Labor Relations Insight by Phil Wilson
Unions and the Corporate “Death Spiral” A friend of mine recently interviewed for a big promotion to a top HR role. His final interview was with his future boss and 2 operations leaders. The interview was winding down and my friend started to relax a little - he was feeling pretty good. Then his future boss asked, “What questions do you have for us?” What would you ask in that situation? My friend is pretty quick on his feet and asked a great question: “What’s the number one priority I can support each of you with?” But my friend was a little surprised by the answer he got. That’s right – he got the same answer from each person: Retention. Retention. Retention. In Deloitte’s 2015 Human Capital Study of over 3,000 companies, 87% rated retention as a high priority. And things aren’t improving. In a new 2017 study by Future Workplace and Kronos once again found 87% of employers saying improving retention is their top people priority. Chances are good retention is at the top of your HR priorities too. And no wonder. Voluntary turnover is estimated to top 20% in 2017. The direct costs of turnover are estimated at over $11 billion dollars each year. And those are just the direct costs. If you lose an A player and replace them with a B or C player it could kill your company.
What does all this have to do with unions? Everything. I have been researching and writing a lot about retention over the last couple of months (check out here, here and here). It is the topic of my next book. But most people who write or think about retention don’t consider its impact on labor relations and union vulnerability. I recently did a webinar for our retainer clients on this topic and thought I’d share a few highlights. Here are 3 ways retention plays a key role in your labor relations strategy.
Turnover is the Canary in the Coal Mine
Some voluntary turnover is inevitable. Sometimes it’s a good thing. If nobody leaves you don’t get a chance to inject new talent into the organization. And if you have a C-player in place you’d love to throw them a going away party. Hopefully they’re headed to your biggest competitor while you are busy replacing them with an A-player. But turnover can quickly get out of control. Losing a top performer puts enormous stress on an organization. The teammates left behind are forced to pick up the slack. If your hiring process and talent pool isn’t top notch you lose ground fast. The business starts pushing for any warm body, which compounds the stress. This pushes your teams and your leaders to the breaking point.
Before long you’re in the retention death spiral. You lose ground to competitors because you’re fielding a bad team. And the teammates who are left usually don’t have the option to leave. They are stuck in a bad situation. Engagement and cooperation plummet. People quit caring about the organization, the customers, or their teammates. And if they can’t change their situation internally they look for help outside the organization. That’s how union organizing campaigns begin. During most of the 20th century miners would take pet canaries down with them into coal mines. Canaries were very sensitive to carbon monoxide levels and could warn miners of a problem in time for them to get to safety. Watching turnover can do the same thing for companies. It is a true “Left of Boom” early warning sign. Caught early enough you can stop problems from spiraling out of control. If you have a location with abnormal turnover pay close attention and support that facility. You might just stop the death spiral.
Unions Cause Turnover What if a union gets into your company? That creates and even bigger turnover problem. A recent study by Professor Brigham Fransden of BYU concludes that unions that get into companies – especially when the election results are close – lead to all kinds of bad outcomes for employees (and ultimately company owners). First the top, highest paid talent leaves the organization. This happens at a higher rate than at the companies that don’t unionize. The study also finds at the same time – contrary to union promises – compensation for the employees who stay behind don’t improve. The effect is that total wages drop (as older, higher paid talent is replaced with younger, lower paid talent). Company owners may think this is a good thing. But it’s not. Those lower paid employees are also lower skilled. Eventually this takes a big toll on the unionized company. The study also found that these companies fail at a much higher rate than the companies that avoid unionization. Here’s why this is a big deal to your labor strategy. Some top executives seem to believe that we don’t have to worry about unions any more. They point to things like a more business-friendly administration and unions are getting embarrassed in high profile elections, like the recent Boeing and Nissan debacles. Unfortunately, that’s about as deep as many executives get into labor issues these days. But like my friend’s interview, when you start talking about retention you will get everyone’s attention. That’s why when you communicate about labor strategy you should also explain the negative impact unions have on retention. Blended companies (those who already have unions) should also pay special attention to turnover at these locations and look to negotiate terms that help counter these problems and retain top talent.
