Modest labor-management bargains continue in 1984 despite the recovery Essay

Modest labor-management bargains continue in 1984 despite the
recovery



Despite an expanding economy, labor-management settlements
continued to be low in 1984. Negotiators grappled with pressures to
reduce or eliminate labor cost increases in the face of growing import
competition, the spreading effects of domestic deregulation in
transportation, and structural changes in other industries. In
addition, moderate inflation and concerns over job security continued to
temper union demands for large wage increases.



During the first 9 months of the year, major collective bargaining settlements (covering 1,000 workers or more) in private industry
provided average wage adjustments of 2.5 percent in the first contract
year and 2.8 percent annually over the life of the contract. 1 This
compares with 8.6 percent and 7.2 percent the last time the same parties
bargained (2 to 3 years earlier, in most cases). Part of the decline in
the “adjustments’ (the combined net result of wage increases,
decreases, and no changes) was traceable to settlements in construction,
which covered 420,000 of the 1.4 million workers under settlements in
private industry. In construction, settlements provided average wage
adjustment of 0.9 percent in the first year and 1.2 percent annually
over the contract life, compared with 3.2 and 3.5 percent, respectively,
in the other industries.



In the fourth quarter, settlements in the auto industry covered an
additional 450,000 workers, and negotiations were continuing for 350,000
workers in the railroad industry. 2


As part of their efforts to improve their competitive position,
some companies that settled in 1984 won several types of contract
provisions designed to limit labor cost increases. One of these was
“two-tier’ compensation systems, which grew in popularity in
1984. Under such systems, which vary considerably in operation, new
employees are paid less than current employees, receive lesser benefits,
or both. Two-tier systems are often agreed to after employers first
demand reductions in wages and/or benefits for all workers in the
bargaining unit. Such systems must be agreed to by current employees,
who are usually not adversely affected by them. During 1984, two-tier
pay systems were introduced into contracts covering about 200,000
employees, all of them already on the payroll.



Another approach to moderating labor costs that continued in 1984
was lump-sum payments in lieu of wage increases. Such payments help
employers in several ways. For example, they usually are paid at the
end of a contract or calendar year, rather than in regular paychecks;
they do not increase base pay rates and so do not increase the cost of
benefits that vary with base rates, such as vacation pay or overtime
premiums. Lump-sum payments are currently provided for about 650,000
workers, mostly in the aerospace industry and in the automobile
industry, at General Motors Corp. and Ford Motor Co.



Efforts to hold down cost increases for health insurance also were
important in 1984. These efforts took several forms, such as increasing
employee deductible and coinsurance payments, requiring a second
surgeon’s opinion on nonemergency operations, and offering
employees coverage by Preferred Provider Plans and Health Maintenance
Organizations as alternatives to “traditional’ insurance
plans. During the year, at least 500,000 workers were covered by
settlements that included one or more of these cost containment provisions.



A question that continued to be asked–but apparently was not
answered–during 1984 was whether the historical practice of pattern
bargaining was ending in the industries where it existed prior to the
economic difficulties and increased competition of the last few years.
These difficulties had impelled some companies to press for contract
terms tailored to their individual needs. The fate of pattern
bargaining was uncertain because of incomplete or contradictory
developments in some industries. These included General Motors’
and Ford’s essentially identical settlements with the United Auto
Workers, followed by uncertainty regarding the outcome of the
union’s request of Chrysler Corp. for unscheduled bargaining in
1984; the continuation of pattern settlements in the soft coal industry
despite the withdrawal of a large number of employers from their
bargaining association; prolonged negotiations in the railroad industry
(which has traditionally settled on a pattern basis); and continuing
defections from the employer association in the steel industry that
increased uncertainties regarding the degree of wage and benefit
uniformity that would be attained in 1986 settlements.


Auto settlements



Negotiations between the Auto Workers and General Motors Corp. and
Ford Motor Co. commenced in July amidst improved economic
conditions–both companies were expected to post 1984 profits exceeding
the record levels of 1983. On the surface, this presaged
“large’ settlements, particularly because new UAW leaders
would presumably want to prove their bargaining mettle by restoring some
of the wage and benefit cuts the union had agreed to in 1982. However,
there were countervailing factors, including the domestic
manufacturers’ need to invest large sums in plant and equipment to
help counter increasing competition from exporters to the United States;
and the possibility that Japan’s voluntary limit on shipments to
the United States would not be renewed when it expires on March 31,
1985. Foreign producers currently hold a 25-percent share of the
domestic market.



In the end, the overriding consideration appeared to be the union
leaders’ conclusion that the workers’ primary need was
increased job security, rather than substantial increases in wages and
benefits. One reason UAW President Owen Bieber and the other officers
emphasized job security was that 40,000 GM and 21,000 Ford workers were
still on layoff, in spite of the high production levels. Another reason
was an internal GM document obtained by the union early in 1984, in
which the company projected possible future cuts in its work force,
varying according to estimated increases in productivity.



There was substantial opposition to the first of the settlements,
with General Motors, as workers approved it by a vote of 138,410 to
102,528 announced on October 14. The essentially identical Ford
agreement was approved by a 33,312 to 18,386 vote announced on October
29.



