**Labor and Management Relations: The American Experience**

*By Peter J. Hurtgen*

*Director, The U.S. Federal Mediation and Conciliation Service*

It is an honor and a privilege to speak to you today. I am the Director
of the Federal Mediation and Conciliation Service, an agency of the
United States government that was created in 1947. The statute creating
the mediation service says that it is our "duty...to prevent or minimize
the interruptions of the free flow of commerce growing out of labor
disputes, and to assist the parties to labor disputes in industries
affecting commerce" though mediation and conciliation. Our primary goal
is to work with companies, and the unions that represent the employees
in those companies, to help them reach collective bargaining agreements,
or contracts, that set forth the wages, hours and terms and conditions
of employment for employees.

**[I. Birth of Labor Law:]{.underline}**

In the latter part of the 19^th^ and early 20^th^ centuries, millions of
immigrants from across Europe flocked to the promise of new jobs created
by America's growing industrialization, bringing the European tradition
of strong trade unionism with them to the United States. During this
period, the growth of unions in the United States was marked by street
riots, armed conflict and severe economic disruption. Key industries,
such as coal mining, railroads and steel manufacturing, were wracked by
long, viciously-fought strikes and lockouts. During this time of
turmoil, unionized workers fought with armed company union-busters and
even government troops. Meanwhile, the government sided first with one
side and then the other, depending on which way the political winds blew
at the time.

Conflict between unions and company management grew so disruptive that
in 1933 across the United States, there were 1,856 separate work
stoppages, affecting major sectors of the economy and plunging several
U.S. cities into urban street violence. The United States was in the
grip of a great economic depression, and it was clear that action had to
be taken. In 1935, the U.S. Congress passed the National Labor Relations
Act, recognizing and seeking to rectify "the inequality of bargaining
power between employees who do not possess full freedom of association
\... and employers who are organized in the corporate or other forms of
ownership association\...\" Congress sought to redress this imbalance by
protecting the right of workers to organize and by encouraging
collective bargaining.

In our system, it is an approach that has withstood the test of time and
many challenges by those seeking to overturn it.

Prior to the passage of this law, the "Master and Servant" doctrine
governed the relationship between employers and their individual
employees. Companies, and the individual employees working for them,
worked out their own private and frequently unenforceable arrangements
on how work would be procured and paid for. The Master and Servant
doctrine descended from an old legal concept which treated employees as
individuals and subservient to their employer or "master." Under this
doctrine, groups of employees had no rights to organize or negotiate as
a group with their employer for their pay and conditions of employment.
However, this situation changed with the passage of the National Labor
Relations Act in 1935. This law recognized the rights of employees to
organize and to bargain together collectively with their employer. This
is how the concept of free unions and what we call the "freedom to
associate" became embedded in our labor laws.

In the United States today, our system ensures that a company's
employees are able to organize themselves into a union and then if a
majority of employees vote for the union, the union is authorized to
represent them in their dealings with their employer. In essence,
collective bargaining replaced the private individual master-servant
relations between employers and employees with a system in which a
majority of employees can negotiate such things as wages and benefits
and working conditions with their employer. Under the law, employees are
allowed to engage in strikes and employers can "lock out" workers as
part of a contract dispute. However, both sides must observe many rules
that govern their negotiations and the relationship between employee
unions and company management. Either side can be sanctioned if it acts
unfairly or violates the requirements of the law.

The National Labor Relations Act at its core has three basic sections:
(1) rules and regulations for holding elections to determine whether a
majority of employees wish to be represented by a union; (2) a
compilation of defined unfair labor practices by employers; and (3) a
similar complement of defined unfair labor practices by unions. The law,
which has been in effect for almost 70 years, is interpreted by the
5-member National Labor Relations Board. This board hears and decides
complaints brought by unions or management alleging that the other side
has violated the law. And to this day, this law continues to govern the
unionized sector of our economy.

