Now, let's look at why unions exist, how they are structured, and how the collective bargaining process works.
In a nonunion environment, the employer makes largely unilateral decisions on issues affecting its labor force, such as salary and benefits. Management, for example, may simply set an average salary increase of 3 percent and require employees to pay an additional $50 a month for medical insurance. Typically, employees are in no position to bargain for better deals. (At the same time, however, for reasons that we've discussed earlier in this chapter, employers have a vested interest in treating workers fairly. A reputation for treating employees well, for example, is a key factor in attracting talented people.)
The process is a lot different in a union environment. Basically, union representatives determine with members what they want in terms of salary increases, benefits, working conditions, and job security. Union officials then tell the employer what its workers want and ask what they're willing to offer. When there's a discrepancy between what workers want and what management is willing to give – as there usually is – union officials serve as negotiators to bring the two sides together. The process of settling differences and establishing mutually agreeable conditions under which employees will work is called collective bargaining.
The Negotiation Process
Negotiations start when each side states its position and presents its demands. As in most negotiations, these opening demands simply stake out starting positions. Both parties expect some give-and-take and realize that the final agreement will fall somewhere between the two positions. If everything goes smoothly, a tentative agreement is reached and then voted on by union members. If they accept the agreement, the process is complete and a contract is put into place to govern labor-management relations for a stated period. If workers reject the agreement, negotiators go back to the bargaining table.
Mediation and Arbitration
If negotiations stall, the sides may call in outsiders. One option is mediation, under which an impartial third party assesses the situation and makes recommendations for reaching an agreement. A mediator's advice can be accepted or rejected. If the two sides are willing to accept the decision of a third party, they may opt instead for arbitration, under which the third party studies the situation and arrives at a binding agreement.