The major innovation in the GM contract was a Job Opportunity
Bank-Security Program financed by a company obligation of $1 billion
over the life of the new 3-year contract and the succeeding contract,
also expected to run for 3 years. (At Ford, with fewer employees, the
obligation was $300 million.)



The program, administered by joint committees at the national,
area, and local levels, guarantees that workers with at least one year
of service will not be laid off as a result of the introduction of
improved technology, “outsourcing’ (procuring parts from other
manufacturers), negotiated productivity improvements, shifting of work
from one plant to another within the company, or the consolidation of
component production. Layoffs resulting from declines in sales,
disposal of facilities, or other reasons are not covered.



Eligible employees facing a layoff will participate in an employee
development bank and will continue to receive the pay rate for their
last job or, if assigned to another job, the rate for that job. They
also will continue to accrue pension credits and receive all other
regular benefits until the funds are exhausted. Other assignments for
bank members include job training, replacing other workers undergoing
training, and moving to a job at another company plant, if there is no
qualified worker with recall or rehire rights.



If the national committee determines that there are more bank
members at a plant than anticipated local and area openings, it is
authorized to set up special programs under which departing bank members
who are age 55–61 and have 10 years of service will receive pensions
calculated at unreduced rates, plus various supplements. Departing bank
members who do not meet the age and service requirements will receive
payments of $10,000 to $50,000, varying by seniority.



Other improvements in job security included–



Increased company funding of the existing Supplemental
Unemployment Benefits (SUB) program under which laid-off employees
receive weekly payments for up to 2 years.



Increased company funding of the Guaranteed Income Stream (GIS)
program established in 1982, under which laid-off employees with 15
years of service who exhaust their SUB entitlement continue to draw
benefits until their return to work, retirement, or the company’s
maximum financial obligation is reached. The maximum GIS benefit is the
lesser of 75 percent of gross earnings or 95 percent of after-tax
earnings, minus $12.50 a week ($17.50 beginning January 1, 1985) for
work-related expenses not incurred during layoff.



Establishment of a venture capital plan under which GM will
provide up to $100 million ($30 million at Ford) to start businesses in
communities hit by closing of company plants, with hiring preference
given to the displaced workers.



A provision intended to cut overtime work by penalizing the
company 50 cents per hour for all overtime hours worked in excess of
straight-time hours worked. The penalty money will go into an existing
skill development and training fund.



A company promise to try to reduce average weekly overtime by 2
hours per worker.



Unlike the 1982 accord, the new 3-year contract provides a
specified wage increase, ranging from 9 to 50 cents an hour, effective
immediately. In a departure from tradition in the industry, the
employees will receive lump-sum payments at the close of the second and
third contract years, rather than specified deferred pay increases at
the beginning of those years. Each of the “performance
bonuses’ will equal 2.25 percent of pay for all compensated hours,
including overtime hours (but not overtime premium pay) and paid time
off.



The union estimated that the specified increase, the two bonuses, a
$180 immediate “special payment,’ money resulting from
continuation of the profit-sharing plan, and cost-of-living pay
adjustments would yield GM workers $11,730 over the term, assuming a
5-percent annual rate of increase in the Consumer Price Index and
continuation of the projected 1984 profit level.



Under the 1982 accords, profit-sharing distributions averaged about
$700 for each GM employee and $440 for each Ford employee, and employees
of both companies received cost-of-living adjustments totaling $1.05 an
hour.



Other terms included–



Adoption of a plan under which employees can receive bonuses of
up to $500 a year for regular work attendance. This supplements a plan
adopted in 1982 under which employees with excessive unwarranted
absences lose part of their benefits.



Addition of a third type of health insurance option,
Preferred-Provider-Organization, some improvements in the existing
“traditional’ and Health Maintenance Organization coverage,
and adoption of “preauthorization’ and review procedures to
prevent unnecessary surgery and shorten hospital stays. During the
negotiations, GM said that restrictions were vital because its health
care costs had been rising about 15 percent annually in recent years and
totaled $2.2 billion in 1983.



Following the GM and Ford settlements, the UAW asked Chrysler Corp.
for an unscheduled reopening of negotiations under its contract
(scheduled to expire in October 1985) to return to the same bargaining
cycle as the other companies and eliminate a disparity in pay and
benefit levels. Chrysler had been at the same levels until 1979, when
the UAW accepted the first of three concessionary settlements (the
others were in 1980 and 1981) to aid the financially stricken company.
In both 1982 and 1983, Chrysler and the UAW negotiated some narrowing of
the disparity.



Elsewhere in the industry, American Motors Corp. raised the
possibility that it might close its only car assembly plant in the
United States if labor costs at the Kenosha, WI, facility are not
reduced. The company said the plant was not competitive with GM and
Ford operations because of higher average hourly earnings, more
restrictive work rules, and a higher ratio of union representatives to
workers. The possibility of a shutdown was reinforced by a company
announcement that it will spend $587 million to build a car assembly
plant in Canada, where it already has a small car plant.



The current American Motors-UAW contract for 7,300 hourly employees
in Kenosha is scheduled to expire in September 1985.



