A Review of Labor Contracts, the Labor Negotiations Process, and Costing Issues

By Cabot Dow
Cabot Dow Associates

Reasonable People Make Reasonable Agreements - G. Richard Shell

The purpose of this HR Advisor is:

1. to suggest a framework for review of existing labor contract issues and provisions
2. to suggest some guidelines (a/k/a punchlist) for navigating the labor negotiations process
3. to offer some resources for costing out labor contract provisions, both from the standpoint of cash as well as paid time off

A. A framework for review of existing labor contract issues and provisions

In getting started for another round of negotiations, we would suggest that employers take the time to identify the historical context as to why existing provisions in its labor agreements were agreed upon in the first place. Identify Legal issues that will need to be addressed, e.g. compliance with the Affordable Care Act (ACA) and Fair Labor Standards Act (FLSA). Get finance involved. Cost out (i.e. "Dollarize") all contract provisions on a line by line basis, in the short and long term, both direct and indirect. Cost out all contract language that drives Wage costs (e.g. shows up on W-2), Overtime provisions, "minimum staffing" provisions or practices, Paid Time Off provisions and Pension- related provisions (e.g., 401(k), 457, MEBT, etc.). Know the cost of cash-out provisions (e.g. sick, vacation, holiday leave, Kelly hours, etc.). Know the cost of release time for union negotiations and who pays.

Now is the time to determine how the Patient Protection and Affordable Care Act (ACA) will impact the bargaining process this year, going forward. The ACA was signed into law by President Obama on March 23, 2010. Beginning in 2015, the ACA mandates apply to employers with 100 or more full-time employees. Beginning in 2016, the ACA mandates apply to employers with 50 or more full-time employees. Full-time employees are employees working 30 hours per week, on average, or at least 130 hours in a month.

Hours of service not only includes hours worked but also hours for which an employee is paid but does not work, such as vacation, holiday, illness, disability, jury duty, military duty, or leave of absence (up to a maximum of 160 hours for any continuous period).

So, it is time to know what ACA issues and impacts need to be bargained and for having a plan for doing so in the next few months and addressing the following concerns:

Next, we would suggest review of language that has an affect on the organization's legal responsibility (positive and negative) and that has an affect on management's ability to manage efficiently and meet customer needs. Critique the adequacy of the no strike clause in the labor contract(s), including whether there is a provision that defines a "strike" broadly and holds the Union liable for damages. Read over the management rights clause to determine if the language includes such rights as the right to maintain efficiency of operations, the right to direct, schedule, discipline employees for cause; the right to issue rules and regulations and take all reasonable actions not prohibited by law or agreements of the parties. Re-write clauses that limit supervisors or managers from doing their job. Re-write provisions in the management rights article that serve to nullify the right to management to act without first negotiating the decision with the Union. Tune up grievance procedures to meet industry standards. For example, this would include reasonable time lines and arbitration provisions, including a clear understanding that the employer and union, respectively, will bear the costs of presenting their case, including attorney and witness fees. Fix language that requires management to discipline an employee within a certain amount of time, even if management did not have knowledge of the policy violation. Beware of layoff language that is based strictly on least amount of seniority regardless of its effect on the organization or programs. Most Unions understand this practical solution.

B. Punchlist (Guidelines) for navigating the labor negotiations process

1. Prior to Entering the Negotiations Process:

Table 1 provides a series of actions that should be taken before entering the negotiations process on a new or successor labor agreement:

TABLE 1

2. Prior to Receiving the Union's Proposals:

Table 2 suggests what an employer's negotiations team should look like, a framework for a broader support system, and assignments for members of the employer's negotiations team:

TABLE 2

Table 3 identifies some important topics members of the employer's negotiations teams need to be prepared to address:

TABLE 3

Table 4 provides a list of useful payroll and economic data for the budget expert to notebook and make available to all members of the employer's negotiations team:

TABLE 4

3. Review with designated operating management group the current CBA, MOUs, LOUs established practices subject to negotiations

Table 5 offers a list of review items that should be assigned to members of the employer's negotiations team so the process is linked to its affecting on operations and to the employer's duty to bargain over wages, hours and working conditions.

