tactics as illegally firing workers for union activity. Despite the illegality of these actions, there is evidence that many companies engage in these activities as the penalties for these actions are weak.

  While the NLRB-supervised route is still the typical method of organizing, it is not the only way. Many unions feel that they do not have a level “playing field” in union organizing drives and the regulation of election conduct. Thus, they will avoid elections where possible and may have already succeeded in passing the EFCA that would preclude elections. Some unions had been successful at obtaining what are known as neutrality agreements from management. These agreements often contain provisions in which management agrees to recognize the union if a majority of the workers sign authorization cards and they waive their rights to wage a countercampaign. Management will typically agree to a neutrality clause when the union and management have a preexisting relationship such as a collective bargaining agreement at another location.

  An alternative and growing trend in the U.S. is non-NLRB organizing or a “corporate” or “pressure” campaign. By rejecting the typical election model, unions have more freedom to take advantage of particular issues related to the targeted company. Particularly effective at non-NLRB organizing is the 1.5 million member Service Employees International Union (SEIU) in recently organizing janitors, health care and hotel workers, and immigrant workers. While the goal is the same as an NLRB-supervised effort, that is, to secure a collective bargaining agreement but without the election, the strategies vary from civil disobedience to boycotts to news coverage of employer indiscretions. Some recent examples involve farm workers where adverse publicity has been directed at Taco Bell, McDonald’s, and Burger King to pressure growers to increase the pay of tomato pickers. Some unions have established new programs for developing and implementing strike-alternative, pressure-campaign strategies and tactics.

  A 2008 study found that the non-NLRB election approach to organizing was more successful for the union than the traditional approach. From 1990 to 2001, unions were more likely to win a non-NLRB organizing drive than an NLRB-supervised election and despite a 9:1 ratio of NLRB to non-NLRB organizing, the difference in the number of workers actually organized each approach was small.


Workers join unions to improve their wages, working conditions, and job security. This section presents opinions regarding whether or not unions actually do provide these improvements and what these effects mean for firm performance. Estimates of union and nonunion wage differentials range from 3 percent (utilities) to 52 percent (construction). On average, the differential in pay was between 15 and 20 percent in 2008 while the “fringe benefit” (e.g., health care, pensions) differential is higher. Unions also have a positive fringe benefit effect. In general, those who are usually paid the least tend to benefit the most from unionization. Studies show that younger workers, nonwhites, people living in the South and the West, and blue-collar workers seem to gain the most from unionization. Interestingly, little apparent difference exists between the wage gains from unionization for males and females. Research on public-sector unions shows a 24 percent pay differential for public-sector employees represented by unions versus public-sector employees not represented. In 2007, full-time wage and salary union workers had median weekly earnings of $863, compared with a median of $663 for workers not represented by unions.

Variations in union wage effects across industries partially occur due to the union’s ability to take “wages out of competition.” Wages can be taken out of competition in several ways. First, labor demand may be relatively insensitive to wage changes (inelastic). That is, consumers will absorb the increased labor costs without offsetting employment effects. The extent of union organization in a particular market also can affect union power. More unionized markets have greater union/nonunion wage differentials because of less nonunion wage competition. The extent of bargaining coverage further augments this effect. This coverage can take several forms. For example, one union may bargain for the entire market—so that all union firms in the industry have virtually identical contracts. In the auto industry, the UAW bargains with one of the big automakers and then uses this contract as a pattern for remaining settlements. This strategy has become less effective as nonunionized automakers have gained market share. A union negotiating simultaneously with numerous employers, such as in steel and coal, provides another example of extensive industry coverage. A union that bargains at the plant level has much less power than those that negotiate on a broader basis.

  Union advocates maintain that the “collective voice” of unions reduces worker quit rates, thereby leading to retention of experienced workers, lowering a firm’s training costs, and raising its productivity. Another side benefit is that management is forced to become more efficient when faced with the necessity of providing higher wages to unionized employees.

  This suggests that unions may actually have positive effects on management. If so, why does management strenuously resist unions? Are they behaving rationally? Or do they resist unions only because unions threaten their decision-making autonomy? Two theories exist regarding the unions’ effects upon firms’ productivity. On one hand, productivity is predicted to decrease in unionized firms because unions create resource misallocation and demand restrictive work rules. In contrast, the collective voice view predicts that productivity gains may occur because the union wage effect causes firms to manage better, employ better-quality labor, substitute capital for labor, and reduce voluntary turnover, leading to the development of a more experienced and better-trained labor force.

  The evidence is mixed regarding the effects of unions on organizational productivity. Unions tend to have a negative effect on productivity when there is relatively greater conflict between the union and management. Florida State professor Jack Fiorito summed up the confusing evidence on unions and productivity this way: “There is indeed considerable variation by industry; overall union productivity effects are probably in the zero to mildly negative range.”17 Positive productivity effects generally tend to be found in competitive industries with higher union wage effects (i.e., where firm survival apparently depends upon offsetting the higher wage costs with increased productivity). Research indicates that when unions and management are working for a “bigger pie” as well as fighting over their relative share, the result is higher productivity. Under conditions of poor labor–management relations, where the focus is on taking a bigger share of the same size pie, the result is usually lower productivity.

  What of the argument that unions raise wages to noncompetitive levels and have thus seriously affected the ability of some U.S. industries to compete? One surprising study of 134 industries concluded that “heavily unionized industries are not found to have lost any more to imports nor gained any more in exports than comparable U.S. industries . . . industrial concentration appears to be a significant disadvantage.”19 This means that U.S. industries facing a more globally competitive environment after less domestic competition tended to have more difficulty competing regardless of union status.

  Studies show that unionization negatively affects accounting profits and shareholder wealth. For example, shareholder wealth decreases during union organizing campaigns and strikes and increases during concession bargaining. Unions do not seem to change the overall firm value, but they do redistribute the firm’s economic profits from the stockholders to the workers. Research on “high-performance work systems” establishes a relationship between the absence of labor unions and corporate financial performance.

Unions can also influence firms through unilateral management responses (in anticipation of union pressure) and can influence nonunion firms through spillover and threat effects (i.e., adoption of “unionlike” practices through imitation or to prevent unionization). The recent improvements in the compensation and benefits of Wal-Mart employees are probably one example of these “spillover” effects. However, such effects could erode in the future due to competitive pressures and declining unionization.


figure 13-5


Quality of worklife (QWL) issues came to the forefront in the 1980s and play an important role in the labor–management relationship. QWL programs such as job redesign efforts, upward communication, team-based work configurations, and quality circles (QCs) have elicited a variety of union responses. Overt hostility and resistance characterize some unions’ reactions to QWL programs. A significant faction of the UAW membership at the Saturn plant, for example, opposed the negotiated worker involvement programs. These members fear that management intends to use these programs to circumvent the union and the collective bargaining relationship. Other members cautiously indicate that they prefer the collective bargaining process to QWL programs but will support QWL programs if there is no attempt to bust the union or interfere with the collective bargaining process.

