CH-8-10 Variable Pay and Benefits – Human Resource Management: Essential Perspectives : Chapter Notes

This Document Contains Chapters 8 to 10 Chapter 8 Variable Pay and Benefits Chapter Outline and Instructor Notes Suggested Content Coverage Employers increasingly are recognizing that the definition of compensation must be extended beyond base pay to include variable pay and employee benefits. A benefit is an indirect reward given to an employee or group of employees for organizational membership. In the U.S., employers often fill the role of major provider of benefits for citizens. In many other nations, citizens and employers are taxed to pay for government-provided benefits, such as health-care and retirement programs. In additional to benefits, many U.S. employers are also offering employees additional compensation on a pay-for-performance basis, known as variable pay. I. VARIABLE PAY: INCENTIVES FOR PERFORMANCE Variable pay, or incentives, is compensation linked to individual, team, and/or organizational performance. Variable pay plans attempt to reward employees for performance beyond normal expectations. The foundation of variable pay rests on several basic assumptions: •Some people perform better and are more productive than others. •Employees who perform better should receive more compensation. •Some of employees’ total compensation should be tied directly to performance. •Some jobs contribute more to organizational success than others. Incentives can take many forms as shown in Figure 8-1. A. Developing Successful Pay-for-Performance Plans – Employers adopt variable pay for the following reasons: •Link strategic business goals and employee performance. •Enhance organizational results and reward employees financially for their contributions. •Reward employees and recognize different levels of employee performance. •Achieve HR objectives, such as increasing retention, reducing turnover, recognizing training, or rewarding safety. B. Metrics for Variable Pay Plans - Different measures of success can be used, depending on the nature of the plan and the goals set for it. A common metric is return on investment (ROI). C. Successes and Failures of Variable Pay Plans - As variable pay has grown in popularity, it has become evident that these plans have both succeeded and failed. Individuals must see incentives as desirable in order for them to put forth the extra performance effort. Also, employees normally prefer that performance rewards increase their base pay, rather than be given as a one-time, lump-sum payment. Further, many employees prefer individual rewards to group/team or organizational incentives. Figure 8-2 shows the three categories of variable pay plans: individual, group/team, and organizational. D. Individual Incentives - Individual incentive systems try to tie individual effort to additional rewards. 1. Piece-Rate Systems – are the most basic individual incentive systems. Under a straight piece-rate system, wages are determined by multiplying the number of units produced by the piece rate for one unit. A differential piece-rate system pays employees one piece-rate wage for units produced up to a standard output and a higher piece-rate wage for units produced over the standard. 2. Bonuses – A bonus is a one-time payment that does not become part of the employee’s base pay. Bonuses can recognize performance by an employee, a team, or the organization as a whole. 3. Special Incentive Programs – focus on rewarding only high-performing individuals. Programs range from one-time contests for meeting performance targets to awards for performance over time. E. Group/Team Incentives - Although the use of teams has increased substantially in the past few years, the question of how to equitably compensate their members remains a significant challenge. The main concerns when designing group/team incentive plans are how and when to distribute the incentives, and who will make the decisions about the incentive amounts. The two primary approaches for distributing team rewards are: 1) Same size reward for each team member and 2) Different size reward for each team member. However, employers must realize that many employees still expect to be paid according to individual performance so caution should be used when creating and implementing group/team incentives. The two more frequently used types of group/team incentives situations are group/team results and gainsharing. 1. Group/Team Results – The design is usually based on the “self-funding” principle, which means that the money to be used as incentive rewards is obtained through improvement of organizational results. Gainsharing is a good example of this. 2. Gainsharing – Gainsharing, also called team sharing or goal sharing, is the system of sharing with employees greater-than-expected gains in profits and/or productivity. To develop and implement this system, management must identify ways in which increased productivity, quality, and financial performance can occur and decide how some of the resulting gains should be shared with employees. Plans frequently require that an individual must exhibit satisfactory performance to receive the gainsharing payments. F. Organizational Incentives - An organizational incentive system compensates all employees in the organization according to how well the organization as a whole performs during the year. Two common organizational incentive systems are profit sharing and employee stock plans. 1. Profit Sharing – Profit sharing distributes some portion of organizational profits to employees. The primary objectives of profit-sharing plans include increased productivity and organizational performance; attract and retain employees; improve product/service quality; and enhance employee morale. Drawbacks of profit sharing are that employees may not trust that management will disclose accurate financial information, profits may vary a great deal from year to year due to factors beyond the employees’ control, and payoffs are generally far removed by time from the employees’ efforts so there may not be a strong link. 2. Employee Stock Plans – A stock option plan gives employees the right to purchase a fixed number of shares of company stock at a specified exercise price for a limited period of time. Stock option plans have decreased in popularity in recent years due to changing laws and accounting regulations. An employee stock ownership plan (ESOP) is designed to give employees significant stock ownership in their employers. Employers can receive favorable tax treatment for earnings earmarked for ESOPs and they are intended to motivate employees to be more productive, and to focus on organizational performance. The main disadvantage is that it makes both employees’ wages/salaries and their retirement dependent on the performance of one company. II. SALES COMPENSATION Sales and marketing employees’ compensation is partly or entirely tied to individual sales performance. Sales incentives are perhaps the most widely used individual incentives. However, some critics have concerns that some incentive plans encourage unethical behavior by salespeople. A. Types of Sales Compensation Plans -- Sales compensation plans are of many types, but are generally based on the degree to which total compensation includes some variable pay tied to sales performance. 1. Salary Only – Often used for new sales representatives, the salary-only approach is useful when serving and retaining existing accounts is being emphasized more than generating new sales and accounts. 2. Straight Commission – A commission is compensation computed as a percentage of sales in units or dollars. In the straight commission system, sales representatives receive a percentage of the value of the sales made. The salesperson receives no compensation if she makes no sales. 3. Salary-Plus-Commission or Bonuses – The salary-plus-commission system is used most frequently and combines the stability of a salary with the performance aspect of a commission. Many organizations also pay bonuses at a percentage of base pay, tied to how well the employee meets the set goals. 4. Sales Performance Metrics – The success of variable sales compensation depends on the establishment of clear performance criteria and measures. Figure 8-3 shows some of the possible sales metrics. The plans should use a variety of criteria to reflect marketing plans, but should generally not include more than three sales performance measures. III. EMPLOYEE BENEFITS Benefits are costly for the typical U.S. employer, averaging 30% to 40% of payroll expenses. For highly unionized industries the percentage may be over 70%. These numbers illustrate why benefits have become a strategic concern in HR management. A. Benefits and HR Strategy –Benefits can be used to help create and maintain a competitive advantage. Employers may offer benefits to aid recruiting and retention, impact organizational performance, and meet legal requirements. Employers with good benefits are viewed positively within a community and the industry. A major advantage of benefits is that they generally are not taxed as income to employees; therefore, they represent a somewhat more valuable reward than an equivalent cash payment. B. Benefits Design - Providing benefit plan flexibility and choices for employees allows employees the opportunity to tailor their plan to their needs. However, the more choices available, the more administrative demands placed on organizations. C. HR Technology and Benefits – The use of HR technology, especially Internet-based systems, has significantly changed the benefits administration time and activities for HR staff members. Information technology also allows employees to change benefit choices, track their benefit balances, and submit questions to HR staff and external benefits providers. D. Benefits Measurement – Both benefits expenditures generally, as well as costs for individual benefits specifically, need to be measured and evaluated as part of strategic benefits management. Some examples include: 1) benefits as a percentage of payroll and 2) health-care benefits costs per participating employee. The most common means of benefits cost control is cost sharing where employees pay more of their benefits costs. Other means include using wellness programs, adding employee health education efforts, and changing prescription drug programs. E. Benefits Communication – Employees generally do not know much about the values and costs associated with their benefits. Benefits