Developing Leaders Stops Turnover The third way retention impacts your labor strategy is that your best tool to reduce turnover is also the best way to prevent union campaigns: strong first-level leaders. If your “early warning” training is focused on union cards and legal “do’s and don’ts” you are probably wasting a lot of money and missing a huge opportunity. You can’t ignore union cards and legal requirements. But for almost all companies the emphasis should be much heavier on developing strong relationships between first-level leaders and their teammates. The good news is you can do both at the same time. The same skills that help identify problems early are the ones that help make sure employees feel comfortable and safe approaching their leaders with concerns. Your leaders must learn to “run to the smoke” and then to be approachable, which creates the “draft” that draws the smoke to them. The good news is that investing in these skills doesn’t just prevent small problems from turning into union organizing issues. It also reduces turnover intention by 71%. Make retention a key part of your company’s labor strategy. Your top executives will thank you for it. After all, the odds are pretty good it’s at the top of their priority list too.
********** Union Bailout Update
It’s as if the DOL is running through a pool of oatmeal. The Senate finally confirmed Marvin Kaplan to serve on the National Labor Relations Board, providing a temporary 2-2 Republican/Democrat split, while Phil Miscimarra (Republican) has decided to decline a second term. William Emanuel, the pending pro-business appointee, won’t face Senate confirmation until after the August recess, so there may actually be a a couple of months of a 3-2 pro-business board composition until Miscimarra steps down Dec. 6th. Then we’re back to a 2-2 tango and will have to wait for another appointee and confirmation process.
It appears the DOL may finally have settled on a candidate for the position of NLRB General Counsel to replace Richard Griffin. Peter B. Robb is a management-side attorney who has criticized the board’s pro-union decisions, especially concerning employer policies and the ambush election rule. Even if nominated and confirmed, he won’t take office until Griffin’s term expires in November.
Meanwhile, Congress is tightening the purse strings of the NLRB, with a House panel approving an 11% cut to the agency’s budget. Consequently, the board has announced the closing of three field offices - San Diego (Region 21), Anchorage (Region 19) and Little Rock (Region 15). Although Congress hasn’t passed a final budget yet, these cuts to the NLRB (not to mention what might happen to the DOL overall budget) will have ramifications. The National Law Review listed these for starters:
- The NLRB could ramp up the pressure on employers, unions, and employees to settle unfair labor practice charges early to avoid NLRB personnel having to travel to speak to potential witnesses.
- The NLRB could loosen its time targets for deciding whether unfair labor practice charges have merit in the hopes that, given more time, a case can be settled.
- The possibility of less-prepared NLRB witnesses in unfair labor practice trials because possibly overtaxed NLRB attorneys will not have been able to meet with witnesses as much as in the past.
- The Board could request administrative law judges permit witness testimony by video to avoid having to pay witness travel costs.
- The NLRB could struggle to process representation petitions quickly, which has been a key focus of the agency since the “quickie” election rules were implemented in April 2015.
Meanwhile, the board spanked a company for firing an employee for suggesting (on Facebook) that a former employee should consider suing the company.
In another case, a re-run election was ordered by the NLRB because a visiting COO asked an audience of employees, “How are things going?” He also responded to a woman who had expressed prior concerns, that he would “look into” the issue. These comments were enough for the NLRB to declare “solicitation of grievances” misconduct by the company.
In the courts, the board hasn’t gotten its way completely. In a recent decision, the D.C. Circuit appeals court sided with CNN in a case of NLRB joint-employer overreach.
The 8th Circuit sided with employers also in the MikLin Enterprises, Inc. case, where a Jimmy John’s franchise fired or disciplined several employees for extreme, public disloyalty that was intended to harm the employer’s reputation and business. The board claimed the behavior was “protected concerted activity,” but the 8th Circuit didn’t agree.
The courts also sided with employers’ rights to limit the activities of union business agents during business hours, particularly when the activities of such agents have been pre-negotiated. The D.C. Circuit upheld Fred Meyer Stores Inc.’s right to call the police to escort business agents from the premises when they violated the terms of the agreement.
The D.C. Circuit did stand behind the NLRB on another micro units case, allowing a carve out of Rhino Northwest LLC employees as “riggers” during a recent campaign.
In light of recent racial conflict in Charlottesville, VA, this last NLRB ruling is a bit chilling. In Cooper Tire & Rubber Co. v. NLRB, the 8th Circuit determined that it was perfectly legal for a white employee to spout the following hate speech at a group of African-American replacement workers on a union picket line:
- “Hey, did you bring enough KFC for everyone?”
- “Go back to Africa, you bunch of f***ing losers.”
- “Hey anybody smell that? I smell fried chicken and watermelon.”
The dissenting opinion of Judge C. Arlen Bean captures the compelling moral and ethical argument against such egregious interpretation of the NLRA:
"No employer in America is or can be required to employ a racial bigot. Indeed … the court’s requiring of the petitioner to do so here, is tantamount to requiring that Cooper Tire violate federal anti-discrimination and harassment laws … . Engaging in union organizing or efforts to vindicate protected labor activity does not insulate the volatility and heinous nature of racist, or sexist, remarks. … Discriminatory and degrading stereotypes are not legitimate weapons in economic disputes carried out on the picket line."
