Collective Bargaining in an Era of Union Decline

Those of us who toil in the trenches of labor-management relations are aware of the happy truth. Unions are weak today. If proper plans are set in motion, management can gain back territory lost to unions over years of collective bargaining.

But, regaining this territory cannot be achieved with a slap-dash “let’s get tough” policy!

The first ingredient in the recipe for management collective bargaining success is a solid understanding of possible strategies. Over the years, we have boiled this down to 7 fundamental strategies.

Strategy #1—Multi-Employer Negotiations

More often than not, we find it was multi-employer negotiations that put the employer into a bad situation. This “one size fits all” concept of a labor agreement often doesn’t fit at all. Normally, after we have analyzed a situation where the company has been in multi-employer negotiations, we conclude that to continue multi-employer bargaining is unlikely to solve the problem. Usually, multi-employer negotiations tend to perpetuate past problems. The clear trend around the country has been for multi-employer bargaining groups to break up. Breaking away is not all that hard.

The key point is that withdrawal from multi-employer negotiations requires jumping through some procedural “hoops.” The ground rules for withdrawal are set out in the National Labor Relations Board’s decision in an old case, Retail Associates (120 NLRB 388).

Basically, withdrawal requires that notice be given to the union and to the multi-employer group prior to the commencement of bargaining. This formal notice, which usually takes the form of a letter, requires only that the company clearly and unequivocally withdraw from multi-employer bargaining, and that the employer indicate a commitment to engage in a course of single-employer bargaining in the future.

Often employers get tripped up by one more procedural “hoop.” In some cases, a multi-employer contract will set a “time window” during which the company is permitted to give written notice of its intent to withdraw from multi-employer bargaining.

One final note – in a recent series we did on the decline of labor unions, “Multi employer bargaining is fast disappearing” was cited as “Reason No. 5” for the steady decline. Our commentary was along the lines that this type of bargaining was doing no more than propping up weak unions.

Strategy #2—Individual Negotiations

Almost without exception, our experience has been that companies fare better in collective bargaining in individual negotiations rather than multi-employer negotiations. The unique needs of a business can be addressed through individual negotiations. Frequently, these singular problems become submerged when bargaining in a multi-employer group.

From what we have seen, the worst that can happen under these circumstances is that the company does no better than the multi-employer group.

A note of caution when engaging the union in concessionary bargaining … an employer must be careful of “pleading poverty.” If a cautious approach is not used, an employer may end up with a legitimate union demand that union auditors go over the company’s books.

Strategy #3—Impasse

A more aggressive bargaining strategy, but one frequently used these days, is “impasse.” The fundamental principle here is that it is entirely legal for an employer to present tough concessionary proposals to a union, to negotiate to impasse and, after impasse is reached, to implement those proposals unilaterally.

NLRB case law provides that the duty to bargain does not require a party to engage in fruitless marathon discussions at the expense of frank statements and support of its positions. Where there are irreconcilable differences in the parties’ positions after exhaustive good-faith negotiations, the law recognizes the existence of an “impasse.”

The best cases to review on this point are old, but instructive: NLRB v. American Nat’l Ins. Co. (343 US 395)and Fetzer Television, Inc. v. NLRB (317 F2d 420).

Keep in mind that this strategy is a bit tricky. A potential union response is to file NLRB charges alleging bad-faith bargaining or “surface bargaining.” Good cases to review here are: Reichold Chemicals, 127 LRRM 1265 and Atlanta Hilton, 117 LRRM 1224.

Note particularly the Atlanta Hilton case. It is especially important for its summary of legal principles and listing of the traditional indicia of bad-faith bargaining:

• Delaying tactics
• Unreasonable bargaining demands
• Unilateral changes in mandatory subjects of bargaining
• Efforts to bypass the union
• Failure to designate an agent with sufficient bargaining authority
• Withdrawal of already agreed-upon provisions
• Arbitrary scheduling of meetings

Once impasse is reached, the employer is free to implement its final proposals unilaterally. The big downside of this strategy is that often the implementation leads to another union counter ¾ a strike.

Dealing with strikes is beyond the scope of this analysis. However, it should be noted that unions are much less willing to strike these days. They are beginning to see the strike as an outmoded weapon, particularly in the face of a determined employer who is prepared to deal with the strike and to use permanent replacements for striking workers.

Strategy #4—Subcontracting

Subcontracting is an effective strategy. It is most useful where the job functions are easily “subcontractable.” The classic example is truck driving or delivery. Subcontracting is commonly used by retailers, who are, in effect, going out of the trucking business and subcontract to an outside contract carrier.

