The Labor Relations Process 9e.

Chapter 6
Negotiating the Labor Agreement
Copyright © 2009 Cengage Learning.
All rights reserved.
PowerPoint Presentation by Charlie Cook
The University of West Alabama
Collective Bargaining: Definition
• Collective Bargaining
 A continuing interdependent relationship that involves
the exchange of commitments to resolve conflicts of
interests by reaching agreements acceptable to both
labor and management.
 Interest dispute: a dispute over terms and conditions
of employment.
• Success in Collective Bargaining
 Objectively: the cost of specific settlements to both
 Subjectively: the enhancement of the relationship.
© 2008 Cengage Learning. All rights reserved.
Collective Bargaining: Structure
• Bargaining Structure
 Employee groups with preferences that affect the
bargaining outcome.
 Employees and employers affected by the bargaining
• Pattern Bargaining
 Attempting to extend the terms of a negotiated
settlement (lead contract) from an employer to similar
Eliminates wage competition among employers
 Increases perceptions of union equity and solidarity
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Exhibit 6.1
Possible Structures for Collective Bargaining
1. Single employer—single union
Single location
Multiple locations
ABC Manufacturing Co.—UNITE
General Motors—UAW
2. Single employer—several unions
Single location
Multiple locations
Johnson Metal, Buffalo, New York—all
crafts and industrial unions
General Electric—IBEW and IUE
3. Multiple employers—single union
Trucking Management Incorporated—
4. Multiple employers—several unions
Association of General Contractors of
North Alabama—Birmingham Trade
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Collective Bargaining: Structure (cont’d)
• The Bargaining Unit
 NLRB determines the appropriate bargaining unit
(ABU) for negotiating purposes.
 Combining bargaining units in the centralized
negotiation of a single labor agreement is a nonmandatory subject of bargaining.
Centralized bargaining of interdependent and industry-wide
units increases the union’s negotiating power.
Diversified (conglomerate) companies are less affected by
union negotiating power.
Multiemployer bargaining reduces union negotiating power.
© 2008 Cengage Learning. All rights reserved.
Collective Bargaining: Structure (cont’d)
• Bargaining Agreements and Strategies
 Lock-in agreement between unions
Requires each union-represented bargaining unit covered by
an agreement to withhold final settlement until all involved
unions are willing to settle. Ruled unlawful by the NLRB.
 Whip-saw bargaining strategy
An employer’s use of the terms of an agreement with one
bargaining unit as leverage in negotiating with other
bargaining units.
 Withdrawal from multi-employer bargaining group
An employer cannot withdraw from bargaining without the
union’s consent once bargaining has commenced.
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Negotiation Preparation Activities
• Selection of the Negotiating Team
 Size
Smaller is better (no more than nine members).
Parties may attempt to match the size of the other team.
Centralized bargaining tends to expand team size.
 Member Qualifications
Management: staff and line managers
Union: representatives from key constituent groups
Both: members who can keep their emotions and opinions in
© 2008 Cengage Learning. All rights reserved.
Exhibit 6.2
Some Common Characteristics of an Effective Negotiator
• Able to say no effectively.
• Has integrity and the ability to inspire confidence in his or her judgment ability.
• Able to plan effectively and conduct research necessary to become thoroughly knowledgeable
about bargaining issues and trends.
• Able to discern the bottom line interests of other parties.
• Even-tempered and able to tolerate conflict and ambiguity.
• An excellent communicator (i.e., able to speak, write, and listen effectively).
• Self-confident and pragmatic (able to establish realistic bargaining expectations and accurately
assess the benefits, costs, and risks of insisting on specific settlement terms).
• Good physical and mental stamina.
• Able to understand the short- and long-term implications of specific bargaining proposals on
the parties’ interests.
• Understands the importance of face saving and is willing to provide opportunities to the other
party to do so (or conversely, knows when to take advantage of such opportunities when
offered by the other party).
• Willing to take calculated risks in order to achieve desired bargaining outcomes without
seriously jeopardizing constituents’ best interests.
• Knows how and when to ask relevant questions and interpret the other party’s responses
(even no response to a question or action may, in fact, represent a meaningful response).
• Has a sense of humor to relieve stress or establish rapport with the other party. Always laughs
with the other party, never at the other party.
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Negotiation Preparation Activities (cont’d)
• Proposal Determination and Assessment
 Sources of information
Recent labor negotiations settled by industry competitors
Contract settlements at other company facilities
Records of previous negotiations
Analysis of grievances
Reviewing the union’s convention proceedings
Visiting the union’s web site
Listening to employees
Libraries, union research departments, databases
© 2008 Cengage Learning. All rights reserved.