Soft coal



New United Mine Workers President Richard Trumka entered
negotiations with the Bituminous Coal Operators’ Association (BCOA)
with a simple mandate from his union: “No backward steps. No
takeaway contracts.’ On the management side, BCOA head Bobby R.
Brown said that too much coal was being produced and, “This has
resulted in some harsh realities–depressed prices, closed mines or
curtailed production, thousands of coal miners laid off.’ Because
of these bleak conditions, Brown said that any negotiated economic gains
for the 160,000 miners (including 55,000 on layoff) would have to be
offset by productivity gains to prevent any further deterioration of the
companies organized by the UMW. Much of the organized industry’s
difficulty has resulted from the growing share of the market held by
foreign producers and by nonunion domestic producers and the easing of
the petroleum crisis, which has slowed the increase in coal use that had
started to develop. In addition to these conditions, the bargaining
also was complicated by the fact that 100 of the 132 member companies
had dropped out of the BCOA, apparently expecting to negotiate more
lenient individual settlements with the UMW. The union countered this
strategy by announcing that it would not bargain with the dropout companies until the BCOA settled, which led many of the companies to
agree to be bound by the BCOA contract. Others who did not so agree
nevertheless settled immediately after the BCOA, on the same terms. The
net result was continuance of uniform pattern settlements in the Eastern
and Midwestern coal fields, where the UMW holds sway.



The 40-month contract provided for revisions expected to increase
job opportunities for UMW members:



New language ensures that miners will not lose their bidding
rights to a job at their mine if it is leased to another company.



Mine owners are now required to give local union officials copies
of warranties covering on-site work, enabling the officials to determine
if employees of outside firms are improperly performing warranty work.



The contract now provides that UMW members will perform all work
“of the type’ customarily done at the mine. This replaced a
provision that the union claimed the operators had misused to improperly
contract out work.



Companies are now required to notify the union of the sale of a
mine where a UMW contract is in effect and to furnish proof that the
buyer will abide by the contract.



In addition to a number of improvements in benefits, the October
accord provided a total of $1.40 an hour in wage increases, compared
with $3.60 over the 40-month term of the prior contract. The $1.40
increase ranged from 11.2 percent for the lowest paid workers to 9.9
percent for the highest paid workers.



The problems of the soft coal industry paled in comparison with
those in the hard coal fields of Eastern Pennsylvania, which have been
in decline for many years. The UMW bargained early in the year for the
1,100 remaining workers it represents and accepted a 1-year contract,
instead of the usual 3-year contract, to give the operators some
“breathing room.’ Terms included improvements in vacation and
sick pay and a 12-cents-an-hour increase in pay, which ranged from $9 to
$15.



Airlines



In 1984, some air carriers operated at a profit, while others
continued to experience financial difficulties. As in trucking, Federal
deregulation of the industry was a major reason for these difficulties.
Under the Airline Deregulation Act of 1978, routes were deregulated on
January 1, 1982, and fares were deregulated on January 1, 1983. This
has led to the formation of a number of new, nonunion, low-cost carriers
that offer intense competition to established carriers, triggering fare
wars, rapid shifts in operating areas, bankruptcies, and cuts in
employment. One result has been a spate of concessionary wage
settlements, as workers acceded to employer requests for aid in
improving their competitive ability, and employers gave workers part
ownership, a share of profits, or a voice in management. Some of the
1984 settlements that included concessionary provisions (while usually
resulting in an overall increase in compensation) were at–



United Airlines, where three unions were involved. The 37-month
contract for 8,500 members of the Association of Flight Attendants included a two-tier pay system under which pay rates for new employees
were cut 25 percent during their first 7 years in the 14-year pay
progression schedule. Mechanics and related employees, represented by
the Machinists, agreed to a 3-year contract that cuts pay rates for new
employees during their first 5 years on the job.



Pacific Southwest Airlines, where 3 1/2-year contracts for 3,600
members of the Teamsters, Air Line Pilots, and other unions called for a
15-percent cut in employee compensation and changes in work rules
intended to increase productivity 15 percent. In exchange, the company
agreed to place 15 percent of its stock in a trust fund for the workers
and to make annual payments to a profit-sharing plan equal to 15 percent
of pretax profit before interest expenses.



Northwest Airlines, where a settlement for 3,000 flight
attendants represented by the Teamsters provided a 6-month wage freeze,
followed by wage increases of 6 percent on July 1 of 1984 and 1985 and 3
percent on July 1, 1986. The 3-year contract also established a dual
pay system under which attendants hired after January 1, 1984, will be
paid 30 percent less than the current rates for employees already on the
payroll. After 6 years of service, the new employees will move up to
the higher pay schedule. Health insurance was revised to cover 80-90
percent of “usual and customary charges.’ instead of 100
percent.



Piedmont Airlines, where settlemtns for 3,000 members of four
unions provided for establishment of two-tier pay systems. The
settlements also changed work rules–such as by increasing maximum
monthly flying hours to 85, from 80, for members of the Air Line Pilots
Association– and deferred the first of three pay increases to the sixth
month of the contracts, which are subject to modification in 1987.



Republic Airlines, where members of 6 unions approved a
“partnership plan’ that called for extension through 1986 of a
15-percent pay cut and deferral of scheduled pay increases that had been
scheduled to end on May 31, 1984. In exchange for the extension,
adoption of a twotier pay system, and planned productivity improvements,
Republic agreed to establish profit sharing and to give the workers
shares of stock, increasing their share of ownership from 20 percent to
about 30 percent.



