What's Behind The Strife?

Dec. 21, 2004
Recent labor-management confrontations have numerous and varied origins.

It's almost impossible to pick up the newspaper or turn on the television anymore and not see an account of some type of hostile labor-management encounter. Since last summer, strikes, lockouts, and other labor-management confrontations involving highly visible, high-profile businesses have dominated the news more than at any other time this decade. There was the 54-day strike at General Motors Corp. last summer and the two-week strikes at U.S. West Inc. and Northwest Airlines Corp. Strikes at Kaiser Aluminum Corp. and Continental General Tire Inc. are into their fifth month. And there was the six-month lockout by the NBA of its players and the 11-week lockout by ABC of its 2,400 technicians, both of which ended last month. In TWA's headquarters city of St. Louis, the International Assn. of Machinists and Aerospace Workers rallied in November to demand that top management be removed because of its failure to return the airline to profitability. The United Food & Commercial Workers marched at Wal-Mart Stores Inc.'s headquarters in Bentonville, Ark., in December to protest the retailer's move into the supermarket business and, at the same time, continued to press allegations that many clothes the retailer labels as Made in the USA actually aren't. And in the last 16 months, unions have withdrawn more than $250 million in funds from the nation's seventh largest bank, Wells Fargo & Co., to protest its role in lending money to Oregon Steel Mills Inc. Wells Fargo saved the company's CF&I mill in Pueblo, Colo., from twice defaulting on its line of credit since the ongoing strike by 1,100 United Steel Workers of America (USWA) members began in October 1997. What's behind the resurgence in activism from organized labor when membership -- which fell from 16.4 million in 1996 to 16.1 million in 1997 -- now constitutes only 9.8% of the private-sector workforce? A major factor is the continuing global economic pressure that is causing companies to "forever be looking for one more place where they can do work more efficiently," says Richard Hurd, professor of labor studies at Cornell University, Ithaca, N.Y. And more often than not, he says, that leads companies to seek ways to "reduce their commitment to core workers" and make greater use of suppliers, contingent workers, subcontractors, and lower-paid workers around the world. Alan L. Rolnick, attorney in the Atlanta, Ga., office of Constangy, Brooks & Smith and special counsel to the American Apparel Manufacturers Assn., agrees. "All the major strikes of late are situations where the companies are saying: 'We can't survive globally without change.' Anywhere there is labor intensity, you will see a squeeze as companies ask themselves: Can we find another way to do the work more efficiently?" Another reason for the increased confrontations is that both unions and companies clearly are taking harder stances than in the past. "Corporate America is taking the opportunity -- since its profits are robust -- to exercise its leverage to the fullest extent possible to try to obtain the flexibility it needs in a global world," says Martin F. Payson, partner in the White Plains, N.Y., office of Jackson Lewis Schnitzler & Krupman. "Their attitude is: Be flexible with us or pay the price. And when unions resist, they are going to see themselves knocked around by the stiffening back of corporate America." A case in point: the current strike by more than 3,000 USWA workers at five Kaiser Aluminum plants in Louisiana, Washington, and Ohio. After a fruitless three-day bargaining session, Kaiser two weeks ago imposed a lockout on the striking workers in an effort to get them to accept the new work rules and end the strike which began Sept. 30. Kaiser's leverage? With the use of salaried personnel and replacement workers, each of the five plants has been meeting its business-plan production and shipment levels, with several plants setting new performance records. "We're really in very good shape operationally and we are prepared, if need be, to operate the plants indefinitely in this manner, though that is not our objective," says chairman and CEO George Haymaker. That new attitude among large corporations is also the reason there are nearly as many major lockouts as strikes. "Employers are using lockouts as a wedge to gain the upper hand whenever they foresee a confrontation," says Cornell's Hurd. That gives the company the leverage to deny the union the opportunity to choose the strike target or date. Indeed, that was the reason, he says, that Northwest took a stance that it knew might prompt its pilots to strike. Northwest management knew that because the pilots are its highest-paid union employees they would garner little public sympathy. That gave Northwest the ability to negotiate its toughest issues when it had the most leverage. Unions also believe that the current economic situation gives them their best opportunity to take a firm stance at the bargaining table. "Unions know they are in a state of siege [from management] and are telling themselves, 'If we don't increase our membership, we will lose our strength,'" says Rolnick. "They are telling companies: 'We know you need to cut costs, but not at the expense of my members.'" It's a point that union leaders such as USWA President George Becker and AFL-CIO President John Sweeney readily recognize. "There are two keys to our success or failure in rebuilding this labor movement -- one is organizing and one is politics," says Sweeney. "We cannot succeed at rebuilding our membership base without winning in politics, and we cannot win in politics without substantially increasing our numbers." Becker agrees: "Our ability to organize and grow the union bears directly on our effectiveness at the bargaining table." Thus, in an attempt to halt their shrinking presence in basic industries such as steel, autos, aerospace, and telecommunications and to expand into other sectors, unions have turned to more visible strikes. And there has been just enough of a shift in the economy to give them some added leverage in