Exhibit 6.3
Practical Advice on Wording Contract Language
• Whenever possible, use common words, terms, or phrases that are easy to read and
• Consider the types of individuals who will use the contract (e.g., employees, managers, union
representatives, arbitrators) and write contract language with this audience in mind.
• Anticipate questions or circumstances that might arise in implementing the intent of the proposal
and include contract language that would answer or address such issues or concerns.
• Use consistent terminology throughout the contract to refer to the same concept or item to
enhance consistency of meaning and interpretation.
• Write concisely using only the words necessary to clearly convey the meaning or intent of the
contract clause.
• Use appropriate section numbers or headings to organize contract language by specific
bargaining subjects or topics.
• Use numbered lists to highlight criteria or factors relevant to a particular subject (e.g., steps in a
grievance procedure, promotion eligibility criteria).
• Be clear and specific when specifying time frames or numbers (e.g., length of employee
probationary period, length of regular work shift or break-time, effective and expiration time and
date of the contract).
SOURCE: Marc Boulanger and Brian H. Kleiner, ‘‘Preparing and Interpreting Collective Bargaining
Agreements Effectively,’’ Management Research News, 26 (2/3/4), 2003, pp. 193–197.
© 2008 Cengage Learning. All rights reserved.
The Bargaining Range
Resistance Point
Initial Offer
No Settlement
No Settlement
Initial Offer
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Resistance Point
Exhibit 6.4
Bargaining Ranges for Union and Management Negotiators
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Costing Contract Proposals
• Reasons for Costing Proposals
 Management needs to know costs of contract terms.
 Union needs to estimate the value of management
• General Costing Approaches
 Preparation of employee background data.
 Calculation of cents-per-hour wage increase and its
roll-up effect on associated time-based benefits.
 The cost of some items (e.g., funeral leave) can be
difficult to precisely estimate.
© 2008 Cengage Learning. All rights reserved.
Collective Bargaining Behavior
• Bargaining Approaches
 Distributive bargaining
Negotiation process is a win-lose (zero-sum) exercise in
which one party must lose something in order for the other
party to win.
Each party relies on its bargaining power to come as close as
possible to the other party’s resistance point.
 Mutual gain (win-win or interest-based) bargaining
Both bargaining parties seek to satisfy each party’s
substantive interest while strengthening their relationship.
The effect of bargaining power is reduced by advance
agreement on how bargaining proposals will be evaluated.
© 2008 Cengage Learning. All rights reserved.
Collective Bargaining Behavior
• Strategies and Tactics
 Using persuasive
arguments and objective
 Painting a picture of the
loss or gain
 Summarizing bargaining
 Presenting a bargaining
 Using a bargaining caucus
 Use of positive
 Linking issues (packaging
multiple proposals)
 Matching proposals
 Splitting the difference
proposal in writing
 Listening carefully for
nonverbal cues
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Exhibit 6.5
Some Strategies and Tactics for Use in Distributive Bargaining
• Undermine the other party’s position.
• Offer initial proposals well removed from your party’s resistance point.
• Concede slowly from initial bargaining positions.
• Attempt to appear firmly committed to bargaining proposals.
• Threaten the other party’s key interests to impose pressure.
• Offer to reward key interests of the other party.
• Seek opportunities to delay negotiations as a means of imposing time
• Seek to maximize the perceived value of your party’s concessions.
• Threaten to withdraw a proposal if it is not accepted within a reasonable
• Schedule marathon bargaining sessions to wear down the other party’s
resistance or concentration level.
• Make a final offer.
© 2008 Cengage Learning. All rights reserved.
Exhibit 6.6
Some Strategies and Tactics for Use in Win-Win (Mutual Gain)
• Set realistic bargaining objectives.
• Clarify the interests underlying each party’s proposals on specific issues.
• Use brainstorming to generate alternative proposals.
• Identify the bargaining subject where the parties share mutual interests and those subjects
where the parties’ interest may conflict.
• Exhibit empathy toward the other party’s interests and concerns.
• Identify and mutually agree on objective standards for evaluating the merits of specific
bargaining proposals.
• Open negotiations with a clear statement of your party’s intent to negotiate cooperatively
• Ask questions to clarify the substantive content or intent behind specific bargaining proposals.
• Share objective information about specific bargaining subjects with the other party.
• Seek to incorporate as much of the other party’s proposal as possible into your party’s
counterproposal on a bargaining subject.
• Explain how or why your party’s proposal meets an important need or interest of the other party.
• Openly discuss perceived obstacles or barriers to achieving a voluntary settlement
• Minimize emotional outbursts.
• Avoid strategies or tactics that might undermine your credibility as a negotiator or damage the
level of mutual trust and respect.
© 2008 Cengage Learning. All rights reserved.