Western Airlines, where members of four unions agreed to a
22.5-percent pay reduction extending through 1986, in place of a
10-percent cut negotiated in 1983 scheduled to expire in November 1984.
Members of another union, the Air Line Pilots, agreed to extend through
1986 the temporary 18-percent cut they had accepted in 1983. All five
contracts, involving 10,000 workers, also called for changes in work
rules to increase productivity. In exchange, the unions gained two
seats on the carrier’s board of directors (bringing their total to
4), shares of company stock, and a profit-sharing plan.



Frontier Airlines, where 5,000 workers represented by several
unions agreed to decreases in pay and benefits, and adoption of two-tier
pay systems. The pay reduction was 11 percent for the workers
represented by the Air Line Employees Association, while the Air Line
Pilots agreed to a 3.5-percent cut and continuation of an 8.1-percent
cut negotiated in 1983 and scheduled to end in 1984. Despite these
changes, Frontier requested additional cuts later in 1984 and the unions
were considering the possibility of buying the company.



Eastern Air Lines, where 6,200 flight attendants, represented by
the Transport Workers, in January 1984 agreed to modifications of a
2-year contract negotiated in November 1983. In the major change,
employees were required to put 18 percent of 1984 earnings in a Wage
Investment Program in return for shares of Eastern stock. Late in 1983,
members of three other unions reached similar modification agreements,
all of which specified that employees would receive all wage increases
(which varied by union) already scheduled for 1984. All of the
modification agreements called for changes in work rules to improve
productivity and for the unions to have a total of 4 members (out of 19)
on Eastern’s board of directors. In September 1984, there were
indications that Eastern planned to ask the unions to continue the
investment requirement, at the 18-percent rate or at another level
through 1985 and possibly beyond.



Braniff Airways, which resumed operations in March, 22 months
after it had filed for protection under Chapter 11 of the Federal
bankruptcy code. The 1,900 employees, members of five unions, returned
under 5-year contracts with the Hyatt Corp. (the new owner) that called
for substantial cuts in pay and benefits. Despite these concessions,
Braniff lost $80 million during the next 8 months and pared operations
and employment.



In other developments–



Pan American World Airways, after losing $120 million in the
first half of the year, froze employee pension service credits at their
current levels, drawing bitter criticism from leaders of five unions,
who pointed out that the carrier had also not made required payments to
the pension plan in the two preceding years.



Continental Airlines rebounded, showing a profit of $17.6 million
for the third quarter, compared with a loss of $77.2 million a year
earlier. Continental’s ability to earn a profit was apparently
enhanced by its actions in 1983, when it sought protection under Chapter
11 of the bankruptcy code, abrogated all labor contracts, reduced its
work force by two-thirds, and reduced pay by about 50 percent. In
mid-1984, the contract abrogation was upheld by the bankruptcy judge.



American Airlines in October raised its inducement to employees
for retiring or quitting to one year’s pay, from $10,000, for those
on the payroll when two-tier pay systems were negotiated in 1983.
Departure of these employees will save money for American because they
are paid substantially more than those thired after the 1983 settlement.
Unlike some of the other airlines, American is profitable; it earned
$227.9 million in 1983.



Aircraft, aerospace



Settlements in 1984 for aircraft and aerospace workers generally
featured two contract provisions negotiated by the Boeing Co. and the
Machinists in October 1983–two-tier pay systems and lump-sum payments
in lieu of specified wage increases. A smaller number of workers were
under settlements that also followed Boeing’s lead in giving some
cost-of-living pay adjustments only to higher-paid workers. This was
done to restore at least part of the percentage pay differential between
the lowest and highest grades that had narrowed over the years as a
result of all employees receiving the same cents-per-hour adjustments.
All of the settlements increased employee compensation, moderated to
some extent by the new features. Companies that negotiated lump-sum
and/or two-tier pay systems in 1984 included–



McDonnell Douglas Corp., which negotiated 3-year contracts with
the Machinists and the Auto Workers that provided for two-tier pay and
annual lump-sum payments equal to 3 percent of earnings during the
preceding 12 months. In addition, pay compression will be relieved by
paying cost-of-living adjustments only to the highest paid 75 percent of
the workers or by providing specified pay increases only for skilled
workers.



Rockwell International Corp.’s Space Division, which
negotiated a 3-year contract with the Auto Workers that provided for
3-percent (of earnings) lump-sum payments in August of 1984 and 1985 and
a 3-percent specified pay increase in July 1986. Under the accord, new
employees have to wait longer before progressing to the maximum rate for
their job grade and will not receive automatic cost-of-living pay
adjustments during their first year on the job.



General Dynamics Corp.’s Aerospace Division, which
negotiated a 3-year contract with the Machinists that provided for
3-percent lump-sum payments in the first and second years and a
3-percent wage increase in the third. Skilled employees will receive
three additional lump-sum payments.



Cessna Aircraft Co., which negotiated a 38-month contract with
the Machinists that provided for September 1985 and September 1986
lump-sum payments equal to 1.5 percent and 2 percent, respectively, of
earnings during the preceding 12 months.



United Technologies Corp.’s Sikorsky Aircraft Division,
which negotiated a 3-year contract with the Teamsters that provided for
3-percent pay increases at the beginning of each your, plus and
immediate lump-sum payment equal to 3.5 percent of 1983 earnings.



