Chapter 11 Compensation | 533NotBelowMeets ExceedsWeighed Total
Score Possible
SafetyCopyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).Applicable Standard Standard Standard ScoreWeight
Encourage and demonstrate safe work habitsEditorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
through use of established safety program X 2 49 38 147
guidelines
Serve as member of the District’s Crisis X 2 21 42 63
Management Team
Maintain CPR and AED certification, and ensure Not Below X Exceeds 2 49 98 147
that all staff within supervision do the same Applicable Standard Standard Weighed Total
Meets Score Weight Possible
Personnel Management Standard X 3 36 Score 108
Recruit, hire and train staff 3 15 108
Manage and evaluate staff X 45
Provide ongoing direction, foresight, and 45
motivation to staff
Prepare for and conduct staff meetings and X 3 24 72 72
trainings as needed
Not Below Meets X 3 36 108 108
Registration Applicable Standard Standard
Manage program registration process Exceeds Score Weight Weighed Total
Manage program cancellation/expansion/ X Standard 2 36 Score Possible
addition process
Manage permit and rental registrations 72 108
X 3 25 75 75
X 3 16 48 48
TOTALS 2227
TOTAL 3255 3255
POSSIBLE
PERCENT- 68.42
AGE (%)
534 | Part 2 Implementation of Strategic Human Resource Management
Table 1
Satisfaction with the Performance Review Session
Variable Original Newly Developed t statistic p-value
Appraisal Appraisal System 0.023
System (n ¼ 56) 0.033
(n ¼ 56) 0.000
Mean S.D. 0.000
Mean S.D.
I felt quite satisfied with my last review 4.05 1.74 4.81 1.39 2.321
discussion
I feel good about the way the last review 4.23 1.63 4.92 1.40 2.166
discussion was conducted
My manager conducts a very effective review 4.21 1.59 5.30 1.024 3.992
discussion with me
The performance review system does a good 3.46 1.34 4.46 1.02 5.458
job of indicating how an employee has per-
formed in the period covered by the review
review session and procedural justice of the performance Procedural Justice of Performance Appraisal System
appraisal system instruments. The four-item satisfaction Employee perceptions of procedural justice were assessed on
with the performance review session yielded an alpha coeffi- Keeping and Levy’s performance appraisal reaction instru-
cient of .93. The four-item procedural justice of the perfor- ment.60 Procedural justice was assessed with a four-item
mance appraisal system instrument was found to have measure on a seven-point Likert scale ranging from strongly
acceptable internal consistency (.97). disagree to strongly agree. Table 2 presents the measures of
central tendency and t-test results for the procedural justice
Satisfaction with the Performance Review Session measures. Significant mean differences were found for all
Once the employees completed the workshops and the trial four items measuring the employees’ perceptions of proce-
run of the newly developed system, they completed the per- dural justice toward the performance appraisal (p < .05). In
formance appraisal reaction instrument again to assess particular, significant mean differences between the new and
their attitudes toward the new system. Four items were previous performance appraisal instrument were found in
used to assess the employees’ satisfaction with the perfor- favor of the new system for “The procedures used to evaluate
mance review session. Responses were indicated on a six- my performance were fair,” “The process used to evaluate my
point Likert scale, with “1” representing strongly disagree performance was fair,” “The procedures used to evaluate my
and “6” representing strongly agree.59 Table 1 represents performance were appropriate,” and “The process used to
the measures of central tendency and t-test results for the evaluate my performance was appropriate."
satisfaction with the performance review session measures.
Significant mean differences were found for all of the items Discussion
measuring employees’ satisfaction with the performance
review session (p < .05). In particular, significant mean dif- Results from the measures of employee reaction to the pay-
ferences were found in favor of the new system for “I felt for-performance system yielded some interesting findings.
quite satisfied with my last review discussion,” “I feel good Significant mean differences between employee attitude
about the way the last review discussion was conducted,” toward the original pay-for-performance interview/review
“My manager conducts a very effective review discussion sessions and the newly developed sessions were found for
with me,” and “The performance review system does a all four of the “satisfaction with the performance review
good job of indicating how an employee has performed in session” items. Employee perception of fairness, operatio-
the period covered by the review." nalized as procedural justice, also indicated significant
mean differences on all four measures.
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Chapter 11 Compensation | 535
Table 2
Procedural Justice of Performance Appraisal System
Variable Original Newly Developed t statistic p-value
Appraisal Appraisal System
System (n ¼ 56)
(n ¼ 56)
Mean S.D.
Mean S.D.
The procedures used to evaluate my perfor- 4.41 1.75 5.43 1.37 3.157 0.002
mance were fair 4.236 0.000
3.494 0.001
The process used to evaluate my performance 4.29 1.72 5.51 1.07 2.337 0.022
was fair
The procedures used to evaluate my perfor- 4.23 1.72 5.30 1.22
mance were appropriate
The process used to evaluate my performance 4.32 1.73 5.05 1.29
was appropriate
Management Implications, Limitations & Future Research pay-for-performance appraisal practices in the public sector.
These results provide further support to the cognitive and Although park districts represent the norm in the state of
affective value of employee participation in the creation of Illinois, public park and recreation departments housed
an agency’s pay-for-performance appraisal system. The find- within municipal or county government represent a pre-
ings are further supported by a comment obtained from one dominant type of leisure service organization in the United
of the supervisors, stating: States. Thus, additional research examining the develop-
ment of a pay-for-performance system within other munic-
“… it was somewhat difficult to tell Employee ‘A’ that he is ipal or county departments is needed.
a ‘1’ (below standards performance rating), but it was
worth it. I was surprised—Employee ‘A’ showed little dis- In addition, research that examines the social context
agreement with the rating (during the performance review of performance appraisal development in municipal agen-
session) and I saw immediate and continued improvement cies could provide additional insight into the role of
in Employee ‘A’s’ attitude and performance." employee participation. As research in the management
field has suggested, research efforts examining the effects
According to the supervisor, the opportunities for of the social context of the agency, such as feedback culture,
employee voice in the appraisal process resulted in the group dynamics, politics, impression management, and
employee displaying little resistance to his performance other environmental variables, are needed.61 Future studies
ratings. Furthermore, the supervisor’s feedback identified examining these issues within municipal agencies are sug-
very specific, job deficient areas for the employee to gested, and could help in providing a richer understanding
improve upon. Taken together, the employee’s participa- of important management issues related to performance
tion in the appraisal process and the clearly stated areas appraisal.
for employee improvement, led to higher perceptions of
fairness and acceptance of the supervisor’s ratings. In Another limitation is the “trial run.” The “trial run” of
turn, these high levels of employee acceptance and under- the performance appraisal process was implemented similar
standing will likely enhance the employee’s motivation to a “live performance appraisal” process, but without the
and job performance. consequences (i.e., using results to make merit salary increase
decisions). Employees were aware of the lack of consequences
This case study of the Elmhurst Park District sought from the “trial run.”
to provide an empirically grounded overview of the
steps involved in developing a pay-for-performance system In summary, this study adopted a two-pronged
for municipal agencies. Future research with different approach to understanding performance appraisal systems
and larger samples is needed to further understand in municipal agencies. First, the study sought to identify the
steps needed to develop a pay-for-performance appraisal
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536 | Part 2 Implementation of Strategic Human Resource Management
system for a municipal agency. Next, the study was interested 9. Dyer, L. & Reeves, T. (1995). Human resource strate-
in examining employees’ reactions toward a system that gies and firm performance: What do we know and
adopted these steps. The Elmhurst Park District served as a where do we need to go? International Journal of
representative case study for this investigation. The study Human Resource Management, 6(3), 656–670;
identified positive employee reactions to a performance Milkovich, G. T. & Newman, J. (2005). op. cit.
appraisal system adopting these steps with strong indicators
found of an increased satisfaction and perception of proce- 10. Levy, P. E. & Williams, J. R. (2004). The social context
dural justice in the new system. of performance appraisal: A review and framework for
the future. Journal of Management, 20(6), 881–905;
Source: IPMA-HR Moss, S. E. & Martinko, M. J. (1998). The effects of
performance attributions and outcome dependence on
NOTES leader feedback behavior following poor subordinate
performance. Journal of Organizational Behavior, 19,
1. Milkovich, G. T. & Newman, J. (2005). Compensation 3, 259–274.
(8th ed.). Boston, MA: Irwin McGraw-Hill Companies,
Inc. 11. Campbell, D. J., Campbell, K. M., & Chia, H. B. (1998).
Merit pay, performance appraisal, and individual
2. Mathis, R. L. & Jackson, J. H. (2006). Human resource motivation: An analysis and alternative. Human
management (11th ed.). Mason, OH: Thomas Learning. Resource Management, 37(2), 131–146.
3. Grote, D. (2000). Public sector organizations. Public 12. Levy, P. E. & Williams, J. R. (2004). op.cit.
Personnel Management, 29(1), 1–20.
13. Bartlett, K. R., & McKinney, W. R. (2004). A study of the
4. Mathis, R. L. & Jackson, J. H. (2006). op. cit.; Thomas, role of professional development, job attitudes, and
S. L. & Bretz, R. D. (1994). Research and practice in turnover among public park and recreation employees.
performance appraisal: Evaluating employee perfor- Journal of Park and Recreation Administration, 24(4),
mance in America’s largest companies. SAM Advanced 63–81; Edginton, C. R., Hudson, S. D., & Lankford, S. V.
Management Journal, 59(2), 28–34; Smith, B. N., (2001). Managing recreation, parks, and leisure services:
Hornsby, J. S., & Shirmeyer, R. (1996). Current trends in An introduction. Champaign, IL: Sagamore Publishing.
performance appraisal: An examination of managerial
practice. SAM Advanced Management Journal, 1, 20. 14. Milkovich, G. T. & Newman, J. (2005). op. cit.
5. Roberts, G. E. (2003). op. cit. 15. Cardy, R. L. & Dobbins, G. H. (1994). Performance
appraisal: alternative perspectives. Cincinnati, OH:
6. Tompkins, J. (2002). Strategic human resources man- South-Westem Publishing; Keeping, L. M. & Levy,
agement in government: Unresolved issues. Public P. E. (2000). Performance appraisal reactions: Mea-
Personnel Management, 31(1), 95–111; Wright, P. M. surements, modeling, and method bias. Journal of
& McMahan, G. C. (1992). Theoretical perspectives for Applied Psychology, 85(5), 708–724; Murphy, K. R. &
strategic human resource management. Journal of Cleveland, J. N. (1995). Understanding performance
Management, 18(2), 295–320. appraisal: Social, organizational, and goal-based per-
spectives. Thousand Oaks, CA: Sage Publications.
7. Chelladurai, P. (1999). Human Resource Management
in Sport and Recreation. Champaign, IL. Human 16. Cardy, R. L. & Dobbins, G. H. (1994). op. cit.
Kinetics; Edginton, C. R., Hudson, S. D., & Lankford,
S. V. (2001). Managing recreation, parks, and leisure 17. Keeping, L. M. & Levy, P. E. (2000). op. cit.
services: An introduction. Champaign, IL: Sagamore
Publishing; McKinney, W. R., & Yen, T. H. (1989). 18. Giles, W. F. & Mossholder, K. W. (1990). Employee
Personnel management in large U.S. park and recrea- reactions to contextual and session components of per-
tion organizations. Journal of Park and Recreation formance appraisal. Journal of Applied Psychology, 75,
Administration, 7(2), 1–25. 371–377; Greller, M. M. (1978). The nature of subordi-
nate participation in the appraisal interview. Academy of
8. Milkovich, G. T. & Newman, J. (2005). op. cit. Management Journal, 21, 646–658; Keeping, L. M. &
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 11 Compensation | 537
Levy, P. E. (2000). op. cit; Smither, J. W. (1998). Lessons performance appraisals. Industrial Management, 41(5),
learned: Research implications for performance apprai- 18–24; Longenecker, C. O. & Fink, L. S. (2003).
sal and management practice. In J. W. Smither (Ed.), Benchmarks for effective performance rating
Performance appraisal: State of the art in practice. instruments. Journal of Compensation and Benefits,
San Francisco, CA: Jossey-Bass. 19(2), 24–31.
19. Keeping, L. M. & Levy, P. E. (2000). op. cit. 35. Longenecker, C. O. & Fink, L. S. (1999). op. cit.
20. Ibid 36. Roberts, G. E. (2003). Employee performance appraisal
system participation: A technique that works. Public
21. Ibid Personnel Management, 32(1), 89–99.
22. Ibid 37. Mathis, R. L. & Jackson, J. H. (2006). op. cit.
23. Ibid 38. Viswesvaran, C. & Ones, D. S. (2000). op. cit.
24. Ibid 39. Mathis, R. L. & Jackson, J. H. (2006). op. cit.
25. Ibid; Levy, P. E. & Williams, J. R. (2004). op. cit. 40. Ibid; Drauden, G. & Peterson, H. (1974). A domain
sampling approach to job analysis. St. Paul, MN:
26. Keeping, L. M. & Levy, P. E. (2000). op. cit. Test Validation Center.
27. Ibid 41. Mathis, R. L. & Jackson, J. H. (2006). op. cit.
28. Levy, P. E. & Williams, J. R. (1998). The role of 42. Milkovich, G. T. & Newman, J. (2005). op. cit.
perceived system knowledge in predicting appraisal
reactions, job satisfaction, and organizational com- 43. Ibid.
mitment. Journal of Organizational Behavior, 19,
53–65; Levy, P. E. & Williams, J. R. (2004). op. cit; 44. Keeley, M. (1978). A contingency framework for per-
Keeping, L. M. & Levy, P. E. (2000). op. cit. formance evaluation. Academy of Management Review,
3, 428–438; Tziner, A. & Kopelman, R. E. (2002).
29. Mathis, R. L. & Jackson, J. H. (2006). op. cit; Rotundo, op. cit.
M. & Sackett, P. R. (2002). The relative importance of
task, citizenship, and counter productive performance 45. Milkovich, G. T. & Newman, J. (2005). op. cit.
to global ratings of job performance: A policy-capturing
approach. Journal of Applied Psychology, 87, 66–80; 46. Arvey, R. D. & Murphy, K. R. (1998). Performance
Scullen, S. E., Goff, M., & Mount, M. K. (2000). evaluation in work settings. Annual Review of
Understanding the latent structure of job performance Psychology, 49,141–168.
ratings. Journal of Applied Psychology, 24, 419–434; Van
Scotter, J. R., Motowidlo, S. J., & Cross, T. C. (2000). 47. Milkovich, G. T. & Newman, J. (2005). op. cit.
Effects of task performance and contextual performance
on systematic rewards. Journal of Applied Psychology, 48. Harris, M. M. & Schaubroeck, J. (1988). A meta
85, 526–535. analysis of self-supervisor, self-peer and peer-
supervisor ratings. Personnel Psychology, 4, 43–62;
30. Wojcik, J. (2000). Focus on performance. Business Ones, D. S., Schmidt, F. L., & Viswesvaran, C. (1996).
Insurance, July, 20. Comparative analysis of the reliability of job perfor-
mance ratings. Journal of Applied Psychology, 81(5),
31. Viswesvaran, C. & Ones, D. S. (2000). Perspectives on 557–574.
models of job performance. International Journal of
Selection and Assessment, 8(4), 216–226. 49. Milkovich, G. T. & Newman, J. (2005). op. cit.
32. Mathis, R. L. & Jackson, J. H. (2006). op. cit. 50. Ones, D. S., Schmidt, F. L., & Viswesvaran, C. (1996).
op. cit.
33. Ibid.
51. Ibid.
34. Levy, P. E. & Williams, J. R. (2004). op. cit; Longenecker,
C. O. & Fink, L. S. (1999). Creating effective 52. Landy, F. S. & Farr, J. L. (1980). Performance rating.
Psychological Bulletin, 87, 72–107.
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
538 | Part 2 Implementation of Strategic Human Resource Management
53. Wilson, J. P. & Western. S. (2001). Performance 57. Roberts, G. E. (2003). op. cit.
appraisal: An obstacle to training and development? 58. Keeping, L. M. & Levy, P. E. (2000). op. cit.
Career Development International, 6, 2/3, 93–102. 59. Ibid.
60. Ibid.
54. Longenecker, C. O. & Fink, L. S. (1999). op. cit. 61. Levy, P. E. & Williams, J. R. (2004). op. cit.
55. Ibid.
56. Schweiger, I. & Sumners, G. E. (1994). Optimizing the
value of performance appraisals. Managerial Auditing
Journal, 9(8), 3–7
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12C H A P T E R
Labor Relations
LEARNING Labor Unrest at the New York MTA
OBJECTIVES
On the morning of December 20, 2005, New Yorkers who relied on public transit to
• Understand the provisions get to their places of employment or around town to complete their holiday shop-
of the National Labor ping woke up to find that the subway and public bus systems had been shut down
Relations Act (NLRA), by a strike of the 34,000 workers who were members of the Transport Workers
which apply to all employers, Union Local 100 of the Metropolitan Transportation Authority (MTA). Negotiations
regardless of whether their for a new contract had broken down because of a failure to agree on retirement
workforce is unionized or pension provisions and wage increases. The strike was seen as a particular hard-
ship for lower-income residents of the outer boroughs of New York City.
• Explain the reasons why
employees form and join While the strike itself lasted only 60 hours, it took another day to get the transit
unions system fully up and running. Nonetheless, the strike had a significant impact on
New York. Public schools were affected and had to operate on a delayed schedule,
• Describe the restrictions while many private schools were forced to close completely. Public safety was
the NLRA places on union impacted detrimentally because of the increased congestion on streets and side-
organizers and employer walks. The financial impact of the strike was significant, as the city estimated that it
behaviors during lost more than $300 million per day and other revenues.
organizing campaigns
The strike was illegal under the New York State Public Employees Fair Employ-
• Gain an appreciation of the ment Act, more commonly known as the Taylor Law, which prohibits municipal work-
reasons for decline in ers from striking and provides alternative means for resolution of labor-related disputes.
union membership and the This law, which had been enacted in response to a previous transit strike, which took
challenges organized labor place in 1966, also provides for criminal penalties, including imprisonment for union
faces in a global officials and fines to be levied against both the union and striking employees. Local
information-based 100 did not have the support of its parent union—the International Transport Workers
economy Union—for the strike, with the parent union ordering Local 100 workers to return to
work as soon as it became aware of what had transpired. As a result of the strike,
• Understand the process of Local 100 president Roger Toussaint was sentenced to ten days in jail and the union
collective bargaining and was fined $2.5 million. $300,000 in strike-related penalties were levied against union
the various types of members and deducted from the paychecks of striking workers.1 The aftermath of the
bargaining items strike involved a tremendous amount of published analysis of the political behavior
of the union as well as local elected officials, particularly Mayor Michael Bloomberg,
• Appreciate the role of illustrating the politically charged realities in which organized labor operates.
alternative dispute
resolution when collective
bargaining has been
unsuccessful
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540 | Part 2 Implementation of Strategic Human Resource Management
L abor relations is a key strategic issue for organizations because the nature of the relationship
between the employer and employees can have a significant impact on morale, motivation, and
productivity. Workers who feel that the terms and conditions of their employment are
less than advantageous will not be as committed to perform and to remain with an employer.
Consequently, how organizations manage the day-to-day aspects of the employment relationship
can be a key variable affecting their ability to achieve strategic objectives.
Workers who have unionized create special challenges for human resource (HR) management.
When workers form unions, the employment relationship becomes more formal through a union
contract and is subject to special provisions of the National Labor Relations Act. This Act allows
unions to be formed and exist as employee organizations that have the legal right to bargain with
management over various terms and conditions of employment. Unions provide membership solely
for employees; managers are prohibited by law from joining employee unions or from forming their
own unions.
Organized labor in the United States has had a cyclical history, generally consisting of short
periods of sharp growth in union membership and activity followed by extended periods of
decline.2 In the early part of the twentieth century, employee-centered management practices were
eroding interest in unionization. The Great Depression then ignited strong interest in unions with
the resultant creation by John Lewis of the Congress of Industrial Organizations (CIO). At that
time, both the CIO and the American Federation of Labor (AFL) were able to unionize large
segments of the workforce. These organizing efforts were largely focused on second-generation
immigrants, particularly Catholics, Italians, and Jews, as unions attempted to provide these
individuals with the full benefits of working in the WASP-dominated economy.
Unions continued to enjoy increased membership until World War II. Interest in unions
declined post-War until the mid-1960s, when unions began to reach out to African Americans
during the drive for civil rights and subsequently enjoyed a renewed popularity. Also at that time,
Cesar Chavez founded the National Farm Workers Association, drawing attention to the plight of
Latino and Filipino farm workers who had been forced to endure deplorable working conditions
and substandard wages. Chavez’s efforts led to a grape boycott that was observed by more than
17 million Americans and, more generally, resulted in widespread awareness and distrust of
exploitation of workers by employers. These successes also led to a flurry of union organization
among public sector employees that continued until the early 1980s.
