Posted on May 27th, 2009 by Tim Eavenson | No Comments »
Filed under: ., Labor Law | 
by reiner.kraft (flickr)
A Quick test: When you think of unions and New York City, what comes to mind? I’m guessing it’s not slim cardigans, GQ-worthy suits and adult-sized under-oos.
Well, shows what you know. As the New York Times reported, over 1,000 NYC employees of the international, high-fashion-low-cost retailer H&M are going to work today under a union contract that will raise their hourly pay and place restrictions on the company’s ability to change schedules at the last minute.
The H&M workers actually voted for representation by the Retail, Wholesale & Department Store Union back in November of 2007; their first contract was ratified on May 20th of this year. According to the RWDSU’s press release, the new 3-year contract promises a 3% wage increase this year, with reopeners on wages for years 2 and 3, and allows for annual, merit-based increases.
The contract also guarantees that employees will know their schedules at least a week in advance – a provision that should make anyone who’s grunted through a mall job jealous. Frank Bail, the President of RWDSU local 1102 pointed out that over-flexibility in weekly schedules can be difficult for some employees with young children.
It’s unlikely that the H&M contract is a sign of big changes in the labor movement. I can’t see midwestern malls being taken over by organizing campaigns in the near future. But in urban areas like New York, Chicago and L.A., the workers at these places are probably more insulated and the turnover rates are lower (well, maybe not in L.A.). Plus, the close proximity of multiple storefronts could create a large enough worker base for organizing to be worthwhile. It’s something retail employers in major metropolitan areas should at least consider.
For now, it seems like NYC union workers are going to have to think a little harder about what they wear to the hall. Skinny up those jeans, and swap that hard hat for a trilby. And remember, it’s summer, so no felt - straw is much more breathable for your scalp.
Posted on May 20th, 2009 by Tim Eavenson | No Comments »
Filed under: ., Labor Law |
Cat dog bed by Jon Åslund (Flickr)
Some unions in troubled companies are finding an unlikely source of salvation and partnership: private equity.
Yesterday, the Chicago Chapter of LERA invited Steve Sleigh, a member of the private equity group Yucaipa Companies, to discuss the current state of labor and capital. Sleigh admitted that private equity is most often associated with greedy takeovers, where the investor comes in to sell off profitable pieces of a foundering company, instituting layoffs and forcing concessions from unions. Increasingly, private equity is the third seat at the table of industrial relations, and disliking its interference is sometimes the only thing unions and management can agree on.
But it doesn’t have to be that way, according to Sleigh. Yucaipa occupies a unique position in the private equity arena: their partners come from backgrounds in all three camps – labor, management and finance, and their focus is on companies with unionized workforces and a solid product. The investments come in large part from multi-employer pension funds, which means the private equity group essentially becomes a conduit for unions to reinvest in the labor movement.
Like most private equity investors, Yucaipa buys companies in hopes of retooling them and selling them. But Sleigh thinks that the prevailing model of reducing payroll and benefits in order to accomplish the quick turnaround is short-sighted. Instead, Yucaipa starts its analysis by assuming that the labor costs are fixed, and then asks what else at the company can be adjusted.
In one example, a large, Midwestern cold storage company had each of its locations making individual contracts and operating decisions. Every facility had its own IT contracts, its own practices and guidelines. “They had 120 fiefdoms,” Sleigh said. By consolidating operating decisions, the company was made profitable with no loss of employment or benefits.
The secret, according to Sleigh, is in getting labor and management to focus on the good of the company together. “We often say that we’re mediators with money,” he said. By the time a company is failing, though, the two sides are often either giving up or at each other’s throats. ”My number one question is always: Who cares about the firm?” The number one answer, Sleigh said, is usually the workers – not just because they want to keep their jobs, but because longstanding workforces develop senses of community that will be lost if a company is grossly restructured or closed. By working with the unions – and having partners with history in labor organizations – Yucaipa can get early information on issues like cash flow and productivity that guide its investment decisions.
Sleigh also pointed out one of the key areas where companies get into trouble with their unionized workforces: lack of transparency. Sleigh said that, during a restructuring, they require annual presentations to both management and union representatives on the health of the company. That way, no matter what changes are needed during the turnaround, they’re not a shock to anyone. Putting unions and management on the same informational page also fosters cooperation between the parties, according to Sleigh.
