The Statutory Strike Formula

The search for a means to eliminate the impact of a strike on the public without weakening the bargaining power of both management and union at the bargaining table gave rise to the statutory strike formula, also known as the non-stoppage strike formula.

ORIGIN

The idea was first suggested in 1949 by two Harvard professors : LeRoy Marceau and Richard A. Musgrave. ⁽¹⁾ The following year, Professor George W. Goble (²) defined a concrete way to use the idea and in 1953, Neil W. Chamberlain (³), the well-known Yale economist, approved the principles of the formula, defining his personal view on the way to use it. In 1959, David B. McCalmont (⁴) published several articles on the subject without knowing at that time that the idea was not a new one.

NATURE

Despite these different approaches, one can draw up a profile of the Non-Stoppage Strike Formula, taking into account the four given sources :

— there is no work stoppage;

— the public does not have to suffer any production or service interruption;

— the parties are supposed to be in the same relative bargaining positions as if the workers had walked out;

— the parties are supposed to impose on each other the same economic burden as if they were involved in a regular strike.

The basic hypothesis of that formula is as follows :

« Aside from the inconvenience which the public suffers, the only direct result of a strike is to inflict an economic loss on both the company and the workers. It costs them both money » (...) « If therefore a system could be devised which would permit the union to inflict the identical loss upon the company without a work stoppage, the bargaining function of the strike would be preserved, yet the conflict with the public interest would be avoided. » (⁵)

ELEMENTS

Setting up of the Formula

Marceau and Musgrave as well as Chamberlain propose the use of the formula when a conflict between management and the union is judged by the State as being an emergency dispute. The law would then force the parties to use the non-stoppage strike formula.

Goble suggests the existence of a law defining the method of application of the system, available on a voluntary basis to the parties involved in the conflict.

Finally, McCalmont thinks that there is no need for any legislation concerning the non-stoppage strike formula. The system could be used following the will of the parties. However, the State or any public intervention would be avoided except where agreed upon by the parties.

It would be more appropriate to name the first case « statutory strike » and the two others, « non-stoppage strike ». We will use that latter term.

Economic Penalties

During a work stoppage, the workers are willing to give up their income in order to force the employer to accept their demands. The strike without work stoppage takes that fact into account. The workers keep on working though they receive only a part of their income. On the other hand, the employer gives up a part of the company's earnings. They negotiate under that pressure until they reach an agreement. There is no work stoppage. The same economic pressure as in a regular work stoppage forces the parties towards an agreement. How can it be done ?

Marceau and Musgrave recommend requiring the company « to pay out (for all work performed) at a rate so high that the company would stand in the same profit and loss position in which it would have stood, had the work stoppage gone ahead » and the workers would receive « a rate so low that, in actual fact, they would be under the same economic pressure that a strike would exert ». (⁶) Since they keep on working, they must receive a little more than that if one is to avoid placing the parties in a worse position than if the workers had really walked out.

Goble would prefer to retain 25 per cent of the workers' income and 25 per cent of the managers' income plus the net profits of the company operating during a non-stoppage strike.

In order to maintain the relative bargaining power of the parties, Chamberlain proposes the retention of 50 per cent of the workers' income and 50 per cent of the fixed costs of the company during the non-stoppage strike. Taking into account the fact that the employer does not lose his market and that the workers have no equal advantage, another penalty would be added to the employer by retaining all his net profits.

The penalties suggested by McCalmont are much alike those of Marceau and Musgrave. They would be as follows : 50 per cent of the owner's income and 50 per cent of the difference between the company's income with and without a work stoppage ; the latter amount being defined in the expired collective agreement to avoid the problems of setting it up.

Use of the Trust Fund Receipts

On this specific point, Marceau and Musgrave, Chamberlain, and McCalmont suggest that these amounts be retained each week during the non-stoppage strike negotiations until the agreement is reached.

Goble adds the possibility of the parties recovering all the money withheld if they settle within 90 days. If not, another period of the same length with the same penalties would begin until the agreement is reached.

Musgrave, Chamberlain and McCalmont would use these amounts to finance public services in the community or to help finance the general needs of the government (strike tax).

Marceau suggests using the money withheld to pay retroactive payments to the parties, hoping that this will bring them to agree upon the formula.

EXPERIENCES

As far as we have been able to determine, there is only one collective agreement which includes a non-stoppage strike clause. It was signed by Dunbar Furniture Corporation (Indiana) and Local 222 of the Upholsterers International Union (AFL-CIO) on May 1, 1964.

