Wage-Reopening Arbitration [Reprint 2016 ed.] 9781512819991

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WAGE-REOPENING ARBITRATION

L. R E E D

TRIPP

• Published for the

LABOR

RELATIONS

COUNCIL

of the

WHARTON SCHOOL OF FINANCE A N D COMMERCE by the

UNIVERSITY

OF

PENNSYLVANIA Philadelphia

1 952

PRESS

Copyright 1952 UNIVERSITY OF PENNSYLVANIA PRESS Manufactured

in the United States of America

L. Reed Tripp is Associate Professor of Economics at the University of Wisconsin. During 1951 and 1952 he served as Director of the Office of Economic Analysis, Wage Stabilization Board. From 1946 to 1949 he was Economist and Assistant Coordinator of Labor Relations for the Libbey-Owens-Ford Glass Company and the Pittsburgh Plate Glass Company. During World War II, Dr. Tripp was associated with the Philadelphia Regional War Labor Board as Section Chief, Wage Stabilization Division, and Associate Director of Disputes. He is a co-author of Management Problems Implicit in Multi-Employer Bargaining ( University of Pennsylvania Press, 1950), and articles in the field of labor relations economics.

CONTENTS CHAPTER

PAGE

Preface

ν

Introduction

1

1. W h y a Desire for Long-Term Contracts

5

2. Feasibility of Long-Term Agreements Over Different Contract Areas

18

3. Provisions for W a g e Flexibility During Long-Term Agreements

34

4. T h e Nature of Wage-Reopening Arbitration

63

5. Wage-Reopening Arbitration and Contract Stability

87

Reference Notes

96

Appendix

100

[iii]

PREFACE

The study of Wage-Reopening Arbitration made by Dr. L. Reed Tripp deals very broadly with the entire question of wage reopenings particularly as they are related to longterm labor agreements. The usefulness, and shortcomings, of arbitration to settle disputes arising under the wagereopening clauses receive attention fundamentally by contrasting reopenings with alternative methods of providing for wage flexibility during the term of a labor agreement. Such an analysis is particularly timely. Not many years ago, the one-year labor agreement was standard. Wage rates were firmly specified for the entire one-year term. During World War II, and in subsequent years, economic changes occurred so rapidly that unions requested, and managements agreed to, a review of wages during the contract year. Sometimes the right to strike over unresolved issues raised at the time of reopening was reserved. The net effect was actually to shorten the agreement term and thus to accentuate industrial relations instability. Uncertainties were increased even when, in order to insure a reasonable period during which there would be no threat to continuous operation, the parties agreed to arbitrate wage issues not resolved at the reopening negotiations. A new kind of arbitration problem developed out of this step. It is this problem which Dr. Tripp analyzes in a detailed and careful manner by directing attention to the new functions which may be assigned to arbitration under these circumstances. It is highly significant that there has been, in some quarters, an actual shortening of labor-agreement terms by widespread resort to wage reopening with a reservation of the right to strike at wage-reopening time while in other situations there has been an increasing use of longer-term agreements—of from two to five years' duration. The difficulty of fixing firm wage rates in times of economic uncer[v]

tainty pulls in one direction, whereas the need for long-term stability of industrial relations pulls in another. Out of the search for long-term agreements during which a no-strike clause is operative has come the increasing use of wageescalator clauses in recent years. In his analysis, and with sound reason, Dr. Tripp characterizes the wage escalator clauses, with or without the so-called annual improvement factor, as an alternative to provide the same basic need as is met by a wage-reopening clause. Seen in this light, the automatic wage escalator geared to cost-of-living changes falls into a different perspective than is customarily given to this wage-change regulator. At the same time a proper appraisal of arbitration under wage-reopening clauses requires a comparison not only with the escalator clause but with the advantages and disadvantages of agreements running for six months or less because of reopening clauses under which the right to strike is reserved. Such comparisons are made in Dr. Tripp's study. The analysis is not a simple one. A careful examination of it, however, will provide substantial returns to those interested in grappling constructively with the difficult problems of industrial relations rather than in dealing with them in a superficial manner. It is through studies like the one made by Reed Tripp that progress will be made in the creation of a professional practice of industrial relations. GEORGE W .

Philadelphia July 1952

[vi]

TAYLOR

WAGE-REOPENING ARBITRATION INTRODUCTION Arbitration is a tool of industrial peace. Its adoption by many companies and unions as a terminal point in their grievance procedure has eliminated much industrial warfare which had previously served to "police" a labor agreement. In untold numbers of unsettled grievances, this process has thus enabled the parties to continue their operating relationship without interruption during the life of a contract. In discussions of this subject, it is sometimes assumed that arbitration is a single, easily definable, and unchangeable process. The briefest observation will reveal, however, that, in adopting the arbitration method, different companies and unions have developed many different procedures and details of operation peculiarly suited to their own needs. A period of experimentation has normally followed its adoption, resulting today in different forms, uses, techniques, and even goals. This variety in detail has enabled unions and companies, after viewing the results of others' experience, to retain or modify their own practices in the light of experience. The process of development and adaptation to industry and labor needs is still going on. Like other human institutions, arbitration could hardly function satisfactorily if considered to be static. It is important that attempts be made continually to make it serve more perfectly the interests of the parties concerned. In any consideration of arbitration, it must also be kept in mind that this process is for the exceptional case in which the parties have not been able to resolve a dispute at earlier stages normally provided prior to arbitration as in the typical grievance procedure. To the extent that companies and unions can settle their differences peacefully between [1]

themselves, they do not need to resort to the arbitration machinery they have adopted. Nevertheless, the provision for this "safety valve," intended to be used only when necessary, has won wide acceptance for the solution of disputes arising out of contract interpretations. It has become recognized as a plan of insurance for uninterrupted continuity of a bargaining relationship for the duration of an agreement. The arbitration of disputes over new contract terms, on the other hand, is a highly questionable procedure to most practitioners in the field, at least for ordinary collectivebargaining negotiations where no "public emergency" dispute can be said to exist. The necessity of bargaining out the terms of a new agreement, even at the risk of strikes and lockouts, by the parties who must live under these terms is believed to be a salutary process, involving the basic values of collective bargaining. 19 Between these two areas of arbitration on which considerable informed opinion has congealed lies the question of the appropriateness of submitting limited issues arising from a reopening clause in a continuing contract to a third party when union and management have reached a stalemate in the determination of such issues. There has been less formulation of general opinion on this subject. Positions are of course taken on this question whenever the parties to collective bargaining sit down to draft a wagereopening provision. On such occasions, however, they are likely to be preoccupied with the immediate problems at hand. Their attitudes may be governed by a similarity of reopening issues to new contract terms without further consideration of likenesses and differences between the two processes. The actual practice of bargaining parties varies greatly in the parties' willingness to submit reopening issues to arbitration if agreement is not reached. There is, furthermore, no unanimity among active participants on either side of the bargaining table on the question. The purpose of this monograph is to inquire into the nature of wage-reopening * Reference Notes at end. Page 96.

[2]

arbitration as a step in evaluating the use of this technique in resolving wage-reopening disputes. Any consideration of reopening provisions cannot be wholly divorced from the broader problem of long-term versus short-term labor agreements. While no exhaustive analysis of this broader problem will be attempted, some of the factors accounting for the interest of collective-bargaining parties in long-term agreements require a brief review. It is recognized that the appropriate contract duration may vary with the special problems confronting particular bargaining parties. In fact during a period of rapid economic change such as characterized the United States from 1946 through 1950, a firm one-year agreement may be properly regarded as "long-term" from the point of view of economic stability. If parties are interested in contracts of two, three, or five years, however, the very feasibility of such terms is of major importance. Does the subject matter of some contract areas lend itself to continuance over longer terms than that of other provisions? Are there ways of providing a "built-in" flexibility for some clauses while leaving others open to periodic review? Basically, how much flexibility of a contractual relationship can the parties permit while still enjoying the advantages of stability? With these considerations in mind, one can seek whatever discernible indications exist toward the use of longer-term agreements. World War II experience was followed by a post-war boom which tapered off in 1949, but merged into a renewed defense economy in 1950. This period can hardly be said to represent "normalcy," but some judgment must be formed from conspicuous experience during these years as to whether contract-duration trends are temporary and therefore ephemeral, or whether they represent in some measure basic collective-bargaining needs. Of the many facets of long-term agreements, the most interesting is the manner in which the general wage level is determined for the contract duration. In this area the [3]

wage-reopening technique vies with specification of objective standards or a prescribed formula for wage behavior during the contract term. Thus if parties negotiate a longterm agreement, they may protect themselves against wage inflexibility by a choice between (1) wage reopening with the right to strike, (2) wage reopenings subject to arbitration, or (3) a gearing of wage rates to some objective standard like the cost of living. Factors entering into the selection of one or another of these approaches are of more than passing interest to the parties and to observers of the collective-bargaining scene. Beyond a direct comparison of these different methods is the question of whether or not the fixed wage formula can be universally adopted. If not, the practical choice for some bargaining relationships may be between arbitration and the right to strike at a wage reopening. In this context, we approach the study of the arbitration of unresolved issues arising out of wage reopenings. Rather than make a quantitative analysis of the number of agreements providing for this arbitration technique, we have attempted to delve more deeply into the collective-bargaining experience of a few conspicuous bargaining relationships in recent years. The cases are selected from heavy-goods industries and consumer-goods industries. They reflect different lengths of collective-bargaining history in the individual cases, but are all reasonably prominent going relationships in 1951. The wage-reopening provisions studied differ in the frequency and timing of periodic review and in the scope and definition of reopenable issues as well as in the procedures provided for determining disputed reopening issues. Those which use arbitration provide illustrations of a variety of techniques, types of arbitration machinery, and arbitration procedures. By analyzing the actual experience of collective-bargaining parties in their attempts to provide wage flexibility by reopening provisions, it is hoped that a more careful understanding of the nature of wage-reopening arbitration may [4]

emerge. Such an understanding may be helpful in making an informed selection of the appropriate method under all the circumstances of meeting the problem of wage flexibility under a long-term agreement. It is essential at any rate for an appreciation of the many uses to which arbitration is put in the current collective-bargaining scene.

1.

WHY A DESIRE FOR LONG-TERM CONTRACTS

There is no quick or universal answer to the problem of long-term contract stability or even to the many-faceted motivations which govern union and management thinking on the question of contract duration. It is likely that a selected agreement term may reflect a particular state of economic circumstances, internal union and management conditions, and even personal qualities of the leadership of both groups. In times of rapidly rising prices and wages, unions are understandably reluctant to agree to a fixed contract for a long period, at least with respect to the level of wages. On the other hand, if a depression threatens, a union might seek to "dig in" on a fixed long-term agreement in order to protect whatever gains it has made, both in wages and other contract terms. Conversely if bleak business prospects faced a particular firm, its management would prefer some opportunity to review wage obligations rather than incur a longterm commitment covering a major element of cost. T h e advantages and disadvantages of long-term versus shortterm contracts must thus be considered in the light of these conflicts of interest, with appropriate differentiation between the effect of long-term commitments upon the heavier costincome elements and the areas of working rules. Apart from the problems of broad economic change, strategic factors involved depend upon what is sometimes called the stage of development of a particular collectivebargaining relationship. During the early years of a relationship when a union and a company are still learning how

[5]

to deal with each other, either party may consider any particular agreement to be quite unsatisfactory for a long pull and only acceptable temporarily as the best that could be obtained at a certain negotiation. If the relationship lasts, many "kinks" in the early agreements are gradually worked out. The necessity for frequent changes in many contract clauses tends, for this reason alone, to disappear. It may still be true that no agreement is perfectly satisfactory to all concerned and that "all that can be gotten," in a broad selfinterested sense, may apply to later stages of bargaining history. Short of perfection, however, or of permanent contractual relationships, we are concerned here with the agreements of two, three, or five years which are relatively long-term when compared with the more common annual agreements. Even if some lengthening of the agreement terms were widely adopted, reasons of persuasive force exist for periodic termination and renegotiation of a labor agreement. In addition, the relatively longer-term agreement may be feasible only after the collective-bargaining relationship has progressed to some degree of maturity. Recognizing the particular needs of individual bargaining parties to continue to use a short-term contract, either because of unusual economic circumstances or because of peculiar problems in a developing bargaining relationship, one may inquire about factors which motivate the current discernible interest in labor agreements of relatively longer terms. This discussion will deal primarily with unions and companies who have overcome their initial hurdles of living together. The techniques of providing wage flexibility to meet economic change within a continuing agreement on other contract terms will be discussed later. A.

A N N U A L CONTRACTS INVOLVE C O N T I N U A L

NEGOTIATIONS

One-year contracts involve an almost continual process of preparation for negotiations, negotiating, and installing a new contract. A common complaint of management is over the amount of time consumed by labor negotiations. Even [6]

with the increasing recognition of the importance of human relations to the functioning of a productive enterprise, any unnecessary time away from the production and operating problems of industry provokes a feeling of resentment among business executives. While corps of specialists can relieve operating executives of much of the burden of labor relations, labor problems inevitably must be related to strictly operating functions. In many of the most successful bargaining relationships today, decisions on labor matters are recognized as inseparable from other operating decisions in a necessary integration of the entire business enterprise.2 Often the participation of top operating executives in negotiations is urged strongly by union spokesmen in order to assure the presence of decisionmaking men when major industrial-relations problems are dealt with. The strain of frequent and sometimes continual negotiations is not confined to management representatives alone. Union leaders often lead a harassed and hectic life, traveling from one negotiation to another. The cry for responsible and thinking union leadership must be viewed in some measure in the light of the drives and pressures of union office. Continual negotiations hardly facilitate securing the many other contributions to stability which union officials can make. The time-consuming effects of negotiations are of course much more serious than personal inconvenince of management and union leaders. The interferences with the normal operation of business and with the smooth functioning of a good collective-bargaining relationship can take a serious toll of productivity and patience of the entire working community. These effects comprise a weakness of the collectivebargaining institution. Actual negotiating time is frequently only a fraction of the time required by annual negotiations. Prior to negotiations union committees meet to formulate demands, often taking committeemen away from their jobs for various periods. Management groups are finding it necessary more and more to prepare well ahead of actual negotiations. The [7]

use of joint pre-negotiation meetings has often been suggested and used in forward-looking bargaining relationships to smooth the path of the actual negotiations themselves. When a new agreement has finally been hammered out of the negotiating sessions, approved and ratified, the task of putting the new provisions into practice remains. Interpretations and explanations of the intent of the negotiators as developed in the negotiating sessions must be compiled on both union and management sides, with occasional use of joint interpretive manuals. Good practice today calls for supervisory-training sessions at which the changes are explained, sometimes the negotiating reasons for them given, and advice and regulations as to changes in practice required by the new agreement are developed. Union reports to membership and retraining of grievance men may be required. Even with these techniques, weeks and sometimes months elapse before new practices required by the contract-clause changes are fully developed and integrated into the normal, customary activities of the working relationship. This time-consuming factor is undoubtedly an important reason for the attempts by more and more collective-bargaining groups to lengthen the term of their contracts. There is a need for a greater permanence to agreements than has generally prevailed if for no other reason than that, with a oneyear contract, the parties spend too much time and energy in getting ready for negotiating and in instituting the new contract. B . ANNUAL

CONTRACTS

INVOLVE SERIOUS

STRAINS

WITHIN

UNION AND MANAGEMENT ORGANIZATIONS

The formulation of a union's negotiating demands requires considerable interplay between union leaders, politically powerful groups within the union, and often the membership. These occasions may easily be used to develop political fodder for personal hopes and ambitions of individuals within the organization. A program must be formulated by leadership with sufficient appeal to the rank and file to overcome upsetting attempts by dissident factions. [8]

When a national union bargains on behalf of large groups of employees, many contract issues are raised which are minor, and significant only to particular locals or plant groups. They may be pressed intensely, however, by particular delegates to an annual bargaining conference. Because of the political responsibility of national officers to local memberships, it is often very difficult to mold these diverse local demands into a selective common program. National leadership must often reject some demands of particular locals where presenting them might interfere with other and more general aspects of the union program. Even if a number of purely local requests are left in the initial bargaining package presented to the employers, at some stage in the negotiation particular issues must give way to the greater concentration upon the more general demands. Supporters of favorite issues may take their abandonment poorly and thus the annual negotiation of all contract terms can entail a crisis within the union itself. In situations where unions have vised the two-year contract term for some time, the leadership is frequently faced by requests from some segments of membership for annual negotiation. The proposal sometimes becomes a political issue on the floor of the union's convention. Thus the struggle continues between union groups desiring frequent changes in the contract and putting great stress upon contract language and those who value greater stability of the contract terms and rely to a larger extent upon interpretation and working arrangements to meet the situations which arise during the contract term. It has been pointed out, in commentaries on recent longterm agreements, that a union leadership may encounter internal political problems as the lack of frequent negotiations eliminates a forum for making the membership aware of the gains which their leaders are continually seeking. 3 It is suggested that union officers will tend to concentrate their attention upon grievance handling and other day-to-day affairs in order to retain the affiliation of the rank and file. Such problems may reasonably be expected under some con-

[9]

tracts of extremely long duration, depending of course upon many other circumstances within the particular union involved. Union spokesmen who oppose long durations express this thought somewhat as follows: "After all, the membership must be continually aware of our efforts to protect their interests. That is what we are paid for." Recognition of this factor does not invalidate the point made here that annual contracts involve serious strains within the union organization. It indicates that the political nature of a labor union involves a complex of different forces, some of which point toward contradictory policy directions.4 On balance it appears that internal political strains can usually be eased by some lengthening of contract terms. These same factors reinforce a conclusion, however, that such lengthening can not practically be carried too far and militate against a concept of a permanent collectivebargaining agreement. Strains created within management organizations may not be of so serious proportions, but still exist. A coming contract negotiation often stirs up strange proposals from particular supervisors reflecting problems of a purely local nature in their own departments. Besides the nuisance of negotiations themselves, the agreements consummated by company negotiators often provoke chagrin on the part of particular operating officials whose relations within their domain have been harmonious under previous contract language. The upsetting nature of change itself is a problem. Most potentially serious are the disagreements among the management team as to how the negotiations should be handled. C . A N N U A L CRISES A F F E C T ADVERSELY THE STATE OF INDUSTRIAL RELATIONS

More evident crises deriving from one-year contracts are associated with the actual negotiations themselves. In the nature of things, many union requests of primarily local significance find their way into the grab bag of demands initially presented to employer representatives. A miscellany

[10]

of bargaining issues increases the difficulty of employerunion bargaining. A great deal of time must be devoted in preliminary sessions to discussion of issues which are not of first-rank importance to either party. These preliminaries must be patiently carried out so that the local committeemen and local company representatives who are not close to the bargaining scene will see the need for concentration upon general problems. A difficult process of selection follows while attempts are made to discern what issues are really important to reaching a final settlement. Meanwhile, unrealistic hopes are nurtured in the minds of employees and to some extent in the thinking of individual members of company officialdom. If publicity is given to the bargaining statements, the uninitiated observer sees only what appear to be impossible positions taken by both sides. The new contract may, in fact, end up with language very similar to the previous contract, but the disappointment and confusion involved in hammering it out may leave bad tastes which must be eliminated before the parties resume their previous working relationship. The after-effects of negotiations, a necessary concomitant to collective bargaining, should not be exaggerated. Sophisticated bargainers tend to part in a cooperative spirit after the agreement has been reached. Even in the best situations, however, the new changes must be interpreted and integrated over a period of time into the working relationship of the parties. This process at best is not an easy one. The strains and stresses of arriving at agreement, with the ever present possibility of strike in the air, emphasize the advantages to all parties concerned of reducing to a practical extent the number of such crises required by annual contracts. D . T w o - W A Y BARGAINING G A I N S M A Y B E L O S T BY CONTRACT RENEGOTIATION

A labor agreement bristles with words and phrases which are not capable of being reduced to precise or mathematical measurement.5 Such phrases as "just cause," "reasonable notification," "insofar as practicable," "qualified to fill,"

[11]

