Chapter 13 – Labor Relations and Collective Bargaining
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CHAPTER 13
LABOR RELATIONS AND COLLECTIVE BARGAINING
Objectives.
After reading this chapter, you should be able to
1. Understand why people join unions.
2. Know the basic elements of labor law.
3. Understand collective bargaining as a tool for labor negotiation.
4. Identify the bases of power in collective bargaining related to both unions and
management.
5. Describe current trends and issues in labor relations.
6. Describe the state of labor relations in other countries.
Chapter 13 – Labor Relations and Collective Bargaining
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CHAPTER 13 – CHAPTER SUMMARY
I. Overview
A. Unions represent employee’s interests to management on critical HR issues
B. Unions prefer stability and equality of wages
C. Union membership in the U.S. has dropped substantially
D. Americans support of unions is down
E. Unions improve working conditions of workers
F. Nonunion workers are protected by laws that unions helped pass
G. Worker-management relationships are affected by unions
H. Knowledge of labor law is critical when union organizing efforts are serious
II. Why Do Workers Join Unions?
A. Worker perceptions of organizational justice, job satisfaction, and perceptions of fair
pay likely deter union organizing drives
B. Three Reasons why workers join unions (Figure 13–2)
1. Perceptions of work environment
2. Perceptions of influence
3. Belief of unions
C. Belief that unions can foster change is in decline
D. Companies try to prevent union formation
E. Management strongly prefer a non-union environment
III. The Legal Environment of Labor Relations
A. National Labor Relations Act (NLRA) (Wagner Act-1935)
1. Prohibited unfair labor practices by private- sector employers
a) No interfering with employee representation and collective bargaining rights
b) No dominating or interfering with union affairs
c) No discriminating against workers who are active in union or who file unfair
labor charges
d) Can not terminate if employee files charges or gives testimony under NLRA
e) Bargain in good faith with employee representatives
2. Established the National Labor Relations Board (NLRB)
a) Two functions of NLRB
i) Prevent and correct unfair labor practices
ii) Certify or decertify union representation by election
b) Hears complaints for unfair labor practices (ULPs)
c) Attempts to settle claim
d) Complaints could be heard by NLRB judge with appeal to five-member NLRB
e) NLRB ruling subject to review by U.S. Court of Appeals and Supreme Court
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f) Approximately 25,000 ULPs filed each year, and over 90% settled
g) In 2011 over 2000 petitions were filed for secret ballot elections
h) 2011 NLRB issued a rule requiring employers to post a notice advising
employee of their rights under the NLRA
i) NLRB can challenge state laws it believes are in conflict with the NLRA
B. The Taft-Hartley Act of 1947
1. Limits the power of unions and defined unfair labor practices by unions
a) Restricted strike usage and granted the President injunction power
b) Restricted interfering with workers right to organize
c) Prohibited discrimination against non-participating workers
2. Provides states with option to pass “Right– to–Work” laws
a) Declare that union security agreements, which require membership as a
condition of employment, are illegal
b) As of 2011 23 states have “Right–to-Work laws
3. Federal Mediation and Conciliation Service
1. The Landrum-Griffin Act of 1959
a) Provided employees with a “bill of rights”
b) Required unions to file annual financial statements with Department of Labor
c) Required unions to elect national officers every 5 years
d) Required unions to elect local officers every 3 years
e) Goal to monitor the internal activity of unions
2. The Railway Labor Act of 1929
a) Applies to transportation industry (rail, airlines, etc)
b) Allows government intercession in bargaining breakdowns
c) President may intervene in case of a strike
3. The Civil Service Reform Act (CSRA of 1978)
a) Similar to NLRA, applicable only to federal employees
b) Prohibits wage negotiations and strikes
c) Established the Federal Labor Relations Authority (FLRA)
