Collective Bargaining Union Negotiation
Gain insight into best practice approaches to collective bargaining negotiation. Learn the factors that can influence the outcome of your labour or union negotiation.
Collective bargaining negotiation between labour unions and corporate employers constitute a specialized area in the field of general negotiations, but the underlying legal and relationship aspects make them distinct. Unlike a general business negotiation and law suit negotiations that are not regulated by statutory provisions, a collective bargaining negotiation is mandated and governed by external laws. Many different statutes comes into play during the negotiation process. Private sector bargaining encounters are regulated by the National Labour Relations Act (NLRA) for most workers and by the Railway Labour Act (RLA) for railroad and airline personnel. Federal workers are covered by the Civil Service Reform Act, while state and local government personnel are under state public sector bargaining laws.
Under the applicable statutes, employees have the right to organize and to select exclusive bargaining agents to negotiate collective agreements defining their wages, hours, and working conditions. They may engage in concerted activity for mutual aid and protection. For private sector workers, this allows them the protected right to strike. Although federal workers and most state and local employees are prohibited from striking, several states do permit non-essential personnel to participate in work stoppages. Individuals who engage in a lawful economic strike may not be dismissed or otherwise disciplined for such protected activity, but under the Mackay Radio decision of the Supreme Court they may be permanently replaced. After they have been replaced, they maintain preferential recall rights and must be rehired as positions become available before outside persons are hired.
Labour unions are chosen by a majority of workers in an appropriate bargaining unit, which may consist of homogeneous skilled workers or heterogeneous industrial workers, become the particular bargaining agent for all of the individuals within that unit. They have the right to demand bargaining over the wages, hours, and working conditions of the affected employees. On the other hand, the NLRA specifically indicates that the duty to bargain does not require either party to agree to specific proposals or to make concessions. They are merely obliged to meet at regular times and to discuss the pertinent issues in good faith.
One aspect of labour-management negotiations that is different from many other types of bargaining interactions involves the on-going relationship between the parties. After collective discussions are completed, the parties must continue to deal with each other. Union and management negotiators must continue to meet to resolve disagreements that may occur with respect to the application of bargaining agreement provisions, and employees and managers must work together to produce profitable goods or services if the firm is to be successful. If union negotiators drive a hard bargain that unduly inflates labour costs, workers will be displaced by new technology or have their jobs transferred to lower cost areas of the U.S. or to developing countries like Mexico, China, or India. If the company treats its workers badly, morale will suffer, and good workers may seek employment elsewhere. Employees may also be less committed to firm success, causing a decrease of productivity or a reduction in work quality.
A factor which makes collective bargaining negotiations relatively unique entails the many issues that have to be addressed. Many types of compensation have to be discussed, including hourly wages, piecework rates, fringe benefits such as pensions and health care, and similar issues. What hours will the employees have to work, when will breaks and meal periods be scheduled? Almost any working condition of interest to employees might also have to be discussed. The expansive number of issues requires drawn-out negotiations that may go on for weeks or months, as the parties try to resolve the different topics. On the other hand, many of the bargaining subjects allows the parties to trade issues in ways that allow them to expand the overall pie to be divided and maximize the joint return involved. Corporations should concede issues union leaders value more for topics management officials prefer. This permits the negotiating parties to seek win-win results that satisfy the underlying interests of both sides.
The multi-factor aspects of collective bargaining interactions creates the need for thorough pre-negotiation preparation especially important. Both labour and management negotiators should sit down with the people on their respective sides before they ever meet with their opponents to decide which items need to be addressed and to ascertain their priorities. Which terms are vital; which are important; and which are desirable? They should decide which lower value issues they are prepared to trade for preferred terms. Which topics should they plan to raise first and which later? Most negotiators favour starting their interactions with less significant subjects hoping to reach tentative agreements on these topics before they move on to more important issues. This allows them to focus initially on areas subject to joint gains, while they start to create a psychological commitment to final accords. As they get to the more controversial topics, those terms don’t seem as difficult as they would have had the parties begun their talks with these subjects. In addition, neither side wants to see their prior tentative agreements disappear through a work stoppage and they both become more accommodating with respect to the controversial terms.