"without undue hardship," set up general standards of conduct by which the parties strive to govern their day-to-day relations. Many clauses of the agreement can only establish general rules for guidance and cannot possibly cover all aspects of the working relationship in different departments and job areas. Even when the most careful drafting is utilized in order to spell out the meaning of such clauses, situations not covered by the language persist in arising. Other circumstances not anticipated in the original drafting may throw quite a different light upon language which seemed crystal clear in a drafting conference. This aspect of the labor agreement, together with the inherent nature of the human relationships which it seeks to govern, explains in large measure why troublesome grievances often defy disposition by a simple or routine application of contract language. Whether the agreement is drawn in elaborate detail by expert draftsmen or is the imperfect expression of agreement between the practical-minded participants in the bargaining relationship, the actions of the parties during the term of the contract frequently determine more largely the meaning of the agreement than the language itself. Harmonious relations in a particular department of the factory may sometimes be based upon quite different practices under a particular clause than the practices in another department covered by the same agreement. Local understandings and unwritten agreements between particular foremen and superintendents and their men are the bane of union presidents as well as of any perfectionists who still remain in labor-relations administration. Everything goes well until a grievance arises and then both the foreman and local grievance man find themselves "in hot water." Shelving a labor agreement may thus create serious difficulty. It is also perfectly clear that the production job to be done in a small operating unit requires such a complex interplay of leadership and teamwork that the language of a voluminous document simply is not used to govern each and every activity. Many a personnel director or union president is aware of production units from which no evidence of trouble [12]

is heard, but in which the supervisor and men are going blithely along in disregard of contract language obviously (to grievance man and supervisor involved) intended for the other fellow. The building up of shop understandings to carry on beyond and between contract language is a process in which both management and union have a stake. Union statements for public consumption that complete and literal enforcement of contract language is maintained does not accord with practice in the shop. Similarly company attempts to live by the letter of the agreement represent an ideal which cannot work out in the operating needs of efficient, practical plant operation in all its phases. Many negotiated contract provisions have been found impractical in operation or inapplicable to numerous and changing production problems. The work of the plant or department goes on with satisfactory understandings developed in the local unit for an actual functioning relationship. Insofar as possible, these understandings and practices clearly should be in conformance with the general standards of conduct set forth in the agreement between the parties. This great body of two-way bargaining gains has been built up in each contractual relationship out of problemsolving by both parties. Knotty problems have been worked out through the grievance procedure. A collection of arbitration awards, sometimes referred to as industrial jurisprudence, is only a part of the body of working rules, understandings, and practices by which the parties live and work together. The risk of negating these gains by frequent redrafting of contract sections under which they have evolved is far more serious than is generally realized. Only the vocal objections of shop units required to adjust to new contract provisions bear witness to this loss. E . S O M E D E M A N D S R E Q U I R E SUBSTANTIAL

IMPLEMENTATION

The spread of collective bargaining to cover pension programs and "social insurance" introduced at many bargaining tables more complicated subjects than had previously been

[13]

considered. The very nature of a pension plan suggests a long-term commitment. Since heavy financial obligations are involved, particularly by reason of past service liability, companies are also anxious to avoid frequent changes. The pension expectation to the individual employee is usually many years in the future. Leaving aside the fact that many employees will not remain with a company long enough to qualify or until the retirement age is reached, and therefore will not receive benefits under the non-vested plans generally negotiated, the practical effect of a pension plan is to establish a long-term commitment in the minds of employees. At the same time, neither union nor employers could reasonably promise that no changes would be made in a given pension program over an employee's lifetime. Such a promise would be highly unrealistic, both because of possible changes in the purchasing power of money and by reason of the many vicissitudes of business over a lifetime. Typically under such circumstances in collective bargaining, a compromise was reached. Most of the recently negotiated pension agreements run for a five-year term. These programs are frequently incorporated in separate contracts and often run beyond the term of the general labor agreement as in the steel industry. Where the five-year term was adopted both for pensions and for the general agreement, the long-term pension contract may easily have been influential in securing acceptance for the five-year duration of the general agreement terms. Apart from the financial problems, it will be rememl ered that an aspect of pensions which attracted early and persistent union attention was the matter of voluntary rather than compulsory retirement. Union objections to the reinstatement of compulsory retirement, after the tapering off of the war-time demand for older workers, took the form of grievances on behalf of particular employees who desired to continue work. The final pension settlements frequently included some leeway for older workers to remain at work if capable of doing their jobs after normal retirement age, as [14]

in the steel industry, or included a voluntary retirement period between sixty-five and sixty-eight years of age, as in the General Motors-UAW contract. This type of provision, along with union participation in some administrative aspects, as well as the educational problem of explaining pension rights to the rank and file, all require a considerable period of assimilation. Nonfinancial aspects of a program as ambitious and complicated as pensions provide in themselves an inducement toward a longer term agreement. In some respects, the insurance benefit provisions negotiated in 1949-50 provide an even clearer example of the need for long-term implementation than the pension agreements. Insurance benefit plans were frequently not spelled out in as much detail, and left considerable bargaining of actual programs to be effectuated after the general agreement had been signed. In the case of the Carnegie-Illinois Steel Corporation and the United Steelworkers of America, for example, the development of the insurance program started with a letter from the corporation to the union in April 1947, accompanying the contract of that year, agreeing to study the problem of insurance benefits. Studies proceeded by both company and union. Then in 1948, in the absence of agreement on this point, a reopening provision was negotiated in the contract extension, which provided for reopening upon insurance benefits as well as wages. Even with this background of study, the strike-settlement agreement of November 1949 covered this plan only in general terms. It was provided that the company and union "will agree" on the insurance program (i.e., death, sickness and accident, and hospitalization benefits ) for all employees, subject to the cost limitation of five cents per hour to be divided equally between company and employees. Such an agreement again required further implementation. An educational problem also remained and union officials were preoccupied over a period of time in adapting pattern provisions to local bargaining situations across the country. The hospitalization program is a particularly interesting problem of adaptation because local bargaining groups in some branches of the

[15]

steel industry and in other industries frequently preferred to adopt a community type of program such as the Blue Cross or other hospital associations provide. Community differences usually arise under such programs. Other instances of particular negotiating issues which may require several years to effectuate include certain aspects of wage structure relationships. The joint intra-plant wage-inequity program of the same parties in the steel industry was initiated upon an order of the National War Labor Board. It was voluntarily continued after the war by the parties under the guidance of a joint commission which they established. The agreement on the point was finally completed in 1947. Whether by coincidence or not, the 1950 five-year contract between Allis-Chalmers and the' UAW-CIO contains a provision for a similar joint evaluation of job-rate relationships. In a somewhat different context, the 1938 "rehabilitation" agreements in the hosiery industry were signed for a three-year duration because it was estimated that it would require that long a time to effectuate the program planned. It is not implied by this discussion that a union demand of these various types (which are by way of illustration only) must always be accompanied by a general agreement with a duration extending until all of the aspects of a complicated program are finally worked out. The cases cited include instances to the contrary, where the program was continued over several different contract durations. It is suggested that the emergence of such complicated issues on the collective-bargaining scene militates in favor of relatively long-term agreements, at least for the period during which such a program is underway. Even a cursory analysis of collective-bargaining processes in mid-twentieth century America suggests, therefore, a number of reasons why parties are interested in longer-term agreements than have previously prevailed. The very timeconsuming nature of contract negotiations, particularly when preparatory and effectuation processes are taken into account, is a factor of some significance in this development.

[16]

Annual negotiations furthermore create strains within management and union organizations. Periodic negotiations for collective-bargaining gains are a natural concomitant of the political interactions between union leadership and rank and file, but it is likely that too frequent negotiation is more disruptive than helpful to the union organization. Even more serious to the collective-bargaining relationship are the ill effects upon the conduct of industrial relations which annual bargaining crises may provoke. T h e charged "strike" atmosphere may be an essential part of the collective-bargaining institution. T o the extent that it is feasible to reduce the frequency of such crises, collective bargaining may be made to operate more smoothly. The nature of certain demands in recent collective bargaining, such as pensions, insurance programs, job evaluation plans, etc., suggests further reasons for lengthening the term of an agreement beyond one year, at least while such programs are being launched. Like any other single factor, this type of demand in itself is no assurance that a particular bargaining relationship will be adapted to meet the same long-term duration requirements for these particular programs. Perhaps the most important of the several reasons advanced as influencing an extended term of collective agreements is the actual nature of bargaining which proceeds during the contract term to give meaning and content to the agreement provisions. This development of working understandings is too valuable to both management and unions to be risked in frequent renegotiation of contract language. Many satisfactory practices may be seriously disturbed by unnecessary language changes of the labor agreement. This list is not presumed to be exhaustive or to attempt to develop all of the pros and cons of long-term agreements. No single rule can be adopted for all bargaining relationships or for a single bargaining relationship at all periods of time. Parties will continue to require short-term contracts to meet given needs at a particular time. A growing need is evidently felt by collective-bargaining parties, however, for [17]

longer-term contract stability than has prevailed in the past. This undoubtedly accounts for much of the recent use of wage-reopening provisions and similar techniques. This trend suggests that contracts of longer term than a single year meet the needs of many collective-bargaining relationships. The problem is whether or not long-term agreements can practically serve to cover the many types of subjects now included in the collective-bargaining relationship.

2.

FEASIBILITY OF LONG-TERM AGREEMENTS OVER DIFFERENT CONTRACT AREAS

Even if collective-bargaining parties under many circumstances have reasons to prefer longer agreement terms than the common annual renegotiations entail, it is essential to explore the feasibility of longer-duration contracts in terms of the typical labor-agreement content and the requirements of collective bargaining. One might answer the question of feasibility by the simple statement: "It has been done." In view of the great variety of collective-bargaining situations, however, and the conflicting points of view on this question, a careful review of typical subjects covered by labor agreements is warranted to determine whether any principles of fairly general application may emerge with respect to contract term. Such an investigation by contract areas is especially relevant here to our major concern with the various techniques, particularly wage-reopening arbitration, used to overcome the obstacle of wage inflexibility over the increased duration. The nature of the problems which arise in these different areas of subject matter has much to do with determining the need for such review. A . U N I O N RECOGNITION AND U N I O N

SECURITY

For the first few years of a collective-bargaining relationship, disputes arise frequently over the extent of union

[18]

membership and union support under the agreement. Unionsecurity aims are looked upon askance by many persons in the management group. Problems in this area, arising usually at contract termination, are of considerably more importance in a young relationship than in an older bargaining situation. After the two parties have "lived together" over a period of years, an acceptance of the status of the union develops, whether it be on a union shop, maintenance of membership, or other basis. Bargaining relationships may then go on for years with no changes being urged as serious bargaining points on this clause, except as occasioned by government regulation as in the requirements of Section 8 of the LaborManagement Relations Act of 1947. 6 1. Requests for Changes in the Bargaining

Agent

The goal of a long-term contract with respect to the union-security issue, however, may be affected by the exercise of the right of employees to change their bargaining agent as well as their bargaining unit within such a term. The Wagner Act included no specific direction for the change of a bargaining agent once established. It simply provided that the Board may investigate, certify, etc., "whenever a question affecting commerce arises concerning the representation of employees." 7 This phrase was apparently considered broad enough to encompass reconsideration of representation questions as well as their initial determination. Under the Wagner Act a number of cases were presented to the Board involving requests for changes in representation. Certain criteria gradually evolved for dealing with such requests. The length of an existing contract was inevitably involved in this determination. Presented to the Board was a difficult problem of balancing two separate interests: the need for sufficient stability to permit effective collective bargaining and the right of employees to change their representatives. 8 The evolution of Board policy defining a reasonable dura[19]

tion of a contract operating as a bar to a new election was amply set forth by the Board opinion in the matter of Reed Roller Bit Company in 1947, as follows: The problem of the contract bar was presented to the Board early in its history. In its first decisions, the Board held a contract for a term of 1 year, whose expiration date was not imminent, would bar a determination of representatives, but that no contract which had been in effect for more than 1 year could foreclose an election. On the basis of these decisions, the Board frequently found that a 2-year contract was no bar after it had been in operation more than 1 year. It was held, however, that a 2-year contract which was customary in the industry, served to preclude a determination of representatives, although it had already run for more than 1 year. Beginning in 1945, the Board modified previous decisions and ruled that a contract for a term of 2 years was presumed to be of reasonable duration, and that the burden was on the petitioning union to prove the contrary by showing that 2-year agreements were not customary in the industry. Failure to sustain the burden of proof resulted in the dismissal of the petition.9 The Board extended this tempering of substitute unionism to agreements concluded after reopening or automatic renewal. 10 It denied petitions arguing that the reopening of a two-year contract should preclude its operation as a bar to redetermination. For example, a very broad reopening provision, permitting the negotiation of "wages, hours, and working conditions," did not preclude the contract as a bar in the matter of S & W Fine Foods, Inc., and Warehouse Union, Local 6, I L W U , CIO. 1 1 Existing contracts have been held not a bar to redetermination of representative, however, in cases where the bargaining agent exceeded the scope of his authority in negotiating an unreasonably long-term agreement. 1 2 The Labor Management Relations Act of 1947 in Section 9 ( c ) directs the Board more specifically to investigate and to hold hearings upon representation questions including a petition for decertification of an existing collective-bargaining representative. Administrative procedures adopted by the Board for decertification elections are similar to those [20]

which have been used for certification. 13 The 1947 statute supports in part the Board policy toward substitute unionism by spelling out in Section 9 ( c ) ( 3 ) that "no election shall be directed in any bargaining unit or any subdivision within which, in the preceding 12-month period, a valid election shall have been held." 14 In many other respects, of course, the Labor Management Relations Act of 1947 puts much greater stress upon individual employee and minority rights in representation matters than did previous legislation. In spite of this fact, in individual cases under this legislation, the Board has indicated a continued regard for stability of the existing agreement while, at the same time, it has tried to provide an opportunity for a change of bargaining agent in response to a timely petition. While petitions found to be timely have been honored both for decertification and change of agent upon the occasion of renewal or renegotiation, a first contract subject to "reasonable renewal term" is still found to be a bar. 15 The two-year term or even longer may still be found to be of reasonable duration. In the Reed Roller Bit case they had found that "even in the presence of a contrary custom in the industry, [two-year terms] should ordinarily preclude a determination of representatives until shortly before their terminal dates." In the matter of California Walnut Growers Association and Sales Drivers, Dairy Employees, Local Union 166, affiliated with International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers, AFL,16 the Board had before it a contract of almost three years (September 18,1945, to August 15, 1948) with approximately annual reopening. When the contract was reopened for the second time in July-August 1947, the petitioner sought recognition. In its opinion the Board stated that "a contract for more than 2 years, in the absence of showing of custom in the industry, is presumed to be unreasonable and, therefore, no bar," citing the Reed Roller Bit Company case and the Puritan Ice Company case (notes 9 and 12). Nonetheless, the instant three-year contract, the second

[21]

consecutive one of the same duration between the parties over an eight-year bargaining history, was determined to be not of unreasonable duration and to be a bar to redetermination at that time. Thus, it appeared that they would consider evidence of industry practice in determining the reasonableness of contract terms for more than two years if raised as a bar to an election, while the two-year term would appear to be generally held as such a bar. The National Labor Relations Board's treatment of contract term in the past suggests developing concepts which take into account the growth of collective-bargaining practices. In this context the recently negotiated five-year agreements in automobiles, farm machinery, and other industries may come within the scope of such concepts. The issue, an important one to long-term contract stability, must await clarification in further determinations by the National Labor Relations Board. 2. Requests to Change Bargaining Units Several aspects of the Labor Management Relations Act of 1947 would appear to modify former policies of the National Labor Relations Board in determining the appropriate unit for collective bargaining. In Section 9, it is provided that "the extent to which the employees have organized shall not be controlling."17 Although this provision may lessen somewhat the Board's reliance upon the doctrine of extent of prior organization in establishing departmental or partial units, it does not appear that a change of bargaining unit once established would be materially affected. The doctrine has been used mainly in the past in dealing with initial organization cases in which no other union appeared to contend for a larger unit.18 The problem of changing a unit once established has arisen most frequently in cases of craft versus industrial unionism. The now famous Globe Machine and Stamping Company case provided that the appropriateness of units would be established by vote of the employees concerned. Under the Wagner Act, however, the doctrine by no means [22]

resulted in general separation of craft units at the desire of a small number of employees. In fact, many requests for such separation were denied.1" The Labor Management Relations Act of 1947, Section 9 ( b ) ( 2 ) , required that the Board shall not "decide that any craft unit is inappropriate for such purposes on the ground that a different unit has been established by a prior Board determination, unless a majority of the employees in the proposed craft unit vote against separate representation. . . . " A case of major importance decided after this legislation was that of the National Tube Company.20 In this case the Board gave its interpretation of this provision as requiring only that prior determination and bargaining history in the company may not be the sole ground for deciding that a craft unit is inappropriate. It was stated that no mandatory craft proviso had been written into law by Congress. In its decision, the petition for a craft unit of bricklayers and apprentices was dismissed where collective bargaining in the steel industry had been on an industrial basis. Other recent cases have supported petitions to set off such crafts as pattern makers in a unit on the grounds that, for example, the pattern makers constitute a skilled craft, while groups of less precisely definable craft status have had petitions dismissed.21 In the Board's thinking, the Labor Management Relations Act of 1947 prevented dismissal of craftunit petitions on as cursory a basis as would have been possible under the Wagner Act but did not necessarily require widespread severance of craft units. With respect to duration of contract term, petitions for redetermination of the unit would be subject to those policies illustrating the timeliness of petitions for a new bargaining agent, discussed in the previous section. The shape of ultimate regulation of possible changes of bargaining agent or bargaining unit cannot be assessed fully until a greater record of Board cases and of Court review is at hand. Both questions affect considerably the provisions of long-term union-security agreements, particularly if such [23]

contracts extend beyond two years. For example, a contract like the separate five-year closed-shop agreement of 1947 between the Amalgamated Clothing Workers of America and the Clothing Manufacturers' Association might be held to be no bar to changing bargaining unit or bargaining agent if it were ever challenged. As contract stability of union-security provisions is sought over longer terms, Board opinions and Court decisions will be required to clarify, under existing legislation, the right of employees to change their bargaining unit or agent on the occasion of contract reopening or at some other interval, while at the same time preserving the stability of collective-bargaining relationships. The emphasis of the Labor Management Relations Act throughout tends much more to favor individual and minority group rights in contrast to the emphasis upon fostering collective bargaining in the Wagner Act. This tenor of the legislation would suggest a greater likelihood of changes in bargaining units and/or bargaining agent to the detriment of long-term contract stability. When or whether such results will materialize, however, must await the law's administration over the years ahead. B.

O T H E R " N O N E C O N O M I C " CONTRACT AREAS

Seniority provisions are notoriously difficult to formulate so as to spell out exact procedures to be followed under all circumstances and still not strait-jacket particular departments or the needs of new operational developments. In practice, the agreement usually sets up objectives and rights but must be interpreted frequently through the grievance procedure. Local understandings and practices may reflect the mutual desires of departmental or local plant employees and management, representing adjustments to their own desires and operational needs.22 Although problems of adjustment are characteristic of seniority provisions of an agreement, particularly in the early years after these provisions are adopted, these problems are not susceptible to handling by periodic review as [24]

in wage reopenings. A sudden decrease or increase in employment may cause a surge of problems not formerly anticipated. Such a situation is usually worked out as the occasion arises, however, rather than at the time of a formal over-all review. Most significant is the fact that individual seniority disputes are commonly submitted to grievance arbitration. This procedure has usually proved flexible enough to resolve questions by reference to the standards set forth in the negotiated agreement. Unsatisfactory solutions then lead to attempts to modify the contract provisions at the ensuing negotiations. It would seem, then, that, after a few years of living under a set of seniority provisions, there would be little occasion for reopening review. Even in the early years, the problem of adjustment does not lend itself to periodic review within the contract term but rather to study, experience in departmental or other units, and evolution of modes of reconciling the interests of both parties in shop practices. Other contract provisions of a noneconomic character often relate to discipline and discharge, safety and health, physical examinations, and other items affecting the day-today relationships of the parties. These, together with the grievance procedure itself, are not susceptible to periodic opening and review, and normally do not require such review. A glance at a typical collection of shop grievances will show these subjects heavily represented among the individual problems arising recurrently. Since the questions in the main are individual ones, the grievance procedure again is the appropriate method of applying the standards in the negotiated contract to the individual situations. C. INDIVIDUAL W A G E - R A T E AND I N C E N T I V E - W A G E

CHANGES

Individual wage-rate problems may arise in two connections—either as alleged inequities in the relationships of the various rates to each other in an existing wage structure, or in the determination of a rate for a new or changed job. Some bargaining situations have been plagued, particularly in their early years, by continual requests to make adjust-

[25]

ments within the wage-rate schedule, based upon comparisons between jobs. Many companies and increasing numbers of unions are recognizing the wisdom of establishing wagerate relationships on an overall basis, either by job-evaluation techniques or by other means of negotiating acceptable jobrate relationships. An outstanding example of a wageclassification program is that worked out jointly by companies and union in the steel industry from the war years to 1947. The relationships within such a wage structure, once established, may be expected to continue over a period of years, except for such general corrections as an over-all adjustment in the rate intervals between job grades on the occasion of a general wage change in cents per hour. The effect of such interval corrections approximates the results of making a general wage change on a percentage basis. The correction of wage inequities within a company, then, except for adjustments incidental to a general wage change or to meet a special problem, is not particularly adaptable to the periodic reopening technique during the contract term, but requires special procedures of its own. Wage rates for new jobs as well as incentive adjustments required by new or changed jobs are typically handled on a day-to-day basis and again are not adaptable to periodic review. Typically, management initiates such changes as the occasion arises. Employee and union disagreements with rates set may then be settled through the grievance procedure. Whatever arrangements are provided in a particular bargaining situation, the significant element is the procedure established for meeting individual operating changes as they arise. The procedure is dynamic in the sense that it may be called into play at any time. To be successful, however, the procedure itself must continue to function in an established fashion and would not lend itself to periodic review within the contract term. Some wage-reopening clauses are worded in such a wav as to permit the consideration of individual wage inequities as well as the general wage level. Consideration of wage inequities on an individual case basis at negotiations almost [26]

invariably causes a problem of unbalanced wage-rate structure. Occasionally some part of a negotiated wage-increase amount may be allocated to meet a broad inequity problem in some segment of the rate structure as in the rates for skilled maintenance jobs. Individual job-rate inequities, however, are much more effectively met by a comprehensive program of job classification and continuing administrative machinery for meeting new situations as they arise than by their treatment at contract or reopening negotiations. D. S U P P L E M E N T A R Y B E N E F I T PROVISIONS OF U N I O N C O N T R A C T S