IV. How Do Workers Form Unions?
A. Process of organizing workers:
1. Employees contact union or union conducts organizing drive
a) Unions are using the Internet to conduct campaigns
b) Employer can restrict the use of company email to “business only”
2. At least 30 % must sign authorization cards
a) Employer can recognize a union at this point without an election
3. NLRB petitioned to conduct election
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4. NLRB sets date for election
5. Secret ballot held, majority to accept
a) If no acceptance, 12 months wait
b) If acceptance, 12 months to decertify (employer)
B. Union Organizing Efforts
1. Bottom-up campaign initiated by workers
2. Top-down initiated by union
3. Goal to build sense of injustice and belief union can impact change
4. Town & Country Electric v. NLRB held that “Salting” of union sympathizers thru
employment in non-union firms is legal as long as they do their work
5. Organization can campaign against union
6. Neutrality agreement from management can contain provision that
management will recognize the union if majority of workers sign authorization
cards
7. Alternative approach to typical election campaign
a) Secure a collective bargaining agreement without an election
b) Implementing strike alternative, pressure campaign strategies and tactics
C. NRLB regulates campaigns
1. Unions can go worker-to-worker or community involvement
2. Organization can hold “captive audience” meetings
3. Unions believe organizations violate law in anti-campaigns
a) Few penalties for violating law
4. Unions can get neutrality agreements
V. The Effects of Unions
A. Wage differential between 15 -20% favoring unionized workers
1. Median weekly (2008): union= $886; non-union=$691
2. Better fringe benefits
3. Collective voice of unions reported to reduce worker quit rates
4. Productivity effects are mixed
5. Higher productivity when good labor/management relations
6. Recent report show “unions have a significant negative effect on profits in the
1. Shareholder wealth decreases during organizing campaigns
2. Unionization redistributes the firm’s economic profits from stockholders to
workers
3. Nature of the mgt-worker relationship has impact on adoption of HPWP’s
4. Spillover effects can occur when non-union firms adopt union like practices
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C. Unions and Quality of Work life Issues
1. QWL programs can enhance firms’ industrial relations
2. QWL programs can mitigate need for unions
3. Union support important for QWL program success
4. Mixed results on QWL programs in union settings
a) Studies have found that QWL programs improve industrial relations
b) Employee involvement programs can be effective at resolving differences
5. Nonunion work teams in union firms must be careful regarding NLRA
a) Electromation v. NLRA (1994) on employer domination
D. Union Effects on Worker Satisfaction
1. Union workers report more dissatisfaction with supervisors and job content than
nonunion workers
2. Only pay provides higher union satisfaction
3. Voluntary turnover lower in unionized firms
a) Golden Handcuffs
E. Unions and HRM
1. Termination for cause only
2. Total compensation is almost always higher
3. Staffing & performance management activities are often subject to collective
bargaining
4. Management must justify the reason for the termination or discipline of union
workers
VI. Collective Bargaining
A. The Labor Contract
1. Formal agreement between union and management
2. Outlines terms and conditions of employment
3. Taft Hartley Act of 1947 requires employer to negotiate with the union
4. Good faith bargaining
a) Requires that meetings are scheduled and conducted reasonable time and
5. Mandatory bargaining issues include wages, benefits hours of work, incentive
pay
6. Permissive issues may include union input into prices of the firm’s products. No
requirement to discuss or include in contract
B. Issues in Collective Bargaining
1. Wage-related issues
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2. Supplementary economic benefits
3. Institutional issues (union security, ESOPs, QWL)
4. Administrative issues (seniority, job security, and training)
C. Types of Bargaining
1. Distributive bargaining is zero-sum negotiation
2. Integrative bargaining is mutually beneficial
3. Concessionary bargaining is union giving back some of previous gain
a) Two-tier pay structures
D. Conducting Labor Contract Negotiation
1. Preparing for negotiating
a) Gather information both internal and external to the firm
b) Prepare written plan
c) Send teams to negotiation table
2. Meetings in Contract Negotiation
a) Union team presents its initial proposals first, management counters
b) Union members vote on tentative agreement
c) The final step is the signing of the agreement
3. Resolving Bargaining Deadlocks and Impasse Resolution
a) Avoiding deadlocks by delaying consideration of more difficult issues until
later stages of negotiation
b) Be prepared to offer concessions and accept alternative solutions
c) Mediation by neutral third party
d) Government intervention necessary if threats to national security or public
welfare
E. Union’s Economic Power in Collective Bargaining
1. Striking the employer
a) NLRB v. Mackey Radio & Telegraph (1938) permitted the permanent
replacement of economic strikers
b) Decreased perception of effectiveness of striking
2. Picketing the employer
3. Boycotting the employer
a) Secondary boycotts are illegal under Taft- Hartley Act
F. The Employer’s Power in Collective Bargaining
1. Capital: how to use of capital in the firm (e.g., close or transfer operations)
2. Strike vs. Costs of agreeing to demands:
a) How employers action affect future negotiations
b) How long the firm can union and endure a strike
c) Whether business can continue during a strike
3. Lockout: shuts down operations in anticipation of a strike
