Paulson saw the fruits of this arrangement shortly after he took over as the plant manager.
When an OCAW employee found a broken valve while inspecting the refinery, for example, that employee didn’t fix the valve. Instead, he sat down and radioed for help. The union had broken the workforce down by specialty skills—or by “trades,” to use the union terminology—and the men only performed work that fell within their trade. When an employee found the broken valve, he called someone whose trade was insulation to come and unwrap the insulation around the pipe. Then he’d call a guy from the electrical trade to check the wiring or shut off electricity to the problem area. And these employees who came to help fix the valve had to drive a truck to the site (the refinery covered seven hundred acres, after all), and there was a union rule that prohibited any union employee from riding in a vehicle with a supervisor. To satisfy this rule, the refinery had a union guy whose job was to sit in a pickup truck and ferry people around the refinery. As the different tradesmen were called on the radio, the pickup truck driver went to collect them—first the insulation specialist, then the electrician—and take them down to the problem site. The truck driver job was one of the cushier positions that the union carved out for its members. Only after the different tradesmen were called, and were ferried down to the site, and did their work one by one, only then could the leaky valve be fixed.
There were also rules for overtime pay that even the OCAW men found amusingly absurd. One rule stated that a shift worker needed to be given at least two hours of notice if he was going to be asked to stay late and work. If he didn’t get that notice, then he received a bonus payment worth two hours’ work plus time and a half. Thanks to this rule, it was often hard to locate anyone at the refinery around two in the afternoon, exactly two hours before the four o’clock shift change came around. The control rooms were empty at two. Then everyone suddenly reappeared at their desks at two fifteen—available to stay late and work overtime if asked, but in need of the bonus payment to do it.
Even longtime union members recognized that these rules were too good to be reasonable. “It’s crazy—I don’t know how they got what they got. The union had management by the balls,” recalled Ernie Tromberg, who was hired at the refinery in 1956 when he was still in his early twenties.
Paulson talked often to Charles Koch on the telephone. He told his boss what he was seeing in the refinery. This might not have been news to Charles Koch. He had seen the union operate firsthand. For at least one summer when he was younger, Charles Koch had worked at Pine Bend and must have seen the near impunity enjoyed by union bosses like Joseph Hammerschmidt. Koch couldn’t have been shocked as Paulson relayed over the phone what he was seeing in the plant. The union put at risk everything that Charles Koch was hoping to build. “He told me, ‘I’m worried that the union is going to take this company down,’ ” Paulson recalled.
Shortly after arriving at the refinery, Paulson was given his chance to fight the OCAW. The union contract was set to expire at the end of 1972. Negotiating a new contract would give Paulson, and Charles Koch, a chance to rewrite the refinery rules and make the place operate as they believed it should.
In April of 1972, Paulson made his first move. He scheduled Hammerschmidt to work on Easter Sunday.
Hammerschmidt, apparently, did not want to work on Easter. So Hammerschmidt did what was commonly done in those days. He told Paulson no. He wasn’t going to work Easter Sunday.
Hammerschmidt could be forgiven if he thought that his open insubordination would not be challenged or punished, because that’s how things worked at Pine Bend: if the union guys were unhappy about something—say, the disciplining of a fellow worker—they simply dropped what they were doing. They walked to the front office and took a seat until the matter was resolved, and management usually caved to their demands. It seemed that Paulson would have caved as well because he wasn’t popular with the employees. The cowboy boots, the military-style inspections, waking the guys up and embarrassing them on Saturday mornings—all of it had soured the employees on Paulson. He recalls hearing what the union men were saying behind his back: “They were going to jam those boots ‘down Paulson’s ass and send him back to Texas.’ ”
When the shift began on Easter, and Hammerschmidt wasn’t there, Paulson fired him immediately. In the eyes of the OCAW, Paulson had just declared war.
* * *
In the late fall and early winter of 1972, it was time for Koch Refining Company and the OCAW to negotiate a new labor contract.
There was a regular calendar and set of traditions that surrounded these contract negotiations. A labor contract is a broad agreement between a union and a company that sets out the terms of employment at the workplace, from the level of wages to the value of extra benefits like health care coverage. The contract even laid out workplace rules, like the procedures for firing a worker or the means by which an employee could file a grievance to complain about abuses by management. The labor contracts typically lasted about three years. When the contracts were set to expire, a group of Koch Refining lawyers would go into a meeting room and sit down across the table from a group of negotiators selected by the OCAW. The union negotiators were almost always refinery employees rather than lawyers or negotiating experts. When it came to bargaining with the company, the union men relied on their personal knowledge of how the refinery worked. They knew what to ask for, and they knew what they could offer in return. To get what they wanted, the union men relied on their collective willpower. They stood together, ready to walk off the job as a group if management did not agree to their requests.
During his first meeting with the OCAW team, Paulson sat down in the meeting room, flanked by his company lawyers. Across the table sat Joseph Hammerschmidt, the union president. Even though Hammerschmidt had been fired, the union insisted that he be present for the negotiations. The union had already filed a grievance over Hammerschmidt’s firing, and, in the meantime, he was still a member.
After everybody was settled, Paulson presented his offer.
Koch would unilaterally rewrite all the work rules inside the refinery. The seniority system the union enjoyed would be gone. The rules that barred employees from doing work in different “trades” would be gone. The employee shuttle truck? Gone. The rule about a bonus payment for overtime without two hours’ notice? Gone. And then Paulson showed the union men that there would be precious little room for negotiation. These were the new rules. This was how things would work at the refinery. End of story.
This might have seemed like a bluff; like a way for Paulson to start the contract negotiations with a Texas swagger. But after Christmas, and into the first frigid days of the new year, it became clear to the union that Paulson was not bluffing. He was not going to negotiate.
In the eyes of the OCAW men, there was no choice as to what to do next.
On January 9, 1973, at four in the afternoon, the entire unionized workforce left their stations and walked off the property grounds. They walked out through the parking lot and then through a wide gate that led outside the refinery property. As they passed through the gate, the gate became something entirely new. It became a picket line. Crossing the picket line marked a moment of no return. After they left the gate, the OCAW men became locked out of the refinery. They became locked out from their jobs. They became unemployed.