At the state level, Oregon became the first state to enact a predictive scheduling law. Employers in retail, food service and hospitality businesses with 500 or more employees worldwide, will have to post schedules seven days in advance, and beginning on January 1, 2020, fourteen days in advance. Employers will also be required to provide a good faith estimate of the worker’s schedule at the time of hire, and are no longer allowed to schedule employees within 10 hours of their last shift. Additionally, if schedule changes are needed, the employee must jump through a set of notification hoops and may need to provide premium pay to affected workers. Even employers with collective bargaining agreements must abide by the new law.
Although Washington state is the traditional bellwether state in the northwest, keep your eyes on this idea spreading from Oregon. Labor rights activists are already stumping for similar legislation in other parts of the country.
Link & Comments Here
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National Employee Freedom Week
This week (Aug 20th through 26th) is National Employee Freedom Week. A coalition of national, state and local organizations, the effort is designed to educate employees about their option to opt-out of union membership. The interactive map on the web site enables employees to click on their state to learn more about their options and alternatives and download a generic opt-out letter.
Link & Comments Here
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New Study: Private Sector Unions Do Not Raise Employee Pay
In a study released by Brigham Young University, MIT-trained economist Brigham Fransen found that average wages in newly organized companies fell by three percent, including all private-sector union elections since 1980. Looking more closely at the data, the main reason for the decline is the exodus from newly unionized companies of the top-performing (and usually more highly paid) employees. When those employees are factored out of the equation, wages do not change at all.
Obviously, most union organizers would prefer this reality to remain hidden!
Link & Comments Here
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Teamsters Beat
After 3 years of show, a decision has finally been made in the Boston Teamsters/Top Chef trial. Local 25 members John Fidler, Daniel Redmond, Robert Cafarelli, and Michael Ross were found not guilty of charges that they attempted to shake down the show for “unwanted, unneeded and superfluous services under the threat of violence and the fear of economic harm.”
The jury also ruled that the events that occurred on the IBT picket line on June 10, 2014 wherein Teamsters members showered the cast and crew with “racist, sexist and homophobic slurs” and slashed tires on nine production vehicles were all a part of a “legitimate labor dispute.”
Link & Comments Here
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SCORE BOARD
Who are the winners (and losers) of the labor movement? Don't guess, just check the LRI Scoreboard
View this month's scoreboard (archives also located here).
Download a PDF of this month's scoreboard
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Union Pension Turmoil
In New York, 34,000 Teamsters could soon vote on a plan approved by the Treasury Department to introduce cuts to pension benefits, which would take effect Oct. 1st. Even if the participants vote “no,” the Treasury Department could allow the cuts to go through anyway in order to protect the Pension Benefit Guaranty Corporation from taking the hit.
Link & Comments Here
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It’s All Academic
It’s been said many times that unions are a thing of the past and if they want to survive they must adapt and adjust their “business model.” While it’s safe to say that they have put in an effort (breaking up bargaining units, minimum wage ventures, attempts at card check elections), they haven’t changed all that much.
Attempts to organize charter schools are one area in particular where we see that the business model is exactly what it was 17 years ago. And we can say that with sheer certainty because a 17-year-old Pennsylvania State Education Association document recently emerged that outlines their charter school organization strategy. Guess what? It’s surprisingly similar to recent efforts in areas like Los Angeles, Chicago, and Washington D.C.
In other academic news, Harvard has appealed to the Board to reverse their decision that the 2016 election wherein the majority of graduate students voted against representation be invalidated.
Link & Comments Here
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Fight for $15
Despite some recent success in places like Kansas City where voters approved a ballot measure this month to increase the minimum wage, it seems the movement itself is losing steam.
So far in 2017, Fight for $15 has “staged protests in just 30 cities… down from more than 600 in 2016.” Of course, much of that could be a loss of financial contribution to the movement now that we’re past an election year. We’ll have to wait until next year’s LM-2’s come out to know for sure. But we do know that last year, SEIU spent $19 million on the movement and failed to make any real progress unionizing the 7.88 million workers in the franchise industry.
Even in places like Kansas City, the vote to increase the minimum wage may have little effect as the Missouri legislature has actually barred cities from setting their own minimum wage. Similar situations played out in Iowa and Kentucky. After 5 counties passed local minimum wage laws in Iowa, 10 city councils effectively voted out of their county’s wage increase. Then, the state went on to ban local governments from setting a minimum wage. And in Kentucky, the Supreme Court actually ruled that “cities in Kentucky lack the authority to increase the minimum wage” after the city of Lexington voted on an increase in 2014.