It can be described as follows :

« The strike-work provisions are activated on receipt of written notice of a strike or lockout. The provisions immediately ban such action; reinstate the terms of the basic contract (whose expiration is a condition for a strike or lockout); and stipulate that the ban will continue during the first twelve payroll weeks after the notice is received. Until a settlement is reached within this period, if it is, half of the weekly earnings of bargaining unit employees (including holiday and vacation pay that may become due) is withheld by the company. This money is placed in a 'strike work trust fund', for which the First Bank of Berne is the fiduciary. The company also turns over to the fund an amount equal to the total withheld from the employees' pay ».

When the basic contract dispute is settled, the company and its employees can regain the money turned over to the trust according to the following schedule :

Settlement during the       proportion of money returned

   first 6 weeks                        100%

   7th — 9th week                     75%

   10th — 11th week                 50%

   12th week                        25%

   After the 12th week               none

If the twelfth week ends without a settlement, the basic contract can be terminated on written notice and a regular strike or lockout can begin. If such notice is not received by the end of the first following week (the thirteenth), the contract is renewed automatically and without change. In this case the contract is not terminable until a year from its original, pre-notice expiration date. (⁷)

Since their agreement on that formula, the parties have renegotiated their contract but without having to use the strike-work provisions.

There is another experience of non-stoppage strike which took place in Miami, Florida. It was not part of the agreement but was a decision taken by the parties after three days of regular strike. (⁸)

The Miami Transit Company and its striking employees agreed to provide free bus service for the city. The bus drivers agreed to provide their services free and the employer was to pay for fuel and maintenance of the buses. The drivers were not to receive any subsidies during the period other than those payments authorized by the union.

The system worked for only three days and ended because the bus company president charged that his investigators had found some drivers accepting tips from riders. They returned to a formal strike. (⁹)

This case is so particular that it could not be extended to other sectors of our economy. It is presented for its originality rather than for its possible application elsewhere.

PLAN ADVANTAGES AS ESTIMATED BY THE PROMOTORS

The great winner with the formula is the public because it does not have to change its practices as there is no work stoppage.

However, in the opinion of the proposers, both the workers and management gain with the formula. Let us now turn to the advantages for them. (¹⁰)

For the workers :

— they receive a bigger pay during the non-stoppage strike than if they had walked out;

— the demoralization which comes from being idle, as required by the regular strike, is not present;

— the bad feeling and dangers of the picket line are eliminated;

— the risk of the company beating the strike by employing strike breakers is avoided;

— the bargaining power of the union is not weakened since they are supposed to maintain the same economic pressure as if they had gone on strike;

— It is an excellent occasion for the union to improve its public image.

For the employer :

— the damage to property, which sometimes results from a picket line, are eliminated;

— all expenses incidental to a shut down are eliminated;

— the disruption which comes to the operation of the business, to its market position and to the satisfying of customers is prevented;

— the temptation to resort to unpopular methods for breaking the strike is not present;

— the good reputation of the company is maintained since it is able to fulfill its obligations.

It seems that each of the parties gains with the formula. Let us now take a look at its weaknesses.

COMMENTS ON THE NON-STOPPAGE STRIKE FORMULA

The Nature of the Formula

Insufficient knowledge of the nature of the strike.

The promotors of the formula postulate that the strike has only an economic finality and that the greatest damage inflicted on the employer during a work stoppage is the immediate loss of profit.

So saying, they take into account only one dimension of the strike. They omit its social, psychological and political functions. The immediate loss of profit is not the worst thing that can happen to an employer during a work stoppage. The employer fears the long-run impact rather more than the « here and now » consequences of the strike. He fears, among other things, the loss of his market. On the side of the workers, sometimes the traditional strike plays an important role of defrustration.

Insufficient knowledge of the nature of union activity.

The non-stoppage strike formula ignores the role of unionism. The strike is the perfect way to enhance the workers' cohesion and solidarity. If one is to remove the right to walk out, then, by the same token, the union loses what makes its strength.

Modified bargaining power

One cannot know if the formula maintains the relative bargaining power of the parties. What makes the strength of a party at the bargaining table is a set of factors. Some can be expressed in money terms but others cannot. The formula fails by converting all of these factors into money terms. Moreover, it reduces the penalties for both parties compared to the traditional strike. The smaller the penalty, the greater the will to resist and the longer the conflict.

Public opinion does not intervene since it is not disturbed by a work stoppage. Danger of bad consequences

The authors agree on the fact that the right to strike is not permanently lost since the parties can remove such a no-stoppage clause from the agreement in later collective bargaining. Once agreed upon, however, it seems that it will not be removed. On the other hand, the workers have to use their right to strike if they wish to convince the employer and themselves of their strength. With the formula, it seems that they will lose their ability to walk out. Once embarked, it becomes a vicious circle.

Such a formula can incite the rank and file workers to slow down if they are not convinced of the pressure they exert during a non-stoppage strike.

