SBC, Union Agree to 5-Year Pact

Both sides declare victory. One expert sees union validation. Another says the phone firm 'blinked.'

By James S. Granelli
Times Staff Writer

May 26, 2004

SBC Communications Inc. and its largest union agreed to a five-year labor pact Tuesday that provides greater job security and gives workers access to positions in growing divisions while saving California's dominant local phone company about $2 billion.

The tentative settlement was reached shortly after midnight, as 100,000 members of the Communications Workers of America returned to work after a four-day strike. It was the first work stoppage at SBC since the Baby Bell became an independent company in 1984.

The CWA agreed to slightly lower annual pay increases in exchange for SBC slowing increases in workers' out-of-pocket medical expenses. The company will continue to pay union members' premiums for health insurance.

For the union, the contract "helps ensure that American workers and their communities benefit from the promise of new information technology jobs," CWA President Morton Bahr said.

SBC Chairman Edward E. Whitacre Jr. said the company "now has a labor agreement that provides us greater control over our cost structure and flexibility to meet our competitive challenges."

After 13 consecutive quarters of declining revenue, the company has been under intense pressure to cut costs. Its profit, though, rose to a record $8.5 billion last year, but about $2.5 billion of that came in an accounting change. On Tuesday, SBC shares fell 14 cents to $24.05 on the New York Stock Exchange.

"SBC blinked — this is not a good deal," said Peter Morici, a business professor at the University of Maryland. "Generally speaking, when both sides declare victory, somebody won and the other is putting a good face on losing."

Lance Compa, who teaches labor law at Cornell University, was more encouraged.

"It's a classic collective bargaining outcome in the best sense," said Compa, a former labor negotiator. "This settlement shows that unions are still here, that they still have a voice and still have a future in certain industrial sectors."

Key to the pact are provisions that allow union workers in, say, SBC's conventional land-line business, which lost 427,000 local access lines last quarter but gained 2.6 million long-distance lines, to take jobs in growing areas like wireless Internet and voice over Internet protocol. VOIP transmits voice calls over data lines, much as e-mail is sent.

The agreement on job security is important because it defines traditional telephone work to include all the new communications technologies, said CWA spokeswoman Candice Johnson.

Union members next month will ratify the deal, completed about 1:30 a.m. in San Antonio, where SBC is headquartered. No date has been set. The previous contract expired April 1 in California and Nevada and April 3 in 11 other states where SBC provides service.

SBC employs about 30,000 CWA members in California.

SBC wanted to use the collective bargaining process to change its cost structure so it could be more competitive with nonunion cable companies. Cable firms are poised to roll out telephone service using VOIP, and companies ranging from small Vonage Holdings Corp. to giant long-distance carrier AT&T Corp. are offering VOIP service now.

Union jobs, on average, pay 50% more than the same jobs at cable firms, SBC spokesman Walt Sharp said. But union spokeswoman Johnson said that a company gets what it pays for and that low-paying cable companies get "many unhappy customers."

SBC veteran operators earn $41,000 a year, while customer service representatives gross more than $46,000 and technicians are paid $56,000 to $59,000, according to company and union sources.

Under the new contract, retroactive to April 4, union members would get a 2% raise in the first year along with a lump-sum payment of 1% of their annual salary. That is lower than the 4% lump-sum payment the company had offered. The remaining years track the company's offer of 2.5% hikes in the second and the third years and 2.25% raises in each of the last two years.

For existing workers whose jobs are eliminated, SBC would guarantee employment elsewhere in the same state for the life of the contract. But workers hired after the contract takes effect won't get this benefit. The union had complained that the company was moving too many of these jobs to outside contractors, many of them overseas.

SBC expects to save nearly $2 billion over the contract's term by increasing the share of healthcare costs that employees and retirees must shoulder. Co-payments for visits to doctors and emergency rooms and for prescription drugs will be increased, but at more modest levels than the company had proposed. To help offset those increases, employees will receive bonuses totaling $1,000 each over four years, and retirees, who are under a different plan, will get $2,500 each.

SBC and the CWA have traditionally enjoyed cordial relations. The previous contract was reached more than a month before it took effect. The union also had joined SBC in working to reduce pricing regulations on the company and the industry.

Even during the union's four-day walkout, the two sides kept lines of communication open.

"There was no turning point," said SBC spokesman Selim Bingol. "Both sides were bargaining pretty hard for the past three months. This one was much more challenging than in the past. Hopefully in five years, we'll be in a mode where the company is growing and controlling costs is less critical. Maybe the negotiations won't be as contentious."

Brutal competition in the telecommunications business may make that sentiment wishful thinking. Thousands of customers are abandoning conventional phone lines and relying on wireless or cable providers. That's putting the squeeze on the entire industry.

This year, the nation's largest local phone company, Verizon Communications Inc., and the CWA went three months beyond their contract's expiration before reaching a new agreement.

Peter J. Hurtgen, head of the Federal Mediation and Conciliation Service, oversaw both the Verizon and the California grocery strike and offered his services in March to SBC and the union. Both sides agreed to what was, for them, unusual national bargaining.

After two months of mediation at the national level, the union set up the four-day strike that began just after midnight Friday. At the same time, the company and the union returned the negotiating process to four regional bargaining tables that had hammered out past pacts.

Besides the core union contract, SBC has several dozen labor pacts with smaller bargaining units represented by the CWA or other unions. Those union members, about 16,000 companywide, are not part of the new pact.


Associated Press was used in compiling this report.


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