The IBU team knew, intuitively, that these dynamics were not in their favor. Union membership in America declined virtually every year between 1975 and 2010. By the time the IBU was ready to take on Koch, only about 10 percent of wage and salary workers belonged to a union. This decline reversed the force of gravity in the labor market—now nonunionized workers were the most powerful force, stripping away pay and benefits from organized labor. When most of the workforce didn’t have job security or pay raises, the job security and pay raises won by unions seemed like an unfair privilege.
Other cultural changes pushed unions into retreat. Back in the 1970s, it was difficult for a company to lock out workers and replace them during a strike. This was in part due to the strength of picket lines, but also because it was seen as unethical to replace workers who were on strike. This changed in 1981 when Ronald Reagan fired federal air traffic controllers who were on strike and replaced them. Reagan didn’t change any laws; he simply set an example. Afterward, the risks of a strike were far higher for workers.
But Teninty and Feekin gave the IBU team hope. Teninty pointed out that no company wanted to face a protracted labor dispute. Teninty explained that the IBU must show Koch Industries that the union was strong and that its workers stood in solidarity.
“Your job is to convince the employer that it’s better to settle with you than to fight with you,” Teninty remembers saying. “That’s, frankly, the name of the game. That’s how unions have worked forever.” This was inspiring talk for guys like David Franzen. He had been a forklift driver his entire adult life (outside of a three-year stint in the US Navy). His bosses and the LMS directed his every move at work. Now he was in a position to speak back to them. This sense of hope and inspiration would be hard for Franzen to recall, after everything that happened next. “That was a lot of beers ago,” he said. “A lot of bad memories.”
* * *
The first negotiating meeting was held at a Georgia-Pacific warehouse, inside a conference room upstairs. Bucknum was joined by Hammond and the six negotiators from the warehouse. The Koch team included a trio of managers from the warehouses, but they didn’t do much talking. The Koch effort was led by Don Barnard, a professional labor negotiator whom Georgia-Pacific had flown in from Atlanta. Barnard was polite and inscrutable. He said his hellos and got straight to work.
Bucknum watched as Barnard set a thick three-ring binder on the negotiating table. If the IBU team had shown up ready for a fight, what they got instead was a bureaucratic process, one that was administered by the unsmiling—but utterly amiable and inoffensive—Don Barnard. He listened pleasantly as the IBU laid out its desires: The annual pay raises. The increases in health care. The IBU had even hired an outside expert to come up with new rules around the LMS software system that might make the workday a little less grinding on employees.
Barnard took it all in and consulted the three-ring binder. Then he informed the IBU team what would be possible. For starters, he said, the IBU needed to drop the health care plan that it administered for employees and put the workers into Koch Industries’ health insurance plan. It would be necessary to do this before Barnard could even think about negotiating wage increases. The union pension plan was a problem as well. Koch Industries preferred that employees entered a 401(k) plan run by the company.
Barnard agreed that changes should be made to the workplace rules: they needed to become far stricter. The absentee policy, in particular, needed adjustment. The warehouse workers were afforded far too many chances to miss work without being disciplined. Koch Industries proposed an absenteeism policy that would allow them to miss less than 1 percent of their total scheduled time.
Neither Hammond, nor Bucknum, nor anyone else on the IBU team had experienced anything like this. Typically, the union asked for a 6 percent raise, and the company countered with 3 percent. Now the union was asking for 5 percent and being offered an overhaul to the entire labor agreement in return.
The proposal that the IBU abandon its existing health care plan was particularly offensive. Since the 1960s, the warehouse workers’ health care plan had been owned and operated by the IBU and administered through a health care trust. The union owned it, controlled it, and set the rules. When Koch Industries revealed the rules of its own health plan, it was apparent that they violated almost everything that the union stood for. Koch’s health plan used a so-called “cafeteria-style” membership, whereby members could pick and choose their levels of health care coverage. This meant that a young employee who was single and had no children might pay a monthly premium of $150. An older employee who had four children, on the other hand, might pay a monthly premium of $500. In the IBU trust plan, every member paid the same premium. The single employee paid $300. The father of four paid $300. It was an economic embodiment of the union’s solidarity. The Koch health plan would institutionalize division between the workers. The drivers were already competing against each other in the LMS rankings. Now it would be each worker for themselves in the health care plan.
The Koch negotiating team insisted that their proposals were not simply a way to save money, but reflected Koch’s principles. Employees needed to act like owners and entrepreneurs. That was why, for example, Koch Industries didn’t just want the workers to join a cafeteria-style health care plan; the company also wanted workers to pay more money out of pocket for their premiums. Previous versions of the IBU plan had covered the entire monthly premium. Now Koch Industries insisted that it would only pay 80 percent of the cost, with employees picking up the rest of the tab. The logic behind this proposal traced back to the earliest days of Market-Based Management. Charles Koch believed that if a service was free to an employee, then the employee would overuse it. Employees needed to have “skin in the game” when it came to receiving health insurance.
Koch’s principles made labor negotiations difficult. It was hard to meet in the middle when Koch believed that the union’s approach was destructively misguided. Still, the IBU tried to argue. That’s when they discovered an infuriating pattern to Koch’s bargaining method. David Franzen or Steve Hammond would propose something to Barnard. Barnard would nod his head, look at his binder, write some notes, and then say that he needed to contact Atlanta to share the new idea. The IBU team came to believe that Barnard wasn’t in charge of the process and needed to get clearance from headquarters. After the IBU made a proposal, the Koch team would gather its things, get up, and leave the negotiating room, promising to return soon with an answer.
Hours passed. Afternoons passed. Bucknum took the negotiating committee out for lunch. Guys paced on the sidewalks outside and smoked cigarettes and talked on their cell phones. Finally, the Koch team returned.
“They’d say, ‘Well, we’ve looked at your proposal,’ ” Bucknum said. “They wouldn’t say ‘No’ directly. They’d just go: ‘This is our counterproposal to what you said.’ Or: ‘We’re sticking with our prior proposal on line eleven,’ or whatever. It was like watching paint dry, talking to these people.”
Koch dragged out the bargaining in another way: Barnard only agreed to meet three days a week. Monday was a travel day, as Barnard flew to Oregon from Atlanta. Friday was also a travel day, when he flew home. The meetings sometimes ended at two in the afternoon, because it was five o’clock in Atlanta, when people started to go home from work.