While subcontracting is a solid strategy, there are several minefields. First is the issue of when to subcontract ¾ at mid-term or at contract expiration. In a high percentage of the cases, we find that it is inadvisable to embark upon this strategy mid-term in a collective bargaining agreement. Frequently there are provisions in the labor agreement which arguably prohibit subcontracting. Often there are clear and explicit prohibitions against subcontracting. In those circumstances, there is a high likelihood of the company being tied up with a difficult arbitration case if subcontracting is undertaken mid-term.

It is an entirely different story once the contract expires. At that point, the employer is free to make a fundamental business decision to subcontract, which, in effect, means going out of the trucking business. Here, too, there are some difficult issues of “decision bargaining” and “effects bargaining,” the subtleties of which are beyond the scope of this broad analysis.

Normally, the best strategy would be to engage in effects bargaining with the union, which would cover such things as extended health care benefits, order of layoff, prorated vacation pay and severance pay.

There is no obligation for the employer to agree nor to grant additional benefits. However, in most cases, we find it to be advantageous to have a “close-down” agreement which would acknowledge that all issues have been negotiated and resolved, the contract has ended and some form of additional benefits, such as severance pay, is granted.

Strategy #5—Close-Down/Facility Relocation

In businesses that do not have to be in a particular geographical area, this is perhaps the easiest and cleanest strategy. As with the subcontracting strategy, “decision bargaining” and “effects bargaining” issues must be addressed. The Dubuque Packing case sets forth the law on this issue (303 NLRB 386).

Before embarking on a strategy where “decision bargaining” may be at issue, required reading should be the NLRB General Counsel’s memorandum GC 91-9. This sets forth the Board’s enforcement guidelines on Dubuque Packing.

Similar to the subcontracting situation, it is normally to the advantage of a company to conclude with a complete close-down agreement.

In developing strategy here, particular attention must be paid to traditional union organizing at a new location. Oftentimes a union counter-attack is to have union employees who have been terminated at the old location apply for work at the new location. If these employees are not hired, they may proceed to file unfair labor practice charges with the NLRB alleging that they were not hired because of their past union affiliation.

Note particularly that relocation of work may trigger obligations under the Worker Retraining and Notification Act (WARN).

Strategy #6—Decertification/Union Loss of Majority Status

An employer commits an unfair labor practice in instigating the ouster of a union. However, there is nothing whatsoever improper about a company advising employees who are dissatisfied with their union of the appropriate NLRB procedures.

Because ousters by dissatisfied employees are on the rise, employers need to be clearly aware of the fundamentals here.

A decertification or “RD” petition requires at least 30 percent support from the bargaining unit members. There are narrow parameters for the filing of a decertification petition:

• either the ninety to sixty day “time window” prior to contract expiration, or
• after contract expiration and before a new contract is signed.

Once a RD petition has been filed, the ground rules are essentially the same as those for the more traditional union organizing petition. There is an election and the issue is decided by a majority of those who actually vote.

A very effective variation on the decertification petition is the “RM” petition. “RM” is the NLRB’s shorthand for “representation petition by management.” There are only small differences here, but a major difference in impact.

The fundamental distinction is that, in a RM petition, as opposed to a RD petition, an employer may file the petition itself. Decertification petitions, which must be filed by the employees, oftentimes do not come to pass because employees are unable to deal with the bureaucratic red tape at the NLRB.

The central focus of the difference between these two types of petitions is the question of “union loss of majority status.” If 50 percent rather than 30 percent of the unit indicate that they no longer want the union, the employer is faced with an interesting and advantageous legal situation. It is an unfair labor practice, and thus illegal, for an employer to negotiate with a minority union. Upon demonstration that 50 percent of the work force no longer support the union, an employer acts properly by ceasing bargaining with the union and filing a RM petition with the NLRB to resolve the matter. In some cases it may be proper to merely withdraw recognition from the union. NLRB rules are spelled out in Levitz Furniture (333 NLRB No. 105). As Levitz indicates, the evidence of loss of support for the union can take many forms. The typical form is a simple piece of paper with signatures attesting to the fact that “we don’t want the union anymore.”

Companies must also keep in mind one-man unit cases and special treatment for the construction industry.

In one-man unit cases, an employer is free, even during the duration of the contract, to repudiate the contract unilaterally. Cases to study here are D. & B. Masonry, 120 NLRB 1016 and a case which our firm handled, CTDU v. Pratt & Lambert, U.S. District Court for the Northern District of Illinois, 89 C 5657.

The construction industry, under the landmark Deklewa decision (282 NLRB 1375) presents unique opportunities for repudiating contracts or for filing RM petitions even during the term of an agreement.

Another point that needs to be kept in mind is the potential for a deauthorization petition. This is beyond the scope of this memo, but it is a very effective tool. Such a petition takes away a union shop contract provision and may be filed at any time.