August 3, 1981, is considered to be a significant day in the history of American labor. On that
date, more than 12,000 employees of the Federal Aviation Administration (FAA) who were
members of the Professional Air Traffic Controllers (PATCO) union walked off of their jobs.
When President Reagan ordered them back to work within 48 hours, 11,325 of them refused and
were fired immediately, as the FAA commenced hiring permanent replacements. Since the
unsuccessful PATCO strike, strikes have nearly disappeared in the United States. During the
1950s, organized labor successfully orchestrated an average of 344 work stoppages annually.3
However, post-PATCO, that number had continuously been in decline and by 2008 had dipped to
just 15, with 9 of these 15 lasting for 10 days or less.4 The PATCO strike greatly influenced public
perceptions against organized labor stoppages and affirmed the right for employers to hire
permanent replacements for striking workers. This shift has turned the strike into a present-day
near-suicide tactic for unions.
Union membership in the United States has been steadily declining for a number of years. In
1970, approximately 30 percent of the private workforce was unionized, in addition to a majority of
public sector employees. By 1999, the U.S. Department of Labor reported that only 13.9 percent of
the workforce was unionized. By 2013 union membership had dropped further to 11.3 percent of the
workforce. Public sector employees were more than five times more likely to be union members
than private sector employees (36 percent versus 6.6 percent), and more than 50 percent of union
members lived in seven states (California, New York, Illinois, Pennsylvania, Michigan, New Jersey,
and Ohio).5 These numbers represented declines in overall union membership as well as in both
the public and private sector union density.6
The decline in union membership can be attributed to a number of factors. First, many
workers have become disenfranchised from their unions. Allegations of union corruption and
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Chapter 12 Labor Relations | 541
misuse of funds—combined with the fact that workers sometimes feel that the costs of union
membership outweigh the benefits—have eroded union membership. Second, many
organizations have moved their manufacturing and assembly operations outside the United
States. Unions have traditionally had their strongest bases of support among these blue-collar
workers, and the movement of those jobs overseas has hurt unions. Third, changes in the
nature of work and technology have eliminated many of the traditional manual labor jobs in
which union members were employed. Finally, many unions have refused to be flexible enough
to allow organizations to grow and adapt in relation to the changes taking place in their
industries, markets, and the technological, economic, and sociocultural environments. The
traditional model of American labor unions, which guard employee rights by attempting to
maintain the status quo, no longer benefits employers or employees. Unions of the future will
have to be based on a different model and have different relationships with the organizations
whose workers they represent—if they continue to exist.
Although overall union membership is declining, it is important to understand organized labor
relations for at least three reasons. First, in many industries, unionization is the norm. Many public
sector workplaces are unionized. In the private sector, industries such as transportation,
construction, hospitality, publishing, education, and healthcare are usually highly unionized. In
fact, the transportation industry has the highest level of private sector union membership, at
25.5 percent.7 Managers and business owners in these industries have no choice but to be well
versed on the laws that regulate the relationship with union employees. Second, competitors may be
unionized, and settlements in those organizations may impact HR practices, programs, and policies
needed to remain competitive in recruiting and retaining productive employees. Arguably, the most
important reason for employers to have a sense of the labor relations landscape is that the National
Labor Relations Act provides all employees—rather than just those who have unionized—with
specific rights. Consequently, many employers who operate in nonunion environments may be
unfamiliar with some of the terms and conditions of employment outlined in the Act. Section 7 of
the Act grants all employees, including those who are not members of unions, the right to engage in
activities that support their “mutual aid or protection.” There are six notable provisions under this
section that employers must know to avoid violations of the Act.8
First is the right of employees to discuss employment terms. In order for employees to
consider whether they wish to organize, they must be able to discuss the terms and conditions
of employment, including compensation, harassment, and discrimination. This right, however,
does not extend to the disclosure of confidential information, such as salaries, to which an
employee might have access as part of his or her job. Second, employees reserve the right to
complain to third parties, such as customers, clients, and the media, about their treatment by
the employer. Again, however, the employer retains the right to prohibit disclosure of any
confidential or proprietary information. Third, employees have the right to engage in a work
stoppage or collective walkout to protest working conditions without fear of retaliation. Any
employee who is disciplined or discharged for engaging in such behavior has a valid claim
against the employer under the National Labor Relations Act. Fourth, employees have the right
to honor picket lines without fear of retaliation. This is considered protected activity regardless
of whether the employee is a member of the picketing union or merely sympathetic to the cause
and plight of the workers on the picket line. Fifth, employees have the conditional right to solicit
and distribute union literature. Such behavior can be restricted but not fully prohibited, as will
be discussed shortly. Finally, employers cannot unilaterally ban employees’ access to the worksite
while off duty. Restrictions may be imposed that limit access to the interior of the facility if
applied consistently to all employees for all purposes, but employees still retain the right to be
present on company property, such as the employee parking lot, after working hours to engage
in behaviors protected under the Act.
It cannot be emphasized enough that nonunion employees enjoy significant protection against
arbitrary, capricious, or harassing conduct by employers. This standard was established by the
Supreme Court in the 1962 case of NLRB v. Washington Aluminum Co.,9 where the Court found
that employee activity that was concerted for mutual aid or protection (in this case, walking off the
job in protest of poor working conditions) was lawful. As long as the employee’s or group of
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542 | Part 2 Implementation of Strategic Human Resource Management
employees’ actions are beyond that of a personal complaint pursued in self-interest, such behavior is
protected without the presence of a formally recognized union. These rights have consistently been
reinforced in numerous court cases since the initial ruling in Washington Aluminum.
Just because an organization is not unionized today does not mean that it may not be in the
future. Managers in such organizations need to know why workers form or join unions, how the
law requires the employer to behave during any union-organizing campaign and after a union has
been voted in, how the collective-bargaining process is conducted, and how impasses may be
settled. Some management advisors who work with organizations on labor relations have even gone
as far to encourage employers to have their supervisors talk openly with employees about possible
union representation in a proactive manner before any possible organizing efforts begin.10 Critical
to such a strategy, however, is training of managers on what they are allowed to say to employees
(facts, opinions, and examples) and what they are not allowed to say or do (threats, interrogation,
promises, and surveillance).11
The word “union” means that workers have agreed to work together in dealing with and
negotiating the terms and conditions of their employment with management. The Latin root uni
means one, in the sense of a union; it means that a plurality of workers has united to speak with
“one voice.”
Organized labor presents a number of key strategic challenges for management. First, when
workers unionize, the power based within the organization is redistributed. Employers can find that
their ability to manage workers at their discretion to achieve the organization’s strategic objectives
has been severely curtailed. Second, the process of unionization involves bringing in outside players:
union representatives, who then become an additional constituency whose support must be gained
for any new or ongoing management initiatives. Finally, a unionized work setting can greatly
impact the organization’s cost structure, particularly payroll expenses and work processes that may
contribute to or retard efficiency in operations.
Why Employees Unionize
Employees usually form or join unions because of the perceived benefits that unionization might
provide them. These benefits can be economic, social, and/or political. Economic benefits can
result from a union’s ability to negotiate higher wages, better or expanded benefits, greater job or
employment security, and improved working hours and conditions. Social benefits can be derived
from the affiliation and sense of community that workers share when they are unionized. Their
personal issues and needs relating to their jobs and lifestyles can often be integrated within the
union agenda, with corresponding support gained from coworkers. Unions also often sponsor
social events for their members and their families. Is it not surprising that many unions have the
word “brotherhood” in their name; this attempts to signify the family or community atmosphere
the union tries to create for its members.
Political benefits can be gained through the sense of power in numbers. In negotiating
with management over terms and conditions of employment, individual employees are rela-
tively powerless. They often need the organization (to earn a living) far more than the organi-
zation needs them (individual workers can be easily replaced). When workers unionize and
speak with one voice, they leverage their individual power against management and equalize
the balance of power within the organization. Management may be able to do without individ-
ual employees, but they cannot do without their entire workforce. Unions can allow workers far
greater say and involvement in negotiating and setting critical terms and conditions of employ-
ment and in ensuring fair treatment from the organization. Unions can often provide addi-
tional political benefits in a literal sense in that the power and strength of their united
membership can be used to support and influence political races and legislation passed at the
local, state, and federal levels.
No benefits come without some cost, and union membership is no exception. Union mem-
bers pay at least two significant costs for their benefits. First are the economic costs of the fees or
dues that unions charge their members to support the initiatives the union undertakes on behalf of
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Chapter 12 Labor Relations | 543
its employees. Second are the political costs employees assume when they relinquish their individ-
ual freedom to deal with their employer and be represented by the union. Individual employees
may not agree with the terms and conditions negotiated for them or the tactics and strategies
the union uses in negotiating. Although individual employees do vote on the decision to strike,
an employee who does not wish or cannot afford to go out on strike is basically stuck in accepting
the majority position and then assumes any risk associated with deviating from the union
majority.
The National Labor Relations Act
In 1935, Congress passed the National Labor Relations Act (NLRA), also called the Wagner Act,
which gave employees the right to unionize and to regulate union and management relations.
This Act has been amended several times, most notably in 1947, with amendments known as the
Taft-Hartley Act, and in 1959, with amendments known as the Landrum-Griffith Act.
The NLRA created the National Labor Relations Board (NLRB) to oversee the provisions of
the Act. Among other duties, the NLRB is responsible for overseeing union elections, certifying a
particular union as the official bargaining representative of a group of employees, and hearing alle-
gations of violations of the Act from employers, unions, and employee groups.
As a first step in establishing a union, a group of employees petitions the NLRB, often
through the assistance of a union representative, to conduct an election. As a prerequisite for an
election, the NLRB requires at least 30 percent of the employees to have signed authorization
cards, which indicate an expressed interest in having union representation from a specific union.
Most petitions to the NLRB involve the presentation of authorization cards from a far greater
number of employees than 30 percent. These authorization cards are not a vote for the union;
they are merely the means for establishing the level of employee interest to conduct an election.
Some employees who are not in favor of union representation often sign authorization cards
under peer pressure or to facilitate the election process. Union-organizing campaigns often create
very stressful working conditions, and some employees who are against unionization may sign
authorization cards to ensure that the election be held as soon as possible.
Once the NLRB has received the authorization cards and determined that there is sufficient
interest to conduct an election, it will attempt to determine the appropriate bargaining unit. A bar-
gaining unit is a group of employees who have similar wages, skill levels, working conditions, and/
or levels of professionalism. The NLRB will determine whether the organization should have one
bargaining unit that covers all employees or separate bargaining units for different groups of
employees, given the differences in their jobs.
For example, airlines have separate bargaining units for flight attendants, pilots, and ramp
workers, given the differences in job responsibilities, training, hours, and working conditions.
Newspapers have separate unions for writers, printers, and press people because of similar differ-
ences. A restaurant, on the other hand, might have one bargaining unit that includes wait staff,
cooks, hosts, bartenders, and bus staff. When a unionized organization has more than one bar-
gaining unit, each bargaining unit negotiates a contract with management separately; however,
the individual units are often impacted by what the other units negotiate, and each unit often
lends support to the others during periods of labor unrest.
When the NLRB conducts an election, the option that receives the majority of the votes
(50 percent plus one) wins the election. There may, however, be more than two options (union or
no union) on the ballot. Given that the NLRB requires authorization cards from only 30 percent of
employees, it is mathematically possible for more than one union to be part of an election. This has
been the case when there has been public knowledge of dissatisfied employees and thus more than
one union attempted to organize workers simultaneously. If there were three options on the ballot
(no union, Union A, Union B) and none of them received more than 50 percent of the initial vote,
then the option receiving the least support would be dropped and a second ballot would be issued.
Eventually, one option will have the support of more than 50 percent of the employees in the
prospective bargaining unit.
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544 | Part 2 Implementation of Strategic Human Resource Management
Behavior During Organizing Campaigns
Union-organizing campaigns often present difficult working conditions for employees, who are
often continuously subjected to opposing information from management, union representatives,
and prounion coworkers in support of their respective positions. In passing the NLRA, Congress
determined that it should regulate the behavior of management and union representatives in
union-organizing campaigns to ensure that one does not have an unfair advantage over the other
in communicating positions to employees.
The NLRA outlines specific provisions pertaining to employer conduct during union-
organizing campaigns in its discussion of unfair labor practices. Section 8(c) of the Act provides
that “the expression of views, arguments or opinions, or the dissemination thereof, whether in
written, printed, graphic or visual form shall not constitute or be evidence of an unfair labor
practice … if such expression contains no threat of reprisal or force or promise of benefit.”
Therefore, employers have free rein to communicate their position concerning unionization to
employees during working hours, which is only appropriate because the employers are paying
employees for that time. However, employers are forbidden from making any threat or promise
pending the outcome of the election. The reason for this directive is that allowing employers to
do so would give employers an unfair advantage in the election. The union does not have the
power to make any such promises, and so to ensure a level playing field, the NLRB also prohibits
employers from doing so. Employers need to treat employees more favorably before the NLRB has
stepped in and established employee interest in conducting an election.
The Act also allows prounion employees the full right to approach their coworkers at work
and express their support of the union, as long as such contact takes place during nonworking
periods in nonworking areas (such as the employee cafeteria during lunch breaks, the parking lot
after leaving work, or in a restroom during a scheduled break). This is consistent with the consti-
tutional guarantee of freedom of speech. Employers can prohibit employees who support the
union from communicating this support to coworkers at any other time.
A more difficult question concerns the extent to which employers can prevent employee
solicitation by union representatives at the worksite. The U.S. Supreme Court has issued several
rulings in this area that continue to redefine the relative positions of unions and management.
Generally, an employer can restrict nonemployee access to employees if two conditions have been
met: (1) The nonemployee—in this case, a union organizer—must have some reasonable means to
access and communicate with employees outside the workplace, such as electronic or print media,
and (2) the employer must have a general ban on all nonemployee solicitation. The latter condi-
tion is not limited to union solicitation; it might also include charitable appeals, blood drives, or
employer-sponsored outings for which employees have to pay. If these two conditions are met,
then the employer can restrict union organizers’ access to employees.
Historically, this issue of access to employees has involved somewhat of a “chess game”
between employers and union organizers. Subsequent to the Supreme Court rulings described
above that restrict union organizer access to employees, unions have turned to a strategy called
“salting” the workplace. Salting involves a paid union organizer applying for employment with an
employer whose employees are the target of an organizing drive. The Supreme Court has held that
under the NLRA, an employer cannot discriminate against a person solely on the basis of his or
her status as a salt and intention to organize the workplace. Employers have since countered salt-
ing efforts through the use of restricted hiring criteria that have the effect of eliminating salts from
employment consideration. The portrayal of union organizing efforts and management responses
as a chess game relates to the fact that each side is attempting to develop a response to counter
the other side’s most recent “move” or court victory. Reading 12.1, “A Big Chill on a ‘Big Hurt’:
Genuine Interest in Employment of Salts in Assessing Protection Under the National Labor
Relations Act,” illustrates the tensions that exist between unions and employers in organizing
campaigns.
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Chapter 12 Labor Relations | 545
Employees who are dissatisfied with their union representative may elect to decertify the
union. The process for decertification happens in exactly the same manner as certification—
utilizing authorization cards and requiring a 50 percent plus one majority employee vote. The
NLRA does, however, require employees to wait at least one year from certification until a decerti-
fication election can be held. This is to ensure that the union has had appropriate time to work on
behalf of the employees and to ensure that employees do not drain the time and resources of the
NLRB by continually calling for certification and decertification elections. Similarly, if a union
loses an organizing campaign, the NLRA prohibits another organizing campaign and election for
at least one year.
Collective Bargaining
When a union is elected to represent employees, the union representative and employer are jointly
responsible for negotiating a collective-bargaining agreement that covers various terms and condi-
tions of employment. There are no set requirements as to the term or content of any collective-
bargaining agreement, but the NLRA classifies bargaining items as mandatory, permissive, or
prohibited. Mandatory items must be negotiated in good faith if one party chooses to introduce
them to the negotiations. They consist of many of the economic terms of employment, such as
wages, hours, benefits, working conditions, job-posting procedures, or job security provisions.
Mandatory items also include management rights clauses and union security clauses. The two
parties are not required to come to an agreement on these items, but they are legally required to
discuss them and bargain in good faith if requested by the other party. “Mandatory” simply means
that one party cannot refuse to discuss one of these items if the other party requests to do so.
Permissive items can be discussed if both parties agree to do so. Neither party can legally force
the other party to negotiate over a permissive item nor can either party pursue a permissive item to
the point of impasse. Permissive items include things such as changes in benefits for retired employ-
ees, supervisory compensation and discipline, and union input in pricing of company products and
services. Prohibited items are things neither party can negotiate because these items are illegal. They
include featherbedding (requiring the employer to pay for work not done or not requested), discrim-
ination in hiring, or any other violation of the law or illegal union security clauses. A listing of some
of the items that fall under each classification is presented in Exhibit 12.1.
Unions often attempt to negotiate security clauses into the collective-bargaining agreement.
These clauses are a mandatory bargaining item and an attempt to ensure that the union enjoys
some security in its representation of employees and that the cost of the union’s efforts on behalf
of employees is covered. The two types of union security clauses are union shop agreements and
agency shop agreements. Union shop agreements require all newly hired employees who are not
union members to join the union within a specified time period after beginning employment.
Agency shop agreements do not require employees to join the union but require all nonunion
members who are part of the bargaining unit to pay the union a representation fee, usually equiv-
alent to the amount of dues paid by union members. The rationale for collecting such fees is that
although individual employees can maintain the freedom of being nonunion, as bargaining unit
members, they reap the advantages of what the union negotiates. Therefore, it is only fair that
they should share equally in the cost of obtaining what the union is able to achieve for the bar-
gaining unit. Although union security clauses are a mandatory bargaining item, the NLRA allows
individual states to pass right-to-work laws that prohibit union and agency shop arrangements. To
date, nearly half the 50 states have passed such laws. When Michigan, the birthplace of the United
Auto Workers and the U.S. labor movement, became the 24th right-to-work state in December
2012, the move was seen by many as a crushing blow to the future of organized labor in the
United States.12
A third type of union security agreement that was originally allowed under the NLRA has
since been outlawed. Closed-shop agreements required the employer to hire only applicants who
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546 | Part 2 Implementation of Strategic Human Resource Management
EXHIBIT 12.1 Types of Bargaining Items
Mandatory Permissive Illegal
Base wages Union representation on board of directors Closed-shop agreements
Incentive pay Benefits for retirees Featherbedding
Benefits Wage concessions Discrimination in hiring
Overtime Employee ownership
Paid time off Union input into company pricing policy
Layoff procedures
Promotion criteria © Cengage Learning
Union security clauses
Management rights clauses
Grievance procedures
Safety and health issues
were already union members. Congress found such arrangements to be detrimental to labor
because individuals without income were forced to pay union dues without the benefit of any
employment. There was no guarantee that an applicant who belonged to a union subsequently
would be hired, and so closed-shop agreements were eventually outlawed.
Failure to Reach Agreement
When the union and the employer are unable to agree on the terms of the collective-bargaining
agreement, workers have the right—under the NLRA—to strike. Whether employers are obligated
to rehire striking employees at the conclusion of the strike depends on the kind of strike.
An economic strike is one in which the parties have negotiated in good faith but have been
unable to settle on a contract or collective-bargaining agreement. The organization has the right to
continue to operate during such a strike and often does so by utilizing management employees,
hiring temporary workers, and/or hiring permanent replacements. The discretion of how to pro-
ceed rests with the organization. Economic strikers cannot be terminated simply for engaging in
collective strike activity. At the conclusion of the strike, they must be reinstated if two conditions
are met: (1) Their individual jobs still exist and (2) permanent replacements have not been hired.
Economic strikers run the risk that the employer may eliminate their jobs or hire replacements;
both activities are protected under the NLRA.
An unfair labor practice strike is one in which employees strike in response to some action of
management that the NLRA identifies as an unfair labor practice. These behaviors are outlined
within the statute, and workers who go out on such a strike have a guaranteed legal right to rein-
statement by the employer even if the employer has hired permanent replacements in the interim.
A wildcat strike is one in which workers decide not to honor the terms of the collective-
bargaining agreement and walk out in violation of their obligation to the employer under the
agreement. Because wildcat strikers have breached their contractual obligations to the employer,
they have no right to reinstatement in their jobs. Wildcat strikes can be caused by perceived unfair
treatment of an employee by management or a worksite may be perceived as hazardous or danger-
ous, such as those found in the mining and construction industries. In certain industries, manage-
ment will attempt to resolve the issue if the claims are deemed to have merit in lieu of fighting the
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Chapter 12 Labor Relations | 547
union in court. In addition, federal workers are prohibited by law from striking for any reason,
including an economic strike. Any strike by federal employees is not protected under the NLRA,
and striking employees have no legal rights to return to their jobs. Such was the case in the early
1980s when the PATCO union struck, and President Reagan immediately fired and replaced the
striking workers.