Construction



Construction settlements were the primary factor in holding down
wage settlements in private industry during the first 9 months of the
year (see above). There was, however, no single reason for the small
wage increases–or the decreases –in the industry, because bargaining
in construction, generally conducted on a State, part-State, or
metropolitan area basis, is particularly sensitive to local economic
conditions. Among the factors that affected the size of 1984
construction labor contracts were the demand for real estate in the area
and the intensity of competition from nonunion firms, which usually have
lower pay and benefit levels and less restrictive work practices than
unionized firms.



The variation in the reasons for low settlements was matched by the
variation in the provisions of the settlements. In some cases wages
and/or benefits were cut for all workers, in others, only for new
employees, for projects started after particular dates, for all
employees on particular projects, or for employees only while engaged in
residential building.



Petroleum refining



The Oil, Chemical and Atomic Workers entered 1984 negotiations with
the major oil companies in a weakened position stemming from then-rising
petroleum prices and shrinking markets. The lower demand had led the
oil companies to close 83 refineries in the preceding two years, to cut
employment–and to take a stronger-than-usual stand in bargaining with
the union. The union also faced a longer-standing problem, the high
degree of automation in the industry, which severely curtails the effect
of strikes by permitting a limited number of management employees to
maintain operations.



The Gulf Oil Corp. settlement, in January, set a pattern for
settlements with other companies. Wages were increased by 20 cents an
hour immediately and 35 cents at the beginning of the second year.
Based on the reported previous average hourly earnings of $13.61, the
increases amounted to 1.5 and 2.5 percent, respectively.



The OCAW did not win its demand that Gulf assume the full cost of
health insurance premiums, but the company did agree to raise its
monthly contributions toward family coverage by $10, effective
immediately, and by an additional $5 a year later. Gulf had been paying
$151.50 of the $174 a month cost, which was expected to rise to $212 on
February 1. Gulf’s obligation for single employees remained at $57
a month, which covered the full cost for these workers.



The difficult conditions in the industry also were reflected in the
reported delays the union experienced in settling local issues with some
companies, which apparently pressed to cut costs by revising work rules.
Overall, the bargaining involved 338 contracts and 50,000 workers.



Longshore settlements



Early in the year, the International Longshoremen’s
Association (ILA) settled with East and Gulf Coast stevedoring companies
for 50,000 workers. This was followed by an August settlement between
the International Longshoremen’s and Warehousemen’s Union
(ILWU) and the Pacific Maritime Association for 10,000 dockworkers on
the West Coast. Revisions of pay guarantee plans were important in both
sets of negotiations, but particularly in the ILA talks, where
employers’ longstanding complaints of excessive costs and resulting
loss of business led to some changes in their Guaranteed Annual Income
plan (GAI). The changes included ‘tightening of eligibility
requirements’ at the port of New York and New Jersey (where the
guarantee is 2,080 hours of work or pay per year for eligible
employees); and cuts in the guarantee, to 1,500 hours’ pay or work
per year, from 1,800, in Hampton Roads, VA, and to 1,500 hours, from
1,900 in Philadelphia. At ports from North Carolina to Florida, GAI was
raised to 1,725 hours a year, from 1,250, but now is reduced by the
amount of holiday and vacation pay.



These changes were specified in supplements to a 1984
“master’ contract for all ports that included terms that the
parties had already agreed on in 1983, including $1-an-hour wage
increases on October 1 of 1983, 1984, and 1985 and a $1.25-an-hour
increase in employer payments to benefit funds.



In midyear, the ILA filed suit against Delta Steamship Lines after
the ocean carrier started shifting its calls to non-ILA ports,
contending that cargo handling was too costly at ILA ports. The ILA
viewed Delta’s action with concern because it could, if upheld by
the courts, induce other carriers to follow suit. The ILA’s legal
contention was that Delta was bound to call only at ILA ports under
terms of a contract the ILA had reached with an employer bargaining
association when Delta was a member, although it subsequently wthdrew.



In November, another dispute was under way in the port of New York
and New Jersey, as a Federal Maritime Commission administrative law
judge said that local firms were subject to excessive costs because
their assessments for employee benefits were based on the volume of
cargo handled, rather than hours worked. Both the ILA and the employer
association then appeared before the Commission to begin an appeal of
the opinion, which resulted from an action initiated by the port
authority.



On the West Coast, the settlement was more routine, as the ILWU and
the PMA agreed on a total increase of $2.50 in straight-time hourly pay
rates: This will average out to more per work hour because workers are
paid 6 hours at straight-time rates and 2 hours at time-and-one-half
rates for a normal 8-hour workday. The pay guarantee also was improved,
to 38 hours a week (from 36) for “fully registered’ workers
and to 28 hours (from 24) for others.



Railroads



Bargaining for 350,000 rail employees was initiated in April, when
13 unions, acting under provisions of the Railway Labor Act, filed
“Section 6′ notices with the major railroads, specifying their
wage and benefit demands. The demands included six 5-percent wage
increases over a 3-year period that would begin on July 1, continuation
of the automatic cost-of-living pay adjustment formula without the
existing “cap,’ increases in overtime pay and improvements in
paid holidays, personal leave dyas, health and welfare benefits, and
pensions. Some of the unions also prposed contract changes that would
be limited to their members, such as adoption of restrictions on
contracting out work.



