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The Growing Popularity of Dot-Com Unions

By Jay Hollander

Jay Hollander, Esq. is the principal of Hollander and Company LLC,, a New York City law firm concentrating its efforts in the protection and development of property interests relating to real property, intellectual property and commercial interests, as well as related litigation.

The content of this article is intended to provide general information relating to its subject matter. Providing it does not establish any attorney-client relationship and does not constitute legal advice. Personal advice in the context of a mutually agreed attorney-client relationship should be sought about your specific circumstances.

Summary: Unions -- long-associated with "old economy" industries -- soon may have a place among high-tech companies. Though favored by some workers, many Internet employers think unions would be a bad idea. This article explains the pros and cons of unions at Internet companies.


Follow the bouncing dots of the past couple of years for a moment. First, there were "dot-coms." Then, there were "dot-bombs." Lately, we've had "dot-layoffs." The question is, are we now ready for... "dot-unions"?

Could be. Given the changes in fortunes of many high-tech companies, an idea that had seemed almost an impossibility just a short time ago has taken on a new currency.Long associated with old economy industries such as textiles, automobiles and teamster workers, unions -- whose ranks already had been dwindling generally as a percentage of workers in a healthy economy -- were thought to be at a particular disadvantage when it came to penetrating the "domains" of the high-tech sector.Why? Several basic reasons, really. First, unlike the manufacturing industry, where there was not much turnover and where workers tended to stay put as long as they weren't being laid off, high-tech workers have been in short supply and high demand.Moreover, because their talents were largely intellectual, tech workers had high mobility and didn't necessarily view their current employment situations as lifetime contracts. This gave them something many of their old economy counterparts lacked: individual bargaining leverage.Second, many of these workers were in it for fast riches by way of IPOs and stock options, not for incremental increases in hourly wages and benefits -- the bread and butter of the union movement.Third, high-tech companies have a disproportionate number of temporary workers and independent contractors, ones who, by their very nature, had not expected, much less received, benefits associated with long-term employment.And, of course, there is the large immigrant component of today's high-tech work force. For these workers in particular, the notion of union representation is still quite a foreign concept.But, what a difference a year makes. As we enter a new millennium in 2001, conditions giving confidence to high-tech industry union organizers have never been more encouraging. And it's no accident.

Are High-Tech Unions Necessary?

The factors underlying the potential revitalization of the high-tech union movement have been both general, as a result of an economic slowdown, and specific, flowing from dramatic victories in symbolic cases. Union prospects have even gotten a lift from the inevitable worker burnout associated with the pervasive fast-paced entrepreneurial culture in the companies comprising the high-tech universe.As the carnage from crashing dot-com companies threatens to continue, if not accelerate, into 2001, and as increasing numbers of stock options have fallen beneath their exercise prices, many workers are seeing the dark underside of trading reliable benefits and employment security for enforced overtime and speculative riches. And they don't like what they see.The high-tech industry's increasingly outspoken demands for less restrictive limits on immigration has raised trepidations among many employees, especially older ones, already fearful of losing their jobs to younger counterparts with lower salaries and little or no benefits. The passage of recent legislation almost doubling the amount of permitted H-1B temporary visas to foreign high-tech workers has only increased the angst level.All of these issues add fuel to the fire, but the real catalyst is the increasing disparity between the haves and the have-nots in the tech economy, a disparity that mostly plays itself out in the dividing line between permanent employees and temp workers.Go to almost any high-tech company and you'll find the use of these "contingent workers" to be significant. The practice has been a godsend to high-tech corporate America. Since temps technically aren't employees, employers do not have to provide real benefits such as health insurance or retirement plans. Nor do they have to worry about layoffs or unemployment insurance when a project is over. Simply put, end of project, end of temporary assignment, even after months of these workers doing the same tasks side by side with better-paid permanent employees.Considering these issues, you might be tempted to think that unions would have an easy time organizing in places like Silicon Valley, but you'd be wrong. There are very real forces working against any broad-based support for high-tech union efforts.From the employers' point of view, there is an undeniable logic to favoring a steady diet of temp workers rather than wholesale increases in permanent employees. Especially among software and other development companies with varied product lines, once a program is developed, the need for continuing with the same complement of staff as was required in the initial development period makes little sense. The same theory goes for workers concentrating on a software program that fails in the marketplace. And shaving these expenses goes right to the bottom line of the companies' per-share earnings.Then there's the hard-to-quantify but undeniable attraction of the high-tech industry to just the kind of independently motivated, self-starter type of employees who haven't grown up in an era where unions dominate the labor landscape, as was the case in their parents' generation.These modern high-tech workers don't want to be paid based on seniority or arcane shop rules. They actually like the mobility of being able to bolt a position for a better-paying competitor or after an IPO gives them a big payday. For these people, unions often appear to have little to offer in exchange for mandatory lifetime monthly dues.At any rate, the shortage of skilled high-tech workers has forced employers to voluntarily give benefits equal to or better than the ones unions traditionally have fought to obtain. Most established high-tech companies gladly give generous medical insurance plans, flexible hours and stock options to induce employees to emotionally buy in to the company and stay for awhile. Start-ups also offer fun atmospheres with pool tables, basketball courts, latte bars, etc., to lure younger skilled workers.If you worked under these conditions, would you feel oppressed?