communication and satisfaction of employees with their benefits are linked. Some employers have used the internet, videos, CDs, newsletters, and employee meetings to ensure that employees are knowledgeable about their benefits. Important information to cover includes the value of the plans offered, why changes have to be made, and the fundamental financial costs of the plans. IV. TYPES OF BENEFITS Some benefits are mandated by laws and government regulations, while others are offered voluntarily by employers as part of their HR strategies. Figure 8-4 shows how the typical employer dollar is spent on different types of benefits. A. Government-Mandated Benefits – include Social Security, unemployment insurance, workers’ compensation, unpaid leaves (under the Family Medical Leave Act), extended health-care coverage to employees leaving the organization (under the Consolidated Omnibus Budget Reconciliation Act, COBRA), and coverage for new employees previously covered by a health plan and privacy rights for medical records under the Health Insurance Portability and Accountability Act (HIPPA). Additional mandated benefits have been proposed but not adopted. A major reason for additional mandated benefits is to shift the social costs for health care and other expenditures from the federal/state government to the employers. B. Voluntary Benefits – Organizations are recognizing the need to provide greater security benefits support to workers with widely varied personal circumstances. As such, there has been evidenced growth in flexible benefits and cafeteria benefit plans. Figure 8.5 lists several types of mandated and voluntary benefits. V. SECURITY BENEFITS A. Workers’ Compensation – Workers’ compensation provides benefits to persons injured on the job. State laws require most employers to supply coverage by purchasing insurance from a private carrier, a state insurance fund, or by self-insurance. Employees give up the right of legal actions and awards in exchange for this coverage. B. Unemployment Compensation -- Established as part of the Social Security Act of 1935, unemployment compensation is a mandated benefit offered in every state. Provisions differ significantly from state to state. The percentage of tax paid by individual employers is based on “experience rates,” which reflect the number of claims filed by workers who leave. Workers fired for misconduct or those not actively seeking employment generally are ineligible for unemployment. C. Severance Pay – Severance pay is a security benefit offered voluntarily by employers to employees who jobs are eliminated or who leave by mutual agreement with their employers. VI. HEALTH-CARE BENEFITS Employers provide a variety of health-care and medical benefits, usually through insurance coverage. The most common ones cover employee and dependent medical, dental, prescription drug, and vision-care expenses. A. Increases in Health Benefits Costs - The costs of health-care insurance have been increasing significantly faster than inflation or workers’ earnings for several decades. Employers are finding that dealing with health care benefits is time-consuming and expensive. This is especially frustrating when employers perceive that employees seem to take their health benefits are granted. Two major groups that have contributed to the increasing costs are uninsured workers and retirees. B. Controlling Health-Care Benefits Costs – Employers are taking a number of approaches to controlling their costs. 1. Changing Co-Payments and Employee Contributions – As health care costs rise, employers have tried to shift some of the cost to employees. A co-payment strategy requires employees to pay a portion of the cost of insurance premiums, medical care, and prescription drugs. These changes are facing significant resistance by employees, especially those who have had first-dollar coverage (all expenses have been paid by the employee’s insurance) previously. 2. Using Managed Care – Managed care consists of approaches that monitor and reduce medical costs using restrictions and market system alternatives. These plans emphasize primary and preventive care, the use of less expensive providers, restrictions on some treatments, and negotiated prices with providers. The most prominent approach is the preferred provider organization (PPO), a health-care provider that contracts with an employer or employer group to provide services at a competitive rate. Employees have the freedom to go to other providers if they want to pay the difference. Point-of-service plans are somewhat similar, offering financial incentives to encourage employees to use designated medical providers. Another common approach is a health maintenance organization (HMO), which provides services for a fixed period on a pre-paid basis. The employer pays a flat fee per employee/family and then the covered individual may go to the HMO as often as needed. C. Consumer-Driven Health Plans – A consumer-driven health (CDH) plan, also called defined-contribution health plans, provides financial contributions to each employee’s account to cover their own health-related expenses and identifies a number of health-care alternatives that are available. Individual employees select from those health-care alternatives provided and pay for part of the costs from their accounts. 1. Health Savings Accounts – Health saving accounts (HSAs) are often combined with high-deductible insurance to cut employer costs. Both employees and employers can make contributions to an account. Employees can set aside pre-tax amounts for medical care into an HAS. Unused amounts can be rolled over annually for future health expenses. D. Health-Care Preventive and Wellness Efforts – Many employers offer programs to educate employees about health-care costs and how to reduce them. Some employers also offer financial incentives to reward employees that stop smoking, lose weight, and participate in exercise programs. E. Health-Care Legislation - Federal and state health-care laws now provide some protection to employees. Two important laws offer protection to employees who leave their employer: COBRA and HIPPA. 1. COBRA Provisions - The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that most employers (except churches and the federal government) with 20 or more employees offer extended health-care coverage to the following groups: •Employees who voluntarily quit •Widowed or divorced spouses and dependent children of former or current employees •Retirees and their spouses whose health-care coverage ends. 2. HIPAA Provisions - The Health Insurance Portability and Accountability Act (HIPAA) of 1996 allows employees to switch their health insurance plan from one company to another to obtain the new health coverage, regardless of preexisting conditions. One of the greatest impacts of HIPAA comes from numerous provisions around the privacy of medical information. VII. RETIREMENT BENEFITS The aging of the workforce, combined with the declining retirement age, are creating a greater concern for retirement benefits for employers, employees, and retired employees. A. Social Security – The Social Security Act of 1935, with subsequent amendments, established a system providing for old age, survivor’s, disability, and retirement benefits. Employees and employers hare in the cost of Social Security through a tax on employees’ wages or salaries. B. Pension Plans – A pension plan is a retirement program established and funded by employers and employees, and is not a required benefit offering. 1. Defined-Benefit Pension Plans – Also referred to as a “traditional” pension plan, a defined-benefit plan is one in which the employer makes the contributions, and the employee will get a promised defined amount each month upon retirement. Such plans are based on age and service. These plans are no longer the norm. 2. Defined-Contribution Pension Plans – In a defined-contribution plan, the employer makes an annual payment to an employee’s pension account. The key to this plan is the contribution rate; employee retirement benefits depend on fixed contributions and employee earnings levels. Profit-sharing plans, employee stock ownership plans (ESOPs), and 401(k) plans are common defined-contribution plans. Because these plans hinge on the investment returns on the previous contributions, the returns can vary according to various factors. C. Employee Retirement Income Security Act – Passed in 1974, its purpose is to regulate private pension plans so that employees are ensured that their pension benefits will be paid to them when they retire. This act prohibits discrimination in which employees are offered retirement plans and sets minimum funding requirements. VIII. FINANCIAL AND FAMILY ORIENTED BENEFITS Employers may offer workers a wide range of special benefits that provide financial support to employees. A major advantage to workers is that many of these benefits are not taxed as income. A. Insurance Benefits – The most common types of insurance benefits offered by employers are life insurance, disability insurance, long-term care insurance, and legal insurance. There are a wide variety of other financial benefits provided by employers. A credit union sponsored by the employer provides saving and lending services for employees. Purchase discounts allow employees to buy goods or services at reduced rates. Employee thrift plans, savings plans, or stock investment plans of different types may also be available. B. Family-Oriented Benefits - The work and life balance equation has grown more challenging, as evidenced by a growth in dual-career couples, single-parent households, and increasing work demands on many workers. As a result, some employers are placing increasing emphasis on family-oriented benefits, and are required to comply with certain federal regulations such as the Family and Medical Leave Act. 1. Family and Medical Leave Act (FMLA) –This act covers all federal, state, and private employers with 50 or more employees who live within 75 miles of the workplace. Employees must have worked at least 12 months and 1,250 hours in the previous year to be eligible for leave. 