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MADISON, Wis. -Both sides of the CUNA Mutual labor dispute gave in on what appeared to be hard-line issues for them to get a deal done. The strife started a few months leading up to the March 31, 2004 expiration of the collective bargaining agreement between the company and the Office of Professional Employees International Union Local 39. This of course wasn’t the first time the two sides had done battle, as the two prior contract negotiations were also contentious. The union approved the new contract by a 622-183 margin. Since the beginning of the dispute, CUNA Mutual’s public take on a new collective bargaining agreement was that it needed to make economic sense for the company going forward. The company maintained that union employees were paid above market wages and it needed to rein them in or risk becoming uncompetitive. It also said it needed to curb healthcare costs by bringing union employees onto management’s health insurance plan, which meant cheaper costs for the company, but fewer plan options for union employees. The union said it sacrificed for the company by some years not getting a raise, and wanted the money it felt its employees were due. It also said the company was pushing to utilize more outsourced employees to rid itself of union jobs, and it would not vote in favor of a new contract that would make that easier for the company. From early on the dispute turned public and rather ugly. There was picketing not only in front of CUNA Mutual’s Madison headquarters but also at the homes and credit unions of chairman Loretta Burd and some other CUNA Mutual board members. Other antics included Valentine’s Day cards sent to Burd from union employees asking her to have a heart and get a new deal done. There were also post cards sent to CUNA Mutual credit union clients, and according to numerous sources a demonstration of union officials at CUNA’s GAC was narrowly avoided. Throughout, the union claimed that CUNA Mutual was doing terrific financially and it was time for to pay up. CUNA Mutual maintained it needed to do better to stay competitive, with new CEO Jeff Post saying the company’s ROE was not high enough and indicative of the need for becoming more efficient. The union didn’t buy CUNA Mutual’s “competitive threats” argument, though it’s hard to deny. Though the dominant insurer in the industry, CUNA Mutual is not without its challenges. The company consistently faces new competitors on bond insurance. It lost the bond business of U.S. Central and Northwest Corporate, showing corporates and credit unions don’t automatically go with the “industry” vendor. Last May Minnesota Life purchased Allied Solutions. Both companies had competed with CUNA Mutual in a number of different areas, including insurance, investments and even mortgages, and together they pose a greater threat. CUNA Mutual, which over the years has tried to offer products in the latest hot areas of the industry, faces challenges from nimble CUSOs that are also responding to market changes. In business lending for example, CUNA Mutual has made strides with its CU Biz Source, however the eight corporates that own CU Business Group are having tremendous success and branching throughout the nation rather quickly through that business services CUSO. Money, Money, Money Looking at the terms of the settlement, it appears CUNA Mutual was willing to pay to get a deal done. The deal calls for a 15% pay hike over the four-year life of the contract. That includes 4% in back pay, 4% for April ’05, 4% in April `06 and 3% in April ’07. With roughly a $60 million payroll already, this will add millions to the company’s operating expenses. The new contract calls for two-thirds of its employees to move from a 34.5 hour week to a 37.5 hour week. More hours was also a goal of the company, but here again it paid for it. Interestingly, employees will probably be spending the same amount of time at work, they just won’t be getting the same amount of paid break time. For those employees who add the three extra hours, they will be compensated in one of the following three ways: * $2,000 lump sum payment * 3% added to base salary * 4% lump sum payment. Post concedes that the company did give in somewhat on wages, and he wants to see more productivity because of it. “The company did have to compromise. I remain committed to aligning our costs with the market. My message to the union – and to all employees – is that we must increase the value we deliver to our customers. We must increase our productivity. The performance bar has been raised. In fact, the union raised it with the pay hike. I don’t mind paying more for something if it’s of higher quality or more productive. We need to work together to ensure the increased labor costs are appropriate,” said Post. The two sides of course see the wage issue very differently. CUNA Mutual claimed studies showed its employees were paid above average market wages, while the union said the company compared CUNA Mutual employees to those at places like “Burger King”, which skewed the numbers. Even after the deal was reached, there