A number of recent reopening provisions, such as the 1948 Supplementary Agreement between the Carnegie-Illinois Steel Corporation and the United Steelworkers of America, CIO, have permitted the reopening of such items as an insurance plan as well as a general wage increase. These provisions have generally been used prior to the negotiation of a plan rather than for modifications of a negotiated plan. The occasion for such use develops from prior commitments for study or willingness to consider such a program when the actual setting up of the program has been subject to delays, often growing out of the complexity of these issues. In fact, the 1949-50 developments in several industries, including the steel industry, as outlined above, have indicated the extremely long-term nature of some such agreements, particularly for pension programs. A retirement program is such a heavy commitment, both cost-wise and with respect to benefit continuation, that annual negotiation has been rejected in these recent cases. These developments would appear to be directly opposite to the consideration of review of "welfare" programs upon the occasion of wage reopenings. Other contract benefits such as holidays and vacations are also generally negotiated for the contract duration, except as modifications may be agreed upon at wage reopening as a part of the entire cost "package" of settlement. When pattern movements have been developing which included such items, some wage-reopening provisions have in-

[27]

eluded the specific commitment to consider modifications in these benefits. The explanation is again in large part a question of the make-up of the "package settlements" in recent years rather than a characteristic of the particular benefit provisions requiring reopening. In collective bargaining experience, "bugs" typically develop in newly negotiated provisions of this type. Eligibility for holiday pay and vacations, calculation of benefits in specific instances and other problems of individual application can cause innumerable headaches to the parties. Bitterly contested grievances, involving in at least one case the dismissal of an impartial umpire, are fought over such issues. All possible contingencies can hardly be anticipated in the negotiation of such provisions. Subsequent conferences for clarification are frequently required, but typically the growth and content are given to these provisions through the grievance procedure. There is nothing to preclude, of course, the discussion of such problems at reopening. The issues are not of sufficiently predictable nature, however, to lend themselves to a provision for periodic review. The possibility that unpredictable disputes may arise in these and other areas of an agreement, which require for solution actual changes in contract language and yet defy mutual agreement upon such changes during the contract term, is sometimes cited as a reason against too-long contract duration. Clearly there comes a time when contract provisions of both "economic" and "noneconomic" nature must be subject to renegotiation with the basic weapons of collective bargaining available to the parties. Where such possibilities are difficult to predict, however, provision for reopening review during contract duration has not been generally used. The realization of their development simply serves as a caution against extending a reasonably long-term agreement for too long a period, and points to the necessity of most parties' renegotiating the agreement terms themselves at some termination point. Benefit provisions established over a period of time generally become standard, and become viewed as typical [28]

perquisites of employment. When being negotiated, their cost impact often yields a consideration of them similar to that given to the negotiation of wages. After they have been negotiated, and especially after the "kinks" are ironed out, there would appear to be no general tendency in current bargaining developments toward making them subject to periodic reopening. SUMMARY

This brief review of different contract areas suggests a number of elements determining the feasibility of long-term agreements. In the first place, the more strictly legal aspects of the collective agreement must be distinguished. Illustrated by the treatment of changes in the bargaining agent and the bargaining unit by the National Labor Relations Board and the courts, it must be recognized that the reasonableness of a given contract term may be subject to court review. In handling these cases, however, the National Labor Relations Board, both under the Wagner Act and the Taft-Hartley Act, has demonstrated a gradually evolving policy which has given recognition to two- and even three-year contracts as a bar to redetermination petitions. The cases cited above indicate that the reopening of a contract may furnish the occasion for a redetermination petition. Such a petition would normally be considered timely only if the term of the original agreement were deemed unreasonably long. There are no indications in this policy development that even longer terms than two or three years, as in the recent five-year unionsecurity agreements in the automobile, farm equipment, and other industries, under appropriate circumstances, would be set aside as unreasonable. The Board's problem is nonetheless a difficult one. The rights of employees to determine their authorized representatives must be reconciled with the needs of a collective-bargaining relationship for stability. The general tenor as well as several specific provisions of the Labor Management Relations Act of 1947 would appear to encourage the severing of craft units more generally than under the Wagner Act. Some highly skilled, clearly integrated crafts, [29]

such as pattern makers, have split off under these provisions, but no general or widespread movement of this sort has so far appeared. Again the Board has the difficult problem of determining whether effective collective bargaining can be furthered more readily by the several crafts or by a larger unit, and whether the wishes of a majority of a small unit or the determination by the larger group of employees shall prevail. Developments in this area under the Labor Management Relations Act can only be viewed over the years as Board and court decisions actually unfold. Another problem of labor agreements having dominant legal aspects today pertains more closely perhaps to the managerial-function problem, whether or not incorporated in management's-rights clauses. The question of the scope of subject matter included in management's obligation to bargain collectively and the "continuous" nature of this obligation as reflected in the Allied Mills case 23 have been the subjects of much recent litigation. Again the collective-bargaining parties, even when they have worked out for themselves in a long-term agreement an appropriate scope of subject matter to suit their modus vivendi, may discover themselves somewhat at the mercy of legal developments.24 In the 1950 five-year agreement between the General Motors Corporation and the United Automobile Workers, CIO, the parties agreed to a waiver clause designed to meet this problem. 25 Thus they seek to assure the stabilityof the contractual relationship, negotiated in this contract, for the duration of the long-term agreement. It is possible that the National Labor Relations Board s doctrine of "continuous obligation to bargain" may have been influential in the choice of the parties for a five-year term and for the selection of an automatic wage formula to avoid any kind of reopening in this agreement. It may also be pointed out that this agreement and many other long-term contracts preserve the right to strike over limited issues. (Output standards are subject to strike in the General Motors contract, although strikes have been infrequent over this subject.) Unless a provision like the GM-UAW

[30]

waiver can limit effectively the continuous bargaining liability, there is danger in leaving even limited areas of an agreement, whether short-term or long-term, subject to strike, since strikes can seldom be contained within the limited issues supposedly permitted. Thus if a legal equity is established in extending the scope of bargaining and if a strike develops over intentionally limited issues, containment of the strike to the specified issues may be even more difficult than in the past. Arbitration then, in spite of the risks of its own extension, may take on increasing significance if it is accompanied by a firm no-strike agreement for the contract duration. Turning to those contract areas outlined above which are less directly the subject of legal regulation in peace time, it is apparent that the device of "built-in" adaptability is appropriate for such individual wage-rate and incentive changes as are required by new or changed jobs to meet the continually changing features of the day-to-day operating relationship. In these spheres the contract provisions may establish procedures for meeting the individual problems as they arise.26 Once these procedures are established, they may require sufficient continual attention to be sure that the relationships are not rendered obsolete by changed conditions, but they do not in themselves require periodic review in the nature of wage-reopening provisions. In practice, individual wage-rate adjustments are frequently made on the occasion of a wage reopening, sometimes as a part of a wage "package" allocated to the correction of inequities. It may be that a general wage increase, in itself or as the latest of a series of cents-per-hour, across-theboard increases, requires special attention to differentials for skill or other strategic relationships within the wage structure. Some general wage-increase applications tend to make relatively automatic corrections for job-rate differentials as in a percentage adjustment or in the practice of the steel industry to widen step-rate intervals on the occasion of general wage increases in recent years. Less formal instances of such applications are illustrated in the 1950 wage settlements

[31]

in the major auto companies when special adjustments were made to skilled categories. Similarly, in negotiating a general wage increase, the parties must determine how the change should be applied to any incentive plans or piece-rate compensation in operation. The effects upon the inter-job rate relationships and earnings potential under incentives will be different depending upon whether a wage increase is incorporated into incentive base rates by one of several procedures or is "layer-caked" in cents per hour on top of incentive or bonus earnings.27 The effects upon the wage structure of a general wage increase may properly be distinguished from the necessity for making job-rate or incentive relationships per se subject to review by the wage-reopening technique. If individual wage inequities are made subject to bargaining at a general wage reopening, they tend to occupy an inordinate amount of time and to divert attention unduly from the main bargaining issues. The practice of making such individual requests wholesale at a general bargaining session may degenerate into a political grab bag in which personal requests become entangled with the attempt to iron out a settlement of major bargaining or reopening issues. A program for development of a well-ordered rate structure with changes to be made by the procedure set forth in the agreement, subject to interpretation through the grievance procedure, is much more conducive to healthy labor relations than leaving such adjustments to wholesale review at a wage reopening. The other areas of collective-bargaining subject matter, excluding the general wage level, also lend themselves to a relatively long-term agreement. Generally these areas comprise supplementary wage or fringe benefits and the many noneconomic aspects of the bargaining relationship or "working rules," as they are sometimes called. They include areas which are among the most difficult to formulate in agreement provisions, and it may take some time and experience to develop them into workably satisfactory form in a growing collective-bargaining relationship. They also become the center of clusters of practices, understandings, and [32]

customs, the preservation of which were found in Chapter 1 to be a major reason for lengthening the term of labor agreements. Problems of growth and change, however, are relevant to these areas in a similar though less measureable manner than the individual wage-rate changes discussed above. It has been argued frequently that even the most detailed and carefully drafted contract cannot anticipate all possible changes likely to occur in a dynamic business institution over the term of an agreement. The nature and unpredictable aspects of such changes, however, would make this problem present under a short-term agreement as well as long-term. The shorter the term, of course, the sooner an opportunity to renegotiate agreement provisions dealing with such areas. The long-term agreement may then accentuate problems of obsolescence of particular provisions unless growth and adaptation can be accomplished within such terms. An aspect of long-term contracts which has received relatively scant attention is the question of whether an established grievance procedure is adequate to meet such problems as they arise throughout the duration. A reopening procedure is clearly inappropriate since the nature, significance, and incidence cannot be anticipated. Their impact must be weighed as they arise. They are not different in kind but only in potential degree from the problems which arise in a one-year term. The typical bargaining relationship, of course, meets such problems as they arise, consciously or informally in the ordinary course of events. Modifications of practices or even changes of agreement terms can be agreed to at any time by the parties who drafted the original agreement. Difficulties arise only when no agreement can be reached upon how to settle these disputes in the lower stages of the grievance procedure. The crux of the problem is whether grievance arbitration can be designed to meet such unresolved problems without a strike while still limiting the risks of too wide a grant of arbitral authority to deviate from literal contract interpretation. [33]

Detailed investigation of this problem would go beyond the scope of this paper. It can only be noted that the feasibility of a long-term contract applied to these many phases of working rules and nonwage provisions depends in no small measure upon the development of a grievance procedure sufficiently realistic to meet the needs and problems which arise over its term. The techniques and procedures of grievance arbitration (discussed in other monographs of this series ) take on new importance in this perspective. With the qualifications noted above, then, we may conclude that long-term agreements are feasible for contract areas other than the general wage level. The problems involved do not appear insurmountable. Periodic review as in wage reopening, at any rate, is not as appropriate for legal aspects, individual wage problems, and "noneconomic" areas, as other approaches to these problems indicated above. The feasibility of negotiating a fixed wage level for the duration of a long-term contract, however, raises questions of a quite different order from those discussed above. This problem requires separate discussion and can best be analyzed in the light of recent trends in the manner of handling the wage level in the negotiation of long-term agreements. Such an analysis will provide an approach to understanding wage-reopening arbitration in contrast to other techniques adopted to meet the problem of wage flexibility over a longer term.

3.

PROVISIONS FOR WAGE FLEXIBILITY DURING LONG-TERM AGREEMENTS

Given the desire in many quarters to lengthen the term of agreements, collective-bargaining parties have devised ways of achieving a degree of stability in most contract areas. The major hurdle to agreeing upon a contract of long term, however, is the question of how to deal with wages in view of economic uncertainties. Unions and employers have

[34]

evolved various types of provisions to allow some flexibility of the wage question during the term of an agreement. They have generally found it difficult if not impossible to anticipate the appropriate level of wages to be maintained during the entire course of the long-term contract. Thus, on the upswing of a business cycle, unions desire to retain the initiative for further wage increases six months or one year hence, even though the contract terms in other respects may continue on over a longer period. Similarly if cost and competitive situations become pressing, employers may want enough flexibility to move for a wage decrease. Wage reopening is thus a safety valve. If the original anticipations of the parties are proved incorrect, an opportunity is provided to adjust the wage level to meet new conditions which have arisen. The wage-reopening provision, with or without arbitration, is only one of several means of providing wage flexibility over a long-term contract. Other techniques have also been devised to this end. These include cost-of-living escalator provisions, the negotiation of a series of step-rate increases, and more recently a combination of these two types of provisions. Other devices such as wages geared to prices of products and various flexible bonus arrangements have attracted less attention and found less general application. Before focusing our attention upon wage-reopening arbitration, some consideration is required of those alternative techniques for securing wage flexibility which have received attention in recent years. A. T H E C O S T - O F - L I V I N G ESCALATOR

CLAUSE

Even a cursory review of the gearing of wage levels to costof-living movement in this country must start as early as World War I. In the inflationary period during and subsequent to World War I, many parties agreed in collective bargaining to adjust wage levels in accordance with changes in the cost of living. Examples of such provisions have been cited in both the apparel and printing industries.28 During the 1920-21 recession of prices the cost-of-living principle received much less acceptance, and arguments more akin to

[35]

"improvement in standards of living" were advanced by unions against wage cuts.2" The prosperity period of the 1920's accompanied by general stability of the retail-price level did not see a return to the cost-of-living principle. In the mid-1930's, a number of large companies, seeking a rationale for a positive wage policy, inaugurated wageadjustment plans geared to the Bureau of Labor Statistics Index. These companies included the Standard Oil Company of New Jersey in 1935, the General Electric Company in 1936, and the United States Steel Corporation in the same year. In the later 1930's, when unionization of several of these companies' employees occurred, such plans were frequently eliminated in collective-bargaining negotiations. Meanwhile, in 1939 and 1940, the signs of an impending mobilization boom renewed labor's interest in cost-of-living escalator provisions. In 1941, the National Industrial Conference Board found thirty companies in a survey of some 1,895 firms which had flexible wage plans geared to cost of living and a number of union-company agreements contained such clauses. These provisions were restricted in operation during the war years of 1942-45 within the limitations of the Little Steel Formula. When prices rose sharply after World War II, the increasing cost of living was generally cited among other reasons for wage increases. With certain exceptions, notably in the petroleum industry, there was no general movement to reinstitute escalator provisions in labor agreements. Contracts were frequently subject to reopening during their term, and cost-of-living trends along with other arguments furnished the rationale for wage settlements at such reopenings. In May 1948, however, the General Motors Corporation and the United Automobile Workers, CIO, signed a twoyear agreement with no reopening, incorporating a cost-ofliving escalator clause as one of two legs of an automatic wage-adjustment provision for the duration of the contract. The Bureau of Labor Statistics' Consumers' Price Index was still rising at that time, reaching the peak of the immediate post-war boom in August and September 1948. Although it [36]

might be said that the rate of increase was tapering off, in the spring of 1947 also the advance of the Consumers' Price Index was halted for two or three months, only to be followed by further substantial increases. Seasonal and other factors frequently combine to slow down or reverse an upward cost-of-living trend in the spring of the year. Reconversion had made substantial progress, however, and the economy at that time was not in the shadow of impending mobilization. Under such conditions, a company's primary concern in gearing wages to cost of living would be its ability to meet the initial wage increase involved, its ability to recoup cost increases by price increases, and prospective ability to meet the annual wage increase pledged in the other leg of the wage adjustment clause. This other leg was a recognition by both union and company of the need for increasing productivity as the source of real wage increases. In 1948, very few other companies and unions copied the automatic wage-adjustment plan. A survey by the National Industrial Conference Board in 1948 reported that six out of seven of approximately 70 leading executives in selected fields were not willing to use the formula in negotiations.30 The most frequently stated objection to its use was that increases already granted had exceeded the rise in cost of living. Adoption of the principle, therefore, would not satisfy the parties' expectations that some wage increases were forthcoming. More serious doubts were expressed, however, as to the general use of such a formula, because of the possible competitive difficulties that would arise and the belief that the formula, if generally adopted, would accentuate inflationary tendencies. A New Jersey survey by Rutgers University indicated that 88 per cent of the managements replying and 79 per cent of the unions were opposed to an automatic costof-living formula such as that provided in the 1948 agreement between the General Motors Corporation and the United Automobile Workers, CIO. 3 1 On May 29,1950, a new five-year agreement was launched by General Motors and the United Automobile Workers of

[37]

America, CIO, continuing the basic cost-of-living escalator of the previous contract as well as the principle of an annual wage-improvement factor to account for "increased productivity." Within a few weeks after this agreement was reached, business and economic anticipations throughout the United States became dominated by the Korean War clouds. Strong inflationary forces were foreshadowed throughout the economy. There was consequently a wave of contract reopenings, "voluntary" wage increases, and the negotiation of substantial wage rises reflecting this new set of economic forces. Many companies and unions followed the General MotorsUAW pattern, often modifying the precise terms of the formula, until by December 1950 the United States Bureau of Labor Statistics estimated that some 2,500,000 workers were covered by contracts containing escalator clauses. A long-term agreement under which the parties have endeavored to protect the real wages of employees against economic storms is a valuable contribution to stability of the bargaining relationship. In considering the desirability of general adoption of the cost-of-living factor in long-term agreements, however, the economic factors prevailing cannot be disregarded. Cost-of-living escalator provisions have grown in popularity during previous periods of rising price levels when market prospects were good. It is likely that the widespread adoption of escalator provisions during late 1950 and 1951 reflected these sweeping economic forces as much as or more than a conversion of labor and management leaders to the adoption of this principle as a universal guide to long-term stability of collective-bargaining agreements in peace time. It may be pointed out in passing that the existence of a wage level subject to automatic adjustment to changes in cost of living in prominent collective-bargaining relationships has a peculiar significance under a national emergency program of wage and price controls. The argument that such a wage clause has no inflationary effect if effective price controls actually stabilized consumer prices has popular plausibility and wide appeal. By wide adoption of this formula, [38]

labor unions have achieved a significantly strong bargaining position vis-à-vis other segments of the economy in the development of an overall stabilization program in a partially mobilized economy. In a particular bargaining relationship under nonemergency conditions, however, company and union spokesmen must satisfy themselves with respect to certain key questions before they adopt the cost-of-living escalator as a means to securing long-term contract stability. In the first place an employer must be in a sufficiently strategic pricing position to be assured that his own price policy will follow or can be adjusted to any significant rise in the cost of living. In a highly competitive industry, this requirement would probably be achievable only if collective bargaining were conducted on an industry-wide basis or nearly so. Even under these circumstances, particular firms may fear their own inability to meet competitors' pricing on a quick and automatic basis, especially if other cost functions are variable and subject to considerable change. The advantage of known wages to business management is sacrificed to some degree in any program of wage flexibility over a long-term agreement, whether by formula or by wage reopening. In some circumstances, however, the continual adjustment of wage scales to cost-of-living indices, for example at three-month intervals, provides a shorter period of firm wage costs to a concern than a contract permitting wage reopening at specified times, such as at the end of six-month or one-year periods. The importance of fixed costs for any specified length of time will depend considerably upon the nature of a firm's production and marketing practices. The construction contractor for example may be in an entirely different position in this regard than an automobile manufacturer. Still different would be the position of a regulatedprice industry such as a public utility. It is likely that the habitual use of annual contracts in the past results at least in part from the common acceptance of one-year periods for the calculation of wage and business costs. Although the negotiation of a wage level in such cir-

[39]

cumstances is for the ensuing year, judgments made with respect to business and employment prospects are crucial to these negotiations. In a period of rapid economic change, a one-year period of fixed wage scales has many attributes of a long-term contract. For this and other reasons, the appropriate timing of wage review or adjustment needs to be viewed in the light of the economic setting of a period. Union leaders also have frequently rejected the cost-ofliving principle as a governor of wage levels in the past. It is well recognized that a cost-of-living escalator per se can do no more than maintain a constant level of real wages. Gains in standards of living, as an economy grows more productive, can only be achieved by obtaining wage increases of greater extent than any rise in retail-price levels over the same period or by maintaining wage levels as retail prices fall. The history of cost-of-living escalators in collective bargaining in the past has been typified by considerable resistance from union groups to a falling money-wage level indicated by declines in a consumer price index. Whether this resistance stems from a human reluctance to see reductions in an accustomed pay check when purchasing commitments have been made or a more deliberate attempt to make improvements in real wages during such a period is uncertain. That such resistance has been characteristic of previous attempts to rely heavily upon "escalation" in wage formulas is well known. The General Motors-United Automobile Workers automatic wage provisions provided some experience over a relatively short term in two-way price level fluctuations. During late 1948 and the 1949 dip in business activity, modest wage cuts were made as indicated by declines in the Bureau of Labor Statistics Consumers' Price Index. One such indicated decrease of one cent per hour was skipped by agreement of the parties on the grounds that the Index did not fully reflect rent increases which were taking place during the period. Whether or not this deviation from strict adherence to the Index was influenced by other collective-bargaining developments during the period would be impossible to determine. The GM-UAW provision for wage escalation then enjoyed a [40]

generally acceptable adherence to the principle in spite of some price-level fluctuation, although the experience prior to the Korean War was probably too short to provide the basis for a balanced judgment of its value in this respect. The "General Motors formula" sought to eliminate some of the common objections to cost-of-living wage escalation indicated above by providing for a guaranteed annual "improvement factor" which would become effective each year regardless of the trend of cost of living. Thus some gain in real wages was assured. Since this provision was an innovation and addition to previous trials of cost-of-living escalation, its adoption was an important element in explaining the GM-UAW experience. Some consideration of the rationale and applicability of such an improvement factor is required to reach a balanced judgment of the formula approach to wage flexibility during a long-term labor agreement. 32 B. T H E I M P R O V E M E N T F A C T O R

To isolate the improvement factor from the cost-of-living escalator, it may be said to comprise, in simplest form, the negotiation at the beginning of a long-term agreement of stated step-rate increases to become effective periodically during the term of the contract. This particular technique has its own significance in collective-bargaining experience which merits attention. Periodic Step-Rate Increases The negotiation at the beginning of an agreement of stated step-rate increases to go into effect at later dates throughout an agreement has been used in a number of industries, including construction trades and printing, in the past. The printing trades, 33 for example, have established as a goal a wage level to be reached over a period of two years or longer. Part of the contemplated wage increase may be agreed to be effective at once, with the remainder of the increase to go into effect after a stated interval of the agreement period. This type of contract is a natural compromise in circumstances where agreement can be reached on the wage-level [41]

objective, but where immediate and future prospects make it necessary to reach the goal in partial steps. Anticipation of appropriate future wage settlements involves many risks to both companies and unions. The problem of agreeing upon a fixed wage level over a long-term contract has been pointed out as a major hurdle to extending the term of agreements. While arrangements made to reach a certain level in steps may soften the harshness of a fixed long-term wage level in that partial adjustments are forthcoming, the inherent difficulty remains. Thus an agreement for a twenty cents per hour increase to be reached in five annual steps may be roughly equivalent cost-wise and benefit-wise to a fixed wage increase of ten cents per hour over the entire period and a further ten-cent increase in rates at the end of the period. There may be advantages in the step method of reaching the goal. In any case there are so many unpredictable elements to employers and uncertain developments among rival union groups that the anticipation of appropriate adjustments in years ahead involves some difficulty and risks. C.