Management’s reported goals included a freeze on pay, adoption
of a two-tier pay system under which new workers would start at 56
percent of the current starting rate, and revision of work rules to
enhance the railroads’ ability to compete with the deregulated
trucking industry. The Interstate Commerce Commission’s role in
rail rate setting was reduced by the Staggers Rail Act of 1980, but the
railroads are still more regulated than trucking or airline
transportation.



As the year was closing, the unions and management were still
bargaining. This followed the usual practice in the
industry–protracted negotiations that finally end in settlements
seemingly just before the time for serving new Section 6 notices.



Trucking



Although the Teamsters’ National Master Freight Agreement is
not scheduled to expire until March 31, 1985, there were a number of
major developments in 1984 that could cause a break in the 20-year
history of pattern bargaining in the industry. Many of these changes
were attributable to the Motor Carrier Deregulation Act of 1980, which
ended most of the Interstate Commerce Commission’s authority to
regulate the entry of new firms, operating areas, cargos, and rates.
This has led to an influx of small nonunion carriers whose lower
operating costs have altered the industrywide bargaining relationship
between the Teamsters and Trucking Management, Inc., the industry’s
leading employer association. This, in turn, has led to the demise of
many unionized carriers and substantial layoffs of Teamsters members.



There was a continued increase in the number of firms the union has
allowed to reduce wages and benefits below levels required by the master
freight agreement, viewing this as preferable to a shutdown or loss of
jobs. The reductions took a number of forms, including cuts in wages
and benefits, and cuts made in exchange for company stock.



Another development that will complicate the 1985 talks was
continued growth in the number of unionized firms establishing separate
corporate entities to reduce costs by employing nonunion
owner-operators.



Management’s unity also continued to deteriorate, as Trucking
Management, Inc., reported that many member companies had quit the
association during the preceding 30 months, apparently because they
believed that TMI was dominated by larger, more profitable companies and
that they could negotiate more lenient terms on their own or by forming
new associations.



The Teamsters did negotiate one important–and controversial
–trucking contract in 1984. The accord reached for 90,000 employees of
United Parcel Service supersedes the balance of a contract negotiated in
1982 that did not provide for any specified pay increases. The
contract, which was similar to the master freight agreement, had been
scheduled to expire on May 31, 1985. Teamsters’ President Jackie
Presser said the early negotiations were undertaken with UPS–which
earned $490 million in 1983–to give the workers some immediate money to
offset 93 cents an hour in scheduled 1982, 1983, and 1984 cost-of-living
pay adjustments that had been diverted to help the company meet cost
increases for maintaining benefits, as required in the 1982 contract.
He also said that the workers had probably gained a better contract now
than they would have by following past practice and waiting to pattern
their settlement after the 1985 master freight settlement.



The UPS settlement met immediate opposition, led by the Teamsters
for a Democratic Union, a longstanding dissident group within the
Teamsters’ ranks that accused Presser of negotiating the contract
in secret and accelerating the ratification process to prevent the union
members from thoroughly studying the terms. The accelerated vote charge
was upheld by a judge in a court test, and he ordered a revote, in which
the contract was approved 44,337 to 18,989.



The contract provisions included immediate lump-sum payments of
$1,000 for full-time employees and $500 for part-timers, pay increases
of 68 cents an hour on September 1, 1984, 50 cents in September of 1985
and 1986, and benefit improvements backed by a guarantee of any further
changes needed to match any benefit improvements in the master freight
agreement.



The contract also provides for continuation of dual pay system
under which part-time workers earn about $4 per hour less than full-time
workers. Much of the opposition to the contract had centered on this
provision. Reportedly, half of the employees are part-timers.



Steel



Although contracts between the United Steelworkers and steel
producers do not expire until 1986, there were a number of developments
in 1984 that will have a bearing on forthcoming negotiations.



In the economic area, profits at the producers where the union
holds bargaining rights were generally small or nonexistent. President
Reagan rejected an International Trade Commission recommendation to
impose quotas and additional tariffs on countries exporting steel to the
United States, but he did pledge to negotiate with the exporting nations
on voluntarily reducing their share of the market to 18.5 percent, from
the current 25 percent. There were moves by Japanese producers to buy
into domestic firms; and more plant closings. Also, “mini
mills,’ which are specialized producers–usually having nonunion
work forces–now hold about 20 percent of the market and are expanding.



In the labor relations area, one fact that will bear directly on
the 1986 talks was further erosion in the number of firms in the
Coordinating Committee Steel Companies, the association that has set the
settlement pattern for the industry. The withdrawal of National Steel
Corp. increased the possibility that the pattern would be less
widespread in 1986. As National Steel President Robert D. McBride said,
“We want greater flexibility to deal with issues most important to
our company.’ (One example of the kinds of contract variations
that could occur in 1986, or earlier, was Wheeling-Pittsburgh Steel Corp.’s announced plan to offer shares of company stock to
employees if they agreed to continue cuts in wages and benefits that had
been scheduled to end in 1985. The cuts, negotiated in 1983, were
similar to those the union negotiated with other steel companies.)



Another reduction in the association’s membership occurred
when LTV Corp. merged its Jones and Laughlin Steel Corp. unit with
Republic Steel Corp. to form the Nation’s second largest steel
concern, LTV Steel Co. This left only five companies in the
coordinating committee, down from 10 a decade earlier, with the
possibility that there could be more defections. The five companies
were U.S. Steel Corp., LTV Steel Co., Bethlehem Steel Corp., Inland
Steel Co., and Armco Inc.