There will always be distributive negotiating items that both sides value. These issues generally entail monetary terms. Even in this area, however, if negotiators are willing to think outside the box and seek innovative solutions, they may be able to expand the pie and simultaneously enhance their respective positions. For example, if profits have been decreasing, a company may offer workers a bonus instead of a pay increase. The employees get the benefit of the cash payments, but the base pay rates remain unchanged. Parties dealing with increasing health costs could agree to larger deductibles and co-payments instead of higher employee premiums. Employee health care premiums are a difficult subject for union officials, since all workers see an immediate reduction in their take-home pay. On the other hand, increased deductibles and co-payments are more palatable, since workers are only affected by these considerations when they become ill. They are so relieved to have health coverage that they have less difficulty accepting the greater deductibles and co-payments.
One factor that makes collective bargaining encounters different relates to the political nature of union officials. They are elected leaders who generally hope to be re-elected. Management officials who lack effective negotiation skills occasionally forget this critical factor and embarrass their union counterparts in a public way. Political persons who are embarrassed before their constituents will almost always attempt to punish those who put them in this position. It thus behoves management negotiators to work to prevent such circumstances. If they have bad news for labour representatives, they should share it with them privately. They may take them outside the bargaining room or contact them on the telephone. The union leaders understand managerial constraints, and appreciate being given this information away from the eyes of unit members. They may then put on a show for their constituents at the bargaining table, but will ultimately yield to firm demands they believe to be necessary. Corporate agents should allow them continue this role during the public sessions, recognizing that it will make it easier for them to give in later.
Another critical factor concerns the impact of negotiation anchoring. When one side begins with a generous initial offer, the other side is unlikely to appreciate this largess and reply in kind. Instead, one side begins to think it will do better than expected, and it begins with a less generous opening offer. When I was in graduate school studying collective bargaining, I asked a friend who had been a local union president what would happen if company negotiators began with a beneficial first offer. He reacted with displeasure and suggested that such behaviour would probably cause a work stoppage. Once the rank-and-file employees learned of the munificent management offer, they would raise their expectations and anticipate far better final terms. This factor may have generated the cancellation of this year’s National Hockey League season. The team owners were clearly concerned about rising labour costs, and they demanded a specific division of revenues between the players and themselves. They apparently hoped to give the players no more than 54 percent and retain 46 percent for themselves. Instead of initially offering the players union 48 or 50 percent and allowing that side to talk them up to 53 or 54 percent, they apparently began with an offer in the 53 percent area. The players and their negotiators understandably thought they might be able to get something in the 58-60 percent range. The parties reached a stalemate that could not be resolved before the entire season was lost. It thus behoves management negotiators to start with offers that are sufficiently parsimonious to give them bargaining room once the serious talks begin. This allows the political union negotiators to talk them up and take credit for the gains they achieve.
Negotiating parties occasionally encounter difficult topics that neither side can surrender without a substantial loss of face. How can such issues be handled without the need for a win-loss result? If the term is not essential, they can resort to constructive ambiguity. They may include language pertaining to this topic that actually says nothing intelligible. Both sides are then able to claim that they did not submit. If the issue subsequently arises they can try to resolve it themselves under less difficult circumstances. If they are unable to obtain a mutually acceptable outcome, they can invoke the contractual grievance-arbitration procedures and ask an outside neutral to decide the matter. The losing party then has someone to blame – that pointed-headed arbitrator – and the labour and management representatives can continue with their relationship without unnecessary acrimony.
Over the past fifty years, the decline of union membership has greatly influenced bargaining interactions. By the mid-1950s, 35 percent of private sector workers were union members who had their employment terms established through collective bargaining. As the U.S. was transformed from a manufacturing to a service and white-collar economy and while American firms were directly impacted by global competition from emerging countries, the elevated labour costs associated with unionised personnel became harmful to many corporations. Non-union companies hired law firms and labour consultants to keep their firms non-union, and organized companies began to discover ways to get rid of their unions. At the same time, Labour Board and court decisions made it easier for companies to “predict” job losses and other dire consequences associated with unionisation. Unions sought to organize post-industrial entities like Wal-Mart and McDonald’s, but they used blue-collar techniques to appeal to white-collar and service personnel who thought of union membership as “lower class.” Union membership steadily lessened, resulting in a union membership rate today below 8 percent. If this trend continues and unions are unable to develop new organizing plans that appeal to post-industrial workers, they will become redundant outside such traditional industries as autos, steel, and electrical manufacturing.
