The cost-benefit analysis of pushing back on unionization

Last September,President Biden reiterated his commitment to be the “most pro-union president” in history. The president appointed and promoted Jennifer Abruzzo, a top union lawyer, to lead the National Labor Relations Board (NLRB), which began fining employers for violations more aggressively, increasing fees, backpay, and fines collected by 44.2% from 2020 to 2021.

As notable brands like Starbucks, Google, Amazon, and Apple have faced internal union drives over the past year, other company leaders are realizing that they may need to think about what they’d do if their own employees decided to organize. According to the NLRB, in the first six months of fiscal 2022—October 1, 2021 and March 31, 2022—petitions for union elections increased 57% from the same period a year earlier.

That hasn’t stopped some companies from resisting their employees’ unionization efforts; for example, the NLRB has “repeatedly found evidence” Amazon violated labor laws, including firing union organizers, and monitoring workers’ organizing efforts.

Gordon Lafer, economics professor at the University of Oregon, told CFO Brew that it’s difficult to measure the costs and benefits of unions from a company’s perspective, since union drives can go on for a long time, and there are many intangibles at stake.

“Companies tend to oppose labor unions for economic reasons, and also for reasons of power and control,” Lafer said. He pointed out that companies spend millions of dollars a year on anti-union consultants, which, for some companies, may seem like money well spent.

“If people want to say, ‘We want to get as much work and as high-quality work as we can, while paying the least amount possible, and having the most control over the employees’—meaning people don’t have job security—and if you can kind of interchange people or dispose of them, then investing in union-busting consultants is probably a smart investment,” Lafer said. “I wish I could say, ‘Oh, if only they added up their numbers, they would see that it costs less to settle a fair contract.’ And I’m sure that's true, sometimes. But for the most part, the point of the union is to shift the distribution of profits and to have more of the profits go to the people who are doing the work.” For some companies, that may be too high a price to consider paying.

At least one major company has taken a different public stance on its approach to potential employee organizing. In June, Microsoft CEO and Vice Chair Brad Smith announced a “new set of principles around employee organizing, and how we will engage with our employees, labor organizations, and other important stakeholders in critical conversations around work.”

Among those principles: When the company is presented with a specific unionization proposal, Smith wrote, Microsoft is “committed to creative and collaborative approaches with unions when employees wish to exercise their rights.”

And while a company the size of Microsoft has more resources that most to manage negotiations with potential union drives, most chief hiring officers and CFOs will have to perform cost-benefit analyses for their own companies to determine how to respond to organizing efforts, should they occur.

Chris Peterson, president and CFO of Newell Brands, told CFO Brew his company has tried to stay ahead of the market on compensation, and invested in training and development plans with clear career paths, “so somebody who maybe starts as a manual laborer can work their way up to become a mechanic or an engineer…And we will support that. And I think through those types of programs, we really haven’t seen our employees want to unionize or feel the need to unionize.”

However, it’s worth noting that a portion of the company was previously unionized under the UAW, a manufacturing union. In 2008, the company faced a federal lawsuit from the union after implementing a monthly premium on retirement plans. The case was later dismissed by a district court. Newell did not reply to a request seeking comment on the lawsuit.

Smith wrote that from the perspective of Microsoft's leadership, “success in a competitive global economy requires that businesses and labor strive to work together well.” While Smith noted that the future is always uncertain, “we’re willing to bet that a company that listens to and works well with its employees is likely to have a winning hand.”—KT