T H E COST-OF-LIVING, IMPROVEMENT-FACTOR FORMULA

The combination of stated future wage increases in addition to a cost-of-living escalator requires consideration of a complex set of factors if it is to be adopted as a guide to wagelevel determination during a long-term agreement. The step-rate increases in pay scales have to be offset by decreasing labor cost through rises in productivity if labor costs are not to increase greatly. The liability for changing compensation levels and labor costs with fluctuations in a cost-ofliving index involves great uncertainty. Union interest in this combination formula is related to the protection of real wages from the ravages of price rises and the assurance of a steady, moderate gain in standards of living over the contract term. Particular union problems involved include a "selling campaign" to the membership when wage decreases are called for and the maintenance of membership-interest for the duration of a long-term agreement. Perhaps the major [42]

element of risk involved is the question of whether the agreed-upon increases provided for in negotiations at the beginning of a long-term agreement prove in fact to be appropriate wage settlements as the years go by when measured against gains won by other or rival unions in comparable collective-bargaining circumstances. The two legs of a wage-adjustment formula operating together as in the GM-UAW provision must both be considered in this connection. Thus while three or four cents per hour might be considered a relatively modest gain by comparison with post-World War II rounds of wage increases, if price inflation boosts the escalator gains by ten to twelve cents in a year, it takes a powerful union in a healthy industry to match a total wage increase of some fifteen cents per hour. By 1951, the experience under the GM-UAW type of provision, in bad times as well as good, was too limited to permit a balanced judgment of this latter factor. The union problem involved, however, is of potential importance. Perhaps the formula is most peculiarly appropriate, from labor's point of view, when adopted by a strong national union which can adhere to a particular wage policy without fear of rival union attack or too damaging internal dissension. The factors outlined above suggest a number of reasons pointing to less than universal applicability of the escalatorimprovement factor approach to wage flexibility over a longterm agreement. But this approach does represent a significant development in the attempt to overcome the obstacle of wage rigidity in achieving greater stability of a bargaining relationship as a whole. 1. A Productivity Index Formula? Beyond the behavior problems of adopting the GM formula to particular bargaining relationships, an "improvement factor" geared to estimates of the trend of increasing national productivity has been suggested as a guide for a noninflationary wage policy. If one assumes that the relationship within an existing national wage structure and the further relationships between different distributive shares [43]

are appropriate as starting points, then increasing real wages by the percentage increase in productivity throughout the economy has a logical appeal in bringing about gradually rising standards of living. Productivity measurement, of course, is not viewed as precise or entirely reliable by its most eminent students but only as approximations. The use of available measures of productivity as a guide for national wage policy involves further questions related to the fits and starts of productivity changes, changes in product mix, variations in the per cent of capacity operations, and the choice between deflated-value productivity measures and physical productivity data. Most relevant to the instant problem is the evidence from available productivity studies of marked variation in trend among industries and the bearing of this variation upon collective bargaining. It is not sensible to hope for automatic adjustments in prices, downward for industries in which productivity has advanced most and upward in lagging or declining industries, to compensate fully for a uniform average rate of wage advance. Some allowance for transitional frictions would suggest that industries going through a period of rapid productivity advance would tend to raise wages more than the average while productivity laggards would tend to lag also in raising wages. The indicated wage guide for an industry then may be somewhere between its own rate of productivity change over a given period and the average for the economy. The question which presents itself is whether the productivity factor can best be embodied in an automatic wage formula or can be reflected along with other criteria in wage negotiations at reopening or contract renewals. It is possible and even likely that unions and companies embracing the automatic wage formula will bargain at the beginning of a long-term agreement over the percentage increase to be embodied in a periodic "improvement factor," that is, the respective rates at which prospective productivity gains will be shared. Alternatively this factor along with other bases for wage change may be brought to bear upon negotiations [44]

between the parties at wage reopening and may be designated by the parties as an element in the determination of an unsettled wage issue by arbitration. 2. Productivity in Collective

Bargaining

Participants in collective bargaining sometimes cite productivity gains in a particular industry or company as the basis for a wage increase. In a broader sense, however, unions have sought to improve their wage position on whatever grounds were available including cost-price-production elements and prospects, considering such factors as having significant bearing upon the wage gains that may be expected to be achieved in a given negotiation. Management's bargaining emphases are likely to be influenced by these very same relationships. Changes in physical productivity per man-hour become meaningful to a business enterprise in terms of reduced labor costs per unit of product in combination with other cost and pricing factors. Investment expenditures for new plant and equipment, fuel and raw-material savings may all enter into a judgment of a firm's ability to pay higher wages. Thus an employer will typically find it necessary to convert changes in physical productivity (when obtainable in that form) to monetary terms in the accounting records of his entire operating unit in considering their relation to contemplated wage increases. When unions have bargained for increased wages during periods of stable retail prices or for real-wage gains beyond a rising price level, they are seeking a share of larger real incomes available in a progressive economy characterized by rising productivity, either in the negotiating company or in the economy as a whole. Whether they label the basis of their demands as productivity, ability to pay, or keeping up with other wage movements may be beside the point. Their goals and the net effect of their activity are substantially the same. Obstruction to increasing productivity by any economic group lowers the gains available generally. In this connec[45]

tion, there may be a special magic in associating real-wage gains with rising productivity in securing acceptance to technological advance, increased speeds of operation or other improvements in productive processes and organization. Apart from this special problem of overcoming worksaving or business-saving predilections on the part of economic groups, there is no peculiar significance to a productivity guide in wage bargaining which can not be viewed through other terms more commonly used in collective-bargaining parlance. In these larger terms then, productivity has been a factor in collective-bargaining wage determination for as many years as collective bargaining has existed. The nature of the process is one in which unions strive to better their economic position against the limitations of the changing capacity of their employers or their industry. In a more formal and narrower sense, a union may be decidedly interested in the trend of physical productivity per man-hour as a basis for a wage increase, even where no specific allowance is established for this factor in an automatic wage formula. The United Steelworkers' brief filed with the Presidential Fact Finding Board in 1949 emphasized the rate of productivity advance in the steel industry during the 1940's as part of the argument for wage increases and supplementary benefits. Expert testimony was brought to bear on technical criticisms of these measures by management in attempts to arrive at the bearing of productivity gains upon these negotiations. Other examples are less readily documented but frequently occur at negotiating tables. Unions ask for a share of the rising profits and production which they observe and which, they argue, are partly due to the cooperation and participation of the labor force. Examples may be cited in piece-rate industries like full-fashioned hosiery and the ladies' garment trades, and even in some units of heavy industry in which incentive compensation predominates, where the sharing of productivity gains is accomplished in part through rising piece-rate and incentive or bonus earnings as technology or speeds of operation improve. Thus numerous approaches [46]

and methods of recognizing increased productivity as an element in wage determination have been invoked in particular collective-bargaining situations. Thus it would seem that public policy is by no means crystal clear in dictating the adoption of a particular universal wage rule, even if it could be measurably based on national average productivity changes. An awareness of productivity increases as a source of standard-of-living gains is important for all groups in society. The inclusion of a consideration of productivity gains, at least as reflected in more favorable cost-revenue functions (to which it must frequently be converted anyway to be meaningful in business decisions ) is commonly found at the bargaining table, whether specifically spelled out or not. Since some degree of flexibility from any rigid rule such as national average productivity as estimated in available productivity approximations is expectable, it is likely that the give and take of bargaining provides such flexibility in the typical case. The formula combining cost-of-living and annual improvement factor in a long-term agreement may of course involve bargaining for differing amounts of "improvement" in standards of living. Thus a union could request a 3 or 5 per cent improvement factor and a company could insist upon a 1 per cent improvement factor. It is likely, however, that the long-term nature of such commitments may be viewed less enthusiastically if either side attempts to exact the maximum advantage through several prospective years ahead of a given negotiation. The wage formula approach is thus a way of providing wage flexibility and, at the same time, collective-bargaining stability over a long-term contract. It may be viewed more properly as a significant development in the search for techniques to this end rather than as a panacea in itself. The formula approach relies ultimately upon collectivebargaining anticipations of appropriate future settlements, including consideration of productivity factors nationally and/or in the instant company or industry. A distinguishing [47]

feature, however, is not the inclusion of productivity factors which are equally pertinent to wage-reopening negotiations or arbitration, but rather its forehanded adoption of the specific formulation of how these and other criteria will determine wage behavior over the contract duration with mathematical automaticity. Thus there is a sacrifice of areas of discretion which are available to negotiators when wage reopenings are used. On the other hand, the use of a formula eliminates the risk of introduction of more sweeping criteria. Applicability of the formula approach depends upon the particular circumstances. Other techniques to provide for wage flexibility during the labor-agreement term will continue to be used. It appears that, except in an industry like petroleum where labor costs are relatively smaller than in other industries and except under emergency inflationary conditions, negotiators for both management and unions are often not sufficiently omniscient to predict acceptable bases for wage determination a year or more later than contract negotiations. Perhaps developments over the years will produce sufficient understanding of the wage-determination process to permit the more general formulation of flexible wage policies acceptable to unions and management. Or it may be that the use of formulas under emergency conditions will result in lasting popularity of such provisions. Meanwhile, negotiators may seek an intermediate technique between prescribing a precise wage formula and leaving wage problems completely wide open as an approach to combining limited flexibility of wage determination with stability of other contract terms over a long-term contract. D . TRENDS IN THE U S E OF W A G E REOPENINGS

From relatively small beginnings in the pre-war period, wage-reopening provisions gained considerable popularity in labor contracts negotiated for the years 1940-41. A survey published in August 1941 showed that 46 of 201 agreements studied contained some provision for possible wage adjustment during the life of the contract.34 Some types of wage [48]

reopenings in use today are similar to those studied in that survey. Contingencies which would permit reopening included a change in the price of the commodity sold, increased company earnings, a rise in community or competitors' wage levels. Provisions ranged from these rather specific occurrences, through a "change in business conditions," a "substantial (5%) rise in the cost of living," "inflation," and the "advent of war" to the even more general type of contract permitting reopening at any time upon fifteen days' notification by either party. The wage stabilization regulations of World War I I limited the operation both of wage reopenings and of escalator clauses in union agreements after late 1942. During the life of the World War II stabilization program, many parties to collective bargaining dropped contract provisions for automatic adjustments based on cost of living and substituted a provision for wage reopening exercisable upon a "change in national wage stabilization policy." Other contracts which had used wage-reopening clauses in the past also made the reopening contingent upon national wage policy. Government regulation had become the main determining factor for adjustments within the contract term as well as for new contract negotiation of wages. In fact, the "wage freeze" together with the possibility of changes in government stabilization policies before the expiration of fixed contracts undoubtedly encouraged a wider use of wage reopenings, generally of this type, than had been common before. With the President's authorization for release of Governmental wage controls at the end of the war ( August 16,1945) and with the continuance of price stabilization regulations until June 1946, wage determination was characterized by a complicated intermixture of the "slugging" type of collective bargaining combined with continuing references to governmental wage-price policies. Unions and many managements had strained at the leash of national policy for nearly three years. Many reopening provisions of union agreements became operative at the close of the war, and muscles were [49]

flexed for a return to the more rugged exercises of collective bargaining. The prominent strikes during this period, however, were not wholly devoid of public action. Presidential fact-finding panels, late War Labor Board recommendations for the settlement of disputes, and finally Wage Stabilization Board "pattern" approvals of voluntary adjustments for price relief purposes all had some part in the events of this period. The second post-war round of wage increases in the winter and spring of 1947 and 1948 continued to show signs of pattern behavior. Many smaller company and union agreements provided wage reopenings to be exercised after leader settlements were reached. The boom market for the products of American industry and the accompanying rise in price levels permitted a wide application of a settlement package which was generally acceptable. In this year and the following year, however, as industries faced the cost and employment realities accompanying limited demand, more and more union and management negotiators were required to draft contract provisions which reflected their own particular situations. Some measure of the extent of the use of reopening provisions in this post-war period is indicated by a finding of the Bureau of National Affairs that approximately 30 per cent of the contracts surveyed by them in 1948 provided that wages might be renegotiated within a year. Two to three per cent of the contracts included provisions for automatic wage adjustment which would be operative within the term of the contract. With respect to contract duration, the Bureau of National Affairs estimated that 75 per cent of the contracts available to them ran for one year or less; 10 per cent from one to two years, and 15 per cent of the contracts were for two years or more.35 E.

CATEGORIES OF CURRENT REOPENING PROVISIONS

No attempt will be made to catalogue all labor agreements in the country which have some provision for reopening the contract prior to its termination. It is sufficient to point out that the practice is widespread. Analysis will be

[50]

furthered by a more intensive investigation of the manner in which a number of prominent collective-bargaining relationships have approached this problem rather than by exhaustive tabulation of individual contracts. Six collectivebargaining relationships, three from heavy industry and three from the consumer goods area, are taken as illustrating major problems and significant experience with wage reopenings. These agreements from steel, automobile, glass, textiles, hosiery, and women's garments will be cited in the paragraphs below. Their reopening provisions appear in the appendix. Important differences appear in the most cursory review of recent wage-reopening clauses. Thus, provisions permitting one or the other party to open the contract during its term vary by frequency and timing of periodic review. They also differ considerably in the scope and definition of issues subject to review. Finally and perhaps most significant are the different procedures established for determination of disputed issues at reopening. To bring these problems of wage review into focus, some categories of current contract provisions will be outlined to highlight the differences mentioned above. 1. Different

Frequency

and Timing of Periodic

Review

Provision for approximately annual wage review has been a natural development as parties to collective bargaining have drafted agreements for two years or more duration. For example, the April 1947 agreement between the Carnegie-Illinois Steel Corporation and the United Steelworkers of America, CIO, was for two years, but either party could notify the other of its desire to negotiate "a general and uniform change in rates of pay" on April 1, 1948. 3 6 When a wage increase was granted in July 1948, the 1947 contract was extended to April 1950 with a new reopening provision to take effect in July 1949. The scheduled reopening in the summer of 1949, however, became involved in proceedings before a Presidential fact-finding panel, and subsequently resulted in a strike. When the strike was settled early in

[51]'

November 1949, the old 1947 contract, still highly prized by the parties for its working terms, was extended for another two years, with provision once more for annual wage review. Thus, the basic terms of the agreement negotiated in 1947 took on the character of a long-term contract, the duration of which was extended by the parties to over four and one-half years. It is apparent that a stability of many of the contract terms was sought. This end was achieved by union and management, while the wage level was reconsidered at approximately annual intervals. 37 The two-year agreement, extended to even longer terms by action of the parties, while retaining approximately annual review of wages, has become general in the steel industry. Such a practice may also be illustrated by the Chrysler agreement which was in effect during several postwar years in the automobile industry. In April 1947, the Chrysler Corporation and the United Automobile Workers, CIO, signed a two-year contract terminable on April 26, 1949. This contract included a clause permitting either party to request reopening of wage rates on one occasion during the life of the contract. 38 No date for reopening was specified. In settlement of a strike emanating from these reopening negotiations in 1948, the parties signed a supplemental agreement, extending the basic terms of the 1947 agreement as modified to August 1, 1950. This supplement included another reopening clause, exercisable by either party on one occasion only, but this time requiring that such notification be subsequent to June 15, 1949.39 Although the periodic review at Chrysler was thus less regular than in the steel industry, the extension of an initial two-year contract to a term of over three years, while permitting approximately annual wage review, is a similar use of reopening provisions to achieve longer-term stability of basic contract terms. Other collective-bargaining contracts permit more frequent review of wage levels during a term of two or more years. The Fall River Textile Manufacturers' Association, the New Bedford Cotton Manufacturers' Association and the Textile Workers' Union of America, CIO, have used

[52]

wage-revision clauses in their agreements for a number of years. Their contract of October 15, 1945, terminating August 1, 1947, provided that requests by either party for wage revision "may not be made oftener than twice a year." It further provided that wage revisions would become effective only on the first Monday after the first day of January or the first Monday after the first day of August, thus contemplating the possibility of approximately semiannual wage reopenings. 40 The subsequent contract, dated January 1, 1948, and running to March 15, 1950, amended this procedure in some degree. The first reopening could not become effective until January 1949, a year after the contract was drawn. Thereafter requests could be made twice a year but could not become effective until September and March (1950 and thereafter) during this agreement or any renewal thereof. 41 It is problematical whether or not this lengthening of the interval between reopenings over the year 1948 and into 1949 was related in the minds of negotiators to the slackening off of business after the post-war boom. In periods of rapid economic change, the interest in more frequent wage review is heightened. When change is less rapid, and particularly if prospects are uncertain, there is greater stress by the union upon holding the status quo. Mere provision for wage reopening in a contract does not necessarily mean that wage revision will take place, but only that machinery is provided to make a revision if such adjustment can be accomplished by the parties. 42 The timing of wage reopenings may be related to the special production problems of a particular industry. This type of clause is illustrated in the agreement between the Merchants' Ladies' Garment Association, Inc., and International Ladies' Garment Workers' Union, AFL, running from July 1948 to May 1951, and covering employees of Association members in four eastern states. These parties provided for semiannual wage reopenings (on the basis of specified increases in the Bureau of Labor Statistics' Consumers Price Index) which could be requested by October

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15 to become effective for the ensuing spring season or by May 1 to become effective for the ensuing fall season.43 The seasonal and stylistic characteristics of the industry require that companies know garment costs prior to production of particular lines. A quite different approach to the timing of wage reopenings has been adopted in the full-fashioned hosiery industry, where the Full-Fashioned Hosiery Manufacturers of America, Inc., and the American Federation of Hosiery Workers have had an unusually successful bargaining relationship extending over a number of years. The National Agreement of this industry provides no specific timing for wage reopenings. Wage revision is permissible on the request of either party if conditions have changed sufficiently to warrant such request.44 In the parties' practice under the agreement, a sufficient time must normally have elapsed since negotiations or since the last general adjustment to provide grounds to make a strong case for the initiating party to the reopening negotiations. Thus, it would normally be a matter of several months or a year before reopening takes place. The actual timing, however, depends upon circumstances. If rapid changes have occurred, revision may be initiated within two or three months of negotiations. At other times the wage structure may run along for well over a year without general revision. The timing of wage revision is thus designed to be sensitive to economic circumstances. A list of alternative approaches to the timing of wage reopening would not be complete without some reference to a contract of one year's duration providing for wage reopening during the contract year. An illustration of this type may be taken from the agreements negotiated between the Libbey-Owens-Ford Glass Company, the Pittsburgh Plate Glass Company and the Federation of Glass, Ceramic, and Silica Sand Workers of America, CIO. A typical agreement, effective May 1, 1948, provided that the question of a general wage increase might be raised once by any party to the supplemental agreement at any time between July 1, 1948, and the expiration date of the contract, May 1, 1949.43 [54]

When the parties at contract negotiations have thus determined to postpone determination of the wage issue, a reopening clause is designed to serve the purpose. Circumstances which have a bearing upon the wage issue may be anticipated at the time of contract negotiations, and may actually occur shortly after the contract has been drawn. Rather than defer the entire contract negotiations or draft a contract for only a few months' duration, the parties complete the terms of their working relationship, leaving the wage issue for subsequent determination. A degree of stability is thus provided for the contract terms over a year's duration while, at the same time, the interest of each party in subsequent developments which may affect the wage issue is protected. Such a reopening provision may or may not provide that any wage increase subsequently agreed upon will be made retroactive to the date of the contract negotiations. If retroactivity is limited, this limit will obviously affect the expectable timing of reopening, since an incentive will be created for protecting as much of the retroactivity as possible. In summarizing the categories of wage-reopening provisions cited above with respect to the timing of reopening, it must be noted that much of the variation is undoubtedly due to the particular circumstances of the parties to the collective-bargaining relationship. The timing of wage revision under the International Ladies' Garment Workers' contract is clearly related to the seasonal character of the industry's styling and production. Similarly, the initiating or pattern-setting nature of the steel and automobile bargaining relationships cited may explain in part the annual intervals selected in preference to more frequent periodic review. The broader implications of the frequency of wage review during the life of a contract, however, are brought out more clearly by a consideration of the extreme case in which no specific timing of wage reopening is set forth. Where parties to a collective-bargaining relationship have found it possible to adopt this procedure, a maximum degree of flexibility is retained.