The statute was passed at a time of great social turmoil in the United
States, when labor disputes were not resolved through the courts, or
through negotiation and mediation, but often through protests in the
streets and through large and sometimes violent strikes. The passage of
this law was intended to help remedy the chaos and conflict that had
been associated with worker disputes in this period of social turmoil.
This remedy, which has proved very effective over many decades, gave
employees the right to organize for their mutual interest and protection
and to increase their bargaining power with their employers. This
process of organizing or banding together as a group and then
negotiating with an employer to agree upon terms and conditions of
employment is known as collective bargaining. Collective bargaining
creates legally binding contracts, also known as collective bargaining
agreements, that govern what kind of work employees perform, under what
conditions, and how much they will be paid for their work.

**[II. Birth and Role of the FMCS:]{.underline}**

About 12 years after the passage of the National Labor Relations Act,
the United States Congress determined that the process of collective
bargaining could use a helping hand from a neutral source, which could
impartially assist labor unions and company management. Congress created
the Federal Mediation and Conciliation Service to function as a neutral
party, with a cadre of mediators who would be available to labor and
management. The mediators work to help unions and employers resolve
their contractual disputes without resorting to economically disruptive
strikes or lockouts.

It is important to note the difference between mediation and
arbitration. Mediation, a form of alternative dispute resolution, is a
process in which a neutral facilitates communication and negotiation
between parties to assist them in reaching a voluntary agreement
regarding their dispute. Arbitration involves a decision by a neutral,
who hears a case, listens to witnesses, credits or discredits them, and
renders a decision that the parties agree is binding. Although
arbitration decisions can be appealed in the courts, courts almost never
overturn an arbitration decision. Arbitration is considered a form of
alternative dispute resolution as well because it is an alternative to
the court-litigated process.

As mediators, we help companies and unions negotiate contracts that
cover wages, hours and other terms and conditions of employment. In the
United States, before a union and an employer begin the process of
collective bargaining, we contact the parties to offer our mediation
services. Often, the parties will consent to our involvement, and
sometimes they do not. In the United States, mediation is a purely
voluntary process, and the law does not impose mediation on parties who
don't desire it. Yet we nevertheless offer our services in almost every
situation, well before collective bargaining begins.

Labor conflict is most obvious in the United States when strikes occur,
and our primary mission is to avoid work stoppages through mediation.
However, even where there is no work stoppage, and where the parties
reach agreement on the terms of a contract, it would be unrealistic to
assume that the relationship between labor and management can be
peaceful all the time. To the contrary, it is anticipated that both
sides will perceive that they have different interests, which can create
conflict.

We cannot stop conflict from occurring, but at the Federal Mediation and
Conciliation Service we place as much emphasis on conflict prevention --
stopping conflict before it happens -- as we do on conflict resolution.
We do this by working with labor and management through our
relationship-development training programs that are designed to improve
the one element that makes conflict manageable -- communication.
Communication is at the core of all successful relationships, including
the relationship between labor and management. Communication that
includes listening without judgment, and response without reproach,
leads to cooperative efforts. In the United States, federal mediators
instruct labor and management partners in the art of positive
communication, which is central to cooperative efforts. With positive
communication, labor and management have a better chance at partnership
instead of partisanship.

As the premiere United States government agency responsible for conflict
resolution, we have expanded our expertise into mediation of individual
employment that cannot traditionally be resolved through the terms set
forth in the collective bargaining agreement. These kinds of individual
employment disputes can include alleged discrimination based on race,
gender, religion, age, or other factors.

The Federal Mediation and Conciliation Service was created to deal with
collective disputes involving large numbers of workers, but over the
decades, the workplace in the United States has changed. Today's laws
recognize that individual employees can make claims of unfair treatment
by their employers. In the United States today, the greater harm to the
American economy might well be the millions of pin pricks caused by
these individual employee claims, such as employment discrimination
claims. The effect of all these claims is hard to measure, but it is
clear that they are very harmful to the economy in the aggregate. In
addition, they are difficult to prevent and to resolve. Labor unions do
not participate in resolving these individual employment claims, unless
a collective bargaining agreement or grievance procedure is involved.

In the United States, litigation involving individual employee claims is
growing rapidly, and the court system is the venue for resolving these
non‑collective disputes. Employers spend enormous sums of money in
deterring, responding to, losing, or winning these lawsuits. A claim
that goes through a trial in the federal courts can involve defense
costs in the neighborhood of \$250,000, win or lose. We make attempts to
mediate these disputes where possible, not only to avoid the obvious
burden to our court system, but also to repair the relationship between
employers and employees that can become irreparably damaged in these
kinds of disputes.

