Legal Requirements for Collective Bargaining

1
Legal Requirements for Collective Bargaining

• Notification of Intent to Bargain
• Warning period Party wishing to terminate or
  modify an existing agreement must notify the
  other party at least 60 days prior to the date
  (90 days in the case of a health care
  institution)
• Parties must notify FMCS within 30 days of the
  initial notification of the intent to terminate
  or modify.
• Union cannot strike during the 60-day period.
  Workers discharged for striking during the
  warning period have no NLRA rights.
• Existing contract terms and conditions continue
  through warning period.

2
Legal Requirements for Collective Bargaining

• 2) Duty to Bargain in Good Faith
• Section 8(d), NLRA
• Mutual obligation of the employer and
  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, .
• But such obligation does not compel either party
  to agree to a proposal or require the making of a
  concession.

3
Legal Requirements for Collective Bargaining

• Standards for Good-Faith Bargaining
• Totality of Conduct bad-faith determination
  hinges on pattern of behavior, not individual
  incidents
• Employer Provision of Information
• Employer must provide information requested by
  the union, provided
• It is relevant to the contract
• It does not reveal trade secrets
• It is not unduly burdensome to collect
• Firm must provide financial information if it
  claims inability to pay

4
Legal Requirements for Collective Bargaining

• Standards for Good-Faith Bargaining
• Surface Bargaining
• Tactical delays or other actions that indicate
  insincere efforts to reach an agreement
• Boulwarism Take-it-or-Leave-it offers
• General Electrics Lemuel Boulwares strategy of
  making a reasonable offer and then refusing to
  budge.

5
Legal Requirements for Collective Bargaining

• Mandatory, Voluntary and Illegal issues
  (Borg-Warner, 1958)
• Mandatory issues
• must be discussed if raised by either party
• can be pushed to impasse
• Voluntary issues
• must only be discussed if both parties agree
• Cannot be pushed unilaterally to impasse
• Illegal issues
• Cannot be raised by either party
• See Table 5-1, p. 209, Carrell and Heavrin

6
Legal Requirements for Collective Bargaining

• Mandatory issues
• Issues included in the NLRA Section 8(d)
• wages, hours, and other terms and conditions of
  employment
• Borg-Warner subjects that vitally affect
  employees
• Employee security
• Job Performance
• Union Security
• Subcontracting or substitution of other labor for
  work in the bargaining unit

7
Legal Requirements for Collective Bargaining

• Ratification of contract by majority vote of
  rank-and-file
• If ratified, contract is written
• Typical parts
• Wage/compensation/working conditions
• Union security
• Job security/individual rights
• Contract administration

8
Legal Requirements for Collective Bargaining

• Impasse If a legal impasse is reached
• Firm can unilaterally implement its last, best
  offer including voluntary issues
• Parties may submit to third party intervention
  (FMCS, others)
• Parties may agree to continue to work under the
  old contract
• Lockout
• Strike

9
Typical Bargaining Process

• Figure 5-2, p. 207 of Carrell and Heavrin

10
Setting Goals Flanagans Model of Public Goods

• Public good
• Nonrival Consumption by one person does not
  limit amount available for others
• Nonexclusive no one can be excluded from
  consuming the good
• Role of homogeneity vs heterogeneity of
  preferences
• More heterogeneity means less satisfaction
• Union stability may be threatened if
  heterogeneity is prevalent
• Median voter preferences matter

11
Setting Goals Flanagans Model of Public Goods

• Problems
• Multiple issuesno unique best solution
• Log rolling
• Intensity of preferences
• Unions do the best they can
• Monitor progress of previous contract
  administration to find sticking points
• Review other contracts in the industry
• Survey of members (example of the Teamsters and
  UPS, p. 213-214 in Carrell and Heavrin)
• Economic (compensation) and Noneconomic (working
  conditions, union security, contract
  administration)

12
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• Features
• Sticking points (reservation wages)
• Union has minimum acceptable wage
• Firm has maximum acceptable wage
• Information is typically private
• Union Resistance Curve
• Determines how rapidly union moderates its
  demands
• Firm Concession Curve
• Determines how rapidly firm raises its offer
• Contract Zone

13
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• Features
• Union reservation wage and resistance depends on
  union bargaining position
• Unemployment Rate
• Strike fund
• Industry experience re wages, benefits
• Possible permanent loss of jobs, union security
  if there is an impasse

14
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• Features
• Firm reservation wage and concession depends on
  firm profitability
• Potential for lost market share and revenue if
  production is disrupted
• Potential for use of substitute labor for union
  labor
• Other plants
• Replacement workers
• Firm profitability and productivity growth
• Inventories

15
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions
Wage
Concession
W
Resistance
T
Time
16
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• HIGH UNEMPLOYMENT RATE

Wage
C
C
W
R
R
T
Time
?
17
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• LOW UNEMPLOYMENT RATE

Wage
C
C
W
R
R
T
Time
?
18
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• Role of strike date
• Imposes costs on both firm and union, forces
  parties to bargain seriously
• Steepens resistance and concession curves

19
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• ROLE OF STRIKE DATE

Wage
C
C
?
W
R
R
T
Time
20
Bargaining Theory Hicks Theory of Union
Resistance and Employer Concessions

• Role of uncertainty
• May cause parties to underpredict rivals
  resistance or overpredict likelihood of
  concessions
• Strikes as Mistakes

21
Bargaining Theory Ashenfelter-Johnson Model

• Features
• Firm knows Union resistance Curve
• Compute expected present value of profit at each
  length of strike
• Force strike if it maximizes profit
• Union leadership rank-and-file
• Strikes as rational outcomes

22
Ashenfelter-Johnson modelfirm forces a strike if
wage reduction will lead to long-run higher
profitability
Wage
Resistance
Strike length
PV(Profit)
Firm Profit
Strike length
S