Generally, a lawsuit is the worst way to resolve a labor dispute. But sometimes, it could be the only & best way.
Case in point, recently I helped a client resolve a difficult union dispute by convincing them that getting sued by their labor union would work to their advantage. For many reasons, I won’t disclose any identifying information about my client & the union.
Arguably, my client owed the union about $50k in unpaid pension contributions & health insurance payments. Since signing off on the collective bargaining agreement, my client had not contributed to either. As a small business, my client & their employees had no interest in either, & they never took advantage of the insurance & never anticipate taking advantage of the pension. Nevertheless, my client needs the union because some of the contracts they work on require union membership & the union’s blessing. Moreover, the union wanted their money.
Also, it should be noted that this particular union has a good reputation among employers. They’re known for being cooperative & empathetic, but not being pushovers or sellouts. I often criticize labor unions, but they’re not all bad. And, even though I’ve predicted that they’ll be out of the U.S.’ private sector by 2050, they’re still around & we still have to work with them.
When we discussed ways of dealing with the union’s demand for the $50k in back payments, my client determined that they could afford the contributions to the pension fund (about $25k) but not the health benefits. Consequently, I posed the following to my client:
- We either had to convince the union to accept an offer to pay only the approximately $25k in pension payments, or we’d have to be sued & either litigate or work out a settlement in court.
For the obvious reasons (costs & needing the union’s “blessing” for future work contracts), my client was hesitant to accept a lawsuit. However, I know that many unions count on their opposition to just give in to either the threat of litigation or some other form of intimidation. By telling the union that we would accept a lawsuit & persevere through the litigation process, in the remote chance that this could save my client more money than the union demanded, the union might negotiate a more reasonable settlement with us.
When I said this to the union, I related that my client didn’t want to be sued, but that I didn’t see a more cost effective alternative. Perhaps even more importantly, I also told the union that in order to expedite the process & save everyone money, we would waive “service of process” & any other court formalities. This must have resonated with the union, because a couple of weeks after telling them this, they agreed to settle for only the pension payments & waived the benefits payments. They agreed that it was best for everyone concerned to avoid litigation & settle the matter.
Not only did they equitably resolve this dispute, but they also referred new business to my client. Like I said, not all unions are bad. Some of them, this one in particular, understand how business works in 2013. Even though they need to protect their pension fund, they also know that they need to help their members & partner with the business owners who sign the collective bargaining agreements. It’s just in everyone’s best interests.
Hi Chuck, I am sorry…you completely lost me here! I read this over three or four times and I did not understand this. How was this the unions fault? Your client owed the money, correct? If they had the money to pay what they owed, they should have paid straight up. If they did have the money, this appears to be a case of someone using the threat of a lawsuit to jam the union. You write “…they also know that they need to help their members and partner with the business owners who sign the CBA’s.” What about the Business Owners that actually paid one hundred percent of their contributions? If I was a signatory to the CBA and found out that another used the system (and frankly that is what happened here) to get out of paying what they were legally required to do, I might seek my own lawsuit. I think it is really late because I think I am missing something here.
Thanks for taking the time to comment.
Due to confidentiality issues, I can’t go into a lot of detail, but my client had an understanding with the union that as long as the owner & one other employee didn’t use the health benefits, then they wouldn’t have to pay into that fund. I won’t tell you the size of my client either, but size matters, especially in this dispute :-).
So, my client had an honest belief that they didn’t have to pay for health benefits, & they never used them either. My client will be using the pension, so they’ll pay for those.
By the way, your comment also assumes that the health benefits & pension are worth the money a company has to contribute, that my client had the power to actually negotiate those rates (they didn’t), & that both funds will remain solvent to the point that current & future beneficiaries will actually receive their benefits. I’m very skeptical that future beneficiaries of union trusts will receive their full benefits. This dispute is representative of one the problems with many labor unions today.
Labor unions don’t exist today to handle their traditional representational issues for individual members (e.g., individual pay or work condition disputes). They largely exist to manage their pension funds. Most union money is wrapped up in their pension funds & the investments they’ve made with that money (real estate, investments, etc.). So, many unions will pursue a company to get the pension money, & will sacrifice other matters to get that money. Also, some companies don’t have a choice about what they can or can’t pay into a union. Increasingly, unions are becoming more flexible about companies being able to select their own benefits like health or 401k, but unions aren’t usually this flexible for very small businesses, because they know that smaller businesses don’t have the wherewithal to fight the union either through arbitration, the National Labor Relations Board or in court. By convincing my client that a fight was reasonable & winnable, we were able to create a win-win for everyone.
Hope this helps.
Chuck Krugel