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Renegotiating Union Contracts: I Got 99 Problems, Pay is Just One...

My friend Ann Bares had a great, thought provoking post over at Compensation Cafe a few weeks ago entitled "Market Downgrades, Bringing Tough Calls to a Conference Room Near You?".  The point of the post follows the trail of tears as Snapple seeks to extract a $1.50/hour wage concession from production line workers at a Mott's plant in New York.

Ann does nice work talking about the conditions and prep work thatMotts  has to be completed in order to consider taking pay away based on market considerations. 

But there's an additional angle to the story that Ann doesn't focus on, so I'll pitch in and add to her post by covering it. 

The angle is simple.  Anytime there's a union contract in play, and renegotiation to be had now or in the future, all is often not what it seems.  Let's get some of the details from a story that ran in the New York Times:

"Chris Barnes, a company spokesman, said Dr Pepper Snapple was seeking a $1.50-an-hour wage cut, a pension freeze and other concessions to bring the plant’s costs in line with “local and industry standards.”

The company, which has 50 brands including 7Up and Hawaiian Punch, reported net income of $555 million in 2009, compared with a loss of $312 million the previous year. Its 2009 sales were $5.5 billion, down 3 percent.

Negotiations have not been held since May, and Dr Pepper Snapple says it has no intention of resuming them. The company has continued to operate the plant using replacement workers and says that production of apple juice and apple sauce is growing each day. Union officials say production is one-third of what it was before the walkout.

The Mott’s workers voted 250 to 5 to strike, walking out on May 23. They were furious about the company’s demands to cut their wages by about $3,000 a year, freeze pensions, end pensions for new hires, reduce the company’s 401(k) retirement contributions and increase employees’ costs for health care benefits. Dr Pepper Snapple said it was merely seeking to bring its benefits more in line with those of its other plants.

Justifying the proposed cuts, management says the Mott’s workers average $21 an hour, compared with the $14 average hourly wage for production, transportation and material moving workers in the Rochester area. Union officials say that 70 percent of the plant’s workers earn $19 or less an hour and that many are highly experienced and deserve well more than $14 an hour."

The lesson here is pretty simple from a contract negotiating perspective and can be summed up like this (with a hat tip to Jay-Z): "When negotiating a contract, you've got 99 problems, and pay is just one".

What do I mean by that?  Anytime a contract is being negotiated, both sides - the union and management - have at least 100 things that they're tracking and thinking about.  As with any negotiation, you're not going to get everything you want unless the party on the other side of the table is very, very weak.  What normally occurs with this in mind is horsetrading: You bargain for things that are most important to you, and in order to get those things, you have to give up some things elsewhere. 

So, the issue in a negotiation like this isn't all about pay.  It's about at least 10 major issues, usually the primary staples of employment (pay, benefits, etc.) and 90 smaller issues (working conditions, seniority stipulations, etc.).  Both sides line up for what's most important to them and they... wait for it... Bargain... That's why they call it collective bargaining.

As for calling a strike, that's one way to go.  But a strike at a plant like this, in a down economy in a depressed area with plenty of replacement workers... well, that's a bad decision by the union.  A better approach would have been to figure out what's most important to the union members, then bargain hard for those items knowing that they'd have to give up something, or multiple things in return. 

In collective bargaining, there may be a lot of emotion tied to headline generating items like pay.  Trust me, there's a lot more under the hood.  Horsetrading rules the day, and if you're not willing to bargain and get the best deal you can for those you represent, bad stuff happens.

Bad stuff like plant worker going on strike and seeing replacement workers take their jobs. 



As you pointed out, collective bargaining is all about trade-offs. Each side needs to know what can be given up and what is the hill they want to die on then work towards a mutually satisfactory/unsatisfactory middle. It's hard work to figure it out and emotionally draining to work it out but if both sides truly want it to work, it's amazing what can be accomplished.

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