NOTE: This UE Steward has not been updated since it was first published over a decade ago, and many of the statistics are out of date. The basic points, however, remain relevant.
The 'above-all-else' drive to increase profits often leads to decisions involving outsourcing, subcontracting and privatization. We're faced with it ... and we have to deal with it.
Outsourcing, subcontracting, privatization — for workers these terms mean lower wages and lost jobs. Subcontracting has always been an issue, but now the drive to increase profits has meant subcontracting is hitting all-time highs and finding brand new forms.
Employers are always trying to increase profits. The easiest way to do this is to cut workers' pay and benefits, or make workers work more hours per week. Now, the latest management fad to increase profits is outsourcing / subcontracting / privatization. Whatever you want to call it, we are faced with it and have to find ways to deal with it.
Subcontracting has always been around. Many UE members work in manufacturing shops that produce parts for other companies. However, in the 1990’s the drive to increase profits by subcontracting has hit an all-time high.
In 1994, companies subcontracted about 16 billion dollars worth of work. In 1998 it was predicted to be 37 billion dollars. In the public sector, right-wing politicians keep pushing to give private companies the work normally done by public employees. The resulting savings from paying lower wages usually end up going to corporations in the form of tax cuts or the hiring of more and more overpaid administrators.
In every UE workplace we face the threat of job loss due to subcontracting. The union is always told, "we face increased competition and therefore must subcontract in order to produce at lower cost (they really mean pay lower wages) so we can save jobs." In UE shops that produce parts for other companies, the loss of job threat becomes "if we give you a pay raise then GM or GE won’t give us any more orders."
WHAT CAN BE DONE ABOUT SUBCONTRACTING?
There is no easy answer. Unless the contract specifically prohibits subcontracting, arbitrators have increasingly found for the employer. Labor law at best provides that the company must give notice and if requested, provide information and bargain. Thus our main muscle is the ability to put up a tough shop floor struggle to deter employers from initiating and carrying out subcontracting decisions.
If a Local faces this problem, here are some guidelines to think about. Like all tough problems we face in the UE, the steward system is key to educating, mobilizing and organizing the membership.
• BE PRO-ACTIVE ... NOT REACTIVE
Don’t wait until the boss tells you a department is being farmed out to take action. When rumors start surfacing about subcontracting check them out, BUT don’t let the boss create an atmosphere of panic. Often employers use rumors to "soften up" the union for the kill. Make a plan before subcontracting starts and put that plan into action.
• DEMAND INFORMATION
If the employer says that work is going out the door, the union has a right to demand information on why the work is going, how much the work will cost at the subcontractor, where the work is going, etc. The employer may resist giving all the information we request–get the members involved in making the employer miserable until we get the information we need. The Labor Board still supports a union's right to "reasonable" information BUT it keeps getting worse on even this basic issue.
• DOES THE EMPLOYER HAVE TO BARGAIN WITH THE UNION OVER THE MOVING OF WORK?
This is a matter of contract interpretation and labor law. If your contract clearly gives the employer the right to subcontract, then the union may only get to bargain over the effects of the subcontracting (layoffs, transfers, etc.) not over the decision to subcontract. However, do not assume that the employer has the right to subcontract without bargaining just because they say so. Check with the staff person assigned to your local. Another point to remember, the union does not give up all its rights just because the employer subcontracted work sometime in the past and the union did not stop it. The NLRB says a union loses its rights only if it clearly agrees to give them up. The employer can try to claim past practice but it takes two parties to make a past practice.
• IF THE CONTRACT IS SILENT ...
If the contract is silent, the presumption is that the employer must give notice about any decision to move work out of the bargaining unit and bargain on request, especially if the employer claims a financial reason for subcontracting.
• EDUCATE THE MEMBERS
Make sure the members understand the problem, even if it is not their area that is being affected. Make sure they understand that this is a hard battle to win, but it is the union's obligation to try.
• MAKE A PLAN
Use the UE workshop on "Strategic Planning." Sometimes many battles have to be fought before the war can be won. This is what making a strategic plan is all about. Size up the employer's strengths and weaknesses. Know the union's strengths and weaknesses. Often, we must wait until the employer really needs our cooperation, then we bargain hard over the current problem and over the bigger issues, like subcontracting. We shouldn't wait until contract negotiations to deal with issues like this.
• PROBLEMS LOCALS HAVE NOTED ...
Ray Pompano at Local 243 reports that the company brought the mortise lock work back from Mexico when they discovered that the shipping dates couldn't meet their schedule. Other locals have seen loss of control over quality; loss of efficiency once certain processes are no longer performed in house; higher rather than lower costs due to unanticipated transportation charges, delays, quality problems, engineering snafus and lost parts.
• THINK ABOUT AND PREPARE TO MAKE CHANGES TO THE CONTRACT
Figure out what language should be added or taken out of the contract to give us more power on this issue. It’s all right to shoot for "pie in the sky" language as long as the members understand that sometimes changes can only be made slowly, bit by bit. Every little roadblock created against subcontracting is a victory.
• STOPPING SUBCONTRACTING BY THE UNION IMPROVING PRODUCTION AND SERVICES
Cooperation Save Jobs?
The United Auto Workers Union has for many years been in the forefront of promoting all sorts of "Labor - Management Cooperation" in order to save jobs. In 1997 to celebrate the sixtieth anniversary of the sit-down strikes in Flint Michigan which won the UAW it's first big victory, the union put out T-shirts that read, "UAW from Confrontation to Communication." In the last five years General Motors alone has laid off 38,000 workers in the U.S. So much for cooperation. ...
During the last couple of years the autoworkers rank & file have begun to act. There have been local strikes over subcontracting and the speed-up. These have been successful in getting the auto companies to agree to slow down subcontracting but as one UAW Local President said after winning an agreement after a 6 day strike in 1996, "We had to fight them for an agreement. Now we have to fight them to honor it."
— From "Too Little, Too Late for the UAW," by Jane Slaughter
Many UE Locals have stopped or slowed down subcontracting and privatization by developing union plans to increase production, or deliver better services. The key to engaging in this strategy is to never get into the concession trap and to get written guarantees from the employer. If the union has a better way to organize production and lower scrap, bargain with the employer before giving the new idea. Don’t accept vague promises, get a written agreement. Remember, it doesn’t hurt to occasionally remind the employer of the bloated salaries and benefits that they get. Eliminate these and the need for subcontracting is over.
The employer may offer a moratorium on layoffs, but propose eliminating workers by attrition in exchange for ideas on increasing productivity. While some locals have been forced to agree to this as the best deal possible at the time it should be avoided if possible. If it can’t be avoided make it part of a temporary solution, not the permanent solution. Make the argument for bringing new work into the workplace, or expanding services. Brainstorm on ways to keep or add more workers.
• ORGANIZE THE UNORGANIZED
Subcontracting and privatization are successful because there are too many unorganized workplaces. If your employer subcontracts work, find out where, and under what conditions. If there are unorganized workplaces in your area, even if they don’t do subcontracting for your employer, try to organize them. Only by raising wages and benefits of ALL workers can we protect our standard of living.
Note: The UE National Office has available sample contract language to help fight subcontracting in both the public and private sectors. UE locals should talk with their staff person or contact their district office or the UE National office for more information.