2. FMLA Leave Provisions - The law requires employers to allow eligible employees to take a total of 12 weeks’ leave during any 12-month period for one or more of the following: •Birth, adoption, or foster-care placement of a child •Caring for a spouse, child, or parent with a serious health condition •Serious health condition of the employee. A significant percentage of employees have been taking family and medical leave since the passage of the act. However, many employers are failing to comply with some of its requirements, resulting in numerous lawsuits. C. Child-Care Assistance – Employers are addressing the child-care issues in the following ways: •Providing referral services to help parents locate child-care providers •Establishing discounts at day-care centers, which may be subsidized by the employer •Arranging with hospitals to offer sick-child programs partially paid for by the employer •Developing after-school programs for older school-age children, often in conjunction with local public and private school systems •Offering on-site child-care centers IX. TIME-OFF BENEFITS Time-off benefits represent a significant portion of total benefits costs. Employers give time off for a variety of circumstances such as paid lunch breaks, paid rest breaks, holiday pay, vacation pay, and various leaves of absence. A. Holiday and Vacation Pay – U.S. employers commonly offer 10 to 12 paid holidays annually. Employers in most other countries are required to provide a significantly higher number of holidays. Paid vacations are another common benefit. The amount of time off is usually based on the employees’ lengths of service. Some employees lose any vacation time that they do not take during the year; while others may be able to carry forward the time to the next year or the firm might “buy back” unused vacation time. B. Sick Leave – Over 50% of all U.S. workers receive paid sick leave, however, this is less than most other developed countries. Some employers allow employees to accumulate unused sick leave while other pay their employees for unused sick leave. C. Paid-Time-Off Plans – A paid-time-off (PTO) plan combines all sick leave, vacation time, and holidays into a total number of hours or days that employees can take off with pay. Some employers have found that these plans reduce absenteeism, are easier to administer, are an aid for recruiting and retaining employees, and increase employee understanding and use of leave policies. CASE 1 – INCENTIVE PLANS FOR FUN AND TRAVEL For incentive plans to pay off for companies, the plans must stimulate employee interest and motivate them to perform well. Firms in several different industries have been creative in developing incentive plans, which have resulted in the companies receiving Top Motivator Awards from Incentive magazine. A look at two of the recent winners illustrates the variety of plans being used. Houston-based Pappas Restaurants has over 10,000 employees working in restaurants such as Pappadeux Seafood Kitchen, Pappas Pizza, and others. As a key part of creating and maintaining a “fun culture,” Pappas has created an unusual job as part of its management structure, a Director of Fun Stuff. This individual’s role is to develop and conduct activities that reinforce the performance-oriented, fun culture that Pappas wants. By stressing this culture, the firm hopes to ensure that both customers and employees enjoy Pappas restaurants. One successful incentive program is called “Rising Stars.” Employees working as bartenders, food servers, and in other customer contact jobs receive $20 gift certificates weekly for such actions as favorable customer comments, attendance, and working extra shifts as needed. But employees without primary customer roles are not forgotten, because Pappas has a “Kitchen Superstars” program for its dishwashers, cooks, and clean-up workers, who can receive gift certificates also. Purchased from well known retailers such as Target, Blockbuster, and other retailers located near Pappas restaurants, the gift certificates provide immediate reinforcement for positive actions, as well as providing an easily used reward. In a very different work setting, Washington Mutual, an insurance and financial services firm based in Seattle, has used sales incentive programs effectively. One successful program was called “Fresh Perspectives.” To motivate sales employees to generate a greater number and volume of home loans, the company developed several different incentive plans. In the primary plan, the firm’s sales representatives accumulated points for loan product sales. Sales results for employees were tracked and posted monthly so that everyone knew where they were in comparison to other sales representatives. The 400 top-producing salespeople became members of the President’s Club. To provide special recognition of their accomplishments, the President’s Club members were rewarded with a five-day trip to Cancun. Unique entertainment events, jungle safaris, and other activities were participated in by the club members and key executives. The Cancun trip was both an incentive to encourage performance and a reward for the top sales performers. Numerous other firms spend considerable time and money on various incentive programs. The key focus of those programs, as well as the ones used at Pappas Restaurants and Washington Mutual, are to motivate and reward Performance.* Questions 1. Why might the use of incentives in the form of gift certificates be better than just providing cash to employees? 2. What are some advantages and disadvantages of a sales incentive program in which the top performers receive a trip or other large reward, while other sales individuals receive lesser or different types of rewards? _______ *Based on Kenneth Hein, “Motivators of the Year,” Incentive, October 2003, 40– 44. Suggested Answers to Case 1 Questions 1. Why might the use of incentives in the form of gift certificates be better than just providing cash to employees? Often cash is spent to pay bills or just used without any remembrance of what was bought with the money. Cash is often just combined with cash in the employee’s pocket. Also, if cash is given in an employee’s pay check the taxes and other deductions seriously reduce the “take home” amount. With a gift certificate the employee can buy something and think that the company bought that gift for the employee. The employee might buy something that they really wanted or something that will last a long time and the connection to the employer could be special and long-term. 2. What are some advantages and disadvantages of a sales incentive program in which the top performers receive a trip or other large reward, while other sales individuals receive lesser or different types of rewards? The main advantage of a sales incentive program where the top performers receive a large reward compared to others is that the larger reward might motivate others to strive to achieve that level of reward. Another advantage would be that the larger reward makes the top performers feel special and feel appreciated by the organization. The main disadvantage of a sales incentive program where the top performers receive a large reward compared to others is that the employees receiving the lesser rewards might be jealous. Another disadvantage is that if employees are competing against each other for a larger award they might be less likely to work together as a team. This would be especially true if all employees could not receive the larger reward, just a specified number. CASE 2 – DELIVERING BENEFITS Employers of all sizes and in a variety of industries have made changes in their benefit programs to deal with rising costs. How FedEx Corporation, a worldwide transportation and shipping firm, responded to the cost pressures resulted in the firm receiving the Optimas award from Workforce Management magazine. The decisions made by FedEx provide some insights on approaches that other employers may wish to consider. For years FedEx offered health-care benefits only through managed care programs such as HMOs and PPOs. But beginning in 2004, FedEx established a program that allows employees to use health-care providers inside or outside of the designated network of providers. Employees who want “freedom of choice” have a higher co-payment and payroll deduction. Also, FedEx expanded its health benefits plan to have four different levels of coverage, so that employees can choose a benefits package that fits their needs and their personal budgets. But FedEx does not just provide health-care benefits; it also has established services to help employees improve their overall health. Many FedEx locations have wellness centers. Because many FedEx employees lift boxes and packages, the firm established a lower-back pain program to help reduce back injuries. For employees with chronic health problems such as arthritis, asthma, and diabetes, there is a disease management program to give them guidance, which also reduces their use of health-care services. A telephone hotline staffed by nurses is available around the clock for employees to call with health-related questions. FedEx uses a variety of means to communicate benefits information, including an internal TV network that features a variety of health-related programs. Employees can also access information electronically or contact a benefits call center. Overall, FedEx employees have responded positively to these health-related efforts, despite increases in their payroll deductions for health benefits. It is likely that FedEx will have to keep making changes in its benefits because of increasing health-care costs. But through planning, continuing communication, and education, FedEx will likely continue delivering its healthcare benefits to meet both the company’s and the employees’ needs.* Questions 1. Why are multiple health-care plans important for FedEx in slowing down increases in the cost of benefits? 2. Discuss how the availability of disease management programs, training programs, and a nursing hotline might help with health benefits costs. ___ *Based on “Choice Offsets Cost for FedEx Workers,” Workforce Management, www.workforce.com. Suggested Answers to Case 2 Questions 1. Why are multiple health-care plans important for FedEx in slowing down increases in the cost of benefits? Having multiple healthcare plans gives employees many more choices for their healthcare plan. This has resulted in FedEx employees responding positively despite increases in their payroll deductions. FedEx has been able to offer more choices for employees, but keep their costs down by having employees pay more in payroll deductions. 