  The labor–management partnership between GM’s Saturn Corporation and the United Auto Workers (UAW) was an innovative approach to labor relations. This partnership includes the union as a partner in decisions regarding the product itself, technology, suppliers, business planning, training, Quality Control systems, job design, and manufacturing systems. Local management and union leadership have established a system of co-management in which bargaining unit members occupy 50 percent of the operations management positions. The main goal of the partnership was to improve and sustain the quality of Saturn vehicles. The partnership seems to have worked. According to J.D. Power and Associates, Saturn had led domestic car lines in consumer ratings based on vehicle quality.

Many have argued that union support remains critical for successful implementation of QWL programs. One study cited management neglect in inviting union participation early enough, or not at all, as a contributing factor to many failures of QWL programs. Generally, in union settings, management is seen as more careful in evaluating the decision to implement a QWL program than in firms where a union is not present. One study found that the presence of “high-involvement” management practices was rare in union settings in the United States compared German union settings.

  Union leaders assert that workers have everything to gain by demanding that employees work to achieve the highest possible product and service quality. This means that QWL programs are important as well as training, up-to-date equipment, and quality materials and resources. These will enable employees to achieve first-rate quality in goods and services.

  There is limited research and mixed results on the effects of QWL efforts in union settings. Two studies found that QWL programs did not have any effect upon the firm’s economic performance. However, more recent research has found that unionized firms had more gains from Employee Participation than did nonunion firms. Other research has shown that QWL programs can improve the firm’s industrial relations.One study found that participants in employee involvement programs felt that these programs were better at resolving differences than collective bargaining.

  Firms must be cautious in their implementation of nonunion work teams because of legal concerns regarding violations of the NLRA prohibition regarding company unions. The NLRA states that it is unlawful for an employer “to dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it.” In the 1994 Electromation v. NLRB case, the U.S. Court of Appeals upheld the NLRBs ruling that management committees addressing employee dissatisfaction with absenteeism and attendance bonuses represented illegal employer domination. However, the facts of this case suggest that management had established these committees to avoid unionization.

Republicans proposed but failed to pass the Teamwork for Employees and Managers or (TEAM) Act to make it easier for workers and management to arrange various types of worker involvement or employee “voice” organizations. In general, the NLRB and the courts have restricted the use of alternative “voice” such as quality circles unless employer control is ceded to these self-governing bodies.


Union workers report more dissatisfaction with supervision and job content than do nonunion workers. Only pay provides more union satisfaction. This finding may reflect unions encouraging members to voice their dissatisfaction rather than to quit. Voluntary turnover rates are substantially lower under unions. Alternatively, union workers may feel compelled to stay because of the “golden handcuffs” of better wages, health insurance, and working conditions. They may feel that they cannot afford to quit when they are dissatisfied. The most recent research indicates that union membership has no effect on either general job satisfaction or intention to quit.


There can be no question that with a union HRM decisions are more constrained. In unionized organizations, the union itself gives employees a voice in the development of work rules. Termination is generally for cause only. Total compensation is almost always higher. Staffing and performance management activities are often subject to collective bargaining. Management must justify the reason for the termination or discipline of union workers.


Collective bargaining occurs when representatives of a labor union meet with management representatives to determine employees’wages and benefits, to create or revise work rules, and to resolve disputes or violations of the labor contract. For almost 16 million workers, collective bargaining represents the primary process for determining their wages, benefits, and working conditions. Despite the decline in unions and their membership in recent years, it is unlikely that either unions or collective bargaining will ever disappear. In fact, there is recent evidence that union activity is surging in some occupations (e.g., nursing) and developing in others (physicians).

  Organizations and unions need to maintain knowledge of Bargaining Strategies and guidelines in order to successfully represent their respective interests. Knowledge of labor relations and collective bargaining is important for HRM specialists and general managers. In fact, it is difficult to separate labor relations as a human resource (HR) function from the many other HR functions. For example, labor relations is closely tied to HR planning since the labor contract generally stipulates policies and procedures related to promotions, transfers, job security, and layoffs. The area of HR where a knowledge of collective bargaining is probably most critical is compensation and benefits, since almost all aspects of wages and benefits are subject to negotiation.

  Collective bargaining should be viewed by both the union and management as a twoway street. This means that the basic interests of management must be protected as well as the rights of employees. Both sides have a responsibility to each other. For example, unions should not expect management to concede on issues that ultimately would impair the company’s ability to stay in business. Likewise, management must recognize the rights of employees to form unions to argue for improved wages and working conditions.


A labor contract is a formal agreement between a union and management that specifies the conditions of employment and the union–management relationship over a mutually agreed upon period of time (typically two to three years, but up to five years). The labor contract specifies what the two parties have agreed upon regarding issues such as wages, benefits, and working conditions. The process involved in reaching this agreement is a complex and difficult job requiring a willingness from both sides to reconcile their differences and compromise their interests. This process is also bound to certain “good-faith” guidelines that must be upheld by both parties.

The Taft-Hartley Act of 1947 (section 8d) states: “to bargain collectively is [to recognize] . . . the mutual obligation of the employer and representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, . . . or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, . . . such obligation does not compel either party to agree to a proposal or require the making of a concession.” Thus, the law requires that the employer negotiate with the union once the union has been recognized as the employees’ representative. Good-faith bargaining is characterized by the following events:

■ Meetings for purposes of negotiating the contract are scheduled and conducted with the union at reasonable times and places.

■ Realistic proposals are submitted.

■ Reasonable counterproposals are offered.

■ Each party signs the agreement once it has been completed.

Good-faith bargaining does not mean that either party is required to agree to a final proposal or to make concessions.

The National Labor Relations Board further defines the “duty to bargain” as covering bargaining on all matters concerning rates of pay, wages, hours of employment, and other conditions of employment. “Mandatory” issues for bargaining include wages, benefits, hours of work, incentive pay, overtime, seniority, safety, layoff and recall procedures, Grievance Procedures, and job security. “Permissive” or “nonmandatory” issues have no direct relationship to wages, hours, or working conditions. These might include changes in benefits for retired employees, performance bonds for unions or management, and union input into prices of the firm’s products. Permissive issues can be introduced into the discussion by either party; however, neither party is obligated to discuss them or include them in the labor contract.


The major issues discussed in collective bargaining fall under the following four categories:

1. Wage-related issues. These include such topics as how basic wage rates are determined, cost-of-living adjustments (COLAs), wage differentials, overtime rates, wage adjustments, and two-tier wage systems.

2. Supplementary economic benefits. These include such issues as pension plans, paid vacations, paid holidays, health insurance plans, dismissal pay, reporting pay, and supplementary unemployment benefits (SUB).

3. Institutional issues. These consist of the rights and duties of employers, employees, and unions, including union security (i.e., union membership as a condition of employment), check-off procedures (i.e., when the employer collects dues by deduction from employees’ paychecks), Employee Stock Ownership Plans (ESOPs), and quality-of-worklife (QWL) programs.

