Collective Bargaining, Mediation and Arbitration in Organizations

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Collective Bargaining, Mediation and Arbitration in Organizations

Business Essentials · Chapter 11: Labor Relations and Collective BargainingSection 11.2 · lesson 54 of 10515 min · free with a free account

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In this lesson

How a contract is made, what it changes, and who settles disputes.

  • Describe the bargaining process and what it changes
  • Distinguish mandatory, permissive, and illegal subjects
  • Recognize good-faith and surface bargaining
  • Match mediation or arbitration to a dispute

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Labor Relations and Collective Bargaining

Collective Bargaining, Mediation and Arbitration in Organizations

The last section explained how a union comes to represent a bargaining unit. This one asks what happens next. We start with the bargaining process itself, from preparation through to a signed agreement. Then we sort the subjects of bargaining into mandatory, permissive, and illegal. We look at the duty to bargain in good faith, and the violation called surface bargaining. We see what a contract actually changes about the employment relationship. And finally, when the parties cannot agree, we look at mediation and arbitration. The theme is that bargaining is not one event. It is a relationship of repeated negotiation. And the rules about who must talk about what, and when, decide many real disputes.

Definition

What Collective Bargaining Is

Collective bargaining is negotiation between an employer and the certified representative of a bargaining unit. It covers the terms and conditions of employment, and it produces a binding written agreement for a fixed term. That agreement is the collective bargaining agreement, often just called the contract. Its parties are the employer and the union. It governs every employee in the unit, members or not. Three features set it apart from other negotiation. First, the employer negotiates with the employees' representative, not with each employee separately. Second, the outcome is binding and enforceable. It is not merely a statement of policy. Third, it lasts for a fixed term, after which the parties bargain again. So the relationship is one of repeated negotiation and continuous administration. Behavior in one round shapes the next. That is worth remembering whenever one side is tempted to win too hard.

Figure 11.2.1

The Bargaining Cycle

Bargaining moves through recognizable stages, and both parties work in parallel at each one. Preparation comes first. Then each side presents its proposals, and explains its reasons. In negotiation, the parties discuss, question, trade, and adjust. As they settle individual articles, they record tentative agreements. Those are conditional on agreement about everything, because a concession on one issue is usually traded for another. Once the issues are resolved, the parties assemble the overall package, and each side weighs it as a whole. The union then submits it to members for ratification, a vote to approve it under the union's own procedures. Administration follows. The agreement is applied day to day, and disputes go through the grievance procedure. And administration loops back. What goes wrong under this contract becomes preparation for the next.

Preparation

The Stage That Decides the Outcome

Preparation is the stage that determines the outcome, and it is the one most often shortchanged. Each side gathers data on wages and benefits at comparable employers. It reviews the grievances and problems of the last contract, and decides its priorities. Costing means calculating what each proposal would add to payroll, benefits, and operating costs, over the whole term. That includes the knock-on effects. A wage increase raises overtime rates and payroll taxes. A change to seniority rules may alter staffing costs. A team that has not costed its proposals cannot judge a trade when one is offered. Establishing authority means agreeing in advance who may commit the organization to what. Get it wrong one way, and the team cannot close a deal at the table. Get it wrong the other way, and its own principals overrule it afterward. The same is true, in mirror image, for the union's team.

Subjects of Bargaining

What Each Side May Insist On

The law sorts possible bargaining subjects into three categories. The category decides what each side may insist on. Mandatory subjects concern wages, hours, and other terms and conditions of employment. If either side raises one, both must bargain in good faith, and either may insist to impasse. Examples include wage rates, overtime, benefits for current employees, seniority, discipline, grievance procedures, and safety. Permissive subjects are lawful, but outside the unit's terms of employment. The parties may discuss them if both are willing, but neither may insist to impasse. Examples are the union's bargaining committee, its internal affairs, and benefits for already-retired employees. Illegal subjects, like a closed shop or a discriminatory clause, cannot go in, even if both sides want them. The classification matters. Changing a mandatory subject unilaterally may be an unfair labor practice. The hard cases sit at the boundary: subcontracting, relocating, closing part of a business, or new technology. The general position is that a decision fundamental to the business may lie outside mandatory bargaining. But its effects on employees, like severance, transfer rights, and timing, remain mandatory. That distinction matters enormously.

