MANAGEMENT RIGHTS IN 1987

By JOHN JACOBY, Partner
Vedder, Price, Kaufman & Kammholz

Management rights. What are management rights? Are management rights under attack? Are they worth defending? Is the defense of management rights a losing battle? What is the best strategy for defending management rights?

Start with the first question. What are management rights? Management rights are the rights of an employer to run its business without interference. The right to hire. The right to discipline. The right to discharge. The right to assign work. The right to promote. The right to demote. The right to transfer employees from one job to another. The right to lay off for lack of work. The right to subcontract operations which have been performed by the employer's own employees. The right to set employees' wages and fringe benefits. The right to pay employees based on their merit. The right to decide what functions the employer will perform, how they will be performed, where they will be performed, and whether they will continue to be performed. In sum, management rights are the rights to take actions which seem appropriate to accomplish the goals of the employer, even though these actions may have a direct or indirect affect on employees.

Management rights are under attack. This does not come as news to anyone. The attack has been underway for decades, perhaps even centuries. It's the nature of the employment relationship that conflict arises between an employer and an employee when the employer exercises its management rights. It's the nature of employees either to utilize self help or to seek assistance from outsiders or government when they feel aggrieved.

Labor organizations have been a traditional enemy of management rights. Unions are probably what everyone came here to talk about. But before we talk about unions, let's talk about some of the other recent assaults on management rights.

First, the United States Congress and the state legislatures have passed a library-full of statutes which have limited the broad discretion which employers previously enjoyed in making personnel decisions. For example, federal and state discrimination statutes prohibit management from making employment decisions based upon a person's race, color, religion, sex, pregnancy, national origin, age, handicap, marital status, arrest record, and military service. In some contexts, management is even required to take affirmative action on behalf of persons who are members of groups which have been the victims of historical discrimination. Federal wage and hour statutes require employers to pay at least a certain minimum wage and to compensate many employees at the rate of time and one-half for their weekly overtime. Federal and state safety laws tell employers how to design their facilities and equipment, and what protective devices to furnish employees. Federal laws such as ERISA and COBRA require employee benefit plans to meet certain standards. Federal immigration laws require employers to follow certain procedures in hiring new employees and prohibit the employment of illegal aliens. State statutes tell employers when and how to pay wages and salaries to employees. State statutes require employers to make personnel records available to employees for inspection. State and federal statutes require employers to pay for certain retirement and disability benefits for employees. And the list goes on and on. Indeed, the list will probably continue to grow.

You and I undoubtedly agree with the policies underlying many of these federal and state statutes. For example, it's morally wrong to discriminate against a person in employment because of race. Sometimes though, employers have ligitimate beefs about the way in which the state and federal governments go about implementing policy. Nevertheless, the restrictions on management rights represented by these federal and state statutes are here to stay.

Besides Congress and the state legislatures, there has been another source of governmental power which has

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attacked management rights. I'm referring to the judiciary, particularly the state judiciary. It wasn't many years ago that employers were thought to have the right to terminate employees at will, subject only to applicable statutes and any contract of employment. Employees could be fired for a good reason, a bad reason, or no reason at all. Today, this has changed. In Illinois, an employee can't be discharged when the discharge would violate a public policy of the state. For example, public policy favors the concept that an employee serves the public good by reporting violations of the law committed by his employer to appropriate law enforcement agencies. If an employer interferes with this public policy by firing an employee who makes such a report, the employer can be sued. Also in Illinois, an employee can't be discharged when the discharge would violate the terms of an employment manual. In January, the Illinois Supreme Court decided a case involving St. Mary of Nazareth Hospital Center, holding that an employee handbook is an enforceable contract if three conditions are met: (1) the manual must contain language clear enough so that employees reasonably believe that an offer has been made; (2) the manual must be disseminated so that employees are aware of its contents; and (3) the employee must continue to work after the dissemination of the manual. Under the St. Mary decision, an employer may be sued if the manual is violated, including its provisions requiring just cause for discharge, or its provisions requiring that a certain counseling and warning procedure be followed before discharge may be imposed.

It's obvious that government has imposed severe restrictions on management rights. And yet, there's a very wide range of employer actions which aren't affected by any statute or court decision. Management rights in the pure sense have been wounded by government assaults, but the wounds are not fatal. Government has left a live body of management rights as prey for labor organizations. And you can rest assured that labor organizations will in fact prey on this live body and impose the fatal wound if employers allow this to happen.

There are basically three ways in which a union can impose restrictions on management rights. And from here on out, let's focus on public employers in the state of Illinois. The first way in which a union can impose restrictions on management rights is simply by becoming the collective bargaining representative for a unit of employees, even before the parties enter into any labor contract. Under the Illinois Public Labor Relations Act, once a union becomes the collective bargaining representative, the employer is obligated to negotiate with the union over any matter relating to wages, hours and other conditions of employment. Section 4 of the Act attempts to create a distinction between "Inherent Managerial Policy" and "Policy Matters Directly Affecting Wages, Hours and Terms and Conditions of Employment As Well As The Impact Thereon." According to Section 4, "Inherent Managerial Policy" includes "The Functions of the Employer, Standards of Services, its Overall Budget, the Organizational Structure and Selection of New Employees." While an employer is not required to bargain over matters of "Inherent Managerial Policy," it is required to bargain over "Policy Matters Directly Affecting Wages, Hours and Terms and Conditions of Employment." The duty to bargain means that the employer can take no action unilaterally. The employer must first discuss or negotiate the proposed action with the union. The employer and the union must either agree to the proposed action, or the parties must reach an impasse, and only then is the employer free to proceed. What this means in practice is that in a unionized environment, even when there is no labor contract in force, the employer cannot change wages, benefits, work rules, job duties, personnel policies, even insurance carriers or vending machine prices, without first going through the union.