4. Administrative issues. These include such issues as seniority, Employee Discipline and discharge procedures, employee health and safety, technological changes, work rules, job security, and training.

While the last two categories contain important issues, the wage and benefit issues are the ones that receive the greatest amount of attention at the bargaining table. In recent years, however, issues of job security have become increasingly important as bargaining items. In addition, the unions have adapted to a variety of workplace changes and have played an important role in defining public policies. For example, they have been active in negotiating family-friendly contract provisions such as child care, elder care, domestic partnership benefits, and paternity leaves and in promoting health and safety protections for their members.


Bargaining between labor and management can take several different forms. Three of the most common are distributive, integrative, and concessionary bargaining. Distributive bargaining is the most common type of bargaining and involves zero-sum negotiation. In other words, one side wins and the other side loses. Union employees may try to convince management that they will strike if they don’t get the wages or working conditions they desire. Management, in turn, may be willing to try to ride the strike out, especially if they have cross-trained other workers or have external replacements to fill in for those on strike. In distributive bargaining, unions and management have initial offers or demands, target points (e.g., desired wage level), resistance points (unacceptable wage level), and settlement ranges (acceptable wage level).

Integrative bargaining is similar to problem-solving sessions in which both sides are trying to reach a mutually beneficial alternative or a win-win solution. Both the employers and the union try to resolve the conflict to the benefit of both parties. One example might consist of providing retraining opportunities to employees to avoid having to lay off workers. Plant safety and incentive pay systems are other programs that involve collaborative efforts between management and employees. Another name for this type of bargaining has been “interest- based bargaining.” The objective is for both parties to find the common ground between them, to build relationships, and to eliminate the adversarial elements of traditional bargaining. This was used when a public electric and water utility, Salt River Project, located in Phoenix, Arizona, was experiencing tension with the International Brotherhood of Electrical Workers (IBEW) Local 266. To resolve an impasse in communications, they tried using a new approach, interest-based bargaining. Both sides shared information about their interests and concerns and they created a list of possible solutions to best meet everyone’s needs. 

  The early 21st century has seen an increased sensitivity on the part of unions and employers to the “shrinking or disappearing pie” phenomenon with more and more international competition. This apparently led to greater interest in “integrative bargaining” approaches and a decreasing rate of strike activity. Among these approaches is “mutual gains bargaining.” “While some companies have openly challenged the bargaining role of unions and unilaterally introduced changed work practices, others have sought to move toward ‘mutual gains bargaining.’ ” Some research supports the notion that collective bargaining can achieve performance advantages through cooperative programs compared to both nonintegrative bargaining approaches but also compared to nonunion firms, including those with high employee involvement. those with high employee involvement.

  Concessionary bargaining involves a union’s giving back to management some of what it has gained in previous bargaining. Why would labor be willing to give back what it worked so hard to obtain? Usually such a move is prompted by labor leaders who recognize the need to assist employers in reducing operating costs in order to prevent layoffs, plant closings, or even bankrupcy. Thus, it is often economic adversity that motivates concessionary bargaining. A good example is the agreement between GM and the International Union of Electric Workers that granted GM around-the-clock operations, wage and benefit concessions for new hires, and a two-week mass vacation. The concessions were made to save over 3,000 jobs at a plant in Ohio. In some cases, despite a financial crisis, the union may not be willing to concede. This may be because the union does not view management’s arguments as credible. Thus, the degree of trust between management and the union may influence the extent to which concessionary bargaining occurs. The UAW and the “Big Three” American auto companies were negotiated major concessions to their 2007 contracts in an effort to help save the suffering and near bankrupt U.S. automakers.

What kinds of concessions are sought by employers? Often they relate to wages and benefits (e.g., health insurance and pensions), for example, putting a cap on increases in compensation or installing a two-tiered pay structure. For example, in return for wage concessions, the union may receive a gain sharing plan that links compensation with performance data, or some form of profit-sharing or stock ownership. Other demands made by unions in return for concessions include restrictions on work rules, transfers of work, subcontracting, and plant closures; getting advance notice of shutdowns and severance pay; and transfer rights for displaced employees.


Preparing for Negotiations

Because of the complexity of the issues and the broad range of topics discussed during negotiating sessions, a substantial amount of preparation time is required. To Prepare for Negotiation, one must have a planning strategy. Negotiating teams typically begin data gathering for the next negotiation session immediately after a contract is signed. Preparation includes reviewing and diagnosing the mistakes and weaknesses from previous negotiations and gathering information on recent contract settlements in the local area and industrywide (e.g., comparative industry and occupational wage rates and fringe benefits). Preparation also includes gathering data on economic conditions, studying consumer price indices, determining cost-of-living trends, and looking at projections regarding the short-term and long-term financial outlook. Internal to the firm, data such as minimum and maximum pay by job classification, shift work data, cost and duration of breaks, an analysis of grievances, and overtime data are almost always of interest to both sides. Often unions and large corporations have research departments that collect necessary data for negotiations. Management is likely to come armed with data regarding grievances and arbitration, disciplinary actions, transfers, promotions, layoffs, overtime worked, individual performance measures, and wage payments.

 During the preparation phase of contract negotiations, employers develop a written plan covering their bargaining strategy. The plan takes into account what the employer considers the union’s goals to be and the degree to which it is willing to concede on various issues. Such a plan is useful to the negotiators because it helps them to identify the relative importance of each issue in the proposal.

  Both the union and management send their negotiating teams to the bargaining table. The union’s negotiating team generally consists of local union officials, union stewards, and one or more specialists from the national union staff. Management’s negotiating team usually consists of one or more production or operations managers, a labor lawyer, a compensation specialist, a benefits specialist, and a chief labor relations specialist, who heads the team

Meetings in Contract Negotiations

One of the most important objectives of early bargaining meetings is to establish a climate for negotiations, in other words, determining whether the tone of the negotiations is going to be one of mutual trust with “nothing up our sleeves,” one of suspicion with a lot of distortion and misrepresentation, or one of hostility with a lot of name calling and accusations. Also, early meetings are used to establish the bargaining authority of each party and determine rules and procedures that will be used throughout the negotiation process. Both parties try to avoid disclosing the relative importance they attach to each proposal so that they will not have to pay a higher price than is necessary to have the proposal accepted. Generally, each side tries to determine how far the other is willing to go in terms of concessions, and the minimum levels each is willing to accept. It is best not to establish a position that is too extreme, or one that is too inflexible. For instance, “take it or leave it” proposals are typically ineffective. One of the best examples of a “take it or leave it” philosophy of bargaining was at General Electric from the 1940s to the 1970s. During this period, GE’s policy was that management initially brought to the bargaining table its final proposal. The unions obviously viewed this as unethical and illegal (lack of good-faith bargaining). A 1964 NLRB and Appeals Court case supported the unions and found them guilty of bad-faith bargaining based upon their “take-itor- leave-it” policy combined with other tactics designed to circumvent the union. Thus, GE eventually relinquished this policy.

