Good-Faith Bargaining

To successfully negotiate a labor agreement, know the business, prepare your strategies and mind your manners.

By Jan 1, 2005
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HR Magazine, January 2005In the 12 years Wynn Resorts owned The Mirage, Treasure Island and Bellagio, the company did not have one union grievance," boasts Arte Nathan, SPHR, senior vice president, HR officer, at Wynn Resorts in Las Vegas.

Why not?

"I know my business and employees. My negotiations have been successful because I understand what the people care about and need," says Nathan, whose last contract covered 17,000 employees. "Here in Las Vegas, we have three dozen job titles [that include] cooks, maids, kitchen cleaners, bellmen. I did every one of those jobs. I put on the uniform and saw what it was like from their perspective. I served drinks, made food, cleaned rooms, made beds and swept up dirt. The HR professional has to become an expert at their business."

Nathan understands the vast scope of knowledge that HR professionals need to negotiate strong labor relations agreements. To negotiate well, HR professionals must clearly comprehend the financial implications of labor-related decisions and know how to build consensus among employees, union representatives and management.

While union membership has declined over the past 20 years, unions still are a staple of certain industries, such as airlines, education and automobile manufacturing. In 2003, the latest year for which statistics are available, almost 13 percent of wage and salary workers were union members-37.2 percent of government workers and 8.2 percent of private-sector workers. So, many HR professionals-especially those in certain industries-must continue to develop and maintain union negotiating skills.

The Role of HR

Some HR professionals prefer to negotiate solo, but most have a team of at least three individuals: the HR professional, the attorney, and the plant manager or chief financial officer.

"Collective bargaining negotiations are so nuanced with legalities, it is difficult not to do negotiations with a team approach," says Paul Salvatore, a labor and employment attorney at Proskauer Rose LLP in New York.

On that team, the HR professional is often the best spokesperson, and he or she needs to possess certain qualities and knowledge to perform that role well, including patience, creativity, trustworthiness and an understanding of collective bargaining laws.

"HR must be willing to take on that responsibility and stay on message, or else the lawyer should have that responsibility," says Salvatore. He says it isn't appropriate for the plant manager to be the spokesperson because of the time-intensive nature of his job.

However, Johnny C. Taylor Jr., J.D., SPHR, president of McGuireWoods HR Strategies, a negotiation consultancy in Charlotte, N.C., notes that some companies might prefer an attorney as the spokesperson. "Some negotiations can be so acrimonious. The HR person doesn't want to be the bad guy."

Regardless of whether you're the official spokesperson, you need to understand the National Labor Relations Act (NLRA) and how it's enforced. "The National Labor Relations Board (NLRB) interprets the NLRA," explains Taylor, who is 2005 chair of the Society for Human Resource Management Board of Directors. "But the NLRB changes composition based on who is in the White House. It's key for an HR practitioner to understand how the interpretation of the law changes" as board members change.

Nathan strongly recommends developing a relationship with the union representative well before union negotiations begin: "Make an appointment to get [acquainted]. Invite that person to visit the plant and ask questions. Put yourself in their shoes and see what they are seeing and hearing. Most often, the union negotiator knows more about our business than we do; they're talking to our employees who are having problems. Craft a framework of collaboration, rather than contention."

Establishing this relationship will also help give you another key in negotiations-credibility. "The most important asset a negotiator has is credibility. Do everything possible to establish and maintain your credibility with the other side. Never say anything false or [anything] you don't mean. Never go back on your word," cautions William L. Sossaman, an employment attorney at Scruggs Sossaman & Thompson in Memphis, Tenn.

Julie Hagen Showers, vice president for labor relations at Northwest Airlines in Minneapolis, agrees: "Credibility at the table is key. Negotiators must be scrupulously honest.