2. Discuss how the availability of disease management, training programs, and a nursing hotline might help with health benefits costs. By establishing services to help employees improve their overall health, employees will stay healthier and not need health care services as much. This can result in lower premium costs for FedEx. Also, having healthier employees means that employees will be less likely to miss work due to illness or injury and less likely to be hospitalized or need to take medical disability leaves. Chapter 9 Risk Management and Employee Relations Chapter Outline and Instructor Notes Suggested Content Coverage The focus of HR managers on risk management and worker protection has grown significantly in the past several years. I. RISK MANAGEMENT In the U.S. and most developed nations, the concept of using prevention and control to minimize or eliminate a wide range of risks in workplaces has been expanding. A. Nature of Risk Management – Risk management involves responsibilities to consider physical, human, and financial factors to protect organizational and individual interests. For HR management, risk management includes a number of areas, as Figure 9-1 depicts: workplace safety and health, employee health/wellness promotion, workplace and worker security, and disaster preparation and recovery planning. . II. NATURE OF HEALTH, SAFETY, AND SECURITY The terms health, safety, and security are closely related. Broadly speaking, health refers to the general state of physical, mental, and emotional well-being. Safety refers to protecting the physical well-being. Safety refers to the condition in which the physical well-being of people is protected. The purpose of safety programs is to prevent work-related injuries and accidents. The purpose of security is protecting employees and organizational facilities. Growing workplace violence has made security at work an even greater concern for employers and employees alike. A. Current State of Health, Safety, and Security – In the U.S. about 4.2 million non-fatal injuries and illnesses occur at work annually. Specific rates vary by industry and employer size. Accident costs have gone up faster than inflation because of the rapid increase in medical costs, even though the total number of accidents has been decreasing for some time. Global safety and health laws vary from country to country, ranging from virtually non-existent to more stringent than those in the U.S. III. LEGAL REQUIREMENTS FOR SAFETY AND HEALTH Employers must comply with a variety of federal and state laws as part of their efforts when developing and maintaining healthy, safe, and secure workforces and working environments. A. Workers’ Compensation - Under workers’ compensation laws, employers contribute to an insurance fund to compensate employees for injuries received while on the job. Premiums reflect the accident rates of employers. Workers’ compensation coverage has been expanded in many states to include emotional impairment that may have resulted from physical injury, as well as job-related strain, stress, anxiety, and pressure. Workers’ compensation costs have become a major issue for employers due to rising medical and litigation expenses. B. Americans With Disabilities Act and Safety Issues – Employers may try to return injured workers to “light-duty” work in order to reduce workers’ compensation costs. When making accommodations for these employees, the employer may undercut what are really essential job functions, or be required to make similar accommodations for job applicants with disabilities. C. Child Labor Laws – as set forth in the Fair Labor Standards Act, employers are prohibited from placing persons under the age of 18 in “hazardous” occupations. IV. OCCUPATIONAL SAFETY AND HEALTH ACT Passed in 1970, the intent of the Occupational Safety and Health Act was “to assure, so far as possible every working man or woman in the Nation safe and healthful working conditions and to preserve our human resources.” Farmers having fewer than 10 employees are exempt from this act. A. OSHA Enforcement Standards – Specific standards were established to regulate equipment and working environments. A number of provisions have been recognized as key to employers’ efforts to comply with OSHA, two of which are as follows: •General duty: The act requires that the employer has a “general duty” to provide safe and healthy working conditions, even in areas where OSHA standards have not been set. •Notification and posters: Employers are required to inform their employees of OSHA safety and health standards and to display OSHA posters in prominent locations in the workplace. 1. Hazard Communication – OSHA requires manufacturers, importers, distributors, and users of hazardous chemicals to evaluate, classify, and label hazardous substances. This information is contained in material safety data sheets (MSDSs), and must be made available to employees, their representatives, and health professionals. The MSDSs also indicate actions to be taken should someone come in contact with the sub¬stances. 2. Bloodborne Pathogens – OSHA has issued standards regarding exposure to hepatitis B virus (HBV), human immunodeficiency Virus (HIV), and other bloodborne pathogens. Regulations require employers with the most pronounced risks to have written control and response plans and to train workers in following the proper procedures. 3. Personal Protective Equipment – One goal of OSHA has been to develop standards for personal protective equipment (PPE). Employers are required to provide PPE to all employees who work in a hazardous environment or who come into contact with hazardous chemicals and substances on the job. B. Ergonomics and OSHA – Ergonomics is the study and design of the work environment to address physiological and physical demands on individuals. Ergonomic studies look at such factors as fatigue, lighting, tools, equipment layout, and placement of controls. For a number of years, OSHA focused on the large number of work-related injuries due to repetitive stress, repetitive motion, cumulative trauma disorders, carpal tunnel syndrome, and other causes OSHA has approached ergonomics concerns by adopting voluntary guidelines for specific problem industries and jobs, gone after industries with serious ergonomic problems, and given employers tools for identifying and controlling ergonomics hazards. C. OSHA Record-Keeping Requirements – OSHA has established a standardized system for recording occupational injuries, accidents, and fatalities. Some organizations are not required to keep detailed records, but other firms must complete OSHA Form 300 to report workshop accidents and injuries. Four types of injuries or illnesses are defined by the Occupational Safety and Health Act: injury- or illness-related deaths, lost-time or disability injuries, medical care injuries, and minor injuries that require first aid treatment. D. OSHA Inspections - The Occupational Safety and Health Act provides for on-the-spot inspections by OSHA compliance officers or inspectors. Employers may require the inspector obtain a warrant before inspecting the workplace, but warrants are easily attained since they do not require the inspector to show probable cause. Because the agency has so many work sites to inspect, there is a relatively small chance for inspection. Some criticize that many employers pay little attention to OSHA requirements for this reason. V. SAFETY MANAGEMENT Well-designed and well-managed safety programs can pay dividends in reducing accidents and the associated costs, such as workers’ compensation and possible fines. A. Organizational Commitment and a Safety Culture – Support by management and continuing management/employee relations are two key aspects affecting the extent of occupational accidents. Figure 9.2 shows three approaches used by employers in managing safety: organizational, engineering, and individual. B. Safety Policies, Discipline, and Recordkeeping – Designing safety policies and rules and disciplining violators are important components of safety efforts. It is important to frequently reinforce the need for safe behavior and supply feedback on positive safety practices. Recordkeeping about accidents and their causes is important for benchmarking safety performance against other employers. C. Safety Training and Communication – Good safety training reduces accidents. Because untrained workers are more likely to have accidents, regular safety training should occur to communicate safety procedures, reasons for accidents, and emergency procedures. D. Safety Committees – Often composed of one member of HR and workers from a variety of levels and departments, the safety committee regularly meets to conduct safety reviews and make recommendations for changes necessary to avoid future accidents. E. Inspection, Investigation, and Evaluation – Employers should regularly inspect the workplace and address problem areas immediately. Accidents should be investigated by the safety committee or safety coordinator as soon as possible after an accident to accurately identify the physical and environmental conditions that contributed to the accident. VI. EMPLOYEE HEALTH Employee health problems may range from minor illnesses such as colds to serious illnesses related to the jobs performed. Employers face a variety of workplace health issues. A. Substance Abuse – Substance abuse is the use of illicit substances or misuse of controlled substances, alcohol, or other drugs. Most large companies test applicants and employees for drug use. The Americans with Disabilities Act (ADA) specifies that current users of illegal drugs are not considered disabled under the act. However, those addicted to legal substances and prescription drugs, and those who are recovering substance abusers, are. To encourage employees to seek help, employers often give employees a firm-choice option whereby the employee is offered a choice between help and discipline. B. Emotional/Mental Health - A variety of emotional/mental health issues arise at work that must be addressed by employers. Some of emotional/mental health illnesses, such as schizophrenia and depression are considered disabilities under the ADA. Employers must be cautious in disciplinary policies when such illnesses have work-related problems. Depression is another common emotional/mental health concern. Often, employees who appear to be depressed are guided to employee assistance programs and helped with obtaining medical treatment. C. Workplace Air Quality – Poor air quality may occur in “sealed” buildings and when airflow is reduced to save energy and cut operating costs. Also, inadequate ventilation, as well as airborne contamination from carpets, molds, copy machines, adhesives, and fungi, can cause poor air quality and employee illnesses. D. Smoking at Work - Smoking at work remains controversial. As a result of health studies, complaints by nonsmokers, and state laws, many employers have established no-smoking policies throughout their workplaces. E. Health Promotion – Employers should move beyond simply providing healthy working conditions and begin promoting employee health and wellness in other ways. Health promotion efforts can range from providing information and increasing employee awareness of health issues to creating an organizational culture supportive of employee health enhancements. 