How unions negotiate for more money when their employers are legitimately cash-strapped

» READ MORE: Update: SEPTA strike averted as TWU 234 reaches tentative deal

As negotiations between SEPTA and its largest union intensified this week, the issues were clear: Union members wanted wage increases and more robust security throughout the system, while SEPTA didn’t yet know if it will have the money to operate next year without “draconian” service cuts, let alone grant wage raises and meet other union demands.

These negotiations exemplify a battle that many unions around the region have waged: How do you negotiate more money for employees when an employer might be legitimately cash-strapped?

Unions negotiating with commercial office building owners, public universities, SEPTA, and even the Philadelphia Orchestra have faced employers that have lost financial breathing room since 2019.

“Sometimes when unions are in industries that are sick, having the union there, maintaining its position and working to support other kinds of benefits [besides big wage increases] is important,” said Francis Ryan, professor of Labor Studies and Employment Relations at Rutgers University.

Historically, Ryan said, unions have bargained around work rules, sick days, or other nonmonetary issues when employers haven’t had the money to give big wage increases or boost health-care or retirement contributions. And in many cases there’s always next time.

“Collective bargaining is an incremental, long-term process,” said Ryan. “An industry’s position right now might not reflect where it is in five years.”

This summer, Philadelphia’s commercial real estate owners were fretting about the forthcoming contract negotiations with SEIU 32BJ, which represents thousands of janitors and other service staff in Center City’s beleaguered office sector.

Office occupancy hasn’t recovered anywhere close to pre-pandemic levels, as hybrid work has become the norm. Mondays and Fridays are particularly sparse. And that means there’s less trash in the waste baskets, less coffee spilled on the floors, less toilet paper to be restocked in the restrooms, less work for office cleaners.

In late August, 32BJ flooded the streets of Center City with hundreds of purple-clad members and drew on the support of Democratic mayoral nominee Cherelle Parker, a longtime ally. Observers feared a brutal showdown between the union and the building owners. But in the end, major drama was averted and a new contract inked because the owners were able to avoid fresh contributions to health and retirement benefits — allowing them to only concentrate on wage increases.

“A key factor in enabling [us] to reach a settlement … despite the challenges facing our industry, was the fact that our welfare and pension funds are well-funded,” said Daniel Brighter, president of Building Operators Labor Relations. The fund has been less heavily used than predicted, and sound investments and an overall strong market have bolstered the fund, he said. “[That] permitted us to avoid having to increase the contribution rates over the four-year term of the new agreement.”

The pressure was also eased by a decline in the number of janitors covered by the contract. Building owners say there are 4% to 6% fewer workers employed as office cleaners since the pandemic; the union says it’s 15% fewer.

It also helped that some office owners are doing well, allowing them to cover for their counterparts facing higher vacancy rates.

Unionized employees of Philadelphia Rite Aid stores were not so lucky. They bargained their most recent contract with a backdrop of their company’s anticipated bankruptcy filing.

They approved the contract last week, and Rite Aid filed a Chapter 11 petition the following Sunday.

“It’s not the best environment to be negotiating in when a company is in bankruptcy,” said Wendell Young, president of UFCW Local 1776, which represents about 1,500 Philly-area Rite Aid workers. “While it fell short of what our members deserved and wanted, there was some level of security in that they had a contract in place before filing for bankruptcy.”

The agreement included slight wage increases, some additional paid time off, and similar benefits as the last contract, Young said.

“We took the bird in hand rather than continuing to bargain for two in the bush,” he said. “If we used maximum leverage, that could easily be undone by a bankruptcy court.”

Publicly funded institutions may have other levers to pull when facing pressure from unions. Rutgers University, for example, was able to fund new agreements with faculty by getting more money from the New Jersey legislature.

Many public colleges and universities across the United States have been getting decreasing amounts of money from their state governments over the years. That includes Rutgers, said Todd Wolfson, president of the professors’ union, AAUP-AFT.

University leaders were speaking publicly about Rutgers’ financial distress and austerity measures “well before we got to the bargaining table,” Wolfson said. But union leaders weren’t deterred by that argument.

“On one hand, I think the state should be putting in more money, but I also want to say Rutgers had the money,” Wolfson said. “Their position that they didn’t have the resources is insincere.”

The faculty unions stuck to their demands and went on strike in April.

“We built an enormous amount of leverage pulling 9,000 people out” of work, Wolfson said. “They — being the university and the state — had to problem-solve.”

Gov. Phil Murphy called the parties to Trenton to continue negotiations throughout the work stoppage. The result: state legislation that allocated an additional $53.7 million to Rutgers, and the union got the terms they had asked for.

“We had asks out there that they said they would never do, not months before the strike,” Wolfson said.

But the Rutgers unions also had the benefit of striking in Democratic Party-dominated New Jersey. In states where Republicans govern, labor leaders may be harder pressed to get that lifeline.

At the federal level, unions are also aided when Democrats are more powerful, ensuring more funds flow to the public sector Ryan says. Historically, the public-sector labor movement — especially before Ronald Reagan’s presidency in the 1980s — could rely on the federal government to help fill gaps in local funding regardless of which party was in charge in D.C. Some Republican state leaders in the Northeast and Midwest were allies of labor, too. That’s less true today.

“When you had a public sector collective bargaining impasse there was some politicking that went on in Harrisburg or Washington that ensured there would be some funding for an agreement,” said Ryan. “But the way politics works now, it depends which party is in power.”

SEPTA is currently negotiating contracts with multiple employee unions, while navigating a gravely uncertain financial future.

The largest SEPTA union, 4,500-member Transport Workers Union Local 234, voted to authorize a strike if members didn’t get a contract by the end of this month. However, the union reached a tentative agreement with the company on Friday. Sources familiar with the agreement said TWU members would get across-the-board raises and a signing bonus. The deal also includes changes in work rules, they said.

SEPTA is nearing a fiscal cliff, as are many public transportation organizations across the country. Leadership is seeking new ways to pad its budget, including legislation that would allocate more state sales-tax revenue to SEPTA.

CEO Leslie S. Richards has said meeting the unions’ requests is difficult with such an uncertain financial future. But as the transportation authority looks to restore ridership to pre-COVID levels and reshape its services to fit travelers’ needs, it’s trying to avoid a strike, too.

“SEPTA remains committed to continuing to negotiate in good faith with the unions in an effort to reach agreements on new contracts,” spokesperson Andrew Busch said Wednesday.