  Successful negotiations are contingent upon each side remaining flexible. It is hoped that the end result will be a “package” representing the maximum and minimum levels acceptable to each of the parties. The bargaining zone, which is illustrated in Figure 13-6, is the area bounded by the limits of what the union and employer are willing to concede. If neither the union nor management is willing to change its demands enough to bring them within the inside boundaries of the bargaining zone, or if neither is willing to extend the limits to accommodate the other’s demands, then negotiations reach impasse.

The union team is first to present its initial proposals. Usually, the original union proposal demands more than it expects to end up with (i.e., excessive demands in terms of changes in, additions to, and deletions from the previous contract), which will allow leverage for trading off for management concessions. The management negotiating team then states the management case, often presenting unrealistic counterproposals and data supporting the view that union workers are treated well. The early meetings are often characterized by both parties remaining far apart on the issues; however, as negotiations proceed, there is generally movement toward a pattern of agreement. As topics are discussed and considered, mutual concessions are offered, counterproposals are made, and eventually a tentative agreement is reached.

  When a tentative agreement is reached, in most cases, the union members vote on the contract. If it is approved, the contract is ratified; if it is voted down, more negotiating takes place. The next step involves the actual drafting of a formal document, attempting to keep it in simple, clear, and concise terms. In fact, however, most contracts are difficult to read and some sections are virtually incomprehensible for the rank and file (e.g., most often sections on seniority and grievance procedures). The last step is the actual signing of the agreement by the representatives of the union and management. The typical labor agreement defines the responsibilities and authority of unions and management and stipulates what management activities are not subject to union authority (e.g., purchasing and hiring).

Resolving Bargaining Deadlocks and Impasse Resolution

If neither the organization nor the union is willing to remain flexible and make concessions, then negotiations reach a deadlock or impasse that can eventually result in a strike on the part of the union or a lockout on the part of management. So how can these breakdowns in negotiations be avoided? One way is to delay consideration of the more difficult issues until the latter stages of bargaining and, for the time being, to simply agree to disagree on the tougher decisions. The easier questions can be considered in the beginning, thus giving both sides a feeling of making progress. Another way to avoid breakdowns in negotiations is for each side to be prepared to offer propositions and to accept alternative solutions to some of the more controversial issues.

  If the two parties are unable to compromise and resolve a deadlock, then they have the option of calling in a mediator, a neutral third party who reviews the dispute between the two parties and attempts to open up communication channels by suggesting compromise solutions and concessions. Mediation is based upon the principle of voluntary acceptance. This means that mediators act as go-betweens between the parties to help clarify the issues but that they have no conclusive power or authority to impose or recommend a solution. In fact, either party may accept or reject the mediator’s recommendations. The Federal Mediation and Conciliation Service (FMCS) was established by the Taft-Hartley Act. Mediators perform their services for free and mediate an average of about 15,000 labor disagreements per year.

Sometimes government intervention is necessary to resolve deadlocks. This is generally in cases where a work stoppage would threaten the national security or the public welfare. For example, one of the provisions of the Taft-Hartley Act is a national emergency strike provision that gives the president of the United States the power to stop a strike if it imperils national health or safety.

figure 13-6


The basis for the union’s power in collective bargaining is economic and generally takes one of three forms: striking the employer, picketing the employer, or boycotting the employer.

Striking the Employer

One tool a labor union can use to motivate an employer to reach an agreement is to call a strike. A strike is simply a refusal on the part of employees to perform their jobs. Strikes occur when the union is unable to obtain an offer from management that is acceptable to its members. Strikes are rare these days. From 1981 to 1990, the average annual number of major work stoppages (involving 1,000 or more workers) was 72 while the average was 27 for 1996–2005. According the Bureau of Labor Statistics, there were 21 major work stoppages during 2007, 12 from the private sector and nine involving state or local governments. The largest major work stoppage in total days idle was between the Alliance of Motion Picture and Television Producers and the Writers Guild of America East and West, with 10,500 workers accounting for 409,500 lost workdays. The mean length of a work stoppage in 2007 was 10.5 days, down from 26.5 days in 2006. Numerous work stoppages in 2007 were short in duration, with six work stoppages lasting two days or less.

  Before a union goes on strike, it must first assess the consequences of a strike and its members’ willingness to make the sacrifices and endure the hardships (e.g., lost pay) that are part of striking. Even when the union perceives the strike as necessary, employees may not be willing to strike. Factors such as loyalty to the organization and commitment to the job have been shown to differentiate workers who are willing to strike and those who are not. Another part of this assessment also involves determining whether or not the employer can continue operating by using supervisory and nonstriking employees.

  There are a number of risks to the union and its members in striking. For one, replacement employees can vote the union out in an NLRB-conducted decertification election. Also, a strike can result in a loss of union members. The public also may withdraw its support from union members and often does.

  The power of the strike to pressure management has been seriously diminished during the past decades. Automation, recent court rulings, and a growing number of unemployed workers willing to serve as replacements have helped management. After Congress passed the Wagner Act in 1935, workers’ rights to organize and to strike were guaranteed. However, the 1938 Supreme Court ruling in NLRB v. Mackay Radio & Telegraph weakened this right by permitting the permanent replacement of economic strikers by management. The use of replacement workers seriously undermines the economic pressure that strikes once had. Even though this court decision was made in 1938, it was not until the 1980s that the ruling was frequently applied. One example is the 2006 Northwest Airlines strike by its machinists. Northwest had replacement workers ready to go the very first day of the strike action by the Aircraft Mechanics Federal Association. Many workers who went on strike never got their jobs back.

  Since President Reagan hired nonunion workers to replace air-traffic controllers in 1981, management’s hiring of nonunion members has been a regular and successful strikebreaking weapon. The Reagan and two Bush administrations have fostered a climate that has made strikes risky for unions. Employers are now emboldened to use or threaten a union with permanent striker replacements. As stated in one review, “In many situations, the strike has actually become the strongest weapon in the employer’s arsenal. If an employer is intent upon busting a union, the strike becomes an integral part of this effort. Union-busters commonly advise employers to create strike situations as a means of creating a ‘union free environment.’”
  While the diminished power of the strike certainly reflects a power shift to employers, with more international competition, there are ever more mutual employer-union incentives to reduce conflict and to avoid strikes.

  As with organizing efforts, unions have developed alternative strategies to the strike. Some recent examples involve farm workers, where adverse publicity has been directed at Taco Bell, McDonald’s, and Burger King to pressure growers to increase the pay of tomato pickers. Some unions have established new programs for developing and implementing strike-alternative, pressure-campaign strategies and tactics. These so-called corporate campaigns are designed to exert pressure on employers by using demonstrations, advertisements, stockholder pressure, and other negative publicity for employers that can lead to pressure on employers from consumers.