1. Wellness Programs – Wellness programs are designed to maintain or improve employee health before problems arise by encouraging self-directed lifestyle changes. 2. Employee Assistance Programs – An employee assistance program (EAP) provides counseling and other help to employees having emotional, physical, or other personal problems. In such a program, an employer contracts with a counseling agency and employees who have problems may then contact the agency, either voluntarily or by employer referral. VII. SECURITY CONCERNS AT WORK Over the past decade, providing security for employees has grown in importance. A. Workplace Violence – Workplace violence in workplaces is increasing. There are a number of warning signs and characteristics of a potentially violent person at work. Things such as humiliation, rejection, ending of a marriage, loss of a lawsuit, or termination of employment may make a difficult employee turn violent. 1. Management of Workplace Violence – The increase in workplace violence has led many employers to develop policies and practices for preventing and responding to workplace violence. Training of managers and others is crucial as well as creating a violence response team composed of security personnel, key managers, HR staff members, and selected employees. B. Security Management – HR managers often have responsibility for security programs, or they work closely with security managers or consultants to address employee security issues. It is also crucial to provide adequately trained security personnel in sufficient numbers. Controlling access to the physical facilities of the organization and to computer systems are key parts of security management. C. Employee Screening and Selection – A key to providing security is screening job applicants. Employers are limited in what can be done, and must avoid violating federal EEO laws and the Americans with Disabilities Act. However, firms that do not screen employees adequately may be held liable if the employee commits crimes later. VIII. DISASTER PREPARATION AND RECOVERY PLANNING During the past several years, a number of significant disasters have occurred. All of these situations have led to HR management having an expanded role in disaster planning. A. Disaster Planning – Three components must be addressed by HR as depicted in Figure 9-3: organizational assessment, human impact planning, and disaster training. 1. Organizational Assessment - A crucial part of organizational assessment is to establish a disaster planning team, often composed of representatives from HR, security, IT, operations, and other areas. 2. Human Impact Training - Human impact planning includes backup databases for numerous company details, including employee contact information. Who will take responsibilities for various duties and how these efforts will be coordinated must be identified. 3. Disaster Training - Disaster training covers a wide range of topics but is not sufficient without conducting exercises for managers and employees to use the training. . IX. EMPLOYEE RELATIONS There are three interrelated HR issues considered a part of employee relations: employee rights, HR policies, and discipline. A. Employee Rights and Responsibilities - Rights are powers, privileges, or interests that belong to a person by law, nature, or tradition. The policies that an organization enacts help to define employees’ rights at that employer. Similarly, discipline for those who fail to follow policies is often seen as a right of employers. Rights are offset by responsibilities, which are obligation to perform certain tasks and duties. Employees’ statutory rights are the result of specific laws or statutes passed by federal, state, and low government. 1. Employment Contracts – A formal employment contract outlines the details of employment. Employment contracts have traditionally been used for executives and senior managers, but are increasingly used for other skilled employees. Employment contracts may include non-compete agreements, which prohibit individuals who leave an organization from working with an employer in the same line of business for a specified period of time. 2. Implied Contracts – The idea that a contract (even an implied or unwritten one) exists between individuals and their employers affects the employment relationship. When an employer fails to follow up on the implied promises, the employee may pursue remedies in court. B. Rights Affecting the Employment Relationship - Several concepts from law and psychology influence the employment relationship: employment-at-will, just cause, due process, and distributive and procedural justice. 1. Employment-at Will (EAW) – Employment-at-will is a common law doctrine stating that employers have the right to hire, fire, demote, or promote whomever they choose, unless there is a law or contract to the contrary. Conversely, employees can leave the company under the same constraints. 2. Wrongful Discharge – Wrongful discharge is the termination of an individual’s employment for reasons that are illegal or improper. Employers should take precautions to reduce wrongful discharge liabilities. A constructive discharge is deliberately making conditions intolerable to get an employee to quit. 3. Just Cause – Just cause is a reasonable justification for taking employment-related action. Just cause for disciplinary actions such as dismissal can usually be found in union contracts, but not in at-will situations. 4. Due Process – Due process, like just cause, is about fairness. Due process is the requirement that the employer use a fair process to determine if there has been employee wrongdoing and that the employee has an opportunity to explain and defend his or her actions. Figure 9-4 shows some factors to be considered when evaluating just cause and due process. 5. Alternative Dispute Resolution – Arbitration is a process that uses a neutral third party to make a decision, thereby eliminating the necessity of using the court system. Some firms use compulsory arbitration, which requires employees to sign a pre-employment agreement stating that all disputes will be submitted to arbitration, and that employees waive their rights to pursue legal action until the completion of the arbitration process. Other employers allow their employees to appeal disciplinary actions to an internal committee of employees. This panel reviews the actions and makes recommendations or decisions. X. BALANCING EMPLOYEE AND EMPLOYER RIGHTS Employees join organizations in the U.S. and some other countries with certain rights, including freedom of speech, due process, and protection against unreasonable search and seizure. Over the years, laws and court decisions have identified limits on them in the workplace. A. Employees’ Free Speech Rights - The constitutional right of freedom of speech is not an unrestricted one in the workplace. Three areas where this constitutional right has collided with employers’ restrictions are controversial views, blogs and wikis, and whistle-blowing. Individuals who report real or perceived wrongs committed by their employers are called whistle-blowers. No comprehensive whistle-blowing law fully protects the right to free speech of both public and private employees. 1. Privacy Rights and Employee Records – The Americans with Disabilities Act (ADA) requires that all medical-related information be maintained separately from all other confidential files. Additionally, it is important that specific access restrictions and security procedures for employee records be established in order to protect employers from potential liability for improper disclosure of personal information. B. Workplace Monitoring – Several court decisions have granted the right of both private-sector and government employers to search desks, files, lockers, and computer files without search warrants if they believe that work rules have been violated. Also, many employers have developed and disseminated Internet use policies. 1. Monitoring of E-Mail and Voice Mail – Employers have a right to monitor what is said and transmitted through their e-mail and voice-mail systems. 2. Substance Abuse and Drug Testing – Unless state or local law prohibits testing, employers have a right to require applicants or employees to submit to a drug test. C. HR Policies, Procedures, and Rules - HR policies, procedures, and rules greatly affect employee rights and discipline. Policies act as general guidelines that focus organizational actions. Procedures provide customary methods of handling activities, and are more specific than policies. Rules are specific guidelines that regulate and restrict the behavior of individuals. D. Employee Handbooks - give employees a reference source for communicating information about workplace culture, benefits, attendance, pay practices, safety issues, and discipline. E. Employee Discipline - Discipline is a form of training that enforces organizational rules. The disciplinary system can be viewed as an application of behavior modification to a problem or unproductive employee. 1. Positive Discipline Approach - builds on the philosophy that violations are actions that can be constructively corrected without penalty. Managers focus on fact-finding and guidance to encourage desirable behaviors, rather than using penalties to discourage undesirable behaviors. 