Bargaining power

In light of our discussions, this past week regarding bargaining power read this article and comment

Now read this article and tell me how it might or should affect the negotiations discussed above:

Support your opinion with at least two sources from the class materials.


Module 2: The Unionization Process and Negotiating the Collective Bargaining Agreement


  1. Union Organizing and Election Campaigns
  2. The Negotiations Process
  3. Negotiating Economic and Administrative Issues
  4. Resolving Negotiations Impasses
  5. Union Organizing and Election Campaigns

The unionization process involves union organizing and election campaigns. The NLRB has adopted a step-by-step procedure for authorizing and conducting elections by employees on the question of union representation. Management and union officials, as well as employees, enjoy specific rights during these campaigns, but these rights have limits.

Typically the union organizer does not create the climate for unionization. Rather, it is a group of dissatisfied employees that creates a climate ripe for unions. The successful organizer can generate support for the union by capitalizing on this dissatisfaction. Unions use several tactics, including house calls, small group meetings, leafleting, and the formation of an employee-led organizing committee, to increase employee involvement and support. Unions are increasingly turning to the Internet and e-mail as additional means to recruit members.

For the union and its supporters, the ultimate goal is to achieve recognition or certification. Only when the union becomes formally recognized by the company or certified by the NLRB can it insist upon good-faith negotiations with the employer. Recognition/certification may occur in one of the following three ways:

  1. secret ballot election conducted by the NLRB
  2. an employer’s voluntary recognition of the union when it finds that the union is acceptable and it is evident that support is widespread among employees (in which case no campaign is called for)
  3. summary direction of the NLRB (supported by the Supreme Court in NLRB v. Gissel Packing Co.),where the board finds that a fair election is impossible because of the employer’s grave and numerous unfair labor practices

Congress has charged the NLRB with determining which employees are within the bargaining unit. In making this determination, the NLRB evaluates whether the group the union is attempting to organize possesses a community of interest. Shared working conditions, shared supervision, and common personnel rules are all indicators that a group of employees shares a community of interest.

Other groups are excluded from union representation by law and may not be part of the bargaining unit. Supervisors and managers are among those who are prohibited from being in the bargaining unit. The same is true for confidential employees, who may fall into this category because of family ties to the business owner or because of the nature of their job responsibilities. As an example, human resources staff would generally qualify as confidential employees and thus be barred from union representation.

Voluntary recognition and summary NLRB direction are both very rare. The normal method is a secret ballot election conducted on-site by NLRB agents. In the days and weeks leading up to the election, the union may hold rallies, contact employees via e-mail, and use other means to persuade employees to authorize the union to represent them.

Employers are free to respond to the union’s campaign. Companies may hire labor relations consultants and hold meetings in the workplace emphasizing the disadvantages of unions. Most employers also emphasize the current benefits employees enjoy without the necessity of paying union dues and point out the potential for economic hardship should a strike occur. An employer may launch a vigorous campaign to dissuade employees from voting for a union, so long as its message is free from threats, promises, or coercion.

Ultimately, each employee in the bargaining unit decides individually yes or no concerning the question of having a union. A majority of those voting will determine the outcome. Some may be convinced that the union is needed to communicate with and persuade management on issues, benefits, and problems in the workplace. Others may be driven by a need to participate and identify with a group. Others may yield to peer pressure to join. Some may simply believe that unions are good and should be supported. Of course, some will be indifferent or opposed to the union or may fear management retribution.

Consistent with NLRB rulings, if employees within the proposed bargaining unit vote “no union,” the employer is insulated from another election for a year. If the union wins, the NLRB certifies it as the sole and exclusive representative of all employees in the bargaining unit, regardless of union membership or voting record. The union is protected for a year from challenge by another union (referred to as a raid) for a year. If the union can negotiate a contract, this protection continues during the term of the agreement for up to three years.

In determining whether the outcome of the election will be validated, the NLRB considers the “totality of conduct” of each party during the preelection period. Employers conducting meetings with employees (called “captive audience” meetings) cannot do so within 24 hours of the election. Threats, coercion, and promises of benefits by employers are forbidden, but employers may express opposition to the union and convey facts to support their views. Polling workers concerning their union sentiments―pro or con―is permitted. Employers must be cautious, however, not to do so in a threatening or intimidating fashion.

Note that even after certification, a union can later lose its status by being decertified in a secret ballot election. When a petition for decertification is filed by a group of disaffected employees, the board initiates a process similar to the initial certification election process.

