UNIVERSITY OF SOUTHERN INDIANA
College of Business
Management 408
Collective Bargaining and
Industrial Relations
D.M. Partridge
Fall 2008
COLLECTIVE BARGAINING SIMULATION CASE MATERIALS
BACKGROUND OF THE COMPANY
EDP, Inc. manufactures, markets, and services a line of business office equipment. (The products include
adding machines; binding machines; mailing, letter handling, and addressing machines; check writing,
endorsing or signing machines; and time clocks and time recording devices.) Founded in 1920, the
Company now employs about 6000 people throughout the U.S. Of these, slightly over 1000 are in the
bargaining unit at the Company's largest and oldest plant, located in Evansville. The Evansville plant in
which bargaining is taking place manufactures some essential components for other plants in the
Company. These components can also be purchased, with some delays, from outside suppliers. The
Evansville plant also produces business office equipment sold to retail outlets. Because of limited
capacity this plant has usually operated on two shifts, even during periods of slow business activity.
Although the Company has experienced steady growth since its founding, the mix of employees has
undergone a significant shift in recent years. The production force is no longer such a dominant part of
the overall operation. This change occurred as the Company moved from its traditional line of mechanical
products into the era of electronics. Direct labor content in the product dropped significantly as
manufacturing became increasingly an assembly operation of components and subassemblies purchased
from other companies. Low-skill assembly jobs replaced the high-skill jobs of earlier years such as
toolmaking, machining, model making, and so on. As the proportion of factory employees fell, dramatic
expansion occurred in the number of professional employees, especially in the area of programming and
systems development. The professional employees are not unionized.
The conversion from mechanical to electronic products has also led to increased competition for EDP.
Until the 1980s the Company enjoyed a virtual monopoly and comfortable profit margins. Today,
however, many electronic companies have emerged as major competitors, margins are small, product
cycles are short, and EDP is fighting hard to stay afloat in many of the markets it once tended to
dominate. Major competitors include Brother International, Canon, Casio, General Binding, Pitney Bowes,
Sharp, Simplex Time Recorder, and Texas Instruments. In addition, competition is developing from
computer-based applications, although there are also emerging opportunities in the home-office market
and possibilities for new product development.
The competitive situation and the change in production skills required have impacted significantly on the
relative position of EDP's production employees in the community. In earlier years, wage rates were as
good or better than any in the area, regardless of industry. Today, they are competitive with the electronic
components industry generally, and well below the leaders in high -paying industries, including computer
and office equipment. EDP's average wage is also lower relative to the community average because of
the large number of low-skill assembly jobs which have replaced the high-skill jobs formerly characterizing
its operation.
In addition to the Evansville plant, the Company operates four other plants. They are located in
Beaumont, Texas; Chattanooga, Tennessee; Macon, Georgia; and Springfield, Missouri. The Company is
facing the prospect of a majority of its plants being unionized within five years. The Evansville plant was
the first to be organized, but a representation election is scheduled in the Springfield plant and organizing
activities are underway in the Beaumont and Macon plants as well. The International Brotherhood of
Electrical Workers (IBEW) is the only union on the ballot at the Springfield plant. In Macon both the IBEW
and the Teamsters are collecting authorization card signatures, while in Beaumont the International Union
of Electronic Workers (IUE) has begun a drive. Corporate headquarters estimates that there is a 7O%
probability that the lBEW will win in Springfield, but events are too uncertain to estimate the outcome of
the Macon situation. The employees in Beaumont have been rather cool to the organizing drive so far,
and the best estimate is that there will be no union in the Beaumont plant for at least another two years.
No organizing efforts have been made at the Chattanooga plant yet, which is the newest of EDP's
facilities. It is unlikely that this plant will be organized in the foreseeable future.
BACKGROUND OF THE UNION
The Union, the EDP Employees' Association (EDPEA), won a representation election in the Evansville
plant in August 2008 by capturing 55% of the votes cast. Eighty percent of the eligible workers voted in
the representation election. Shortly after the representation election, the Union elected and installed its
officers. A negotiating committee was also selected. The Union and the Company began negotiations on
September 2, 2008.
Employee relations at EDP had generally been cooperative prior to the 1980s, and the plant had never
been unionized. This was largely due to the fact that for years the wages and fringes matched or led the
community, including the unionized employees at Alcoa and Whirlpool. Since the conversion to
electronics, however, EDP's wages and fringe benefits have begun to fall behind certain other employers
in the community, leading to the unionization of the Company in August.