The incidence of labor strikes in the United States is decreasing as both employees and
employers realize that everyone loses during a strike. The company gets hurt financially and in
the public domain; workers get hurt financially and emotionally; customers may be hurt opera-
tionally and financially, particularly if there are no substitute providers. Organizations can prevent
strike activity in two principal ways: through the use of a formal grievance procedure or through
the alternate dispute resolution (ADR) processes of mediation or arbitration.
Grievance procedures are a permissive bargaining item under the National Labor Relations
Act, as indicated in Exhibit 12.1. Grievance procedures outline how conflicts or disagreements
between workers and management over the terms of the collective-bargaining agreement are han-
dled. Grievance procedures are often the catalyst to resolving problems before the conflict escalates
to a strike. They are also useful in helping union leaders and management identify weaknesses or
oversights in the collective-bargaining agreement that can be addressed during the negotiations
over subsequent collective-bargaining agreements. Grievance procedures are also useful as a
means of communicating to management firsthand work-related sources of employee dissatisfac-
tion that can hamper morale and productivity.
An increasing number of collective-bargaining agreements are calling for mediation or arbi-
tration of labor disputes as a means of avoiding strikes. Mediation involves an outside third party
who has no binding decision-making authority assisting both sides in reaching a settlement. This
individual assists the two sides in finding some middle ground on which they can agree and in
facilitating dialogue and concessions. Arbitration works in a similar manner: It involves an out-
side, unbiased third party who listens to the arguments presented by both sides. However, the
arbitrator renders a ruling or decision that binds both parties. Both sides agree to abide by the
decision of the arbitrator prior to entering the arbitration hearing. Mediation is frequently used
in public sector organizations where strike activity is outlawed at the federal level and often greatly
restricted at the state and local levels. Arbitration is used quite frequently in professional sports in
resolving salary disputes between union players and the owners of their teams.
Arbitration has been controversial in that it has been perceived as depriving employees of
their rights to pursue claims in courts of law and have their cases heard by a jury and replacing
this process with an employer-controlled system that is less likely to result in a favorable decision
for the employee. However, history has shown that this is not the case. Employment-related cases
heard in federal district courts historically have resulted in a 12 percent rate of success for employ-
ees, while general employment arbitration has favored employees in 33 percent of cases decided,
and labor arbitration—heard under a collective-bargaining agreement—has favored employees in
52 percent of cases.13
Unions Today
One way in which unions are attempting to maintain their viability in light of declining member-
ship is to recruit in organizations and industries with which they have no previous affiliation.
With the demise of their traditional manufacturing base, many domestic unions have expanded
their missions, as efforts to recruit new members have become a top priority. Such recruiting
efforts are seen as so central to the ongoing livelihood of unions that the AFL-CIO now earmarks
one-third of its operating budget for organizing, compared to just 5 percent 10 years ago.14
Consider the diversity now present in some of the leading labor unions: the United Steelworkers
of America, established in 1936 to represent steelworkers, now includes employees from Good
Humor/Breyers, the Baltimore Zoo, and Louisville Slugger; the United Auto Workers, established
in 1935 to represent auto workers, now includes employees from Miller Beer, Planter’s nuts,
Kohler bathroom fixtures, Yamaha musical instruments, and Folger’s Coffee; the International
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548 | Part 2 Implementation of Strategic Human Resource Management
Brotherhood of Teamsters, established in 1903 to represent drivers in the freight-moving industry,
now includes flight attendants, public defenders, and nursing home employees. There is no con-
sensus regarding the value of such diversification by unions. Some argue that it provides more
power to unions and their members by strengthening their numbers and preventing their depen-
dence on one particular industry. On the other hand, critics argue that this prevents unions from
being very influential in setting wages and policy in a particular industry, given the need to spread
time and resources across multiple industries. However, given the demise of traditional
manufacturing jobs from which unions originated and relied on for their support and power,
unions have little choice but to reach out to new industries. The critical issue is whether this diver-
sification is really strategic for the union or merely opportunistic.
Another new development in how unions operate is their reliance on technology. Unions have
been using the Internet effectively to recruit new members, particularly those in technology-based
industries, and to gain support from others in their organizing efforts. The South Bay Central
Labor Council, based in California’s Silicon Valley, consists of 110 affiliated unions that represent
more than 100,000 employees in the area. The Council is using the Internet to communicate with
and, it is hoped, organize contingent workers.15 Similarly, the Service Employees International
Union undertook a campaign to organize janitorial workers in the Silicon Valley. The union success-
fully used the Internet to publicize its case against Apple Computer, Oracle, and Hewlett-Packard
worldwide via electronic bulletin boards that informed engineers and programmers about the wages
and working conditions of those who cleaned their offices at night.16 Finally, the Oakland-based
Local 2850 of the Hotel Employees & Restaurant Employees International Union used the Internet
in a campaign against software giant PeopleSoft. In attempting to organize workers from a hotel
used extensively by PeopleSoft and its corporate partners and unable to gain the support of People-
Soft, the union launched an Internet campaign that caused PeopleSoft’s stock value to decline by
more than $63 million, according to the company’s own estimates.17
The NLRB has also considered the role of technology as it relates to worker rights under the
NLRA. Given its charge to ensure that employees are able to communicate freely with each other
about wages and all other conditions and terms of employment, the NLRB has endorsed e-mail
communication between employees as a means of safeguarding those rights. Only when an
employee’s behavior is disruptive does NLRA protection cease. As a result, employer policies that
ban all nonbusiness and/or personal use of e-mail may interfere with the right to self-organize and
therefore constitute a violation of the NLRA. A key issue here is the extent to which employees
normally use the employer’s computer system for their regular work and communication with
coworkers. Employees who normally use a computer system in carrying out their regular job
responsibilities are considered differently from employees who generally do not use computers or
e-mail to carry out their regular job responsibilities. In addition, the more e-mail is normally used
in the workplace, the less restrictive a policy an employer can implement that regulates communi-
cation that might be considered protected concerted activity under the NLRA.18
In recent years, the proliferation of social media has greatly altered the means by which
employees communicate with each other, both inside and outside of the workplace. The National
Labor Relations Board has provided protection to some employees who have had adverse action
taken against them by their employers due to their social media communications and postings.
Reading 12.2, “Social Media, Employee Privacy and Concerted Activity: Brave New World or Big
Brother?,” discusses issues surrounding employee privacy and how social media posting by
employees may fall with NLRA protection.
Broader employer policies regarding employee electronic communications have also been tar-
geted by the National Labor Relations Board. Warehouse retailer Costco had a policy which pro-
hibited employees from making defamatory statement deemed unlawful by the NLRB. Specifically,
the policy stated, “Employees should be aware that statements posted electronically (such as to
online message boards or discussion groups) that damage the company, defame any individual or
damage any person’s reputation or violate policies outlined in the Costco Employee Agreement,
may be subject to discipline, up to and including termination of employment.” The NLRB found
the prohibition to be too broad and designed to squelch employee concerted communications with
each other.19 As part of the same decision, the NLRB also struck down Costco rules that
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Chapter 12 Labor Relations | 549
prohibited employees from (1) posting, distributing, removing, or altering any material on com-
pany property; (2) discussing “private matters of members and other employees … including
topics such as, but not limited to, sick calls, leaves of absence, FMLA call-outs, ADA accommoda-
tions, workers’ compensation injuries, personal health information, etc.”; (3) sharing, transmitting,
or storing for personal or public use without prior management approval sensitive personal infor-
mation such as membership, payroll, confidential credit card numbers, Social Security numbers, or
employee personal health information.20
To guide employers, the NLRB has prepared three separate updated social media reports, which
describe all social media cases reviewed by the agency. These documents provide guidance to
employers in formulating social media policies that will comply with federal labor laws.21 Their two
main advisories for employers are (1) employer policies should not be so sweeping that they prohibit
the kinds of activity protected by federal labor law, such as the discussion of wages or working
conditions among employees; and (2) an employee’s comments on social media are generally not
protected if they are mere gripes not made in relation to group activity among employees.22
Conclusion
Unions have a long and deep history in the United States and enjoy strong support under federal
law. However, union membership is declining in America; unions in this country probably will not
survive if they continue to display traditional adversarial relationships with employers. Traditional
approaches to negotiation usually involved the union trying to gain concessions from management
and winning the negotiation. To be successful in the future, unions must develop partnerships
with employers and seek win–win outcomes to collective bargaining that strengthen both the
union’s position and employees’ rights and enhance the performance of the organization. Rigid
posturing by unions in attempting to maintain the status quo works against the many initiatives
and innovations organizations develop as they attempt to respond to changes in their environ-
ments and remain more competitive.
Given the changing nature of organizations and work, unions clearly need to reinvent them-
selves. Unions need to consider that the jobs of today and those of the future are quite different
from the jobs of the past. Increasing global competition, changing technology, the heightened pace
of merger and acquisition activity, the move toward smaller businesses and autonomous divisions,
and the increasing diversity in the workforce represent broad changes for unions in the United States.
The jobs being created in our economy are more service- than manufacturing-oriented; are much
more complex, multifaceted, and broadly designed; involve teams, cooperation, and working with
others; and involve more self- or peer supervision than supervision by management. Countries such
as Japan and Germany have extensive unionization and produce some of the highest quality, most
technologically advanced products. Their unions facilitate worker involvement, development, and par-
ticipation programs; also, the unions partner with employers in creating beneficial change rather than
inhibiting change and attempting to ensure workers’ rights by maintaining the status quo.
As unions decline in number and stature, workers become less powerful. Without union
representation, employee interests can only be advanced through increased government regulation
of the employment relationship or through innovative and responsive HR programs that organiza-
tions initiate themselves. Increased legislation may ensure worker rights, but it can also inhibit
organizational flexibility and change. Innovative HR programs can provide workers with benefits,
but usually, the organization retains power and control over the workers, who maintain their indi-
vidual status in dealing with separate issues with the employer. Legislation preserves rights and
empowers workers to a limited extent, but it inhibits change. Organization-designed initiatives
can promote change but still leave individual workers at a disadvantage when dealing with
employers on issues of equity. Hence, policymakers need to take a critical look at the institution
of collective bargaining to determine whether it has lived up to the ideals Congress established
for it under the NLRA.
Very few unionized companies have developed effective worker participation programs
because unions are interested in keeping workers insulated from management issues. Ironically,
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550 | Part 2 Implementation of Strategic Human Resource Management
however, successful employee participation programs in nonunionized organizations have actually
increased workers’ power and voice in dealing with management. Union leaders need to create a
new model of worker representation if they plan to survive in the twenty-first century. This can
only be done if union leaders rethink their roles and adopt collective-bargaining strategies that
allow both the employees and employers to benefit. Union leaders need not only political and
negotiating skills but also management skills in understanding the whole organization: strategic
issues facing the employer and the organization’s environment. Instead of seeing themselves as
adversaries to management, they should envision themselves as facilitators and consultants.
Although employers clearly need to consider labor relations from a strategic perspective, union
representatives must do so even more if they are to keep their unions viable for tomorrow’s
organizations.
Critical Thinking 7. What rights and responsibilities do employers and
employees have regarding the use of social media com-
1. With unionization on the downturn, why should an munications under the National Labor Relations Act?
organization be concerned about labor relations?
Reading 12.1
2. What benefits are received and what costs are incurred
when workers unionize? 8. Assess the status of employer and union recruiter beha-
viors in union-organizing campaigns. How much access
3. Describe the process by which workers unionize. should union organizers have to employees? What new
behaviors are likely from employers and union organi-
4. What are the possible outcomes of failure to reach zers in response to the actions of the other party?
consensus on a collective-bargaining agreement?
Reading 12.2
5. Contrast the style of labor unions in the United States
to that found in other countries. 9. How can social media impact the rights of employees
under the National Labor Relations Act? Can or should
6. Does union diversification make unions stronger or any restrictions be placed by employers on workplace
weaker? How would you feel as an auto worker to discussions that take place through social media?
see the United Auto Workers representing employees
outside the auto industry?
Exercises contrast the nature and state of collective bargaining in
these areas as well as determine the implications this
1. Locate a local unionized organization. Interview both a has for global business.
manager and a union employee to determine the level
of satisfaction each has with the employment relation- 4. Visit the Web sites for the AFL-CIO (http://www.aflcio.
ship. What types of union activity/inactivity contribute org) and Teamsters (http://www.teamsters.com). What
to these positions? programs does each union offer its members? What are
the main issues each union appears to be pursuing?
2. Investigate one large union, such as the United Auto Do these programs and issues appear to be well
Workers, United Steelworkers, or Teamsters, in depth matched to the needs of the U.S. labor force?
and then examine its member base and recent activity
on behalf of its members. Does it appear that diversi- 5. Visit the Web site for the National Labor Relations
fication has made this union more or less effective? Board (http://www.nlrb.gov). Of what value is this
Web site for employers? Of what value is this Web
3. Investigate the nature of collective bargaining in site for union leaders?
Australia, Canada, and Mexico and the countries that
constitute the European Union and then compare and
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Chapter 12 Labor Relations | 551
6. Design a social media policy for an employer that employee without running afoul of the National
would optimally serve both the employers and the Labor Relations Act.
Chapter References
1. Wikipedia. “2005 New York City Transit Strike,” avail- nbcnews.com/business/economywatch/michigans-right-
able at http://en.wikipedia.org/wiki/2005_New_York_ work-laws-will-ripple-across-us-1C7559684.
City_transit_strike.
13. Wheeler, H., Klaas, F. and Mahony, D. Workplace Justice
2. Caudron, S., et al. “The Labor Movement to War,” Without Unions. W.E. Upjohn Institute for Employment
Workforce, January 2001, pp. 27–33. Research, 2004.
3. McCartin, J. “PATCO, Permanent Replacement and 14. Hirsh, S. “Unions Reach Everywhere for Members,”
the Loss of Labor’s Strike Weapon,” Perspectives on Baltimore Sun, January 25, 2004, p. ID.
Work, 10, (1), Summer 2006, pp. 17–19.
15. Newman, N. “Union and Community Mobilization
4. Bureau of Labor Statistics, available at http://www.bls. in the Information Age,” Perspectives on Work, 6, (2),
gov/news.release/wkstp.nr0.html. pp. 9–11.
5. U.S. Bureau of Labor Statistics, Union Members Sum- 16. Ibid.
mary, January 23, 2013. Available at http://www.bls.
gov/news.release/union2.nr0.htm. 17. Ibid.
6. U.S. Bureau of Labor Statistics, Labor Force Statistics 18. Lyncheski, J. E. and Heller, L. D. “Cyber Speech Cops,”
from the Current Population Survey, Union Members, HR Magazine, January 2001, 46, (1), pp. 145–150.
available at http://stats.bls.gov.
19. Costco Wholesale Corp. and United Food and Commer-
7. Ibid. cial Workers Union, Local 371, 358 NLRB No. 106
(2012).
8. Segal, J. A. “Labor Pains for Union-Free Employers,”
HR Magazine, March 2004, 49, (3), pp. 113–118. 20. Ibid.
9. NLRB v. Washington Aluminum Co. 370 U.S. 9 (1962). 21. NLRB, Office of the General Counsel, (Third) Report
of the Acting General Counsel Concerning Social
10. Smith, A. “Talk, Talk Talk About Unions,” Society Media Cases (Memorandum OM 12-59) (May 30,
for Human Resource Management, November 14, 2012).
2012. Available at http://www.shrm.org/Pages/login.
aspx?ReturnUrl=%2fhrdisciplines%2flaborrelations% 22. Deschenaux, J. “NLRB Issues Second Social Media
2farticles%2fpages%2forganizing-discussions.aspx. Report,” Society for Human Resource Management.
January 31, 2012. Available at http://www.shrm.org/
11. Ibid. legalissues/federalresources/pages/nlrbsocialmediare
port.aspx.
12. Linn, A. “Michigan’s Right-to-work Laws Will Ripple
Across the U.S.” NBC News. Available at http://www.
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
552 | Part 2 Implementation of Strategic Human Resource Management
READING 12.1
A Big Chill on a “Big Hurt:” Genuine Interest in
Employment of Salts in Assessing Protection
Under the National Labor Relations Act
Jeffrey A. Mello
Abstract Fourth, many of the jobs being created in our economy
are in areas in which unions have no experience organizing,
As union membership has continued to decline steadily in the such as call centers, and involve workers who work from
US, union organizers have become more creative and vigilant their homes or remote locations, rather than at the employ-
with their organizing strategies. Chief among these strategies er’s physical facility. Fifth, an increasing number of employ-
has been “salting,” a process by which unions attempt to ers are resisting and fighting union organizing attempts
organize employees from the inside rather than the outside. more so than in the past. More than 75% of employers con-
The Supreme Court has ruled that, under the National fronted with union organizing campaigns now hire consul-
Labor Relations Act, “salts” cannot be discriminated against tants and an entire new industry of “union avoidance
solely on the basis of their status as salts. This paper examines firms,” often consisting of former union leaders, has been
employer responses to resist salting efforts, including a recent established over the past three decades with anti-union suc-
decision by the National Labor Relations Board, which cess rates that generally exceed 90% (Maher 2005; Logan
redefines the landscape under which salting activities can be 2006). Sixth, unions themselves have been blamed for not
conducted and considered protected activity. keeping up with the times and failing to address the con-
cerns of the fastest growing segments of the hourly labor
Union membership has been declining steadily in the force, including women, minorities and immigrants. Finally,
US since the US Bureau of Labor Statistics began tracking the alleged antiunion doctrine and teachings of business
such numbers 25 years ago. At that time, 20.1% of the US schools have been cited as promoting and encouraging
workforce was unionized. By 2008, only 12% of workforce more adversarial relations between employers and unions
was unionized with a continuous steady decline having been (Gould 2008; Anonymous 2003).
recorded over that time. In 2008, public sector unionization
stood at 35.9% while private sector unionization had declined Unions have responded to declines in membership by
to 7.4%, with both percentages having each lost a full per- becoming much more aggressive in their recruiting tactics.
centage point over the preceding 3 years (Bureau of Labor One of the main strategies now being employed by unions
Statistics 2008). This steady 25 year decline, however, was is “salting,” a process by which union organizers attempt to
not a new trend but rather the continuation of a trend organize a workplace internally. Originally implemented in
that pre-dated the Bureau of Labor Statistics tracking the early 1970s in the construction industry (Raudabaugh
(Curms et al. 1990). 2008), salting involves a union representative applying for
and subsequently obtaining employment with the organiza-
This decline can be attributed to a number of factors. tion whose workers are being targeted for unionization. Salt-
First, the movement of many traditionally union-held jobs ing provides union organizers with more direct and regular
to developing countries overseas to take advantage of lower access to employees who are the target of the unionization
labor costs has been increasingly dramatically in recent drive that would be realized by organizing from the outside.
years. Second, changes in the nature of the employment More recently salting activity has evolved into a means of
relationship, including the increased transience of the work- political and economic warfare against employers as the
force and the erosion of the assumption, or presumption, of basis for unfair labor practice allegation filings with the
lifetime employment and the growing trend toward part- National Labor Relations Board (NLRB). This paper dis-
time and contract employment have impacted workers’ cusses the legal foundation upon which salting activities are
interest in being represented by unions. Third, the rise in based, the recent court activity and NLRB rulings in salting
undocumented or illegal workers who are unprotected or
afraid to protest and/or organize has affected unions.
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Chapter 12 Labor Relations | 553
cases, subsequent management reactions to curtail salting Intentional Misrepresentation in the
activity and the judgments on the legality of such activities Employment Application Process
under the National Labor Relations Act (NLRA; 29 U.S.C.
