Under a labor contract, job opportunities are allocated to people on the basis of seniority. Seniority is the length of time a person works for an employer. In a unionized company, promotions, job assignments, and shift preferences are given to the employee with the most seniority in the unit.80 Layoffs in unionized firms are also governed according to the last in, first out rule (see Chapter 6).81

Work rules tend to be less flexible in a unionized workplace because they are likely to be formalized in the labor agreement. When labor relations are adversarial, labor contracts are more likely to have inflexible work rules written into them. When labor relations are more cooperative, work rule specifications may purposely be left out of the contract. In certain industries, this gives management the flexibility to adjust to the rapidly changing technological requirements of producing a product or service. For example, unions that have a cooperative relationship with management can play an important role in overcoming barriers to the effective adoption of high-performance work practices that have been linked to organizational competitiveness. Unions can work with management to overcome employees’ resistance to change by advocating for change that provides mutually beneficial outcomes for both employees and management.82

In the absence of a union, the employer is more likely to allocate job opportunities to employees on the basis of merit.83 In most cases, merit is determined by a supervisor’s judgment of the employee’s performance. Supervisors in a nonunion workplace have more power and influence because of their authority to reward employees’ efforts with promotions, attractive job assignments, and preferred work schedules. Layoff decisions in nonunion firms are more likely to take both merit and seniority into consideration. Finally, work rules are often more flexible in a nonunion firm because the employer is not tied to a contract and is, therefore, not required to justify to employees any changes made in the way work is done. In nonunion firms it is management alone that determines the most efficient way to produce a product or service and deliver it to the customer.

In unionized companies, the uses of performance appraisal are very limited because the appraisal data usually come from the supervisor, a source that many unions find problematic. Unions tend to balk at using performance appraisal as the basis for making pay and staffing decisions. If performance appraisal is done at all for union employees, it is used simply to provide some feedback on their performance. In a nonunion workplace, however, the performance appraisal is used to determine pay raises, promotions, job assignments, career planning, training needs, and layoff or discharge.84

Unionized firms tend to retain their employees longer than nonunion firms do.85 First, unionized employees are more likely to express their dissatisfaction through the grievance procedure, so this channel may become an alternative to quitting. Second, unionized firms on average pay their employees a higher wage, which may make it more difficult for them to find an equally high-paying job if they leave. Moreover, higher employee retention rates in unionized companies make it more economically feasible for these firms to provide greater investments in training union-represented employees because the firms can expect to retain trained employees long enough to earn positive returns on the investment in training.86

Unions themselves have become far more interested in worker training and development. The 1990 contract between General Motors and the UAW, for instance, specified that the company will create Skills Centers (adult educational facilities) for union workers. A total of 36 GM plants in the United States have set up these centers. As unions have stepped up their organizing efforts, many have offered to fund worker training programs. In New York City, for instance, locals of the Amalgamated Labor and Textile Workers Union, the International Ladies Garment Workers Union, and other major unions work with the Center for Worker Education to provide English as a second language and high school equivalency classes for their members and for worker groups they are trying to organize.87

A company experiences an increase in total compensation costs when a union organizes its employees. On average, union employees earn 10 to 20 percent higher wages than comparable nonunionized employees.88

The presence of a union also affects the company’s policy on pay raises. Unionized firms avoid using merit pay plans and are likely to give across-the-board pay raises to employees based on market considerations.89 Across-the-board pay plans are often based on cost-of-living adjustments (COLAs) that are tied to inflation indicators such as the consumer price index. About 23 percent of unionized U.S. workers received COLAs in 2002.90 Unions prefer across-the-board pay raises over merit pay plans because they see the latter as undermining union solidarity by encouraging employees to compete against one another to win higher pay increases. Furthermore, unions are often skeptical of the fairness of merit pay increases because of the potential for favoritism on the part of supervisors (see Chapter 7). Unions apply this same logic to the use of individual pay incentives such as lump-sum bonuses. In contrast, nonunion firms tend to use merit pay and bonuses to encourage competition and recognize their top performers. One notable exception to unions’ generally critical predisposition toward merit pay has been the recent adoption of merit pay for teachers in Denver, Colorado. The teachers’ union and the school district worked closely to design a plan to reward high-performing teachers that overcame the union’s fears that giving rewards on the basis of merit would undermine collaboration between teachers.91