was some of the same old rhetoric. John Peterson, business manager for OPEIU Local 39, said he was pleased that the hourly issue could be settled by just removing two and a half hours of paid break and adding a half hour to the work schedule, but said it may hurt CUNA Mutual in the long run. “People were using their paid breaks to visit the Life Site (exercise area). It seems like the company doesn’t want that utilized. It could mean more unhealthy employees,” said Peterson, who also said he wanted to dismiss the notion that union employees are clock punchers, and that most employees worked unpaid overtime even during the dispute. “If there’s a message I could get out to credit unions, it’s how proud I am of CUNA Mutual employees for keeping their focus on what they were all about, which is servicing credit unions and members, throughout this ordeal. We could have went on strike, and we fought off a lock out. These employees should be rewarded for keeping their focus,” said Peterson. Peterson, long the spokesperson for the union, saw his role diminish somewhat as the dispute progressed. The top person at the OPEIU, its president Michael Goodwin, became more involved, meeting with Post and prior to that former CUNA Mutual CEO Mike Kitchen, on a number of occasions. CUNA Mutual also made changes on its end. Its head of HR, Phillips Kimball, who the union long pegged as a union buster, took a back seat to Peter Hurtgen, a renowned labor negotiator who Post brought on as a consultant to lead negotiations. When this dispute is looked back on years from now, Kitchen will be an obvious casualty. Kitchen was forced out of his position for allegedly offering a group of IT employees $1,000 for legal counsel to assist them in forming their own bargaining unit. Kitchen maintains he did nothing wrong. Some believe this was simply a way to remove Kitchen. Sources have told Credit Union Times that Kitchen cleared the legality of the $1,000 offering with CUNA Mutual lawyers, though no one will go on record confirming that. Credit Union Times has stayed in touch with Kitchen, who consistently says he appreciated all the good work employees did while he was CEO. He had no comment on the new contract. The company’s big win – more outsourcing power -can’t be measured in dollars saved just yet. CUNA Mutual now has the right to outsource without negotiating the effects or decision with the union. OPEIU gave up the right to file a grievance and can not take outsourcing decisions to arbitration. Arbitration is exactly what the union did with the company’s decision to outsource housekeeping jobs, and it won. But it also lost on some occasions. “You know we won one housekeeping and then lost two. It was in doubt whether we could successfully battle these things, so we instead improved the severance program,” said Peterson. Post said outsourcing is an option the company needs. “We don’t want situations like we had with the housekeeping staff here – where we make a decision, implement a decision, reduce our costs significantly, only to have an outside party tell us we have to bring the work back inside. That doesn’t benefit anyone. We will look at outsourcing options carefully with a bias toward keeping the work in house. However, where we can reduce costs and increase the quality of service to our customers, we have the responsibility to use all the tools at our disposal,” said Post. The severance changes Peterson referred to include displaced employees being entitled to a severance package that includes two weeks of pay per year of service up to 52 years. It used to be capped at 26. Also those employees can receive health insurance for as long as their severance period, whereas it was once capped at 90 days. CUNA Mutual also succeeded on its goal of moving union employees on to management’s health plan. The company said the added economies of scale on the same plan will greatly reduce costs. The plan offers three options: * An HMO with monthly employee contributions of $25 for single, $127 for family, * A PPO with monthly employee contributions of $25 for single, $247 for family, * A Consumer Directed Health Plan with monthly employee contributions of $18.10 for single, $96 for family. Peterson said this was one of the hardest parts of the contract for the union to swallow. “The low light I think was accepting the company’s health plan structure. It has limited choices, people will have to give up doctors. There’s skepticism that the company’s structure is the best,” said Peterson. When asked if getting a new contract was one of his toughest challenges, Post said absolutely not. “I’ve had tougher challenges. Quite frankly, I think we have a greater challenge at CUNA Mutual today than the labor contract – that being bringing the company together to address the changes we need to make to be successful in the future and continue serving the credit union movement,” he said. The new contract is certainly a feather in the cap of Post, now the focus will be on what type of leadership Post brings to the strategic direction of the company. [email protected]

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