§ 151 et. seq.). These decisions have significant implications In 2002 the Seventh Circuit addressed the extent to which a
not only for unions as they attempt to maintain their viability salt may lie about organizing intentions in Hartman Bros.
but also for employers in ensuring that their management Heating and Air Conditioning, Inc. v. NLRB (280 F.3d 1110,
practices and actions do not run afoul of the NLRA. 2002). Hartman Bros., an Indiana-based heating and air-
conditioning contractor, hired Starnes, who had stated on
Supreme Court Provides Protection to Salts his employment application that he had been laid off from
Under the National Labor Relations Act his previous job which paid him $11 per hour. The truth was
that Starnes had taken a formal leave of absence from his
The Supreme Court first addressed salting in NLRB v. Town position so that he might work for a union to assist with its
and Country Electric, Inc. (116 S. Ct. 459, 1995) where it organizing efforts. As the position at Hartman for which
found that paid union representatives who attempt to gain Starnes had applied paid only $8.50 per hour, suspicions
employment with a specific employer whose workers they might have been aroused if Starnes stated that he was still
are trying to organize cannot be discriminated against solely employed at a job which paid $11 per hour. Immediately
on the basis of their status as “salts.” Even though a salt may upon being hired, Starnes informed Hartman Bros. that he
have no intention of remaining with the employer subse- was a union salt who intended to organize the company.
quent to a successful organizing drive, the Court found that Hartman responded by telling Starnes to leave the workplace
union salts are considered “employees” under the NLRA and without formally terminating him.
hence, are entitled to the full range of rights expressly pro-
vided to employees under the statute. As a result, any failure The job for which Starnes had applied and been hired
to consider or hire otherwise qualified salts, as well as the required driving. Consequently, as part of his application
decision to terminate a salt once the salt’s intentions are Starnes was required to provide information about his driv-
made known or union organizing activities begin, solely ing history and stated that he had received one speeding
based on salt status, is unlawful under the NLRA. While an ticket. Hartman Bros. then informed him that its liability
employer has no per se obligation to hire a salt, no job appli- insurer would need to check his driving record and that
cant can be denied employment solely based on her or his Starnes would be ineligible for employment if, as a result of
status as a salt. this investigation, the insurer refused to provide liability cov-
erage for his driving. Four hours after Starnes had been
Town and Country constituted what was described as a ordered off the premises for declaring his salting intentions,
“chess match” between employers and union organizers as the insurer contacted Hartman Bros. and disclosed that
each attempted to assert their rights under the NLRA Starnes had received not one, but two speeding tickets and
(Mello 1998). A previous Supreme Court ruling, Lechmere, that he would be denied coverage. Starnes was immediately
Inc. v. NLRB (112 S. Ct. 841, 1992), had strengthened man- discharged as a result of this misrepresentation and his dis-
agement rights in resisting organizing activity by disallowing qualification for insurance coverage.
the practice of union organizers approaching employees on
the employer’s property; in this case, the employer-owned Around the time Starnes applied for a position with
employee parking lot. Salting served as a union response to Hartman, Till also applied for employment. Till, however,
the restrictions placed on union organizer access to employ- was accompanied by a known union organizer, who declared
ees in Lechmere and the Town and Country decision vali- that he was a union organizer and wore a baseball cap with
dated the use of salting as a tactic to organize workers. the union’s logo. Hartman refused to hire Till.
While Town and Country was a significant victory for orga-
nized labor in prohibiting employers from refusing to hire an The court found Hartman Bros. in violation of the
applicant or subsequently terminate an employee who is NLRA in its refusal to hire Till as it found that this refusal
attempting to organize its workers, the decision didn’t was motivated solely by hostility toward unions. Hartman
address the question of whether a salt can intentionally lie was ordered to cease and desist in its discriminatory practices
as part of her or his employment application process about against salts and other union supporters and to hire Till with
his or her status as a salt and/or the intention to organize the backpay, in line with the Supreme Court ruling in Town and
workplace. More so, to the extent that Town and Country Country.
gave unions the upper hand in the “chess match,” the deci-
sion certainly gave employers incentive to respond by moni- Starnes’ case was more complicated than Till’s. In justi-
toring more closely the specific activities of union organizing fying its decision to terminate Starnes, Hartman cited an
efforts. Indiana law which prohibits any person from knowingly or
intentionally making a false or misleading written statement
in seeking employment. The court, however, found that if the
state statute was being cited as a means for an employer to
deny employment to an individual based on an applicant’s
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554 | Part 2 Implementation of Strategic Human Resource Management
lies about salt status, the statute would be pre-empted by the an applicant’s actual or perceived salt status. Although no
National Labor Relations Act. Any lie about salt status would cases have been heard relative to “perceived” salt status, the
be immaterial to the hiring decision nor to an applicant’s Seventh Circuit’s ruling in Hartman Bros. makes it likely that
qualifications for the job for which (s)he had applied and those applicants perceived to be salts would enjoy the same
be based on a presumably erroneous employer assumption protection as actual salts. One weapon employers might have
that the individual would not be a bona fide employee at to counter salting in light of Hartman Bros. would be the
any point in time. The court further found that criminalizing implementation of a policy that prohibits any employee
any applicant deception over salting intentions could only be from simultaneously holding any full or part-time employ-
a strong-arm means of discouraging salting, which would be ment with another employer, particularly one within the
further at odds with the Supreme Court’s decision in Town same industry. Any such policy may or may not be upheld
and Country. The fact that Starnes lied about his being laid in a given jurisdiction based on local laws and general atti-
off by his previous employer would not be grounds for dis- tudes toward labor but its chances of success are more likely
missal as it was done solely to hide his salting intentions and if enforced in a uniform manner toward all employees.
the NLRA would preempt the Indiana statute that prohibits
individuals from making false or misleading statements as Employers Fight Back—Use of Preferential
part of an employment application. Hiring Criteria
The Seventh Circuit did concur with the earlier NLRB The Seventh Circuit provided unions with a significant victory
ruling that the discharge of Starnes based on his driving in Hartman Bros which affirmed their rights to use aggressive
record was legitimate as the action was done pursuant to a salting tactics as a means of organizing a workplace. As unions
company policy that had been uniformly applied to all have gained the upper hand in their “chess match” with
employees without animus toward an employee’s participa- employers, employers have not been passive in fighting aggres-
tion with or attitudes toward unions. Hartman Bros. was, sive union organizing efforts. A post-Hartman Seventh Circuit
however, required to pay Starnes backpay, for the 4 h that ruling, Operating Engineers Local 150 v. NLRB (325 F.3d 818,
had elapsed between his arrival at work and being sent 7th Cir, 2003), provided employers with a significant victory in
home upon receipt of the insurance report. The court further their efforts to fight union salting tactics.
ruled that the unfair labor practice committed by Hartman
Bros. was not the discharge of Starnes but rather, sending Local 150 involved Brandt Construction Company, an
him home and depriving him of the opportunity to begin Illinois highway contractor, which provides municipal road
organizing prior to the arrival of the insurance report. construction, bridge building, concrete and asphalt paving,
sewer and water utility work and demolition work. Brandt
Implications had utilized a long-term preferential hiring policy whereby
employment applications submitted by current or former
Hartman Bros. dealt employers another post-Town and employees and those filed by individuals referred by current
Country blow in finding that paid union organizers can lie employees received preferential consideration over applica-
on their job applications about their affiliation with unions tions received from non-referred walk-in applicants. Brandt
as salts but cannot misrepresent facts about their credentials, also gave preferential consideration to applicants referred by
skills or qualifications for employment. Lying about salt sta- equal employment opportunity service providers under a
tus is not material to a hiring decision because, under Town prior conciliation agreement entered into with the US Depart-
and Country, an employer cannot reject a job applicant solely ment of Labor which required Brandt to increase the numbers
on the basis of being a salt, union employee or union sup- of women and minorities employed on each job pursuant to
porter. Any applicable state statutes which might make it ille- federal, state and local equal employment opportunity regula-
gal for applicants to lie or make misrepresentations on their tions. Brandt allowed any of these applicants who receive pref-
employment applications are preempted by the National erential treatment to apply for employment at any time
Labor Relations Act when any such lies or misrepresentations without an appointment while walk-in applications were only
pertain to any union affiliation or activity. accepted on Mondays and only when the company was hiring.
The Hartman Bros. decision represented another victory These hiring practices and policies were formalized and
for unions that further put employers on the defensive. posted at the time Brandt entered into its agreement with the
Under Hartman Bros., unions have less difficulty placing Department of Labor. The posting noted that applications
paid organizers in the employ of companies they are attempt- would only be “considered current for a period of two
ing to organize. To prevent unfair labor practice charges from weeks.… After fourteen days the employment application
being levied, employers need to be sure that any criteria used expires and any individual interested in employment must
for screening and selection of employees is objective, valid, complete a new application, if they are being accepted.
essential for job performance and not based, in any way, on We do not accept applications when we are not hiring.”
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Chapter 12 Labor Relations | 555
The posting further specified that Brandt showed preference management, did not discriminate on the basis of union
for applicants in the following descending order; (1) current activities because “the policy does not on its face preclude
employees of the company; (2) past employees with proven or limit the possibilities for consideration of applicants with
safety, attendance and work records; (3) applicants recom- union preferences or backgrounds.” The second, Custom
mended by supervisors; (4) applicants recommended by cur- Topsoil, Inc. (328 N.L.R.B. 446, 1999), held that an employer
rent non-supervisory employees; (5) unknown (walk-in) did not discriminate on the basis of union membership when
applicants. it differentiated between “stranger” and “familiar” applicants
as this differentiation did not involve a per se distinction
Shortly after the conciliation agreement and Brandt’s between union and nonunion applicants.
award of a large job, Local 150 sent some of its members to
Brandt to apply for employment. The union members had In issuing its ruling favoring Brandt, the court relied on
been told by Local 150 to apply wearing union hats or the fact that Brandt applied its preferential hiring policy in a
other insignia and further instructed to indicate on their nondiscriminatory manner with applications submitted by all
applications that they were salts and had been sent by the walk-ins rejected under a long-standing and consistently
union for the express purpose of organizing Brandt. At the applied policy, absent of any direct anti-union animus. The
same time, Brandt received 32 referral applications as well as court also noted and commended Brandt for improving its
20 additional non-union walk-in applications. Brandt hired a employment of women and minority applicants pursuant to
total of eight applicants, all of whom had been referred. For its conciliation agreement with the Department of Labor. The
the remainder of that year, Brandt hired 29 additional appli- court found that the critical factor that prevented Local 150
cants, 28 of whom were referrals, from a pool of 67 referrals. members from being hired was the fact that they freely chose
Consistent with posted policy, all new hires were offered to apply as walk-ins, traditionally the applicants of last choice
employment within 14 days of their application. for Brandt under its publicized policy. Brandt gave union
applicants exactly the same consideration as all other walk-
In response to the hiring, Local 150 filed an unfair labor in or unknown applicants and union members were in no
practice charge against Brandt with the National Labor Rela- way prevented from obtaining a referral from a preferential
tions Board. The union alleged that Brandt had “changed, applicant source if they so chose.
limited and made more onerous its hiring practices and pro-
cedures with the purpose of making it more difficult for The NLRB ruling in Local 150 has found support in sub-
applicants with pro-union sentiments to apply or obtain sequent cases. The Board also ruled in favor of another
employment,” in direct violation of Section 8(a)(1) of the employer who used preferential hiring criteria in Ken Maddox
National Labor Relations Act. Several months later Local Heating and Air Conditioning, Inc. (340 N.L.R.B. No. 7, 2003).
150 filed an additional unfair labor charge against Brandt, Maddox, an Indiana HVAC contractor, gave preference in hir-
alleging that the company refused to hire union members ing to applicants it had previously employed as well as to
despite the fact that all of new hires at Brandt at that point applicants referred by current employees and business associ-
had been former employees, referrals from current employees ates, similar to Brandt. This long-standing policy was chal-
or supervisors or referrals from equal employment opportu- lenged when only one of 37 qualified overt union applicants
nity service providers and the company had also not accepted was hired while 55 nonunion applicants were hired to fill 56
any walk-in applications. Local 150 later filed a third unfair vacancies. The NLRB noted that because Maddox’s policy had
labor charge which alleged that Brandt “has in effect and been in place for some time, this fact invalidated the allegation
continues to maintain and apply a hiring practice of giving that the policy was specifically implemented to counter a salt-
preference in hiring to referred applicants regardless of their ing campaign. The Board further found that the policy “was
skill level over walk-in or unknown applicants” and that not inherently destructive of employee rights” or “sufficient, by
“such policy is designed to discriminate, interfere and prevent itself, to establish animus.” Citing Brandt as precedent the
union-affiliated applicants from being considered for NLRB found that the general use of referral policies is a legiti-
employment ... and is designed to deter the effects of union mate and justifiable employment practice. In Maddox the
organization in violation of the Act.” referral practice did not create a closed hiring system, which
effectively screened out union applicants, nor was it applied in
The court found that while Brandt’s policy clearly made any kind of inconsistent or disparate manner.
it more difficult for union applicants and salts to gain
employment, it did not violate the NLRA as the manner in Employers Find Additional Support for Their
which all applicants had been hired, by referral, excluded all Use of Restricted Hiring Criteria
walk-in applicants, regardless of whether or not these indivi-
duals were affiliated with a union. In issuing this decision in The victory for employers in Local 150 was only the beginning
favor of the employer the court relied on two earlier NLRB as other employers have succeeded in their attempts to fight
rulings. The first was Zurn/N.E.P.C.O. (329 N.L.R.B. 484, union organization and salting through the use of restricted,
1999), which held that a hiring policy which gives preference rather than preferential, hiring criteria. Kanawha Stone
to current and former employees, as well as referrals by
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556 | Part 2 Implementation of Strategic Human Resource Management
Company, Inc. (334 N.L.R.B. No. 28, 2001) involved an possible and minimize disruptions and costs incurred
employer whose hiring policy consisted of an assessment of through excessive turnover. When Kelley refused to hire 27
specific hiring needs on a particular job, based on applications union applicants based on this criterion, the union filed
filled out on the employee’s first day of work. The company charges with the NLRB. The NLRB had previously estab-
did not maintain any applicant pool or hiring lists unless some lished a precedent for wage disparity as a legitimate means
kind of mass hiring was being conducted. All hiring was han- of selecting applicants in the absence of evidence of disparate
dled by superintendents at individual job sites rather than at application to union members in Wireways, Inc (309 N.L.R.B.
the main office. Kanawha’s hiring criteria restricted hiring to 245 1992). In Kelley, the Board applied the FES burden-
three groups of individuals; (1) employees on temporary lay off, shifting criterion in concluding that Kelley’s hiring decisions
(2) former employees and (3) referrals from existing employees. were made without regard to the prospective salts’ union
Applicants not falling into one of these categories were not affiliation because the salts did not satisfy the neutral and
considered for employment. This long-standing policy had legitimate hiring criteria of wage compatibility.
been in effect since the company’s inception. After a group of
union members applied for employment at the main office, Subsequent to Kelley, however, the NLRB was presented
rather than at an individual job site, and who did not fit the with another salting case involving wage incompatibility crite-
above criteria were not hired, the union filed charges with the ria in which it ruled that wage disparity was not a legitimate
National Labor Relations Board. justification for denial of employment. In Contractors Labor
Pool (CLP; 335 N.L.R.B. No. 25, 2001) the employer enforced
Refusal to hire cases are considered under a burden- a “30% rule,” which involved rejection of any applicant whose
shifting scheme established by the Third Circuit in NLRB v. most recent wages differed by more than 30% from CLP’s
FES (A Division of Thermo Power; 301 F.3d 83, 3rd Cir., starting wages. When challenged by a union, CLP’s 30% rule
2002). This case established the following criteria by which had been newly established and based on a study of worker
refusal-to-hire cases are analyzed: retention which calculated the “break point” at which employ-
ees would be less likely to remain in the employ of CLP.
To establish a discriminatory refusal to hire, the General
Counsel must ... first show: (1) that the respondent was The NLRB found that while CLP had shown a legitimate
hiring, or had concrete plans to hire, at the time of the business reason for adopting the policy that appeared not to
alleged unlawful conduct; (2) that the applicants had be motivated by anti-union animus, the policy was “inher-
experience or training relevant to the announced or gen- ently destructive” of employees’ NLRA rights to organize as
erally known requirement of the position for hire, or in the the net effect of the policy was to “disqualify automatically
alternative, that the employer has not adhered uniformly virtually all applicants who had recently earned union con-
to such requirement, or that the requirements were them- tract wages” which “directly penalizes those who have exer-
selves pretextual or were applied as a pretext for discrimi- cised their protected right to work in an organized workforce
nation; and (3) that anti-union animus contributed to the and imposes a formidable threshold barrier to protected
decision not to hire the applicants. Once this is established, organizational activity in the unorganized workforces of
the burden will shirt to the respondent to show that it CLP and its contractor clients.” The Board considered this
would not have hired the applicants even in the absence outcome analogous to the theory of disparate impact applied
of their union activity or affiliation. to anti-discrimination cases heard under Title VII of the Civil
Rights Act of 1964. In disparate impact cases, all individuals
When the NLRB applied this criterion to Kanawha, it are treated the same but the treatment results in different
found that while union applicants were excluded from con- outcomes or consequences for different groups.
sideration for employment and some anti-union animus
appeared to be present, Kanawha met its burden of proof While the NLRB acknowledged that the 30% policy
by showing that it lawfully failed to consider the union appli- impacted both union and non-union applicants, this fact
cants because they simply failed to meet any of its legitimate did not mitigate the “obvious and profound discriminatory
hiring criteria. effect” it had on those who rights were “expressly protected
under the NLRA.” This was based on the finding that the
While Kanawha dealt with a flat-out refusal to hire, an policy, regardless of its intent, excluded virtually all appli-
employer in another case found a more specific means of cants with union history while only excluding some appli-
excluding union members from consideration for employ- cants with nonunion wage history. The outcome was that
ment. This criteria, refusal to hire based on wage incompati- the only way to gain employment with CLP was through
bility, was challenged in the NLRB ruling Kelley Construction prior employment with another nonunion employer.
of Indiana, Inc (333 N.L.R.B. No. 148, 2001). Kelley utilized
the hiring criterion that new employees be accustomed to Despite the fact that the NLRB accepted the employer’s
earning wages in line with those paid by Kelley. This policy legitimate business interest in employee retention as the basis
ideally would allow Kelley to retain employees for as long as for its wage compatibility policy, it held that a balancing act
was necessary between the legitimate rights of CLP’s business
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Chapter 12 Labor Relations | 557
interests and those of employees under the NLRA. Because campaign to begin targeted nonunion employers for unioni-
the 30% rule was “not essential to the successful operation of zation via salting. Indeed in a videotaped speech produced
CLP’s business,” the “destructive direct, broad, severe and and distributed at that time he encouraged local unions to
enduring impact of this rule on employee rights” had to unite with him in “driving the non-union element out of
receive priority in the balancing act. business.” In tandem with this, the IBEW issued a Construc-
tion Organizing Membership Education Training (COMET)
The Board did note that it was not making a blanket manual, which provided guidance for local unions on how to
ruling in CLP on the legitimacy of any other wage compati- conduct effective salting campaigns. The COMET manual
bility rules “that may have a lesser exclusionary effect or that emphasized organizing strategies that would cause employers
may be more narrowly drawn and essential to an employer’s to scale back their businesses, be forced to leave the union’s
business operation.” While Kelley provided affirmation for jurisdiction entirely or even completely go out of business.
employer wage disparity policies, CLP refined that ruling by The driving force behind such economic outcomes would
articulating the need for wage disparity cases to be examined be the filing of unfair labor practices charges against employ-
on a case-by-case basis relative to balancing employer needs ers at every opportunity. Such charges would impose imme-
with employee rights. The end result is that while employers diate and usually substantial costs on employers as they
may be able to justify wage disparity employment screening attempted to defend themselves as well as disrupt the
policies, they clearly need to be able to show that such poli- employer’s workforce and operations via a series of continu-
cies have a non-disparate impact on union members and/or ous and ongoing unfair labor practice allegations.
prospective salts.
In 1994 Toering Electric became a target of Local 275 of
The Latest Chapter—Genuine Interest the IBEW’s salting campaign. IBEW filed charges alleging
in Employment that Toering refused to hire or even consider any union-
affiliated individuals who applied for employment, in viola-
As the courts and NLRB have ruled on wage disparity poli- tion of section 8(a)(3) of the NLRA. In 1995 Toering agreed
cies and clarified the criteria under which they should be to settle the allegations by offering employment to six mem-
considered, another issue has arisen regarding salting and bers of Local 275 but all six failed to show up for work. Prior
employer responses to salting activities. This issue concerns to the settlement, Local 275 boasted in its newsletter that it
whether prospective salts need to show a genuine interest in succeeded in inflicting “a big hurt” on Toering’s business.
actually working for the employer to which they’ve applied in
order to received protection of their salting activities under In 1996 Local 275 again targeted Toering via a salting
the NLRA. campaign. The head of Local 275 submitted 18 resumes to
Toering. Of these resumes, five contained no work history
In Phelps Dodge Corp. v. NLRB (313 U.S. 177, 1941), one dates, five were “stale,” meaning that they were not current,
of the first Supreme Court cases under the NLRA, it was held outdated by as much as 6 years, and one was from one of
that the statute made it an unfair labor practice by an the six individuals who had failed to show up for work when
employer to discriminate against applicants for employment hired the previous year under the settlement agreement.
in addition to actual employees. As noted, the Supreme Court Because the resumes were mostly stale or incomplete, Toering
ruled in Town and Country Electric that job applicants who declined to hire any of the individuals whose resumes were
are also salts are considered “employees” under the NLRA submitted by Local 275. This action prompted another set of
and entitled to protection afforded by the statute, particularly unfair labor practices charges to be filed by Local 275 against
section 8(a)(3) which prohibits an employer from “discrimi- Toering. Toering Electric argued that the applicant salts should
nation in regard to hire or tenure of employment or any term not be entitled to protection under the NLRA as they had no
or condition of employment to encourage or discourage intention of ever working for Toering, as evidence by the fact
membership in any labor organization.” In other words, job that none of the applicants to whom employment offers had
applicants are de facto “employees” under the NLRA. Such been made the previous year ever showed up for work.
protection has served as the foundation for salting activities Instead, Toering argued that the only purpose of the charges
by union organizers but a new NLRB ruling, Toering Electric was to induce economic harm on Toering and such behavior
Company (Toering Electric Company and Foster Electric, should not be protected under the NLRA.