Also, the company would be attracted by the idea of cutting its product prices since it has to give up all its net profits.

There would be, finally, the possibility that the workers would quit their jobs as they would receive only « a half day's pay for a full day's work ».

Problems emerging from the implementation of the formula

During a strike without work stoppage, the workers are willing to renounce a part of their income. What happens to the workers hired once it has begun ? If they receive full pay, it will affect the moral of the other workers. If they receive only a part of it, they will not accept work there.

Since the Marceau and Musgrave article in 1949, there has been only one agreement containing such a clause. Moreover, according to the views of the president of the company, sooner or later, industrial and union leaders are going « to have to find a better way to resolve industrial disputes ».

Details of Application

Setting up

Three means of setting up the formula are proposed : a coercive law, a permissive law and a decision of the parties without any legislation. The first would be effective in avoiding the appearance of the strike but the conflict would remain. The two others leave the parties free to choose the formula or not. By doing so, one can be sure that it will not be very useful since nobody believes in its effectiveness.

Determination of the penalties

The penalties imposed on the parties should be determined by public referees (Marceau and Musgrave, Chamberlain, Goble). The employers will resist such intrusions in their private affairs.

What about the determination of the net profit ? What will motivate the employer to operate efficiently if he is to give up all his net profit ?

Goble proposes retaining 25 per cent of the manager's income. Will they accept a worse situation than during a regular strike ? What is to prevent the company from distributing at the end of the year a bonus covering that lost income ?

As far as the Dunbar Formula is concerned, it is simple, but its equity is doubtful.

Use of the trust fund receipts

The Dunbar formula seems to encourage the parties to settle early (within six weeks) since they would then recover all the money withheld. In the other case, there is no such pressure. Marceau's idea of using the money to make retroactive payments is not valuable as there would no longer be a penalty.

To sum up, let us say that if we stick to the idea, we give an unworkable means of imposing penalties, and if we define easy means of imposing penalties, we stand away from the formula.

Annexe

DUNBAR FURNITURE STRIKE WORK AGREEMENT

This Strike Work Agreement, made and entered into 20th day of May, 1964, by and between the Dunbar Furniture Corporation of Indiana, Berne, Indiana, its successors or assigns, hereinafter called the company.

and

the Upholsterers' International Union of North America affiliated with the AFL-CIO, hereinafter designated as the Union acting through its agency, Upholsterers' Furniture and Novelty Workers' Local Union No. 222, and under charter from the said Union, for itself and in behalf of the employees now employed and hereinafter employed by the company and collectively designated herein as the employees, hereinafter called the union.

LABOR AGREEMENT

The company and the union have a Collective Bargaining Agreement and it is agreed that this Strike Work Agreement and the attached Fiduciary Agreement are subsidiary agreements to the Collective Bargaining Agreement.

PROCEDURE

NOTICE

In case the union decides to strike or the company decides to have a lockout after a collective bargaining agreement expires it is agreed that the Strike Work procedure as outlined in the agreement will be in effect.

The union will send official written notice of the decision to strike to the company or the company will send official written notice of the lockout to the local union.

Starting with the first payroll week after the notice is received the Strike Work procedure will be in effect as outlined in this agreement.

The collective bargaining agreement is reinstated and will continue; in force for the entire Strike Work period.

WORK DEDUCTIONS

There will be no stoppage of work.

All employees will continue to work during the Strike Work period.

Onehalf of the earnings of all employees in the unit will be withheld and placed in the Strike Work Trust Fund in the custody of the Bank named in the Fiduciary Agreement.

The company will place in the fund each week an amount of money equal to the total amount paid by all employees that week.

PERIODS — REFUNDS

FIRST PERIOD — SIX WEEKS — ALL MONEY RETURNED

If the Strike Work is settled inside of six weeks, all of the money will be returned to the employees and the company. The bank will donate its services.

SECOND PERIOD — THREE WEEKS — 75% RETURNED

If the Strike Work is settled in the next three weeks, 75% of the money paid will be returned to the employees and the company, less 10c per check issued in the distribution process.

THIRD PERIOD — TWO WEEKS — 50% RETURNED

If the Strike Work is settled in the next two weeks, 50% of the money will be returned to the employees and the company, less 10c per check issued in the distribution process.

FOURTH PERIOD— ONE WEEK — 25% RETURNED If the Strike Work is settled in the next one week, 25% of the money will be returned to the employees and the company, less 10c per check issued in the distribution process.

OLD FASHIONED STRIKE OR LOCKOUT

If the Strike Work has not been settled by the end of the fourth period (12th week) then no money will be refunded.

The Strike Work Agreement and the Collective Bargaining Agreement may then be terminated and also there may be an old fashioned strike or lockout by written notice of either party to the other.

