Human Resource Management (MGT501) VU

Lesson 35
TRADE UNIONS

After studying this chapter, students should be able to understand the following:

A. Unions
B. Collective Bargaining
C. The HRM Department in a Nonunion Setting
D. Phases of Labor Relations

This chapter talks about why workers organize, outlines the basics of labor law, and reviews the procedures of
labor elections, collective bargaining, and contract administration. We will also go through the grievance
procedures.

A. Unions
Organization of workers, acting collectively, seeking to protect and promote their mutual interests through
collective bargaining is termed as union. The most significant impact of a union on the management of human
resources is its influence in shaping HRM policies. In the absence of a union, the company may develop all
HRM policies based on efficiency. But, when a union enters the picture, management must develop HRM
policies that reflect consideration for the preferences of workers who are represented by a union. A union's
strong preferences for high wages, job security, the ability to express dissatisfaction with administrative actions,
and having a voice in the development of work rules that affect their jobs get injected into the equation along
with the employer's preferences.

I. Union Objectives
Several broad objectives characterize the labor movement as a whole. These include:
(1) To secure and, if possible, improve the living standards and economic status of its members.
(2) To enhance and, if possible, guarantee individual security against threats and contingencies that might result
from market fluctuations, technological change, or management decisions. (3) To influence power relations in
the social system in ways that favor and do not threaten union gains and goals. (4) To advance the welfare of all
who work for a living, whether union members or not. (5) To create mechanisms to guard against the use of
arbitrary and capricious policies and practices in the workplace. In order to accomplish these objectives, most
unions recognize that they must strive for continued growth and power.

ƒ Growth—To maximize effectiveness, a union must strive for continual growth, but the percentage of
union members in the workforce is declining. Union leaders are concerned because much of a union’s
ability to accomplish objectives comes from strength in numbers. Unions must continue to explore new
sources of potential members.

ƒ Power—We define power here as the amount of external control that an organization is able to exert. A
union’s power is influenced to a large extent by the size of its membership and the possibility of future
growth. By achieving power, a union is capable of exerting its force in the political arena.

II. Factors Leading to Employee Unionization

Three types of factors play role in origin of employee unions they are:
a. Working Environment: Inadequate staffing, Mandatory overtime, Poor working conditions
b. Compensation: Non-competitive Pay, Inadequate benefits inequitable pay raises
c. Management Style: Arbitrary Management Decision Making, Use of fear, Lack of recognition
d. Organization Treatment: Job insecurity, unfair discipline and policies, Harassment and abusive
treatments, Not responsive to complaints

III. Why Employees Join Unions

Individuals join unions for many different reasons, and these reasons tend to change over time. They may
involve dissatisfaction with management, need for a social outlet, opportunity for leadership, forced
unionization, and peer pressure.
A union is an organization that represents employees' interests to management on issues such as wages, hours,
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and working conditions. Generally, employees seek to join a union when they (1) are dissatisfied with aspects of
their job,
(2) feel a lack of power or influence with management in terms of making changes, and
(3) see unionization as a solution to their problems.

a. Dissatisfaction With Management—Unions look for problems in organizations and then emphasize
the advantages of union membership as a means of solving them. Management must exercise restraint and
use its power to foster management and labor cooperation for the benefit of all concerned. Some reasons
for employee dissatisfaction are described:
1. Compensation: If employees are dissatisfied with their wages, they may look to a union for
assistance in improving their standard of living.
2. Job Security: If the firm doesn’t provide its employees with a sense of job security, workers
may turn to a union. Employees are more concerned than ever about job security due to a
decline in employment in such key industries as automobiles, rubber, and steel.
3. Management Attitude: Employees do not like to be subjected to arbitrary and capricious actions
by management. In some firms, management is insensitive to the needs of its employees. When this
situation occurs, employees may perceive that they have little or no influence in job-related matters,
thus becoming prime targets for unionization.

b. A Social Outlet—Many people have strong social needs. Union-sponsored recreational and social
activities, day care centers, and other services can increase the sense of solidarity.

c. Opportunity For Leadership—Employers often promote union leaders into managerial ranks as
supervisors.

d. Forced Unionization—It is generally illegal for management to require that an individual join a union
prior to employment. However, in the 29 states without right-to-work laws, it is legal for an employer to
agree with the union that a new employee must join the union after a certain period of time (generally 30
days) or be terminated.

e. Peer Pressure—Many individuals will join a union simply because they are urged to do so by other
members of the work group.
f.
IV. The Impact of Unions on Human Resource Management
Managers are more likely to develop HRM policies based on efficiency. But, when a union is in the picture,
policies must reflect employees' preferences as well. Employees have preferences related to staffing, employee
development, compensation, and employee relations.

a. Staffing: The contract can dictate how jobs are filled and on what basis they are filled.

b. Employee Development: Performance evaluations are rarely used in unionized organizations.