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G. Administration of the Labor Contract
1. Grievance procedure (Figure 13-7)
a) How the grievance will be initiated
b) Number of steps in the process
c) Who will represent each party
d) Number of working days that grievance will take
2. Resolution of Grievances
a) Most are expressed (orally or written) to supervisor
3. Arbitration process
a) Should be last resort
b) Is usually binding
c) The Arbitration Process
i) The decision to arbitrate
ii) Selection of the arbitrator
(a) Impartial third party
iii) The arbitration hearing
d) Basis for Arbitrator’s Decision and Award
i) Arbitrator writes his or her opinion supporting the decision and award
ii) A fair decision and award must be based upon the contract
iii) Decide if the employee was accorded due process
e) Criticisms of the Arbitration Process
i) Costs
(a) Reduce costs: develop system to ensure only high importance
grievances end up in arbitration, hiring local area arbitrators,
consolidating grievances into one hearing, issue awards without
providing detailed written opinion
ii) Delays
(a) Overcome through mini-arbitration & grievance mediation
VII. Current and Future U.S. Trends in Labor Relations
A. Union Membership
1. The future of unions in the U.S. is not clear
2. Increased emphasis in union organizing: Change to Win Coalition
a) 2005 the largest five AFL-CIO affiliates formed a coalition to focus on
organizing
b) Unions are gaining political force
3. Unions continue to challenge team-based productivity improvement programs
as violations of the NLRA
4. UAW concessions
5. Increasing support among
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a. Women, minorities and immigrants
b. Nursing Home workers
6. Cumulative effect of court rulings has decreased ability of unions to organize
7. Managers more likely to be fired or not promoted after a successful organizing
effort
B. Public-Sector Union Membership
1. Public sector increasing union membership-36.8% in 2008
2. Less bargaining power
3. Majority of members in AFSME are women
C. Mergers and Acquisitions
1. Bargain with the existing union
2. Fall River Dyeing & Finishing Corp vs. NLRB established when a successor
employer is required to recognize and bargain with the predecessor union:
a) Substantial continuity
b) Bargaining unit is appropriate
c) Predecessor employed a majority of the new employers’ workers
3. Anti-takeover statutes
D. Retraining Provisions
1. Enhance employee development in order to limit downsizings and maintain jobs
E. Employee Benefits
1. Emphasis on healthcare & family-oriented benefits
2. Child-care & family-leave issues
3. Unions instrumental in passage of FMLA
4. State child care funds
5. Child care centers
F. A Proposal to Reinvent U.S. Trade Unionism
1. Current hostile environment contrary to unionization’s goal of “social uplift”
2. Current situation requires a new strategy and tactics
3. Figure 13-8: Strategy for Reinventing Trade Unionism in the 21st Century
VIII. International Issues
A. Unique characteristics to U.S. labor relations
1. “Exclusive representation”, U.S. has one union for any worker, Europe may have
more than one
2. In U.S. government is passive in labor relations, most of world government is
active in labor
3. U.S. more adversarial between union and management
4. Collective bargaining is more centralized in other places in world
5. U.S. emphasizes economic issues, others political issues
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B. Codetermination exists in other countries
1. Labor and management exist equally on supervisory boards of firms
2. Neutral chair casts deciding vote
C. U.S. Managers & Unions
1. Major cause of expatriate difficulties is not understanding country’s union
structure and underlying social dimension
2. U.S. Union membership is one of lowest in world (See Figure 13–9)
3. Guidelines for MNC’s have been developed
a) Attempt to guarantee basic social and labor relations rights for all workers
D. Global Collective Bargaining & Productivity
1. Union workers get significantly higher average wages
2. Wage differential largest in US
3. Union membership reduced wage differences between skills & unskilled workers
and men & women
4. Difficult to generalize labor relations across borders
IX. Summary
A. The direction unions will take is not clear
B. Unions must be flexible and adapt to changes
C. Politics play a major role in the current state of unions
D. NLRB interpretive decisions tend to track with the political party in power
E. Cooperation and collaboration describe contract negotiations today
F. Unions and collective bargaining continue to play a role in the lives of workers
G. The effects of Change to Win Coalition is uncertain
Chapter 13 – Labor Relations and Collective Bargaining
CHAPTER 13 – IMPORTANT TERMS
Arbitration – involves bringing in an impartial third party to settle disputes between labor and
management
Boycott – refusing to purchase employer’s products or services
Change to Win Coalition – started in 2005 as an answer to the questionable management of
the AFL-CIO, was originally a partnership of 7 labor unions including the Teamsters and Service
Employees International (www.changetowin.org)
Codetermination – Labor and management are represented on supervisory or corporate boards
Concessionary bargaining – when a union gives back to management some of what it has
gained in previous bargaining
Distributive bargaining – zero-sum negotiation where one side wins and the other side loses
Enterprise unions – Japan has enterprise unions in which most firms have a single union with
virtually all job families in the same union. There is no clear distinction between labor and
management. Bargaining is done by the central organization during the “spring offensive” with
details then negotiated at the individual company.