TABLE 5

4. Analyzing Union Demands:

Table 6 identifies a framework for analyzing proposals that the Union brings to the bargaining table, often a result of an information gathering process involving its members. Each demand should initially be analyzed with the items and questions listed below in mind. This will assist the employer in making counterproposals to union proposals.

TABLE 6

5. Establishing Negotiating Goals and Authority

Under guidance and direction of the CEO, thoroughly prepare for extended executive session(s) with elected officials to establish their role, general negotiating goals and review upper limits of overall authority

Determine the extent to which to include the top management cabinet in the development of overall strategy for labor negotiations

Explain the negotiations process to the elected officials, the "whys" and "hows" of their policy direction and underlying role in support of the process.

It is also important to know what the negotiation team's upper authority is for total compensation package and core concerns of elected and management officials on non- economic items.

If ordinal ranking in the market is part of the policy-making process, provide the CEO with all relevant information and a summary of the survey data before presenting a package to the election officials for action.

Be aware of the effects concessions may have on the budget and priorities established by the elected officials.

Be aware of permissive subjects of bargaining, as provided in Table 7, which provides a list of items which do not have to be negotiated with the Union or which the employer cannot insist that the Union negotiate. Negotiations may take place on such items, but engagement by either party is not required. For example, if the employer decides not to discuss the issue, the Union must drop it (at least before reaching impasse).¹

TABLE 7

6. Establish Communication Procedures to be Followed During Negotiations:

Table 8 is a reminder of the types of communication procedures that should be followed during negotiations.

TABLE 8

7. Punchlist for Initial Meeting with Union

Table 9 is a reminder of the types of subjects that should be addressed with the Union at the outset of the bargaining process for a new or successor contract.

TABLE 9

8. Negotiating Process

Table 10 offers guidelines for the employer's spokesperson to follow during the bargaining process:

TABLE 10

9. Crisis/Impasse Negotiation

Table 11 addresses guidelines for the process if and when parties are in mediation and approaching impasse.

TABLE 11

C. Resources and strategies pertaining to costing labor contract issues and provisions both from the standpoint of cash as well as paid time off

1. Costing Parameters

Table C-1 assumes that parameters for bargaining have been secured by the employer's chief negotiator and shared with the employer's negotiations team. It is important for the employer to take credit for concessions already made and employ creativity in crafting a mutually acceptable agreement with the Union that balances the interests of both parties. The employer will want to know how its offer compares to settlements or offers others are making in the industry.

TABLE C-1

2. Costing Team

Table C-2 identifies the detailed components of costing, communicating costs to the Union, how to know if the employer's offer is within budget and consistent with market- driven principles.

TABLE C-2

3. Obvious Costing Issues

Table C-3 provides a sampling of contract components to which dollars are relatively easy to attach.

TABLE C-3

4. Not so obvious costing issues:

Table C-4 provides a sampling of contract components to which dollars are not quite as easy to attach as those in Table C-3. Nevertheless, the components in Table C-4 affect payroll costs in the form of number of FTEs, coverage, risk management, creeping costs affected by years of service and leave accrual systems.

TABLE C-4

5. Some Professional Resources:

• AWC: www.wacities.org
• IPMA: www.ipma-hr.org
• NPELRA: www.npelra.org
• WAPELRA: www.wapelra.org

Suggested Reading in Getting Prepared for Negotiations:

• Bargaining for Advantage, Negotiation Strategies for Reasonable People, G. Richard Shell, Director of the Wharton Executive Negotiation Workshop, 2006, Penguin Books
• Negotiate to Close: How to Make More Successful Deals, Gary Karrass, 1985, Simon & Schuster.
• Negotiating a Labor Contract, Charles S. Loughran, Exq., BNA Books, 3rd Edition, 2003.

1Consult with legal counsel as to PERC authority on such items listed as permissive. However, an employer may advance to interest arbitration on a management rights clause, which includes waivers of union rights, in negotiations for a new or successor contract.

2However, an employer may advance to interest arbitration on a management rights clause, which includes waivers of union rights, in negotiations for a new or successor contract.

3MOB = The cost of maintenance of current level of benefits, without a cap on employer costs