Inc., and Local Union No. 275, International Brotherhood
of Electrical Workers, 351 NLRB No. 18, 2007), answered In considering the merit of Local 275’s allegations, the
the question of whether an applicant needed to be genuinely NLRB considered that under Phelps Dodge, protection against
interested in employment to qualify for protection under the discrimination is not limited to individuals who are actually
NLRA. employed by the employer and extends to job applicants as
well. This interpretation was further reinforced by the
In 1987 the President of the International Brotherhood Supreme Court in Town and Country Electric in 1995 in
of Electrical Workers (IBEW) announced an aggressive which the Court considered whether salts could receive any
protection under the NLRA. In this latter case, the Court
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558 | Part 2 Implementation of Strategic Human Resource Management
stated that the term “employee” did not necessarily exclude implicit presumption that anyone who applied for a job is
paid union organizers but stopped short of saying that paid protected” under the NLRA. Most important for employers
union organizers enjoyed blanket protection under the is that the employer’s motivation for engaging in the behavior
NLRA. The NLRB was asked to determine in Toering that constitute the alleged discrimination act does not become
whether in order for a job applicant to receive protection relevant until the burden of proof has been satisfied that the
under the NLRA that such applicant have a genuine interest applicant does indeed have a genuine interest in employment.
in employment with the employer to whom he had applied.
Implications
The NLRB found that Phelps Dodge was distinguishable
from Toering as the applicants in Phelps Dodge were clearly The Supreme Court decision in Town and Country Electric
interested in employment with the employer. The NLRB held represented the beginning of a new era in labor relations in
in Toering that in order for a job applicant to receive protec- the US (Mello 2004). At the time of the decision, unions
tion under the NLRA the applicant had to be “genuinely were suffering from declining memberships and finding little
interested in seeking to establish an employment relationship success as they attempted to employ more creative and aggres-
with the employer.” The NLRB found that the salt applicants sive organizing strategies. In its Town and Country decision,
at Toering had incurred no harm as the employment they the Supreme Court validated the right of labor organizers to
were being denied was not something they actually sought salt the workplace, handing organized labor a significant vic-
and that the filing party, the union, had to prove an indivi- tory. As salting has become a more prevalent union organizing
dual’s genuine interest in actually seeking to establish an strategy, employers have attempted to counter salting by
employment relationship with the employer as a prerequisite attempting to force salts to disclose their union affiliations if
for filing a charge. The Board found that it had an obligation the salts have not blatantly done so and are attempting to
to “allay reasonable concerns that the Board’s processes can organize in a more discreet manner. The Seventh Circuit
be too easily used for the private, partisan purpose of inflict- handed unions and labor organizers an additional major vic-
ing substantial economic injury on targeted nonunion tory in Hartman Bros., which will bolster union efforts to con-
employers rather than for the public, statutory purpose of tinue to test the extent of their NLRA support in the courts.
preventing unfair labor practices that disrupt the flow of
commerce.” In considering the request for backpay for the These pro-labor rulings have enticed employers to devise
rejected applicants, the Board found that Section 10(c) of new strategies to prevent their workplaces from becoming
the Act did not provide for any kind of punitive damages unionized. Chief among these have been the use of preferential
and was limited to effecting “a restoration of the situation, and restricted hiring criteria. Employers do not appear to be in
as nearly as possible, to that which would have obtained violation of the NLRA when they employ preferential hiring
but for the illegal discrimination.” Hence, there was no policies as evidence in Local 150, where the Seventh Circuit
basis for any action or award to the salt applicants, even if affirmed an employer’s right to do so, as long as the policies
Toering had been found to have committed an unfair labor were consistently applied to both union and nonunion appli-
practice in violation of the NLRA. The board found that cants. Restricted hiring criteria cases, heard under the FES
“submitting an application with no intention of seeking burden-shifting scheme, are a bit ambiguous. Initially affirmed
work but rather to generate meritless unfair labor practice by the NLRB relative to the right of an employer to exclude
charges is not protected activity” under the NLRA. non-refereed applicants from hiring consideration, those cases
involving wage disparity are less clear-cut as the Board has
Perhaps what is most significant about Toering is the fact stressed the need to consider them based on their individual
that the Board realized that the automatic presumption of an facts and circumstances.
applicant’s genuine interest in employment with an employer
is a flawed assumption. Because it had not been previously Even though employers have enjoyed some success with
necessary to prove this as the basis for filing a charge, unions the use of restricted hiring criteria, such policies should be
could easily inflict “big hurts” on employers by engaging in implemented with caution. While both the courts and NLRB
such tactics used by Local 275. Employers would indeed have found that referral-only policies do not directly violate
incur significant costs and disruption of operations. More so, the National Labor Relations Act, such policies may violate
the resources of the NLRB ended up being diverted to cases anti-discrimination in employment provisions of the Civil
and protracted litigation where there was no actual loss of the Rights Act of 1964. To the extent that an employer has a
opportunity to work as applicants never intended to work for homogeneous workforce, referrals may logically come from
the employer in the first place. Hence, in Toering, the Board the same population, which could expose an employer to a
shifted the burden of the employer needing to prove that the possible discrimination charge if non-hired salts were not
applicant was indeed interested in employment back to the part of this population. Under the theory of disparate impact,
union and applicant in requiring that this evidence of “genuine all employees/applicants are treated equally but the treatment
interest” be submitted in justifying the unfair labor practice results in different outcomes for different classes of individuals.
allegation. Hence, the Board felt the need to “abandon the
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Chapter 12 Labor Relations | 559
This may be particularly true when an employer has a Organized labor in the US continues to find itself at a
racially homogeneous workforce. In such case, a union might critical juncture. As jobs traditionally performed manually by
simply target employers whose workforces are entirely Cau- union members have become automated, filled by undocu-
casian by using an African–American, Hispanic–American or mented/illegal workers, and/or moved overseas, unions have
Asian–American salt. While the consequences of using such a to be aggressive and creative in maintaining and expanding
strategy have not yet been tested in the courts, the civil rights their membership bases if they are to survive. This will need
of individual salts might easily trump employer rights and to happen at the same time that many employers take actions
responsibilities under the NLRA and ultimately impede an to cut costs by eliminating positions held by union members
employer’s ability to use restricted hiring criteria and remain and/or reducing benefit levels of unionized employees. The
salt and union-free in the long run. stakes are high for both sides with the parties continuing to
see collective bargaining as a zero-sum game. Recent court
In Toering, the NLRB addressed the fact that union decisions have provided both employers and unions added
organizing campaigns in which prospective salts applied for incentive to continue their adversarial behavior. As both
employment had turned, in many instances, from those in sides test the limits of the NLRA, the courts and the NLRB
which there was a genuine interest in organizing the employ- will ultimately determine who wins not only individual bat-
er’s workforce, which is protected activity under the NLRA, tles but the ongoing war as ambiguous sections of the
to adversarial processes which were designed intentionally to National Labor Relations Act are challenged interpreted.
inflict substantial harm on employers. The shifting of the Ladies and gentlemen, the chess match is far from over.
burden of proof from employer to applicant under Toering
greatly alters the landscape under which salting activities can Source: Employee Responsibilities and Rights Journal, 21, (1), 37–49
and will be conducted in the future. Union organizers, on the (2009). Reprinted by permission.
other hand, will now be forced to consider salting as origi-
nally intended; a means of organizing the employer’s work- REFERENCES
force from the inside, an activity that is clearly within the
protection of the National Labor Relations Act, rather than Anonymous (2003). Special Report: Deja Vu?—Trade
one that is used to coerce employers into responses that form Unions. The Economist 367(8327). 77–80.
the basis for unfair labor practices allegations. Ironically this
“pro-employer” decision could greatly benefit unions. By Bureau of Labor Statistics (2008). Report USDL 08-092
realizing the limitations of the protection afforded to salting (issued 25 January, 2008). http://www.bls.gov.cps.
efforts to “gain entry” into an employer’s workforce can allow
unions to fine-tune their campaign organizing strategies. Curms, M. A., Hirsch, B. T., & MacPherson, D. A. (1990).
Union membership and contract coverage in the United
It is also probably safe to say that the issues confronted States, 1983–1988. Industrial and Labor Relations Review,
by the NLRA in Toering have not been put to rest. The case 44(1), 5–33.
was decided by a slim 3–2 margin and in a lengthy and scath-
ing dissent the minority points out several problems with the Gould, W. B. (2008). LERA and industrial relations in the
majority’s decision. First is the fact that Congress has expressly United States. Perspectives on Work, 11(2), 6–9.
chosen not to amend the NLRA relative to the issue of genuine
interest or intent of job applicants through a number of anti- Logan, J. (2006). The union avoidance industry in the United
salting bills which have been introduced since Town and States. British Journal of Industrial Relations, 44(4), 651–676.
Country. Second, and perhaps more notable, is concern over
the difficulty of assessing “genuine interest,” given the multi- Maher, K. (2005). Unions’ new foe: Consultants. The Wall
tude of factors which enter into a job applicant’s decision Street Journal, August 15, 2005, p. Bl.
whether to accept or not to accept employment. Of course,
the importance of such factors can vary from one applicant Mello, J. A. (1998). Redefining the rights of union organizers
to another so certainly the issues addressed in Toering have and responsibilities of employers in union organizing drives.
not been fully resolved and give unions the opportunity to Society for the Advancement of Management Advanced
test the ambiguities inherent in the decision. While Toering Management Journal, 63(2), 4–9.
constitutes a victory of sorts for employers there is no question
that unions, many of whom are fighting for their livelihood, Mello, J. A. (2004). Salts, lies and videotape: Union organiz-
will be further resolved in their organizing efforts as a result of ing efforts, management responses and their consequences.
the decision. More so, the slim majority in this case could Labor Law Journal, 55(1), 42–52.
easily be overturned in the future by political appointees to
the NLRB from another political party or even by those from Raudabaugh, J. (2008). National Labor Relations Board 2007
the same party with different ideologies. year in review: Fueling unions’ demand for Euro-centric
labor lab reform. Labor Law Journal, 59(1), 16–25.
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
560 | Part 2 Implementation of Strategic Human Resource Management
READING 12.2
Social Media, Employee Privacy and Concerted
Activity: Brave New World or Big Brother?
Jeffrey A. Mello
Introduction human resource professionals by the Society for Human
Resource Management found that 68 percent of organiza-
Advances in technology which allow tremendous portabil- tions were using social media for external communica-
ity and affordability of personal computers, personal tions, recruiting and marketing to engage customers,
digital assistants and tablet devices combined with the potential customers and potential employees.7 Employers
proliferation of social media networking sites have chan- see tremendous benefit from social networking which
ged the way in which we communicate, both privately and include facilitating collaboration among employees,
publically. Individuals are now afforded the means to improved efficiencies in operations, facilitation of orienta-
communicate with friends, co-workers and even strangers tion and learning, internal brand building, employee and
via networks that until very recently were not available. organizational development and faster development of
While e-mail has existed for several decades, new social new products and services.8 However, 85 percent of IT
media, particularly Facebook and Twitter, have not only professionals acknowledge that they are aware of employ-
greatly altered how both individuals and organizations ees visiting social networking sites for personal usage
communicate, but also changed the ways in which busi- while at work.9 The use of online social media has con-
ness is conducted as well as how people interact with tributed to the further blurring of the separation between
each other in many of their personal and professional employees’ work and personal lives.
dealings.
Traditional Employer Monitoring—
As of December 2011, Facebook had more than 800 mil- E-mail and Internet Usage
lion active users, half of whom log on to the site on a daily
basis and half of whom access Facebook through their A significant number of employers monitor the communica-
mobile devices.1 Roughly 200 million of these members tions and online activities of their employees in the work-
are in the United States, representing two-third of the place.10 In fact, 43 percent of employers were actively
population.2 Facebook is currently available in more than monitoring their employees’ internet use in 2007, the most
70 languages around the world3 and is estimated to reach recent year in which a reliable widespread survey was admin-
30 percent of global internet users.4 Twitter has approxi- istered.11 Most large employers have electronic communica-
mately 300 million users,5 although participation in both tions policies that alert employees that the employer reserves
sites continues to expand in both numbers of members the right to conduct such monitoring. E-mail activity is also
and volume of communications. widely monitored.12 Most of this monitoring is accomplished
not manually but electronically via software programs which
The use of social networking is not limited to per- can track time, content, size, attachments and recipients.13
sonal communications. 46 percent of information technol- This tracking can also be used on personal e-mail accounts
ogy professionals believe that online social networking is (such as those from AOL, yahoo and Google) which are
an important business tool and 31 percent of that number accessed from the employer’s network.14 96 percent of
considered it to be essential to contemporary business. employers who monitor their employee e-mails track incom-
More than 25 percent of organizations with 500 or more ing as well as outgoing messages.15 It is, however, more diffi-
employees have developed some sort of social networking cult for employers to monitor text and e-mail messages sent
presences as a business tool.6 A recent poll conducted of from employees’ personal personally-owned communication
devices than from those provided by the employer.
Copyright of Labor Law Journal is the property of CCH Incorporated and
its content may not be copied or emailed to multiple sites or posted to a There are many reasons why employers engage in mon-
listserv without the copyright holder’s express written permission. However, itoring the electronic communications of their employees.
users may print, download, or email articles for individual use.
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Chapter 12 Labor Relations | 561
The first is to protect the employer from a variety of legal often view electronic monitoring by employers as an invasion
liabilities which could come about as the result of the content of their privacy which serves to erode any trust relationship
of such communications. Reporting requirements imposed which exists between employees and employers. Eroded trust
under the Sarbanes-Oxley require the retention and storage can have detrimental effects on employee morale, commit-
of all e-mails related to financial transactions.16 In the event ment, performance, retention and self-esteem.23 Employees,
of any kind of employee misconduct, the employer can be however, can and do circumvent employer monitoring
held liable if the employer knew of the conduct and did noth- though the usage of personal e-mail accounts, rather than
ing about it as well as if the employer was unaware of the those of the employer, and/or use a variety of personal com-
conduct but was presumed that the employer “should have munications devices, such as their own laptop computers, cell
known” about the conduct.17 Such an obligation on the part phone, Blackberrys, i-Phones or other portable digital assis-
of employers requires a heightened level of sensitivity toward tant devices to communicate during work hours for personal
the activities of individual employees which might necessitate communications, web browsing, shopping, checking sports
the monitoring of communications taking place at work, on scores, pleasure reading or any other kind of personal activ-
employer-owned equipment and networks and within the ity. A typical supervisor may not have the time to monitor
context of an employee’s job. Additional liability can be each subordinate to determine whether the device being used
incurred through the sending and transmission of sexually is owned by the employer or the employee. In addition, the
explicit or provocative e-mails, with or without graphic portability of such devices can make them difficult to conceal
images, and display of materials on pornographic websites and their similarity to the typical hardware provided makes
which can serve as a basis for a sexual harassment lawsuit.18 personal usage difficult to determine.
Second, employers also might engage in employee mon- 28 percent of employers who monitor employee e-mail
itoring to determine the extent to which employees are actu- admit to having terminated one or more employees due to
ally doing their jobs during work hours and not engaging in what was discovered as a result of monitoring.24 In two–
distracting personal business. In addition to paying employ- thirds of these cases the terminations were the result of inap-
ees for work which is not being performed during regular propriate or offensive language, content or both. In other
working house, excessive personal use of employer networks cases the dismissal was attributable to excessive personal
and servers can result in lost productivity and efficiency for a use of the internet during working hours.25
work unit, data storage problems and/or slower network
operations.19 Legality and Privacy
A third reason for employer monitoring rests with the Generally speaking, employer monitoring of employee com-
fact that electronic media can be a means for disgruntled munications is not only legal but also practical, given the
employees to transmit confidential files or provide access nature and reach of electronic communications. E-mail mon-
to secure parts of the employer’s website or intranet.20 itoring has not been found to be unlawful, regardless of
Employers need to ensure that confidential documents, files, whether or not employees had been informed of company
information and/or trade secrets are not disseminated to policy,26 mainly because the employer usually owns the hard-
those outside of the organization who have no legitimate ware that is being used for communications as well the net-
business interests in accessing such information.21 The chal- work access on which the e-mail has been sent and received.
lenge here is that electronic transmission of proprietary infor- Employer internet monitoring is generally protected because
mation is quick and relatively easy but can also be “undone” employees cannot expect any reasonable expectation of pri-
if detected in a timely manner, justifying the need for vigilant vacy relative to websites they visit while they are at work and
monitoring. being paid by the employer for their services.27 In short, there
is no statutory right to privacy afforded to employees regard-
How widespread are these alleged transgression activi- ing their employment-related electronic communications.
ties? A recent American Management Association survey
found that 14 percent of employees admitted to e-mailing To date, courts have consistently held that employees do
confidential or proprietary information about their employer not have any reasonable expectation of privacy regarding
its people, products and services to outside parties; 14 percent online communication, including internet usage and work
admitted to sending third parties potentially embarrassing e-mail systems.28 The early precedent-setting case regarding
and confidential company e-mail that is intended strictly e-mail monitoring, Smyth v. Pillsbury,29 was heard in 1996.
for internal readers; 89 percent of employees admitted to The court found that employees have no reasonable expecta-
using the office system to send jokes, gossip, rumors or dis- tion of privacy because e-mail communications are voluntary
paraging remarks to outsiders; and 9 percent admitted using and employer’s interests in maintaining professionalism and
company e-mail to transmit sexual, romantic or porno- preventing harassment in the workplace take precedent over
graphic text or images.22 any privacy expectations of employees. This reasoning was
extended in another case, McLaren v. Microsoft,30 where
Despite the justifications for employer monitoring, there
can be a significant downside to this activity. Employees can
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562 | Part 2 Implementation of Strategic Human Resource Management
Michael McLaren, a Microsoft employee, had labeled some discomforting information about an employee on a social
folders as “personal” on his computer and created private networking site as the purpose of such sites is to share infor-
passwords by which he accessed them. The court found that mation which is personal and sites such as Facebook seem to
the employer’s ownership of the computer and the network encourage individual self-expression.
preempted any presumption or expectation of privacy on the
part of the employee. The court further held that any alleged Employers face an ethical question relative to whether,
privacy claims were rendered moot when an e-mail was as part of due diligence in the hiring process, they should
transmitted to another person, hence becoming public.31 scour online networks and sources to discover information
about prospective hires. A 2011 survey of HR executives
The Next Wave of Monitoring—Social conducted by the Society for Human Resource Management
Networking Sites and Search Engines found that 26 percent of organizations were using search
engines and 18 percent were using social networking sites
Social networking, as noted above, is the latest significant to screen, rather than recruit,34 applicants for employment.
trend in personal communications. However, a significant Of this group, 15 percent were using information gathered
number of businesses have embraced social networking sites via search engines to disqualify candidates and 30 percent
as a critical means of communication, public relations, pro- had used information found on social networking sites to
motion and marketing and branding. Social media is also disqualify an applicant.35 However, a more general survey
being used to communicate with employees as well as with found that 95 percent of employers admitted to using social
prospective employees about job opportunities and the media sites to discover additional information about job
employment relationship in general. applicants.36 A third survey found that 45 percent of
employers research social media sites as part of the routine
The combination of employer business use of social net- screening of job applicants.37
working combined with its popularity among individuals
who use it for personal reasons creates two strong simulta- While the survey results vary, it is very clear that
neous forces driving the proliferation of social networking. employers are utilizing search engines and social media to
Use of social networking sites by employees is easy and inex- discover information about job applicants and, in some
pensive. Similarly, monitoring of employees’ social network cases, use this information to screen out applicants. Argu-
activities by employers is easy and inexpensive. No special ments in favor of utilizing such practices would include the
technology or customized software program is needed for desire to ensure that the applicant provides the best “fit”
such monitoring. To conduct any kind of monitoring activity, with the company, particularly in light of how expensive
an employer would only need to create a free account, even recruiting activities can be. Many employers condone, if
under a disguised identity, on a social networking site to gain not encourage, hiring managers and human resources per-
access to the activities of any or all of its employees. Unless sonnel to conduct such due diligence, feeling that the prac-
users of a social networking site restrict their personal tice is certainly not unlawful and, given potential costs and
account to “friends only,” the accounts they create and their risks associated with hiring the wrong candidate, an ethical
content are publically available. Some employees are aware of if not necessary practice. Privacy advocates would argue that
the possibility of employer monitoring as 29 percent of visiting the Facebook profile of a job applicant as part of the
employees report having become both more private and con- employer’s screening of potential employees is both unnec-
servative in their social networking endeavors for fear of essary and an invasion of privacy.
employer discovery and retribution.32 This is an especially
risky issue for employees as an employer can shield their Once a job applicant becomes an employee, the appro-
identity by using a pseudonym allowing them to learn priateness of such searches becomes even more ambiguous.
about employee’s off-work, personal life in a manner that While the same information obtained via social networking
the employee may not know who has actually gained access and search engine monitoring may be available post–hire as
to the information the employee has posted. well as pre-hire, one could question the motivation of an
employer’s searches into existing employees’ private personal
Monitoring through the use of search engines is as lives outside of work. Once the practice became public within
equally quick, easy and inexpensive. Google or Yahoo the workplace, such post-hire searches might greatly affect
searches, for example, can turn up information about employee morale and trust38 as in most cases an employer
employees which they employee may not have personally might monitor an employee’s social networking activities
chosen to make public and/or information which was posted and posts as a means of collective evidence to use against
by others. Much of this information can be potentially an employee for disciplinary purposes rather than simply
embarrassing, such as information about legal proceedings.33 wanting to get to know the employee better.
