CHAPTER 8: EMPLOYEE BENEFITS ISSUES
LABOR NEWS: NEW HEALTH CARE LAW
CHAPTER 8 OUTLINE
I. Purpose of Benefits
A. Wages are a means of attracting, retaining, and motivating employees.
B. Benefits provide income regardless of unforeseen circumstances.
C. Benefits no longer a “fringe” cost. Can be between 25 and 45 percent of
employee costs.
II. Required Benefits
A. Federal–State Unemployment Insurance
2. States develop formulas for benefits paid to workers—generally, workers
are required to be available, able, and actively seeking work.
B. Federal Insurance Contributions Act—FICA (Social Security)
1. Provide income to retired workers, disability, survivorship, and medical
benefits.
C. Workers Compensation Laws
2. Employer contributes to a state fund.
D. Negotiated Benefits
1. Those not required by law, but gained through bargaining—most
III. Income Maintenance Plans
A. Pension Plans
2. Types: defined benefit plan, defined contribution plan, tax-deferred
401(K), cash balance plans.
4. Employee Retirement Income Security Act (ERISA) major provisions
a. Vesting credits
5. Issues in pension negotiations
a. Vesting
b. Qualified plan
c. Funding method
d. Contributory vs. noncontributory
e. Age or service requirements
f. Benefit formula
B. Wage Employment Guarantee
1. Guarantees minimum amount of work or income for a limited period of
time
2. Escape clause—suspend guarantee for delays beyond control of
management
C. Supplemental Unemployment Benefits Plans (SUB)
1. Additional income for unemployed
D. Severance Pay (Figure 8-3 Severance Pay Article)
E. Death/Disability Insurance
1. Case 8.1 shows how a disability pension might be the subject of a
IV. Health Care—THE issue
A. Ninety-seven percent of all contracts provide some health care.
B. Health Care Cost Containment
C. Behavior Modification Programs
D. Health Reimbursement Arrangements
E. Domestic Partners—some contracts include domestic partners in health care
coverage
F. Voluntary Employees Beneficiary Association (VEBA)
2. UAW took over Ford VEBA in 2007.
G. Wellness Program
H. Employee Assistance Programs (EAP)
I. Consolidated Omnibus Budget Reconciliation Act (COBRA)
1. Provides for continuation of medical and dental insurance for employees,
2. Management is required to provide continued health care coverage to
striking employees and families at employer’s expense.
II. Pay For Time Not Worked (Table 8-2 Percentage of U.S. Workers with Paid Leave)
A. Paid Holidays—contained in 99 percent of all contracts
1. Most agreements have 8–12 paid holidays (see Table 8–3)
2. Floating Holiday—employee decides when to take holiday
3. Agreements for paid holidays should specify (Figure 8-5)
a. Eligibility
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B. Vacation Pay (Case 8-2)
1. More than 86 percent of contracts provide two to six weeks of paid
vacation.
3. Uniform plan provides all workers with same length of vacation.
5. Funded plan requires employees to contribute to a vacation fund from
which they draw vacation pay when no work is available.
6. Agreements for paid vacations should specify:
a. Eligibility
7. Figure 8-6 Sample Vacation Provision
C. Sick Leave
1. Usually accumulated at specific rate per month
2. Agreement for sick leave should specify:
a. Procedure
b. When to report sick leave
D. Paid Leaves of Absence
1. Agreements for paid leaves of absence should specify:
2. Conducting union business most common provision, others vary by
industry.
III. Premium Pay
A. Overtime—pyramiding prohibited
B. Shift Differentials—additional pay for working least desirable hours
C. Reporting pay—minimum payment for reporting to work, even if no work is
available
D. Call-in pay—additional pay for being called back to work before you are
scheduled to return
IV. Employee Services (less common provisions)
A. Social and recreational activities
B. Subsidized food services
C. Credit unions
D. Legal services
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VIII. Flexible Benefit Plans
A. An alternative to negotiating fixed benefits is to offer employees choices under a
contract.
B. Types:
C. Advantages of flexible plans
2. Improves benefits offered
4. Avoids duplicate benefits
D. Child Care—not a mandatory bargaining issue, but of increasing importance to
most employees.
E. Eldercare programs—growing in demand
F. Credit Unions—one of the oldest, most common employee service. Contracts
usually provide that employees manage the union.