negotiations with companies. Unions believe -- global pressures notwithstanding -- that now is an ideal time to strike, because corporate profits have been at near-record highs and workforce shortages have reduced, in many cases, the ability of a company to hire replacement workers. "Management's trump card always was being able to hire replacement workers," says John Wymer, attorney with Powell, Goldstein, Frazer & Murphy LLP in Atlanta. "But with unemployment low and skilled workers even harder to find, it is almost impossible for companies to go out and hire replacement workers. There is no elasticity anymore for management because they can't even find enough qualified workers to do the work that they have" when there is not a strike situation. One exception: Continental General Tire Inc.'s facility in Charlotte did begin hiring replacements last month for some of its 1,450 workers who have been on strike since Sept. 20. What's more, says Wymer, "companies are posting extraordinary profits of 10% to 25%, making money hand-over-fist, and are in a position to be struck. "Ever since former President Ronald Reagan fired the air traffic controllers in 1981 and broke their union [the Professional Air Traffic Controllers Organization], unions had been afraid to strike," says Wymer, who always tells his clients to make as generous an offer to avoid a strike as they would to settle a strike. "But since the Teamsters' strike in late 1997 against United Parcel Service of America Inc. [UPS], the view in the labor movement is that they can win these things -- or at least get management to make some concessions." Indeed, GM this summer agreed to keep open several plants even though the plants were losing money. U.S. West, as part of the settlement that ended a 15-day strike this fall, agreed to remain neutral whenever the Communication Workers of America (CWA) tries to organize any of its nonunion operations. "Unions are not achieving great victories, but they are achieving little victories," says Wymer. "And, for the unions, that is critical and important, because they now feel that if they put enough pressure on companies, they can win." Still the question remains whether unions have made any significant gains -- except increased visibility -- from the clashes. "My sense is that it is less a symbol of any new strength in organized labor, but more a sign of fear that they will have even more membership shrinkage," says John Tysse, attorney with McGuiness & Williams in Washington. Edward E. Lawler III, director of the Center for Effective Organizations and professor of business management at the Marshall School of Business at the University of Southern California, agrees. "My sense is that, in frustration, some of the unions figure that strikes are their last weapon" to combat what he calls the "inevitable membership losses" that are going to occur in unionized workplaces in a global economy "since companies are going to have to continually do more with less." Besides, as Lawler astutely points out, unions that are based in a single country are at a disadvantage at the bargaining table. "National unions fighting global companies have no weapons to go into battle with." Unions are striking only because they lack options besides a strike and lack creativity in resolving workplace problems, he says. The same is true for business lockouts. "Other than getting publicity," says Lawler, "strikes in this entirely new competitive global environment appear to be lose-lose for everyone." The most glaring example: the UPS strike that publicity suggests the Teamsters won. "In the aftermath, it is lose-lose," says Lawler. "It didn't change the reality of the situation for the unions -- there still has been essentially no increase in the number of full-time workers, and UPS has yet to regain all of the four percentage points of market share it lost during the strike." In the GM strike last summer, GM lost $2.6 billion in profits and the United Auto Workers only won temporary reprieves on the closing of plants that are unprofitable. It failed to obtain an agreement on how 53,000 Delphi Automotive Systems workers who will spin off from GM this year and next will be compensated. In addition, the no-strike pledge that the union made for the Dayton brake plants where the strike began is already in jeopardy. And GM is now planning to replace some of its smaller-car plants with new plants that operate under less-restrictive work rules. Likewise, at U.S. West, says Lawler, the CWA obtained a neutrality agreement from the company with regard to its organizing attempts at nonunion operations -- but at a price. CWA members at U.S. West now can opt out of the union's standardized negotiated pay plan for a pay-for-performance plan U.S. West wanted to put in across the board. "Such a change in pay structure ultimately challenges the basis of unions," says Hurd, "which were originally formed to limit arbitrary actions by management." "These strikes are a last resort by unions," says Lawler. "And they are not working." Nevertheless, there is concern within the business community that union organizing efforts eventually will begin to bear fruit -- for two reasons: management complacency and targeted organizing with dramatically higher budgets. First, under Sweeney, who assumed the presidency of the AFL-CIO just over two years ago, the AFL-CIO has boosted its organizing budget from a paltry $2.5 million to $30 million in 1999. And several unions, most notably the USWA and CWA, are following suit in making organizing their top priority. The USWA has added a penny-per-hour-worked charge to its dues that will more than triple its organizing fund to $40 million in 1999. Likewise, the CWA will use 10% of its operating budget -- up from 3% -- for organizing this year. Sweeney also has persuaded different unions to band together to target specific areas, rather than fight with each other for new members. Their three current targets: the rural I-70 corridor between St. Louis and Kansas City where manufacturers have set up new operations; the Southwest, particularly Phoenix, where many high-tech companies are relocating or expanding operations; and