However, it is probably much easier for an employer to find
A number of recent situations have illustrated the conse-
quences for employees of employer monitoring of employee
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 12 Labor Relations | 563
activity online. After thirteen members of the Virgin Atlantic and the availability of the means to monitor the usage and
Airlines cabin crew expressed their impressions of employer, content by which people communicate raise the issue of the
its planes and passengers as part of a Facebook group Virgin appropriateness of employer monitoring.
terminated them.39 The airline could not find any “justification
for using [Facebook] as a sounding board for staff of any com- The only existing law which impacts communications,
pany to criticize the very passengers who ultimately pay their the Electronic Communications Privacy Act (ECPA),44 was
salaries.” When Boston-based Anglo Irish Bank employee enacted in the 1980s in response to the kinds of electronic
Kevin Colvin told his supervisor he had to miss work due to communications which were being utilized at that time. Title
a family emergency in New York, his supervisor checked his I of the EPCA45 addresses electronic communications solely
Facebook page the following day and discovered that Colvin from the perspective of the interception of wire and aural
had posted Halloween party pictures from the previous night messages. Despite the fact that e-mail was in its earliest stages
with Colvin dressed as a green fairy holding a wand and can of of development at the time the EPCA was passed and social
beer. Colvin was fired for lying after his supervisor forwarded networking as we know it was non-existent, federal court deci-
the photo to everyone in the office.40 sions have applied the terms and conditions of the EPCA to e-
mail. However, Title I provides for the express exemptions
Mario County FL Sherriff’s office fired deputy Brian from the statue communications related to the normal course
Quinn after Quinn posted a picture of himself on his of business as well as those conducted on proprietary commu-
MySpace page in full uniform with comments about women’s nication networks and systems. Consequently, employers have
breasts, binge drinking and nude swimming for “conduct prevailed in every case in which employees have objected to
unbecoming of an officer.”41 Dan Leone, a Philadelphia monitoring as a violation of their privacy rights.46
Eagles parking lot attendant, was terminated after six years
of service when he posted derogatory comments on his Face- Hence, employees currently enjoy no specific privacy rights
book page which criticized the Eagles for their failure to in their communications and very limited protection against
resign a player.42 In yet another case, a server at Brixx Pizza employer monitoring (unless such monitoring was targeted at
in North Carolina berated a couple who left her a small tip a specific employee who alleges the monitoring was based on
on her Facebook page, mentioning her employer (Brixx) by protected class status) and the possible consequences employers
name, and was fired as a result. In defending its action, Brixx take in response to what they discover as part of any monitoring.
claimed a violation of company policy against disparaging Courts have also not overturned firings which have been based
customers and criticizing the restaurant.43 solely on derogatory postings on social networking sites.
Employers have generally not been liable for adverse employ-
These incidents illustrate the fact that issues related to ment actions resulting from employee postings on social media
work and employment which were previously “vented” among sites unless the employer gained access to the information in
co-workers at the water cooler, in the cafeteria or in the rest violation of the website’s agreed terms of usage or without con-
room and now being vented publically online for a much sent.47 However, because social networking is still a relatively
wider audience. A disgruntled employee doesn’t have to wait new phenomenon in personal, mass public communication, it
to get back to the office to express her or his feelings. Online is understandable that no specific laws have yet been developed
networks provide an immediate opportunity to deal with issues regarding employee and employer rights and responsibilities.
and express feelings. While such public venting allows for spon-
taneity of expression, posts also cannot often be retracted and National Labor Relations Act
may continue to exist and be accessed long after the employee and Concerted Activity
has “calmed down” or even had a change or heart about any
specific incident. More so social network monitoring of existing Prior to the advent of social networking, the first case which
employees can allow employers to monitor activities and dis- tested the extent to which electronic communication by
cover personal information which may or may not be work- employees was protected under any federal law involved an
related. The ethical issue for employers is that much of which online bulletin board system. In Konop v. Hawaiian Air-
may be discovered online is not related to job performance and lines,48 the Ninth Circuit Court of Appeals held that an
how is such information to be used once it is discovered. online bulletin board, established and maintained by a com-
pany pilot, used to discuss and criticize the employer’s rela-
Where We Stand tionship with the employee union was protected concerted
activity under the Railway Labor Act (RLA). Because the
As the above discussion illustrates, the American legal system Konop court relied upon National Labor Relations Act
has not kept up with the technological advances which have (NLRA) in reaching its decision, which is typical in RLA
greatly altered how we communicate. The creation of new cases, the Konop holding was considered precedent for inter-
communication media which were previously unavailable pretation of the NLRA relative to this issue.49
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564 | Part 2 Implementation of Strategic Human Resource Management
Given the advent of social networking and online managing editor had told the employee that he was not
employer monitoring of employees, the question has been allowed to tweet about anything related to work.51
raised as to whether the NLRA might provide employees
some kind of protection against employer actions taken in In the AMR example, it is noteworthy that Souza was
regard to employee postings online. At this juncture, several part of a unionized workplace. Employers need to remain
complaints have been filed with the National Labor Relations cognizant, however, of the fact that nonunionized employ-
Board (NLRB). ees enjoy the same rights under the NLRA as those who
already belong to unions, including the right to communi-
The first complaint was filed with the NLRB in Novem- cate with coworkers about working conditions in a con-
ber 2010. Danwmarie Souza, a union member/employee of certed manner. In May 2011, the NLRB announced that it
the American Medical Response of Connecticut (AMR) was suing Hispanics United of Buffalo, a nonprofi t agency
ambulance service, posted negative comments about her which provides various social services to low-income clients.
supervisor on her Facebook page from her home computer After an employee of Hispanics United alleged that the
after a work request she submitted had been denied. When organization’s employees did not do enough to assist its cli-
some of her co-workers posted supportive comments in ents, fi ve co-workers responded to this statement, through
direct response to her post, Souza posted further negative Facebook postings, by criticizing their workloads and work-
comments and was subsequently fi red for alleged violation ing conditions. Hispanics United terminated the Facebook-
of the AMR’s internet policy which prohibits employees from posting employees on the grounds of harassment of their
posting anything about AMR without express permission. co-worker who made the initial statement. The NLRB
While the employer stated that Souza was fi red due to “mul- argued that the Facebook postings constitute protected con-
tiple, serious complaints about her behavior,” the NLRB certed activity under Section 7 because they pertain to terms
reasoned that because Souza was communicating with her and condition of employment. In September 2011 an NLRB
co-workers about her supervisor, even though it was in a administrative law judge ruled against the employer, accept-
public forum which could be accessed by others, she was ing the MLRB argument, and ordered that the fi ve employ-
engaging in concerted activity rather than being disloyalty to ees be reinstated with back pay.52
her employer. Concerted activity is protected under Section 7
of the NLRA, which prohibits employers from interfering with Section 7 of the NLRA provides all covered employees
employees’ efforts to work together to improve the terms and the right to engage in “concerted activities for the purpose of
condition of their workplace and their employment. There was collective bargaining or other mutual aid or protection.” It is
no court ruling in the case as the parties settled in February critical however, that in order to receive protection that the
2011. As part of the settlement AMR agreed to revise its com- employee’s actions or communications not be simply on her
pany policies regarding employees’ rights to communicate or his own behalf nor should the employee disparage the
with each other about work-related matters.50 employer, display blatant insubordination or distribute or
publicize confi dential information to which the employee is
However, in April 2011, the NLRB did not fi nd unlaw- privy.53 Section 7 protection would not be afforded in such
ful another employer’s decision to fi re an employee because instances.
of inappropriate post to his Twitter account. When the
Arizona Daily Star newspaper discovered tweets from one Regardless of whether a workplace is unionized or non-
of its reporters which made sarcastic and derogatory com- union, any employer policy which attempts to impede employ-
ments about copy editors the employee was told by the man- ees’ abilities and rights to communicate outside of the work-
aging editor that he was prohibited from airing grievances or place regarding wages, hours, supervision or working
commenting publically about the Daily Star. Subsequent to conditions would be subject to a Section 7 challenge. Such
this incident the reporter posted additional sarcastic tweets protected concerted activity could include online discussion
which criticized both the Tucson police and the reporting boards, as noted in the Konop case, or even the case of a single
of a local television station. When the reporter was termi- employee who discusses issues related to supervision.
nated he fi led a complaint with the NLRB who held that Although there has been little commentary about how social
the reporter’s behavior was neither protected nor concerted media could be used as a means of organizing workplaces, the
activity under the NLRA because it did not related to terms NLRB interpretation issued in AMR could easily be seen by
and conditions of employment nor did it seek to involve union organizers as a new means to communicate with work-
other employers on matters related to employment. While ers who are being recruited by the union for representation.
the associate general counsel of the NLRB recommended Both pro-union employees and organizers themselves are
that the charge be dismissed, he did note that the employer afforded opportunities to communicate with workers via social
had made statements which could be interpreted as impeding media and networks that were previously unavailable, more
employees’ Section 7 rights, specifi -cally noting that the cumbersome and/or more costly. Social networking has chan-
ged the way in which we communicate and this is particularly
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 12 Labor Relations | 565
so for employees who wish to express themselves about work- 4. Jeremiah Owyang, A Collection of Social Networks
ing terms and conditions which apply to others. Given the Stats for 2010, http://www.web-strategist.com/blog/
above discussion it seems inevitable that social media will be 2010/01/19/a-collection-of-social-network-stats-for-
embraced by labor unions as a means and strategy for not only 2010/, retrieved 6 January 2012.
communicating with existing union members but, perhaps
more important, a means to communicate with employees of 5. Wikipedia, http://en.wikipedia.org/wiki/Twitter,
companies which are being targeted for organization. retrieved 6 January 2012.
Summary 6. Lauren Leader-Chivee and Ellen Cowan, Networking
the way to success: online social networks for workplace
Social networking is here to stay as not only have individuals and competitive advantage, http://findarticles.com/p/
embraced it as a vital means of communication, organiza- articles/mi_6768/is_4_31/ai_n31909656/, retrieved
tions have similarly embraced it as a vital 21st century 6 January 2012.
means of marketing and promotion and conducting business.
The question remains as to whether employees are entitled to 7. Society for Human Resource Management, SHRM
a reasonable amount of privacy in their personal, public com- Survey Findings: The Use of Social Networking
munications on social networking sites. At this juncture, Websites and Online Search Engines in Screening Job
unless such postings can be considered concerted activity, Candidates, 25 August, 2011.
employers are free to take action against employees based
on postings which do not sit well with the employer. How- 8. Leader-Chivee, supra note 6.
ever, the NLRB is apparently readily to vigorously investigate
any allegations of alleged suppression of or intimidation 9. Sarah Perez, A Growing Acceptance of Social Net-
related to concerted activity but even then there is some pre- working in the Workplace, http://www.readwriteweb.
sumption of a duty of loyalty to the employer and limitations com/enterprise/2009/07/a-growing-acceptance-of-
as to how far an employee can go. social-networking-in-the-w.php, retrieved 6 January
2012.
While numerous states have passed laws which restrict
employer actions which are the result of an employee’s legal 10. See Am. Mgmt. Ass’n & The ePolicy Inst., 2007 Elec-
off-duty conduct, there is no body of law which addresses the tronic Monitoring & Surveillance Survey 4 (2008),
issue of employer monitoring of and resultant discovery of available at http://www.plattgroupllc.com/jun08/
information posted on social networking sites. Employers can 2007ElectronicMonitoringSurveillanceSurvey.pdf (sur-
be fair-minded in developing policies which balance business veying employer monitoring practices in various areas
needs and any reasonable perceived privacy expectations such as the Internet, e-mail, computer usage, etc.)
employees could have but in the interim, until such case law
is developed, the only protection employees potentially have 11. Id. at 1.
against employer actions based on discovery of social network-
ing posts is the defense of protected concerted activity under 12. Id. at 5 (stating that twenty-six percent of employers
the NLRA. However, while the NLRB has been quick to file suit monitor all employees’ e-mail accounts and seventeen
in such cases, no court has yet to rule on this interpretation. In percent of employers only monitor the e-mail accounts
the meantime, employees need to use discretion and judgment of employees in selected job categories).
with their posts, realizing the perpetuity issue associated with
hitting the “send” or “enter” button on the keyboard. 13. Id. (reporting that seventy-three percent of all
employers that monitor employee e-mails do so via
Source: © 2012 by Jeffrey A. Mello software monitoring programs).
ENDNOTES 14. Online Spying: Remote Computer Spyware Software,
Online-Spying.com, http://www.online-spying.
1. Wikipedia, http://en.wikipedia.org/wiki/Facebook, com/webmail-spy.html (last visited Oct. 7, 2010). See
retrieved 6 January 2012. also Rachel Konrad & Sam Ames, Web-Based E-mail
Services Offer Employees Little Privacy, cnet News (Oct.
2. New York Times, http://topics.nytimes.com/top/news/ 3, 2000), http://news. cnet.com/2100-1017-246543.
business/companies/facebook_inc/index.html, html (stating that, “unfortunately, security experts say
retrieved 6 January 2012. many employees would be surprised to know that
Web-based email services also offer little privacy.
3. Wikipedia, supra note 1. Messages sent via a Yahoo or Hotmail account … are
just as accessible [as employer-created e-mail
accounts] to nosy employers.”).
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
566 | Part 2 Implementation of Strategic Human Resource Management
15. Am. Mgmt. Ass’n & The ePolicy Inst., supra note 10, http://searchsecurity.techtarget.com/news/interview/
at 1. 0,289202,sid14_gci940369,00. html (quoting an expert in
electronic monitoring who stated that “[e]mployee
16. Carolyn Holton, Identifying disgruntled employee sys- monitoring is a bad idea ... when it’s used for Big
tems fraud risk through text mining: A simple solution Brother and micromanagement purposes. Organizations
for a multi-billion dollar problem, 4 Decision Support would be better off not doing it if they’re going to
Systems, 46, 853–864 (2009). scrutinize their employees’ every move. If it creates a
morale problem (and it will if it’s not handled properly)
17. Christopher Pearson Fazekas, 1984 Is Still Fiction: all of its value is diminished.”). More generally,
Electronic Monitoring In the Workplace and U.S. employee monitoring can have the following negative
Privacy Law, 15 Duke L. & Tech. Rev. 1-16 (2004). effects: 1. An employee may suffer loss of self-esteem if
she interprets the monitoring to indicate a lack of trust
18. See, e.g., Blakey v. Cont’l Airlines Inc., 751 A.2d 538, in her.; also, Smith and Tabak, supra note 19, at 43.
543–44 (N.J. 2000) (discussing the facts of a sexual
harassment case filed by a female airline pilot claim- 24. Am. Mgmt. Ass’n & The ePolicy Inst., supra note 10,
ing, among other things, that her coworkers posted at 1.
sexually explicit comments about her on Continental
Airlines’ online bulletin board). 25. Id. at 8–9.
19. See, e.g., Lisa Scott & Ross Tate, Monitoring Internet 26. Encouragingly, seventy-one percent of employers
Usage—Spring 2010, Ass’n of Local Gov’t Auditors monitoring employee e-mail notify such employees
(2010), http://www.governmentauditors.org/index. prior to any monitoring. See id. at 5 (stating that
php?option=com_content&view=ar ticle&catid=47: eleven percent of employers do not notify employees
accounts&id=594:monitoring-internet-usage-spring- while another eighteen percent do not know whether
2010<emid=123 (reiterating that employee Internet e-mail monitoring took place).
use for personal reasons can cause “[b]andwidth and
storage shortages [sic] [particularly] from peer to-peer 27. See, e.g., Doe, 887 A.2d at 1167 (upholding an
[sic] file sharing and audio/video streaming.”); and employer’s Internet monitoring policy, questioning
William P. Smith and Filiz Tabak, Monitoring whether, “with actual or imputed knowledge that
Employee E-mails: Is There Any Room for Privacy? Employee was viewing child pornography on his
23 Academy of Management Perspectives, (4), computer, was defendant under a duty to act, either by
33–48 (2009). terminating Employee or reporting his activities to law
enforcement authorities, or both?” and concluding that
20. See, e.g., Jared A. Favole, Ex-Bristol-Myers Employee such a duty exists).
Charged with Stealing Trade Secrets, Barclays Latitude
Club (Feb. 3, 2010), http://www.barclays.com/latitu- 28. Tanya E. Milligan, Virtual Performance: Employment
declub/er_gr_global_news_article.html?ID_NEWS= Issues in the Electronic Age, 38 Colorado Lawyer (2),
133949142 (discussing accusations against a Bristol 29–36 (2009).
Myers’ technical operations associate for allegedly
stealing company trade secrets in order to form a 29. 914 F. Supp. 97, 100 (ED Pa. 1996).
competing company in India); Elinor Mills, Microsoft
Suit Alleges Ex-Worker Stole Trade Secrets, cnet News 30. 1999 WL 339015, 1999 Tex. App. LEXIS 4103 (Tex.
(Jan. 3, 2009), http://news.cnet.com/8301-10805_3- App.-Dallas May 28, 1999).
10153616-75. html (stating that an ex-employee
“allegedly downloaded confidential documents 31. Michael Rustad and Sandra R. Paulsson, Monitoring
onto his company-issued laptop … and then allegedly Employee E-Mail And Internet Usage: Avoiding The
used a file-wiping program and a ‘defrag’ utility Omniscient Electronic Sweatshops: Insights From
designed to overwrite deleted files in order to hide Europe, 7 University of Pennsylvania Journal of Labor
the tracks.”). & Employment Law, 829–904 (2005).
21. Smith and Tabak, supra note 19, at 34. 32. See, e.g., Deloitte, Social Networking and Reputational
Risk in the Workplace 4 (2009), available at http://
22. Laura P. Petrecca, More employers use tech to track www.deloitte.com/assets/Dcom-UnitedStates/Local%
workers, USA Today, 17 March, 2010. 20Assets/Documents/us_2009_ethics_workplace_
survey_220509.pdf., at 12.
23. See, e.g., Mia Shopis, Employee Monitoring: Is Big
Brother a Bad Idea?, SearchSecurity.com (Dec. 9, 2003), 33. See, e.g., Corey A. Ciocchetti, The Eavesdropping
Employer: A Twenty-First Century Framework for
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 12 Labor Relations | 567
Employee Monitoring, 48 American Business Law 44. Pub. L. 99-508,Oct. 21, 1986, 100 Stat. 1848, 18 U.S.C.
Journal, (2), 285–369 (2011). §2510-2522.
34. A different survey, also conducted by the Society for 45. Stored Communications Act, 18 U.S.C. §§ 2701-12
Human Resource Management in 2011, found that
56% of organizations use social media sites to recruit 46. Smith and Tabak, supra note 19, at 38.
applicants, with 95% using Linkedin, 58% using Face-
book and 42% using Twitter. This 56 % represented an 47. LaPlaca and Winkeller, supra note 36, at 7.
increase from 34% just three years earlier in 2008.
SHRM Research Spotlight: Social Networking Website 48. 236 F.3d 1035 (9th Cir.2001).
and Staffing, http://www.shrm.org/Research/Survey
Findings/Documents/Social%20Networking%20 49. Scott Grubman, Think Twice Before You Type: Blog-
Flyer_FINAL.pdf, retrieved 6 January 2012. ging Your Way to Unemployment, 42 Georgia Law
Review 615 (2008); Carson Strege-Flora, Wait! Don’t
35. Society for Human Resource Management, supra fire that blogger! What Limits Does Labor Law Impose
note 7. on Employer Regulation of Employee Blogs?, 2 Shidler
J. L. Com. & Tech. 11 (Dec. 16, 2005), at <http://www.
36. Alexis Madrigal, What You Shouldn’t Post on Your lctjournal.washington.edu/Vol2/a011Strege.html>
Facebook Page If You Want A Job, http://www. thea-
tlantic.com/technology/archive/2011/10/what-you- 50. Chang, supra note 41, at 35.; Maria Greco Danaher,
shouldnt-post-on-your-facebook-page-if-you-want-a- NLRB Settles Complaint Based on Facebook Posts as
job/246093/, retrieved 6 January 2012. ‘Concerted Activity’, http://www.shrm.org/LegalIssues/
FederalResources/Pages/NLRBSettlesComplaintFace
37. Damian R. LaPlaca and Noah Winkeller, Legal Impli- book.aspx, 9 February 2011, retrieved 6 January 2012.
cations of the Use of Social Media: Minimizing the
Legal Risks for Employers and Employees, 5 J. Bus. 51. Allen Smith, NLRB: Discharge of Employee for Inap-
Tech L. Proxy 1 (2010), http://www.law.umaryland. propriate Tweets Was Lawful, http://www.shrm.org/
edu/academics/journals/jbtl/proxy/5/5_001_LaPlaca. LegalIssues/FederalResources/Pages/NLRBInappro
pdf, at 8. priateTweets.aspx, 13 May 2011, retrieved 6 January
2012.