However, there is often a greater amount of worker training.

c. Compensation: On average, union employees earn 10% to 20% higher wages than comparable
non-union employees. Unionized firms avoid using merit pay plans and are likely to give
across-the-board pay raises to employees based on market considerations.

d. Employee Relations: The labor contract gives employees specific rights. The employees,
through the collective bargaining process, have a voice in the development of work rules that
affect their jobs.

B. Collective Bargaining

Under a collective bargaining system, union and management negotiate with each other to develop the work
rules.
The performance of the mutual obligation of the employer and the representative of the employees to meet at

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reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of
employment, or the negotiation of an agreement, or any question arising there under, and the execution of a
written contract incorporating any agreement reached if requested by either party; such obligation does not
compel either party to agree to a proposal or require the making of a concession.

I. Labor Management Relations and Collective Bargaining

ƒ Forms of Bargaining Structures AND Union/ Management Relationships—The bargaining

structure can affect the conduct of collective bargaining. The four major structures are one company
dealing with a single union, several companies dealing with a single union, several unions dealing with a
single company, and several companies dealing with several unions. Types of union/management
relations that may exist in an organization are conflict, armed truce, power bargaining, accommodation,
cooperation, and collusion.

ƒ The Collective Bargaining Process—Both external and internal environmental factors can influence
the process. The first step in the collective bargaining process is preparing for negotiations. This step is
often extensive and ongoing for both union and management. After the issues to be negotiated have
been determined, the two sides confer to reach a mutually acceptable contract. Although breakdowns in
negotiations can occur, both labor and management have at their disposal tools and arguments that can
be used to convince the other side to accept their views. Eventually, however, management and the
union usually reach an agreement that defines the rules of the game for the duration of the contract.
The next step is for the union membership to ratify the agreement. There is a feedback loop from
“Administration of the Agreement” to “Preparing for Negotiation.” Collective bargaining is a
continuous and dynamic process, and preparing for the next round of negotiations often begins the
moment a contract is ratified.

ƒ The Psychological Aspects Of Collective Bargaining

Prior to collective bargaining, both the management team and the union team have to prepare positions and
accomplish certain tasks. Vitally important for those involved are the psychological aspects of collective
bargaining. Psychologically, the collective bargaining process is often difficult because it is an adversarial
situation and must be approached as such. It is a situation that is fundamental to law, politics, business, and
government, because out of the clash of ideas, points of view, and interests come agreement, consensus, and
justice.

a. Preparing For Negotiations

Bargaining issues can be divided into three categories: mandatory, permissive, and prohibited.

ƒ Mandatory Bargaining Issues—Fall within the definition of wages, hours, and other
terms and conditions of employment.

ƒ Permissive Bargaining Issues—May be raised, but neither side may insist that they
be bargained over.

ƒ Prohibited Bargaining Issues—Are statutorily outlawed.

b. Bargaining Issues
The document that results from the collective bargaining process is known as a labor agreement or contract. Certain
topics are included in virtually all labor agreements.
ƒ Recognition—Its purpose is to identify the union that is recognized as the bargaining representative
and to describe the bargaining unit.

ƒ Management Rights—A section that is often, but not always, written into the labor agreement and
that spells out the rights of management. If no such section is included, management may reason that it
retains control of all topics not described as bargainable in the contract.

ƒ Union Security— The objective of union security provisions is to ensure that the union continues to
exist and to perform its function.
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1. Closed Shop: An arrangement whereby union membership is a prerequisite to employment.

2. Union Shop: An arrangement that requires that all employees become members of the union
after a specified period of employment (the legal minimum is 30 days) or after a union shop
provision has been negotiated.

3. Maintenance of Membership: Employees who are members of the union at the time the
labor agreement is signed or who later voluntarily joins must continue their memberships until
the termination of the agreement, as a condition of employment. This form of recognition is
also prohibited in most states that have right-to-work laws.

4. Agency Shop: Does not require employees to join the union; however, the labor agreement
requires, as a condition of employment, that each nonunion member of the bargaining unit
“pay the union the equivalent of membership dues as a kind of tax, or service charge, in return
for the union acting as the bargaining agent.” The agency shop is outlawed in most states that
have right-to-work laws.

5. Exclusive Bargaining Shop: The company is bound legally to deal with the union that has
achieved recognition, but employees are not obligated to join or maintain membership in the
union or to financially contribute to it.

6. Open Shop: Employment that has equal terms for union members and nonmembers alike.

7. Dues Checkoff: The Company agrees to withhold union dues from members’ checks and to
forward the money directly to the union.

