CHAPTER 11
Managing Labor Relations
Learning Objectives
After studying this chapter, the student should be able to:
1. Describe the role of labor unions in organizations.
2. Identify and summarize trends in unionization.
Chapter Outline
Opening Case: Unionizing in the New Age
Today, unions at many “old–line” businesses still wield power and represent thousands of
workers. On the other hand, many newer businesses have successfully avoided unionization
among their employees. Their arguments against unions include: unions constantly push for
Firms like Walmart, Starbucks, and Amazon are at the forefront of large, younger businesses
work diligently to thwart efforts to unionize their employees. Some Walmart workers complain
about low wages, poor benefits, a lack of full-time jobs, and erratic and unpredictable work
schedules. For its part, Walmart warns that unionization could mean the end of employee perks
like paid vacation and quarterly bonuses. The United Food and Commercial Workers Union has
made Walmart its major battleground and has won several small battles. Still, most of Walmart’s
employees remain nonunionized, and the UFCW faces an uphill battle.
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Chapter 11: Managing Labor Relations
Introduction
Walmart, Starbucks, and Amazon are contending with a significant issue that has confronted
business leaders for decades: dealing with organized labor in ways that optimize the needs and
priorities of both the organization and its employees. When the challenge is handled effectively
and constructively, both sides benefit.
I. The Role of Labor Unions in Organizations
Labor relations can be defined as the process of dealing with employees who are represented by
a union. A labor union, in turn, is a legally constituted group of individuals working together to
A. Historical Development of Unions
Figure 11.1 shows the major historical events in the emergence and growth of labor unions in
the United States. For example, the earliest unions in the United States emerged during the
Revolutionary War. These associations were called craft unions, meaning that each union
limited itself to representing groups of workers who performed common and specific skilled
jobs.
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The Knights admitted anyone to membership, regardless of race or creed (which typically
were important considerations for memberships in unions at the time), except for those they
considered to be “social parasites” (such as bankers). In addition to improving wages, the
Knights of Labor sought to replace capitalism with worker cooperatives. The single event that
led to its demise, however, was a meeting in Chicago’s Haymarket Square on May 4, 1886.
The meeting was held to protest some earlier violence stemming from an attempt to establish
an 8-hour workday. When the May 4 meeting was over, further violence left 200 wounded
and resulted in the hanging of several leaders of the Knights.
While the AF of L focused exclusively on the “business” of unions, several more radical and
violent movements developed after the demise of the Knights of Labor. Under the leadership
of Eugene V. Debs, for example, the American Railway Union battled the railroads
(especially the Pullman Palace Car Company, which made railroad passenger cars), mostly
over wages, and many people were killed during strike violence. The Industrial Workers of
the World (IWW) consisted mostly of unskilled workers and advocated extreme violence as a
means of settling labor disputes. The mining companies and textile mill owners with which
they battled also believed in violence as a means of settling labor disputes, and many people
killed during strikes organized by the “Wobblies,” as the IWW members were called.
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B. Legal Context of Unions
Partly because of the tumultuous history of labor unions in the United States, a great many
laws and regulations have been enacted to deal with unions, and this legislative history is
critical to understanding the development of the U.S. labor movement. The earliest legislation
simply dealt with the question of whether unions were legal.
The Wagner Act also established the National Labor Relations Board (NLRB) to
administer its provisions. The NLRB still administers most labor law in the United States.
Congressional activity in the years after World War II curtailed the power of unions. The
most important piece of legislation in this era was the Labor-Management Relations Act,
also known as the Taft-Hartley Act, which was passed in 1947. The basic purpose of the
Taft-Hartley Act was to curtail and limit union practices. It also outlawed an arrangement
called the closed shop, which refers to a workplace in which only workers who are already
union members may be hired by the employer.
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Chapter 11: Managing Labor Relations
A final significant piece of legislation affecting labor relations is the Landrum-Griffin Act,
which was passed in 1959. Officially called the Labor Management Reporting and
Disclosure Act, this law focused on eliminating various unethical, illegal, and undemocratic
union practices. For instance, the Landrum-Griffin Act requires that (1) national labor unions
elect new leaders at least once every five years and (2) convicted felons cannot hold national
union office. It also requires unions to file annual financial statements with the Department of
Labor. Finally, the Landrum-Griffin Act stipulates that certain information regarding their
internal management and finances to all members.