38. Ciocchetti, supra note 33.
52. Maria Z. Stearns, NLRB Actively Engaged in Examin-
39. John Browning, Employers Face Pros, Cons with Mon- ing Employee Social Media Use, http://www.rutan.com/
itoring Social Networking, Houston Bus. J. (Feb. 27, files/Publication/46b9dcfa-2034-4c1f-a7ce-5907c824
2009), http://www.bizjournals.com/houston/stories/ a6de/Presentation/PublicationAttachment/e806e8b8-
2009/03/02/smallb3.html. 2e0d-48ae-9ed3-5f095a222d18/Society%20for%20
Human%20Resource%20Management.pdf,
40. Id. 16 September 2011, retrieved 6 January 2012
41. Id. 53. Nancy King, Labor Law for Managers of Non-Union
Employees in Traditional and Cyber Workplaces, 40
42. Kabrina Krebel Chang, Facebook Got Me Fired, American Business Law Journal, (4), 827–883 (2003);
Builders and Leaders, http://www.bu.edu/builders- Robert Sprague, Fired for Blogging: Are There Legal
leaders/2011/05/18/facebook-got-me-fired/34-35, Protections for Employees Who Blog?, 9 U. Pa. J. Lab. &
retrieved 6 January 2012. Emp. L. 355 (2007).
43. Id.
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
13C H A P T E R
Employee Separation and
Retention Management
LEARNING Retention Management at Kraft Foods
OBJECTIVES
Information technology (IT) is one of the most difficult areas for organizations to staff. The
• Understand the short supply of trained, experienced workers coupled with the increasingly strong demand
importance of proactive has presented almost limitless career opportunities for IT professionals. Most large organi-
management of employee zations experience annual turnover in the 20 percent range. Kraft Foods, however, has
separation developed a retention program that has resulted in the reduction of the turnover rate of
its nearly 1,000 full-time IT professionals to a staggering 5 percent.
• Examine the alternatives
employers have when The program Involved Kraft’s chief Information officer (CIO) partnering with human
considering large-scale resource (HR) to help HR understand the unique challenges being faced by IT. Kraft’s
layoffs or reductions retention program involves more than just the standard attractive stock options; it
in force involves a holistic and integrated set of HR programs. Many of Kraft’s IT professionals
have come directly from its college Internship program. Interns are given early responsibil-
• Gain a sense of the costs ity for learning different technologies and are held accountable for rigorous performance
of turnover and how to outcomes early on. Seventy percent of IT interns who are offered permanent jobs accept.
manage turnover
strategically Once hired on a permanent basis, employees are expected to engage in an objectives-
based management system. Managers are specially trained to provide ongoing feedback
• Appreciate the factors that and conduct developmental performance feedback sessions. Employees are allowed to pur-
influence retirement and sue one of two career tracks within IT: technical or managerial. To assist with development,
how employers can actively an intranet site provides learning tutorials, links to job postings, formal training courses, and
and strategically manage both division and functional area Web sites that discuss competencies required in these
this process areas. Consequently, employees are allowed to develop a plan for career development
within Kraft. IT employees are further encouraged to devote 10 working days per year exclu-
• Understand the function of sively to career development pursuits. In addition to in-house development opportunities, a
and processes associated tuition reimbursement plan is offered for outside programs of study.
with employee retention
and its critical role in Employees also become part of the IT Leadership Program, where junior employees
strategic human resource are paired with an executive mentor. The one-year program involves about 30 days of joint
management work activities and provides additional exposure to leadership and technology issues.
Probably most importantly, IT employees at Kraft note that the top reason they stay
is the sense of family they find at work. Ideas are solicited and accepted from every level
in the organization, and inclusion is a strong company value. Kraft also understands the
needs of its younger workers who populate the IT division. It offers flexible hours, telecom-
muting and part-time work options, a casual dress code, and a new campus that includes
a company store and an onsite health club.1
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570 | Part 2 Implementation of Strategic Human Resource Management
O rganizations can expect continuing pressure to change and adapt. Societal changes affecting
lifestyles, technology, and the economy create threats and opportunities for nearly all orga-
nizations. The organization of yesterday that was able to serve the same customers in the
same markets, use the same production technology, and operate in a relatively stable domestic
economic landscape no longer exists. Profitable markets invite entry of new competitors; techno-
logical changes in production impact efficiency; lifestyle changes alter preferences for certain types
of products and services; and economic decisions must be made within a global context.
Contemporary organizations that wish to remain competitive need to be flexible and responsive
to their environments. These organizations must develop ways to deal with increasing skill
obsolescence among their employees and the labor market in general; they must also consider
alternative forms of organization structure due to downsizing operations, selling off subsidiaries,
and merger and acquisition options. From an HR perspective, this often involves employee training
and development. In an increasing number of scenarios, however, the organization must strategically
analyze its workforce and objectives and make decisions to sever relationships with employees.
Similarly, employees today spend less time with individual employers than workers did in the past
and make a greater number of career changes during their working years. Personal lifestyle
decisions, opportunities with other organizations, and entrepreneurial motivations are causing many
employees to leave their organizations.
The pressure to remain competitive and efficient—coupled with the fact that employees are less
committed to individual employers than in the past—makes the process of employee separation a
key strategic issue for organizations. An effective HR strategy involves managing the process by
which employees leave the organization, regardless of whether such departure is by the employer’s
or employee’s choice. Organizations can manage this separation process to ensure that transitions
are smooth for both employers and employees, that operations are not disrupted, and that
important professional relationships are not damaged. The three major ways that employees leave
the organization are through reductions in force (initiated by the employer), turnover (initiated by
either the employer or employee), or retirement. Organizations should have strategies for managing
each form of separation.
Reductions in Force
Reductions in force or employee layoffs are attempts by employers to reconfigure their workforces.
Reductions in force are becoming increasingly common in nearly all industries and are often
caused by organizational restructuring following merger or acquisition activity. A reduction in
force is sometimes used to make an organization more competitive by reducing costs.
Organizations reduce the size of their workforces for three main reasons: inefficiency, lack of
adaptability in the marketplace, and a weakened competitive position within the industry. In all
regards, efficiency is a major driving force: In many organizations, labor or payroll is one of the
largest expenses. This is particularly true in service organizations, which are making up an increas-
ingly significant portion of our economy and gross national product (GNP). Efficiency is sought
by attempting to reduce labor costs and accomplishing more work with fewer individuals by rede-
signing work processes. Interestingly, an organization’s stock price often skyrockets when layoffs
are announced. Such decisions create expectations among investors of improved short-term finan-
cial performance.
One federal law regulates employer actions taken as part of reductions in force. The Worker
Adjustment Retraining and Notification Act (WARN) went into effect in 1989 and requires
employers with 100 or more employees to provide affected employees with a minimum of 60
days’ written notice of any facility closings or large-scale layoffs of 50 or more employees.
WARN does not apply to federal, state, or local government agencies. Employers found to be in
violation of the law can be required to provide back pay, expenses, and benefits to all workers dis-
missed without appropriate notice in addition to fines.
Employers who conduct layoffs often provide affected employees with 60 days’ notice and
immediately relieve them of their job duties. The employees remain on the payroll for two months
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Chapter 13 Employee Separation and Retention Management | 571
but are able to use the two-month period to adjust, seek new employment, and transition out of
the organization. This not only assists the employee in his or her transition and job search, but it
also helps to ensure that laid-off employees will be less likely to file for unemployment compensa-
tion insurance. State unemployment compensation insurance programs are funded by employers,
with the percentage rate determined by the use of the funds by the employers’ former employees.
An employer who lays off a large number of employees who file for and collect unemployment
compensation will have to reimburse the compensation insurance program proportionately.
To facilitate the transition (and ensure that their unemployment insurance payments remain
lower), many organizations implement outplacement programs for laid-off employees. Outplace-
ment services, which may be conducted in-house or contracted to an external vendor, not only
help laid-off employees land on their feet but also serve as a public relations tool: These services
help to retain the support and goodwill of remaining employees by making them feel that the
organization will look out for them if future reductions are necessary. In addition to helping main-
tain the morale and motivation of remaining employees, outplacement programs reduce the risk of
litigation by disgruntled former employees.
Realizing that in certain circumstances it might be unrealistic, impossible, or unfair to require
employers to provide such written notification, Congress allowed several exceptions to WARN.
These exceptions are for (1) a “faltering company” that is actively seeking capital to retain its
scope of operations and reasonably believes that giving employees a warning will jeopardize the
financing; (2) an “unforeseeable circumstance,” such as a strike at a supplier’s business; (3) a natu-
ral disaster, such as a fire, flood, earthquake, or hurricane; and (4) any operation set up as a “tem-
porary facility,” where employees who were hired were informed that the facility and employment
were nonpermanent.
Layoffs can sometimes be avoided through proper planning. The main benefit of strategic HR
planning is to ensure that supply and demand of employees are equated while avoiding the costs
associated with severe overstaffing and understaffing. Effective HR planning in most instances can
reduce or eliminate the need for any kind of large-scale reductions in force or layoffs. Regardless
of the size of the surplus, employers must identify the real reason for the excess number to deter-
mine an appropriate response. This strategic perspective determines whether the surplus is
expected to be temporary or permanent to assist in developing a plan of action with a correspond-
ing time frame. For example, longer range surpluses can often be managed without the need for
layoffs by utilizing hiring freezes, not replacing departing employees, offering early retirement
incentives, and through cross-training of certain employees to allow them to develop skills that
the organization anticipates needing. Short-run surpluses can be managed through loaning or sub-
contracting employees, offering voluntary leaves, implementing across-the-board salary reductions,
or redeploying workers to other functions, sites, or units.
Two more policy-oriented solutions to remedy overstaffing might involve (1) tying a greater
portion of compensation to division or organization performance and/or (2) regularly staffing the
organization at less than 100 percent and making up the difference with temporary employees or
offering overtime. The former strategy creates a flexible or variable pay plan to control costs
because payroll expenses are directly related to the organization’s profitability. Therefore, over-
staffing is somewhat less of a concern. The latter strategy creates a flexible or variable workforce
that can be expanded or contracted to meet business needs and conditions. These strategies are
summarized in Exhibit 13.1.
As part of any layoff plan, an organization also needs to develop an appropriate strategy for
managing the survivors. A key management challenge that is often overlooked is ensuring that the
retained employees can adjust to the changes. It should not be assumed that these individuals will
automatically be relieved (and thrilled) to have retained their jobs during the layoff and will still
be motivated and productive. These individuals may feel less secure about the jobs they have
retained; be asked to perform more work than previously without a corresponding increase in
pay; have lost long-term friends and coworkers; and may have damaged morale and fear that
they are vulnerable to future layoffs. Consequently, they may be less loyal to the employer and
have strong incentives to leave the organization. Studies have shown that employees who survive
layoffs have decreased morale, less commitment to their work environments, more negative
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572 | Part 2 Implementation of Strategic Human Resource Management
EXHIBIT 13.1 Strategies for Managing Employee
Surpluses and Avoiding Layoffs
Long Run
• Hiring freezes Short Run Policy © Cengage Learning
• Attrition
• Offer early retirement • Loaning or subcontracting • Greater percentage of
labor compensation tied to
incentives performance
• Cross-training of • Voluntary leaves
• Across-the-board salary • Staff at less than
employees 100 percent
reductions
• Re-deploying employees
attitudes toward their employers and higher turnover intention.2 The organization needs a sepa-
rate strategy in addition to its layoff strategy to ensure that these retained employees remain com-
mitted, loyal high performers. That strategy needs to include a comprehensive communication
plan whereby management communicates openly and honestly with survivors to counterbalance
the negative effects of the downsizing on employee attitudes toward the organization. Communi-
cation of the reasons for the downsizing as well as future plans and strategies can have a strong
mitigating “damage control” effect on possible employee attrition.3 This is of critical importance
to employers because retention of these employees and their levels of productivity will probably
determine whether the organization will survive. Ironically, downsizing organizations often ignore
this critical fact and assume that retained workers will be happy to still have their positions and
work harder than ever. Reality has shown that nothing could be farther from the truth.
Layoffs at Kodak
A critical component of the successful outcome of any layoff is the manner in which the sur-
vivors are managed. Rochester, New York–based Kodak actually had its surviving employees
defend the organization’s decision to lay off colleagues to the media during recent job cuts.
When Kodak decided it needed to lay off 3,500 employees worldwide, it immediately consid-
ered how this decision would impact not only the employees being cut but those who were
staying. One key to the positive response to the layoffs was the manner in which communi-
cations were handled. To help minimize uncertainty and anxiety, complete and honest infor-
mation was provided to employees as soon as it was available. Employees were informed that
details had not been worked out yet but that the downsizing was not temporary and would
affect only certain, specified parts of the organization. A range of services was provided to
those employees being let go, including a termination allowance of two weeks’ pay for each
year of employment; retained medical, dental, and life insurance for four months; outplace-
ment counseling; and a retraining allowance of up to $5,000 for schooling. By strategically
planning and implementing the layoffs, Kodak was able to enjoy the continued support of
its remaining employees and customers.4
While the decision to lay off employees should usually be done as a “last resort,” it is inevita-
ble that sometimes an employer has no other choice. However, many layoff decisions by senior
management are misguided and create additional problems for the organization. While the invest-
ment community may react to a layoff announcement with initial enthusiasm, the long-term per-
formance results are often disappointing. One study found that employers that laid off more than
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Chapter 13 Employee Separation and Retention Management | 573
3 percent of their workforces saw little or no gain in their stock price over a three-year period,
whereas those that laid off 15 percent or more of their workforces performed significantly below
average over the same time period.5 Layoffs tend to have better results when done strategically as
part of a merger or repositioning rather than as a means to cut costs or impact stock price in the
short term. Sears, Roebuck & Company recently eliminated 2,400 jobs and closed 89 stores as part
of a strategic restructuring. In the same year, Praxair, Inc., a $5 billion producer of specialty gases,
eliminated 900 jobs as part of a plan to change its product mix. In both cases, the value of the
company stock rose 30 percent in three months.6 The lesson here is that layoffs alone will not
turn around a company whose strategy is ineffective. However, when layoffs are conducted as
part of a strategic restructuring that involves fundamental changes in the direction of an organiza-
tion, they have a higher probability of success.
Unfortunately, too many layoffs are conducted as a short-term strategy to improve financial
performance rather than as strategic initiatives. The majority of organizations that have under-
taken downsizing initiatives have failed to report any kind of increased efficiency, productivity,
or profitability.7 A good deal of this failure has been attributed to poor management of the sur-
vivors of the downsizing,8 many of whom subsequently display behavior and attitudes that are
dysfunctional to the organization’s success.9 In addition, one study found that considerable
costs result from unanticipated increases in voluntary turnover that follow layoffs. Post-
downsizing turnover increases can be staggering as, on average, layoffs that reduce an employer’s
workforce by 1 percent generally result in a 31 percent increase in voluntary post-downsizing
turnover rates.10
Studies have shown that layoff decisions rarely produced the sought-after financial out-
comes.11 In addition more recent attention has been paid to the less-quantifiable human conse-
quences of layoffs, which have been shown to be potentially devastating for individuals, their
families, and entire communities.12 These effects provide additional support for the contention
that while reductions in force may not be completely avoidable, they should be utilized as a
last, rather than first, resort. Employers always have additional cost-reduction options available
beyond layoffs and should weigh the pros and cons of such options in determining their overall
strategy.13
A framework is presented in Exhibit 13.2, which enables organizations to minimize, defer, or
avoid any large-scale reductions in force, layoffs, or downsizing through the implementation of
strategic cost-reduction strategies. Various strategic options are presented, which relate to short-,
medium-, and long-range cost adjustments and allow employers to consider sequential stages that
may be followed in leading up to or hopefully avoiding layoffs.
Strategic Downsizing at Charles Schwab
San Francisco, California–based discount brokerage Charles Schwab was hit hard in the early
2000s by the downturn in the stock market. However, given the cyclical nature of the econ-
omy, it was likely that many workers who were no longer needed might be needed again in
the undeterminable future. In March 2001, when the company laid off 3,400 employees, each
received a transition package that consisted of 500–1,000 stock options, cash payments to
cover COBRA costs for benefits continuation, a stipend of up to $20,000 to cover tuition
for schooling, and a full range of outplacement services. More important, however, was the
$7,500 bonus to be provided to any employee who was rehired within 18 months of separa-
tion. This program greatly assisted in the quick rehiring of knowledgeable, trained employees
when business improved, saved the organization a tremendous amount of money, and
secured the goodwill of customers and remaining employees. Perhaps more important, when
across-the-board pay cuts of 5 percent for rank-and-file employees were announced, it was
also announced that any manager at the vice-presidential level or higher would be receiving
a 25 percent pay cut. Schwab was cited as a model responsible employer within the business
community and continued to be one of the most sought-after employers in the country.14
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574 | Part 2 Implementation of Strategic Human Resource Management
EXHIBIT 13.2 Conceptual Framework of Cost-reduction
Stages
First Stage:
Short-range cost Second Stage: Third Stage:
Medium-range cost Long-term cost
adjustments
adjustments adjustments
Short-term Medium-term Long-term business
business slowdown business slowdown slowdown expected
expected from 6–12 exceeding 12 months
expected up to 6
months months
Preliminary Secondary Extended
(short-range) (medium-range) (long-range)
adjustments adjustments
adjustments
HR practices HR practices Phase 1
(cumulative): (cumulative): • RIF
• extended salary • Layoffs
• hiring freeze reduction • Downsizing-
• mandatory vacation
• reduced workweek • voluntary related activities
• cut in overtime sabbaticals
• salary reduction Phase 2
• temporary • employee • rehiring bonuses
lending • maintaining
facility shutdown
• soliciting cost- • exit incentives communication
with layoffs
reduction ideas • internal job fairs
from employees • hiring new talent
(after economic
bounce–back)
Source: Adapted from Vernon (2003), George (2004), and Gandolfi (2008).
Turnover
Employees who leave the organization at the organization’s request (involuntary turnover) as well
as those who leave on their own initiative (voluntary turnover) can cause disruptions in opera-
tions, work team dynamics, and unit performance. Both types of turnover create costs for the
organization. In some cases, these costs may be short term but have longer-term benefits; in
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Chapter 13 Employee Separation and Retention Management | 575
other cases, the costs may be significant and longer lasting. Costs of turnover include the direct
economic costs of staffing and training new hires as well as the indirect costs of the downtime
needed for the new employee to gain proficiency in his or her job and to become fully socialized
and integrated into the organization. In addition, those responsible for training the new employee
are pulled away from their regular job responsibilities. If an organization has made significant
investment in training and developing its employees, that investment is lost when employees
leave. Excessive turnover can also impact the morale of employees and the organization’s reputa-
tion as being a good place to work, which makes retention and recruitment more challenging and
time consuming.
The economic costs of turnover can be staggering. In Chapter 8, it was noted that one tech-
nology company calculated turnover costs to average $200,000 per employee.15 Merck and Com-
pany, the pharmaceutical giant, has estimated that its turnover costs are between 150 percent and
250 percent of the employee’s annual salary.16 Sears, Roebuck estimated that turnover among its
retail sales staff amounted to $110 million annually, which constituted 17 percent of its operating
income.17 Sears also found a strong negative correlation between employee turnover and customer
satisfaction. Merck and Sears are not alone; most large employers suffer from excessive turnover
costs. A recent survey found that at companies with more than 1,000 employees, annual voluntary
resignations averaged 21 percent.18 For employers with more than 5,000 employees, the rate
climbed to 26 percent.
Turnover can, however, be beneficial. It can allow the organization to hire new employees
with more current training who are not locked into existing ways of doing things. Fresh ideas
from outsiders can be critical to organizations that have become stagnant and are in need of inno-
vation. Turnover can also lower the average tenure of employees and translate into lower payroll
expenses. Turnover also affords opportunities to promote talented, high performers. Finally, when
poor performers or disruptive employees leave the organization, morale can improve among
coworkers.
It may be assumed that voluntary turnover generally provides more costs than benefits and
that involuntary turnover is beneficial for the organization from a cost perspective. Both these
assumptions are often false. First, voluntary turnover may allow the organization to find an
even better performer than the employee who left, possibly at a lower salary. Second, involun-
tary turnover often results in much higher costs than training or counseling an employee with
performance deficiencies. These and other commonly held assumptions about turnover are
addressed in Reading 13.1, “Retaining Talent: Replacing Misconceptions With Evidence-Based
Strategies,” which uses evidence-based research practices to more clearly explain the causes and
sources of turnover.