ƒ Compensation and Benefits—This section typically constitutes a large portion of most labor
agreements. Virtually any item that can affect compensation and benefits may be included.

1. Wage Rate Schedule: The base rates to be paid each year of the contract for each job are
included in this section. At times, unions are able to obtain a cost-of-living allowance (COLA) or
escalator clause in the contract in order to protect the purchasing power of employees’ earnings.

2. Overtime and Premium Pay: Provisions covering hours of work, overtime pay, and premium
pay, such as shift differentials, are included in this section.

3. Jury Pay: Some firms pay an employee’s entire salary when he or she is serving jury duty.
Others pay the difference between jury pay and the compensation that would have been earned.
The procedure covering jury pay is typically stated in the contract.

4. Layoff or Severance Pay: The amount that employees in various jobs and/or seniority levels
will be paid if they are laid off or terminated is presented in this section.

5. Holidays: The holidays to be recognized and the amount of pay that a worker will receive if he
or she has to work on a holiday are specified. In addition, the pay procedure for times when a
holiday falls on a worker’s nominal day off is provided.

6. Vacation: This section spells out the amount of vacation that a person may take, based on
seniority. Any restrictions as to when the vacation may be taken are also stated.

7. Family Care: This is a benefit that has been included in recent collective bargaining
agreements, with child care expected to be a hot bargaining issue in the near future.

ƒ Grievance Procedure—It contains the means by which employees can voice dissatisfaction with
specific management actions. Also included in this section are the procedures for disciplinary action by
management and the termination procedure that must be followed.

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ƒ Employee Security—This section of the labor agreement establishes the procedures that cover job
security for individual employees. Seniority and grievance handling procedures are the key topics related
to employee security.

a. Negotiating The Agreement

The negotiating phase of collective bargaining begins with each side presenting its initial demands. The term
negotiating suggests a certain amount of give and take, the purpose of which is to lower the other side’s
expectations. Each side does not expect to obtain all the demands presented in its first proposal. Demands that
the union does not expect to receive when they are first made are known as beachhead demands.

b. Breakdowns In Negotiations
At times negotiations break down, even though both labor and management may sincerely want to arrive at an
equitable contract settlement. Several means of removing roadblocks may be used in order to get negotiations
moving again.

ƒ Third-Party Intervention—Often a person from outside both the union and the organization can
intervene to provide assistance when an agreement cannot be reached and a breakdown occurs. At this
point there is an impasse.

1. Mediation: A process whereby a neutral third party enters a labor dispute when a bargaining
impasse has occurred.

2. Arbitration: A process in which a dispute is submitted to an impartial third party to make a

binding decision.

3. Sources of Mediators and Arbitrators: The principle organization involved in mediation

efforts, other than the available state and local agencies, is the Federal Mediation and
Conciliation Service (FMCS). Either or both parties involved in negotiations can seek the
assistance of the FMCS, or the agency can offer help if it feels that the situation warrants this.

ƒ Union Strategies for Overcoming Negotiations Breakdowns—There are times when a union
believes that it must exert extreme pressure on management to agree to its bargaining demands. Strikes
and boycotts are the primary means that the union may use to overcome breakdowns in negotiations.

1. Strikes: When union members refuse to work in order to exert pressure on management in
negotiations.

2. Boycotts: An agreement by union members to refuse to use or buy the firm’s products. The
practice of a union attempting to encourage third parties (suppliers and customers) to stop
doing business with the firm is a secondary boycott.

ƒ Management’s Strategies For Overcoming Negotiation Breakdowns—One form of action that is

somewhat analogous to a strike is called a lockout. Management keeps employees out of the workplace
and may run the operation with management personnel and/or temporary replacements. The employees
are unable to work and do not get paid.

a. Ratifying The Agreement

In the vast majority of collective bargaining encounters, the parties reach agreement without experiencing severe
breakdowns in negotiations or resorting to disruptive actions. Typically, this is accomplished before the current
agreement expires. After the negotiators have reached a tentative agreement on all topics negotiated, they will
prepare a written agreement complete with the effective and termination dates. However, the approval process
can be more difficult for the union. Until it has received approval by a majority of members voting in a
ratification election, the proposed agreement is not final. Union members may reject the proposed agreement,
and new negotiations must begin.

b. Administration Of The Agreement

The larger and perhaps more important part of collective bargaining is the administration of the agreement,
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which is seldom viewed by the public. The agreement establishes the union-management relationship for the
duration of the contract.
.
II. Grievance Handling Under a Collective Bargaining Agreement
If employees in an organization are represented by a union, workers who believe that they have been disciplined
or dealt with unjustly can appeal through the grievance and arbitration procedures of the collective bargaining
agreement.

a. Grievance Procedure—A grievance can be broadly defined as an employee’s

dissatisfaction or feeling of personal injustice relating to his or her employment
relationship.

b. Arbitration—The process that allows the parties to submit their dispute to an

impartial third party for resolution.
c. Proof that Disciplinary Action was Needed—Any disciplinary action
administered may ultimately be taken to arbitration, when such a remedy is
specified in the labor agreement.

d. Weaknesses Of Arbitration—The reason for the initial filing of the grievance

may actually be forgotten before it is finally settled. Another problem is the cost of
arbitration, which has been rising at an alarming rate.

