Labor Agreements: Cases for Study
Use the following case for the questions which follow:
The Sanitation department has 100 employees in the bargaining
unit:
- 30 truck drivers (at $7.00/hr.), 10 with less than 5 years,
10 with 5-10 years, and 10 with more than 10 years;
- 60 laborers (at $5.00/hr.), 30 with less than 5 years, 20
with 5-10 years, and 10 with more than 10 years; and
- 10 mechanics (at $8.50/hr.), 2 with less than 5 years, 4 with
5-10 years, and 4 with more than 10 years.
- All work 40 hrs. a week, 52 weeks a year.
- Overtime: 1 driver & 2 workers average 2 hrs. overtime
per week; 1 mechanic averages 4 hours. Overtime is paid at
time-and-a-half. 5 mechanics work second shift (5% premium).
- Vacations: 1 week for workers with less than 5 years; 2 weeks
for all others. Vacation is covered by temporary employees (1
temporary for every 2 vacations), but at 110% of salary cost
(the only fringes are those required by law). There are also
9 paid holidays; 5 are covered by overtime work, 2 by double-time,
and 2 are left uncovered.
- Workers Compensation Cost is 8% of payroll, Unemployment insurance
is 3.6% and FICA is 7.61% up to $53,400.
- The current contract is a one-year contract with no COLA.
Current sick leave is 1 day per month (with up to 100 days
accumulating toward retirement), and no replacements are hired.
- In addition to the statutory requirements, there are
three additional fringe benefits: health insurance (at $25
per employee), life insurance (at $6 a month), and a pension
plan (at 10% of employee's salary). Severance pay is one-half
of a week's base pay for each year of service, up to a maximum
of 10 weeks' pay.
1. What are the three key indexes for this contract?
2. What is the cost of a third week of vacation for employees
with more than 10 years experience? What effect will it have
on the indices?
3. Which is more expensive: a tenth paid holiday or improving
health insurance to include dental and optometric coverage (addition
cost: $10 per month per employee)?
4. Which is more expensive: increasing overtime pay to double-time,
or increasing pensions by 1%?
5. Suppose the union demands a 10% wage increase for all
employees. Suppose, further, that you have no additional funds
to support the increase. How many jobs would have to be taken
to pay for the increased wages? Which jobs (or parts of jobs)
would you take, and in what order?
© 1996 A.J.Filipovitch
Revised 15 November 96