Unions are less likely to object to group pay incentives because group plans (such as gainsharing or profit sharing) tend to reinforce group cohesion. Each of the Big Three automakers in the United States has negotiated a profit-sharing plan with the UAW. Union employees at Ford Motor Company received profit-sharing bonus checks of $5,000 in 2010, $6,200 in 2011, and $8,300 in 2012 when the company declared profits during those years. However, Ford employees received no profit-sharing bonuses in the three years from 2005 to 2007 when the company reported losses in each of those years.92 It is not unusual to find gainsharing plans in both union and nonunion companies.93 However, nonunion firms generally have more flexibility to use both individual and group pay incentives to reward different types of work outcomes.

Unions have generally influenced employers to offer a more valuable benefits package to each employee.94 Through collective bargaining, they have been able to negotiate packages with a broader array of benefits than nonunion workers receive.

In unionized firms the employer pays for most benefits, whereas in nonunion firms employer and employee share the costs.95 The result is better health benefits for unionized employees than for their nonunion counterparts. As U.S. health care costs have soared over the last decade, nonunionized companies have begun asking their employees to pay a greater share of these costs through both higher monthly premiums and higher deductibles. Although unionized employers face the same rising health care costs, unions have used collective bargaining to persuade many employers to pursue alternative cost-saving methods, such as managed health care, second opinions, and audits.96

In terms of retirement benefits, unions have been able to provide more security for employees by influencing employers to adopt a defined benefit plan, which provides a fixed amount of income to employees upon retirement. Nonunion employers are more likely to adopt a defined contribution plan, which requires only that the employer set aside a fixed portion of the employee’s income each month in a plan that meets the ERISA (Employee Retirement Income Security Act) standards for these plans. Under a defined contribution plan, employees do not know how much total income will be available for their retirement until they actually retire (see Chapter 12).

Unions can play an important role in monitoring and enforcing legally required benefits such as workers’ compensation and unemployment insurance.97 In a unionized firm, employees are more likely to receive workers’ compensation and unemployment insurance benefits because union representatives give workers information on how to use them. Furthermore, unionized workers are less likely to be discouraged from filing claims for fear of being penalized or challenged by their employer.98 In contrast, management in a nonunion firm is not as likely to make employees aware of their right to use these government-mandated benefits because a firm’s payroll taxes to fund the benefit increase in proportion to the number of employees using the benefit (see Chapter 12).

The union is an empowerment mechanism that gives employees a voice in the development of work rules that affect their jobs. The labor contract gives employees specific rights. For example, an employee overlooked for promotion may file a grievance and be reconsidered for the promotion if the contract stipulates that the employee has a right to that promotion.

Nonunion employers tend to document their employees’ basic rights in an employee handbook (see Chapter 13). However, employee handbooks provide fewer employee rights than labor contracts do. In fact, many of them contain only general guidelines and specifically state that supervisors may need to make exceptions to the written policy from time to time.

The appeals mechanism that a nonunion employer is most likely to use is the open-door policy.99 Unlike the grievance procedure, which is administered by both the union and management, the open-door policy is controlled by management. It gives management the opportunity to resolve an employee’s complaint while balancing both parties’ interests. The only recourse open to employees who are unhappy with the resolution of a complaint under the open-door policy is to find legal counsel and go to court to obtain justice—an option more employees are pursuing every year. Under the union grievance procedure, it is much less likely that an employee will take a case to court because judges are usually unwilling to challenge the results of arbitration.

When an employer is investigating a union employee for the purposes of imposing discipline, the employee has a right to have a union representative present during questioning. The right to have a union representative present during a disciplinary investigation is called a Weingarten right based on a 1975 Supreme Court case, NLRB v. Weingarten, which established this right from an interpretation of the National Labor Relations Act.100 The union representative in the investigation is likely to be a union steward who is trained in conflict resolution methods and understands employee rights under the labor contract. In 2000, the National Labor Relations Board ruled that nonunion employees are also entitled to Weingarten rights, which permits them to have a coworker present when undergoing an investigatory interview that could lead to a disciplinary action. However, the coworker selected as an employee representative in the nonunion setting is likely to have fewer skills at resolving grievances or defusing conflict than a trained union steward.101