  Strike activity will probably continue to decline for the foreseeable future. The main reasons are declining union density, a decrease in the perceived and real effectiveness of strikes as a bargaining weapon, and growing mutual concern about the costs of a protracted strike. Because of this decline in strike effectiveness, unions are now looking at alternatives to the strike, including in-plant strategies and corporate campaigns. In addition, strike cost concerns have encouraged management and labor to explore more cooperative approaches to collective bargaining.

Picketing the Employer

Another union tactic is the picket. The picket is used by employees on strike to advertise their dispute with management and to discourage others from entering or leaving the premises. Picketing usually takes place at the plant or company entrances. It can result in severe financial losses for a firm and eventually can lead to a shutdown of the plant if enough employees refuse to cross the picket line. Picket lines can become very emotional at times, especially when employees or replacements attempt to cross them. These people may become the target of verbal insults and, although rarely, even physical violence. Companies hire security firms to protect nonstriking and replacement workers.

Boycotting the Employer

Boycotting encourages refusing to patronize an employer, refusing to buy or use the employer’s products or services. As an incentive to employees to honor the boycott, heavy fines may be levied against union members if they are caught patronizing an employer who is the subject of a union boycott. The union hopes that the general public also will join the boycott to put additional pressure on the employer. Generally, there are two types of boycotts: the primary boycott and the secondary boycott. The primary boycott involves the refusal of the union to allow members to patronize a business where there is a labor dispute. In most cases, these types of boycotts are legal. A secondary boycott refers to the union trying to induce third parties, such as suppliers and customers, to refrain from any business dealings with an employer with whom it has a dispute. This type of boycott is illegal under the Taft-Hartley Act.


Employers may come to the bargaining table with their own base of power. Foremost is their ability to determine how to use capital within the organization. This enables them to decide whether and when to close down the company, the plant, or certain operations within the plant; to transfer operations to another location; or to subcontract out certain jobs. All these decisions must be made in accordance with the law. This means that management must be sure that its actions are not interpreted by the National Labor Relations Board (NLRB) as attempting to avoid bargaining with the union.

If an employer is confronted with a strike by one or more of its unions, then the firm must weigh the costs associated with enduring the strike against the costs of agreeing to the union’s demands. There are a number of considerations the employer must take into account: (1) how the employer’s actions will affect future negotiations with the union, (2) how long the firm and the union can endure a strike, and (3) whether business can continue during the strike. Today, employers are more able to endure strikes than they were in the past. This is because the permanent hiring of replacements has greatly weakened the power of the strike. Research finds that the use of replacement workers usually prolongs strikes.

In general, union members themselves are less willing to support a strike, and without strike unity, the power of the strike is negligible. Also, technological advances have increased some employers’ ability to operate during a strike with a substantially reduced staff. Strikes in the public sector are illegal in most states, although walkouts have occurred in some states where strikes are illegal. Federal employees cannot strike pursuant to the 1978 Civil Service Reform Act.

The lockout is another source of power for the employer. A lockout is basically a shutting down of operations, usually in anticipation of a strike. The lockout can also be used to fight union slow-downs, damage to property, or violence within the plant. Generally, lockouts are not used very often because they lead to revenue losses for the firm. Many states allow employees to draw unemployment benefits, thus weakening the power of the lockout.


The earlier part of this chapter dealt with the negotiation of the labor contract. In this part of the chapter, we will address the application and interpretation of the labor agreement. Despite the incredible amount of time and effort that goes into negotiating and carefully writing the contract, most are written in such broad, ambiguous terms that a great deal of interpretation is required in order to put the contract to work. Most rank-and-file union workers do not clearly understand the labor contract.

Most of the problems associated with the interpretation or application of the labor contract are resolved at the lower levels of the grievance procedure (i.e., between the supervisor and the union steward). Grievance procedures and the time limits associated with them are generally spelled out in the contract for the purpose of reaching quick, fair, and equitable solutions to contract problems. Unresolved grievances proceed progressively to higher and higher levels of management and union representation. If the grievance procedure fails (i.e., the grievance reaches a deadlock or stalemate), most contracts stipulate that the final step will be Binding arbitration. Arbitration involves bringing in a third party, an impartial outsider mutually agreed upon by both parties, to decide the controversy. In the following section, both the grievance procedure and the arbitration process will be reviewed. Figure 13-7 illustrates what these processes look like.

Grievance Procedure

Grievance is a formal complaint

When an employee believes that the labor agreement has been violated, the employee files a grievance. A grievance is a formal complaint regarding the event, action, or practice that violated the contract. The grievance procedure serves a number of purposes. The primary purpose is to determine whether the labor contract has been violated. Also, the grievance procedure is designed to settle alleged contract violations in as friendly and orderly a fashion as possible, before they become major issues. Other purposes of the grievance procedure include preventing future grievances from arising, improving communication and cooperation between labor and management, and helping to obtain a better climate of labor relations. The grievance procedure also helps to clarify what often is not clear in the contract (e.g., defining lawful or unlawful conduct). Grievance procedures generally establish the following: (1) how the grievance will be initiated, (2) the number of steps in the process, (3) who will represent each party, and (4) the specified number of working days within which the grievance must be taken to the next step in the hearing. Failure to comply with time limits may result in forfeiture of the grievance.

Resolution of Grievances

In most cases the labor contract stipulates that the employee’s grievance be expressed orally or in writing to the employee’s immediate supervisor. One advantage of expressing the grievance in written form is that it reduces the chance that differing versions of the grievance will be circulated. It also forces the employee to approach the grievance in a comparatively rational manner, thus helping to eliminate or reduce the likelihood of trivial complaints or feelings of hostility. Generally, the grievance is processed through the union steward, who will discuss it with the employee’s supervisor.

  Most grievances are settled early in the process. Settlement generally occurs after an employee has either presented his or her grievance in writing to the supervisor or appealed to the next higher level. An early settlement is contingent, however, on each side being willing to listen to the other side and discuss the problem in a rational and objective manner. Settlement can be hampered if both sides enter the procedure with an attitude of “win-lose” as opposed to “win-win.”

  When a grievance does not get settled in the first or second step, it goes to a higher level, often to company representatives (e.g., a general superintendent) and union representatives (e.g., a grievance committee). These representatives meet to further discuss the grievance and try to reach a solution agreeable to all. In most cases, the burden of proof in a grievance proceeding is on the union. Sometimes a mediator will be brought in to help resolve the grievance. The mediator’s role in a grievance resolution is much the same as in contract mediation (i.e., to get the two parties to communicate and to offer compromise solutions). The mediator’s role is not to establish which side is right or wrong. His or her recommendations and suggestions can be accepted or rejected by either party. The role of the mediator, as will be seen later, is much different from that played by the arbitrator, whose decisions are final and binding. Arbitration Process

  While there is no law that forces parties to include arbitration in their labor agreements (either party can refuse to incorporate any arbitration provisions), almost all labor agreements in the United States do provide for arbitration as the final step in the grievance procedure. In the majority of grievances filed, arbitration is not necessary since resolutions are usually made during lower-level discussions. In fact, arbitration should be the last resort after all other options in the grievance process have failed. Since both parties share the cost of arbitration, there is a financial disincentive to rely upon it. Arbitration involves bringing in an impartial third party (referred to as the arbitrator or adjudicator), who is mutually agreed upon by both parties to break the deadlock between the union and management. Unlike the mediator’s role of providing recommended solutions, the arbitrator’s role is to make a ruling that is “final and binding upon both parties.”