"Listening to the other side's concerns in a meaningful way is also important," Showers continues. "Know and trust at least one person on the other side of the table. The union could present three issues: increased staffing on day shift, holiday pay and overtime pay. You can't pay all three, so you pick the one you think is most important to them. If you've guessed wrong, and holiday pay wasn't important to their members but staffing is a strike issue, you can't take the other things back. If you trust your opponent, he or she can provide information about their priorities. It allows us to make better decisions about where to put capital to meet the greatest need."

Prepare for the Negotiation

Finding out the other side's key issues is all about being prepared. "Being prepared is critical to a successful negotiation," says Robert Morehouse, SPHR, who recently became the plant HR manager at ETHICON Inc., a surgical products manufacturer in San Angelo, Texas. Morehouse has negotiated more than 30 labor agreements for previous employers.

Unfortunately, adds Richard Kreyer, vice president of labor relations at the Minnesota Hospital Association in St. Paul, "a common mistake with the HR professional's hectic schedule is to come unprepared or underprepared. It's a lot of work to be on a bargaining team and also do your regular job. You have to balance the responsibilities and do your homework in advance."

To prepare, HR professionals must research:

  • The company's needs and wants. "Know what you want to accomplish in the negotiations. Identify any problems that have come up since the last negotiation," explains Morehouse.

    It's important to include all levels of management in these discussions. "Identify the parameters for monetary and non-monetary items with the plant management. Create a document you submit to senior management for approval," he says.
    Always prepare for the worst. Ensure that "your operational management is prepared for the possibility of a work stoppage," warns Sossaman. "It is almost impossible to have successful negotiations unless you are in a position to say 'no.' Too many companies find themselves in a position where customer demands force them to make unwise concessions to avoid the possibility of a work stoppage. This preparation must begin far in advance of contract expiration."
    How do you know your deal breakers? "Develop a strategy and determine what is important. Are you willing to take a strike over it?" asks Morehouse.

  • The union's needs and wants. "To deliver a better argument, you need to understand the issues of the people across the table, as well as your own," says Ace Hilpp, a commissioner for the Federal Mediation and Conciliation Service in Mount Washington, Ky."See if there is a pattern of grievances filed. Talk with supervisors and union people. What kinds of changes does the union want to make?" says Morehouse. "If you look at the last four negotiation agreements and the same subject comes up, it's probably going to come up again."
  • Relevant company statistics. "Lawyers depend on HR for complete and accurate information," says John Fullerton, a labor and employment attorney for Proskauer Rose LLP in New York. "Ensure that your statistics about the workplace and benefits are accurate. Making statements that prove to be wrong damages the trust you're trying to build." Morehouse recommends having supporting documents with you. "If the union wants to increase the company safety shoe allowance by $5, I need to know how many people bought new shoes last year and how many employees I have," says Morehouse. "I always lean to the highest possible cost, so if I have 300 employees, agreeing to that item would cost me $1,500. You need to know what each item is worth."
  • Market conditions and industry norms. "Look at industry wage and benefits surveys. Understand what your competitors are doing," says Morehouse. Also, know the current inflation rate so you can respond to cost-of-living increase requests.

    "Post 9/11, security has become an issue in collective bargaining. Security has become so tight that a host of issues are coming up, such as cleaning employees who require background checks," says Salvatore. Unions may object to such checks because they do not want their members' privacy violated unnecessarily.

  • The financial ramifications of potential agreements. "The mistake I see most often is [HR professionals who] enter the negotiations without understanding the financial impact of things they put on the table. The things you give up can make or break your employer," says Taylor. "For example, the union wants three extra vacation days. That doesn't sound like a lot, except that in some states, if an employee leaves, you have to pay them for unused vacation time. Now your employer has to carry that liability on their books at all times."

The Structure of Negotiations

Most union contracts last between three and four years, and some HR professionals may spend up to a year preparing for the negotiations. Most negotiations begin a month before the contract expires and take a week or two to complete.