Here, though, Sleigh said unions presented the biggest obstacle. Often, the union doesn’t have anyone to represent them who truly understands the financials. He said unions needed to start thinking of themselves as partners in the process.
It seems there would be some inherent conflicts in using private equity – with union pension fund backing – to restructure unionized workforces. First, what happens when a company won’t survive unless pension benefits are cut, or a defined benefit plan has to be changed to a contribution-based plan like a 401(k)? It seems like robbing Peter to pay Paul. Sleigh said that Yucaipa actively avoids those investments, and that they would ask for concessions where necessary. But drastic measures like replacing plans are much less necessary than people think.
“In 20 years of doing this,” Sleigh said, “I don’t think we’ve ever replaced a DB plan.”
Sleigh was also quick to dispel the notion that his work was less investment and more labor activism. “It’s not our business model to just be nice to unions,” he said. “It’s that being nice to unions is good for our business.”
How good? In the twenty or so years that Yucaipa has been doing this type of private investing, their average annual ROI sits above 40%. In the past few years, when overall investing has seen losses of about 35%, private equity (including Yucaipa) has lost more like 5%. That makes pension plan fiduciaries happy to invest, Sleigh said. The benefit to unionized workforces is a happy side-effect.
So what’s the next step for this blended investment model? Employee ownership. Sleigh said that he’s working on a business model that would use ESOPs as an exit strategy. So, once a company was healthy, instead of putting it up for sale on the open market, an ESOP would be put in place to turn ownership over to the employees without requiring the massive debt that’s made recent ESOP use such a disaster (think: Sam Zell’s Tribune takeover).
Posted on April 27th, 2009 by Tim Eavenson | No Comments »
Filed under: ., HR Issues, Labor Law, Politics |
You can’t get away from it. The thing is everywhere.
The internet has ads for it. And against it. At the party your wife dragged you to, they were talking about it. At your office yesterday, too. The news can’t get enough of it, be it Fox, Air America or NPR. It’s on people’s bumpers, for crying out loud.
Maybe you’ve gone along with these people, not wanting to be the one to admit you don’t really get it, or maybe you ‘ve never heard of it. But the fact remains, everyone – everyone – is talking about the Employee Free Choice Act, and you have no idea what they’re saying.
Hi. This post is for you.
Introduced in both houses, for the second time (it first hit the House in 2007), EFCA is the proposed legislation that blew the doors open on NLRA reform. Called “Card Check” by its detractors, the bill would drastically change national labor law and policy, resulting in easier unionization of workplaces, more strength for union activities, and higher penalties for employer violations. Needless to say, the business community is less than pleased.
You may have heard that the Free Choice Act might not pass – that’s true. Some key former supporters have jumped ship recently, leading to questions about the bill’s viability in this year’s Congress. But the cat’s out of the bag on reforming the national labor laws, and if when something happens, it will be because of the conversation started over EFCA.
So what’s the big deal? Here’s what the bill would do:
1. Replace the current rules for voting for or against a union.
Currently, a union has to get a majority of workers to sign cards indicating they want to hold a union election, present the cards to the NLRB, then let the NLRB oversee a secret ballot election. The unions say this takes too long, and gives the employer a chance to hire a union-busting consultant or lawyer (or both), retaliate and threaten pro-union supporters, force employees to attend anti-union meetings, and otherwise clog worker’s attention with reasons they should vote “no”. Then, they say, a lot of employers find ways to just plain cheat.
The Free Choice Act would do away with everything except that very first part, where a majority of workers signed cards saying they wanted the vote. After EFCA, those cards would be their votes, and a majority of cards would mean the union won. This is where the bulk of the EFCA debate focuses its attention – the business community says giving up “secret ballot” elections is unamerican. The unions say there were never fair elections to begin with. But that’s mostly just rhetoric. Here’s the real debate:
From the business perspective, this has “fraud bait” written all over it. Without NLRB oversight, the potential for cheating by a union looking for new meat would be huge (think: writing in cards, changing votes, padding, etc.). Trying to keep things fair would prove impossible.