Exclusive representation – in the U.S. there is only one union for any given job
Federal Mediation & Conciliation Service (FMCS) – created by Taft-Hartley Act to provide
mediation and conciliation services in labor disputes
Good-faith bargaining – characterized by reasonable scheduling of bargaining, submitting realistic
proposals and counter proposals, parties signing the agreement once completed
Grievance procedure – formal complaint regarding the event, action, or practice that violated a
labor contract
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Lockout – shutting down of operations to avoid a strike
Mutual gains bargaining – seeks to resolve conflict to the benefit of both management and labor
Spillover effects– when non-union firms are influenced to make changes similar to those of a
unionized firm, for example to remain competitive in wages
Strike – a refusal on the part of the employees to perform their jobs
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CHAPTER 13 – LEGISLATION
Civil Service Reform Act of 1978 – Established right of federal employees to have union
representation, created the Federal Labor Relations Authority to monitor federal labor relations
and forbade wage negotiations and prohibited strikes
Labor-Management Reporting and Disclosure Act of 1959 (Landrum-Griffin Act) – established
employee “bill of rights,” required unions to file annual financial reports, and regulated
trusteeships
Landrum –Griffin Act – see Labor-Management Reporting and Disclosure Act of 1959
representation and investigating and remedying unfair labor practices by employers and unions
(www.nlrb.gov)
Railway Labor Act of 1926 – first significant pies of labor legislation: Encouraged collective
bargaining for handling railroad disputes
Right-to–Work Law – allow workers to work in an establishment under a collective bargaining
employer’s workforce
Chapter 13 – Labor Relations and Collective Bargaining
CHAPTER 13 – IMPORTANT CASES
Electromation v. NLRA (1994) – U.S. Court of Appeals upheld the NLRB ruling that management
committees addressing dissatisfaction with attendance and absenteeism bonuses represented
illegal employer domination
Fall River Dying v. the NLRB – Supreme Court established conditions under which a new employer
must recognize and bargain with the predecessor’s union
NLRB v. Mackey Radio & Telegraph (1938)- permitted the permanent replacement of
economic strikers
Town & Country Electric v. NLRB – that as long as the “salts” did the work for which they were
hired, employers violate the NLRA if they took action against them
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CHAPTER 13 – DISCUSSION QUESTIONS
1. Should public employees of all types of jobs be allowed to strike?
Those who believe public employees should be allowed to strike argue that only by buttressing
collective bargaining with a strike can true collective bargaining occur by individuals who are
intimately familiar with the workplace.
allowed to strike.
2. What are the major effects of unions on compensation?
There are two major views regarding the effects of unions: monopoly and collective voice. The
monopoly view of unions starts with the premise that unions raise wages above competitive
levels. Estimates of union and nonunion wage differentials are around 15 percent higher for
union employees. Unions have been condemned because some economists believe that the
union wage effect leads to inefficient firm responses such as substituting labor for capital. They
argue that society suffers due to resource misallocation between the union and nonunion
Chapter 13 – Labor Relations and Collective Bargaining
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© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
Some argue that unions force management to become more efficient and productive because of
the higher wage levels. Collective bargaining agreements do tend to reduce management
discretion in promotion and layoff decisions and reduce managerial flexibility in work
assignments, and work rules.
3. Why do unions sometimes have a positive impact on productivity?
When the industry is growing and more specifically the company is growing, union shops tend to
4. If unions are to survive, what do you think they will have to do to attract and maintain
members?
In order for unions to survive, they will need to aim their organizing efforts at the growing service
sector of the labor force. In addition, unions must also begin recognizing and responding to the
5. Should companies be allowed to hire workers based on their attitudes toward unions?
Currently, the laws state that a company must not discriminate on the basis of union membership
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6. Why is it advantageous for both the union and management to remain flexible during
collective bargaining negotiations?
The negotiations will go smoother, faster, and with less costs involved for both sides if both
7. Describe the sources of power brought to the bargaining table by both the union and
management sides.
Unions’ bargaining power is economic and can be used to strike the employer, picket the
employer or boycotting the employer. The determination of which to use is assessed by weighing
8. Describe how union and management might prepare for labor negotiations. How are
their preparations similar and different?
Since both union and management start out with their own demands, research for strengthening
the justification of the demands would probably be done on both sides. For instance, if a wage
increase is to part of the union’s side of the negotiations, average salary data in the industry may
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9. Should the government be allowed to intervene in strikes that are not a threat to
national security or public welfare, in order to expedite their resolution? Why or why
not?
In passing the Railway Labor Act and the National Labor Relations Act (Wagner Act), the federal
government gave employees the right to organize and bargain collectively. One of the powers
the union has in its negotiations of the collective bargaining process is striking. With the
10. How might a multinational corporation better prepare itself for dealing with the
differing union environments in other countries?
The first information that a multinational corporation might need to know is how strong the
union is in the particular area the multinational wishes to locate. What the union focuses on,
whether its economics and/or politics, is another question that would be helpful to ask. A few
of the other questions might be: Is there just one union or do multiple unions represent the
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11. Compare and contrast unions in the United States, Germany, and Japan. How are they
similar and different? What can they learn from one another?
Both Germany and Japan have representatives from the union and management on work
councils or consultation groups to discuss personnel and financial issues. This type of
codetermination is foreign to the United States. The United States also has the lowest union