"The time you spend face-to-face tends to be relatively short," says Morehouse. "You may spend one hour across the table and then go back to your caucus room for much longer before coming back together." The negotiation is structured around each party's demands, known as "dockets."

"In the first meeting, I give a 'State of the Company' presentation, talking about where we're doing well and [where we're] having problems," says Morehouse. "Then the union will go through their docket items and explain why each one is important. They might have 10 items or 100. As the company spokesperson, I have to understand what each one represents. Then the company presents its docket, which is usually 10 items or less, and you explain why each item is important."

With so many items to keep track of, a simple thing like good organization comes in handy. Morehouse recommends using a three-ring binder with one docket item per page. "When I make comments about an item, I write down what I said and date it. When the union responds, I write down what was said, who said it, and the date and time. Somebody usually takes notes all of the time, but I've got to have a system to keep track of what was said on each item. This allows me to prepare my response to a docket item in advance."

Morehouse recommends dealing with nonmonetary items first.

"Monetary items tend to be more critical, but they don't take as long to discuss as nonmonetary items," says Morehouse. Thus, it takes a long time to explain why you think you should change the way vacations are scheduled because each side may have multiple reasons for their positions. However, it doesn't take as long to explain why the union wants a 6 percent wage increase and management wants a 3 percent increase.

HR professionals differ as to whether you should agree to items one at a time or only when the contract is completed. Some believe that it is more efficient to discuss one item, come to an agreement, write the language, sign it and move on until you've resolved every item.

Morehouse prefers this method. This way, "I know I've signed off on this, there's no going back on it. When you finish the negotiations, you have all of the agreed upon proposals in a packet for the membership to vote on."

Others argue that items are so interconnected it is impossible to agree to one without seeing the rest. "Don't agree to parts of the negotiation, only on the entire package," contends Taylor. For instance, "the union has five issues. First, they want an additional holiday, Veterans' Day. You agree. Then you get down to issue number five and they want triple time for [working on holidays]. Veterans' Day at time-and-a-half was acceptable, but at triple time it's unacceptable. Now you've gotten yourself into trouble because you're locked in."

Lastly, Morehouse says in analyzing every union proposal, he looks at four things: "Does this make it harder for us to operate or less competitive? Will it affect the quality of our product or the safety of our employees?" Then he responds accordingly.

Potential Pitfalls

A climate of distrust can pervade union-management negotiations and lead to problems. "Often, each party is afraid of being honest with the other, and they hold back," says Showers. "That isn't helpful. The more you disclose about your interests-informally or at the table-the more likely you'll get a good solution."

By the same token, don't "underestimate the power of the words you use and body language," says Kreyer. "Just as you are watching and listening for clues to what the union is likely to do, they are watching you."

Problems can occur if you rush too quickly into an agreement. "Another big mistake is short-term thinking-focusing too much on the immediate goal of getting an agreement and losing sight of what the items you may be agreeing to might mean to the company's future operations. An example: agreeing to overly generous vacation benefits for employees with 15 years of service when the plant has been in existence for only five years. You can get an agreement now without it costing you anything, but you will pay big in the future," says Sossaman.

Finally, use precise language and get all aspects of the agreement in writing. "Many times in grievance arbitration we hear, 'The union promised us that provision would not apply to situations like this.' The agreement will be enforced as written, so it is vital to ensure that language accurately reflects the understanding and intent of the parties," warns Sossaman.

The Contract Bond

Labor relations negotiations are complex, regulated processes. But when an HR professional can forge a strong agreement with the union, it demonstrates how vital HR is to the success of the organization.

"One reason I like contract negotiations is that you form a bond with both the management and union teams. It's like climbing a mountain together; you form a friendship," says Morehouse.

Hilpp agrees: "If you have a good HR person and a good union leader working together, there's nothing they can't do to promote safety, health and welfare in that plant to make it a smooth-running organization."

Kathryn Tyler is a freelance writer and former HR generalist and trainer in Wixom, Mich.

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