The second way in which a union can impose restrictions on management is by entering into a labor contract with the public employer. Under Section 7 of the Act, an employer has the duty to negotiate with the union representing a unit of employees with the objective of reaching an agreement. Labor negotiations are really nothing more than an attempt by a union to impose restrictions on an employer's management rights. A labor contract typically fixes wages and bene-

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fits and prohibits the employer from changing them during the contract's term. A labor contract typically sets the hours of work and requires the payment of certain premiums for work outside the defined hours. A labor contract typically requires employers to give heavy weight to seniority in making various personnel decisions, such as transfers, promotions, vacation scheduling, layoffs and recalls. A labor contract typically requires an employer to have just cause in order to discipline or discharge an employee. And under Section 8 of the Act, a labor contract must contain a procedure for processing grievances arising under the contract, culminating in final and binding arbitration. Most of the public sector labor contracts which I have seen run 40 or 50 pages in length — 40 or 50 pages containing mainly restrictions on the public employer's right to manage the affairs of the employer.

The third way in which a union can impose restrictions on management is through wear and tear on first line supervisors. Labor contracts are frequently negotiated by skilled labor attorneys or labor relations executives who try valiantly to limit the erosion of management rights. With the support of the employer's governing board, at the risk of a strike, at the cost of a higher-than-planned wage increase, the public employer may succeed in fighting off many of the union's attempts to strip away the employer's management rights. Then, it falls to first-line supervisors to apply the labor contract to everyday working situations. Over time, these supervisors are bullied by the union business agent, hassled by the rank and file, ignored or undercut by top management, and the hard won victories at the bargaining table are reversed by abdication. Unfavorable, inefficient and irreversible practices develop and become part of the fabric of the relationship between the public employer and the union.

Is there no hope? Is it inevitable that public employers will lose their management rights, if not at the hands of the legislatures and courts, then at the hands of the unions? I emphatically submit to you that this doesn't have to happen! What can public employers do to defend or even regain their management rights?

If the public employer has no union and is not currently undergoing an organizing campaign, it should audit its personnel policies and practices. Are wages and benefits in line with those provided to comparable employees in neighboring communities and unionized communities? Are wages internally equitable? Are supervisors fair? Do supervisors communicate effectively with employees? Do supervisors have the authority to deal with employees' problems and are they responsive? Are supervisors loyal and effective spokesmen for top management? Are employees furnished with the necessary tools and training to do their jobs? Do employees regard themselves as being in deadend positions with no hope for improvement? Are working conditions reasonably pleasant, given the nature of the job to be done? Is the governing board and top administration acting in a careful, concerned and effective way which earns the respect of employees? Do employees know and agree with the employer's goals and principles? If the audit discloses problem areas, they should be addressed. And the auditing process should be made ongoing. Significantly, in order to preserve management rights, it's necessary for an employer to establish a track record of exercising them reasonably and fairly and with due concern for the interests of employees.

If the employer is currently undergoing an organizing campaign, it must first decide whether it is truly interested in preserving its management rights, even though a necessary corollary of this decision is that the employer must vigorously oppose the union organizing. Some governing boards are reluctant for political reasons to mount a vigorous union-free campaign. Some governing boards fail to recognize that the price of having a union is the loss of management rights and the possibility of work stoppages. Some governing boards are unwilling to pay the cost of retaining professional assistance in fighting the union. But if a governing board is willing to vigorously oppose the union organizing, and if the public employer has done an effective job in auditing its personnel policies and practices, there is no reason why the union organizing cannot be defeated. In the panel discussion which will follow, some of the techniques for opposing union organizing will be discussed, but they won't work if the employer awakens to problems with its personnel policies and practices only after the union election petition has been filed.

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If the employer already has a union, it still can do much to preserve its management rights. A specific provision in the act that an employer is not compelled to agree to any union proposal or to make any concession. When the union makes proposals to restrict the employer's management rights, the employer may make counterproposals to expressly preserve its rights. An employer has an obligation to bargain in good faith, but if the employer is determined in good faith not to enter into an agreement which surrenders important management rights, there is nothing which can force it to agree. Aside from police and fire employees, the union's recourse is either to abandon its proposals or to go out on strike. I would submit to you that a strike is not a very effective way for a union to force an employer to surrender its management rights if the governing board is committed and if the employer's position is reasonable and communicated well to the public. In the case of police and fire employees, the act does not even allow the union to utilize the strike but provides that a contract dispute is ultimately resolved in the forum of public opinion.

If the employer already has both a union and a labor contract, it has not entirely lost the battle of management rights. Rather, the management representatives who administer the contract, particularly first-line supervisors, must be trained to know what their rights are under the contract and how to exercise them properly. Then, top management must be willing to support the contract administrators when the inevitable conflict arises.

In conclusion, management rights are not a relic of the past. They don't survive in every environment. But show me a governing board and administration which are truly committed to retaining their management rights, and I will show you a community where management rights are alive and well. •

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