**[III. A Mediator's Job:]{.underline}**

A mediator's job, at its core, is to assist the parties in reaching
contract settlements. How do they accomplish this task?

The agency employs 200 mediators who are experts in conflict resolution.
They are dispersed around the country and spend a significant amount of
time in their communities making themselves known to the labor and
management representatives situated in their areas. I can't
overemphasize the importance of this process. We call it outreach -- a
process by which mediators make every effort to gain trust from the
parties so that they are viewed favorably by both sides even before a
dispute begins. The relationship-building between mediators and labor or
management representatives is time consuming, but it pays off
significantly when the parties need a neutral to assist them.

Once mediators have established a level of trust, they are often asked
to provide assistance in improving the relationship between the
representatives of management and labor through the relationship
development training programs I described earlier. These programs have
one common thread, which is to improve communication between the parties
such that their communication is respectful and can lead to meaningful
cooperation.

Through such meaningful cooperation, there are great benefits to the
enterprise and its unions. Workers' voices are heard, as their ideas and
suggestions are encouraged by management. This means that businesses are
able to take into account the feedback that is only possible when there
are committed workers directly engaged in the production process; that
is to say, when there are workers with an "owner's mentality." When
workers are respected and begin to feel that they have a stake in a
company, morale improves, customer service improves, productivity
improves, work attendance improves and, as a consequence, these
companies are best equipped to meet the great challenges of global
competition

In addition, the type of support for collective bargaining that is
provided by the FMCS is consistent with the commitment that the United
States and many other nations made in the International Labor
Organization's 1998 *Declaration of Fundamental Principles of Rights at
Work*. In that document, the ILO member states agreed to "promote and
realize" 4 core labor standards, once of which was support for Freedom
of Association and Collective Bargaining. For that reason, the Federal
Mediation and Conciliation Service programs are of interest to the
world: As nations endeavor to meet their commitments pursuant to the
declaration, our agency has provided technical assistance in more than
20 countries in the last 6 years.

**[IV. FMCS Statistics:]{.underline}**

In government, we spend a lot of time collecting statistics. We use
these statistics to gauge trends in the world of labor relations
throughout the country, and equally important, we use them to show the
effectiveness of mediation in our reports to the White House and to the
United States Congress.

Our latest statistics from October 1 2003 to October 1, 2004, show that
there were 26,526 labor-management contracts that expired in this
period. The law requires that, in each one of these cases, either the
union or management must notify the agency 30 days prior to the
expiration of the contract that they intend to re-negotiate their
agreement. We received 26,526 such notices in the last year, and most of
these cases were assigned to agency mediators. Our mediators then
contacted the parties in each and every assigned case to offer their
assistance in mediating and reaching agreement prior to the contract
expiration date.

The law in the United States does not require the parties to accept
mediation. To the contrary, it is well known in the field of dispute
resolution, that mediation is purely voluntary and third party mediators
are only welcome where the parties allow them to be present.

Because mediation is a voluntary process, of the 26,526 contracts that
expired in the last year, FMCS mediators became actively involved in
approximately 5,000 contract negotiations. While that might appear to be
a fairly low percentage, we are extremely successful at helping the
parties where they allow us to be present. Indeed, of those
approximately 5,000 situations where mediators assisted the parties, 80
percent of those cases were resolved with the assistance of a mediator.
We consider that a very high settlement rate, and we are particularly
proud of that settlement rate considering the complex issues that are
affecting businesses in the United States. Of the cases that are listed
as unresolved, some are because the company has gone out of business;
the union has dissolved; the parties have agreed to accept an arbitrated
solution; they have gone to impasse procedures; or they continue to
negotiate.

Our job has been made harder in recent years because of increasingly
difficult and complex issues that both labor and management are bringing
to the negotiating table. Over the last year, 55 percent of contract
negotiations in the United States centered on rising health care costs.
Roughly 61 percent of working Americans receive their health insurance
through their employer. Their employer pays part of the health insurance
premiums, while the employees of the business pay the other part.
Because health care costs have been rising at a pace that exceeds the
rate of inflation, health insurance costs have become perhaps the most
difficult issue we have faced over the last year, and as I indicated, 55
percent of all our cases involved this issue. Businesses are trying to
keep their health insurance costs down by requiring more employees to
shoulder the costs themselves. The fact that we have an 80 percent
settlement rate, under these circumstances, is a testament to the
process of mediation and how much we can be of assistance when the
parties are willing to accept our help.