III. Grievance Handling In Union-Free Organizations

Although the step-by-step procedure for handling union grievances is common practice, the means of resolving
complaints in union-free firms varies. A well-designed union-free grievance procedure ensures that the worker
has ample opportunity to make complaints without fear of reprisal.

C. The HRM Department in a Nonunion Setting

Employers who adhere to certain union-free strategies and tactics can remain or become union free.
ƒ Effective first-line supervision: Extremely important to an organization’s ability to remain union free
is the overall effectiveness of its management, particularly its first-line supervisors. These supervisors
represent the first line of defense against unionization.

ƒ Union-free policy: The fact that the organization’s goal is to remain union free should be clearly and
forcefully communicated to all its members.

ƒ Effective communication: One of the most important actions an organization that wants to remain
union free can take is to establish credible and effective communication. One approach taken to
encourage open communication is the open-door policy. The open-door policy gives employees the right to
take any grievance to the person next in the chain of command if the immediate supervisor cannot
resolve the problem.

ƒ Trust and openness: Openness and trust on the part of managers and employees alike are important in
order to remain union free. The old expression actions speak louder than words is certainly valid for an
organization that desires to remain union free.

ƒ Effective compensation programs: The financial compensation that employees receive is the most
tangible measure they have of their worth to the organization. If an individual’s pay is substantially
below that provided for similar work in the area, the employee will soon become dissatisfied.

ƒ Healthy and safe work environment: An organization that gains a reputation for failing to maintain a
safe and healthy work environment leaves itself wide open for unionization.

ƒ Effective employee and labor relations: No organization is free from employee disagreements and
dissatisfaction. Therefore, a means of resolving employee complaints, whether actual or perceived,
should be available. The grievance procedure is a formal process that permits employees to complain about
matters affecting them. Most labor-management agreements contain formal grievance procedures, and
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union members regard handling grievances as one of the most important functions of a labor union.

D. Phases of Labor Relations

Labor relations consist of the human resource management activities associated with the movement of employees
within the firm after they have become organizational members and include the actions of promotion, transfer,
demotion, resignation, discharge, layoff, and retirement. Labor relations can be divided into following three
phases:

a. Union organizing: Organization of workers, acting collectively, seeking to protect and promote their
mutual interests through collective bargaining is termed as union. The most significant impact of a
union on the management of human resources is its influence in shaping HRM policies. In the absence
of a union, the company may develop all HRM policies based on efficiency. But, when a union enters
the picture, management must develop HRM policies that reflect consideration for the preferences of
workers who are represented by a union. A union's strong preferences for high wages, job security, the
ability to express dissatisfaction with administrative actions, and having a voice in the development of
work rules that affect their jobs get injected into the equation along with the employer's preferences.

b. Collective bargaining: The performance of the mutual obligation of the employer and the
representative of the employees to meet at reasonable times and confer in good faith with respect to
wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or
any question arising there under, and the execution of a written contract incorporating any agreement
reached if requested by either party; such obligation does not compel either party to agree to a proposal
or require the making of a concession.

c. Contract administration: The larger and perhaps more important part of collective bargaining is the
administration of the agreement, which is seldom viewed by the public. The agreement establishes the
union-management relationship for the duration of the contract. The agreement established the union-
management relationship for its effective length. Usually no changes in contract language can be made
until the expiration date except by mutual consent. Administering the contract is a day-to-day activity.
Ideally, the aim of both management and the union is to make the agreement work to the mutual
benefit of all concerned. This is not easy. In the daily stress of the work environment, terms of the
contract are not always uniformly interpreted and applied.

KEY TERMS

Grievance procedure A formal, systematic process that permits employees to complain about
matters affecting them and their work.
Collective bargaining The process through which representatives of management and the union
meet to negotiate a labor agreement
Mediation A process whereby a neutral third party enters a labor dispute when a
bargaining impasse has occurred.
Boycotts An agreement by union members to refuse to use or buy the firm’s products.
Arbitration The process that allows the parties to submit their dispute to an impartial third
party for resolution.

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