Topic 1 Self-Assessment Questions – Please go to My Tools > Self Assessments > to complete this self assessment.

  1.  The Negotiations Process

Once the union is recognized or certified, its first order of business is to initiate negotiations with the employer. The union is eager to complete negotiations for many reasons. Primarily, it must demonstrate to its supporters that their investment in the union was warranted. An agreement with the employer guaranteeing enhanced wages or benefits, a workable grievance procedure, or stronger safety rules may serve as evidence of the union’s worth. Management has more interest in maintaining the status quo. Finalizing an agreement with the union is likely to lead to higher wage and benefit costs as well as more formal work rules.

Regardless of the parties’ attitudes, the NLRB requires both parties to bargain in good faith and to reduce their agreement to writing when it is reached. This requirement does not mean that either party must reach a settlement or must agree to the other’s proposal(s). It does mean that both parties must demonstrate a sincere and honest resolve to reach agreement.

Bargaining is a give-and-take process. In the vast majority of cases, this process results in a voluntary agreement between union and management. Most of us are familiar with the traditional bargaining model involving tradeoffs, compromises, and even bluffing. It is this traditional model that continues to characterize most union-management negotiations. However, unions and employers are engaging increasingly in newer forms of negotiation such as win-win bargaining and interest-based bargaining (IBB). These types of negotiation are grounded in the notion that the union, employer, and employees have many interests in common. These forms of negotiation deemphasize the adversarial relationship between the parties and encourage them to seek solutions based on consensus.

Under these newer forms of negotiation, parties agree to discard the win-lose mentality and create a cooperative environment along with appropriate new procedures that enhance their ability to recognize and appreciate each other’s interests. From there, they attempt to fashion an agreement that fulfills those interests to the maximum extent possible. Early experience appears to be yielding positive results. Whether these approaches will survive over the longer term remains to be seen. In the meantime, the longer-standing traditional form of bargaining will continue to predominate.

Whatever style or approach may predominate, many aspects of bargaining continue unchanged. During the pre-negotiations phase, each party must assemble a bargaining team and will often informally survey other unionized employers in an effort to gauge contract settlements in the same economic sector or geographic area. Before negotiating in earnest, the two sides will usually exchange written proposals. As the process continues, they will develop counterproposals, offer compromises, and sharpen their strategy and tactics in an effort to achieve a satisfactory settlement.

NLRB rulings and the general requirement for good faith also play an important role in negotiations. Among these requirements are the following:

  • Both sides must be willing to meet at reasonable times and locations to negotiate.
  • The employer must be willing to give the union information it may need to bargain intelligently. This information could include, for example, salary data, health benefits costs, or overtime figures.
  • The use of trickery, false statements, or other acts of bad faith can lead to intervention by the NLRB.
  • Once a final agreement has been reached, it must be committed to writing and signed by both sides.

Topic 2 Self-Assessment Questions – Please go to My Tools > Self Assessments > to complete this self assessment.

  1. NegotiatingEconomic and Administrative Issues  

When most people think of a collective bargaining agreement or union contract, the first thing that comes to their mind is wages. Indeed, establishing wage rates for employees in the bargaining unit is often the most contentious issue the parties must resolve. Many people are surprised to learn that, on average, unionized workers are paid much better than their nonunion counterparts in the same industry. In the retail sector, for example, the weekly earnings of unionized workers are nearly 20 percent greater than those of workers in nonunion firms. In construction, the gap is even more dramatic, with the unionized workforce earning a premium of nearly 40 percent (U.S. Department of Labor, 2003, p. 1). In this section, we look at some of the major wage and benefit issues that arise in collective bargaining.

Economic Issues

Many factors influence negotiated wage levels in union agreements. Some of these factors are intuitive. For example, how financially healthy is the company? What kind of wage increase can it afford to pay and still remain competitive? Other factors may be less apparent. How labor intensive is the involved industry? In industries that can leverage technology, such as the pharmaceutical and energy industries, a relatively small number of workers may be able to produce a very valuable product. In this type of product market, it may be realistic to pass wage increases on to consumers in the form of higher prices.

Labor Costs

At the other extreme, consider enterprises such as the United Parcel Service (UPS) and Wal-Mart. They are two of the largest employers in the United States. Labor costs account for a huge proportion of the total operating budget for each firm. Increased wages can severely undercut profit margins or force increased prices to compensate for the costs associated with higher wages. Perhaps that explains why bargaining between UPS and its union is often so intense. Package delivery rates and labor costs are closely linked. A new, more costly labor agreement often prompts an increase in the cost of a parcel delivery. It also helps to explain one of the reasons why Wal-Mart is vigorously resisting unions. Even a slight increase in wages could upset Wal-Mart’s entire profit margin and make it more difficult to maintain its dominant position as a low-price leader.

