Resolving Impasses

In the private sector, when the management and union are unable to reach agreement, the actions that the parties can take are governed by the applicable federal law such as the National Labor Relations Act (that covers most manufacturing and service industries) or the Railway Labor Act (that covers transportation, including railroads, airlines and trucking industries).The procedures under the Railway Labor Act are designed to help parties resolve the impasse without impacting the transportation of people and goods.The law considers these industries as vital to the economic well-being of the country and limits the ability of the unions and managements covered by the law to use economic weapons - the strike and lockout - to force an agreement.The National Labor Relations Act permits union to strike and managements to lock out employees if the parties have reached an impasse in negotiations and the contract has expired.

Strike Costs to the Union and Workers

In calling a strike, the union must weigh the cost of the strike against the probable benefit. One of the most obvious costs to a striking employee is the loss of income (no pay check), particularly when wages may have been high after years of successful union negotiations. Complicating matters, striking workers are often denied eligibility for government assistance programs like unemployment compensation benefits or food stamps. [In Lying v. Automobile Workers (March 3, 1988), the U.S. Supreme Court upheld the disqualification of strikers and their families from participation in the federally funded Food Stamp Program.] Though unions often help striking members through the use of strike funds (money to help with food, clothing and other necessities), it rarely provides income equal to the take-home pay earned prior to the strike. For the most part, workers end up financing the strike from personal savings. The problem becomes more acute the longer the strike continues.Union members who are unable to financially hold out to the end of the strike, may choose to resign from the union and cross the picket line to work. (In most cases, the union is prohibited from disciplining members even though they agreed to union rules prohibiting the crossing of picket lines. See: Pattern Makers League v. NLRB, 53 U.S. 4928 (June 25, 1985)). For the union, paying out strike benefits can be a drain on union funds. Moreover, the union's financial dilemma is exacerbated because union members do not customarily pay dues while participating in a work stoppage.

Because employers have the right to replace (economic) strikers permanently, an employee who participates in a work stoppage runs the risk of losing his or her job. Even in instances where a striking employee is not permanently replaced, he or she may suffer interruptions in accumulated vacation, sick leave, seniority, and retirement benefits. [However, an employer may not be able to unilaterally revoke employee medical and hospitalization benefits and employees may still be entitled to receive workers' compensation or sick leave benefits during a strike.] The permanent replacement of strikers also poses a critical risk to the unions: the loss of majority employee support in the bargaining unit and the danger of decertification. In addition to the loss of a job via a replacement, striking workers and their unions need to consider the implications of the employer closing operations in the plant altogether.

Even after a settlement is reached, relationships among union officials, employees, and the company may be irreparably damaged or destroyed. Then too, a strike may jeopardize or destroy the union's public sympathy or support. Also, the success or failure of previous strikes and the availability of other jobs must also be considered.

Finally, strikes can also precipitate domestic problems among families and friends.Family members may find their loyalties divided on the strike issue and line up on different sides of the picket line.

Strike Costs to the Employer

Management's ability to withstand a strike depends on the length of the strike, the type of business, and the preparation made. Perhaps the major cost of a strike from the employer's standpoint is the lost business and permanent damage to the customer goodwill. (If a firm chooses to remain idle during the strike, it will need to consider the effect on consumer loyalty. Some customers may temporarily change to other products or supplies due to a strike, but return upon conclusion of the strike. However, there is the possibility that customers may never return, if they find the substitute products satisfactory, or as an expression of dissatisfaction with the striking company.)

On the other hand, an increasing number of firms in recent years are maintaining total or partial operations during strikes (in the belief that the union's bargaining power is significantly reduced when the firm is able to continue produce or sell its products).In this capacity, the concern is for legal and other associated fees, diminished profits because of continuing operating costs, and the shutdown and startup costs associated with the strike.Thus, the employer needs to consider costs such as the loss of output, overtime costs to fill back orders, and the possible short-term and long term effect on consumers and therefore market share.

One cost of continuing operations is the hiring of workers to replace those who have gone on strike.Hiring strike replacement often means additional advertising, training and administrative expenses.A company may not be to hire an adequate number of replacements to maintain normal business operations. Under such conditions, management may elect to use partial or "skeleton" crews, an arrangement that may pose scheduling problems and require the use of overtime payments.It may also be necessary to provide additional security measure to ensure that replacement employees (or employees who refuse to participate in the strike) are not subjected to physical harm or verbal harassment by striking personnel.Even when operations are maintained, management may discover that customers, suppliers, and other may be unwilling to enter the struck facility

When operations are totally or partially suspended during an economic strike, there are costs associated with shutting down facilities, protecting company proper and later restarting operations after a settlement is reached. Maintenance costs often continue during shutdowns. Additional security in and around a plant of facility may be necessary to reduce the likelihood of vandalism and, in some cases, sabotage by striking workers or strike sympathizers.

Conclusion and Question

Both sides consider their own strike costs in comparison to possible negotiation gains resulting from a strike. If the strike costs for the two parties are obviously unequal, that inequality translates into reduced bargaining power for the side facing lower costs.Given the drop in unionized workforces in the private sector, and the global competition in which many industries operate, the strike and lockout have not frequently used.Both parties, particularly unions, find that the work stoppage is too damaging from an economic standpoint.

To help resolve impasse, parties have turned toward mediation and fact-finding as techniques to help find common ground for agreements.Both mediation and fact-finding involve the use of a neutral third party to help the union and management reach an agreement.Neither process can force a party into accepting specified terms within the agreement.Interest arbitration, however, can resolve the impasse by permitting the neutral party to make the decision on the terms of the agreement.[The use of arbitration to resolve grievances that arise as a result of alleged violations of the agreement or disagreement regarding the interpretation of the language in the agreement is well accepted in the U.S. system of labor relations.This type of arbitration is referred to as grievance arbitration.]However, in the private sector, we do not see the parties frequently using interest arbitration as a means to resolve an impasse.

Why is interest arbitration used so infrequently in the private sector?You must provide support for your response by referencing information in the textbook or other academic source.