IX. Public Sector Benefits Issues
A. Similar to private sector
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CHAPTER 8: CASE DISCUSSION
Case 8.1 DISABILITY PENSION
1. Do you think the arbitrator should have decided the ability question or referred the
issue back to the Pension Board? Explain.
2. Do you think a Pension Board should decide “disability” or “eligibility”? What is the
difference in this case?
Case 8.2 VACATION PAY
1. Explain why you agree or disagree with the court’s decision.
Agree: It is clear that the past practice would require the company to pay an
individual employee who, due to a unique situation, was on the payroll on the day of
2. Do you think the employer purposefully picked July 1 as the layoff date in order to
not pay these employees one vacation week of pay?
CHAPTER 8: END CASE DISCUSSION
Case Study 8.1: Paid Leave of Absence
Decision:
The arbitrator ruled in the union’s favor. She found the past practice testimony to be credible.
Under prior arbitration decisions, if the past practice establishes a “benefit” it is very unusual to
allow the employer to point to a management rights clause as the basis for a unilateral change.
Questions for Discussion
1. The union claimed the employees lost a benefit when the company changed the use of
compensatory time for illness. As the use was permitted if the employee had no sick
leave available, how were the employees damaged?
2. The company paid employees the same wage whether the time was credited against
accrued sick leave, compensatory time, or vacation. Why would the employer care which
leave was used?
3. As the arbitrator, give your reasons for ruling in the union’s favor.
Now give your reasons for ruling in the company’s favor.
The collective bargaining agreement was clear and specific. The company had the right to
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Case Study 8.2: Employee Benefits
Decision:
The judge agreed with the company that the applicable CBA section set out how the premiums
would be calculated and that the dollar amounts were there as examples only. The judge analyzed
the section thus: The first sentence establishes two significant things: 1) the effective date will be
“1/1/2000” and 2) the premium sharing will be 11 percent of the monthly premium.
The second sentence begins with “Based on the 1999 premiums for the TOP this is …” and then
sets out the rates that the Union relies upon. The third sentence specifies that the rates for the next
Questions for Discussion
1. Premiums for health insurance have had a tendency to increase appreciatively from year
to year. Has the union negotiated a “good” benefit provision here? Explain.
2. Do you think that the union’s interpretation of the CBA language was reasonable?
Explain.
3. Do you think the company should have made the language of the CBA provision more
specific so that the union members voting on the contract would understand exactly what
the premiums would be? Explain.
The company is not the only one with responsibility to ensure that the language of the
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CHAPTER 8 REVIEW QUESTIONS
1. How can negotiators reduce health care costs and maintain good health care benefits?
Employers and unions have successfully implemented many programs in health care cost
containment in both the short and long-run aspects. As discussed in the chapter, these
include:
Alternative providers 1. HMOs
of insurance: 2. Self-insurance
Lower health care bills: 1. Increase employees’ copayment
2. In recent years, management negotiators have become more resistant to increases in
private pension plan funding. Why?
3. Why might workers be ineligible for retirement funds from a private pension plan,
although they have worked all their lives?
4. What is meant by “eligibility” in a holiday clause?
Exactly what conditions must an employee meet to receive payment for holiday when no
work is performed? Eligible employees, for example, might include only permanent, full-
5. Why do workers try to negotiate wage employment guarantees?
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Supplemental Unemployment Benefits (SUB)?
6. Who is responsible for COBRA payments?
7. What type of health care plans are normally negotiated?
How can a Health Maintenance Organization (HMO) be considered as an alternative to
such plans?
What are the purposes of HMOs?
The purposes of HMOs are:
8. Why do employees today place a high priority on paid time off?
How has the Monday holiday caused administrative problems?
How can holiday provision problems be minimized?
a. Require employees to work the last working day before or the first day after a
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9. Which paid leaves of absence are usually provided by labor agreements?
10. Why does management dislike pyramiding of overtime?
Pyramiding is the payment of overtime on the same hours for both daily and weekly
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CHAPTER 8: YOU BE THE ARBITRATOR
Not Working a 40-Hour Week
1. As arbitrator, what would be your award and opinion in this arbitration?
In determining whether the employer had just cause to suspend the grievant, the arbitrator
2. Explain why the relevant provisions of the CBA as applied to the facts of this case dictate
the award.
3. What actions might the employer and/or the union have taken to avoid this conflict?