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A number of advantages flow from the flexibility inherent in an unspecified reopening date. Union leadership may realize that no case exists for a wage increase at a particular time. Yet, if a wage-revision date is specified in the agreement, local union pressures, reflecting unfounded hopes of the membership or political ambitions, may force into action the expensive and time-consuming mechanics of wage reopening, only to be submerged in shattered hopes and disappointments. When no reopening date is specified, the question of a general wage adjustment may be more readily deferred than is feasible politically in the case of a specified reopening date. A more obvious advantage in having no specific reopening dates may accrue to either or both sides if drastic changes in the economic environment require a review of the wage structure shortly after a contract is signed. Such factors as rapidly rising wages, gains by related or opposing unions may require quick action by the union. If sudden business reversals occur in a competitive industry, quick management action may be appropriate and important to the survival of the unionized segment of an industry. Union desire for an assured level of wage rates and management concern for a known labor cost are served by lengthening the intervals between wage revisions. Thus, the specification of long periods between reopening dates is itself an element of contract stability, provided that the wage structure does not become so obsolete over the period that serious operational or business problems result. 2. Scope and Definition of Reopenable

Issues

When union and management negotiators include a wagereopening provision in a long-term contract, they have particular functions in mind. They presumably seek a considerable degree of stability of the bulk of contract terms, while at the same time they provide a safety valve through the reopening clause. The fundamental problem of the negotiators is how to design the safety factor, in the plan of the [56]

entire contract relationship, to perform its function best. Careful drafting of the reopening provision by both parties to the agreement can contribute much to clarifying the issues at reopening. For example, agreement by union and company upon the phrase "general wage increase" may serve to eliminate requests by particular locals or members of the union for differential wage treatment. The mere definition of the issue subject to reopening, however, provides no indication as to what bases the contract writers consider as appropriate for reopening or what future events would be relevant to determining a settlement. While related to definition of issues, the scope of a wage reopening presents considerably broader problems than those of definition in a strict sense of the term. Reopening provisions differ considerably. Parties may try to define and limit strictly the issues subject to reopening, without specifying any standards for determining the amount or extent of changes considered appropriate for reopening. A different approach for outlining the scope of reopening specifies the bases upon which reopening may take place and outlines anticipated criteria to guide the negotiators who take part in the wage review. One of these approaches does not necessarily preclude the use of the other. In practice, however, much greater stress is placed on one or the other in different bargaining relationships. The 1948 supplemental agreement between the CarnegieIllinois Steel Corporation and the United Steelworkers of America, CIO, defined the issues subject to reopening sixty days prior to July 16, 1949, as follows: ". . . either party may serve notice on the other of its desire to negotiate "(a) for a general and uniform change in rates of pay and/or "(b) for life, accident, health, medical and hospital insurance benefits."46 No reference is made to the economic circumstances or events which would be considered an appropriate rationale for reopening. There is also an absence of the criteria which

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the negotiators had in mind for acceptable measures upon which a settlement could be based on the occasion of the contract reopening. These omissions left unanswered a fundamental question as to whether the parties intended the reopening to take into account only such economic changes as had occurred between the contract negotiations and the reopening date. The Presidential fact-finding board in the steel industry dismissed the companies' argument that the reopening involved only such economic changes as had taken place since the agreement was signed. The panel pointed out that the parties themselves did not ascribe such a meaning to the clause, as was evidenced by the facts and arguments presented, but that the dispute had been treated rather as the negotiation of a new wage rate. 47 With respect to the pension issue, which developed into major proportions at the 1949 reopening, the fact-finding board considered this language as referring only to "wages" and "wage rates" and found that, in all the circumstances, pensions were not covered by the contract-reopening clauses of these agreements. Their recommendation for a pension settlement was based upon the obligation of the companies to bargain on a subject not covered by the written contract between the parties. 48 This doctrine of statutory obligation to bargain emanated from the decision of the National Labor Relations Board in the case of Allied Mills, Inc.,49 confirmed by a subsequent decision of the National Labor Relations Board in the matter of Tide Water Associated Oil Co. and the Employees Association, Inc. (Independent). 5 0 With respect to pensions, the limitation of reopening by definition was somewhat pyrrhic in this instance. The definition approach was entirely effective, however, in excluding such matters as individual wage rate grievances. Many other labor agreements define the subjects of wage reopening without specifying any bases or criteria for dealing with the subjects. For example, the 1948 supplemental agreement between the Chrysler Corporation and the United

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Automobile Workers, CIO, provided that each party could signify its desire to open negotiations on the "general level of wage rates." The New England cotton textile groups in their 1948 contract with the Textile Workers Union, CIO, provided that either party may request "(1) a general revision upwards or downwards in rates of pay; and/or (2) a revision of any rate or rates of pay . . . ," illustrating a situation where the parties agreed to include in their reopening definition both matters of job rates and the general wage level. The International Ladies' Garment Workers' Union, AFL, contract cited above states that "if the cost of living index of the United States Bureau of Labor Statistics shall rise five (5%) percent . . . , the Union shall have the right to demand" that wages be brought into line with such increase in the cost of living.01 This clause thus specifies the basis for wage reopening. It goes on to indicate that an appropriate measure of the wage adjustment is that required to "bring the same into line with such increase in the cost of living." In practice, of course, the piece-rate nature of compensation in this industry, together with earnings variations dependent upon styles and volume of production, yield considerably more flexibility from this rule than its direct application would yield in most other industries. The Full-Fashioned Hosiery Manufacturers of America, Inc., and the American Federation of Hosiery Workers have gone furthest among the groups under discussion in enumerating in their wage-revision clause various factors to be taken into account in determining an appropriate wage settlement at reopening. Specific criteria such as a rise or fall in the earnings of workers in the industry and cost and equipment conditions are coupled with a reference to general conditions. It is stated that wage determination should be made, however, only after considering the operating conditions of the member mills and their "continued sound operation," and conditions tending toward "job and earning security.""'2 Thus, the scope of the reopening provision is [59]

outlined by a number of reference points for the guidance of negotiators at reopening. An interesting application of this approach is illustrated by the agreements between the Libbey-Owens-Ford Glass Company, the Pittsburgh Plate Glass Company and the Federation of Glass, Ceramic, and Silica Sand Workers of America, CIO, cited above. In that contract, it was agreed that the determination of whether a general wage increase should be granted, or its amount, would take into account, "among other relevant facts presented," the facts and circumstances of the flat glass industry, price and wage developments in other major industries, and the costs of certain items of settlement already agreed upon.53 Much of the bargaining had already taken place and had emphasized a "package settlement" and the particular events which, if they occurred between negotiations and reopening dates, would be appropriate considerations in the minds of the negotiators to guide a settlement. The problem of properly outlining the scope of reopening negotiations is an important one and has received much less attention than it deserves. Since the provision for wage review is an integral part of the negotiations for a long-term agreement, the parties making such an agreement must have in mind the function which they expect the reopening to perform. It is not enough simply to postpone negotiations for a specified period of time. Carried to extreme, such postponement would be accomplished as well by a shortterm contract. In trying to achieve greater stability of the longer-term contract, parties have generally approached the problem of outlining the scope of reopening either by defining the reopenable issues or by setting forth bases and criteria for the guidance of the reopening negotiations. Although careful definition of the issues may assist both parties in excluding extraneous matters, it leaves the function and operation of the reopening unexplained and undescribed. In a few instances, collective-bargaining parties have specified criteria for guidance of negotiators at reopening.

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3. Different Procedures ing Issues

for Determining

Disputed

Reopen-

In the quest for longer term stability of the labor contract, parties to collective bargaining have provided for periodic wage review of varying frequency and with differing approaches to the guidance of the projected reopening negotiations. Perhaps the most difficult problem growing out of the need for wage revision is the procedure to be set up for determining unsettled disputes over the terms of the wage revision. The nature of collective bargaining suggests that all participating parties in the process will hope and expect that agreement can be reached by the parties themselves. Occasionally stalemates do develop. The collectivebargaining relationships considered above have evolved differing provisions in their reopening clauses to come into play at such occasions. The 1948 agreement between Carnegie-Illinois Steel Corporation and the United Steelworkers of America, CIO, includes the following statement: "Failing mutual agreement on such issues by July 16, 1949, the parties may thereupon, notwithstanding any of the other provisions of the Agreement, respectively resort to strike or lockout in support of their contentions, . . . etc." This procedure is accompanied by a temporary contract termination, with subsequent reinstatement of all terms of the contract except for the changes agreed upon with respect to the issues subject to reopening. Many other contracts, including the 1948 Chrysler agreement cited above, have similar provisions for resort to economic force if no agreement is reached on the issues arising at wage reopening. Chrysler Corporation and the Auto Workers treat an unsettled wage revision in the same manner in which other disputes not subject to arbitration are handled. Strikes and lockouts on such issues may take place after all the bargaining procedures, including at least five days of negotiations, have taken place, and a strike has been sanctioned by the International Union, United Automobile, Aircraft and Agricultural Implement Workers of America.54

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Thus the parties retain their recourse to the exercise of economic strength if no agreement is reached through their negotiations. The other labor agreements considered in this chapter provide for the submission of an unsettled dispute at wage reopening to arbitration. The International Ladies' Garment Workers' contract and the Textile Workers Union agreement provide for arbitration of stalemated wage reopenings by their respective industry permanent umpires. The Hosiery Workers' agreement includes a procedure for the selection of an ad hoc chairman of a wage tribunal if no agreement is reached between the parties on wage revision. The Federation of Glass Workers' contract cited provides for the selection of an arbitrator from a panel of five men appointed under their regular arbitration procedure. In commenting upon the varying procedures established by these different bargaining groups for the determining of unsettled issues at wage reopening, it is significant to note that contracts having the longest stated intervals between reopenings permit recourse to economic force. While oneyear contracts including wage-revision provisions also provide occasionally for resort to strikes and lockouts, the choice of less frequent wage review is undoubtedly associated with the need for long-term stability. On the other hand, the contracts among those cited which allow more frequent wage review have developed terminal procedures for settling disagreements at reopening to prevent a break in the operating relationships of the parties. It is also noteworthy that the agreements in steel and Chrysler permitting resort to strike exercise great care in defining the issues subject to reopening but include no criteria or guides for the determination of the wage-revision negotiations. Of the clauses considered which are subject to arbitration, the Textile Workers' agreement sets up no criteria, the Ladies' Garment Workers' contract includes a statement of the basis on which reopening may take place and a rough measure of the wage adjustment envisaged, while the Hosiery Workers' contract sets forth a number of [62]

criteria, specific and general, to guide the negotiators or an arbitrator in the determination of a reopening issue. The contract cited in the flat glass industry also outlines a number of factors to be taken into account if arbitration should eventuate at reopening, thus establishing guideposts not only for a possible arbitrator but also for the negotiations preceding, and in most cases avoiding the actual arbitration procedures. It is not enough to compare the contract provisions of a number of bargaining groups dealing with wage reopenings, even in some detail. These particular bargaining experiences can be interpreted more meaningfully if an inquiry is made into the basic characteristics of wage-reopening arbitration and the manner in which it has been used in recent collectivebargaining situations. An analysis of the nature of wagereopening arbitration is necessary to an appraisal of these experiences and of the contribution of the wage-reopening technique as compared with alternative approaches to the problem of long-term contract stability.

4.

THE NATURE OF WAGE-REOPENING ARBITRATION

A generalized opinion of arbitration as good or bad is often formed as if the procedures and practices for arbitrating labor disputes were invariably the same in all situations. In fact, the procedures and techniques of arbitration vary greatly from situation to situation. The institution may take on quite distinctive characteristics not only in response to the particular desires of the parties concerned, but also to meet different types of problems. It is peculiarly necessary to identify the characteristics of wage-reopening arbitration as distinguished from other uses of the arbitration device. Special characteristics of wage-reopening arbitration arise from the fact that this proceeding takes place at the occasion of wage review within the stated term of the agreement. The other terms of the contract continue in effect while the consideration of possible adjustment of the wage level pro-

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ceeds according to the provision for wage review agreed upon by the parties when the contract was negotiated. It takes place then within the terms of a continuing collectivebargaining relationship. A . CIRCUMSTANCES RELEVANT TO WAGE-REOPENING ARBITRATION

When the contract was originally negotiated, it must be presumed that the parties appraised the economic situation at that time, together with their relative strengths, in arriving at the agreement. If economic and bargaining circumstances at the time of contract formulation warranted a greater advantage to one or the other side, such advantage would be expected to appear in the contract, barring mistakes or extenuating circumstances surrounding the contract negotiations. Where no evidence exists of such mistakes of appraisal or limitations upon the free-bargaining process, it must be assumed that the basic contract portrays properly the bargaining positions of the parties at the time of negotiation. The question must be asked then, "What did the parties have in mind in providing for wage reopening?" If their original positions were appraised properly, they must have provided the wage reopening to take account of changes in circumstances between the date of negotiations and the reopening date. Such changes may occur in the economic environment, bargaining gains by other unions bearing upon wage equity, particular industry market and employment prospects, legal developments, and all other phases of the bargaining framework which go into wage determination. If the relevance of such changes, however, are recognized by the parties to be limited to the period between the last wage negotiation and the reopening date, the arbitration of the wage issue at reopening takes on a very different character from the arbitration of new contract terms, when a reappraisal of economic circumstances and bargaining strength would be in order.55 The desire on the part of one or the other party upon re[64]

opening to reappraise the entire wage level anew and to throw the full force of their economic strengths on the single reopening issue may be impossible to avoid where a wage reopening is subject to strike. A serious anomaly may develop from this situation. At the time of negotiation of an entire contract, the economic strength of the parties on a wage scale may be enhanced or modified by positions taken on other contract provisions. At reopening, it is assumed that other contract areas are in agreement while negotiations, and perhaps resort to economic force, proceed on a single issue such as wages. In practice, of course, it is difficult if not impossible to confine such negotiations to the reopenable issue. Even if it were demonstrable that the freezing of other agreement terms gave the union a greater economic power to strike for wages at reopening, this conclusion would be poor solace to labor. It would hold true in only those circumstances where the economic environment was favorable to maximum exercise of labor's bargaining strength. In changed economic circumstances, favorable to management's advantage in exercising full bargaining power, the reverse situation would hold true. It is significant that the bargaining relationships which have substituted wage arbitration for the exercise of economic force at reopening are those which have experienced the ups and downs of business prosperity in their respective industries. The major unions in mass-production industry such as autos and even steel have experienced almost continually expanding segments of the economy from their organization to 1951. Bargaining attitudes and actions must be interpreted in large measure in the light of the circumstances of their development. B . LIMITED OR " O P E N - E N D " ARBITRATION?

Occasionally, a union and company in such an industry as local transit have provided in their collective-bargaining agreement that any dispute over new contract terms at the termination of the existing agreement will be submitted to arbitration. This type of arbitration is an extreme example of

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"open-end" arbitration, with little or no limitations, guidance or rules for an arbitrator to follow. This situation can be distinguished from an agreement to arbitrate certain unresolved contract clauses when a deadlock is reached after genuine and persistent attempts have been made to negotiate these clauses. In this situation a stipulation to arbitrate may be negotiated which will define the area of disagreement and may direct the arbitrator to determine the issue upon specified bases within the area. This procedure has been used successfully. While less satisfactory to all parties involved than a completely negotiated settlement, it offers a fruitful area of experimentation for parties engaged in public utility enterprises or other fields in which "public emergency" disputes may occur. A number of distinguishing characteristics of wagereopening arbitration have been pointed out, indicating that we are dealing here with a procedure quite different from the arbitration of new contract terms. The development of certain techniques by some parties using this device, however, have further bearing upon its limited nature as distinct from an "open-end" variety of arbitration. When a union and company negotiated their contract six months, one year, or two years prior to reopening, they were unable to predict at that time what an acceptable level of wages would be over the entire period of the contract. They agreed, therefore, upon the wage-reopening provision. It might well be asked: "What was in the minds of the negotiators in providing for reopening?" On the one hand they were unable to decide the precise long-term wage level, but on the other hand, one can hardly assume that their minds were blank or completely without foresight on questions of great moment to them in the near future. On many such occasions, the exchange of arguments at negotiations themselves, if preserved, would furnish some indication of what future conditions would make one or another wage level acceptable at reopening. Recent major negotiations have been replete with concern over uncertain employment and business prospects, potential but unknown legal develop-

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ments,36 unpredictable gains by other unions, etc. Frequently such records are not preserved, and often the desire on one part or the other to forget them is very strong. In some instances, extraordinary care is taken to avoid negotiation of bases for wage determination at reopening. Under such circumstances one can hardly wonder that wage-reopening determination is considered so mysterious and that submission to arbitration of a wage dispute at reopening is feared. One of the major techniques used to limit wage-reopening arbitration, removing further any likeness to "open-end" arbitration is the negotiation of guides or criteria for wage adjustment. The problem facing an arbitrator often includes the question of what the parties had in mind in agreeing to the possible arbitration of a wage dispute. In practice, an arbitrator may be able to fathom the vital considerations to each party without negotiated wage criteria, either through his familiarity with the collective-bargaining relationship or by keen analysis of the parties' presentations at the arbitration hearings. Testimony at the hearings, however, may reflect in high degree an emotional heat growing out of the dispute itself. Much has been written in recent years about criteria for wage determination. In economic theory, wages should be expected to approximate the net marginal revenue productivity of labor. Even though underlying forces embodied in this concept may have long-run determinative influence, the concept itself provides no ready formula which a union and company may apply to their immediate problem even if they were disposed to do so. Negotiators' arguments talk rather of cost of living, patterns of wage adjustment, comparable wage levels in the area and occasionally in the industry, market and employment prospects, profits and poor business, equities and wage standards. Thus an entire array of factors in the economic environment, beyond and apart from potential militant economic force, may be brought into play upon a particular negotiation in evolving a meeting of the minds. Even the potential effects on the general price level

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of a continual rise in wages at a more rapid rate than increases in productivity is difficult if not impossible to apply in an individual company-union negotiation. The main problem before negotiators in a given bargaining situation is to arrive at an acceptable wage level, including a careful assessment of the costs to the parties of a breakdown of negotiations. All of the economic factors considered above and many noneconomic facts as well may go into the attempts at persuasion and compromise to this end. It may be said that the very absence of any generally acceptable absolute criteria for the determination of wages is sufficient reason why no criteria for wage-reopening arbitration should be specified. Since there are no universally applicable criteria, why clutter up the wage-reopening clause by "high-sounding phrases"? The fact that economists do not agree upon absolute criteria for wage determination provides no ground for the omission of any attempt by the parties themselves to meet their own particular situation. In fact, the very absence of generally accepted absolute criteria makes it even more important that the parties themselves convey to an arbitrator either by long standing acquaintance with him or by negotiation of some standards in the wagereopening clause, what criteria are most significant to those parties under the circumstances of the time. Such criteria for wage determination as ability to pay and inability to pay, rising cost of living and falling cost of living, must be recognized in large measure as the rationalization of each party's position in collective bargaining. It has been pointed out frequently that neither management nor labor is consistent in its reference to one or the other of these criteria. Falling short of validity in any absolute sense, however, these criteria are invaluable tools of bargaining in a collective-bargaining negotiation. By the same token, they are extremely useful for an arbitrator as the pegs upon which to rest his award. The arbitration award further becomes more reasonable to the constituents of union and company negotiators because of the rationale employed. The importance of so-called wage criteria in the thinking