Wage Surveys

To assist them in negotiating economic issues, virtually all firms use wage surveys. Simply stated, they gather data about the wages and benefits being paid by their competitors. These data are invaluable in crafting and responding to bargaining proposals. Nonunion firms also conduct such surveys. They are less concerned with any union demands but simply wish to benchmark their wages against those of competitors. Like companies, national and international unions track wage settlements throughout their respective industries. These data are then shared with their affiliated local unions so that they too can negotiate more intelligently.

Profit Sharing

Yet another feature of economic bargaining is a variety of bonus, profit sharing, gain-sharing, or performance payments. Although different labels are used for these programs, each involves some type of payment to employees over and above their basic pay. The parties’ negotiated language may link the timing and amount of these payments to such factors as productivity increases, cost savings, corporate profitability, or even employee longevity.

Fringe Benefits

Finally, another economic matter addressed in the vast majority of union contracts is employee benefits, often referred to as fringe benefits. Benefits can run the gamut from health care to pensions, paid time off to tuition reimbursement. However, in recent years, two important trends related to health care and to pensions have emerged in negotiations over employee benefits.

Health Care

The first trend is closely tied to the continuing rise in health care costs. Unionized firms are not immune from these escalating costs, and companies are taking a strong position with their unions when it comes to cost sharing. They are making it clear they cannot continue to absorb all of these increased costs. Therefore, employee co-pays must be raised, employees must pay a higher share of premiums, or plan benefits must be reduced, or all of these.

This is a hard pill for unions to swallow, because they struggled for so many years to achieve these benefits. There is a definite trend in union agreements toward employees absorbing some of the additional costs associated with escalating health care costs.


A second and even more dramatic trend has emerged in the area of employee pensions. Traditional, company-funded pension plans, known as defined-benefit plans, are rapidly declining in popularity. Employers are shifting to 401(k)-style plans. Under such plans, the company does not guarantee a specific benefit upon retirement. Rather, both employer and employee contribute to the plan, with the employee making basic decisions about how to invest the funds. Unlike the traditional plan, these newer plans are premised upon a substantial contribution by the employee. Equally important, the employee’s ultimate benefit amount will not be linked to years of service. Rather, it will depend upon the timing and amount of contributions, as well as the employee’s ability to make sound investment decisions.

Noneconomic or Administrative Issues

In addition to topics such as wages and benefits, the parties also bargain over a wide array of administrative or noneconomic issues as well. Although these issues may have less visibility, they often have a profound effect on both the health of the enterprise and employees’ long-term job security. One example is found in clauses that stabilize or compel union membership (e.g., union shop) and guarantee payment of dues by its members through payroll deduction dues check-off). Another example is seen in outsourcing or subcontracting clauses in labor agreements, which have taken on added importance in recent years.


To pare costs, many firms have decided to send specific tasks or functions to outside vendors. Sometimes this outsourcing even involves sending work overseas. During the bargaining process, unions will attempt to insert language in the contract that restricts, or prohibits entirely, the company’s ability to outsource work. Understandably, the union wishes to keep as much work in-house as possible. Companies may resist restrictions on their ability to contract out work, believing that they need maximum flexibility to remain competitive.


Another noneconomic issue that is addressed in most collective bargaining agreements is seniority. An employee’s cumulative years and months of company service may be a factor in a wide range of human resources decisions. For example, in the event of a layoff, those with the most seniority may retain their jobs, whereas those with less seniority may be separated.

Seniority may also play a role in promotion decisions. Some contracts require that if two employees meet the basic qualifications for a job, the one with the most seniority must be selected. The same may be said for shift work. Seniority is often used as the basis for selecting the shift to which an employee will be assigned. Likewise, when it comes to choosing preferred vacation periods, the contract may grant a preference to those with the most seniority.

Topic 3 Self-Assessment Questions – Please go to My Tools > Self Assessments > to complete this self assessment.

