‘Shelf’ agreement could secure investment, but diminish bargaining power
The shelf agreement has long been purported by unions as a means to drive investment and secure jobs — but the cost can come at a high price, including the forfeiture of some bargaining rights.
The dilemma of the shelf agreement has cropped up at General Motors Canada’s operation in Oshawa, Ont., where Unifor has touted the possibility of early collective bargaining to secure future product development for its workers.
At root, the shelf collective agreement is negotiated with the employer in advance, and ratified by the bargaining unit, but does not take effect until (or unless) a precondition occurs. Effectively, the contract sits on the shelf.
As it currently stands, neither Unifor nor GM have expressly asked for a shelf agreement, but it is a tactic the union has successfully applied in Oshawa in the past, for instance in 2006, to come up with a flexible plan to manufacture the Chevrolet Camaro.
"When we have those types of investment’s infrastructure, then (the company) builds on long-term commitments," said Ron Svajlenko, president of Unifor’s Local 222 in Oshawa. "When they put a plant in, and they commit long term like they did with a shelf agreement, there are benefits down the road."
But negotiating a shelf contract is akin to walking the edge of a knife.
According to David Amyot, a labour lawyer on the automotive file at McTague Law Firm LLP in Windsor, Ont., a shelf agreement puts the union at a vantage point — in that it sits at the table as a legitimate business partner — but at the high price of its bargaining power.
"The rationale for doing that is to secure the work, and once the employer or company commits significant capital investment for that product in that facility, they would hope to achieve gains at the bargaining table in future years based on roots being put down in that facility with that new product," Amyot explained. "(Unions) might operate under the motto: short-term pain for long-term security and gain."
Eroding a union’s bargaining clout is one such painful short-term concession, Svajlenko agreed, adding that the ends justify the means.
"No one really ever wants to negotiate a shelf agreement, it’s more of a result of circumstance. You do it when you feel it fits your membership and your products," he said, citing this summer’s forthcoming bargaining between GM and the U.S.-based United Auto Workers union. "We know the product that GM has available across the board is limited, so obviously we’ve taken the more aggressive step to try and get ahead of them and say, ‘What about us?’"
Particularly in Oshawa, the fecund garden is primed for harvesting. Svajlenko pointed to the plant’s demographic, two-thirds of which will be or become eligible for retirement in 2015, as a contributing factor during the upcoming round of negotiations.
But traversing a shelf agreement can have benefits in Oshawa that will outlive the provisions of a specific contract. Survival, for instance — and the guarantee of work — are worth making concessions for, Svajlenko added.
"There has been a host of concessions, and some of that was driven by the United States, because I can’t compete with Mexico or Indonesia or China, but if I can’t be competitive with the United States, I won’t exist," he explained.
Should the company commit to Oshawa, brokering a shelf agreement has its benefits — particularly one that determines what the cost of labour will be without making any definitive or concrete commitment to put the product there.
"You’re mitigating the risk of many hundreds of millions of dollars of investment and you’re kind of sharing a little bit of that with the union," he said. "It’s a known labour component."
And presumably, the automaker will be satisfied with the workforce up for consideration — a facility with trained and familiar employees will mitigate false expectations, he added.
Such a gamble will be felt on both sides of the table.
"A high level of trust is required to negotiate a shelf agreement," Amyot said. "To some degree, each side is exposing more of their strategic plans than they may otherwise want to. But they’re doing it for the common purpose of trying to get a business case that makes sense to put the particular product into the facility."
The automaker is open to such an arrangement at its Oshawa operation, according to GM Canada’s president Stephen Carlisle.
"Who’s to say what’s possible at this stage? It’s been done before — so let’s see. I wouldn’t rule it out," Carlisle told Reuters.
The current contract between GM and Unifor’s Local 222 chapter expires in 2016.