The Bargaining Power Model
• Chamberlain and Kuhn’s Concept of Bargaining
 A party’s power is defined as equal to the other
party’s cost of disagreement divided by their cost of
agreement to the first party’s terms.
 Assumptions:
Both parties are rational and use the same approach to the
costing of proposals.
Either party will accept the other party’s proposal if it costs
that party more to disagree than to agree.
Bargaining power “costs” can be estimated precisely and
aren’t subject to drastic and sudden change.
© 2008 Cengage Learning. All rights reserved.
Factors Affecting Bargaining Power
• Prevailing economic conditions
 Unemployment rate
 Labor supply
 Sales volumes
• Bargaining parties
 Goodwill
 Public image
• Governmental interventions
 Jaw-boning
 Cooling-off periods
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Factors Affecting a Union’s Disagreement
and Agreement Costs
• Financial Supplements
 Strike pay
 Other outside compensation earned or received by
• Public Aid
 Welfare payments
 Unemployment compensation
 Charitable organizations
© 2008 Cengage Learning. All rights reserved.
Factors Affecting Management’s
Disagreement and Agreement Costs
• External Competition Factors
 Ability to pass on increased costs to customers
 Global competition
 Governmental regulations and controls
• Company-Specific Factors
 Low inventories and high demand
 Loss of customers to competitors
 High fixed and variable operating costs
© 2008 Cengage Learning. All rights reserved.
Internal Factors Affecting Bargaining Parties
• Intraorganizational Bargaining
 Negotiations that occur within each bargaining party
as negotiators attempt to achieve consensus within
their respective parties.
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Ethical and Legal Considerations in
Collective Bargaining
• Immoral or Unethical Behaviors
 Bribing opponents
 Stealing opponents’ confidential information
 Demeaning or humiliating opponents
 Surreptitiously observing opponents
 Self-Dealing
Giving in to union demands that may harm the company in
the long-term to preserve short-term performance bonuses
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Ethical and Legal Considerations in
Collective Bargaining (cont’d)
• Conformance to Professional Standards by
 To obtain the best possible settlement benefiting their
party’s interests.
 To convince the parties involved that they are
effective negotiators.
 To communicate honestly and respectfully so as to
enhance the continuing labor relations relationship.
© 2008 Cengage Learning. All rights reserved.
The Legal Duty to Bargain in Good Faith
• Good Faith Bargaining
 Each party must demonstrate a sincere and honest
intent to reach a labor agreement and be reasonable
in their bargaining positions, tactics, and activities.
• Totality of Conduct
 NLRB assesses a party’s overt behavior and intent in
deciding the merit of an unfair labor practice charge.
Parties are not required to reach a settlement, agree to a
specific proposal, or make a concession.
© 2008 Cengage Learning. All rights reserved.
The Legal Duty to Bargain in Good Faith
• Sources of Violations of Good Faith Bargaining
 The nature of the bargaining issues
 Specific bargaining (per se) violations
 Totality of conduct
 Successor employer bargaining obligations
© 2008 Cengage Learning. All rights reserved.
Nature of Bargaining Subjects
• Categories of Bargaining Issues
 Illegal Subjects
Violate the law and, if included in a contract, are
 Mandatory Subjects
Issues that directly affect wages, hours, and terms and
conditions of employment.
Issues that can be bargained to impasse (neither party will
agree to a change of position on the issue).
 Voluntary (Nonmandatory or Permissive) Subjects
Items that do not directly affect terms and conditions of
employment—cannot be bargained to impasse.
© 2008 Cengage Learning. All rights reserved.
Exhibit 6.7
Some Mandatory Subjects of Bargaining*
*The subjects listed are not intended to represent an all-inclusive list of possible mandatory bargaining subjects.
© 2008 Cengage Learning. All rights reserved.
Specific Bargaining Violations
• Management Per Se ULPs
 Refusing to meet with the union to negotiate
 Implementing a wage change without consulting the
union (unilateral change in a mandatory item).
 Reaching a bargaining impasse on a nonmandatory
 Refusing to furnish information necessary for the
union’s carry out its duty to bargain.
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Specific Bargaining Violations (cont’d)
• Union Per Se ULPs
 Insisting on a closed shop or discriminatory hiring
 Refusing to meet with a legal representative of the
employer about negotiations.
 Refusing to negotiate a management proposal
involving a mandatory subject.
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Specific Bargaining Actions
• “Pleading Poverty”
 Claiming the inability to pay for a union proposal
requires the employer to furnish information validating
its claim to the union.
 Limits on the duty to furnish financial information:
The union must request the information.
The union can request only relevant information.
The information must be furnished promptly and in a useful
© 2008 Cengage Learning. All rights reserved.