Two large international unions had made tentative efforts at organizing EDP's employees during the past
several years, the IBEW and the IUE; neither of these efforts resulted in a NLRB election. Both of these
unions are watching the current negotiations involving the EDPEA closely, however, as they remain
interested in recruiting EDP employees in the event of dissatisfaction with the terms negotiated by the
EDPEA. Each union has a core group of supporters who feel that the vote for the Employees' Association
was a mistake, and that a "real union" should have been selected instead.
The problem facing the EDPEA is one of obtaining a sufficiently impressive settlement to counteract the
dissidents but to do so without further eroding EDP's competitive position in the business office
equipment industry. The members of the negotiating committee are, by and large, a responsible group
and are anxious to avoid a strike if possible. They are convinced, however, that the threat of a strike is
very real. They have a fairly precise cents-per-hour figure in mind as to what it will take to secure
ratification and prevent a strike. Although they want the Company to succeed in the marketplace just as
much as management does, the negotiating committee must be properly sensitive to the demands of the
membership and extract the kind of improvements which will insure ratification.
EMPLOYMENT AND EARNINGS
Straight-time average hourly earnings for EDP employees in the Evansville bargaining unit are $10.41 per
hour; with overtime and shift differentials added, average hourly earnings over the past year came to
$11.56. As these figures indicate, overtime pay and shift differentials account for approximately 10
percent of EDP employees' total earnings. Normally, the plant works two 8-hour shifts, but at times when
heavy orders come in the Company has gone to 12-hour shifts. The U.S. Bureau of Labor Statistics'
Employment and Earnings reports that gross (straight-time plus premium pay) hourly earnings of
production workers on manufacturing payrolls in the Evansville-Henderson area were $21.69 in February
2007 (as compared with $20.80 in February 2006, $21.42 in February 2005, $15.29 in February 2004,
and $14.04 in February 2003).
EDP jobs are virtually identical in all five plants and are roughly comparable to jobs with the same titles
regularly reported in the Bureau of Labor Statistics' Area Wage Surveys. However, there are always
certain differences between the general BLS job classifications and the jobs at any particular company,
and these differences should be kept in mind when drawing comparisons with area wages. [Note that
EDP, Inc. falls within the Commerce Department's North American Industry Classification System
(NAICS) Group 333313, Commercial and service industry machinery, misc. FYI, Miscellaneous
Electronic Components is NAICS Group 334419. February 2007 gross hourly earnings, NAICS 333313:
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$20.77; February 2006: $19.27; February 2005: $19.17; February 2004: $18.25; February 2003: $15.99
(note: the 2003 data is from the comparable SIC code, which was replaced by the NAICS). February
2007 gross hourly earnings, NAICS 334419: $15.11; February 2006: $13.57; February 2005: $13.75;
February 2004: $13.63; February 2003: $13.43.] Note also that the BLS data include overtime premiums
and may differ from other data sources such as occupational data from O*NET OnLine.
Annual turnover at the EDP Evansville plant historically has averaged about 10 percent. The opening of
the Toyota plant in Fort Branch, however, has had a significant impact on turnover (see, e.g., "Toyota
Plant Roils the Hiring Hierarchy of an Indiana Town," Wall Street Journal, April 6, 1999). Last year
turnover was twice the rate prior to Toyota’s opening: 220 bargaining unit employees quit, retired, were
discharged, or left for other reasons, while the Company hired 155 new employees. Turnover is usually
higher in the unskilled jobs and lower in the skilled jobs, although twelve machinists resigned in the past
year to take positions at Toyota. The Company has not replaced them and has no immediate plans to do
so. Layoffs occur once or twice a year, but they are generally confined to the machinist classification, the
second smallest and most skilled group of workers in the plant. No employee is currently on layoff. The
three highest skilled groups of workers are predominantly older white males. The two lower groups are
predominantly filled by African -Americans and women.
JOBS AT EDP, INC.
Machinist. EDP machinists perform production as well as maintenance functions. Duties at EDP are
somewhat more routine than at many other workplaces, with less discretion, but include team leadership
of production work groups. Generally these employees produce replacement parts and new parts in
making repairs of metal parts of mechanical equipment operated in the plant.