  Major League baseball and NHL hockey use binding arbitration in salary determination. In this form of negotiation, the player and the team each put in an offer for what they consider to be an acceptable salary. If no agreement is reached, the arbitrator hears arguments from both sides and chooses one of the figures. The decision reached then becomes binding on both the player and the team.

  Arbitration is generally not used as a method of breaking a deadlock in negotiating a new labor contract in the private sector. This is because both labor and management would prefer to make their own decisions regarding conditions of employment rather than have these decisions made by a third-party arbitrator. However, because most public-sector workers do not have the right to strike, arbitration is often used as a substitute for the strike in the public sector. Of course, arbitration will take on a much more important role if the Employee Free Choice Act becomes law.

The Decision to Arbitrate: The decision as to whether or not to take a grievance to arbitration depends upon a number of factors and circumstances. At least two things might happen before arbitration becomes necessary: (1) the union could withdraw the grievance or (2) the employer could give in. If neither of these happens, then both sides must decide whether or not the case is important enough to justify the costs in terms of time, money, and effort. They also should determine what the chances are for a favorable ruling.

  According to the duty of fair representation doctrine, unions cannot ignore their legal obligation to provide assistance to their members who are pursuing a grievance. Even if the union knows that an employee’s case is weak, it often pursues the case to demonstrate its commitment to its members. In addition, management cannot refuse to arbitrate unresolved grievances if the labor contract contains an arbitration clause.

Selection of the Arbitrator: Most labor agreements state that union and management will select an arbitrator from a panel of names submitted by either the FMCS or the American Arbitration Association (AAA). Neither party is obligated to use either service. Either of these organizations will provide the two parties with a list of names (usually seven) from their roster of arbitrators. The two parties will then agree upon an arbitrator through a process of elimination or some other mutually acceptable procedure. Many labor contracts stipulate a procedure for appointing an arbitrator. In some cases, a permanent arbitrator may be appointed under the terms of the labor agreement. The advantages of using a permanent arbitrator are that it saves time in the selection process, the arbitrator is already familiar with the contract and the current state of labor relations in the company, and there is a greater likelihood of uniformity in decisions because there tends to be more consistency in the interpretation of the contract. The other option for selecting an arbitrator is what is known as the “ad hoc method,” which simply calls for a different arbitrator for each case. Despite the fact that the selection process takes longer, the ad hoc method is more popular precisely because the parties are not stuck with the same arbitrator for every case.

The Arbitration Process: While arbitration hearings are considered quasi-judicial, they are less formal than court proceedings. The arbitration hearing begins with a submission agreement, either oral or written, that describes the issues to be resolved through arbitration. Once the issues are presented, it is up to each of the parties to educate the arbitrator about relevant issues, facts, evidence, and arguments. The arbitrator does not play the role of fact finder; however, he or she does have the right to question witnesses or to request additional facts. Interestingly, union complaints of employers’ failures to disclose information for collective bargaining purposes have increased.

  Arbitrators are not bound by formal rules of evidence like those used in a court of law. For example, hearsay evidence may be introduced as long as it is identified as such. Throughout the arbitration proceedings, a court recorder may be present to prepare a transcript of the hearing.

Basis for the Arbitrator’s Decision and Award A

+fter hearing all of the evidence, the arbitrator writes his or her opinion supporting the decision and award. This includes providing a written rationale for the decision (i.e., an explanation for why the decision was made the way it was). The written opinion of the arbitrator presents the basic issues of the case, the pertinent facts, the position and arguments of each party, the merits of each position, and the reasons for the case. As a rule of thumb, the arbitrator has 30 days in which to consider the evidence and to prepare a decision.

  A fair decision and award must be based strictly upon the contract if relevant contract language exists. Also, the decision should be based upon an accurate assessment and interpretation of the contractual clauses of the labor agreement. The contract is the final authority. That is why the contract language is so important; it should be as clear-cut and precise as possible. Unfortunately, contractual language usually is unclear and ambiguous and has many different meanings. When contract language is silent, such factors as past practice, negotiation history, and other relevant laws play an important role in the arbitrator’s decision.

  In reaching a decision, an arbitrator must decide if the employee was accorded due process. The arbitrator must also determine whether the employer had just cause for any actions taken against the complainant. One final consideration for the arbitrator is to make sure that his or her decision is not based upon precedents established in previous cases, but rather on the facts of the current case. The arbitrator’s awards should be clear and to the point. If the union receives the award, the arbitrator should state explicitly what actions the employer must take to comply with the provisions of the contract.

Criticisms of the Arbitration Process

Probably the criticisms heard most often about arbitration relate to costs and delays. Arbitration can be both expensive and time-consuming. However, supporters of arbitration will counter that argument with the fact that the costs associated with strikes and lockouts are even greater. The average fee for an arbitrator exceeds $2,000 per day, plus expenses. These costs include all the arbitrator’s expenses such as hotel, travel, and meals; his or her time to analyze and write up the case and opinion; and other miscellaneous costs such as those associated with lawyers and stenographers.

  A few strategies have been found to reduce the costs of arbitration. These include developing a system to ensure that only grievances of high importance to the union and employer end up in arbitration, using arbitrators from the local area, consolidating grievances into one hearing, and having the arbitrator issue an award without providing a detailed written opinion.

  The arbitration process is also frequently criticized for being too time-consuming. Cases often become backlogged due to arbitrators’ busy schedules. Also, the actual hearings get drawn out because of the need to read lengthy transcripts or briefs. Finally, the writing of the opinion is very time-consuming. Several things can be done to cut down on this excessive time. These include using new arbitrators with smaller case loads, creating a permanent panel of arbitrators from which to choose, and cutting out transcripts and posthearing briefs (i.e., having the arbitrator take his or her own notes).

Some employers try to reduce arbitration time and costs by using a form of expedited arbitration sometimes referred to as miniarbitration. Miniarbitration requires that a hearing be held within 10 days after an appeal is made. Also, arbitration hearings are completed in one day, the arbitrator’s decision must be made within 48 hours after the close of the hearing, there are no transcripts or briefs, and the fee is paid for only the hearing day. Miniarbitration is not always appropriate, but it generally works well with simple, routine cases. Another alternative is a process called grievance mediation, which combines aspects of both mediation and arbitration. It is much less formal than arbitration, with no briefs or cross-examinations of witnesses.

figure 13-7



The future of unions in the United States is unclear. There can be no question that political power at the state and federal levels has diminished. As of 2009, some of that political clout may have already returned. Legislation dealing with how unions can spend members’ dues will be on many state legislative agendas. Republicans tend to support “paycheck protection” ballot initiatives that give union members more say in how their money is spent. With the unions suffering from declining membership and unfavorable legislation, a new movement has begun within the union leadership to place greater emphasis on union organizing.