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of all parties to the proceedings should be given more serious attention than it has received. Actual specification of criteria to be considered in determining a wage dispute may be set forth in a contract clause or in a stipulation to arbitrate a particular wage matter. An example of negotiating some guidance to the arbitrator and incorporating such standards into the stipulation to arbitrate a particular wage dispute may be found in the arbitration proceedings of 1948 between the Consolidated Edison Company of New York and the International Brotherhood of Electrical Workers, AFL. In this instance, the arbitrator had before him a stipulation by the parties that the arbitrator should make an initial determination of the total payroll cost of settlement terms by the parties, which would then be allocated into the several economic demands at issue and recognized in the arbitrator's award. This agreement by the parties enabled the arbitrator to eliminate from his consideration the troublesome arguments which often develop as to whether or not particular cost impacts of wage and other economic demands may appropriately be considered against particular standards otherwise desirable. With respect to wage-reopening provisions, when criteria are contemplated by the parties for the guidance of an arbitrator, reference is usually made to such criteria in the actual language of the wage-reopening provision. In negotiating the initial contract the parties are then in a position of attempting to forecast the considerations which will be significant to them at the time of wage reopening. Difficulties may, of course, be encountered in attempting to foresee changes in the economic environment and other factors which will affect the basic considerations of both parties in a wage reopening-negotiation six months, one year, or eighteen months hence. This problem is similar in nature to, but less in magnitude than, the problem of negotiating an actual wage formula or fixed wage rates over the entire period of a long-term contract. The actual bargaining out of such bases to be considered at wage reopening is thus a process falling between the necessity of agreeing upon a fixed formula to [69]

be adhered to rigidly over the entire period of the contract, and the provision for wage reopening more closely resembling the wide open variety with no attempt by the parties to foresee bases for its determination. These conditions suggest that the provision of some criteria in a wage-reopening clause may have some promise of reasonable success in the development of wage-reopening arbitration. The exercise of ingenuity and the use of a practical approach to this problem should give the collective-bargaining negotiation more content as the parties strive to incorporate standards not too general and not too inflexible. The working out of these bases which the parties themselves determine to be acceptable for the guidance of wage determination over the contract term can assist the long-run success of the bargaining relationship. The national agreement between the Full-Fashioned Hosiery Manufacturers' Association and the Federation of Hosiery Workers of America contains a wage-reopening provision which lists several criteria for wage determination at reopening. These include a general decline or a rise in the earnings of full-fashioned hosiery workers elsewhere in the industry, a decline in the cost of production on the same type and condition of equipment, an increase in the cost of living and a consideration of whether "general conditions shall warrant a decrease ( or increase )." Complete reading of the several sections of this provision reveals further criteria stated as conditions which will tend toward job and earnings security. Thus cost and employment factors, as well as increased cost-of-living and comparable-earnings levels, are all included by reference in this wage-reopening provision. Further flexibility is included by reference to "general conditions." These standards have been selected by the parties as generally relevant to wage determination in their circumstances. They have been used repeatedly and have remained substantially unchanged. Thus they are not peculiarly related to a particular economic trend or period of business cycle, but have been considered as underlying bases to be taken [70]

into account during any of the periods of possible wage change during which the provision has been in effect. The criteria thus specified are notably flexible in operation but guiding in influence. This combination of features required for agreed-upon wage criteria is difficult to attain. With such long-term criteria set forth it may sometimes be necessary to interpret the clause in the light of economic trends, rather than to adhere to a rigid and literal interpretation. A case can be made against the specification of long-term criteria in a reopening clause on the ground that it may lead to unacceptable results. The 1946 Hosiery Award of six cents per hour in the immediate post-war readjustment period was followed by a strike and then by a ready agreement by the parties on a higher wage increase. This may have been related in part to too close an interpretation of the specified criteria. If an arbitrator in early 1946 had concentrated upon cost and earnings levels throughout the hosiery industry, and judged the cost-of-living criteria on the basis of piece-work earnings at a high level of operation, his award presumably would not penetrate to the fundamental bases of acceptability to both parties in the difficult post-war months. In other instances, however, the hosiery experience has been notably successful in suggesting that the criteria developed by these parties have been well suited to the industry conditions when considered in the light of other procedures developed by the hosiery industry outlined below. The wage-reopening provision of the Merchants Ladies' Garment Association, Inc., and the International Ladies' Garment Workers' Union, AFL, provides only one criterion for a wage increase at the reopening periods specified in their 1948-51 agreement. A wage increase may be requested if there is an increase of 5 per cent in the United States Bureau of Labor Statistics Cost-of-Living Index. In actual experience under this agreement, and more particularly under the previous five-year agreement which also provided for wage reopening upon an increase in cost of living, percentage [71]

wage adjustments requested by the union in piece rates have been less than percentage increases in the cost of living. Employee earnings in the industry in the war and postwar period rose considerably more, however, than the percentage by which unit labor cost was increased. This doubtless reflected high volume and steady work on the same type of garment. These special circumstances of the industry, including the nature of piece-rate compensation and the behavior of earnings at various levels of production, have enabled the parties to administer their wage-reopening provision satisfactorily even though it includes just one criterion. Notably it does not provide for a wage-decrease reopening under its terms. The development of wage criteria acceptable to the parties to negotiations, and the incorporation of such criteria in some instances into a wage-reopening provision, are useful tools to the parties to collective bargaining in setting the framework for arbitrating a wage reopening if necessary. The particular criteria would obviously depend upon the circumstances of the particular industry or company and union situation. The most significant aspect of such criteria, from the point of view of the development of collective bargaining, is the appeal and acceptability of these standards to the parties themselves. Thus the measure of success of the use of such criteria is not necessarily the absolute validity of the measures selected, but rather the extent to which the parties can incorporate guidance for themselves and an arbitrator, which will make a subsequent wage determination more acceptable to them. C . M A C H I N E R Y , TECHNIQUES,

PROCEDURES

In providing for arbitration of disputes incident to wage reopenings, the unions and companies have developed a number of arrangements which have considerable bearing upon the degree of success attained. The negotiation of criteria for the guidance and limitation of an arbitrator has been outlined in the previous section. It is pertinent to consider also the manner of selection of an arbitrator, special-

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interest representation with the arbitrator in his deliberations, and certain other aspects of the proceedings revealed by the experience of parties using this arbitration technique. 1. Selection of an Arbitrator In wage reopening arbitrations, both ad hoc and permanent umpires are used. The relative merits of temporary versus permanently named arbitrators in the settlement of grievances under a contract have long been debated without arriving at a conclusive rule suitable to all situations. Greater familiarity with a particular situation, consistency of contract application, and continuity of service in assisting the parties to develop a sound relationship have all been associated with a named arbitrator for handling contractinterpretation disputes as they may arise. On the other hand the selection of specialists to arbitrate particular types of disputes have been thought to be more important by other parties, particularly when arbitration is used infrequently. The reference of a wage-reopening dispute to a permanent umpire in contrast to an ad hoc arbitrator is an important matter. Some of the general considerations applying to grievance arbitration carry over, but take on different significance in this connection. The Full-Fashioned Hosiery Manufacturers Association and the American Federation of Hosiery Workers have had a long and eminently successful experience with an impartial chairmanship for the determination of unsettled grievances during their contracts. 57 Their wage-revision clause, however, specifies a special procedure under which a referee, other than their impartial chairman, is appointed to serve as the third member of a wage tribunal for the final determination of a wage-reopening dispute. 58 The parties to this agreement have chosen deliberately to exclude wagelevel disputes from the jurisdiction of their impartial chairman. This policy is designed to protect their regular umpire from the possible damaging effect to his usefulness in the industry which might result from an unpopular wage award. The impartial chairman of the industry is most useful to

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the parties in grievance arbitration after he has become familiar with the wage-rate structure of this industry and the many special characteristics which in fact must be assimilated for complete familiarity with any single industry's problems. They do not want to sacrifice an experienced and satisfactory impartial chairman in the fires which might be fanned around a serious wage dispute. 59 The agreement cited in full-fashioned hosiery provides that the parties may make use of their impartial chairman to designate a wage-tribunal referee if the two party representatives fail to agree upon his appointment within a specified period of time. The agreement does not prevent consultation between the ad hoc arbitrator and the impartial chairman. On the contrary the parties desire the ad hoc arbitrator to have access to the intimate knowledge of the chairman in order that he may secure perspective and background on the immediate dispute. It would seem that such contacts with a person intimately familiar with the industry would be a logical step to the most careful weighing of the arguments presented by the parties in the wage dispute. This opportunity together with the criteria for wage determination set forth by the parties in their agreements provide an ad hoc arbitrator with considerable guidance for his award. The New England cotton textile industry and the Textile Workers' Union of America, CIO, on the other hand, provide for the arbitration of an unresolved wage-reopening dispute, after fifteen days of negotiations, under the regular arbitration provision of their agreement. 60 The impartial umpire named in their agreement was called upon twice in the postwar period to 1949 to determine a wage-reopening dispute. The absence of specified criteria in this agreement may be explained in part by the reference of these disputes to the impartial chairman, who is already familiar with the parties and their problems. It is likely that the considerable success of this arrangement in the past has been due in part to the parties' mutual understanding of each other's problems. A further factor of importance may be the composition of the union group. If aggressive and powerful locals comprise dis[74]

turbing influences within an international union, the damaging effect of possible wage awards to the status of an impartial chairman would be much greater than in a situation where the national union leadership is more generally ahead of local pressures on wage questions. Even in the New England cotton textile group, however, provision had to be made for the selection of a new permanent umpire in the 1951 extension agreement after the arbitrator's denial of a wage increase under the previous contract. The designation of the impartial chairman by the International Ladies' Garment Workers' Union, AFL, and the Merchants' Ladies' Garment Association, Inc., for the determination of unresolved wage-reopening disputes as well as other matters in disagreement must be considered in the light of the history of these parties in collective bargaining and their manifold experiences with arbitration machinery during this history. From the "Protocol of Peace," established in 1910 at the behest of former Justice Brandeis, the union and industry making women's apparel have experimented with and developed an industrial regulatory mechanism unparalleled except perhaps in the men's clothing branch of the industry. In the settlement of many strikes, arbitration has been found useful in dealing with contract terms including wages. Over different periods, more stress was placed on conciliation (as in the original Brandeis concept) and in other periods on more strictly arbitral determination of the matters in dispute. The two approaches have ultimately blended into a system of industrial self-regulation of rather elaborate complexity required by an industry of manifold and diverse producers and unstandardized products. The impartial chairman is an integral part of this regulatory machinery. Local joint boards of the ladies' garment trades are powerful in their own right. Their relationships with the International Union have been carefully established over the years. In view of the industry's complexities, it is to be expected that the impartial umpire in New York City, for example, will be used when union and management find it [75]

useful for a third person to assist the parties in determining a wage level. In fact it would be a very unusual problem which would require deviation from their normal machinery by calling in an ad hoc arbitrator in these circumstances. A further variation of procedure for selection of the arbitrator at wage reopening is employed by the parties in the flat-glass industry. The agreements between LibbeyOwens-Ford Glass Company, Pittsburgh Plate Glass Company and the Federation of Glass, Ceramic and Silica Sand Workers of America, CIO, set forth a mechanism for the selection of a panel of five arbitrators, any one of whom may be requested to serve in the disposition of disputes subject to arbitration of an unresolved dispute at reopening under the regular arbitration machinery of the contract. A strikingout procedure is established for the selection of a particular arbitrator from this panel in the event that the mechanism is called into play by either party. The procedure developed in this situation is thus a compromise between the selection of a single impartial chairman and strictly ad hoc selections. It has certain of the advantages (and presumably also some of the disadvantages) of both methods. Knowing that a wage-reopening question may be arbitrated during the contract term, the parties have an opportunity in their initial selection of the panel to include at least some persons whom they believe to be particularly qualified to handle this type of problem. Other persons may be asked to serve on the panel in view of their more specialized qualifications for some phases of grievance arbitration. The companies and union in flat glass thus preserve in some measure the stated advantage of ad hoc arbitration in the use of persons with specialized abilities. As pointed out above, they have usually provided criteria for wage determination in the language of the reopening, thus giving an ad hoc arbitrator some guides which the parties themselves have negotiated. At the same time they know beforehand the limited group of persons from whom an arbitrator will be chosen. They sacrifice some of the intimacy which a single umpire would have with their affairs, but encounter

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less risk of damaging their grievance arbitration machinery by an unpalatable wage award. The modes of selecting an arbitrator for wage reopening are thus varied and have been adapted, often with considerable ingenuity, to the needs of the particular parties involved. The special techniques adopted and the considerations involved reëmphasize the peculiar nature of this type of arbitration, akin in some respects, but not all, to arbitration of disputes over contract application, and quite distinct from the "open-end" arbitration of new contract terms. The experience of the bargaining relationships described suggests tentatively that in most circumstances, short of many years of accommodation of unions and companies to each other, specialized machinery apart from a regular impartial chairmanship has been found useful in arbitrating a wagereopening dispute. An ad hoc arbitrator may be guided helpfully by the use of negotiated wage criteria to be applied at reopening. Less emphasis upon such criteria is associated with the use of a regular impartial chairman in the disposition of a wage-reopening dispute. Most significant, however, is the ingenuity applied, growing out of experimentation and experience, of collective-bargaining parties in devising modes of selection to assist them in overcoming the wage hurdle to longer-term contract stability. 2. Arbitration Boards vs. Single Arbitrators A further process of experimentation has revolved around the question of whether a wage-reopening issue is to be decided by a single arbitrator or by a board of arbitration with an impartial chairman. Again no single method has been adopted by the several bargaining situations reviewed, but significant adaptations have been developed. As pointed out above, the 1948 agreement between the Textile Workers' Union of America, CIO, and the New England cotton textile employers provides for the submission of an unresolved wage-reopening dispute to the impartial chairman named for their regular grievance machinery. Thus a wage question would generally be determined by a [77]

single arbitrator. Their grievance procedure provides, however, that either party may demand a three-man board for the disposition of any particular dispute. If such a board is demanded it is to consist of their named arbitrator "as Chairman, a representative chosen by the Union and a representative chosen by the Association."61 Although the submission of a wage question to the impartial chairman acting alone may in most cases be agreeable to both parties, an opportunity is provided for the designation of interested representatives to sit on an arbitration board at the request of either party. This conditional mechanism is significant in the further respect that such a board, if constituted, would not render its decision by a majority vote. The contract language specifically contemplates unanimity if possible.62 If unanimity is impossible the determination reverts to the sole decision of the impartial chairman. In this situation then, the function of the parties' designated representatives upon the arbitration board becomes that of informed "sitters," to counsel and persuade the impartial chairman, but not to have any determining vote. The agreement cited between the Joint Board of Cloak, Suit, Skirt and Reefer Makers' Union and International Ladies' Garment Workers' Union, AFL, and the Merchants' Ladies' Garment Association, Inc., provides, as indicated above, for the reference of an unresolved wage-reopening dispute to their regular impartial chairman for final determination. There is no indication that a board would be used for a wage-reopening issue, although other sections of the agreement establish boards of interested representatives for handling other matters under the agreement, for example the Board of Stability and Control (Article XLVIII) and the Board for the Administration of the Retirement Fund ( Article X I X ). In this connection also it is apparent that the long experience of these parties in collective bargaining and the firm establishment of their impartial arbitration machinery have conditioned their treatment of wage-reopening questions. In contrast to this picture the National Labor Agreement

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between the American Federation of Hosiery Workers and the Full-Fashioned Hosiery Manufacturers of America, Inc., outlines with some precision the creation of a special wage tribunal for the determination of a wage-reopening question. It has already been pointed out above that an ad hoc chairman or referee for this wage tribunal is sought, other than their regular impartial chairman named for grievance arbitration under the agreement. This program was found to reflect a deliberate policy of excluding a wage question from the jurisdiction of their impartial umpire in order to preserve and protect the umpire from the possible damaging effects of an unpalatable wage award. In constituting this wage tribunal, "party representatives" are designated by the Union and Association respectively. These two representatives are then directed to select a third member of the tribunal who is known as a referee. If the two party representatives cannot agree upon a referee, the impartial chairman of the industry is called upon to designate a third member, "after consultation with the parties to the Agreement." The wage tribunal is directed to hold hearings and make a final determination of the wage schedule by majority vote. In this instance, labor and management groups have determined that the wage-reopening question is so vital to both that each should have a representative on the arbitration panel, not only to counsel with the referee but to have a vote in the final award. It would appear at first glance that this provision gives further protection to both parties in protecting their interests in the outcome of a wage award. The provision for majority vote, however, may as frequently operate adversely to the interest of a party as it favors him. With this procedure, the referee must constantly strive to capture the vote of one or the other of the interested party representatives in order to achieve a majority. He will of course try to persuade one or both the other members to agree with his own judgment of the case, after the tribunal has deliberated on all aspects of the proceedings. Failing to succeed in such persuasion, however, he may feel compelled

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to accept the view of one or the other of his colleagues, presumably agreeing with that position which is not as far from his own judgment of the situation as the position which the other vote would require. The unfortunate result which may occur under these circumstances is particularly apparent when the party representatives are in such places of responsibility with respect to their own principals that they cannot agree with a position which would compromise the union's or companies' initial stand. A panel of arbitrators to decide an unresolved wagereopening dispute is the procedure adopted by the Federation of Glass, Ceramic, and Silica Sand Workers of America, CIO, in their agreements with the Libbey-Owens-Ford Glass Company and the Pittsburgh Plate Glass Company. It will be remembered that these parties use the same machinery for the arbitration of a wage reopening as is set up for grievance arbitration under their contracts, although the personal selection of an arbitrator from their named panel of five persons may vary in a wage issue from any particular set of grievance cases. The arbitration clause of these agreements provides that "Each party may appoint a representative who shall be entitled to sit with the Arbitrator during the hearing and during the consideration of the decision; but those representatives shall not vote on the decision." This procedure provides deliberately for the final decision to be made by the impartial arbitrator selected by the parties for the wage-reopening issue. Prior to making his decision, however, he has the benefit of all of the expert advice and consultation which he may need by persons more familiar with the intimate problems of the parties than himself. By the same token each party has the opportunity to have its chosen representative sit with the arbitrator during the hearings in order fully to develop all aspects of the case and also attempt to persuade the arbitrator to take account of the pressing realities of each party's case when the three are locked in "executive sessions" after the hearings are over. More careful and thorough scrutiny of the entire case may result from this interchange of opinion in the board sessions.