Trades Helper. Principal production workers. Work in teams of 3-4, with Machinist as team leader. Most
skills learned on-the-job. Senior Helpers perform some specialized machine operations, but most perform
routine assembly.
Material Handling Laborer. Entry-level job, requiring no previous experience. Often promoted to Helper,
although until last year fewer Helper quits had reduced promotion opportunities and lowered once-high
turnover.
Shipping and Receiving Clerk. EDP jobs involve both shipping and receiving functions. Occasionally
serves as an "alternative route" into Helper position, but generally a dead-end job.
Janitor. Traditionally entry-level, dead-end jobs. Although allowed to bid for other jobs, promotion (usually
to Laborer) is quite rare.
ISSUES SETTLED IN BARGAINING: EDP, INC. AND EDPEA
Negotiations to date have produced settlement on a number of issues. Final agreement on these issues
is, of course, contingent upon settlement of those issues that remain in dispute. The following contract
language has been initialed by both parties.
SENIORITY
(1) Definition. Seniority is defined as length of continuous service with the Company since the date of
hire.
(2) Seniority Lists. The employer shall publish lists showing the seniority status of all employees in
the first week of every month.
(3) Loss of seniority. Loss of seniority shall result from: (a) voluntary quit; (b) discharge; (c) failure to
return from layoff within 10 days of recall; and (d) layoff longer than six months.
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(4) Probationary Period. New employees shall acquire seniority after forty-five (45) working days.
After expiration of such probationary period, continuous service shall be calculated from the date
of hire.
(5) Promotions. (Unresolved)
(6) Layoff and Recall. Seniority shall be the determining factor in the case of layoff or recall; that is,
the last person hired shall be the first laid off, and the last laid off shall be the first recalled,
provided employees have the ability to do the jobs.
(7) Union Officers. For a maximum of 10 union officers in the plant, such officers: (a) shall continue to
accumulate seniority during leaves of absence granted for union business, and (b) shall have,
regarding layoffs, the greatest seniority of all workers in the bargaining unit.
GRIEVANCE AND ARBITRATION PROCEDURE
(1) A grievance is defined, for the purpose of this Article, as any expressed difference, dispute or
controversy between an employee and the Company, or the Union and the Company, concerning
the interpretation or application of any of the terms of this agreement.
(2) All grievances shall be negotiated as follows:
(a) First, between the aggrieved employee or his shop steward, or both, and the foreman of the
department involved.
(b) Second, between the Grievance Committee of the Union and the superintendent of the plant
or his representative.
(c) Third, by arbitration by three arbiters of whom one shall be appointed by each of the parties
and the third by the two so appointed. The decision of a majority of the arbiters shall be final
and binding upon both parties for the duration of this agreement.
VACATIONS
For each calendar year during the term of this Agreement, each employee with seniority as indicated
below shall receive a paid vacation in accordance with the following schedule:
Years of Employment
1 Year - less than 5
5 Years - less than 10
10 Years - less than 20
20 Years and over
Vacation
1 week
2 weeks
3 weeks
4 weeks
SICK LEAVE
Any employee having been employed by the employer less than the probationary period (45 continuous
working days from the date of hire) shall not be eligible for sick leave with pay. After the probationary
period, in case of illness of an employee, leave with pay will accumulate at the rate of one (1) day per
month. Employees may accumulate a maximum of sixty (60) days of sick leave.
STRIKES, LOCKOUTS
It is hereby agreed by the Union and the Employer that since this Agreement provides for the orderly and
amicable adjustment and settlement of any and all disputes, differences, disagreements or controversies
of any nature or character, for the duration of this Agreement there shall be no resort to strikes (which
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includes stoppages, sit-downs or slowdowns of work by the employees) or any lockout by the employer of
any employee or group of employees.
The status of the following issues has also been determined:
PENSIONS
EDP, Inc. instituted a "defined contribution" employee pension program a number of years ago. The
Union considers the program adequate and therefore is not pursuing the issue in these negotiations,
although pension improvements will likely be on the agenda in the future. The Company, meanwhile, is
monitoring the current discussion of "cash-balance" pension plans with respect to whether a conversion
would be in the Company's interest.