On the union side, there was new leadership, as Lynn Williams was
elected president, succeeding Lloyd McBride, who died in 1983. Williams
faced the daunting problems of declining membership and maintaining or
increasing worker compensation in a troubled industry.



West Coast forest products



More than 14,000 employees were covered by 32-month contracts
between the Association of Western Pulp and Paper Workers and several
pulp and paper companies that called for an immediate lump-sum payment
of $1,000 to each employee, followed by specified wage increases of 4
percent at the beginning of the second year and 4.5 percent at the
beginning of the final year. The union also agreed to give up mandatory
shutdowns on Christmas and Independence Day and to changes designed to
hold down the company’s health insurance costs, including adoption
of higher deductibles and coinsurance payments.



In the lumber industry, uncertainty increased regarding the future
of pattern bargaining after Louisiana-Pacific Corp. employees voted to
end union representation at 17 of 19 mills that had been on strike for
15 months. As a result, the 1,700 workers continued to work at the
compensation levels Louisiana-Pacific had put into effect in 1983, which
were lower than those the other companies had negotiated with the union,
an affiliate of the Carpenters and Joiners. Prior to 1983,
Louisiana-Pacific had accepted the same terms as the other companies.
The company’s decision to go-it-alone in 1983 was based on its
contention that wage and benefit concessions were necessary to enable it
to compete with lower-cost mills opening in the South. This led to the
strike, which became less effective over time, as more and more strikers
returned to work, joining management employees and new hires in
operating the mills.



Meatpacking


During the last few years, labor-management relations in the
meatpacking industry have been chaotic, and will apparently continue so
until the industry’s level of employee compensation stabilizes and
marginal firms either improve efficiency and profitability, or shut
down. During 1984, there were further developments in the difficult
movement toward stability, which might be aided if uniform wage and
benefit levels are agreed to when contracts for several major pork
processors expire in August 1985. Contract expirations in beef
processing, which are less concentrated in the year than those in pork
processing, began in January 1985.



Wilson Foods Corp., which drew much attention in 1983 when it
used the provisions of Chapter 11 of the Bankruptcy Code to shed its
labor contracts, emerged from Chapter 11 proceedings in March 1984 when
the court approved a reorganization plan. The plan included termination
of a salaried employees’ pension plan, which Wilson said was
overfunded, and establishment of a new plan. In November, leaders of
the Food and Commercial Workers union accused the company of hiding the
fact that its officers had received large salary increases after the
5,000 workers represented by the union had reacted to the contract
abrogation by negotiating new 2-year contracts in 1983 that cut pay by
25 percent. Wilson, located in Cedar Rapids, IA, is the Nation’s
largest pork processor.



In Waterloo, IA, a Federal bankruptcy judge approved the decision
of employee-owned Rath Packing Co. to abrogate its labor contract and
cut pay and benefits. The January ruling cleared the way for the pork
processing firm to seek an infusion of money from new owners. In
November 1983, when it filed for protection under Chapter 11, Rath
listed $56.7 million in assets and $91.6 million in liabilities. In
October 1984, the plant had about 375 production employees, down 700
from a year earlier. The workers are represented by the United Food and
Commercial Workers.



In Billings, MT, Pierce Packing Co. reopened a pork processing
plant after members of the United Food and Commercial Workers and
Operating Engineers unions agreed to wage and benefit cuts. Pierce had
shut the plant down in 1983 after the unions had refused to indefinitely
extend a 1-year, $1.90 an hour wage cut negotiated in 1982. At the time
of the reopening, Pierce was operating under the Chapter 11 bankruptcy
protection it had petitioned for in 1983.



Another plant reopened, in Independence, IA, financed in part by
$3,000 investments by each employee. The balance of the financing came
from city and State grants and from private investors. The new
operation, Iowa Ham Canning, Inc., succeeded Cudahy Specialty Foods,
which closed the plant in 1983. The new, nonunion operation was
expected to employ about 100 people within a year.



In Madison, WI, Oscar Mayer imposed a 23-percent pay cut for
2,600 workers that opened the way for George A. Hormel and Co. to lower
wages for 1,800 workers in Austin, MN. The Oscar Mayer reduction of
$2.44 an hour in base wages came after Food and Commercial Workers
members had three times rejected a demand for adoption of the $8.25 rate
prevailing at other companies. The cut will continue until the
company’s current contract expires in August 1985. Imposition of
the pay decrease will also lead to a reduction at Hormel, whose contract
permits a reduction when a lower wage becomes an “industry-wide
standard.’ Under a 1984 arbitration decision, Hormel won the right
to implement a lower wage based on the average of reduced rates at three
of the five major companies in the industry, with the union to select
the three companies.



Farm and construction equipment



The only major firm that bargained in this industry in 1984 was
International Harvester Co., where a contract with the Auto Workers
expired on September 30 but a settlement had not been attained at this
writing. When a settlement is reached, it could influence the
union’s 1986 bargaining with Caterpillar Tractor Co. and Deere
& Co. Historically, these companies, and others in the industry
where the union holds bargaining rights, have bargained more or less
simultaneously and agreed to similar contracts but this pattern was
disrupted in 1979, when most firms settled, but International Harvester,
hit by a 172-day strike, did not settle until 1980.



