Labor Agreements: Cases for Study

Use the following information 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?

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