But to be fair, the movement isn’t all the way caput. In fact, we found this Craigslist ad looking to hire an Fight for $15 organizer in Boston, MA. Check it out.
Link & Comments Here
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Right-to-Work
Missouri is fighting to keep its newly enacted right-to-work law in place, and Big Labor recently achieved a victory in the courts that paved the way to bring the issue to a public vote. Due to go into effect on Aug 28, opponents have collected more than 300,000 notarized signatures, 3 times the minimum required to push the measure to the ballot box in November 2018.
While Big Labor continues to fight against right-to-work laws with its right arm, the left arm is starting to pull the ballot lever for right-to-work! In Maine, the Maine State Employees Association (an SEIU local) agreed to eliminate the requirement that state employees who choose not to join the union pay a mandatory fee to the union for collective bargaining and other services, in exchange for a 6 percent pay increase over the next two years. Union loyalists of course are calling it a sell-out.
Ben Johnson, a former state union president for both the Vermont AFL-CIO and the state chapter of the American Federation of Teachers (AFT), has endorsed right-to-work as a critical workplace right. Johnson came to this realization after he left Big Labor. “I don’t expect to bring around to my way of thinking any union officers or staff still in the wilderness,” Johnson said. “To them the words and arguments I utter are only tools the forces of capitalism use to bust the union.” Click here or on the image above to watch him on YouTube.
Link & Comments Here
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Auto Workers
For the first time since the Auto Worker’s 2014 attempt to organize the Chattanooga, Tenn. Volkswagen plant, the union held a representation vote in the South. And lost. Again. This time at Nissan’s plant in Canton, Miss. Despite receiving only 37% of the vote, many believe the union isn’t going to let up.
That would come with little surprise, as it’s exactly what happened in Chattanooga. Remember how they set up an office just down the road from the plant only months after the election? And how they accused Volkswagen of interfering? It appears we’re in for the same strategy with Nissan.
One thing that this outcome reiterates regardless of if the Auto Workers want to accept it or not – the majority of southern auto workers aren’t interested in union representation.
Meanwhile, the union has also been dealing with a federal investigation into corruption at the UAW-Chrysler National Training Center. The investigation seeks to determine who is at fault for the redirection of $4.5 million in funds from the training center. So far, the FBI has charged three former UAW leaders and one Fiat Chrysler analyst, James Durden.
Durden pleaded guilty earlier this month.
For details on how this might affect the union’s 2018 election, check this article out.
Link & Comments Here
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Labor Around the World
Increased levels of automation in the workforce are inevitable. However, one thing that isn’t certain is just how much these AI developments are going to impact job quality and availability for human workers. In Japan, the leading country for robots per 10,000 workers in the auto industry, the effects are muted due to low birth rates and fears of an impending labor shortage. Click here to read more.
South Korea has laid out a new five-year plan to combat the growing economic inequality in the country. Namely, “it calls for sharply increasing the minimum wage and unemployment benefits and imposing bigger fines for unfair labor practices.”
Similarly, France is working on its own major labor transition. Here, new president Emmanuel Macron is taking on the country’s “infamous, almost indecipherable labor code,” the Code du Travail. For many, the code is viewed as “the wellspring of the country’s malaise and the chief obstacle to generating jobs.” For others (the country’s unions), the code is revered.
As for the United Kingdom, one analysis recently found that Brexit will cost the country more than 1.1 billion euro per year conservatively. The major factor will be the increased number of customs checks caused by the elimination of the free flow of goods between borders. Since 1993, when the European Single Market was established, these checks have been few and far between for goods travelling between the U.K. and EU.
Lastly, despite Finland’s high unemployment rate (currently sitting at 8.9%), the construction industry cannot fill their rosters. Click here for more.
Link & Comments Here
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Sticky Fingers
Current charges or sentences of embezzling union officials:
- Clementine Ray - AFT: $4,067
- Charles Hill - GMP: $7,000
- Ryan Jones - IAM: $281,000
- Fonda White - CWA: $10,000 - $100,000
- Lonzell Moore - APWU: $18,857
- Kimberly Steinhoff - USW: $12,751
- Tamika Bullock - Boilermakers: $24,600
- Jeanette Willoughby - AFGE: $2,487
- Scott & Nancy Alexander - IBT: $14,404
- John T. Coli, Sr. - IBT: $100,000
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