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The Right to Contract Out: Case Study

Which party has the burden of proof? Which level of proof should be used? Why?

In the case 11-1 about the right to contract out in terms of the bargaining unit, the Union was the party that has the burden of proof. The Union was the party that initially filed a grievance with the Company about subcontracting the janitor jobs as a direct violation of the contract. With that said, the issue begins with the Union’s request for re-evaluation of the janitor jobs, although the Company did not support it due to the survey showing the highest wage rates in the area.

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Furthermore, the senior and other janitors signed the sheet of paper noting their willingness to stay Class L-1, which was presented to the Union. However, the re-evaluation process still occurred as the Union insisted; the Company honored the change in the evaluation of the janitor service and upgraded it from Class L-1 to Class 1 with the raised payment included.

According to the Company, it has followed all the steps ordered by the Union and has warned it about the intention to contract out the janitor jobs as well. Such a decision aimed at the significant amount of savings in 370, 000 dollars of the annual cost. Besides, the Company claimed that the subcontracting process did not financially affect none of the janitor employees. As described by Sulzner (2018), the grievances increased in accordance with the increase in contracting out; however, the grievance arbitration might result in the case of employees being adversely affected by subcontracting.

The Company further explained the issue and stated that there is no violation against the Collective Bargaining Agreement. Therefore, considering the standards of proof, clear and convincing evidence should be provided by the Union to the arbitrator, as there is no clear evidence of the violation in this case.

Is this case a matter of “good faith” on the part of the Company or a contract interpretation issue? Why? Why not?

As the Company-Union issue concerns the complexity of the labor standards, this case is, therefore, a contract interpretation issue. Based on the positions of two parties, one may conclude that both the Union and the Company are interpreting the contract differently. However, the problem lies in the broad management clause of the Company that has no changes in over thirty years. In addition, the contract language is quite ambiguous in general, which facilitates the Company’s right to interpret it in the way beneficial to its position in this case. First, there is a clear definition of the employee in Article 2, which implies the contract’s agreement to include “skilled trade employees”, which might not correlate with the skill level of janitor workers (Holley, 2016, p. 516). Hence, the Company can benefit from this statement, as the issue concerns the janitor service only that is not mentioned in the contract.

Moreover, Article 4 implies the “introduction of new, improved or different production, maintenance, service, or distribution methods or facilities; the placing of production, service maintenance, or distribution work with outside contractors or subcontractors…” (Holley, 2016, p. 517). These are the managerial functions presented in the contract that virtually allows the management to perform the transition of full-time service work to contracting it out. Following this, the contract also includes the powers of an arbitrator that are limited in Article 6, grievance and arbitration. It prohibits any modifications of the agreement, as well as to substitute the discretion for the Company’s discretion by this agreement.

Develop some general guidelines for companies to retain the right to contract out bargaining unit work

By analyzing this grievance, both the Company and the Unit need to provide a clear and specific contract language in order to avoid any misunderstandings from both positions. Referring to this case, Article 4 disclosed the detailed management rights that form the basis for companies to be flexible in establishing the use of contracted work to their convenience. Furthermore, the additional terms might be included by the company to address the decrease in grievance occurrence.

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The situation with janitor workers demonstrated the secondary role of the re-evaluation process in determining the wage rates of employees. With that said, one of the guideline’s points might be the labor rate surveys, as presented by the Company’s sheet paper signed by the janitor workers, and the average labor rate according to the class level. Another point should involve the open and direct subcontracting permission in case of financial control and the company’s savings.

The core points of the contract should involve the specific list of services and types of work that can be subcontracted in terms of determined management functions, as well as the transitional agreements. Zinyama (2016) highlights the capacity as the critical element required by subcontracting, as it might contribute in the enabling environment for this process and includes “the legal framework, the regulatory and policy framework and human resources management” (p. 14). Consequently, the freedom of contract is a significant concept for the overall comprehension of a collective bargaining agreement because every party should have the right to write their own terms and conditions of the contract. As such, there is a relevance in free collective bargaining that should be implemented by a national labor policy.

When a company contracts out work formerly performed by bargaining unit employees, is the company violating the recognition clause of the Labor Agreement?

Depending on the contract’s details and terms, contracting out work formerly performed by bargaining unit employees might be or might not be the act of violation. Considering the fact that collective bargaining agreements limit the ability to contract out work of the bargaining unit, each of the cases should be viewed and performed individually. However, these limitations protect one of the most vital aspects of employment, which is the right to do the work required by one’s employer; otherwise, the income and employment of oneself might be unstable.

In the case 11-1, the grievance was denied, as there was no clear evidence of the violation according to all articles of the contract agreement. Therefore, the Union could win if it proved the negative outcomes due to the Company’s decision to subcontract work. This implies the following: one or more of the employees lost their jobs, had financial troubles, were demoted, or even had a decrease in work hours.

The Company has notified about their intention to contract out the work; however, without previous negotiations with the Union representatives, which means their role in the Company and Union contract was neglected yet not violated. According to the Regional Labor Agreement (2017), namely the Section 7 in Company-Union Relationships, a Working Relations Committee must be created for addressing “broad concerns of mutual interest to the parties” (p. 28). This should have been applied for the decision to contract out by the Company in this case.

Besides, Section 7b in Regional Labor Agreement (2017) also requires every six months meeting of the Committee upon request of either party. This implies discussing any information each party may wish to present, “including but not limited to subcontracting and supervisors’ performance of Unit work” (Regional Labor Agreement, 2017, p.28). Hence, the case 11-1 demonstrates the poor contract performance in accordance with the Labor of Agreement that has broader requirements related to the subcontracting issue. Nevertheless, the Company action was, in no case, a violation.

Be the arbitrator. How do you rule? Why?

As for an arbitrator, it is important to make a decision primarily regarding the Company and Union contract agreement. As analyzed above, the Company, in any way, has violated the contract with the Union; however, it disregarded the Union’s relevance in such a case. The Union, in turn, has as well neglected the Company’s denial of the re-evaluation process, although the illustrative evidence from the janitor workers was provided, including the overall employees’ satisfactory levels. As such, the Union’s grievance could be appropriate in case of the negative outcomes due to Company’s subcontracting process.

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Vrangbæk, Petersen, and Hjelmar (2013) state that the consequences of contracting out for the employees can result in a more serious matter, such as psycho-social changes. Thus, the transition phase might increase the uncertainty for employees as they are adjusting to a new competitive environment. However, none of these aspects were traced in this case, so it was the right decision to deny the Union’s grievance. Besides, the contract revision and improvement would be suggested for both of the parties.

References

Holley, W., Wolters, R., & Ross, W. (2016). The Labor Relations Process (11th ed.). Boston, MA: Cengage Learning.

Regional Labor Agreement (2017). CWA, AT&T Mobility Services LLC, AT&T Customer Services, Inc.

Sulzner, G. (2018). The impact of grievance and arbitration processes on federal personnel policies and practices: The view from twenty bargaining units. In Kershen, H. (Ed.), Collective Bargaining by Government Workers: The Public Employee (pp. 30-35). New York, NY: Routledge.

Vrangbæk, K., Petersen, O., & Hjelmar, U. (2013). Is contracting out good or bad for employees? A review of international experience. Review of Public Personnel Administration, 35(1), 3-23. Web.

Zinyama, T. (2016). Competencies in local government contracting out: A critical review. Public Policy and Administration Research, 6(5), 12-23.

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