In addition to the statistics we gather as a measurement of our
effectiveness, we conduct a customer survey every three years to
determine how we are rated by those who use our services. Our recent
customer survey, conducted this past winter, found that 50 percent of
both private sector union and management respondents said that without
mediation, a work stoppage would have been likely in their contract
disputes. In the public sector, 52 percent of management respondents and
62 percent of union respondents said that without mediation, such a
result also would have been likely in their disputes. The survey also
showed that there is increased divisiveness in labor-management
relations, which only makes mediation services ever more critical to the
success of labor relations in the United States.

**[V. The Economic Importance and Success of Labor Law]{.underline}**

The United States has found that collective bargaining and dispute
resolution techniques are institutions that are very practical and very
beneficial for economic growth. The U.S. economy is successful, in part,
because we have these institutions to avert or minimize work stoppages
or other economically disruptive labor strife.

Why is collective bargaining and alternative dispute resolution
important? The system of collective bargaining, unfair labor practices
and the role of FMCS, has not changed because the practice of labor
relations still is based on an adversarial system in the United States.
The system has, and continues to be adversarial because, when collective
bargaining was created, it was believed that capital and labor would be
eternal enemies or eternally in conflict. Thus, a system of law and
regulations, and government agencies, such as the Federal Mediation and
Conciliation Service, were created to take that conflict out of the
streets and channel it into collective bargaining and more acceptable
forms, such as lawful strikes, lockouts or economic pressure. I would
submit that channeling the employer-employee relationship into
collective bargaining has indeed reduced harmful work stoppages in the
United States.

Work stoppages in the form of strikes and lockouts over the last five
years have diminished substantially, continuing a long-term trend. This
year, there were 271 work stoppages. In the preceding 5 years, the
number of work stoppages has dwindled. In 2003, there were 289 strikes;
in 2002 there were 327; in 2001 there were 445; in 2000 there were 392;
and in 1999 there were 411. As you can see, there is a downward trend.
There are a number of factors behind the reduction in work stoppages,
but the primary reason is likely the understanding, of both sides, that
no one wins in a strike. Businesses suffer because they lose money when
employees are not available to work. Employees suffer because they are
not paid during the time that they are on strike. Familiarity with these
concepts, through the process of collective bargaining, is likely a
factor in the downward trend in work stoppages over the years.

I also submit that there is another force that has reduced the number of
labor disputes in the United States. That force is the importance and
success of United States labor laws. The National Labor Relations Act
has not changed in many decades. Sections of the law can be interpreted
differently today because of changed circumstances of the workplace, but
in essence, the law remains intact, and the parties look to the law for
guidance in determining their collective bargaining rights. And Congress
intended for the Federal Mediation and Conciliation Service to use
traditional dispute resolution techniques to gain the parties' trust,
hold their confidences, help them save face, and communicate with one
another to reach agreements that benefit the employer, the employees,
and the economy in general. The National Labor Relations Act remains the
blueprint against which the parties determine their rights under the
law, and the FMCS remains the glue that can hold the parties together
when conflict threatens to tear them, and the economy, apart.

This is not to say that the U.S. labor laws are perfect. The reality is
that either side, labor or management, may find it advantageous to
violate the law on occasion. However, despite some abuses, industrial
relations in the United States remain relatively peaceful, and unions
and companies generally abide by the law because of the general respect
for the Rule of Law in the United States---both within and outside of
labor relations.

**[V. Summary:]{.underline}**

In conclusion, studies have shown that people who are able to
successfully navigate conflict, and broker divergent interests with
others, are far more likely to be successful in life, yet formal
education rarely includes the types of conflict resolution and conflict
management lessons that are the focus of collective bargaining. The
United States government, through the creation of the Federal Mediation
and Conciliation Service, is committed to the peaceful resolution of
labor disputes and cooperative efforts that turn collective bargaining
into an alliance between labor and management for the improvement of the
economy.

Thank you.