Strategy #7—Corporate Restructuring

A frequently used approach is commonly referred to as “double breasting.” It is most often seen in the construction industry. Under the law, it is totally proper for an employer to restructure and maintain both union and non-union operations. However, as with so many of these strategies, it is not as simple as it sounds. There is much more to it than just setting up a separate corporation.

Union counters to such corporate restructuring are to allege an “alter ego” relationship or that, in reality, the two entities remain a single employer. The following factors are frequently considered by arbitrators, the NLRB and the courts in determining whether an “alter ego” relationship exists:

• Common ownership
• Interrelationship of operations
• Common management
• Centralized control of labor relations
• Interchange of employees
• Other indicia of separateness such as offices, bookkeeping, personnel policies, equipment, telephone, business cards, advertising, etc.

Another potential form of corporate restructuring to improve labor costs lies with bankruptcy laws. When a company files for reorganization under Chapter 11 of the Bankruptcy Code, the company becomes a “debtor-in-possession” or trustee and continues to run its business under the supervision of the Bankruptcy Court. The trustee may also seek the Court’s permission to reject any signed contracts ¾ including collective bargaining agreements.

Under Section 1113 of the Bankruptcy Code, the debtor company may unilaterally change the terms of the collective bargaining agreement or reject the agreement altogether if the Court finds the following three conditions:

• The company made a proposal to the union regarding the modifications necessary to merit the reorganization; and
• The union refused to accept the proposal without good cause; and
• The balance of the “equities” clearly favors rejection of the agreement.

Although this bankruptcy avenue may work to reduce labor costs, it is a very complicated situation which should be carefully considered before implementing.

Planning for Bargaining

In the majority of cases Wessels Sherman handles, the conclusion is that the best strategy is single employer tough bargaining. We regularly take management through the following checklist:

1. Relevant wage and benefit comparisons.
2. Points to consider if a “hard bargaining” or “concession bargaining” approach is used. Of major importance is strike preparation – IT IS IMPORTANT THAT YOU HAVE A STRIKE CONTINGENCY PLAN!
3. Development of company objectives, including initial proposals.
4. Obtain an understanding of the particular local union involved in the labor negotiations. In addition to union officers, history with this and other companies, etc., information should include the most recent LM-2.
5. All relevant background facts, including employee lists with wage, benefit and seniority information; contracts; policies; grievances; side letters, etc.
6. Composition of company bargaining committee? We usually decide that owners, presidents, or perceived top decision makers should not be at the bargaining table.
7. Anticipated employee committee (if any), including a decision on pay or no pay? The company cannot dictate the size of the union’s committee, but it is negotiable and the company should have input.
8. Location of meetings?
9. Use of Federal Mediation and Conciliation Service?
10. Review all legally required notification issues.
11. Communication issues (including timing, communications with the union and direct communication with employees)
12. Timing issues including assessing the ability of the union to get a deal ratified. Do they need to have one offer voted down?
13. Need for an extension agreement?
14. Evaluation of union proposals or anticipated proposals.
15. Sharing of data or other information with union and/or union committee
16. “Off-the record” meetings with union leadership.

In most negotiations today, management can get what they want without a strike. Careful planning is key. Frequently, off-the-record meetings with top union leadership will work wonders. Typically, union leaders are far more interested in re-election to office than the substance of a settlement. Crushing realities have caused union leaders to push their members for ratification of labor contracts calling for long duration (as much as 6 years), bigger health care contributions by employees, reasonable wages and greatly increased management flexibility in work assignments and scheduling.

So long as they are not badly embarrassed, union leaders will concede ground to management. It takes a well thought out plan and good execution to achieve this.

Finally, management needs to stay focused on their plan. If you execute, you will prevail. I am often reminded of what an FMCS commissioner told me years ago.…“Dick, arguments and concessions really aren’t that important……in the end, it’s all about leverage!”

Biographical Information for Richard H. Wessels

Richard H. Wessels, the founder and senior shareholder of Wessels Sherman Bailey Joerg Liszka Laverty Risch P.C., has practiced labor and employment law since 1967. Wessels Sherman Bailey Joerg Liszka Laverty Risch P.C. is a labor and employment law firm concentrating exclusively in the representation of management. Wessels Sherman Bailey Joerg Liszka Laverty Risch P.C. maintains offices in St. Charles and Chicago, Illinois; Milwaukee, Wisconsin; Davenport, Iowa; and Minneapolis, Minnesota. Mr. Wessels can be reached at the St. Charles, Illinois office at (630) 377-1554. His e-mail address is: riwessels@stch.w-p.com.