Unionization of a Parker-Hannifin Corp - Research Paper Example

Unionization of a Parker-Hannifin Corp Overview Bombardier is a large airline company in Canada, which is unionized. It was founded in 1907 by Joseph Armand Bombardier. It is an airline company that offers global transportation, and has 69 engineering and production sites in 23 nations, besides service centers of worldwide networks (Bennett, 2009). It is ranked a global leader in fast-paced aerospace and rail transportation industries. Globally, it is the third largest aerospace company, and the world’s largest in rail transportation. According to Bennett (2009), it has 65,400-plus employees, who work together with the company in development of ingenious products and game changing technologies. This creates ways that are more sustainable getting materials and people, to places that they want to go. The employees are free to join labor unions. However, the employees and management must agree on collective bargaining. In case of a strike, the workers have to reach to a tentative agreement with the management, like the case in Toronto, where an agreement was reached hours after extending deadline of the strike, on June 23, 2010 (Bennett, 2009). Bennett claims that the company’s spokesman, John Arnone had failed to give an accord details with two workers of the Canadian Auto, who represented 2,700 office and production workers. Other strikes that were solved by unionization and management negotiations were in 2000, where job security and pension negotiations collapsed. Parker-Hannifin is concerned with the manufacture of design, and marketing of systems and components for users and builders of durable goods. On June 30, 1987, Bennett assess that the company had 28,708 employees, where only 6.5% (18570 were union members. In this company, there is no collective bargaining between the management and the employees, on issues concerning them. The company’s labor rules and practices are practiced as per the management’s will, without any agreement with the employees. This has really down played the employees welfare, while the company reaps substantial benefits. What are the differences in the bargaining powers of employees between the two companies? And, what are their bargaining items? Wage agreement, the steps in this process, issues addressed and any challenges, public relations issues or concerns, economic analysis, implementation and policy? Extensive Collective Bargaining Agreement Parker Company In 1987, Parker formed Parker-Hannifin, an employee welfare benefit trust, a national association with Ameritrust Company, as a trustee (Open Jurist, 1998). This trust uses the cash accounting method and its fiscal year ends on June 30. Parker designed this trust to work as the medium of funding for welfare benefit plans for certain employees. The trust agreement stated that Voluntary Employees’ Benefits Association (VEBA) was concerned with providing life, disability, health care, and other benefits of welfare to members, beneficiaries, dependants, except post retirement life benefits and health care for key employees. Parker intends that the term is defined in the code (section 416(i). this act states that contributions to the trustee should be sound and actuarial, and should be submitted before the last day of the year, which is final and applicable to all employees. Once made to the VEBA trust, these contributions were irrevocable the trust agreement further provides that withstanding any of this agreements’ provisions, the corporation shall not be required, in any event, to further fund benefits through the trust, under any plan. In 1987, Open Jurist, (1998) assessed that Parker gave VEBA trust $42million as its contributions. This decreased the maximum the tax rate of Federal Income for corporations by 12%. It also funded the Parker-Hannifin insurance plan and disability long term plan for employees, who were employed, from Parker-Hannifin Corporation. Joseph B. Dorn, director of taxation was the one responsible for the funding and implementation of the trust. In life insurance and health care provisions, the company’s annual report stated that $8.4 million was used (Open Jurist, 1998). Additionally, in provision of pension benefits, the company also provides certain life insurance and health care benefits to retired employees. The company employees are only eligible to such benefits, if only they work for the company until the time for their retirement this cost is referred to as expense, when claims are paid. Parker does not recognize any other labor union, in representing its employees, besides VERA Trust. Its contribution to the trust and existence of VERA Trust reserves are also never notified. It also never notifies its retirees or employees, except employees concerned with the VERA Trust implementation. On the other hand, it never disclosed VERA Trust, or its reserves’ existence in any of the descriptions of its summary plans that it gives to its employees, in notifying them about their retirement and pension plans. Furthermore, it makes no specific disclosure to either the public or its shareholders that it has prefunded VERA trust (Open Jurist, 1998). For instance, its annual reports between 1987 and 1989, Parker only disclosed the prefunding of benefits of specific future employees as ‘other’, which was not clear and specific. Increase in assets was comprised of increase in prepaid expenses, other assets and joint venture investment, as due to prefunding benefits of specific future employees. Acquisition of products of United Aircraft further increased the cost of investment at the expense of its employees, due to absence of a strong collective bargaining from labor unions. Bombardier Company Bombardier Company allows its staff to be members of labor unions. Therefore, its employees enjoy high wages, medical and housing allowances, among other benefits (Bennett, 2009). The wages of employees is determined through collective bargaining, where the management goes into an agreement with labor unions. This company enjoys quality services from its employees, because the high wages act as an incentive or motivation to its staff. It also maintains good public relations, as they are free to air their personal issues, which the company addresses keenly. This industry is unionized, and its employees are free to join labor unions. However, the employees and management must agree on collective bargaining. In case of a strike, the workers have to reach to a tentative agreement with the management, like the case in Toronto, where an agreement was reached hours after extending deadline of the strike, on June 23, 2010. The company’s spokesman, John Arnone had failed to give accord details with two workers of the Canadian Auto, who represented 2,700 office and production workers. Other strikes that were solved by unionization and management negotiations were in 2000, where job security and pension negotiations collapsed (Bennett, 2009). Bargaining Items The bargaining items include disability benefits, medical benefits, severance pay benefits, life