2. Progressive Discipline Approach – incorporates a sequence of steps that are designed to change the employee’s inappropriate behavior. Figure 9.5 shows a typical progressive discipline process, which includes verbal and written reprimands and suspension before resorting to dismissal. The final stage in the discipline process is termination. The positive and progressive approaches clearly provide employees the opportunity to correct deficiencies before being dismissed, which is more likely to appear equitable and defensible to a jury. CASE – COMMUNICATING SAFETY AND WELLNESS SUCCESS Many different organizations in various industries have focused on safety and health for employees. Two examples in the communications industry illustrate how such efforts have been successful. NorthStar Communications, based in Birmingham, Alabama, provides engineering, network, and infrastructure services to numerous communications industry firms. With 500 employees, NorthStar has emphasized safety to all managers and employees. The success of its safety efforts resulted in NorthStar’s efforts being designated “Safety Program of the Year” by an international safety forum. To emphasize the importance of safety, every NorthStar individual signs a safety pledge upon being employed. After hire, all employees are expected to identify any potential safety problems and assist co-workers as needed. A safety guidebook is posted on the firm’s Website, with a special section being set for safety training and information. A safety newsletter is posted every month also. The success of NorthStar’s safety efforts is evident. Compared with an industry incident rate of 9.6%, NorthStar’s rate is less than 1%. In a recent year the firm had zero lost workdays, which is extremely unusual. The safety focus of NorthStar is paying off for the employees in terms of their personal safety, as well as maintaining low safety costs for the firm. A much larger and well-known communications firm is Cox Communications, with thousands of employees throughout the United States. At its Orange County, California, operations with 750 employees, emphasizing safety and health has produced significant results. The firm has had a 93% decline in workers’ compensation incidents, and a 94% reduction in the average worker compensation claim costs over 4 years. Safety and wellness are linked at Cox Communications. The firm offers a variety of activities to support its efforts. Health fairs, onsite physical fitness programs, stretching classes for employees, and other efforts have gotten extensive individual employee involvements. Workstations are ergonomically reviewed and changed as needed. A safety incentive program has been successful in rewarding employees for improved safety and health. The efforts of these two different communications industry firms illustrate how safety and health are crucial parts of effective HR management. The firms, their staff members, and even customers are benefiting from these efforts.* Questions 1. Identify how these two firms have incorporated elements of safety management and health promotion described in the chapter into their programs. 2. Discuss how the reductions in injuries can be used to justify the expenditures on the various programs at NorthStar and Cox. _____ * Based on “Safety Is a Way of Life for These Employees,” Best Practices in HR, Business & Legal Reports, Inc., October 13, 2006, 3; and Patricia Vowinkel, “Hog Wild for Health,” Human Resource Executive, February 2006, 61– 63. Suggested Answers to Case Questions 1. Identify how these two firms have incorporated elements of safety management and health promotion described in this chapter into their programs. Safety management includes safety policies, discipline, and recordkeeping. It also includes safety training and committees. Health promotion is a supportive approach to facilitate and encourage employees to enhance healthy actions and lifestyles. Wellness programs are designed to maintain or improve employee health before problems arise. NorthStar has every employee sign a safety pledge upon being employed and all employees are expected to identify any potential safety problems and assist co-workers as needed. A safety guidebook is posted on the firm’s website with a special section for safety training and information and a safety newsletter is posted every month. Cox Communications holds health fairs, on-site physical fitness programs, stretching classes for employees, and other efforts have gotten extensive individual employee involvements. Workstations are ergonomically reviewed and changed as needed. A safety incentive program has been successful in rewarding employees for improved safety and health. 2. Discuss how the reductions in injuries can be used to justify the expenditures on the various programs in NorthStar and Cox. A cost-benefit analysis could be conducted yearly to track any decreases in medical costs, workplace illnesses, injuries, absenteeism, poor nutrition, obesity, and smoking, heart disease, and cholesterol levels. Employee participation levels should also be considered. Most employers report that the benefits do outweigh the costs. Chapter 10 Union/Management Labor Relations Chapter Outline and Instructor Notes Suggested Content Coverage 1. Even though union membership has been changing in the U.S., labor relations must be considered an important part of HR considerations. How the economic and workforce changes during the next decade will influence unionization and the nature of unions will be interesting to observe. I. UNION-MANAGEMENT LABOR RELATIONS A union is a formal association of workers that promotes the interest of its members through collective action. A. Why Employees Unionize – Research shows that employees join unions for two primary reasons: (1) they are dissatisfied with how they are treated by their employer and (2) they believe that unions can improve their work situations. Figure 10.1 shows the major factors triggering unionization - compensation, working environment, management style, and employee treatment. HR professionals and operating managers must be attentive and responsive to employees in order to deter unionization. B. Why Employers Resist Unions – Employers usually would rather not deal with unions because doing so constrains what managers can and cannot do in a number of areas. C. Union Membership Globally – In some countries, unions either do not exist at all or are relatively weak, but in others, unions are extremely strong and are closely tied to political parties. Codetermination, which is common in European countries, is a practice whereby firms must have union or worker representatives on their Boards of Directors. The union movement in the U.S. has some different approaches from those used in other countries. In the U.S. the key emphases are economic issues, organization by kind of job and employer, collective agreements as “contracts,” and competitive relations. II. UNION MEMBERSHIP IN THE UNITED STATES On the whole, union membership in the U.S. has declined in the last several decades, even though more people are employed than previously. There has been, however, some increase in union membership for many lower-paid workers in the past several years. A. Reasons for U.S. Union Membership Decline – Several factors have contributed to the decline of unions: deregulation, foreign competition, a larger number of people looking for jobs, and a general perception by firms that dealing with unions is expensive compared with the nonunion alternative. Also, management has taken a more activist stance against unions than during the previous years of union growth. 1. Geographic Changes – Over the past decade, job growth in the U.S. has been the greatest in the Southern, Southwest, and Rocky Mountain states. These areas tend to have more “employer-friendly” and small percentages of unionized workers. 2. Industrial Changes – There has been a major shift of jobs from manufacturing, construction, and mining to service industries. Figure 10-2 shows that non-governmental union members are heavily concentrated in transportation, utilities, and other “industrial” jobs. 3. Workforce Changes – Workforce and economic changes have contributed to the decline in union representation of the labor force. The primary growth in jobs in the U.S. has been in white collar jobs in the technology, financial, and other service industries. Also, the percentage of women in the U.S. workforce has grown. Unions have not been as successful in organizing women workers or in organizing white collar workers. B. Public-Sector Unionism – The government sector is the most highly unionized part of the U.S. workforce. Since many of these workers are critical to public health and safety, such as police officers and firefighters, more than 30 states have laws prohibiting work stoppages by public employees. C. Union Targets for Membership Growth – Unions are tending to focus on workers in the retail, hospitality, home health care, and other service industries. Also, unions are targeting professionals who have turned to unionization including engineers, physicians, nurses, and teachers. On the other end of the wage scale, unions are targeting low-skill workers such as janitors, building cleaners, nursing home aides, and meatpacking workers. D. Union Structure in the U.S. – U.S. labor is represented by many kinds of unions. A craft union is one whose members do one type of work, often using specialized skills and training. An industrial union includes many persons working in the same industry or company, regardless of jobs held. 1. AFL-CIO Federation - The broadest level of union structure is the federation, which is a group of autonomous national and international unions. The most prominent federation in the U.S. is the AFL-CIO (American Federation of Labor-Congress of Industrial Organizations) with about 10 million members. However, in 2005 several prominent unions such as the Teamsters left the AFL-CIO to establish the CTWF (Change to Win Federation). The CTWF has about 6 million members. 2. Local Unions - Local unions typically have business agents and union stewards. A business agent is a full-time union official who operates the union office and assists union members. A union steward is an employee who is elected to serve as the first-line representative of unionized workers. III. BASIC LABOR LAWS: “NATIONAL LABOR CODE” Three acts constitute what has been labeled the “National Labor Code”: (1) the Wagner Act, (2) the Taft-Hartley Act, and (3) the Landrum-Griffin Act. Figure 10-3 indicates the primary focus of each act. The Civil Service Reform Act and the Postal Reorganization Act also affect governmental aspects of union/management relations. A. Wagner Act (National Labor Relations Act) - was an outgrowth of the Great Depression, and is recognized as pro-union. In effect, this act established that the official policy of the U.S. government was to encourage collective bargaining, and established the right of workers to organize. 1. Unfair Labor Practices - The Act prohibited employers from utilizing five unfair labor practices: •Interfering with, restraining, or coercing employees in the exercise of their rights to organize and bargain collectively •Dominating or interfering with the formation or administration of a labor organization •Encouraging or discouraging membership in any labor organization by discriminating with regard to hiring, tenure, or conditions of employment •Discharging or otherwise discriminating against an employee who filed charges or gave testimony under the act •Refusing to bargain collectively with representatives of the employ¬ees National Labor Relations Board (NLRB) – The NLRB enforces the provisions of the Wagner Act and subsequent labor relations acts. Primary functions of the NLRB include conducting unionization elections, investigating complaints by employers or unions through the fact-finding process, issuing opinions on its findings, and prosecuting violations in court. Members are appointed by the President of the U.S. and confirmed by the Senate.