C. Union Structures
Figure 11.2 shows the most common basic structure. Locals are unions organized at the level
of a single company, plant, or small geographic region. Each local has an important elected
II. Trends in Unionization
A. Trends in Union Membership
Since the mid-1950s, labor unions in the United States have experienced increasing difficulty
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Chapter 11: Managing Labor Relations
A corollary to these trends has to do with the fact that much of the workforce has shifted
toward geographic areas in the South and toward occupations in the service sector that have
also been less unionized. A second reason for the decline in union membership in the United
States is more aggressive antiunionization strategies undertaken by businesses.
B. Trends in Union–Management Relations
The gradual decline in unionization in the United States has been accompanied by significant
trends in union–management relations. In some sectors of the U.S. economy, perhaps most
C. Trends in Bargaining Perspectives
But now unions are often bargain for different goals such as job security. Of specific interest
in this area is the trend toward moving jobs to other countries to take advantage of lower labor
III. The Unionization Process
A. Why Employees Unionize
In the early days of labor unions, people joined them because their working conditions were
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B. Steps in Unionization
The general steps are shown in Figure 11.4 and are described in more detail below.
• First, employees must figure some interest in joining a union.
• If the required number of signatures is obtained, the organizers petition the NLRB to
conduct an election.
o If a simple majority of those voting approve union certification, then the union
becomes the official bargaining agent of the eligible employees.
o But if a majority fails to approve certification, the process ends.
C. Decertification of Unions
Just because a union becomes certified, however, does not mean it will exist in perpetuity.
Under certain conditions, an existing labor union can be decertified. For decertification to
occur, two conditions must be met.
• First, no labor contract can currently be in force (that is, the previous agreement must
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IV. The Collective-Bargaining Process
A. Preparing for Collective Bargaining
Management can take several actions to prepare for collective bargaining. For example, the
firm can look closely at its own financial health to work out a realistic picture of what it can
B. Setting Parameters for Collective Bargaining
In general, two categories of items may be dealt with during labor contract negotiations.
• One set of items, as defined by law, consists of mandatory items.
o Mandatory items include wages, working hours, and benefits.
V. Negotiating Labor Agreements
A. The Negotiation Process
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A useful framework for understanding the negotiation process refers to the bargaining zone,
which is illustrated in Figure 11.5. During preparations for negotiation, both sides are likely to
On the other side of the table, the labor union also defines a bargaining zone for itself that
includes three points:
• The union’s minimum acceptable limit on what it will take from management (the union
resistance point may be the settlement level below which the union will strike)
As soon as an agreement is reached, both parties begin to make public statements about how a
negotiator the other party was. Both acknowledge that they really wanted a lot more and that
they hope they can live with this agreement, but the other party was such a good negotiator
that this agreement was the best they could come up with. This posturing helps both parties
“sell” the agreement to their constituencies and also allows both parties to maintain their
image as strong as strong negotiators no matter how one-sided the final agreement might be.
B. Barriers to Effective Negotiation
The foremost barrier to effective negotiation between management and labor is the lack of
overlap for bargaining zones of the respective sides (i.e., there is a negative settlement zone).
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VI. Resolving Impasses
If labor and management have reached an impasse, several actions can be taken by either side or
both sides in an attempt to break the impasse. A strike occurs when employees walk off their
HR in the 21st Century: All Shapes and Sizes
Many people associate unions, union members, collective bargaining, and strikes with blue-
collar manufacturing jobs in factories and on assembly lines. But in reality, of course, unions
Two less extreme tactics that unions sometimes use are boycotts and slowdowns.
• A boycott occurs when union members agree not to buy the products of a targeted
employer.
• A slowdown occurs when workers perform their jobs but at a much slower pace than
normal.
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In mediation, a neutral third party called the mediator listens to and reviews the information
presented by both sides. The mediator then makes an informed recommendation and provides
advice to both parties about what he or she believes should be done.
Under final-offer arbitration, the parties bargain until impasse. At that point, the two parties’
final offers are submitted to the arbitrator. Under traditional arbitration, the arbitrator is then free
A. Administering Labor Agreements
Another key clause in the labor contracts negotiated between management and labor defines
VII. Labor Unions in the Twenty-First Century
The labor movement in the United States focused on bread-and-butter issues such as wages and
hours of work, unlike the labor movements in many European countries. U.S. labor unions have
A. “Replacement” Sources of Labor
For example, in 2010, there were roughly 1.6 million people serving time in federal or state
correctional institutions. Although many of these inmates work in paid jobs, they are paid
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Chapter 11: Managing Labor Relations
B. Contingent Workers
Another source of “replacement labor” is the pool of contingent workers. Although, the
C. Unions and the Electronic Age
The Internet also presents many interesting challenges for U.S. labor unions. Although unions
must oppose some of the technical advances for the sake of their members’ jobs if nothing
else, they cannot simply reject these advances wholesale. Clearly, in many cases the firms
Finally, unions have found that the Internet has significant effects on the way they conduct
their own internal business. It has also enabled unions to mobilize international resources to
deal with issues that all union members face wherever they work such as the lower wages and
looser labor regulations associated with agreements under the World Trade Organization.