Las Vegas because of its high concentration of construction activity, union-ripe casinos, and the 4,000 new residents who move to southern Nevada each month. "Sweeney is targeting industries and developing campaign messages around issues of fairness that are harder to attack," says attorney Stephen J. Cabot, chairman of the Labor Relations & Employment Law Dept. at Harvey, Pennington, Herting & Renneisen Ltd. in Philadelphia. "He is looking down the scope of his rifle and focusing on a single issue to try to show that the union cares and management doesn't. All the high-profile strikes are over the same issue -- fairness and caring -- but each with a different label, whether it be job security, fair treatment, or benefits for part-time workers." The second reason why business is worried about union organizing is that management complacency toward unions is so rampant. "Companies have lived a charmed life for the past 15 years and made the assumption that unionism can't happen at their workplace," says Payson. "You also have an entire generation of managers and supervisors with no experience whatsoever of being confronted by union organizing efforts and who are naive and, to a certain extent, insensitive to their own vulnerability to being organized." Cabot, a management attorney with a 34-year unblemished record of never losing a union representation election, agrees. "Companies have to recognize that there is this challenge out there. Unless management gets smart and puts in the building blocks to prevent this, unions will eat them for lunch and they will wake up one morning 18 months to two years from now and ask themselves what happened." What's the best way to create an environment where workers won't want to join a union? In the long run, it comes down to three basics: communication, involvement, and offering workers arbitration of disputes and grievance procedures so there is no need to turn to a union for such help, says Wymer. Where will all this new activism from both management and unions lead? No one knows, but two things seem certain. One, the new activism isn't going to go away. Two, even if unions have success in organizing, it will be an uphill battle for unions to increase the percentage of the private sector that they represent. "The only thing that you can predict is that things will get more confrontational," says Daniel Yager, legal counsel for McGuiness & Williams. "Whether unions will have more success is debatable." Wymer agrees. "The trends that we are talking about are going to continue. As long as unemployment stays low and skilled workers are hard to find, you can expect the unions to say, 'We are hitting the bricks unless you give us what we want.'" There will be a similar hard line within business ranks, says Payson. "Companies are aware of the new realities of the workplace and are not going to be pushed around anymore." And, because those two lines drawn in the sand don't cross, says Payson, "you will see a heightened militancy and an increase in the number of strikes," especially in industries that are labor-intensive, those that have been deregulated, and those where the work can be done elsewhere around the globe. Indeed, GM has had 25 strikes since 1990 and faces negotiations this spring on a new three-year contract. Labor issues also are sure to surface in telecommunications because of de-regulation, mergers, and global competition in that industry. "Only those unions that attempt to participate in the new realities of the global world will survive," says Payson. "The others are almost certainly destined for death row." But the strikes and confrontations notwithstanding, "the ultimate answer of the future strength of unions," suggests Cornell's Hurd, "will rest much more in the organizing arena than in these strikes that are currently going on." That is where the unions face their biggest battle. Even if unions can organize more than 70,000 workers annually -- their average in recent years -- it still will be hard for them to make major membership gains, says Cornell's Hurd, "unless they can figure out ways to take on whole industries, whole companies, and whole geographic regions." Even if they do make sizable membership gains, says Richard Rothstein, adjunct professor of public policy at Occidental College in Los Angeles and a research associate at the Economic Policy Institute in Washington, "it is still difficult to see how the waning of the union influence could be reversed." First, he says, the global economy, concession bargaining, deregulation, a neglect of organizing, and union reliance on rigid rules have dramatically reduced labor ranks in the last 20 years. Second, labor laws in the U.S. are stacked against organizing. A case in point: Even in the aftermath of an organizing victory, unions are able to negotiate a first contract just slightly more than 60% of the time. Third, just to retain their approximately 10% share of the private workforce today, unions would have to increase their organizing success between three- and fourfold to about 250,000 new members annually. (About 200,000 are needed to have the equivalent of 10% of the net gain of 2 million jobs the economy has been adding each year, and another 50,000 to compensate for the fact that a disproportionate number of jobs lost in an economic upheaval are in union firms, says Rothstein.) "The new leadership clearly is dedicated to organizing and their efforts may succeed in doubling, even tripling, their historical organizing success rate," says Rothstein. "But they will not match the organizing rates of the past. In the absence of significant reform of U.S. organizing laws, a revival of the union movement is unlikely." Constangy, Brooks' Rolnick is more blunt. "The real question is what can unions do to become relevant in an economy where pressure on the bottom line is forcing management to reduce costs. Unions are saying that top management is getting richer and the poor are getting poorer. But since the bargaining table is not amenable to quick change, unless unions reinvent themselves, they are irrelevant in a global economy."

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