HEALTH INSURANCE
The Company for a number of years has provided health care coverage for employees through the
Welborn HMO, using Welborn-affiliated doctors. It has been the Company's policy for over a decade to
contribute 80 percent of the cost of medical insurance premiums, with employees paying the remaining
20 percent. The basic coverage pays 90 percent of hospital room and board, ancillary services, inpatient
services, outpatient services, and surgery. There is no deductible, although there are co-pays for office
and/or emergency room visits. All employees who have completed 90 days of service with the Company,
and their immediate families, are eligible for medical insurance. The parties have agreed to continue this
practice for the duration of the present agreement, although management has indicated that health care
cost containment is likely to become a priority issue in the coming year, particularly pharmaceutical costs.
Union leadership agrees that controlling health care cost increases is important, but has put management
on notice that their membership will not view kindly any cost containment involving "takeaways" from
workers.
UNSETTLED ISSUES FOR BARGAINING: EDP, INC. AND EDPEA
SUBCONTRACTING AND JOB SECURITY
A major area of contention between the Company and the Union is that of subcontracting. For many
years, all the work was done in the plant. However, as production shifted from mechanical products to
electronic, the Company began to increasingly depend on subcontracting. The Company thinks its policy
of subcontracting has at least two advantages. First, the policy allows the Company to handle a
fluctuating number of orders most efficiently. For example, when many new orders are received the
Company need not itself recruit, hire, and place workers who may only be needed for a relatively short
period of time. To the extent that the Company can stabilize employment in the "home" plant, the
Company can save the costs associated with employee hires and terminations. Second, the Company
has found that a number of small electronics plants in the Nashville and Louisville areas pay their skilled
machinists less than EDP does. Thus, the Company feels the cost of subcontracting for components is
often lower than the cost of producing the components itself. (During the past year the cost differential, on
average, between subcontracting for components and in-house production was approximately 15
percent.) As a matter of principle, the Company does not want to discuss subcontracting with the Union,
since it feels the issue is strictly a management prerogative. Further, the Company wishes to retain the
right to move any work from the Evansville plant to another EDP facility without consulting the union.
The workers are upset about subcontracting. Throughout the last year, the Company laid off skilled
machinists at the same time that it was subcontracting for components. Some workers think the
Company would like to get rid of its remaining skilled machinists and simply carry on assembly and
shipping work in the plant. The Company's policy of subcontracting has allowed it to replace, in effect,
high-paid machinists with lower-paid assemblers and shippers. The machinists' objections to
subcontracting reflect their more general fears about their own job security. Many of the workers were laid
off by other Evansville-area companies and had to depend on state unemployment insurance (Ul) for long
periods of time. They have concerns about the prospect of being laid off again with only Ul to depend on,
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although the recent low unemployment rate and tightening of the manufacturing labor market following
the opening of the Toyota plant have alleviated these concerns to some extent. On the other hand, the
current economic crisis and increasing unemployment rate has clearly renewed these concerns, as well
as the projected lack of growth of machinists’ jobs in Indiana in the coming decade. The Union will likely
propose that the Company will neither subcontract work the bargaining unit is capable of performing nor
close the plant or move any of its operations during the life of the agreement.
UNION SECURITY
The Union is likely to demand an agency shop provision and dues check off. Union officers are currently
putting a great deal of effort into dues collection. The Union has assigned this task to its stewards. The
Company has insisted that dues collection not be done on company time, but it has no means of
adequately controlling the practice.
The Company will not yield easily to an agency shop demand. It doesn't feel that the Union received a
strong mandate in the NLRB representation election. In fact, the Company sees the vote as evidence that
the majority of the workers in the plant actually do not want a union at all. (Recall that only 80 percent of
those eligible voted and only 55 percent of those voting voted for the Union.)
HOLIDAYS
Since 1981 the Company has given its employees in the Evansville plant eight paid holidays: New Year’s
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas (twoday shutdown). Last year the Company shut the plant down completely for seven of these holidays. In
November, however, the Company was rushed with orders. On Wednesday afternoon, November 21,
officials of the Company realized that it would be difficult to complete certain orders that were due by
December 1 unless four departments in the plant with 80 workers worked Thanksgiving Day. At about
3:30 pm supervisors told the workers in these departments of the Company's decision. The workers were
told they had to work the next day, but that they would receive a "compensatory" paid day off to be
scheduled by the Company "as soon as our scheduling allows." All but 12 of the workers showed up the
next day and worked eight hours at straight-time wages. The 12 who were absent received a disciplinary
warning when they returned to work.