Good Faith

The Duty to Bargain, Section 8(d)

Section eight d imposes a duty to bargain in good faith on both employers and unions. It means meeting at reasonable times, and conferring in good faith about wages, hours, and working conditions. In practice, the parties must not delay or avoid meeting. They must supply relevant information on request. An employer that claims it cannot afford a demand may have to support that claim with financial information. And they must consider proposals with an open mind, respond to them, and explain their own positions. Just as important is what the duty does not require. Neither side must agree to any proposal, or make any concession. A party may bargain hard and hold its position, as long as it does so in good faith. The recognized violation is surface bargaining, going through the motions with no real intention of agreeing. It is judged from the totality of conduct, not any single act. Warning signs include no counterproposals, unexplained demands, delayed meetings, and reopening settled positions. So do bypassing the union to deal with employees directly, and making unilateral changes while bargaining continues.

What a Contract Changes

3 Shifts in the Employment Relationship

Here is the analytically important part. What does an agreement change about the employment relationship? Three changes stand out. First, terms become jointly determined and enforceable. The employer can no longer revise wages, schedules, and rules at will. They are fixed for the term. An employee's terms are enforced through the grievance procedure, not left to managerial goodwill. Second, just cause generally replaces at-will employment. Discipline or discharge needs a legitimate reason, consistently applied and fairly investigated, and possibly defended before an arbitrator. Third, seniority, meaning length of service, becomes the rule for decisions once left to managerial judgment. It decides who is laid off and recalled first, who gets which shift or vacation, and sometimes who is promoted. Often the senior employee must also be qualified. So both sides trade. The employer gives up discretion, for stable, predictable terms and a no-strike commitment. Employees gain protection and a voice, and give up bargaining individually over what the agreement covers.

Grievance Machinery

Enforcing an Agreement No One Can Fully Foresee

A typical agreement covers recognition of the union, and the definition of the bargaining unit. It reserves management rights, the decisions the agreement does not restrict. It covers union security where permitted, wages, hours, benefits, seniority, and discipline. And it includes a grievance procedure, a no-strike commitment, often a no-lockout commitment, and a duration. No agreement can anticipate every situation, so the enforcement machinery matters as much as the terms. A grievance is a complaint that the employer has violated the agreement. It usually starts informally, with the employee, often a union steward, and the immediate supervisor. If that fails, the union files a written grievance. It climbs through levels of management, with time limits at each step. The final step, if nothing else works, is grievance arbitration. The procedure gives a peaceful, orderly way to settle disputes, in exchange for the union's promise not to strike over them. It is also where the duty of fair representation bites. The union must handle grievances in good faith, never arbitrarily.

Bargaining Approaches

Dividing the Pie, or Growing It

Richard Walton and Robert McKersie distinguished two approaches to negotiation in nineteen sixty-five. Distributive bargaining is about a fixed resource, where one side's gain is the other's loss. Each side has a target point it hopes for, and a resistance point, the worst result it will accept. Agreement is possible only where resistance points overlap. That range is the bargaining zone. Take illustrative figures. An employer targets a two percent raise, but would go to four and a half. The union hopes for five percent, but would accept two and a half. So the zone runs from two and a half to four and a half. Integrative bargaining searches for trades across issues the parties value differently, so both can gain. It depends on separating positions, the specific demands, from interests, the needs behind them. A union demands no layoffs, because its interest is income security. The employer refuses, because its interest is adjusting staffing to demand. A trade exists. Retrain and redeploy before any layoff, plus flexible scheduling, serves both interests better. Integrative bargaining needs several issues, shared information, trust, and a continuing relationship. Real talks combine both approaches.

Impasse and Pressure

Strikes and Lockouts, by Purpose

An impasse is a genuine deadlock that persists after good-faith negotiation, when further meetings would be futile. Whether one exists is a question of fact, judged from the length of bargaining, good faith, and the issues involved. At a genuine impasse on a mandatory subject, the employer may implement its last offer, and the union may strike. Before ending or changing a contract, the statute also requires advance notice to the other side and the federal mediation service. The law treats strikes very differently, depending on their purpose. An economic strike over new terms is lawful, but the employer may hire permanent replacements. Strikers keep a right to recall. An unfair labor practice strike is protected more strongly. Those strikers cannot be permanently replaced. A sympathy strike depends on the no-strike clause, and on secondary-action rules. A wildcat strike, unauthorized by the union, is generally unprotected. A jurisdictional strike between unions is unlawful. A lockout is the employer's counterpart, temporarily withholding work to support its bargaining position. It can be lawful after the contract expires and talks stall. It is not lawful to discourage membership, or under a no-lockout clause.