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At no time, however, is the arbitrator forced to modify his own and final judgment in order to capture a second vote to obtain a majority decision. The question of whether a single arbitrator or a panel should be used in the determination of a wage-reopening dispute has thus been resolved variously in different bargaining relationships. Where the regular impartial chairman is used, he sits as a single arbitrator although provision may still be made for the designation of interested representatives to sit with the chairman. The use of an arbitration board is frequently found and will probably function best if a majority vote is not required. In the nature of such consideration, an attempt will be made to secure agreement among the board members. Failing such agreement, however, it is likely to be more satisfactory for the board chairman to have full responsibility for the award. In wage-reopening arbitrations, however, the parties have frequently found it desirable to have informed though interested members of the board assist in conducting the hearings and consult with the chairman in his deliberations. This procedure has provided considerable guiding effect for the determination of an issue as important as wage review. 3. Other Aspects of Wage-Reopening

Proceedings

Many aspects of an arbitration proceeding are not immediately apparent from the citation of contract clauses and the mechanics set forth for the conduct of arbitration proceedings. Experience with wage-reopening arbitration in the above-mentioned situations, as well as of others, suggests a number of important considerations, not easily catalogued, but of equal importance to successful arbitration. The effect of providing for arbitration upon the prior conduct of negotiations, the use of mediation in the arbitration proceedings, the measures of acceptability of a wage award, and the use of an arbitration decision even when the parties are at or close to agreement are all questions of great significance. An objection often voiced against the arbitration of a wage issue is that the mere existence of arbitration machinery will [81]

tend to hinder genuine collective bargaining between the parties. It is reasoned that a union will not accept a company offer when it might get more in arbitration. Similarly a company may not negotiate if arbitration is expected in any event. Certainly the compulsory arbitration features of state public utility acts has resulted in at least some negotiations where no real attempt was made to reach agreement. During the existence of the National War Labor Board in World War I I , cases involving long lists of disputed issues were submitted to the Board when it seemed to be apparent that very little if any real attempt had been made to settle these issues between the parties themselves. In both of these types of cases, the process involved was the "arbitration," under terms not developed by the parties themselves, of new contract provisions. The peculiar nature of wage-reopening arbitration as distinguished from the referral of new-contract issues has been developed in some detail above. Even in these instances the common observation that provisions for arbitration discourage collective bargaining has undoubtedly been exaggerated. Certainly during the days of the National War Labor Board, many more agreements were consummated by negotiations between the parties themselves than were submitted to the disputes procedure of the Board. Where particular unions and companies persisted in submitting whole contracts for determination, the Board often attempted to refer issues back to the parties for further negotiation or urged in some cases the adoption of voluntary arbitration. The actual experience of industries using agreements with arbitrable wage reopenings does not bear out the fear that available arbitration machinery will be used to the detriment of genuine collective bargaining. In each of the major contracts cited above, arbitration of wage reopening has been used sparingly. The norm or expected behavior is to negotiate the wage-reopening determination without resort to arbitration. When called into play, it has been used as an adjunct to collective bargaining, not in lieu of it. When parties go into a carefully prepared arbitration on the wage

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question, there is considerably greater fear than is generally realized, both on the part of the union and company, as to "what an arbitrator may do to them." In more than one case, this experience has been a sufficiently real factor to lead to final settlement of the wage issue by the parties themselves before completion of the arbitration hearings. Parties who have created a healthy collective-bargaining relationship will not call upon arbitration lightly, even though each side may charge the other with evading its responsibility when an issue is taken to arbitration. Contrariwise, each side may threaten arbitration in its bargaining. This type of discussion, like other arguments during negotiations, is by no means determinative of what the actual course of the negotiations will prove to be. Each party's consideration of the merits of its own position in relation to what an arbitrator is likely to decide is more likely to facilitate the bargaining process than to impede it. Reasonable self-analysis is extremely important to the essential goal of a "meeting of the minds." If such considerations introduce greater reliance upon reason in negotiations than upon adamant positions based upon elements of economic force, collective bargaining is more likely to endure. Sometimes officials of the most democratically controlled unions find it most difficult to consummate binding agreement on their own authority. Internal union political pressures operating in this situation are sometimes behind a leaning on arbitral determination to avoid responsibility for direct settlement. The realities of such a situation do not all point in this direction. Union leaders risk losing some stature if they cannot settle an issue by hard bargaining. Pride in negotiating a final settlement has real effect even when arbitration machinery is provided. As experience accumulates in these relationships, there is little danger of overworking the arbitration machinery. Union charges of company actions in "taking everything to arbitration" are probably met in practice as frequently as company accusations of union abuse of the arbitration process. As maturity of a collective-bargaining relationship de[83]

velops, however, this charge is also less frequently heard. Where arbitration is overworked, a company may find that it loses more in morale and uncooperative shop attitudes than it gains in winning decisions. To be effective, arbitration machinery by its nature must be used sparingly by both parties to the collective-bargaining relationship. These psychological attitudes in a developing bargaining relationship suggest a further positive use which the provision for the arbitration of a wage reopening may serve. Bargaining may bring the parties extremely close together, but with a fine difference remaining which prevents full agreement. Recognition of the "facts of life" in unioncompany dealings must sometimes take cognizance of the psychological obstacles to agreement pointed out above. Arbitration may occasionally serve an actual service to the collective-bargaining relationship by "firming" a settlement almost reached but not quite consummated in negotiation. In cataloguing the uses of wage-reopening arbitration, recognition may be given to the use of an award to give status to a solution realized to be inevitable but difficult for bargaining representatives themselves directly to make. Rival union problems and company reluctance to disregard widelv held industry positions may bring about this use of arbitration as much as internal union and company relationships. In various ways, then, wage-reopening arbitration maybe viewed as a part of, or as a continuation of, the bargaining process rather than as an alternative procedure designed to negate collective bargaining. An unusual use of wage reopening, suggesting the wide variety of approaches possible, lies in the experience of the cloak and suit industry in New York and the International Ladies' Garment Workers' Union. It is common to assume that a wage reopening should not precede too closely the contract termination date at which time the parties have an opportunity directly to negotiate anv differences on wages. In the industry in question, however, the wage level was changed by an arbitration award three months before the negotiation of the February 1948 contract. [84]

The union and the employers in this industry used the wagereopening procedure to arrive at agreement upon the new level of wage rates for the ensuing period in order that the negotiation of other terms of the new agreement would not be confused and rendered more difficult by discussion of the wage issue at that time. Thus they disposed of the wage question just prior to negotiations in order to smooth the course for more careful negotiation of actual contract terms other than wages. Consideration of appropriate uses of wage-reopening arbitration necessarily involves the much-debated question of whether any mediation should be undertaken in these proceedings or whether the process should be purely "judicial." While this question is broader in scope than the instant subject, since it is raised with respect to all types of arbitration, only those aspects of it can be considered here which bear upon wage-reopening arbitration. No attempt will be made to suggest any final answer to the broader question. Whether or not an arbitrator mediates, it is generally agreed that every possible opportunity should be given to the parties themselves to reach a settlement of a wage-level determination in the lobby, so to speak, of an arbitration hearing. Actions of an arbitrator to encourage such a settlement, either by suggestion or by indications of the likely award, must depend in the final analysis upon the receptivity of the parties to such a procedure. The parties' willingness to receive such suggestions, furthermore, is likely to vary from time to time, depending upon many circumstances including the personal stature of the arbitrator. In a hotly contested wage dispute, as one example, the union may concentrate upon a particular part of the employer's operations to show the feasibility of its demands. The employer, on the other hand, may seek to show the unreasonableness of the union's demand by emphasizing quite another segment of operations. Skilful mediation in such circumstances may bring the parties to a settlement by isolating the areas of agreement. Since exceedingly valuable media[85]

tion has frequently been accomplished by a competent arbitrator called in to rule upon such a dispute, any doctrinaire ruling out of such activities on the part of the arbitrator would seem to be unwise. Its application in particular instances must be a matter of careful judgment by all concerned. Certain techniques which unions and companies have developed to govern wage-reopening arbitrations suggest that the parties themselves conceive the arbitration proceeding as an extension of collective bargaining. Specification of negotiated criteria right in the reopening clause and the provisions under which interested party representatives consult with the arbitrator in reaching his decision have been described in the preceding sections. If the main objective of collective bargaining is to achieve a meeting of the minds, arbitration techniques may be assessed with this aim at least partiallv in view. While many arbitration cases will call for a final determination of an issue where there is no hope of reconciling the parties' position, an element of mediation in arbitration cases where appropriate is a logical corollary of the treatment of the arbitration process as an extension of collective bargaining. Perhaps the most vital ingredient of an arbitration, often overlooked in comments and criticism on the subject, is the acceptability of the award to the parties in dispute. A carefully formulated and documented decision of an arbitrator may yield a given cents per hour adjustment at wage reopening. If such an award is so completely unpalatable to either union or company that a strike occurs, or if efforts are provoked by either company or union to circumvent the award, the entire proceeding fails in its purpose. A 1946 arbitration award of six cents per hour in the full-fashioned hosiery industry was followed by a strike, and an almost immediate offer by management of a considerably higher wage increase. This experience can scarcely be summarily dismissed as a wildcat situation because of the long history of stable collective bargaining in this industry. The award served no good purpose even to management in this situation. A fundamental

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element of acceptability, to be distinguished from the exaggerations which sometimes characterize public statements of position, must have some recognition in the arbitration process, just as it is recognized as the heart of collective bargaining.

5.

WAGE-REOPENING ARBITRATION A N D CONTRACT STABILITY

The recent trend toward long-term agreements evidences desire to further stability of collective-bargaining relationships. Union and company needs are resulting in a growing preference for a longer-term agreement than has heretofore been the case. In considering the feasibility of long-term labor agreements, it is apparent that the major hurdle is in providing a sufficient flexibility for the general wage level during the agreement term. As indicated above, the problem of wage flexibility has been met: (1) by agreement upon some wage formula expressed in the contract, and (2) by providing for reopening the agreement during the contract term as respects wages only. The selection of the appropriate method and the further prescription of its detailed operation must necessarily depend in large measure upon the particular circumstances facing the collective-bargaining parties. The wage-formula approach has grown in popularity in recent years, finding peculiar adaptability in certain industries where the percentage of labor cost is low or where the leadership on both sides see advantages in fixing a stable relationship and in laying the work-stoppage methods aside for the time at least. The inflationary period in the autumn of 1950 resulted in a wide adoption of this technique in American industry. Commitment to long-term and uncertain wage factors, however, by less than omniscient negotiators on both sides of the table carries substantial risks which cannot be avoided

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when wages are geared to an impersonal mathematical formula. Although it can be recognized as a significant development in the search for contract stability, the wage-formula idea appears to be limited to considerably less than universal applicability. Our investigation of wage-reopening provisions, the other major category of techniques used when the contract term is lengthened, shows considerable differences among such clauses in their timing, in the scope of reopening, and in provisions for final determination of a wage dispute, i.e., by arbitration or by resort to economic force. Such factors as change in cost-of-living and productivity-improvement trends are more characteristically considered as only parts of the mass of considerations that are subjectively appraised. They are not ordinarily introduced as precise arithmetical formulations. Wage-reopening provisions, subject either to strike or to arbitration, follow collective-bargaining practices more clearly. Their constructive use is of substantial significance to the development of longer-term agreements. The focal point of immediate interest in wage-reopening provisions is the nature and peculiar characteristics of wagereopening arbitration. They have been explored by reference to selected collective-bargaining experiences in Chapter 4 of this monograph. The circumstances attending a wage review within the period of a continuing agreement were there discussed. Since the parties to a labor agreement presumably have appraised their economic strength at the negotiation of their contract, the peculiar significance under reopening clauses of changes between the time of negotiations and the wage revision was pointed out. Other methods of limiting the nature of the arbitration process were found to have been developed by the parties themselves. The negotiation of criteria or guides distinguishes this type of arbitration from the open-end type generally associated with new contract terms. Machinery, techniques, and procedures which collective-bargaining parties have developed were considered, including methods of selection of an arbitrator and special interest representation with the arbitrator

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in his deliberations. It was pointed out further that the agreed-upon provision for wage-reopening arbitration had not generally resulted in a deterioration of collective bargaining. In fact, positive uses were found for arbitration as a part of, or as an extension of, the collective-bargaining process. In some cases, mediation efforts by the arbitrator have been effective in arriving at wage determination at reopening. The greater acceptability of an award keyed as closely as possible to the bargaining relationship at hand was pointed out. The basic decision which negotiators of a long-term agreement must make, however, involves a choice between wagereopening arbitration and retention of the right to resort to economic force on the occasion of wage review. A.

CONFUSION B E T W E E N W A G E - R E O P E N I N G ARBITRATION AND T H E ARBITRATION OF N E W CONTRACT T E R M S

A dispute about a wage reopening is considered by some parties as being so vital to their respective interests that they retain the strongest weapons in their economic arsenal to use, if necessary, to arrive at a settlement. The view that "wages should not be arbitrated" derives in part from the important distinction which has been drawn in recent years between the arbitration of disputes over the interpretation of contract language on the one hand and disputes over new contract terms on the other hand. The prospective wage level is usually one of the disputed contract terms at the negotiation of a new agreement. The nature of wage-reopening arbitration discussed above, however, should suffice to show the difference between this process and the open-end type of arbitration where parties have agreed, sometimes at the beginning of a contract, to arbitrate any disputed terms of a new contract with no reference to guideposts or even objectives mutually acceptable to the parties. To avoid this open-end characteristic in wage arbitrations, unions and employers have incorporated negotiated wage criteria as reference points in the language of wage-reopening clauses and taken other measures to limit its scope. By so setting up a frame of

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reference for the determination of the wage issue, the arbitration becomes more limited in scope. The interpretation of the parties' negotiated intent and its application to specific wage rates approaches the interpretation and application of contract terms to specific grievances. B.

DIFFICULTY

OF CONTAINING A W A G E - R E O P E N I N G

STRIKE

A reopening clause which permits a strike or a lockout defeats the very stability which was sought for in the longterm contract. Although attempts may be made to limit by language the issues subject to strike at contract-reopening time, such a limitation is often not effective in practice. A strike may be called nominally over a wage issue, but other issues tend to intrude. The most difficult work of a negotiator, conciliator, or mediator during a strike is often to get behind the smoke screen of statements for public consumption to determine what the basic hurdles really are. A strike on wages at a reopening may technically not involve other terms of the contract, but experience indicates the difficulty in holding to technical compartmentalization. For example, actual cases have arisen where, under terms of the contract not subject to reopening, holiday pay has been paid even though employees were on strike on the holidays. There have been arbitration cases dealing with the status of striking employees with respect to benefits under a retirement program. Companies face the question of whether to continue payments for employees' group life insurance during the strike period. Even though practice, arbitration, and and legal precedents are well established on the status of striking employees, many problems arise under other sections of an agreement which are technically continued through a wage-reopening strike. An extreme illustration of complications arising from a wage reopening, under which the right to strike was reserved, is found by reference to the negotiations between the Chrysler Corporation and the United Automobile Workers, CIO, in February 1950. After about twenty days of strike over the details of a pension plan being negotiated under the [90]

parties' wage-reopening provision, the union presented 109 new "noneconomic" demands, comprising substantially a new contract. The union's position was stated to be that the contract, because of the strike, was void. The company argued that the negotiations to settle the strike had to be confined "strictly to wages" and that other terms of the agreement had not expired.63 It seems apparent that the maintenance of a binding contract during a strike at the time of a wage reopening, particularly when such a contract by its terms is temporarily "terminated" to allow industrial strife, is a difficult undertaking at best. Provisions for resort to economic force in a document establishing rules for a peaceful relationship can surely be characterized as an anomaly. Contract provisions may specify that, upon reopening, only wages are subject to arbitration. If a strike over pensions should materialize, however, how can one preclude the possibility that the employees may then not go back to work for a wage increase? In the 1949 steel situation, the union was said to have had the right to strike only over wages and social insurance. Yet the strike was settled only when a pension plan was agreed upon. While attempts continue to be made to develop agreement clauses to govern conduct during an interruption of the agreement, and while it may be earnestly hoped that such understandings can prevail, the very attempt has elements of futility about it which raise grave doubts as to its wisdom. As indicated above, recent support of the doctrine of "continuous obligation to bargain" has accentuated the difficulties of containing a reopening strike. C.

RISK OF WAGE-REOPENING

ARBITRATIONS

The major deterrent to submission of a wage-reopening dispute to arbitration is the great risk entailed in permitting an "outsider" to rule as respects important company costs and also as respects the basic-earnings levels of employees. This deterrent may be expressed as a fear of bankruptcy or of placing the fate of a company in the hands of a third party. Sometimes such a course is said to be an abdication of man-

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agement's responsibility to the stockholders. Hardly less determined is the opposition of many unions to relinquishing their most powerful economic weapons in protection of their wage structure, the heart of the labor agreement. The fear of major disaster from submission of a wage dispute to arbitration may be appreciably reduced by specifying directly in the reopening those standards chosen by the parties and which serve to limit the arbitrator's discretion. It may be objected that, if the parties could agree on criteria, there would be no dispute on the issue. In fact, the careful and serious negotiation of criteria for the determination of a wage dispute may actually lead to a final settlement of the dispute itself. Full exploration of reaching mutual understanding on criteria deemed appropriate to the parties would certainly go far toward narrowing the area of dispute. Most significant is the fact that conflicts over the criteria for incorporation in a reopening clause may be ironed out in the general appraisal of economic strength at the initial contract negotiations, thus establishing a contract providing longerterm stability. In Chapter 4 of this monograph there was a discussion of means other than the specification of criteria which negotiators have used to narrow the risks of the wagearbitration process. Such techniques, developed sometimes as experiments, included the way of selecting the arbitrator, insuring interested party representation in the arbitration and others. Further development of such measures by the parties themselves would follow a more general appreciation of the possible use of arbitration in wage reopening. Industry and labor are by no means unanimous in viewing the risks involved in arbitrating wages as excessive. Contract provisions cited in Chapter 4 illustrate agreements where different types of arbitration procedures have been used. Leland Hazard, General Counsel and member of the Board of Directors of Pittsburgh Plate Glass Company, referring to the risks of arbitration, made the following statement in November 1948 : [92]

There is a substantial margin of error in the management of any business. I need not point out that very large sums are expended in unproductive research, research which fails; estimates of cost of plant construction or expansion made by the most careful and competent engineers overrun, in these days, by 20 to 100 percent; a faulty commercial policy or an unfortunate advertising line may prove extremely costly to the corporate enterprise. Why should we be so allergic to the risks of an arbitrator's awkward decision?64 After pointing out that his company h a d not hesitated to arbitrate wages in cases of failure to agree, his closing paragraphs indicate a keen awareness of the importance of this question by a responsible business spokesman: Some of our labor contracts are now being executed for a twoyear period with a provision for a reopening of the general wage question at the end of the first year and arbitration of that question if the parties are unable to agree within a specified number of days. Naturally, we have agreed to arbitration of the general wage increase on the reopening; otherwise, how could we properly insist upon the no-strike clause throughout the entire two-year period? . . . We look forward to the possibility of even longer contracts with periodical reopenings on a few major and fundamental issues and with arbitration as the method of solution if we are not able to agree in collective bargaining at the time of the reopening. We are convinced from our experience with arbitrating that in this direction lies a way to industrial peace and to the full production which our nation must have for what lies ahead of us—else, we face something worse than industrial unrest.0·"' In stating this position, Mr. Hazard relies in large measure upon the conduct of the arbitration process as a quasijudicial, formal proceeding in which a finely "distilled," irreconcilable difference between the parties is submitted to an arbitrator as to a judge. Whether or not the judicial character of the proceedings is essential to a sound industry position on this matter may be debated. It is likely that the precise nature of the process depends in large measure upon the type of arbitration which both parties to a collective-bargaining relationship agree upon. 8 " Certainly, the limitation of the [93]

scope of the arbitration bv the parties themselves and the careful adherence by negotiators, mediators, and arbitrators to the guides, procedures, and techniques developed cannot be slighted if the arbitration process is to be used. It is only by narrowing the risks of such proceedings and by a close approximation to acceptability tests based on standards valued by those particular bargaining parties at hand that unions and companies will adopt this device. D . RISKS OF LEAVING W A G E REOPENING S U B J E C T TO STRIKE

In addition to the difficulty of containing the actual strike itself to the issue defined in the wage-reopening clause is the risk of loss of many of the values built up over a continuous bargaining relationship. There are, of course, the economic losses to both sides in the strike. The deterioration in morale which accompanies an interruption of production will vary considerably from one situation to another, but is generally a serious matter. Beyond these obvious points, however, when an interruption occurs, there is serious danger of losing many of the twoway bargaining gains which have evolved over a period of time in a continuous bargaining relationship under a contract. The shop understandings that have gradually developed become an integral part of the mores of the plant operations. The awards of grievance arbitration are often considered as important elements in the continuing structure of industrial jurisprudence. When, during negotiations, the canceling of all local understandings and practices is threatened each side can easily say that it would be glad to be rid of many of them. Both sides also know in their hearts, however, that these practices are the result of much experience and mutual adaptation and that much of value would be lost by their elimination. Thus while recognizing that there are times when a strike may clear the air, an unwanted interruption of production throws overboard in the first instance much that is good for both parties in the bargaining relationship and may have lasting ill effects on the gradual reëstablishment of these values. [94]

E . STRIKES W I T H I N THE AGREEMENT

The substance of the matter is that stability simply does not exist when an agreement is periodically subject to strike. It is like warfare within a truce, a contradiction in terms. The costs and harmful effects of strikes are well known to all. These costs, heavy as they are, must still appear to some as necessary to avoid the risks of submitting to a third party the final determination of wage review during the contract term. When the costs of strikes are compared, however, with a limited and carefully guarded procedure for the peaceful determination of wage reopening, the standard answer of "fighting it out" may not make sense. Many characteristics of arbitration developed by the parties themselves in collective bargaining have been referred to in this monograph, in order to emphasize the peculiar nature of wage-reopening arbitration as it is evolving. These characteristics distinguish it significantly from an unlimited, open-end abandonment of an issue to an "outsider." This evolution of a process is undoubtedly far from complete. With the ingenuity and talent now being concentrated upon collective-bargaining activities, this development may be expected to yield even more refined processes than those which have already proved valuable in many relationships. It is by emphasis of the parties themselves in collective bargaining, in putting greater attention upon improving machinery, techniques, and procedures of reopening arbitrations along with other devices to this end that long-term contract stability may more widely be attained.