Five of the largest AFL-CIO affiliates formed a separate coalition in 2005 in order to focus on organizing. The Change to Win Coalition is composed of unions that were very unhappy with the leadership of AFL-CIO President John Sweeney, who was reelected in 2005. The new coalition is made up of the Service Employees International Union, the United Food and Commercial Workers Union, Unite Here, the Laborers’ International Union, and the International Brotherhood of Teamsters. The coalition maintains that the AFL-CIO has spent too much money on politics and not nearly enough to organize new members. The five unions represent 5 million workers. The Coalition pledges to devote 75 percent of its income to organizing.

  Unions continue to challenge team-based productivity improvement programs as violations of the NLRA. They have also successfully blocked the Republican-supported Teamwork for Employees and Management (TEAM) Act. A ruling by the NLRB upheld a claim by the union at DuPont’s largest chemical plant that the company’s quality circles (QCs) constituted an employer-dominated labor organization and thus violated NLRA as an unfair labor practice. A similar ruling also affected Electromation, Inc.These rulings make the environment unclear as to the continued formation of employee committees and have left many organizations wary of testing empowerment programs in a union environment. Of course, QCs are still legal if first agreed to as part of a collective bargaining contract.

  There are challenging times ahead for the United Auto Workers (UAW). The union has been offering major concessions in an effort to help the “Big Three” American automakers (Ford, GM and Chrysler) get financial help from the federal government in 2008. In that year, UAW labor costs averaged $73.12 per hour in wages and benefits at “Big Three.” (this figure includes retiree costs). Auto workers at Japanese plants in the U.S., all non-union, averaged $44.17 per hour. It is estimated that there is an additional $1,500 in labor costs in a GM car compared to a Toyota. Among the proposed concessions were an end to a “jobs bank” that paid 3,500 laid off UAW workers 95% of their salaries when they were not working. None of the Japanese plants have a “jobs bank.” The UAW also negotiated a two-tiered wage structure in 2007 that should be very beneficial to the “Big Three” down the road if they can survive the 2009 recession. Under this new structure, salaries for newly hired workers are lower than the structure for current workers.

  Unions are gaining support among women, minorities, and immigrants. Since the rate of women and minorities entering the workforce is higher than the rate for white males, this represents a bright spot for the future of unions. In fact, one highlight for unions in the early part of the 21st century is the increase in the number of women who joined unions and the growth of unionism among nurses, a fast-growing occupation with critical real (and projected) shortages. Most experts predict that if union representation is to increase, the focus of organizing must be on jobs that can’t be moved overseas. In many of these jobs, women represent the majority of workers.

  A prime and successful target of late has been nursing home employees who toil at very difficult and physically taxing jobs at slightly more than the minimum wage. The Service Employees International Union won the right to represent 75,000 home care workers in Los Angeles County. This is the single largest gain for unions anywhere since the first auto contracts were signed over 75 years ago. Unions even won 25 of 37 elections in the South for health care workers and over 75 percent of elections across the country in the late 90s.

  Many physicians are unionizing against Health Maintenance Organizations due to low fees, excessive patient loads, and increased interference in what physicians believe to be their decision making regarding medical treatment. The Federation of Physicians and Dentists claims over 42,000 members as of 2007.

  There are a few recent and successful union organizing efforts. Hollywood casting directors (the people who pick the actors) recently voted to become Teamsters. Says Gary Zuckerbroad, a casting director and organizer who weeds out auditioning actors, “Every other major craft in the entertainment industry is unionized. Casting directors get no residuals—writers do.” But a key question in this case is whether casting directors, given the nature of their jobs and as independent contractors, are even protected by the NLRA. Are they management since they participate in hiring the actors?

  Recent court rulings and NLRB decisions are certainly not favorable for unions. “The cumulative effect is to decrease the capability of unions to organize,” says Theodore St. Antoine, former Dean of University of Michigan Law School and professor of labor law. These rulings and the growing conservatism of the federal judiciary should make labor organizing more difficult, and, given the decline in unions in most sectors of the U.S. economy, things have apparently gone from bad to worse in terms of union organizing. The elections of 2008 have clearly improved the political situation for unions in Washington.

  As of 2009, no American Wal-Mart worker belonged to a union. Wal-Mart’s prices are about 14 percent lower than its competitors for lots of reasons (e.g., economies of scale, price control pressures on suppliers, technology on products bought and sold, cheaper imports). Low wages are certainly another factor. Sales clerks in some areas of the United States earn less at Wal-Mart than unionized workers doing essentially the same work for competitors. Health care benefits are estimated to be 30 percent less than coverage for workers within the same industry. There is no doubt that Wal-Mart will continue to be a high-priority target for union organizing. Recent success organizing Wal-Mart workers in Canada will encourage this effort.

  There is a lot at stake for managers too. Research shows that managers who preside over a successful union organizing effort are much more likely to be fired and not promoted. Many former Wal-Mart managers, for example, have reported that they were warned they would be fired if any part of their workforce even authorized an election.


While private-sector union membership has been dropping, public-sector, or government employees’ unionization has been on the increase. Public-sector employees generally have less Bargaining Power than private-sector employees. This is because unions often have to negotiate or bargain with more than one person or group. Also, many governmental entities prohibit striking. Colorado and Florida, for example, forbid striking by any state employee, including teachers. However, many state employees in midwestern states have maintained the right to strike. Visit the website of the National Education Association ( for a study of teacher salaries as a function of the right to strike.

  The most sophisticated (and successful) of the service sector unions has been the American Federation of State, County, and Municipal Employees (AFSME), which emphasizes workplace dignity and safety, Pay Equity programs (comparable worth), resistance to performance and electronic monitoring, and career development. AFSME, an affiliate of the AFL-CIO, has 1.3 million members. According to the Philadelphia Inquirer, “AFSME seems to represent labor’s future. A majority of its members are women, nearly a quarter of them are minorities, and more than half are younger than 40.


A common occurrence today is for a new company to buy a failing (or failed) business. What then are the legal obligations of the new company with regard to active collective bargaining agreements? Federal labor law addresses the duties of the new employer to recognize and bargain with the predecessor’s union. In the 1987 case Fall River Dyeing & Finishing Corp. v. NLRB, the U.S. Supreme Court established that when (1) a successor employer shows “substantial continuity” in business operations, (2) the bargaining unit is appropriate (performing essentially the same jobs under the same working conditions), and (3) the predecessor employed a majority of the new employer’s workers, then the successor employer is required to recognize and bargain with the predecessor union. However, there is no duty imposed on the successor employer to hire the predecessor’s workers unless the failure to hire them was based upon their union status. Also, the successor is not legally required to adopt an old collective bargaining agreement that was made with the predecessor.