The Microsoft "Permatemp" Case and the Verizon Strike

Still, there are enough of the have-nots in the high-tech world that the anti-union dike is beginning to leak in places. Two well-publicized cases deserve special mention here.Following an investigation by the IRS that re-classified many of Microsoft's so-called "contingent" temporary contract workers as common-law employees for payroll tax purposes, a class action was brought to compel Microsoft to provide these reclassified workers with the same benefits as would have been provided if they had been recognized as permanent employees. Overturning a lower court decision in Microsoft's favor, the Ninth Circuit ruled in 1997 that these workers were, indeed, entitled to participate in the company's 401(k) and stock purchase plans, among other benefits.This decision came as a group of temporary workers at Microsoft called on the company to recognize them as a group and collectively bargain with them. While Microsoft refused, the result of the effort was that the temp agency through whom the workers were hired began providing better benefits than had previously been provided.Elsewhere, Verizon workers went on strike in the summer of 2000 to facilitate the union's efforts to organize the vast majority of workers performing services for the company's wireless and broadband divisions, to reduce the prevalent high-tech practice of "forced overtime" and to try to limit the amount of work given by Verizon Wireless to outside temporary workers.While the strike was settled, the gains achieved by the Verizon action on decidedly high-tech issues set an example for similar workers elsewhere, a fact that was lost on no one monitoring the situation.

An Uphill Battle for High-Tech Unions

Despite these isolated symbols of success from the union point of view, the overall hill for high-tech union organizers remains a steep one to climb. Recent efforts make it clear that unions realize that organizing high-tech workers will require some important strategic changes.At the forefront of changing the labor union business model is a Seattle group called Washtec, affiliated with the AFL-CIO. Rather than hitching all its horses to a wagon of broad-based high-tech worker membership, the fledgling group has picked its battles, concentrating on temp workers and on becoming a voice and a resource for high-tech workers. Among its accomplishments, a non-profit temp agency was formed, giving temporary workers better benefits than were available through the private agencies, while still allowing high-tech companies to remain in the contingent worker market. Focus also has been given to portability of benefits, in an effort to ensure that temporary workers can take their benefits with them from job to job.As much as from any impetus flowing from a prolonged decrease in stock option values or layoffs stemming from a slowing economy, union efforts to be a force in the high tech sector and the evolving U.S. economy, will be made or broken largely to the extent that examples like those mentioned above will be followed and expanded.

While the question of organized labor success in this area is still an open one, it is clear that, to avoid an early retirement from influence in the nation's biggest sector of growth, unions will have to sell high-tech workers something other than the equivalent of their father's Oldsmobile.

Copyright © Jay Hollander, 2007. All Rights Reserved.

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