You are the Union President, and have been tasked with developing the Union proposals for the upcoming negotiations with. Your members had a 1% increase in wages for each of the three
previous years of the current three-year agreement. You know, for a fact, that Management employees received a 5% annual pay increase, 500% more than your members. Your members know this as well, and they are livid. Your Union members have charged you with doing far more in the upcoming negotiations, as a 1% increase in wages is far less than the current rate of inflation and they have told you in no uncertain terms they will not stand for any more such treatment.
Item 1. Managerial Compensation
While the Management team has attempted to keep salary increases a secret you know from talking with many salary employees that HCC managers received 5% across-the-board annual raises for each of the past three years which has caused considerable resentment among your union rank-and-file. You have heard that future managerial compensation increases will take the form of at-risk annual lump-sum bonuses based on achieving the projected strategic yearly goals in Item 1 over the next three years.
You are also hearing rumors that Management is planning significant investments into the site to upgrade its production equipment. Overall, this is a good sign, as a large capital investment means the plant will stay, but you have also heard that this new equipment will eliminate 30-50 Production employee jobs. This reduction will be a major issue for your members, as you are not interested in bargaining jobs away.
Item 2. Union Employee Compensation
The average hourly wage for Production employees at the site is $16.00 per hour. The employees work a 40-hour week. Little to no overtime is worked. Thus, the average annual wage for Production employees equals $33,280 dollars per year. There are currently 1000 Union production workers in the bargaining unit.
You are planning on starting negotiations with the Company with a proposed 8% annual increase in wages for each of the following three years. Your minimum level of wage increase is 3% per year.
For the purpose of this exercise, you will cost out proposals for only the first year of the new Collective Bargaining Agreement.
Item 3. Strikes, Lockouts, Unfair Labor Practices
In previous negotiations in years past the Management negotiation team has always stated they may elect to lockout labor at any time if it believes that no reasonable progress has been made in negotiations. However, you know that work stoppages will severely damage HCC customer relationships and its valued reputation as a firm dedicated to the prompt delivery of quality products. This is to your advantage
Item 4. Health Benefit Costs
HCC employees currently have a first-dollar (no deductible or co-pay) health benefits package that costs $3,500 annually per employee. If left unchanged, the cost of health benefits is expected to increase 10% annually for each of the next three years.
You have heard through the grapevine that Management is seeking to drop the current health care plan and substitute it with an HMO-type plan, that costs less and has an annual deductible. This is not acceptable to you or the Union members, as your members have zero interest in changing to an HMO style medical plan. There have been far too many issues with employees in other firms being denied surgery or their choice of doctors that are outside of the HMO plan. You and your members have no interest in changing your medical plan, and your objective is to keep it exactly as it is.
Item 6. Other Informational Items
The current contract includes six paid holidays and two days of miscellaneous leave. For costing purposes – each holiday costs the company, on average, a total of $128,000 ($16/hour x 8 hours x 1000 employees = $128,000). The Union members has made it clear to you they. believe they deserve two additional holidays per year, which can be fixed or floating.
For or every 1% increase in hourly wages the total increase in cost equals per year, and compounded every year thereafter (1.00% increase x $16/hour x 2080 hours per year x 1000 employees equals $332,800). Your bottom line of 3% will equal close to $1 million dollars to your members
The 2nd shift differential is currently $0.15 cents per hour, and hasn’t been increased in two decades. This is very low; Your going in position is to propose an increase to $1.00 per hour, with your lowest acceptable differential at $0.50 per hour. There are 300 Union employees on 2nd shift.
The 3rd shift differential is currently $0.25 cents per hour, and hasn’t been increased in two decades. This is very low; Your going in position is to propose an increase to $1.00 per hour, with your lowest acceptable differential at $0.50 per hour. There are 300 Union employees on 3rd shift.
Your Challenge by Union Members
The Union members have heard rumors of a layoff if new automated equipment is added. They are in favor of upgrading the antiquated equipment. They want you to ensure a fair severance package is negotiated, allowing enough employees to voluntarily retire, with severance, to avoid any involuntary layoffs.
In summary – Your Union members have charged you to negotiate nothing less than the following:
A minimum 3% raise for each year of the new agreement
Two additional paid holidays per year
A 50 cents per hour increase in 2nd & 3rd shift differential
Maintaining the existing health care plan as is.
From your perspective, you expect to hear the Management group tell you that the amount of dollars the Union is demanding for increases is quite high, and that the Union must be willing to change the health care plan, as its current cost structure is not feasible. Your answer to theManagement team is quite clear – for the past three years the management employees received a 5% raise, each year for the past three years, while your Union members received an annual 1% increase, a total increase in pay that is 12% higher than your members. From your perspective the company has a lot of nerve to imply that your Union members must financially suffer while Management enjoys well above average pay raises.
Your members have told you that they are willing and able to take a strike, if necessary, in order to achieve these cost objectives. They state they have full confidence in your ability to negotiate a new agreement with the allocated ranges, and expect you to deliver an agreement acceptable to the Union.
Read the attached article, entitled Interest Based Bargaining (the same one as used with the Management Case Study paper).
Using the BATNA Concept as the framework for your paper describe your strategy using the following Subheadings in your paper:
Identify the Interests, i.e., the interests that both the Union and Management have in the process, briefly summarizing theSubstantive Issues,Procedural Interests, andPsychological Interests.
Choose your team – You will be the Chief Negotiator in your position of Union President. Choose other team members that you believe are needed to be part of your Union team.
Frame the Issue:
Summarize the major issues the Union is seeking in Negotiations:
– Substantial increase in the hourly wage– Substantial increase in Shift Differential for 2nd and 3rd shift– Addition of two new paid holidays– No change to the Union Medical plan– No involuntary layoffs due to the rumored automation of equipment
Paraphrase the fact that while Management has enjoyed substantial raises each year the Union has basically paid for them via sub-standard, small increases. That ends this year.
Generate Options – You will be focusing on only four proposals – an hourly wageincrease, changes in shift differential, additional paid holidays, and no change to the medical plan. These sample positions are provided for your review in the Excel wage calculator. Feel free to modify these positions as you deem appropriate.
Summarize your Final Offer to the Company.
The Final offer should simply be listed in the paper, highlighting the percent increase in hourly wages, thee change, if any, in second and third shift differential, as well as other proposals the Union plans to stick with to the end.