insurance benefits, pension benefits, health care benefits, and good working conditions. In this case, for non unionized employees like Parker, the employees do not enjoy such benefits and provisions. Their powers are limited to the company’s trust, which is very inefficient and lacks transparency. However, unionized employees, like in Bombardier, the employees enjoy full benefits, since it is empowered by the unions’ collective bargaining. Wage Agreement In parker industry, where its employees are not allowed to join labor unions, the wage agreement is only an issue to be discussed by the management. They solely determine how much to pay its workers and employees have neither power nor right to question them (Open Jurist, 1998). This has left many of them at the loosing end, as they work for long hours, under non conducive working conditions with no one to help them. They are also paid very little, that it sometimes becomes hard even to cater for their basic needs. Unless the government steps by declaring minimum wage in their support, they are doomed to suffer silently, since they have no voice for the voiceless. On the other hand, wage agreement for unionized employees is determined through collective bargaining, which is an agreement between the management and the labor union. In the case of Bombardier, the employees enjoy high wages, since they have a collective voice. On the other hand, incase the union feels that the employees are under paid, the union goes into negotiations with the company, failure to which they call for a strike. To avoid strike losses like low output, the company is forced to listen to their cries, by wage increment. This is what has greatly benefited many employees, who are unionized. These employees further enjoy benefits like medical and housing allowances, which further increase their wages. Steps in Wage Agreement Process To be unionized, a person first has to be an employee of a company that allows its employees to join labor unions. Labor unions of such employees first the employees company on the need to increase the employees’ wages (Open Jurist, 1998). Failure to this, they are given a 21 days notice, (Open Jurist) to consider their decision, or the union threatens to call for a strike. They meet again for negotiations after this period; they meet again for further negotiations. If they come to terms, the strike is withdrawn and workers salaries are increased. However, if the agreement fails, a strike is called. In cases where many companies are involved, unions may decide to work decide to work as cartels. In this case, they limit the supply of workers, by holding labor supply, and due to labor shortage, they are forced to increase employees salaries, as they compete for the few workers available. Bombardier witnessed this in 1998, when it was forced to increase employee wages by 23%, in order to meet its desired out put Bennett, 2009). Issues Addressed and Challenges The issues that are addressed by labor unions in Bombardier include staff working welfare, wages, allowances, and other benefits like pension and job security. These issues are addressed for the benefits of the staff, without compromising the welfare of the company. However, addressing these issues pertains many challenges since the company also has its rules that have to be observed by all employees. On the other hand, the union has to work within the legal mandate, so that it does not violate the legal law. Furthermore, it has to ensure its long term existence, by acting within a legal frame work. However, these are not applicable in Parkers company employees. Public Relations Issues or Concerns The issues in public relations that Bombardier Company has are to ensure that its workers work peacefully, and coexist well with the public (Duez, 2006). Ensuring that wage agreements succeed is very healthy, because it ensures that workers do not strike, and hence the public can continue enjoying their services. It further ensures that people reach their destinations at convenient times, as well as the goods under delivery. If there is good relationship between the employer and employees, the public will always enjoy the goods and services offered by the company. In the case of Parker, maintaining good relationship between the company and the public is much easier but crucial. This is because, it is hard for workers to strike as they fear being laid off, but there is a serious issue of the employees undertaking a go slow kind of strike, which negatively affects the company’s productivity. Therefore, such a company should also consider maintaining good relationship with its employees in order to win public confidence, in offering its goods and services. Economic Analysis According to economic analysts, presence of labor unions has a negative effect on the economy. (Duez, 2006). This is further worsened by cases where labor unions work as cartels. In this case, they limit labor supply, so that employee’s wages can be increased. This compromises the capacity of hoe industries to compete with other companies in the global market. For example, when a company is forced to increase its employees’ wages, the cost of input increases, while at the out put is reduced. In order to recover the production cost the price of products is increased. However, companies that do not face such problems maintain their low prices, making it easy for them to compete out companies with expensive products (Duez, 2006). In this case, it can be very hard for Bombardier to compete with Parkers in the world market, since its products are expensive than those from Parkers. Such companies may even be forced to pull out of the world market due to such unhealthy competition. Conclusion Though labor unions help employees to enjoy high wages and many other benefits, they also pose a serious problem to the economy. Companies without labor unions like Parkers can easily enjoy market survival, which is very difficult for Bombardier Company. To ensure economic growth and stability, labor unions should be regulated by the civil law. However, absence of labor unions in companies makes companies to reap very many benefits at the expense of its employees. The best solution to these issues is for the government to step in ensuring that all employees are free to join labor unions, but at the same time regulate labor inions, in such a way that the economy will not be compromised, and all companies will be able to compete and survive in the world market. References Bennett, A. (2009). Bombardier; Bombardier and Union Tentative Accord. Toronto, University of Toronto Publishers. Duez, J. D. (2006). Economic Effects of Labor Unions. Washington DC; Harvard University Press. Open Jurist, (1998). Parker-Hannifin Corporation, Petitioner-Appellant,v. Commissioner of Internal Revenue, Respondent-Appellee. [Online] Available at Hyperlink "http://openjurist.org/139/f3d/1090/parker-hannifin- corporation-v-commissioner- of-internal-revenue" http://openjurist.org/139/f3d/1090/parker-hannifin- corporation-v-commissioner-of-internal-revenue Accessed on May 2nd, 2011. Read More