Specific Bargaining Actions (cont’d)
• Totality of Conduct Doctrine
 If the actions of a bargaining party constitute a pattern
of misconduct within the totality of the circumstance of
negotiations, the NLRB charge that party with an
unfair labor practice.
• Boulwarism
 Refusal by one party to consider any modification of
its original bargaining proposal unless, in its view, the
other party offers significant facts to the contrary in
© 2008 Cengage Learning. All rights reserved.
Specific Bargaining Actions (cont’d)
• Other Bad-Faith Bargaining Conduct
 Surface bargaining
Going through the motions of bargaining without the sincere
desire to reach an agreement.
 Dilatory tactics
Procrastinating, unreasonable delay, avoiding meetings, and
other evasive actions that impede the progress of bargaining.
 Imposing unreasonable conditions
Stipulating overly restrictive measures that interfere with the
process of bargaining.
© 2008 Cengage Learning. All rights reserved.
Specific Bargaining Actions (cont’d)
• Other Bad-Faith Bargaining Conduct (cont’d)
 Unilateral changes
Changing in terms of a mandatory employment issue (e.g.,
wages and benefits) before bargaining it to impasse.
 Commission of unfair labor practices
Committing ULPs to discourage union support or taking
actions that affect large segments of the bargaining unit.
© 2008 Cengage Learning. All rights reserved.
Managerial Rights
• Management Rights
 The discretionary freedom of management to decide
about and to direct the operations of the firm is
derived from:
The property rights of the owner.
The laws of agency—the legal responsibility of managers to
act as agents for the owner.
 Reserved Rights Doctrine
Management retains all rights except those rights restricted
by terms of its labor agreement with labor.
– Short-form management rights clause
– Long-form management rights clause
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Successor Employer Bargaining Obligations
• Successor Employer
 Has a legal duty to bargain with an existing union
over the terms of a new labor agreement if there is
substantial continuity in the operation of the
purchased firm as determined by:
Percentage of union employees retained.
Change in the location of the firm.
Type of customers served.
Products produced.
Processes and technology used.
Previous managers retained.
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Successor Employer Bargaining Obligations
• Successorship Clause
 A clause in the labor contract requiring the present
owners to obligate subsequent owners to continue the
labor contract upon assumption of ownership.
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Collective Bargaining and Bankruptcy
• The Bildisco Decision
 A bankrupt firm can abandon (or seek modification of)
the terms of a labor contract if:
The firm seeks to make a fact-based proposal to the union to
modify the contract.
Modification is necessary to reorganize the firm and treats all
parties fairly.
The firm provides relevant information to the union.
The firm bargains in good faith over the modification.
The union rejects the modification without good cause.
The balance of equities in the case favor modification of the
© 2008 Cengage Learning. All rights reserved.
Legal Remedies Associated with Violations
of the Duty to Bargain in Good Faith
• Remedial Orders of the NLRB
 A cease-and-desist order that halts further ULPs
 A requirement to post written notices of employee
basic rights under the LMRA, ULPs, and the
respondent’s pledge to cease ULPs
 A requirement to take affirmative actions (make-whole
remedies) that restore employees’ rights and remove
the effects of past practices:
Reinstatement, back pay, restoration of seniority
Resumption of bargaining (in good faith)
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Contract Ratification
• Ratification
 Union negotiators are typically only authorized to
reach a tentative agreement on contract terms.
 Indicates union members approval of, but not
necessarily satisfaction with, contract provisions.
• Factors Affecting Ratification
 Alternative employment opportunities
 Degree of satisfaction with proposed settlement
 Perception of effectiveness of representation by union
 Internal union politics
 Communication problems
 Endorsement by negotiating team
© 2008 Cengage Learning. All rights reserved.
Key Terms
Collective bargaining
Interest dispute
Pattern bargaining
Bargaining unit
Centralized bargaining
Multi-employer bargaining unit
Degree of labor intensiveness
Lock-in agreement
Whip-saw bargaining strategy
Coordinated bargaining
Bargaining range
Resistance point
Cents-per-hour cost
Roll-up factor
© 2008 Cengage Learning. All rights reserved.
Jobs Bank program
Distributive bargaining
Mutual gain bargaining
Resistance point
Win-win bargaining
Interest-based bargaining
Intraorganizational bargaining
Good faith bargaining
Illegal bargaining subjects
Mandatory bargaining subjects
Mid-term bargaining
Good faith bargaining impasse
Voluntary bargaining subjects
Inability to pay
Totality of conduct doctrine
Key Terms (cont.)
Management’s rights
Reserved rights doctrine
Short-form management’s rights
Long-form management’s rights
New employer
Successor employer
Successorship clause
Contract ratification process
Funeral leave policy
© 2008 Cengage Learning. All rights reserved.