Unions say that EFCA just levels the playing field, since right now they don’t get to talk to the employees before an election, and the employer can say whatever it wants. To the unions, the employers just don’t want to lose the time they have to hold their indoctrination sessions, and the card check procedure would make it more likely that a worker’s vote wouldn’t be influenced by employer bias.
2. Force Arbitration for First Contracts
If a union wins a vote, of course, the next thing they have to do is start negotiating their first Collective Bargaining Agreement, or CBA. Right now, while employers have to negotiate in “good faith,” they don’t have to agree to any specific demand made by the union. They can always say “no” - it’s called bargaining to an impasse - and the union’s recourse is to do things like go on strike or file a claim with the NLRB. It’s just understood that first contracts are going to take longer than other contracts, many many months longer, in a lot of cases.
Under EFCA, after two months of bargaining, either side will have a right to submit the negotiations to binding arbitration. An arbitrator will hear both sides and then work out the contract’s provisions as they see fit. Those contract terms will then be binding on the employer and the union for two years.
So, if an employer really feels strongly enough to fight a union demand tooth-and-nail, it’s not only going to have to bargain hard with the union, it’s going to have to convice an arbitrator that whatever the union wants is bad for the company and the workers. Former Republican Speaker of the House Newt Gingrich recently calls the arbitration changes in EFCA the ”real threat” of the bill.
3. Raise the Penalties for Employer Labor Law Violations
This doesn’t get nearly as much attention as the two other changes, but to me, the penalty increases are EFCA’s sleeping giant.
Right now, when an employer violates an employee’s rights under the NLRA, most of the remedies are focused on getting the employer to do something: sitting down at the bargaining table or restoring an employee’s status. The Board does have some power to act to ensure future violations won’t happen, by posting signs regarding the employees’ rights, for example. As far as money goes, the Board can order an employer to pay an aggrieved employee front and back pay in some cases, or pay litigation costs if the employer’s actions warrant it. But the focus is on restoration of relations, not punishment.
Under EFCA, the concept of “remedy” in the labor law will drastically change. Instead of just being about restoring an employee, financial damages will move into the “make-sure-this-doesn’t-happen-again” column. If the Board finds that an employer infringed on a worker’s rights during an organizing campaign, the worker will be entitled to treble damages – three times the back pay he’s owed. The NLRB will also have to seek an injunction to stop an employer’s actions if it has reason to believe the employer is violating the Act, and can assign fines of up to $20,000 for other employer violations, like threatening to close a plant or lay off workers when they seek unionization.
When the penalty issue comes up in EFCA debates (which is not as often as it should), employers are quick to point out that there are no comparable penalties for union-side violations of the NLRA. In their defense, unions cite statistics showing that the overwhelming majority of NLRB cases are employer violations. Employers say that’s only because workers don’t generally go after unions, but unions will always go after employers.
I’ll go into more detail on the penalty provision of EFCA in another post, but suffice it to say punishment-style penalties for employers will likely change the nature of the NLRB, from facilitator to enforcer. Depending on which side of the labor debate you’re on, that is either exciting or very, very scary.
What Does All This Mean?
The one thing both sides of this debate can agree on is that the Employee Free Choice Act (if it ever gets passed) will drastically alter the landscape of the American workforce. With card-check elections, employers will have to either accept unionized workers, or work constantly to maintain an anti-union mentality in their employees.
Plus, service and tech industries that have never thought about national labor law may find themselves with 90 days to negotiate a first contract before going to arbitration, and fear of stiff penalties for violations of the Act.
Unions see EFCA as levelling the playing field, and there’s no doubt that they have had a difficult time organizing for decades. As for the business community, even the employers who think they’ve had it relatively easy see EFCA as a drastic move to unionize workers, partially by stripping important safeguards against union misconduct.
Support for the Free Choice Act is diminishing on the Hill, and the debate now seems to be whether a compromise will take some of the teeth out of one of the three provisions or if the democrats will table EFCA until they can get the votes needed to pass it as-is.
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That’s it. Now you’re all caught up. If you have strong feelings about this significant law, feel free to leave them in the comments. Otherwise, go hang out at the water cooler and wait for a chance to look smart.