Closing Case: “Give and Take”
Case Summary
The general view of management and labor unions is that they are antagonists: When one wins,
the other loses—and vice versa. In reality, of course, there are many situations where businesses
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Chapter 11: Managing Labor Relations
Case Questions
1. Do you think the Harley deal was too one-sided? Why or why not?
Students’ answers will vary. Some will agree with Harley that the company has the right to
reduce the size of its workforce, cut pay, and change job classifications in order to stay
2. If you were a Harley or GM employee and union member, would you have voted for the
new deal? Why or why not?
Students’ answers will once again vary. Clearly, one side in labor-management
3. Do you think that it is appropriate for a government entity (such as the state of
Pennsylvania) to take an active role in union-management negotiations? Why or why not?
Two sides to these questions are apparent. (1) Government entities should become
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Chapter 11: Managing Labor Relations
The following items appear on the in-text Instructor Prep Cards. These notes and
suggested talking points should help instructors conduct these exercises with the students.
Discussion Questions
1. Discuss the historical evolution of labor unions in the United States.
Early organizations of labor during the Revolutionary War were known as craft unions.
The first major union to have a significant impact in the United States was the Knights of
2. Identify and briefly explain each of the major laws affecting unionization in the United
States.
The National Labor Relations Act, also known as the Wagner Act, was passed in 1935 and
still is the cornerstone of contemporary labor relations law. The basic purpose of the act
was to put unions on a more equal footing with managers by giving workers the legal right
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Chapter 11: Managing Labor Relations
3. What is a shop steward?
Each local elects its own shop steward, a regular employee who functions as a liaison
4. Is your state a right-to-work state? What are your personal opinions about this issue?
Texas and most other southern states are right-to-work states. Some states such as
5. Discuss trends in unionization.
Today, only 14 percent of wage and salary workers belong to labor unions, down from 26
6. What steps would you take to increase union membership?
Traditionally, unions have used both promises of increased benefits and vilification of
7. Summarize the basic steps employees must follow to create a union.
First, employees express interest in forming a union or a union organizer creates interest.
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Then the NLRB is asked to define a bargaining unit based on the common interests shared
8. What is the bargaining zone?
For management, the bargaining zone and its three intermediate points include the
9. Identify and describe the three general areas that relate to collective bargaining.
Both parties must negotiate in good faith over mandatory issues, which include wages,
10. Identify and discuss the methods for resolving impasses.
Unions use tactics such as strikes, picketing, boycotts, slowdowns, and sickouts in an
Ethical Dilemmas in HR Management
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Chapter 11: Managing Labor Relations
Scenario Summary
An employer has given the student a list of things to do to thwart union organization, including
giveaways, overstated promises of benefits, and termination of an organizer. The employer states
that he is doing these things for the good of the employees, since he believes that the plant will
close if it is unionized. Though the student only 14 percent of wage does not believe the plant
will close, does the student believe some jobs will be lost?
Questions
1. What are the ethical issues in this situation?
One issue is whether the supposedly good end justifies the proposed means; that is, if it is
true that unionization may cause the plant to close, is it then ethical to deceive the workers
into voting against the union? Some would say that if one told the workers the truth about
2. What are the basic arguments for and against taking extreme measures to fight
unionizationefforts?
For:
• Workers are often not well enough informed to make decisions regarding
Against:
• Labor laws prohibit certain activities by employers. The NLRB has the power to levy
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3. What do you think most managers would do in this situation? What would you do?
Students’ answers will vary. One influence on answers will be the extent to which students
Assignment
This exercise provides students with insights into the bargaining process. It should take
approximately 40 to 50 minutes.
Step 1 (5 minutes): Divide the class into groups of three, with any extra students joining
existing groups.
Step 4 (10 to15 minutes): The teams will then conduct a labor negotiation. It should be stressed
that the object of the exercise is not to win the negotiation but to get a feel for how far the other
Step 5 (10 to 15 minutes): Each group should summarize for the class the agreement they
negotiated.
Step 6 (10 minutes): Student groups should then respond to the three discussion questions
1. Explain differences and/or similarities in negotiated agreements.
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Similarities are that both management and labor are attempting to reach a mutually
2. How useful did you find the bargaining-zone model? Without using this model, would your
bargaining have been more or less difficult?
3. Can you see other areas of applicability besides collective bargaining for the bargaining-
zone model?
Students may find there are many occasions to use the skills they learn through this