AGREEMENT RENEWED

If no such notice has been received by either party at the end of the 13th week after the Strike work started then the last agreement will be automatically renewed without change for one year.

The expiration date will then be one year from the written date of expiration in the last written agreement.

ARBITRATION

Any dispute as to the meaning or application of the agreement between the company and the union or with the fiduciary that cannot be settled otherwise will be arbitrated except only as is provided in Article IX of the fiduciary agreement, if either party to the dispute so requests.

The arbitration will be under the rules and procedure outlined in the collective bargaining agreement.

RULES

The following rules will be in effect with the start of the first payroll week of a strike or lockout under this Strike Work Agreement.

RETIREES

In case an employee is eligible to retire and does retire, then the money that he has paid into the fund will be refunded to him when he retires. Written proof and authorization will be given to the Fiduciary in jointly signed statement.

SICK OR INJURED

If an employee is sick or injured and received benefits under the UIU Health and Welfare Fund or Workmen's Compensation or other statutory industrial compensation funds, the benefits so received will not be considered as wages.

The money that he has paid into the fund will remain there pending his return.

In case it is proved that he is totally disabled then the money that he has paid into the fund will be returned to him when he retires. The Fiduciary will be given proof and authorization as outlined in A above.

When an employee that has been sick or injured returns to work, then he will receive a refund or will additional money so that he will pay the same percent of his wages as other employees. The payments, if any, can be divided into four weekly instalments.

QUITS

In case an employee quits or is discharged during the time a Strike Work is going on, he will forfeit and lose all claim to any money that he has paid into the fund. If he should be rehired, he will start as a new employee without seniority.

If the amount that he had paid into the fund was a smaller percent of his weekly wage than others paid, he will pay the difference before starting to work, to the company and the company will deposit the money so received in the fund.

NO STRIKE OR SLOW DOWN

It is agreed that there will be no strike stoppage or slow down or restrictions of output during the time that the Strike Work is in effect.

In case any such action should occur the company may at its option discipline or discharge any or all of the people taking part in a strike, stoppage, slow down or restriction of output.

In case such action by the company is taken to arbitration to sustain its action it shall only be necessary for the company to prove that the employees so dealt with did actually take part in the above strike, stoppage, slow down or restriction of output.

NO LAW SUIT

It is agreed that the International Union or the Local Union or any of its agents or officers, or any employees will not bring any legal action against the company or the fiduciary. The company will not bring any legal action against the International or Local Union or any of their officers or members or against the fiduciary.

NO CONTRIBUTIONS

1 — During the Strike Work period it is agreed that the International Union and its affiliates shall not directly or indirectly render financial assistance to any of the employees in the bargaining unit.

2 — The company agrees that it will not solicit or accept any contributions from any association or from any other source.

3 — The employees agree that they will not solicit or accept any contributions or help from local merchants or any other source.

If it is discovered that this section has been violated the guilty party shall pay double the amount received into the trust fund.

ENFORCEMENT

This paragraph shall be applicable not withstanding the termination of this agreement or any statute of limitations.

The accused party, however, if it denies the accusation may go to arbitration in an attempt to prove its innocence.

The arbitration will be held as is provided in the Collective Bargaining Agreement with the company and union sharing equally in the cost of the arbitration.

The arbitrator will decide only whether or not the accusation is correct and it is agreed that his decision is final.

DURATION

The Strike Work Agreement may be amended, changed or abolished by mutual agreement between the company and the union.

IN WITNESS WHEREOF the parties hereunto set their hands and seals as hereinafter stated, on this the 20th day of May 1964.

(1) Marceau, LeRoy and Musgrave, Richard A., «  Strikes in Essential Industries, A Way Out » in Harvard Business Review, Vol. 27, No. 3, May 1949, pp. 286-292.

(2) Goble, George W., « The Non-Stoppage Strike » in Current Economic Comment, Vol. XII, August 1950, pp. 3-12 and in Labour Law Journal, Vol. 2, No. 2, February 1951, pp. 105-114.

(3) Chamberlain, Neil W., Social Responsibility and Strike, New York, Harper Brothers, 1953, p. 293.

(4) McCalmont, D.B., « The Semi Strike » in Industrial and Labour Relations Review, January 1962, pp. 191-208.

(5) Marceau and Musgrave, op. cit., p. 287.

(6) Marceau and Musgrave,op. cit., p. 287.

(7) The Conference Board Record, August 1964, p. 41. (See the text of the said agreement, p. 304.)

(8) New York Times, October 4, 1960, p. 13.

(9) New York Times, October 10, 1960, p. 14.

(10) See Goble, op. cit., p. 108.