  Union lobbyists have been successful in passing legislation regulating mergers and acquisitions. According to the Investor Responsibility Research Center, 39 states now have some form of antitakeover statute. This legislation typically requires a lengthy waiting period for completion of a takeover or the approval by the corporation’s board of directors. Legislation enacted in Massachusetts is considered the most favorable for unions. Hostile takeovers in Massachusetts require approval by the board of directors, and a long waiting period is stipulated for the takeover. Workers laid off within two years of the takeover get severance pay, and new management must recognize all existing collective bargaining agreements.


Experts on U.S. unionism drafted a proposal in 2005 with the goal of revitalizing the union movement. They prefaced their list of recommendations with the following context: “The economic and political changes over the last thirty years both in the United States as well as globally have resulted in a far more hostile environment for labor unions specifically and for working people generally. In this context, contrary to the spirit of A. Philip Randolph’s notion that the essence of trade unionism is social uplift, the trade union movement is rarely looked to today as a voice of progress and innovation, or a consistent ally of progressive social movements.”

  After much discussion, this consortium of experts concluded: “The current situation necessitates a new approach to strategy, tactics, and fundamentally, the vision of trade unionism. This is more than the production of new mission statements, but instead rests on the necessity to rethink the relationship of the union to its members, to the employer(s), to government, to U.S. society as a whole, and to the larger global village. Can the union . . . rise to the challenge of being a means to confront injustice, or is the union condemned to be solely an institutional mechanism to lessen the pain of contemporary capitalism on those fortunate to be members of organized labor?” Figure 13-8 presents a summary of their strategy for reinventing trade unionism in the United States. They have an uphill battle. The Democratic Party dominance in Washington will certainly help.


There are several unique characteristics of the U.S. labor relations system relative to systems in most other countries. Among the most significant are the following:

1. In the United States, unions have exclusive representation (i.e., there is representation by only one union for any given job in the United States). In Europe, more than one union, often with religious and political affiliations, may represent the same workers.

2. In the United States, the government plays a passive role in labor relations and dispute resolution, characterized by regulating the process, not the outcomes. In Western and Eastern European countries, Australia, Canada, and Latin America, the role of the government is much more active.

3. In the United States, there is generally an adversarial relationship between the union and management, while in most other countries the relationship is much more conciliatory and cooperative.

4. Collective bargaining in the United States is more decentralized (i.e., agreements are negotiated primarily at the local level). Unions in Europe, Japan, and Canada rely primarily on macro-negotiation by industry.

5. In the United States, unions place a high emphasis on economic issues such as wages, benefits, and job security, while in other countries (e.g., France), the unions emphasize political issues to a greater degree. Swedish unions emphasize both economic and political issues. For example, the Swedish model is considered humane since their goal is to replace unemployment benefits by a guarantee of work or training for long-term unemployed people. In China, unions have very little political or economic power and great difficulty in organizing workers.

  In several countries, trade unions influence firm economic and financial decisions by including worker representatives as members on the supervisory boards. In Germany, workers are represented at the plant level in work councils and at the corporate level through Codetermination. Work councils are committees that have representatives from both employees and managers. They have responsibility for the governance of the workplace, including hiring and firing workers, training issues, and overtime. Codetermination is usually associated with Germany because, there, a full-parity system was established in the steel and coal industry. Labor and management are equally represented on the supervisory or corporate boards of these companies. Some form of codetermination also can be found in other industries in Germany. Since 1976, German law has required companies with over 2,000 employees to have the same numbers of management and worker representatives on the supervisory board (usually 11 members including the chair, who is chosen by the other 10 members). The decisive vote is cast by the “neutral” chair in tie situations. AEG-Telefunken, a German appliance and machinery company, provides a good example of the codetermination principle: AEG was in deep financial trouble in the early 1980s. Surprisingly, the chair cast the deciding vote in favor of the labor representatives’ proposal to persuade the government to provide more aid.

  When making union comparisons across countries, it is important to recognize that even within a country there may be marked differences among unions. In Germany today, two of the biggest unions are IG Metall with over 2 million members representing cars and electronics and IG Chemie with over 1 million members representing chemicals. Their approaches to union issues are quite different even though both were established in 1890–1891. The main goal of IG Metall is to fight for better benefits, wages, and hours even if it means losing members as companies lay off workers. On the other hand, IG Chemie recently signed an agreement that allows employers who are in trouble to cut wages by up to 10 percent in return for job security. IG Metall has a similar agreement.

  The head of the works council at the Hamburg factory of Daimler Benz Aerospace (DASA), Hans-Gunter Eidtner, was able to persuade the IG Metall union to eliminate overtime pay so that employees would not lose their jobs. German workers seem more eager to compromise given the large number of people out of work. In fact, as in the United States, employers are increasingly making deals with workers that improve productivity and flexibility. Most of the companies negotiate concessions with the works councils at individual factories, then gain approval (often reluctantly) from national unions. Companies in eastern Germany have an easier time making deals and cutting labor costs since the unions are less powerful than in western Germany. Some of the agreements reached in Germany are similar to those reached in the United States where employees are expected to make some concessions in order to help out struggling companies. Some of these are listed below:

■ At Bayer, the chemical union agreed to reduce bonuses, eliminate an employee sharepurchase program, and introduce flexible work hours over three years.

■ At Volkswagen, the union agreed to a two-tier wage system and temporary employees will earn 10 percent less than current employees.

■ Workers at the Hanover tire plant for Continental will increase their workweek by 75 minutes and make other concessions worth about $20 million.

■ At Deutz, a machinery maker, employees will accept a second year of pay cuts and will receive up to $11 million in Deutz stock.

Figure 13-8 A Strategy for Reinventing Trade Unionism in the 21st Century

1. There is a need for a vision that includes, but is not limited to, organizing the unorganized: There must be massive organizing of the unorganized.

2. The union movement must be unapologetically pro-public sector and pro-public service.

3. The union movement must stand for the expansion of democracy: Organized labor must stand AND fight for an expansion of democracy beyond the limits of formal legality.

4. We must have a U.S. union movement structure suited to advancing organizing of the unorganized workers: The question of the shape and structure of the U.S. union movement cannot be driven by a concern about jobs for the officers and staffs of the current unions.

5. The union movement must reshape its political program to focus on the needs of the working class: The union movement has made the repeated mistake of assuming that it can tell its members how to vote, and that the Democratic Party structure will automatically represent their interest.

6. The union movement must organize in the South and Southwest: There is a direct (though not exclusive) relationship between union membership and one’s tending to vote in one’s own economic interests.

7. State federations and central labor councils must be democratic, inclusive, young and audacious: Too many central labor councils and state federations are disconnected from the realities that their members face and most of the working class.

8. The union movement needs real membership education: It is presumptuous to think that either organized or unorganized workers will blindly follow or adhere to a certain point-of-view without providing them with a coherent and up-to-scale mechanism by which they can access information.

9. The U.S. union movement must build both global union partnerships and solidarity with others fighting global injustice.