B. Taft-Hartley Act (Labor-Management Relations Act) – was passed in 1947 to answer the concerns of many who felt that unions had become too strong. Viewed as a pro-management act, the act forbade unions from engaging in unfair labor practices, much like the Wagner Act forbade management from engaging in. 1. National Emergency Strikes - The Taft-Hartley Act also allows the President of the United States to declare a national emergency strike – one that would impact an industry or a major part of it such that the national economy would be significantly affected. 2. Right-to-Work Provision - Section 14(b) of the Taft-Hartley Act allows states to enact laws that restrict compulsory union membership. State right-to-work laws prohibit requiring employees to join unions as a condition of employment. An open shop is when workers are not required to join or pay dues to a union. A closed shop (when a firm requires individuals to join a union before they can be hired) is generally prohibited by the Taft-Hartley Act. Non-right-to-work states may allow the following types of shops: •Union shop: requires that individuals join the union, usually 30-60 days after being hired •Agency shop: requires employees who refuse the join the union to pay amounts equal to union dues and fees in return for the representation services of the union. •Maintenance-of-membership shop: requires workers to remain members of the union for the period of the labor contract. C. Landrum-Griffin Act (Labor-Management Reporting and Disclosure Act) – passed in 1959 is the third segment of the National Labor Code. The law was passed in part to ensure that the federal government protects the democratic rights of union members to elect officers and approve labor contracts. The Secretary of Labor will act as a watchdog of union conduct. D. Civil Service Reform Act of 1978 - Passed as part of this act, the Federal Service Labor-Management Relations statute identified areas that are subject to bargaining. The Act established the Federal Labor Relations Authority (FLRA) to oversee and administer union/management relations in the federal government and to investigate unfair practices in union-organizing efforts. IV. UNIONIZATION PROCESS The unionization process, as outlined in Figure 10.4, may begin in one of two primary ways: (1) a union targeting an industry or company, or (2) employees requesting union representation. A. Organizing Campaign – A union usually mounts an organizing campaign to gain support for its efforts. Union prevention efforts by management may include holding mandatory employee meetings, distributing anti-union leaflets at work, mailing anti-union letters to employees’ homes, and providing and using anti-union videos, emails, and other electronic means. Many employers have written a “no solicitation” policy to restrict employees and outsiders from distributing literature or soliciting union membership on company premises. The persuasive efforts by unions may include personal contacts with employees outside work, mailing materials to employees’ homes, inviting employees to attend special meetings away from the company, and publicizing the advantages of union membership. B. Authorization Cards – A union authorization card is signed by an employee to designate the union as his or her collective bargaining agent. At least 30% of the employees in the targeted group must sign cards before a certification election can be held. In reality, the fact that an employee signs an authorization card does not mean that the employee is in favor of a union; it means only that the employee would like the opportunity to vote on having a union. C. Representation Election - An election to determine if a union will represent the employees is supervised by the NLRB for private-sector organizations and by other legal bodies for public-sector organizations. 1. Bargaining Unit – A bargaining unit is composed of all employees eligible to select a single union to represent and bargain collectively for them. A bargaining unit has mutual interests in the following areas: •Wages, hours, and working conditions •Traditional industry groupings for bargaining purposes •Physical location, and amount of interaction and working relationships between employees groups •Supervision by similar levels of management 2. Supervisors and Union Ineligibility – Provisions of the Wagner Act exclude supervisors from protection when attempting to vote for or join unions. As a result, supervisors cannot be included in bargaining units for unionization purposes. 3. Unfair Labor Practices – Both the Wagner Act and the Taft-Harley Act place restrictions on the pre-election activities of employers and unions. Some of the legal and illegal actions managers must be aware of during unionization efforts are included in the Appendix. 4. Election Process – In order to win an election, the union must receive a majority of votes (50% of those voting plus one) in the election. If either side believes that the other side used unfair labor practices, the election results can be appealed to the NLRB. D. Certification and Decertification – Once certification of a union as the legal representative is given by the NLRB for private-sector employees, or by an equivalent body for public-sector employees, the employer must bargain, or face charges of an unfair labor practice. Decertification is a process whereby a union is removed as the representative of a group of employees. This process also requires decertification authorization cards signed by at least 30% of the employees in the bargaining unit before an election may be called, and majority vote in the election. V. COLLECTIVE BARGAINING AND CONTRACT NEGOTIATION Collective bargaining, the last step in unionization, is the process whereby representatives of management and workers negotiate over wages, hours, and other terms and conditions of employment. A. Collective Bargaining Issues - A number of issues can be addressed during collective bargaining. One of which, management rights, are rights reserved so that the employer can manager, direct, and control its business. Another is union security provisions, which are contract clauses to help the union obtain and retain members. Another growing type of union security is the no-layoff policy, or job security guarantee. Another union security provision is the dues checkoff, which allows union dues to be automatically deducted from union members’ pay checks. The NLRB has defined collective bargaining issues three ways. Mandatory issues are identified specifically by labor laws or court decisions, and are required. Permissive issues are not mandatory, but can be bargained if both parties agree. Illegal issues would require either party to take illegal action, and can be refused. B. Collective Bargaining Process - The collective bargaining process consists of: preparation and initial demands, negotiations, settlement or impasse, and strikes and lockouts. 1. Preparation and Initial Demands – Both labor and management spend much time preparing for negotiations by gathering and analyzing employer and industry data concerning wages, benefits, working conditions, management and union rights, productivity and absenteeism. Typically, bargaining includes initial proposals of expectations by both sides. 2. Continuing Negotiations – After taking initial positions, each side attempts to determine what the other values highly and what they are willing to give up, so the best bargain can be struck. Federal law requires both sides to negotiate in good faith. Some give-and-take discussions must occur, and the negotiators should have the authority to bargain and make decisions. 3. Settlement and Contract Agreement – After reaching an initial agreement, the bargaining parties usually return to their respective constituencies to determine if the informal agreement is acceptable. The ratification phase of the labor agreement takes place when union members vote to accept the terms of the negotiated agreement. Figure 10-5 lists typical items in labor agreements. 4. Bargaining Impasse - occurs when labor and management do not reach agreement on the issues. If an impasse occurs the disputes can be taken to conciliation, mediation, or arbitration. 5. Conciliation and Mediation – Conciliation is an attempt by a third party to assist union and management negotiators to reach a voluntary settlement, but makes no proposals for solutions. Mediation is an attempt by a third party to help the negotiators reach a settlement. Sometimes, fact-finding helps to clarify the issues of disagreement as an intermediate step between mediation and arbitration. Arbitration occurs when a neutral third party makes a decision. Arbitration can be conducted by an individual or a panel. 