Both voluntary and involuntary turnover can be managed strategically to allow the organiza-
tion to maximize the benefits of turnover and minimize the costs incurred with the process.
Exhibit 13.3 presents a Performance-Replaceability Strategy Matrix that was developed by Martin
and Bartol as a tool to allow organizations to manage turnover strategically.19 The model on which
this matrix is based argues that turnover in organizations, while unavoidable, can be strategically
managed to allow organizations to minimize the disadvantages of turnover and maximize its
advantages.
Martin and Bartol have classified turnover as being functional (beneficial) or dysfunc-
tional (problematic) for an organization. Whether turnover is functional or dysfunctional
depends on two factors: the individual employee’s performance level and the difficulty the
organization would have replacing the individual. In Exhibit 13.3, replaceability is depicted on
the X axis and performance level on the Y axis. Each of the six cells is then classified as result-
ing in functional or dysfunctional turnover, and appropriate strategies for managing employees
who fit into each of the cells are provided. Clearly, the more dysfunctional the turnover, the
greater the attention that will be required by management to retain the employee. Retention
strategies for such employees might involve additional career development opportunities,
incentive compensation that rewards high performance, or innovative benefits that are tailored
to the needs of the employee. Regardless of the performance level, backups should be devel-
oped by the organization for any employees who would be difficult to replace. Ideally,
the strategy for managing turnover involves keeping high performers rewarded through inno-
vative compensation and recognition and reward programs while engaging in HR planning to
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576 | Part 2 Implementation of Strategic Human Resource Management
EXHIBIT 13.3 The Performance-Replaceability Strategy Matrix
REPLACEABILITY
Difficult Easy
High High performers—difficult to replace High performers—easy to replace
Dysfunctional Turnover
Highly Dysfunctional Turnover Retain/invest in employee
Retain/invest in employee:
develop backups
PERFORMANCE Average Average performers—difficult to replace Average performers—easy to replace
Dysfunctional Turnover
Dysfunctional Turnover if Replacement
Retain/provide performance incentives: Costs Are High
develop backup Retain/provide performance incentives
Poor performers—difficult to replace Poor performers—easy to replace
Functional Turnover
Short-Term Dysfunctional/Long-Term Improve performance or terminate
Low Functional Turnover
Improve performance or terminate:
develop backup
Source: Adapted from Martin, David C. and Bartol, Kathryn M. “Managing Turnover Strategically’ Personal Administrator,” Volume 30,
#11, November 1985, p. 63.
ensure that as few employees as possible occupy positions that will make them difficult
to replace.
Exhibit 13.4 presents the eventual outcomes of a successfully managed employee turnover
and retention program. All employees whose turnover would be disruptive would be reclassified
as easy to replace once appropriate backups had been trained. At the same time, performance
incentives and counseling should be provided to low performers to encourage and motivate them
to become average performers. Similar incentives should be provided to average performers to
encourage and motivate them to become high performers. If these lower performers do not
improve in time, they should be terminated.
In cases of involuntary turnover or termination, employers need to have a strategy and stan-
dard policy that, if followed, would allow the employer to defend a charge of wrongful termina-
tion. In recent years, courts have been increasingly open to hearing complaints that an employer
violated the public policy exception to employment at will, as discussed in Chapter 7. Although
there may be no legal responsibility to continue to employ individuals, many courts have found
that employers have an ethical responsibility to discharge employees only for just cause. Conse-
quently, employers who discharge their employees should have strong evidence of just cause that
has been documented and communicated to the employee over time. Otherwise, the employer
could incur significant costs in defending itself against the charges or face negative publicity and
dissension among the ranks of its employees. The Martin and Bartol model argues that the orga-
nization’s goal should not necessarily be to reduce all turnover but to reduce dysfunctional turn-
over by developing appropriate HR programs and policies.
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Chapter 13 Employee Separation and Retention Management | 577
EXHIBIT 13.4 Strategic Management of Turnover and Retention
High REPLACEABILITY
Difficult Easy
Develop
Backup
PERFORMANCEAverage Increase Develop Increase
Performance Backup Performance
© Cengage Learning
Low Increase Increase
Performance Performance
Managing Retention at Sprint PCS
In the early 2000s, Sprint PCS, a provider of consumer cellular telephone services, suffered
from excessively high turnover, which exceeded 100 percent annually. Employees were leaving
faster than new hires could be brought on board. Unfortunately, many of the organization’s
highest performing employees were among those departing. Sixty-eight percent of employees
reported in exit surveys that the organization could have done something to retain them. To
address this, Sprint developed a strategy to address retention that focused not on pay and pro-
grams but on developing managers to become “retention agents.” Through survey data, Sprint
learned that employees were leaving not because of issues related to compensation or benefits
but because their managers were not seen as individuals who knew and understood them and
therefore were deemed to be untrustworthy. Ten retention competencies were designed for
managers: trust builder, esteem builder, communicator, climate builder, flexibility expert, talent
developer and coach, high-performance builder, retention expert, retention monitor, and talent
finder. Assessments were then done in five pilot customer contact centers to rate each manager
on each of these competencies via 360-degree surveys. Each manager then received a plan that
identified at least four competencies to be developed through e-learning modules. A survey was
taken of over 7,000 PCS employees, with their response compiled into a database; that infor-
mation illustrates three categories of factors that impact employee retention: organization-
wide conditions, job conditions, and leader behaviors. Managers use this database to share spe-
cific “best practices” relative to retention with each other and to create a learning community
around employee retention. The result is that every pilot site reported lower attrition and resul-
tant cost savings, projected in the millions of dollars, than the control sites. The program is
about to be rolled out to remaining customer service sites.20
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578 | Part 2 Implementation of Strategic Human Resource Management
Retention of top employees continues to be a vexing problem for a large number of employ-
ers. One study of HR professionals found that 75 percent of those surveyed reported that retention
of high performers was the top HR problem they confronted.21 A critical strategic issue for
employers is the development of policies and programs that help retain high performers and/or
those employees who are difficult to replace. It has been suggested that retention can be aided by
using a customer-service approach whereby employers treat their best employees as they would
treat their best customers, focusing on things like organizational culture, employee development
opportunities, and enhanced supervisory relations.22 However, employer-provided training has
been found to be associated with higher employee turnover due to the enhanced marketability of
employees with sought-after skills.23 Hence, any retention strategy must be strategic and holistic in
design whereby, for example, enhanced employee training is coupled with other individually deter-
mined incentives that motivate employees to remain with the employer.
Strategic Retention at United Airlines
United Airlines recently developed a “key employee retention program” that focuses on 600
workers identified as critical to the organization’s efforts to emerge from bankruptcy. These
individuals, who were employed in the organization’s information services division, received
a cash payment equal to 20 percent of their base pay. Because these individuals were deemed
to have highly marketable skills, be highly expensive to replace, and be critical to United’s
survival objectives, United justified the payments even as other employees were being laid
off. Turnover rates among these technical workers had risen to 11 percent, while the com-
pany’s overall turnover rate stood at 7 percent. The plan, while popular with technical
employees, was criticized by United’s Association of Flight Attendants, which argued that
the retention bonuses would come at the expense of other workers.24
When attempting to retain talented employees and top performers, employers face competi-
tion not only from other organizations but also from the very employees they are attempting to
retain. Particularly in service- and information-related industries, startup costs for new businesses
are often relatively low, creating opportunities for employees to start their own organizations. The
access to information, such as client lists and marketing and strategic plans, which many employ-
ees have in the course of doing their jobs can provide strong support for such endeavors. In addi-
tion, these employees may have also built strong relationships with customers that transcend
loyalty to the organization on the part of both parties. The number of lawsuits that involve
employee startup companies has increased greatly in recent years, and many employers now
require employees to sign “noncompete” agreements. However, such noncompete agreements fre-
quently are not seen as legally valid and binding. For example, the courts in California, a state
with some of the highest startup activity, do not recognize any noncompete agreements. When
an employee decides to engage in an entrepreneurial endeavor, an employer essentially has two
ways in which it can respond: It can treat the new business as an adversarial competitor or it can
attempt to enter into a partnership with the new enterprise.25 Many large organizations, including
Xerox, General Motors, Sun Microsystems, and Microsoft, have been involved in the funding of
new startup organizations created by their employees. This funding, however, comes in exchange
for some involvement with and control of the new enterprise.
Retaining Talent at Intel
One of the employers that not only supports but actively embraces startup operations by
employees is Intel. The Oregon-based computer chip manufacturer has an internal program
called the New Business Initiative (NBI) that not only funds startups but actively solicits pro-
posals for new businesses from Intel employees. The NBI has its own staff to examine propo-
sals and determine whether NBI will provide funding. If approved, the employee works with
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Chapter 13 Employee Separation and Retention Management | 579
the NBI to develop the project, becoming an entrepreneur while still remaining on the
Intel payroll. Successful new enterprises may operate as independent organizations; others
may be integrated into Intel’s operations. The program is consistent with Intel’s innova-
tion strategy and entrepreneurial culture and has also served very successfully as both a
retention and a training and development tool. Employees who decide to abandon their
projects return to their jobs at Intel with new job skills and a stronger commitment to
the organization. Employees are allowed to chase their dreams as technical entrepreneurs
without the financial risk of investing in the business and having to leave their full-time
employment. The program has also helped the company to retain many of the employees
who have come on board as part of one of the many mergers or acquisitions completed by
Intel.26
Retention of employees, particularly in a strong employment market and for those employees
who are top performers, can be a significant challenge for organizations. While many employers
appropriately attempt to retain top employees by offering opportunities for growth and develop-
ment, interesting work, a congenial work environment, and strong values-driven management,
the reality is that many top performers still remain focused on their salary, particularly relative to
the marketplace.27 Yet, in other cases, employees may be willing to stay with an employer at a
lower salary than could be obtained elsewhere because of the nonsalary-related factors noted pre-
viously.28 The ultimate decision for an employee to voluntarily leave an organization is a function
of whether (1) the inducements to stay are sufficiently attractive and (2) the ease with which the
employee could depart and is willing to sever or rearrange personal and social networks estab-
lished.29 A related factor could also be the transitions necessary for the employee’s family, which
might result from a decision to change employers. The significant challenge for employers in man-
aging retention of top employees is the fact that different employees are motivated by different
factors relative to their desire to stay with an employer. Hence, any retention program needs to
be individualized based on the needs of the key employees who have been targeted for retention.
Smaller organizations face special challenges relative to retention of employees. Individuals
who choose to work in small organizations generally do so for the unique benefits and challenges
associated with small companies. Small companies offer a fast-paced work environment with less
bureaucracy, near-constant change, less structure, constant interface with coworkers, including
senior management, opportunities for growth and development, and the chance to shape a new
organization’s future. Small companies may also provide significant opportunities to share in the
organization’s future financial success, sometimes in tandem with a more modest starting salary.
However, as smaller organizations become more successful, they change. Growth usually mandates
more formality and bureaucracy, which can greatly alter the work environment employees have
come to enjoy. Many smaller organizations simply cannot retain many of their early employees
who opt to move on to other smaller startups. Some smaller organizations attempt to become
more creative as they grow and organize, with smaller units or divisions that retain the character-
istics of the initial startup. Others attempt to create a strong and unique vision or mission that
keeps employees engaged as the internal environment of the organization becomes more formal-
ized. Small organizations face some unique challenges relative to employee retention and hence
need to be creative in developing the necessary means to engage and retain their top performers.
One key tool employers can use to gauge the effectiveness of their retention efforts is the exit
interview. Exit interviews provide employers with the opportunity to gain candid feedback from
departing employees in a manner that might not be possible if conducted within the context of
an ongoing employment relationship. Departing employees are more likely to be forthcoming
and honest in their assessments of their employer without fear of repercussions, and assuming
that departing employees have been interviewing with other organizations, they are able to provide
employers with information as to how the organization compares with other employers who
recruit from the same talent pool. Exit interviews can serve three purposes: (1) provide the organi-
zation with feedback to allow it to better compete in the recruiting marketplace; (2) ensure that
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
580 | Part 2 Implementation of Strategic Human Resource Management
departing employees are able to voice their concerns and respond to such to keep the employer’s
reputation strong; and (3) provide, in some cases, an opportunity to retain the employee by
addressing concerns in a satisfactory manner.30 Effectively conducted exit interviews can be a cat-
alyst for maintaining an ongoing relationship with departing employees who might be recruited
back to the organization at some point in the future. The data that can be obtained in the exit
interview process can provide key insights as to how well an employer is doing relative to delivery
of its overall HR strategy and branding initiatives. Departing employees can also influence the per-
ceptions of others who might be possible future employees and/or customers of the organization.
Employers need to be cognizant of the value of the exit interview from multiple perspectives as
well as understand the role of the exit interview from the perspectives of data collection and
communication.
Retirement
Employees also leave the organization through retirement. Except for certain occupations dealing
with public safely (such as airline pilots), the Age Discrimination in Employment Act of 1967 pro-
hibits an employer from setting a mandatory retirement age. Because medical advances are allow-
ing individuals to live longer and stay healthier longer, older workers are maintaining a strong and
increased presence in the workforce. Ironically, however, many older workers tend to be set in
their ways and resistant to change, particularly to technological change. Employers have a distinct
challenge in finding ways to keep older workers motivated and productive and ensuring that they
do not violate the legal rights of these employees.
When older workers retire, the organization can hire new employees to replace older workers
who may have less physical or mental energy or skills that have become dated or obsolete. These
new employees may cost less than the older workers relative to salaries and health insurance pre-
miums. Because many older workers are higher in the organizational hierarchy, promotion oppor-
tunities may be made available when they retire.
However, significant costs are often associated with retirement. Retirees who have worked for
the organization for many years usually have a wealth of knowledge about the industry and the
marketplace. They also have extensive historical knowledge about the organization and experience
with organizational processes, politics, and culture. Although fresh ideas from outsiders can be
critical to an organization, knowledge and experience can be equally important, and decision
makers need to ensure that the organization capitalizes on both to assist in meeting its objectives.
The challenge again becomes how to maximize the benefits of retirement while simultaneously
minimizing the costs. Reading 13.2, “Knowledge Management Among the Older Workforce,” pre-
sents some insights as to the needs and interests of senior employees as well as some strategies for
managing both older workers and the process of knowledge management and retention.
Older workers will become more prominent in the workplace. Employers can usually not set
mandatory retirement ages, force employees to retire, or treat older workers in a discriminatory
manner in any employment decision. Particularly when conducting layoffs, employers must ensure
that there is no adverse treatment of older employees, which would violate the Age Discrimination
in Employment Act. Indeed, many large-scale reductions in force have been accompanied by law-
suits that allege discrimination based on age. This issue may be exacerbated in the very near future
as the baby boom generation moves through middle age.
Older workers are becoming a reality for employers. A recent study by the American Associ-
ation of Retired Persons found that 80 percent of the baby boom generation intends to continue to
work during retirement.31 This statistic helps to counteract existing fears concerning the mass
retirement of baby boomers in the coming years In fact, the number of Americans aged 65 and
older in the labor force recently grew by 7 percent, to a total of 4.5 million individuals.32 One
survey of executives found that 44 percent intend to continue working past the age of 64, while
15 percent plan to continue working past the age of 70.33
In addition to the many seniors who wish to keep working, there are a number of them who
have to keep working: Lack of adequate health insurance in post-employment years is keeping
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Chapter 13 Employee Separation and Retention Management | 581
some seniors in the workforce.34 Others feel the need to continue working because of the per-
ceived inadequacy of their organization’s retirement benefits programs, many of which have been
altered in recent years because of the economic downturn.35 Those workers who are part of the
baby boom generation are also known to have a strong work ethic and, in many cases, wish to
continue to contribute to their organizations. Another survey of baby boomers reported that
67 percent of this group stated that their main motivation to stay working in later years was the
mental stimulation and challenge associated with work.36 Consequently, employers may face not
the anticipated worker shortage but rather an older workforce.
Many older individuals seek to cut back on their working hours in what is known as a
“phased retirement” stage of their careers. Employees who opt for phased retirement show a sig-
nificant lower probability of ever retiring completely compared to those who move from full-time
employment to full retirement.37 However, phased retirement can impact an employee’s ability to
collect retirement pensions, so it is critical that such programs be structured to benefit both the
employee and the organization.38 As part of overall HR planning, employers need to determine
how to deploy human assets for maximum organizational benefit. Many employers who have
offered early retirement incentives have found that a larger-than-anticipated number of employees
chose to participate in the program, leaving the employer in a bind, at least for the short term.
Phased retirement can allow employers to engage in much more effective HR planning. Assisting
with retirement planning has become a critical strategic HR function of which phased retirement
programs may be a vital component.
Employers can develop programs to give older employees incentives to retire or to take early
retirement as long as employees are not coerced into doing so. When older employees retire, the
organization can replace them with younger workers, but the organization can lose a great wealth
of knowledge and expertise. To remedy this, many employers rehire retirees on a part-time or
consulting basis. This allows the organization to retain the benefits these older workers bring to
the company and gives these individuals the opportunity to gradually transition into a shorter
workweek or semi-retirement. Retirees can enjoy more leisure time and work at a less hectic pace
but also continue to make meaningful contributions to their employers, maintain their careers,
and stay alert and challenged.
Strategic management of the retirement process results in everyone winning: Retirees gain the
best of both worlds; the organization retains their knowledge and experience base; existing
employees are afforded opportunities to be promoted; and new employees may be hired and
learn from the experiences and knowledge bases of seasoned veterans.
Alumni Relations
An increasing number of employers are not only paying very careful attention to the processes by
which employees leave the organization (to minimize potential liability) but also to maintaining
communications and good will with these individuals. It has been noted that departing employees
are “ambassadors” for an organization and are not only potential continued customers but also
important referral sources for additional business and the recruitment of new employees.39 Former
employees who leave on positive and amicable terms, often due to reasons outside of the control
of the organization, such as a family relocation, might also be able to return to the organization at
some point in the future.
Employer outreach to former employees has been aided by the growing presence of online
professional networks. Many employers establish Web sites, postings, or discussion groups on pro-
fessional social media Web sites such as Linkedin to continue to build and enhance their employer
brand. Employers are also able to continue to follow and track former employees in whom they
have invested and maintain a professional business relationship. Audit and tax advisory firm
KPMG has more than 100,000 alumni, 36,000 of whom are registered on KPMG Connect, a
restricted membership alumni Web site that provides company updates, information on activities
and events and professional development information for this specific group of former
employees.40
Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
582 | Part 2 Implementation of Strategic Human Resource Management
Alumni Relations at Ernst & Young
Global professional services firm Ernst & Young (E & Y) employs more than 167,000
employees in more than 140 countries. The organization also has an estimated 500,000
alumni worldwide, approximately 200,000 of whom are located in North America. E & Y
employs a 20-person staff dedicated to alumni relations who maintain a dedicated alumni
Web site and database, publish a semi-annual print and online magazine, organize and pub-
licize events and maintain a prolific social media presence on sites which include LinkedIn,
Facebook, and Twitter as well as a video series on YouTube related to entrepreneurship and
careers. The Web site has aided in the recruitment of new employees, in partnership with
HR, as a critical component of the organization’s candidate relations management system
and has also facilitated the hiring of 19 percent of the organization’s hires at the management
level and above from the ranks of alumni who choose to return to E & Y.41
Conclusion
Organizations have only recently begun to pay attention to the HR function of employee separa-
tion. The increased pace of merger and acquisition activity as well as downsizings have made HR
programs and policies that address employee separation a key strategic issue in ensuring the new
organizations’ success.
For many years, managing turnover has been ignored, taken for granted, or assumed to be a
simple process of automatically terminating poor performers and trying to fill the gaps when
employees involuntarily left the organization. It was more of a coping process than any kind of
active strategic management. Organizations today, however, are realizing that the effective strategic
management of turnover can be a critical factor affecting overall performance.
Retirement is no longer a process of filing paperwork as employees reach mandatory retirement
age. Effective management of employee retirement can provide organizations with an important
competitive advantage: the means of retaining knowledge, expertise, experience, loyalty, and positive
role models while simultaneously allowing an infusion of new ideas and energy. The development
of creative, mutually beneficial programs and policies related to retirement will become even more
critical as our population ages and baby boomers approach traditional retirement age.42
The reality of employee separation is that the organization relinquishes key assets. Every
employee represents an investment by the organization in terms of direct and indirect expendi-
tures relative to staffing, training, compensation, and benefits. Strategically managing employee
separation entails determining the value of human assets from an investment perspective and con-
sidering the costs of discarding these assets. How this process is managed may be one of the most
important investment decisions an organization makes.
Critical Thinking 4. What costs are associated with turnover? What bene-
fits can be derived from turnover?
1. Why is it important to manage the process of
employee separation? 5. Explain the Martin and Bartol matrix for managing
turnover. How does this relate to taking an investment
2. What short-run, long-run, and policy options are approach to HR?
available to employers in lieu of layoffs?
3. Under what conditions might layoffs be advantageous
to an employer?
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