Some workers say they were persuaded to vote for the EDPEA in the representation election because the
Company "showed it was a turkey on Thanksgiving Day." In any event, the Union is certain to present
demands for more holidays and for language regulating work and pay on holidays.
The Company views the holiday issues as primarily economic in nature. Holidays cost money, and the
Company's position will be that anything it gives away in holidays will be subtracted from possible wage
increases. Furthermore, the Company believes that the nature of its business requires it to retain
substantial flexibility with respect to scheduling work on holidays.
WAGES AND CONTRACT DURATION
The Company would be pleased to sign a two-, or even three-year contract with the Union, provided it is
satisfied that the costs of the contract are both reasonable and reasonably certain. The Company will
object to provisions that introduce uncertainty and unpredictability with respect to its labor costs.
The Union is less certain about the advantages of a long-term contract. Since this is a new bargaining
relationship, the Union feels there is much to be done. The Union's willingness to agree to a long-term
contract will partly depend on its ability to achieve substantial breakthroughs on other high -priority issues
in this year's negotiations. If the Union doesn't win on some important issues this year, it doesn't feel it
can afford to wait three years to try again. Wages will certainly be an important issue in this year's
negotiations. Both sides will present carefully thought-out proposals that are based on the best available
data pertaining to wages and costs. Such factors as (a) comparative wages and earnings, (b) the
Company's ability to pay, (c) the Company's prospective earnings, sales and profits picture, (d) the
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industry's prospects, (e) past and future changes in the cost of living, and (f) employee productivity,
morale and performance will play an important part in the parties' arguments on the wage issue. The
Company is likely to attempt to offset any wage increase granted to current employees with a "two-tier"
wage scale that would provide lower wages for new hires.
PROMOTIONS
Promotion procedures may also prove to be a difficult issue to resolve. Although the Company has
generally followed the practice of promoting the more senior employee when the qualifications of two or
more candidates are roughly equal, it insists that it needs to retain the final determination on questions of
ability (i.e., that such determinations should not be covered by the contract's grievance and arbitration
procedures). Such flexibility is important, it claims, because of the need to increase worker productivity in
the face of stiffening competition and uncertain demand for the Company's products.
The Union, on the other hand, insists that the senior employee be promoted to any vacancy, provided he
or she is able to perform in that position. It rejects with vehemence management's insistence that "ability"
issues be excluded from grievance and arbitration procedures. It claims that its seniority proposal and
the right to grieve and arbitrate such issues are essential, in light of evidence of past management
abuses in selecting "favorites" for promotion. Privately, Union officials acknowledge that management's
record in the past two or three years has been fairly good, but that it is under heavy pressure to "deliver'
for workers in the lowest job classifications. The number of their promotion opportunities had sharply
contracted until recently, several of them have "long memories" of past abuses, and, most importantly,
their support for the Union is questionable. Both Management and Union officials are aware that, without
the votes of the less-skilled workers, the chances of winning ratification of a contract would be uncertain.
The Union needs a way of winning their support, without jeopardizing its strength among Machinists and
Helpers.
BUREAU OF LABOR STATISTICS AND BUREAU OF NATIONAL AFFAIRS DATA SOURCES
Each negotiating team should familiarize itself with recent economic developments and the latest results of major
negotiations. You may wish to consult the most recent issues of the following publications:
Employment and Earnings. A monthly report providing current statistics on U.S. employment, unemployment, hours
and earnings.
CPI Detailed Report. A monthly periodical featuring detailed data on consumer price movements.
Monthly Labor Review. One section of the MLR provides current principal statistical labor series data collected and
calculated by the BLS. The tables present information on hours and earnings by industry, consumer price indices,
productivity, and labor-management data.
Daily Labor Report The single best sources of current information on labor-management relations and labor market
developments. [Note: N/A @ USI]
Area Wage Surveys. Continuing series of reports on BLS surveys covering hourly earnings for selected plant and
office occupations.
Basic Patterns in Union Contracts. Consult the latest edition of Collective Bargaining Negotiations and Contracts.
[Note: N/A @ USI]
Handbook of Labor Statistics. This publication provides in one volume the major series available from the BLS.
Compensation and Working Conditions. A monthly report on employee compensation, including wage and benefit
changes resulting from collective bargaining settlements and unilateral management decisions, statistical summaries,
and special reports on wage trends.
Note: a number of these sources may now be accessed on the Bureau of Labor Statistics website:
www.bls.gov.
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