6. Strikes and Lockouts – During a strike, union members refuse to work in order to put pressure on an employer. In a lockout, management shuts down company operations to prevent union members from working. C. Union/Management Cooperation – An adversarial relationship naturally exists between unions and management, and may lead to strikes and lockouts. However, such conflicts are relatively rare. VI. GRIEVANCE MANAGEMENT Unions know that employee dissatisfaction can be a source of trouble, and that it is important that dissatisfaction be given an outlet. A complaint is an indication of employee dissatisfaction. A grievance is a complaint formally stated in writing. A formal grievance procedure provides a valuable communication tool for the organization, which is also beneficial for maintaining and improving employee relations. A. Grievance Procedures – Grievance procedures are formal channels of communication designed to settle grievances as soon as possible after the problem arises. While first-line supervisors are usually closest to a problem, supervisory involvement presents some problems in solving a grievance at this level. To receive the appropriate attention, grievances go through a specific process for resolution. Figure 10.6 shows a typical grievance procedure, which consists of the following steps: •The employee discusses the grievance with the union steward (the representative of the union on the job) and the supervisor. •The union steward discusses the grievance with the supervisor’s manager and/or the HR manager. •A committee of union officers discusses the grievance with appropriate company managers. •The representative of the national union discusses the grievance with designated company executives or the corporate industrial relations officer. •If the grievance is not solved at this stage, it goes to arbitration. An impartial third party may ultimately dispose the grievance. Grievance arbitration is a means by which a third party settles disputes arising from different interpretations of a labor contract. The U.S. Supreme Court has ruled that grievance arbitration decisions issued under labor contract provisions are enforceable. CASE – WAL-MART AND WATCHING ITS “UNION PREVENTION” Wal-Mart is one company that works hard to avoid unionization. The company says it does not have unions because it takes care of its employees. It surveys employees regularly, and many workers have been promoted from cashier and stocker jobs to management jobs. A companywide stock ownership program has generated significant long-term returns for employees. Unions counter that Wal-Mart uses aggressive and even unfair labor practices to prevent unionization. When a union tries to organize workers, the company often reacts with a coordinated “union prevention” program. Mandatory employee meetings are held in stores, where managers and supervisors read prepared scripts explaining the consequences of unionizing and show videos emphasizing the negatives of unionization. As a result, at Wal-Mart in the United States, virtually no workers are unionized. In fact, when unions have won elections in some Wal-Mart locations, the firm has outsourced the jobs to independent contractors or even closed stores. Even outside the United States, Wal-Mart has been aggressive at resisting unionization of any workers in Canada, despite more union-friendly Canadian laws. To put more pressure on Wal-Mart, unions have formed a coalition called Wal-Mart Watch. This organization has targeted Wal-Mart organizational practices. For instance, extensive publicity about deficiencies in health benefits offered by Wal-Mart has led to the firm revising its plans. The Watch also has encouraged workers to file legal complaints that Wal-Mart has violated anti-discrimination laws. The watch has established its own Web site (http://walmartwatch.com), which contains numerous articles discussing Wal-Mart actions. That Website has a blog that allows previous and current employees to post comments, as well as outsiders to provide input and opinions also. The ultimate goal of the Watch is to be able to unionize employees at Wal-Mart because of its huge number of workers. As Wal-Mart grows and adds more stores, its growth also results in the decline or closing of other retailers, in which there are often a significant number of unionized workers. How Wal-Mart will change over the next years and the effects of the Watch on those changes will be interesting to observe.* Questions 1. Describe the advantages and disadvantages of Wal-Mart’s aggressive union prevention efforts. 2. Go to http://walmartwatch.com and review some of the articles and blogs. Then identify your view of the Watch’s efforts. ______ *Anthony Bianco, “No Union, Please, We’re Wal-Mart,” Business Week, February 13, 2006, 78. Suggested Answers to Case Questions 1. Describe the advantages and disadvantages of Wal-Mart’s aggressive union prevention efforts. Students’ views will vary. Some students might think that what Wal-Mart does is perfectly legal and has no disadvantages. Other students might think that the disadvantage is that some employees might feel intimidated into going along with Wal-Mart’s union prevention program. Some students might mention that the advantage for Wal-Mart appears to be that they are successful in keeping unions out of their stores. Wal-Mart's aggressive union prevention efforts have both advantages and disadvantages: Advantages: 1. Maintaining Control: By preventing unionization, Wal-Mart retains control over its workforce and can implement policies and decisions without negotiation or interference from labor unions. This allows the company to maintain flexibility in managing its operations and responding to market dynamics. 2. Cost Savings: Avoiding unionization can help Wal-Mart avoid potential increases in labor costs, such as higher wages, benefits, and additional administrative expenses associated with collective bargaining agreements. This can contribute to maintaining competitive pricing and profitability for the company. 3. Preserving Company Culture: Wal-Mart prides itself on its corporate culture and values, which it believes are best preserved without the influence of labor unions. Aggressive union prevention efforts help reinforce and protect this culture by ensuring that employees align with the company's mission and objectives. 4. Preventing Disruption: Unionization efforts can sometimes lead to labor disputes, strikes, and disruptions in operations, which can negatively impact productivity, customer satisfaction, and financial performance. By proactively preventing unionization, Wal-Mart can mitigate the risk of such disruptions and maintain stability within its workforce. Disadvantages: 1. Employee Relations: Aggressive union prevention tactics, such as mandatory meetings and anti-union propaganda, can create a hostile work environment and erode trust between management and employees. This can lead to decreased morale, job satisfaction, and loyalty among workers, ultimately affecting productivity and retention rates. 2. Legal and Reputational Risks: Wal-Mart's aggressive union prevention efforts may raise legal and ethical concerns, particularly if they involve coercion, intimidation, or violations of labor laws protecting employees' rights to organize. Engaging in unfair labor practices can damage the company's reputation and expose it to legal liabilities, including fines, lawsuits, and regulatory sanctions. 3. Public Perception: Wal-Mart's anti-union stance and tactics may attract negative attention from stakeholders, including consumers, activists, and policymakers, who may view the company unfavorably for its perceived disregard for workers' rights. This can lead to boycotts, protests, and negative publicity, affecting brand image and customer loyalty. 4. Employee Empowerment: Unionization can empower employees by giving them a collective voice in workplace decisions, bargaining power for better wages and benefits, and recourse for addressing grievances. By preventing unionization, Wal-Mart may limit opportunities for employees to advocate for their rights and improve working conditions through collective action. Overall, while aggressive union prevention efforts may offer short-term benefits for Wal-Mart in terms of cost control and operational stability, they also carry significant risks in terms of employee relations, legal compliance, and reputation management. Balancing these factors is crucial for the company to navigate its labor relations effectively while maintaining its competitive position in the market. 2. Go to http://walmartwatch and review some of the articles and blogs. Then identify your view of the Watch’s efforts. Students’ answers will vary. Some students might be very supportive of Wal-Mart and others might be very negative toward Wal-Mart. There are a lot of individuals on each side. Wal-Mart Watch's efforts appear to be focused on advocating for workers' rights, addressing labor issues, and holding Wal-Mart accountable for its practices. Here are some potential views on their efforts: 1. Advocacy for Worker Rights: Supporters of Wal-Mart Watch may view the organization's efforts as essential for advocating for the rights and well-being of Wal-Mart employees. They may appreciate the watchdog role the organization plays in highlighting issues such as inadequate healthcare benefits, unfair labor practices, and potential violations of anti-discrimination laws. 2. Transparency and Accountability: Wal-Mart Watch's emphasis on transparency, through articles, blogs, and legal complaints, may be seen as a positive step towards holding a large corporation like Wal-Mart accountable for its actions. By bringing attention to organizational practices and their impact on workers, the organization aims to drive positive change within the company. 3. Empowerment of Workers: Wal-Mart Watch's encouragement of workers to file legal complaints and share their experiences through the website's blog section may be seen as empowering employees to speak out against injustices and advocate for their rights collectively. The platform provides a voice for current and former employees to share their concerns and experiences, potentially fostering solidarity and support among workers. 4. Criticism of Wal-Mart's Practices: Critics of Wal-Mart's business practices may support Wal-Mart Watch's efforts in scrutinizing the company's actions and advocating for reforms. They may see the organization as a necessary counterbalance to Wal-Mart's immense power and influence, particularly in labor relations and its impact on communities and workers' livelihoods. Overall, perspectives on Wal-Mart Watch's efforts may vary depending on one's stance on labor rights, corporate accountability, and the role of advocacy organizations in addressing social and economic issues. Some may view the organization as a champion for workers' rights, while others may see it as a contentious force challenging a corporate giant like Wal-Mart. Instructor Manual for Management of Human Resources: The Essentials Robert L. Mathis, John Jackson, Sean Valentine 9780324592412, 9781305115248