In their recent book, What Workers Want (1999), Professors Richard Freeman and Joel Rogers discovered that over 80 percent of employees would like some form of collective interaction with management, with almost half of these respondents indicating an interest in traditional labour unions. On the other hand, most of the individuals indicating an interest in unionisation, suggested a desire for less confrontational labour-management relationships. Representative unions can no longer sit down with employer agents and simply negotiate the terms they would prefer to have. In out global economy, they must understand the impact of their bargaining decisions on firm competitiveness. If they unduly increase labour costs or lower productivity, corporate earnings will decline and workers will be laid off. They have to work together as partners to achieve results that reward employees for their contributions to firm success, while simultaneously recognizing the need to keep companies competitive.
A number of successful unionised firms have taken courses together on interest-based bargaining compiled to teach labour and management representatives how to look for ways to satisfy the underlying needs of both sides simultaneously. Despite this recent approach, its underpinnings were noted forty years ago by Professors Richard Walton and Robert McKersie in their classic book A Behavioural Theory of Labour Negotiations (1965). They discussed the need for participants to prioritise their underlying interests and seek ways to maximize the returns achieved by both sides. When complicated issues are brought forth, parties may use separate committees to explore different options that might be employed to handle these matters. These groups can meet away from public bargaining sessions and look for pioneering alternatives that might not have been used previously. Without the glower of public scrutiny, they can explore options that might not be ultimately adopted without the fear of embarrassment.
Management officials often complain to Labour Law teachers how difficult it is to determine whether particular topics are mandatory bargaining subjects that must be discussed with union agents. Some subcontracting decisions that merely involve the substitution of less expensive outside workers for present employees must usually be bargained about, while other decisions involving partial department closures or other fundamental changes in the business do not have to be discussed. The Supreme Court endeavoured to draw a clear-cut line between these areas in First National Maintenance Corp. v. NLRB, 452 U.S. 666 (1981), where it indicated that “in view of an employer’s need for unencumbered decision-making, bargaining over management decisions that have a substantial impact on the continued availability of employment should be required only if the benefit, for labour-management relations and the collective bargaining process, outweighs the burden placed on the conduct of the business.” When basic firm decisions are based chiefly on labour cost considerations and do not entail significant changes in company operations, bargaining will generally be required. On the other hand, when the decisions do not concern labour costs and do involve changes in basic operations, bargaining will not be necessary. Where the line between required bargaining and non-mandatory bargaining is to be drawn is not clear. This fact should not, however, frighten management officials.
As noted earlier, the duty to bargain does not require that either party to agree to particular demands or the making of concessions. If company leaders are considering changes that might arguably be subject to mandatory bargaining, they should resolve doubts in favour of collective negotiations. They should advise union officials of their contemplated changes and offer to bargain. They should carefully explain the reasons for the proposed changes and ask for a union response. If the union is able to respond appropriately to their needs, company officials may decide to retain their current workers and adopt the union proposal. If union negotiators do not work to satisfy firm concerns, the company negotiators need only bargain to a good faith impasse. At this point, they may legally effectuate their previous proposal despite union objection. They have to be sure to satisfy two crucial prerequisites to such unilateral changes. First, they must be sure they have arrived at a good faith impasse. This is when after thorough bargaining, the parties have reached presently irreconcilable positions. When in doubt, they should offer to have another bargaining session to be certain they have reached this point. Second, the changes they unilaterally implement cannot be more generous to the workers than those already offered by their side at the bargaining table.
Individuals who must partake in collective bargaining interactions should take a good training course on negotiating if they can, and also should read several books on the negotiation process. They should prepare for long, drawn-out talks which will take time to develop, both because of the many issues to be addressed and the political nature of union representatives. They should also distinguish that most bargaining encounters will not be settled until shortly before the existing contract is due to expire. If labour leaders agree to terms too early, unit personnel may suspect they have become too comfortable with management and vote against contract ratification. If, on the other hand, management negotiators allow the union agents to take credit for the gains achieved through their last-minute efforts, the affected employees are likely to be satisfied with the final results.
Charles B. Craver is a Professor of Law at George Washington University.
Advanced Negotiation Training
Sales Negotiation Training