Postal service


Bargaining for 600,000 postal employees began in April but ended up
in binding arbitration, with a decision expected to be announced at
yearend. The United States Postal Service led off the unsuccessful
bargaining with four unions in April by calling for a cut in wages,
asserting that the average postal worker earned $23,031 a year ($27,920
including benefits), 10 to 25 percent more than workers in comparable
jobs in private industry. Later, the USPS made a specific 3-year
proposal that included a pay freeze for current employees, a lower pay
scale for new hires, a less liberal cost-of-living pay adjustment
formula, and other changes, all of which were denounced by the unions.
Negotiations continued intermittently until after the current contracts
expired on July 20, when the quasi-government agency announced that it
was going to reduce the pay rates for new employees by more than 20
percent. Before the scheduled August 4 effective date, Congress enacted
legislation prohibiting the cut.



Despite this easing of the tension, the parties were unable to
reconcile their differences, leading to the first broad use of the
arbitration procedures of the Postal Reorganization Act of 1970.



Government workers



During the year there were several developments affecting Federal
workers’ pay.



In January, 1.4 million white-collar employees received a
3.5-percent pay raise that would normally have been effective in October
1983 but was delayed by President Reagan under authority of the Federal
Pay Comparability Act of 1970. Later in 1984 the increase was raised to
4 percent, as Congress legislated a 0.5-percent increase retroactive to
January. The 2 million military personnel also received the equivalent
of a 4-percent increase in January, under laws linking increases in
their pay levels to those for white-collar workers. About 450,000
blue-collar workers also received up to a 4-percent increase sometime
during the fiscal year ending September 30, 1984. Their pay is raised
at various times during the year based on the results of local surveys
of wages for similar private industry jobs. However, their potential
increase was “capped’ at the level for the white-collar
workers.



In August, the President’s Pay Agent (a triad consisting of
the Secretary of Labor, the Director of the Office of Personnel
Management, and the Director of the Office of Management and Budget)
reported that an 18.2-percent pay increase would be necessary to bring
the white-collar employees to pay parity with employees in similar jobs
in private industry, based on the annual National Survey of
Professional, Administrative, Technical and Clerical Pay conducted by
the Bureau of Labor Statistics. However, the President again used his
authority under the law to propose a 3.5-percent increase and to defer
it from October 1984 to January 1985. Blue-collar workers received a
matching increase, while military personnel received a 4-percent
increase.



Wage and benefit increases for State and local government workers
were larger in fiscal year 1985 than in the preceding fiscal year. This
is apparent from the Bureau of Labor Statistics’ Employment Cost
Index, which showed that during the third quarter of the calendar
year–when most governments begin their fiscal year–State and local
government workers’ pay increased 3.4 percent in 1984, compared
with 3.0 percent in 1983. Similarly, their compensation–pay plus
benefits–rose 3.5 percent during the third quarter of 1984, compared
with 3.2 percent in the third quarter of 1983.



Legal developments



Perhaps the most important legal ruling in 1984 from the viewpoint
of both labor and management came in February, when the Supreme Court
held that employers filing for reorganization in Federal bankruptcy
court may temporarily terminate or alter labor contracts even before the
judge has heard their case. In the case, NLRB v. Bildisco &
Bildisco, the Court also held that the termination or alteration could
be made permanent if the employer can persuade the judge that the
agreement burdens chances of recovery.



The ruling drew sharp criticism from AFL–CIO President Lane
Kirkland, who viewed it as giving management an unwarranted tool for
ousting unions or forcing compensation concessions on them.



Later, Kirkland endorsed legislation that modified the bankruptcy
code to require a firm or bankruptcy trustee to attempt “to reach
mutually satisfactory (contract) modifications’ before going to the
court. If they are unable to agree on modifications, the judge is
permitted to put the employer’s proposal into effect only if the
union has rejected it “without good cause’ and “the
balance of the equities (among the union, management, and other vested
parties) clearly favors’ the proposal.



From organized labor’s point of view, things did not turn out
as well at the National Labor Relations Board, as it handed down a
series of rulings favoring management. Labor’s charges of
pro-management bias were countered by defenders of the rulings, who
claimed that the board was simply correcting a pro-union bias that had
developed during the Carter Administration.



In the decisions, the board held that–



The National Labor Relations Act did not preclude managers from
asking workers about union activities.



The board cannot order an employer who has committed unfair labor
practices to negotiate with a union that is not supported by a majority
of the workers in a bargaining unit.



An employer may shift operations to a nonunion plant it owns to
escape the higher labor costs of a union contract, if the contract does
not specifically ban such relocation.



It is contrary to Federal labor law for the board to intervene in
a labor-management dispute before the parties have exhausted their own
arbitration procedures.



Employers are no longer required to publicize the fact that an
employee can solicit another employee for union activities while at work
if both are on their own time, such as during a lunch period.



1 Preliminary statistical information for all of 1984 is scheduled
to be released on January 24, 1985. Both the first 9 months and full
year figures exclude possible pay adjustments under cost-of-living
formulas because such adjustments are contingent on the future movement
of a consumer price index.



2 This article is essentially based on information available in
early December for bargaining units of 1,000 workers or more.

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