Table 11.2.1

6 Forms of Third-Party Help

When the parties cannot resolve a dispute alone, they can bring in a neutral. Mediation helps the parties reach their own agreement. The mediator has no power to impose one. The Federal Mediation and Conciliation Service, created in nineteen forty-seven, provides mediators. Its capacity has changed, so verify it. Arbitration is different. The neutral hears evidence and argument, and issues a decision, which may be binding or advisory. Six forms run from least to most third-party control. Conciliation just keeps communication open, and suits an early breakdown in talks. Mediation actively clarifies interests and suggests options. It suits parties who are close and want to keep control. Fact-finding issues non-binding recommendations, and is common in the public sector. Advisory arbitration offers an independent view of the merits, to help settlement. Grievance arbitration, also called rights arbitration, decides how an existing agreement applies. Its task is interpretation, not rewriting. Interest arbitration sets the terms of a new agreement, mainly where strikes are barred, as for police and fire units. The more control a neutral has, the less the parties own the result.

Choosing the Form

Match the Neutral to the Dispute

Three considerations guide the choice of form. First, the relationship. Continuing parties keep ownership of the outcome through mediation. An imposed result can breed resentment. Second, the need for a decision. A discharged employee needs an answer, and a unit that cannot strike needs a contract. Third, cost. Mediation is usually quicker and cheaper, while arbitration means fees, preparation, and a hearing. Some argue interest arbitration discourages settling, since each side expects the arbitrator to split the difference. Now a composite case. Gideon manages Ferrin Castings, a unionized foundry. Management decides to close the forty-person pattern-making department, and buy patterns from a supplier. On Friday, Gideon announces the closure, effective in two weeks. He tells the union the decision is final. Even if the decision itself was management's to make, its effects are mandatory subjects of bargaining. Severance, transfer and bumping rights, recall, benefits, and timing all had to be bargained. Refusing to meet is likely a unilateral change, and a refusal to bargain under Section eight a five. The sound decision is to notify the union, offer to bargain over effects, and adjust the timetable.

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FAQ

Questions students ask us

About Collective Bargaining, Mediation and Arbitration in Organizations

What are mandatory, permissive, and illegal subjects of bargaining?
Mandatory subjects concern wages, hours, and other terms and conditions of employment, such as overtime, seniority, discipline, and safety; both sides must bargain on them in good faith, and either may insist to impasse. Permissive subjects are lawful but outside those terms, such as benefits for already-retired employees, and are discussed only if both sides agree. Illegal subjects, like a closed shop or a discriminatory clause, cannot be included even if both sides want them.
What is surface bargaining?
Surface bargaining is going through the motions of negotiation with no real intention of reaching agreement, which violates the duty to bargain in good faith under Section 8(d) of the National Labor Relations Act. It is judged from the totality of conduct. Warning signs include no counterproposals, unexplained demands, delayed meetings, reopening settled issues, bypassing the union to deal with employees directly, and unilateral changes during talks. Hard bargaining alone is not bad faith.
What is the difference between mediation and arbitration in labor disputes?
In mediation, a neutral helps the parties reach their own agreement but has no power to impose one. In arbitration, the neutral hears evidence and argument and issues a decision, which may be binding or advisory. Grievance arbitration interprets an existing contract, while interest arbitration sets the terms of a new one, mainly where strikes are barred, as for police and fire units. Mediation is usually quicker and cheaper and keeps ownership with the parties.
What is the difference between distributive and integrative bargaining?
Distributive bargaining divides a fixed resource, so one side's gain is the other's loss, while integrative bargaining seeks trades across issues the parties value differently, so both can gain. Richard Walton and Robert McKersie described both in 1965. If an employer would go as high as a 4.5 percent raise and a union would accept 2.5 percent, the bargaining zone runs from 2.5 to 4.5 percent. Integrative bargaining focuses on the interests behind positions.

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