Airlines Devise a New Way to Bust Unions
Continental Airlines pioneered a way to break union contracts in 1983 by just declaring that it could no longer afford to pay its workers the wages and benefits they were entitled to under their agreements.
In a move that made him a nationwide symbol of union-busting, Continental Chairman Frank Lorenzo abrogated union contracts by reorganizing the company under Chapter 11 of federal bankruptcy law. He laid off 75% of his employees and slashed the wages and benefits of those still on the payroll by about 50%.
Now, another method of ousting a union has been pioneered successfully by USAir and Pacific Southwest Airlines.
The USAir-PSA ploy rendered useless efforts by workers to keep their union contracts when their employer was taken over by another firm--a common event in this merger-mania era, in which workers are usually the victims, not the beneficiaries, of corporate guerrilla warfare.
In 1984, Teamsters Local 2707 and its 3,800 members at PSA went along with a company demand that workers take a pay cut of 15% and change work rules. As a result, PSA saved another 15% in labor costs, mostly by reducing the work force. The workers agreed to the cuts because the company said they were essential. In exchange, though, Local 2707 Executive Secretary Marvin L. Griswold and his negotiating committee won one of the strongest “successor clauses” in labor history: The company promised that it never would agree to a merger unless the company taking over PSA agreed to accept PSA’s contract with the Teamsters.
The clause also provided that there could be no merger until seniority lists of both companies were integrated in a “fair and equitable manner.”
In addition, the workers were given about 15% of the company’s stock.
Successor clauses weren’t needed before airline deregulation in 1978, because the Civil Aeronautics Board provided protection for workers who might be hurt by airline mergers.
The Reagan Administration eliminated the government-guaranteed protection when the Department of Transportation began taking over many of the duties of the now-defunct CAB.
The Administration said protection for workers should be left for unions and and management to negotiate, without “government interference.”
Thus, the union and company negotiated a severance clause that was good enough to serve as a model for union contracts--but it didn’t survive the attacks by USAir and PSA.
The battle began when USAir offered to buy PSA for $400 million. (USAir also hopes to buy Piedmont Airlines.)
USAir set a stiff condition for the merger: no deal unless the Teamsters’ successor clause was eliminated. This meant eliminating the Teamsters from the merged airline, except as the representative of one small group now at USAir.
The union fought to save itself and the clause, because job and seniority protection often is most needed after a merger. But when the courts rejected the Teamster request for arbitration, negotiations began to see what the union could save for its PSA members.
As the talks proceeded, though, PSA began an intensive campaign to convince its workers that if they didn’t “voluntarily” give up the successor clause, and thus oust their union, they would almost surely be out of jobs.
USAir joined the attack, warning that if the workers did not dump the clause, their future in the industry would be bleak, indeed.
To make sure the workers didn’t misunderstand the warnings, PSA agreed to pay USAir $5 million and give it the option to buy four gates in Los Angeles and San Francisco if the acquisition plan fell through because of union resistance at PSA.
That would have cost PSA workers many jobs in the two cities.
It didn’t take much of those tactics to convince most PSA employees that they had to choose between their jobs and their union, so many workers joined management in demanding the elimination of the successor clause.
Thus pressured, Griswold and his committee finally reached an unusual agreement with management under which Teamster members would kill their own union. Union leaders did not recommend that the death sentence be rejected, although Griswold said he would vote against it.
It wasn’t all bad for the workers. In the same self-destruct contract, the Teamsters negotiated provisions for the workers to get between $12,000 and $15,000 each for the stock they had gotten in return for concessions made in 1984.
Also, the company agreed to put $3.2 million in a fund to provide severance pay for workers who do not accept job offers in another city if they lose their current jobs as a result of the merger. They get one year’s salary if they’ve been employed more than five years.
The fund also will finance a job placement program for those who lose their jobs.
Experienced workers who are not offered a job in the merged airline can get severance pay, which is 60% of their regular salary, for up to 60 months.
That wasn’t bad, but it doesn’t come close to the value of the so-called golden parachutes PSA officers negotiated for themselves. For instance, PSA Chairman Paul C. Barkley has about $600,000 of stock options and will also get $783,000 if he is put out of work by the merger.
The contract was apparently as good as the union negotiators could get. A strike almost surely would have failed.
After reviewing the proposed contract over closed-circuit television, union members in 28 cities voted during a two-week period by secret ballot to eliminate their union and take the gains that were negotiated.
Griswold says the Teamsters are not finished. The union will campaign for elections to represent workers at the merged airline. But it faces an uphill battle.
More than half of USAir’s 15,700 employees are non-union, which should help the merged airline to stay at least partly non-union. Further, most of USAir’s unionized employees are members of other unions. Unless those USAir workers desert their unions, the Teamsters clearly will be outvoted, because USAir is much bigger than PSA.
USAir and PSA are not going to replace Lorenzo as labor’s symbol of a union-buster. But clearly they have found an effective way to get rid of a union. And, more significantly, they have devised a system to break what had seemed to be an ideal successor clause that all American workers should have.
Congress is considering legislation to require some form of a successor clause for all workers, not just those in the airline industry. Congress should adopt the proposal to prevent other workers from receiving the type of damage inflicted on the Teamsters’ successor clause at PSA.
It Pays to Insist
It may sound strange, but a union is trying to recoup a drastic membership loss primarily by insisting that companies abide by their labor agreements.
The elegant Windsor restaurant, which has had a union contract for the past 42 years, was the first Los Angeles target of the contract-enforcement campaign being waged by Herman Leavitt, international secretary of the Hotel Employees and Restaurant Employees Union.
On Thursday, all 30 Windsor employees suddenly walked out of the downtown restaurant during the busy lunchtime. Owner Ben Dimsdale tried to recruit replacements, failed, and closed down on Monday.
But by Tuesday, Dimsdale relented and signed a new contract--which, Leavitt said, will be strictly enforced.
The union’s problem: Since 1972, membership of HERE Local 11 in Los Angeles has dropped from about 25,000 to 13,000. Leavitt says the main reasons were the failure of the union to organize new members and, more important, its failure to enforce the union’s contracts.
Union members were dropping out in large part because they were paying dues to get contract benefits--on paper, but not actually provided by the employers. The union believes it can draw members simply by enforcing contracts.
Management’s problem: Most restaurants are non-union. Dimsdale had said he could not meet the competition if he abided by the labor agreement.
Leavitt was named trustee of Local 11 last month after its former leader, Andrew (Scotty) Allen, was removed because, among other things, he allegedly failed to make employers provide contract benefits to workers.
Leavitt said that in recent years, Dimsdale and other restaurateurs have not balked at signing union contracts because Local 11 officials didn’t enforce them.
The union is gambling that employers cannot break strikes to enforce the pacts and that a well-run union will retain old members and attract new ones.
The gamble paid off at the Windsor, and it should not end there. Without contract enforcement, members pay union dues without getting any benefits of unionization.
