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KATHLEEN VALLEY VICTORIA MEDVEC

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Adam Baxter Company/Local 190 1985 Negotiation Baxter Management Confidential Information

On May 31, 1985, Baxter management announced that if the company and Local 190 have not come to an agreement by the expiration date of the current contract, it will terminate the current contract. Any employer in the United States has the right to terminate a contractwhen it expires, but

1 Endnotes (indicated by letters) are summarized in the final case, “Adam Baxter Company/Local 190 Debrief and Endnotes,” HBS No. 396-326. 2 Use your agreed-upon wage here. If you did not come to an agreement, use the arbitrator’s decision: the arbitrator agreed with management that the “me-too” clause was applicable to falling wages as well as to rising wages. Thus, thearbitrator ruled that the base-rate wage be set at $8.67/hour, calculated by taking the three highest of the competitors’ wages and averaging them. ________________________________________________________________________________________________________________ Professor Kathleen Valley, Harvard Business School, and Professor Victoria Medvec, J.L. Kellogg Graduate School of Management, prepared thisexercise with the assistance of Research Associate Julia Morgan, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1996-1998, 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800545-7685, write Harvard Business School Publishing, Boston, MA02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

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Since your last negotiation, relations between management and labor at the Deloitte planthave been increasingly acrimonious. Preliminary negotiations have produced no movement on either side’s part, and little evidence that an agreement will be reached soon. Both sides publicly acknowledge the likelihood of a strike when the current contract expires in August. Local 190 leadership is vocal and antagonistic in its clear “no concessions” stance. They have begun to prepare for a strikeby getting finances in place and hiring a New York City public relations firm to tell their side of the story. In anticipation of increased acrimony, management recently purchased $80,000 of barbed wire to circle the packinghouse, claiming it was needed for protection of the plant and its workers. Part of the tension is due to the specific situation in Deloitte, but part is probably attributable tothe climate of labor relations in general—throughout the nation, industrial relations are in turmoil. Some have gone so far as to claim that this era will see the end of organized labor in the United States.

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It is July 18, 1985, exactly one month prior to the expiration of the contract established in the 1978 labor agreement. In the 1981 wage negotiation between the International AFL/CIO anda number of the food processing companies including Baxter, the base wage rate was frozen at $10.69. Following significant changes in the industry, wages were renegotiated at nearly all of the food processing companies. In your 1983 negotiations with Local 190, wages were renegotiated and set at x.2

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REV: MAY 13, 2008

396-324

Adam Baxter Company/Local 190 1985Negotiation—Baxter Management Confidential Information

The union is quite up-in-arms about the injury rates. They claim the injury rate is 202 injuries per 100 employees. You know this figure is exaggerated, but realized that Deloitte has more workdays lost to injury than Baxter’s other plants and than the industry average. You believe most of the injuries result from the employees’ inexperience with the...