  1. Resolving Negotiations Impasses

Labor-management negotiations seldom lead to a strike. In recent years, the frequency of strikes in the United States declined rapidly. Indeed, a high percentage of labor contracts are negotiated or renegotiated without the parties reaching a bargaining impasse of any kind. Students of labor relations must understand, however, the mechanisms for resolving those impasses that do occur. Strikes, initiated by the union, and lockouts, initiated by employers, receive wide coverage in the media. You must also understand the less disruptive and more structured processes of third-party mediation and arbitration. Ideally, the parties will opt to engage in a cooperative relationship in the hope of reducing conflict.

Causes of Impasses

Impasses occur when union and management are unable to reach a voluntary agreement concerning a new collective bargaining agreement. Negotiations typically involve discussions of a wide range of topics. As described in topic 3, issues open for negotiation may include both economic and noneconomic issues. An impasse may result when the parties have reached a stalemate over a single subject, e.g. wage rates, or when disagreements linger regarding several subjects.


Each side in the negotiations possesses an important economic weapon, which it may use in an effort to break the impasse. The union may call for a strike of its members to pressure the employer to accept its terms for a contract settlement. Typically the union will conduct a vote among its membership to decide whether to authorize a strike and then inform the employer of the results of the vote. But unions do not engage lightly in strikes. Obviously, those in the bargaining unit do not receive their wages during a strike, and there is no guarantee that the employer will yield to union pressure and accept its terms for settlement.

A strike can cause long-term damage to the company, such as loss of market share to competitors. This loss could adversely affect employees’ long-term job security. Finally, a strike can engender bitter feelings and resentment between workers and managers. This type of open conflict may seriously harm morale.


The counterpart to the strike is the lockout. It is management’s primary economic weapon in attempting to force a contract settlement. In a lockout, management does precisely that. It locks its doors and refuses to allow the employees entrance. Paychecks are cut off, and the employer ceases operations. The theory behind a lockout is that once employees experience a few days, or weeks, without their paychecks, they may reconsider the employer’s offer to resolve the collective-bargaining impasse.

Obviously, a lockout is an extreme action on the part of a company. By closing its doors and ceasing operations, it is cutting off its own sources of revenue. Unless the company has stockpiled goods in anticipation of a labor dispute, it is, in effect, starving itself economically. To even consider a lockout, the employer would have to be convinced that employees and the union would soon see the wisdom of its settlement offer.


The strike and the lockout are clearly the chief economic weapons of labor and management respectively. However, the vast majority of impasses are resolved without resort to such extreme measures. The parties often rely upon mediators to help them resolve impasses. Congress has charged a small federal agency, the Federal Mediation and Conciliation Service (FMCS), with providing expert mediation services, without cost, to assist in resolving impasses.

Mediators are expected to possess a high level of knowledge concerning the labor relations process, economic and industry trends, and problem-solving techniques. A mediator is not empowered to impose any particular settlement upon the parties. Rather, the mediator is there to help overcome communication problems, suggest solutions, and prod the parties toward compromise.


Another means of resolving impasses is referred to as interest arbitration. It is used primarily in the U.S. Postal Service and in the rail and airline industries. It is much less popular in other sectors of the economy. In interest arbitration, the parties jointly select a neutral person to hear and weigh the bargaining positions of each side. Thereafter, the interest arbitrator makes a final and binding decision as to what should be included in the negotiated agreement.

Interest arbitration is a way to avoid the conflict and hard feelings often associated with the strike and the lockout. Nevertheless, it is often criticized on the basis that arbitrators “split the difference.” Critics allege that rather than urging the parties closer and closer to a voluntary agreement, this strategy causes each side to take a more extreme position. A second criticism is that it eliminates some of the parties’ motivation to reach a voluntary settlement on their own. One side or the other may believe that it can gain a better settlement through arbitration than it can through agreement with the other side.

National Emergency Strikes

Finally, a few labor disputes are regarded as adversely affecting the national economy. For example, if a strike threatened to shut down coast-to-coast rail service or if a dockworkers’ strike cut off many of the imported goods coming into the United States, the national economy would likely be adversely affected. These rare occurrences are referred to as national emergency strikes.

Congress has passed legislation granting the president special powers where a work stoppage threatens the national interest. Under the Railway Labor Act, the president may order a “cooling-off” period to temporarily block the strike and may even propose that Congress enact special legislation imposing contract terms. A similar process is contained in the National Labor Relations Act. The president may appoint a special Board of Inquiry to investigate the dispute and may authorize the attorney general to go into federal court and seek an injunction against the strikers.


U.S. Department of Labor. (February 25, 2003). Union members in 2002. News release. [Online]. Available:

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