Collective Bargaining

Posted: September 6th, 2013

Collective Bargaining

Name:

Course:

Institution:

Instructor:

Date:

Collective Bargaining

Hsu, T. (2012, April 18). Hostess Brands labor dispute could lead to liquidation. Los Angeles Times. Retrieved from http://articles.latimes.com/2012/apr/18/business/la-fi-hostess-twinkies-20120418

Nature of the Dispute

The Hostess Company, maker of the Ding Dings, Ho Hos, and Wonder Bread was faced by bankruptcy few months ago. The company found itself in a tight dispute with the collective bargaining unions representing the worker. The dispute was due to differences on the fact that the company would go bankrupt if it did not cut costs on labor through reducing the workers pension. According to the union, this would be unacceptable. The company was persuading a bankruptcy judge to allow it reject the agreements made with the unions in order to cut costs on labor (Hsu, 2012). The company would be faced by bankruptcy if the judge did not allow it to reject the agreement. The collective bargaining dispute comes from the fact that the unions represent all the workers, and bargains their salaries, working conditions, pensions and treatment. Thus, workers were protected collectively and the company had to face the unions. Thus, the dispute was between the employer and its workers’ unions that refused to the idea of cutting pensions for the workers to reduce the costs (Hsu, 2012).

While the company was pushing to have permission to reject the agreements, on the other hand, the unions representing the workers were threatening a strike should the judge choose to grant the company its requests. The company on the other hand, held to the fact that if not allowed to cut on pension costs, the company could liquidate, sending rendering 18500 people working for the company jobless.

Causes of the Dispute

One of the causes had been high unsustainable costs structure that reduced its competitive advantage such as labor expenses, corporate overheads and its infrastructure. Its agreements with collective bargaining unions, Teamsters and Baber’s Union that required high pension for the workers was one of the reasons it was going bankrupt (Caisley, 2007). Having to pay for high pension rates was overburdening the company that was already in the verge of liquidating, just after three years of coming off another bankruptcy threat three years ago. In the year 2011, the company made a huge loss of $341 million (Hsu, 2012). Therefore, the company would not be in a position to sustain some of the expenses and had to cut on them. Those selected for cost cut measures were the infrastructure, pension cutting as well as outsourcing some of their operations in order to lower the costs. With the intention to cut on the pension, a dispute between the company and the two unions representing the workers were in a dispute.

Economic or Ethical Pressures

`           The dispute is rooted on economic issues, with the company pushing to reduce costs through cutting the pension paid to its workers. On the other hand, the union is always under pressure to bargain higher pay rates for the workers as well as benefits including the pension. They are against the company reducing the pension benefits for the workers. In addition to reducing the pension, the company will be tightening the working conditions and rules in order to realize optimum productions and cost efficiency. The company will be seeking all means of reducing their huge costs, including outsourcing some of its delivery work, meaning that some of the delivery workers will loose their jobs since their services may no longer be needed (Hsu, 2012). Evidently, the company is pushing all means of reducing costs due to its economic crisis that puts it at a corner. On the other hand, the union is under pressure to maintain the workers salaries since it means harder economic difficulties for them if they have to receive pension cuts. The unions want the best for the workers. In addition, on ethical issues, one of the union officials said that the executives had engaged in unethical behaviors prior to the earlier bankruptcy when they raised their pays by 240%. He cited that he was not sure the executives were fighting to save the company based on the mismanagement before (Hsu, 2012).

Unethical Behavior

            As mentioned earlier, on e of the officials had no trust in the executives on the issue of saving Hostess. This was due to a pay rise of 240%, while the company was just about to go bankrupt in its previous crisis. A 240% increase doe not look normal. Rather, it shows a greedy executive that is ready to exploit the company. Normally, a company does not go bankrupt in a day. Therefore, raising their salaries by this percentage before the bankruptcy was a bad sign. Thus, the executives who represent the company have been involved in unethical behavior before that could have contributed to the status of the company at present. In addition, despite seeking to reduce pension, the company is planning to tighten the rules and regulations for the workers. This would not be fair to the workers who might have had little to blame.

Solving of the Dispute

            In such a dispute where the company was, filing for a bankruptcy under the federal law requires a court hearing (United States Department of Labor, 2012). In addition, for the company to reject the agreement with the unions there would be need for a court to make a fair ruling. The company was persuading the judge to grant the company permission to reject the agreement while the union was fighting to have the agreement remain. The solution was dependent on the ruling made by the judge. A few months ago, the judge found no reason to deny the company their requests. The solution was granted in favor of the company, where they were allowed to reject the union agreement on labor. However, this cannot be considered a solution considering it was not an agreement. More so, the union is still fighting to come up with a solution for the company and the workers (Stagemeyer, 2012).

Third Party Role

The role played by the third party was listening to the reasons the company had for rejecting the union agreements. Upon verifying they were justifiable, the judge saw no reason to deny the company what it sought. In this case, the third party was the court. The court had the power to make the decision they deemed right and legal, despite what would be the consequences to the workers. The court had only to find out whether the reasons for rejecting the union agreement were substantial. In this case, due to the situation of the company, and what would happen to it if the reduction were not made, it was found reasonable to allow the company to reject the agreement. More over, if the company would liquidate, the workers would loose their jobs. Thus, the third party played the role of making a judgment on the dispute as opposed to third parties that facilitate negotiations so that parties involved can come to an agreement (Colosi & Berkeley, 2006).

Alternative Solution for the Dispute

            Considering the company was going into bankruptcy and would soon face liquidation if it did not reduce on its coast structure, I think there was no better solution. Probably an alternative could have been having the company and the unions discuss the matters between themselves before going to the courts. However, the company had no other way of preventing liquidation except through cost cutting measures to increase their competitive advantage. Considering the unions did not want the company to reduce the pension funds, it could have been quite hard to come to an agreement since the company had no time until they would be forced to liquidation. However, the solution sought by the company was out of desperation not only to save the company, but also to ensure that workers would not have to be jobless after the company liquidates. Additionally, pensions are future benefits and it would take sometime for the workers to realize the effect. The pensions cold be paid back later if the company could come off the current situation as a growing company as intended by the executives.

References

Caisley, K.T. (2007). Collective Bargaining: CCH a Wolters Kluwer business. New Zealand: CCH New Zealand Limited.

Colosi, T.R. & Berkeley, A.E. (2006). Collective Bargaining: How it Works and why: a Manual of Theory and Practice. New York, N.Y: Juris Publishing, Inc

Hsu, T. (2012, April 18). Hostess Brands labor dispute could lead to liquidation. Los Angeles Times. Retrieved from http://articles.latimes.com/2012/apr/18/business/la-fi-hostess-twinkies-20120418

Stagemeyer, S. (2012). Teamsters: Judge refuses to reject Hostess labor contracts. Retrieved from http://www.bizjournals.com/kansascity/news/2012/05/15/teamsters-judge-keeps-hostess-contracts.html?page=all

United States Department of Labor, (2012). Collective Bargaining Agreements File: Online Listings of Private and Public Sector Agreements. Retrieved from http://www.dol.gov/olms/regs/compliance/cba/index.htm