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REFERENCE NOTES 1. Compare the distinction made between the arbitration of questions of contract interpretation and the arbitration of new contract terms in United States Bureau of Labor Statistics, Collective Bargaining Provisions, Grievance and Arbitration Provisions, Bulletin 908-16, April 1950, p. 82 ff. 2. Cf. National Planning Association, Case Studies on the Causes of Industrial Peace under Collective Bargaining, 1948-50. 3. Cf. Harbison, Frederick H., "General Motors-United Auto Workers Agreement of 1950," Journal of Political Economy, LVIII (October 1950), 397-411. 4. For a stimulating account of the relation of the political nature of unions to collective-bargaining policies, see Ross, Arthur, Trade Union Wage Policy (Berkeley: University of California Press, 1948). 5. Cf. Williamson, S. T., and Harris, H., Trends in Collective Bargaining (New York: Twentieth Century Fund, 1945), p. 116 ff. 6. Bureau of National Affairs, Inc., The Taft-Hartley Act After One Year, Washington, 1948, summarizes short-run effects of the law. 7. The National Labor Relations Act, 1935, Section 9 ( c ) . 8. A question more basic than either of these is whether union job control over an area may be dominant over self-determination by majority rule of employees within a unit of this area. Cf. Taylor, G. W., Government Regulation of Industrial Relations (New York: Prentice-Hall, Inc., 1948), pp. 53-89; also Gregory, C. O., Labor and the Law (New York: W. W. Norton and Company, Inc., 1949), p. 311. 9. 72 NLRB 927, 928-929. 10. For example, in the Quaker Maid Company Case (71 NLRB 915, 1946) a first agreement, consummated on July 30, 1945, between the company and a recently certified independent union, provided for reopening on 30 days' notice. Negotiations beginning in February 1946 resulted in a new wage schedule on May 13, 1946, and extended the original contract to July 30, 1947. On May 6, 1946, the United Steelworkers of America requested recognition, was denied, and petitioned the Board on June 20, 1946. This petition was dismissed in line with the Board's general policy of denying substitute unionism in the middle of a contract signed within one year after certification. Other cases have directed an election in case of premature extension of a contract (Witchita case) but have dismissed petitions when recognition requests were untimely, because made after the operative notification date of an automatic renewal clause ( Northwestern Publishing Company ( WDAN ) 71 NLRB 167, 1946). 11. 74 NLRB 1316. 12. Trailer Company of America (51 NLRB 1106); a contract expiring within three months in Wheland Company (72 NLRB 351, 1947); contracts terminable at any time in General Motors Corp. (72 NLRB 1199, 1947); Wisconsin Telephone Co. (21 LRR M 1112, 1948); contracts of indefinite duration in Detroit Sheet Metal Works (73 NLRB 475, 1947); a bar during initial two-year period in Puritan Ice Company (74 NLRB 1311, 1947). 13. United States Department of Labor, Bureau of Labor Standards,

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Federal Labor Laws and Agencies, A Layman's Guide, Bulletin No. 100, 1948, pp. 17-18. 14. United States, 80th Congress, Pub. Law 101, Title I, Section 101, Section 9 ( c ) ( 3 ) . 15. In Kraft Goods Company (76 NLRB 492, 1948) decertification election was permitted after contract termination upon petition filed between an oral agreement and written form for new contract. In General Shale Products Corp. (75 NLRB 778, 1948) an election petition by another union was honored when filed three months before automatic renewal of existing contract. On the other hand, in Texas Paper Box Manufacturing Company ( 75 NLRB 799, 1948 ) an automatic renewal of a first contract was found to bar an election petition filed prior to the renewal date. 16. 77 NLRB 756, 1948. 17. United States, 80th Congress, Pub. Law 101, Title I, Section 9 ( c ) ( 5 ) . 18. Gregory, C. O., and Katz, Η. Α., Labor Law, Cases, Materials and Comments, Michie Casebook Corp., Charlottesville, Va., 1948, p. 877n. 19. 3 NLRB 294, 1937. In the matter of American Can Company (13 NLRB 1252) petitions by two craft unions filed between the agreement upon tenus of a renewal of any industrial-union contract and its final consummation were dismissed on the grounds of majority rule throughout the plant and in the light of employer and union testimony on the propriety of the larger unit. In the matter of General Electric Company (58 NLRB 57, 1944) the Board supported the severance of a craft union for pattern makers in two plants, if chosen by vote of the pattern makers themselves. On the other hand, in the matter of Philip Morris and Co., Ltd. (70 NLRB 274, 1946) the Board dismissed a petition for a craft unit of "fixers" on the integration of jobs and operations, older organization of industrial unionism, and a generally satisfactory existing relationship. Gregory, C. O., and Katz, Η. Α., op. cit., pp. 889-94. 20. 76 NLRB 1199, 1948, ibid., p. 895. 21. For example, Matter of Link Belt Company, Philadelphia Operations, 76 NLRB 429, 1948, ibid., p. 899. 22. The Carnegie-Illinois Steel Corporation and the United Steelworkers Union agreed in 1947 to make a corporation-wide study of all local seniority practices. No resulting measures of unifying such practices or of changing the contract provision governing seniority were announced between that time and 1951. 23. 82 NLRB 854; 23 LRRM 1632 (April 1949). 24. For a strong case in favor of allowing the parties themselves to determine the appropriate scope of bargaining in each case, see Cox, Archibald, and Dunlop, John T., "Regulation of Collective Bargaining by the National Labor Relations Board," Harvard Law Review, LXIII, No. 3 (January 1950), 389-432. 25. Agreement between General Motors Corporation and the UAW-CIO, May 29, 1950, paragraph 154, p. 102. 26. Brown, Douglass V., "Management Rights and the Collective Agreement," Industrial Relations Research Association, Proceedings of First Annual Meeting, December 29-30, 1948, pp. 145-55. 27. For a more extended discussion of problems of the application of general wage changes, see Garrett, S., and Tripp, L. R., Management Problems Implicit in Multi-Employer Bargaining (Philadelphia: University of Pennsylvania Press, 1949), pp. 23-24. 28. Soule, George H., Wage Arbitration, Selected Cases, 1920-24 (New York: Macmillan Company, 1928), pp. 9-11. Also Feis, Herbert, Principles

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of Wage Settlement (New York: H. W. Wilson Company, 1924), p. 247. See also Lauck, op. cit., and reference to the "living wage" in Report of the Federal Electric Railway Commission (Washington: United States Government Printing Office, 1920). 29. Carr, Elma Β., The Use of Cost-of-Living Figures in Wage Adjustments. This development followed naturally from reference to the rising cost of living in wage awards by government boards and in negotiations by the parties themselves. While the "high cost of living" had undoubtedly been related to wages and personal incomes in much earlier periods of history, the development by Dr. Royal Meeker, Commissioner of Labor Statistics, at the President's request, of a living-cost index for the period of the war provided in this country a measure which could serve as the basis for an escalator clause. For the history of cost-of-living and budgetary studies in relation to wage determination in this country and in England, see Political and Economic Planning: British Trade Unionism ( London, 1948 ) ; Carr, Elma Β., The Use of the Cost-of-Living Figures in Wage Adjustment, Bulletin of the United States Bureau of Labor Statistics, No. 369 (Washington, United States Government Printing Office, May 1925); Lauck, W. Jett, The New Industrial Revolution and Wages (New York: Funk and Wagnalls Company, 1929); Bing, Alexander M., War-time Strikes and Their Adjustment (New York: E. P. Dutton and Co., 1921); United States Department of Labor, Bureau of Labor Statistics, Bulletin No. 699, Changes in Cost of Living in Large Cities in the United States, 1913-41 (Washington: United States Government Printing Office, 1941). The author is indebted to Mr. Henry Lowenstern for bringing together much of this early material on cost-of-living factors in an unpublished manuscript at University of Wisconsin, Madison, Wisconsin. 30. Bambrick, J. J., and Stieglitz, Harold, "Reaction to GM Wage Formula," Conference Board Management Record, July 1948, pp. 337-45. 31. Wood, Richard H., and Pearce, John J., The Use of the Cost of Living Factor in General Wage Adjustments, A Survey of Recent Experience and Opinion in New Jersey (New Brunswick: Rutgers University Institute of Labor and Management Relations, 1949), p. 22. Cited in Lowenstern, Henry, "Use of the Cost of Living Factor in Wage Adjustments," unpublished graduate thesis University of Wisconsin, Madison, 1950. 32. For further references on cost-of-living provisions in union contracts see Hoag, M., "Adjustment of Wage Scale during Life of Contract," California Institute of Technology, Industrial Relations Section, November 1945, Pasadena, California. 33. Seybold, J. W., "The Philadelphia Printing Industry," in Industrywide Collective-Bargaining Series (Philadelphia: University of Pennsylvania Press, 1949), p. 83n. 34. Princeton University, Industrial Relations Section, Representative Clauses Permitting Wage Adjustments during the Life of the Agreement, 1941. 35. Bureau of National Affairs, 1949, Collective Bargaining, XV:401. 36. Section 18. See Appendix for individual contract clause citations. 37. Certain specified insurance programs were also included for review in the 1949 reopening. The settlement finally reached in November 1949, after a fact-finding board report, provided for a pension program which was embodied in a separate memorandum of agreement. 38. Agreement between Chrysler Corporation and the United Automobile Workers, CIO, April 26, 1947, termination clause. 39. Supplemental Agreement, dated May 28, 1948.

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40. Agreement dated October 15, 1945, Article III ( J ) . 41. Agreement dated January 1, 1948, Article III ( J ) . 42. In the case of New England cotton textiles, a union request for a general wage increase was denied in arbitration in early 1949, on the basis of prospective trends in the cotton industry. The September 1 9 4 9 and March 1 9 5 0 wage-reopening dates were passed by the union without a demand for a wage increase, in view of industry conditions and the prior arbitration award. 43. Agreement dated July 1 9 4 8 , Article X I I . 44. Article X I . 45. Article 17 ( h ) ; also Exhibit " B , " Supplemental Agreement, May 5, 1948. 46. Supplemental Agreement—July 16, 1948, Section II, paragraph 6. 47. Report to the President of the United States on the Labor Dispute in the Basic Steel Industry, September 10, 1949, p. 2. 48. Ibid., pp. 6 9 - 7 8 . 49. 8 2 N L R B 8 5 4 ; 2 3 L R R M 1 6 3 2 (April 1 9 4 9 ) . 50. 8 5 N L R B 1 0 9 6 (September 8, 1 9 4 9 ) . 51. Agreement, July 1948, Article X I I . 52. Agreement, 1 9 4 7 - 4 9 , Article X I - 1 , 2, 5. 53. Agreements, May 1948, Exhibit " B " Supplemental Agreement, May 5, 1948, Section 2. 54. Agreement dated April 26, 1947, Article I, 6. 55. As noted earlier (ante p. 5 8 ) the President's fact-finding panel in the 1949 steel dispute rejected an argument made at the hearings that only such changes as had occurred between negotiations and reopening should be considered in determining their wage award. This finding of the panel rested in part upon the fact that both parties presented evidence at the hearings which would indicate their treatment of the reopening as the negotiation of a new wage rate. Under the circumstances the panel's interpretation was probably the only one which could reasonably be taken, since no meeting of the minds had been reached between the parties on this point. There was certainly no indication in the language of the reopening provision which would limit the determination to such changes. All possible arguments were, of course, mustered on both sides for the hearings, some relating to recent changes, others to comparisons and trends over longer periods. It is significant to note, however, that the major panel recommendations and ultimate bases for settlement reflect in large measure the changes in environment, both legal and economic, which took place between negotiations and reopening. The pension recommendation was based upon an interpretation of decisions issued by the National Labor Relations Board in 1949, which, following the Supreme Court's ruling in favor of the United Steelworkers of America in the Inland Steel case, first made it possible to negotiate pensions in some measure comparable to the gains of the United Mine Workers in this field. While the finding on the wage issue that no inequity existed between the steel workers and other groups in the economy was supported by comparisons over a period of years, the basis of denial as being harmful to the general economy rested mainly upon the changed economic environment in 1949 as compared with 1 9 4 8 . 5 6 . E.g., the "portal to portal" shadow over 1947 negotiations, "overtime on overtime," bargainability of pensions, etc. 5 7 . For a detailed account of this experience, see Kennedy, T., Effective

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Labor Arbitration: The Impartial Chairmanship of the Full-Fashioned Hosiery Industry (Philadelphia: University of Pennsylvania Press, 1948). 58. National Labor Agreement, 1947-49, American Federation of Hosiery Workers and Full-Fashioned Hosiery Manufacturers of America, Inc., Article XI. 59. Kennedy, op. cit., pp. 37-39. 60. Agreement between Fall River Textile Manufacturers Association, New Bedford Cotton Manufacturers' Association, and Textile Workers' Union of America, CIO, January 1, 1948, Article III ( J ) . 61. Fall River Textile Mfrs., etc., and T.W.U., Article VII, 1948. 62. Ibid. The relevant clause follows: "Unanimous decision of this board shall be final and binding upon the parties. In the event of a failure to reach a unanimous decision, the written decision of the impartial chairman shall be final and binding on the parties hereto." 63. New York Times, February 14, 1950, p. 6:4. 64. University of Pennsylvania, Wharton School, Conference on Labor Arbitration, November 12, 1948, Proceedings, pp. 12-13. 65. Ibid., pp. 13-14. 66. Cf. remarks by Dr. George W. Taylor at same meeting, ibid., pp. 17-18.

APPENDIX Contract

Provisions

Carnegie-Illinois Steel Corporation of America, CIO, Agreement, April SECTION 1 8 — T E R M I N A T I O N

Cited

in

Text

and the United 22,1947.

Steelworkers

DATE

The terms and conditions of this Agreement shall continue in effect until Midnight April 30, 1949, provided, however, that either party may, on April 1, 1948, give written notice to the other party of its desire to negotiate a general and uniform change in rates of pay. Within 5 days after the giving of such notice, the parties shall meet for the purpose of negotiating such issue. Failing agreement on such issue on or before April 30, 1948, this Agreement shall remain in effect until Midnight April 30, 1949. SUPPLEMENTAL AGREEMENT,

July 16, 1948

II. Provisions for Termination and Extension: 6. Wages and Insurance: The Wage Provisions of the April 22, 1947 Agreement as amended by ( 1 ) above shall be continued in effect, provided, however, sixty days prior to July 16, 1949, either party may serve notice on the other of its desire to negotiate ( a ) for a general and uniform change in rates of pay and/or [100]

(b) for life, accident, health, medical and hospital insurance benefits. Within 30 days after the giving of such notice the parties shall meet for the purpose of negotiating such issues. Failing mutual agreement on such issues by July 16, 1949, the parties may thereupon, notwithstanding any of the other provisions of the Agreement, respectively resort to strike or lockout in support of their contentions, and the Agreement shall thereupon be deemed terminated; provided, however, upon settlement of the two issues above named, the Agreement shall be reinstated in all its terms with the addition of such provisions as may be agreed upon with respect to the two above issues, but no others and such Agreement shall remain in effect until April 30, 1950. Said provision for reinstatement shall survive and be a continuing obligation in the event the Agreement is terminated as above provided. Chrysler Corporation and the United Automobile, Aircraft and Agricultural Implement Workers of America, CIO, Agreement, April 26, 1947 (Terminable April 26, 1949). Termination Clause During the term of this agreement the rates of all existing classifications are fixed except that each party may on one occasion only, and upon written notice to the other, signify its desire to open wage rate negotiations, in which event the notice shall set forth the adjustment or adjustments desired . . . etc. Article I, 6—No Strike Provision The Union will not cause or permit its members to cause nor will any member of the Union take part in any strike or stoppage of any of the Corporation's operations or picket any of the Corporation's plants or premises until all the bargaining procedure as outlined in this agreement has been exhausted, and in no case until after the negotiations have continued for at least five days and not even then unless sanctioned by the International Union, United Automobile, Aircraft and Agricultural Implement Workers of America. . . . The management will not cause or sanction a lockout until all the bargaining procedure as outlined in this agreement has been exhausted, and in no case until after the negotiations have continued for at least five days. Supplemental Agreement, May 28,1948 (Terminable August 1, 1950). During the term of this agreement the rates for all existing classifications are fixed except that each party may on one occa[ 101 ]

sion only, and subsequent to June 15, 1949, and upon written notice to the other, signify its desire to open negotiations on the general level of wage rates, in which event the notice shall set forth the adjustment desired . . . etc. Fall River Textile Manufacturers' Association, the New Bedford Cotton Manufacturers' Association, and the Textile Workers' Union of America, CIO, Agreement, October 15, 1945. Article III (J) Wage Revision: Either party hereto may request: (1) a general revision, upward or downward, in rates of pay; and/or (2) a revision of any rate or rates of pay, but such request may not be made oftener than twice a year. Revisions in rates of pay shall become effective only on the first Monday after the first day of January or the first Monday after the first day of August; and shall continue in effect until the termination of this Agreement or any renewal thereof unless changed by mutual agreement or under the provisions of this Section. Requests for a revision in rates of pay under this Section shall be in writing and shall be mailed or delivered to the other party not less than thirty (30) days prior to the requested revision date. Upon the giving of such written notice, the parties shall immediately negotiate the request, and if they are unable to agree within fifteen ( 15 ) days after the receipt thereof, either party may require arbitration of the dispute under the provisions of Article VII of this Agreement. Agreement, January 1, 1948. Article III (J) Wage Revision: Either party hereto may request (1) a general revision upwards or downwards in rates of pay; and/or (2) a revision of any rates of pay, but such revisions shall not become effective prior to the first Monday after the fifteenth day of January, 1949, and shall continue in effect until the termination of this Agreement or any renewal thereof unless changed by mutual agreement or under the provisions of this section. On and after January 15, 1949, requests for such revisions may not be made oftener than twice a year and such revision shall become effective only on the first Monday after the fifteenth day of September or the first Monday after the fifteenth day of March (1950 and thereafter); and shall continue in effect until the termination of this Agreement or any renewal thereof unless changed by mutual agreement or under the provisions of this section.

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Requests for a revision under this section shall be in writing and shall be mailed or delivered to the other party not less than sixty (60) days prior to the requested revision date. Upon the giving of such written notice, the parties shall immediately negotiate the request and if they are unable to agree within fifteen (15) days after the receipt thereof, either party may request arbitration of the dispute under the provisions of Article VII of this Agreement. Merchants' Ladies' Garment Association, Inc., with International Ladies' Garment Workers' Union, AFL, Agreement, July 1948-May 1951. Article XII—Wage Adjustment The parties recognize that during the period of this agreement there may be a further inflationary trend resulting in an additional increase in the cost of living. The parties hereto agree that if the cost of living index of the United States Bureau of Labor Statistics shall rise five (5%) percent above its level as of February 15, 1948, the Union shall have the right to demand upon notice in writing to the Association that all of the members of the Association shall increase the wages of all of their workers in all the crafts covered by this agreement who are employed in their inside shops and in the shops of their contractors and sub-manufacturers to bring the same into line with such increase in the cost of living. The Union shall have the same right during the tenu of this agreement with respect to any further five (5%) percent increase in the cost of living as reflected by the index figures of the United States Bureau of Labor Statistics. The Union, however, agrees that it will not demand any increase in wages for the Fall season of 1948, and it further agrees that if it demands an increase in wages under this article for any subsequent time, such demand shall be made either on or before October 15th of the year (the increase granted to become effective for work performed beginning with the ensuing Spring season) or on or before May 1st of the year (the increase granted to become effective for work performed beginning with the ensuing Fall season ). If the Union and the Association fail to agree upon the amount of wage increase to be granted, then the matter shall be submitted to the Impartial Chairman hereinafter designated for his final determination and the parties agree to be bound by his decision. This Article numbered Twelfth shall only be applicable for the period during which the emergency caused by the inflationary trend shall continue.

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Full-Fashioned Hosiery Manufacturers' Association and American Federation of Hosiery Workers' Agreement, 1947-49. Article XI—Wage Revision (XI-1). It is hereby agreed that if there shall occur a general decline or fall of earnings of full-fashioned hosiery workers in the industry, or if the cost of production on the same type and condition of equipment shall generally decline, or if general conditions shall warrant a decrease, then the Association on behalf of all its members covered by this Agreement, may request in writing and in detail a specific revision of the rates of pay. (XI-2). In the event there shall occur a rise in the earnings of fullfashioned workers in the industry, or an increase in the cost of living, or if conditions generally shall warrant an increase in earnings, then the Union may request in writing and in detail a specific revision of the rates of pay. ( XI-3 ). In either event, the Union and the Association shall negotiate the request and if they cannot agree within fifteen days after the receipt thereof upon a revised Schedule of Rates of Pay, then that matter shall be submitted to arbitration by a Wage Tribunal, composed of three persons, who shall be selected as follows: The Union shall designate one person, the Association shall designate one person ( these two persons shall be known as the party representatives), and these two shall select a third person who shall be known as the referee. In the event the two party representatives shall fail to agree upon a referee within five days after the expiration of the aforesaid fifteen day period of negotiations, then the Impartial Chairman shall designate the referee, after consultation with the parties to the Agreement. (XI-4). The Wage Tribunal shall hear testimony as expeditiously as possible and render its decision, which shall be final and conclusively binding upon the parties hereto. A majority decision by the Wage Tribunal shall be the decision of the Wage Tribunal. (XI-5). The Wage Tribunal may revise the Schedule of Rates under the provisions of this clause, but only after considering the operating conditions in the Member Mills and their continued sound operation, and may condition the revision of the Schedule of Rates upon changes in method of operation, installation of new equipment, or fulfillment of any other condition, which in its opinion will tend toward job and earning security.

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Libbey-Oicens-Ford Glass Company and the Federation of Glass, Ceramic