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The Union Free Advantage and Union Costs

The Union Free Advantage: and costs associated with union employees.

Tangible Costs

Research indicates that the cost of running a unionized employer is 30% to 40% greater than for a non-unionized employer, and may not include subsequently negotiated increases in unionized employee wages or benefits.

The administrative budgets of unionized employers are higher due to:

More staff: Plant grievance administrators, Supervisors of Industrial Relations, Corporate Directors of Labor Relations, and Labor Relations Specialists. The average pay for a Labor Relations Specialist is $76,034.68. (2010 ASE Southeast Michigan Salary Survey) A Labor Relations Director would earn $115-120K base pay range (also according to ASE) with bonus/variable pay averaging an additional $15K during profitable years. And, unionized employers need outside legal counsel who offer labor law advice, handle arbitration cases, and negotiate new labor agreements for $ 250 per hour- or more.

• Unfair labor practice charges (ULP’s) brought by unions harm the employer’s reputation and diminish the corporation’s good will. Once a charge is filed, an NLRB filed agent will visit the employer and conduct an investigation. At this stage, the entire workforce will know that something happened. Next, if the charge is not settled, the NLRB will schedule the matter for hearing. Preparing for and conducting a hearing may cost the employer more than $ 10,000 in legal fees, plus the non-productive time associated with witnesses, and management preparation/testimony. An unfair labor practice charge is public information. Further, a valid ULP prevents employers from replacing workers during a strike.

Over-compliance with government regulations. “Union Bird Dogs” monitoring workplace statute compliance are prevalent in union facilities. Unions sometimes call OSHA safety inspectors to identify safety issues for their own uses at the bargaining table. Labor relations professionals and legal counsel would respond to these allegations, appeal unfavorable decisions, and attend administrative hearings as needed (see bullet number two to quantify these additional costs).

Increased involvement with regulatory agencies, especially Wage and Hour claims, OSHA/safety, NLRB, EPA, and the EEOC. State and Federal regulators have the administrative authority to shut down an employer’s operations for some violations. Willful safety violations may involve criminal penalties.

Indirect costs of outside services, such as the frequent need for an employment/labor attorney to deal with contract negotiations, handle grievances, arbitration cases, and review compliance with a collective bargaining agreement. Unions demand that negotiations take place away from the employer’s offices, which adds travel, meeting rooms, food, and related hotel costs. Management time is dedicated away from serving the customer. When you add management time, meeting costs, and legal fees together, the actual cost of negotiating a labor agreement amounts to over $ 100,000 for each agreement. Labor negotiations usually take place every three years or sooner as negotiated by the parties.

• Extra accounting staff for calculating, deducting and documenting employee union dues. Unions, including the Teamsters, for one example, often demand that employers participate in union health and welfare and pension funds. These benefits are super costly and come with regular audits that penalize employers for not covering part time employees and sometimes those who are already covered under a spouse’s insurance provided by another employer. A client of mine has paid a union $ 22,000 to settle a benefits-related lawsuit- involving only one employee and during one year.

Additional wages and benefits for employees who work to cover for the absences of other employees in union representative positions when they are attending to union business during working hours. According to the U.S. Supreme Court, It is unlawful to counsel or discipline one of your union employees without having union representation present. For some major employers a chief steward is a full time job paying over $ 100,000 in wages and benefits.

Outside Contracting with consultants, storage facilities, and offsite manufacturing teams to develop an action plan for a possible work stoppage or strike. Prior to labor negotiations, it is common for employers to create a “strike bank” of parts (often produced with overtime costs) in anticipation of a possible strike. Having to build a strike bank of parts is contrary to today’s “just in time” quality manufacturing programs and it may cost an employer its customer.

Wages for short-term replacements when a strike occurs, which can be significantly higher than striking employees wages, especially if replacements are required for highly trained positions.

Employees also incur costs when a union wins a NLRB election.

• Union initiation fees vary between $ 500 and $ 1,000.

• Average annual union dues are $400, or about two hours of pay per month.

• Unions negotiate agreements that limit employers’ use of temporary, part time, or seasonal workers, because unions want more full-time dues paying members. Unions generally don’t care about opportunities to save operating costs. As a practical matter, employers are forced to outsource temporary work- rather than pay the added labor costs associated with hiring full time employees.

• The employee puts it all on the line during a labor dispute. It is the union employee who is not receiving a full paycheck or benefits during a strike. Further, if a union member crosses a picket line during a strike, that employee can be fined under union by-laws for those earnings.

Intangible Costs

In addition to obvious increased costs, having a union affects morale, creativity and resiliency. Ultimately, an organization’s profit margin can decline. Productivity appears to be lower in unionized environments, possibly due to:

• Employee anger or frustration when the collective bargaining process for an initial contract lasts more than a year or does not result in the changes promised by a union during the organizing campaign. About 75% of initial contracts are negotiated a year or more after the NLRB representation election according to the Federal Mediation and Conciliation Service, and 50% of initial contract negotiations never achieve an executed agreement.

• Union strategies and rules undermine the employee-employer relationship by playing on employee emotion and interfering with direct employee-supervisor communication, which cast the employer in the role of “enemy,” result in employee mistrust of management, and reduce teamwork.

• Poor communication and diminished employee participation in workplace decision making via power sharing programs when these programs had been in place prior to an election. Unions file unfair labor practice charges against employers who choose to speak directly to employees and do not deal direct with union officials, first.

• Employees coping with divisiveness, name-calling and, terrorizing behavior of union co-workers.

• Less flexibility, both internally and externally, to move quickly or creatively in response to change due to union rules and related contract language that results in rigid operating guidelines. Quality and productivity enhancements demanded by customers are good examples.

• Increased difficulty recruiting and retaining the most creative and effective employees. Union-imposed contract provisions limit the employer’s ability to reward an employee based on performance or productivity. Union grievance procedures tend to protect low-performing, negligent- and negative employees, which cause morale problems.

• Decreased client or vendor satisfaction if unionization affects service or product cost or quality.

• Interruption in service provision or production if a work stoppage or strike occurs.

• Legal onslaught of multiple cases as a tactic used to intimidate employers. Union employees are often provided with free legal services by union-affiliated law firms to pursue worker’s compensation, FMLA, ADA, and other claims. An employee actually paying a private lawyer out of his or her own pocket would be reluctant to file this litigation.

• Labor contracts require employers to make personnel decisions based on seniority- not skill, ability, or work ethic. Compensation is based on seniority, not merit. Seniority-based personnel and compensation systems decimate productivity, quality, and profitability.

Union avoidance initiatives and union free action plans benefit both employees and management. These are cost-effective for all organizations that wish to retain their competitive edge. Avoid spending 30-40% more to run your business. Stay or become union-free. Contact Attorney Tom Fredericks at (517) 655-4100 or to begin work on your company’s union-free action plan. Caveat: once a union drive begins, management cannot change wages, benefits, and conditions of employment.