Sample Personnel Negotiations

Washington Wood Products (WWP) is a United States corporation headquartered in Seattle and one of the worldís most prominent producers and exporters of wood products. It is the second largest employer in Washington State (after Boeing) and one of the largest exporters in the Pacific Northwest. During its 60 year history WWP has had a stormy relationship with United States unions and approximately 40% of its labor force is unionized. Two years ago, in a heavily publicized labor dispute, WWP ìbrokeî its office employee union after a 4 month strike.

WWP-Japan is a wholly-owned sales and distribution of subsidiary of WWP having nearly 800 employees. It is by far the most profitable subsidiary of WWP producing historically over 40% of the WWPís net profit. With the recent recession in Japan, however, this contribution has declined to roughly 30%, and WWP-Japan management (under the direction of WWPís finance department) has recently requested a number of budget tightening measures.

Three months ago, Mr. Smith of the WWPís Human Relations department (who was a key player in WWPís stike breaking efforts in the United States was assigned to WWP-Japan for a three year assignment. His position is Managing Director-Human Resources and he officially reports to Mr. Suzuki, the President of WWP-Japan (although as a practical matter he is accountable only to the Vice President of Human Resources of WWP in Seattle.

Approximately two weeks ago (on a Friday afternoon), Mr. Smith prepared letters to six employees of WWP-Japanís Forestry Markets Research Division (virtually all of the division) notifying them of their immediate dismissal from the company effective the following Monday morning and advising them of the amount of their severance pay. Mr. Smithís letters explained that the dismissal was necessary because of their low productivity, the need to increase the contribution made by WWP-Japan and budget cutting measures issued by the head office finance department. In addition to the accrued retirement and other payments required by the WWP-Japanís work rules, a generous severance payment was promissed in the letters.

On the following Monday morning, a request for mediation was filed with the Tokyo Metropolitan Labor Office. In addition, a general strike was called against WWP-Japan by the Federation Of Japanese Office Workers Unions (ìFOJOWî) on behalf of the dismissed employees. Although WWPís company union (the ìWWP Cooperative Employeeís Unionî) is not a member of FOJOW, only half of WWPís office workers have been willing to cross FOJOWís picket lines to go to work. The head of WWPís employee union is Mr. Toshiaki (ìToshî) Tanaka, a 15 year veteran employee of WWP who Seattle top management has slated for a managerial level job (after his current term as union president was completed) and an eventual directorship. During the current dispute he has been acting as the spokesperson for the dismissed employees and the Union.

WWPís business is starting to suffer badly not only because of the lack of support, but also because of the extremely negative publicity the company has received from the termination incident. Many of WWPís contruction industry customers (which compise 80% of WWP-Japanís business) are refusing to attend meetings at WWPís head office and indicate that they are only continuing to do business with WWP because they have few alternatives to WWPís products in the market in the near term and must meet their contractual commitments. The have urged WWP to resolve its dispute with the employees as soon as possible.

WWPís legal department had determined to send their most experienced negotiating team to Japan to meet with Mr. Tanaka and his colleagues to determine if a settlement of the matter can be worked out. The negotiation is scheduled to take place at 10:00 a.m. on Februry 4, 1995 at a mutually agreed neutral location near Takadanobaba station in Tokyo.

Your team has been sent to Tokyo by the Chairman of the Board of WWP to negotiate the resolution of the labor dispute in Japan. Both the Chairman and the President of WWP are concerned that developments in Japan and the negative publicity from the Japanese labor dispute could have a serious negative impact on WWP and on its second quarter earnings. In addition, WWP is currently engaged in discussions with various organs of the government of Japan in an attempt to open the wood products market in Japan to further sales. If such opening in Japanese markets is successful, WWP will stand to benefit substantially from such opening through increased sales and market share. Consequently, WWP executives wish to maintain the cleanest possible image for WWP during this sensitive period of discussions with the Government with Japan.

The President of WWP has given your team an authority to reach a settlement with the terminated employees of WWP-Japan within the following parameters:

1. You are authorized to reinstate with full back-pay any of employees terminated.

2. You are authorized to pay up to ¥2 million to any reinstated employees to cover the costs of inconveniences to them during the period of their termination in exchange for the execution of a Settlement and Confidentiality Agreement pursuant to which each employee releases all claims and agrees to maintain the amount and nature of the settlement in confidence.

3. Your are authorized to pay to any terminated employee who does not wish to return to WWP-Japan a termination benefit of up to 18 months salary in addition to retirement and other benefits to be paid to such employee in connection with the termination. Such compensation is to be paid in consideration of the execution of a Settlement and Confidentiality Agreement with WWP-Japan in which the employee agrees to maintain in confidence the amount and nature of the settlement.

4. You are authorized to deliver to each employee who returns to WWP-Japan an apology signed by the President of WWP-Japan (or lower level employee of WWP-Japan).

5. You are authorized to offer that Mr. Smith deliver an oral apology to each of the employees and their family members.

6. You are authorized with respect to each non-returning employee to provide an oral apology by Mr. Smith to such terminated employee and their family as well as a letter of recommendation from the Company with respect to such employee.

7. You are authorized to negotiate the dismissal or Mr. Smith from WWP-Japan and his return to the United States, but you are not authorized to negotiate for his dismissal from WWP since this decision must remain with the Human Resources Department in Seattle.

You are not authorized in any fashion to make any payments to any union or any political party in connection with the settlement of the various employee claims. In particular, you are not authorized to make any payment which violate the Foreign Corrupt Practices Act of the United Sates or to take any action which would give rise to any issues under the Act.

The Chairman and the President of WWP wish to ensure that this matter remains an problem confined to the Japanese subsidiary and that the head office personnel (including the Chairman and the President) do not become involved in the dispute. They are very concerned to remain uninvolved because they have already been contacted by their financial advisers for information on the effects of the dispute on their projected earnings and have received indirect questions from the Securities Exchange Commission about the need for disclosure in relation to the strike in Japan related to the labor dispute.

Your teamís responsibility is to work out a resolution as promptly as possible with minimum publicity (and maximum smoothing over of relations in Japan). It is important to avoid further publicity of the dispute in Japanese domestic publications, and in particular in domestic publications in the United States. The Chief International Counsel of WWP will be stepping down in several years and success in this negotiation will leave a positive impression with the Board of Directors, the Chairman and the President of WWP (and give you a good chance to succeed the existing Chief International Counsel).

Your client is Mr. Tanaka, the Chairman of WWP-Japanís company labor union. The WWP-Japan company union (ìUnionî) has loose affiliations with various other unions in the same industry and with the Federation of Japanese Office Workers Unions (the ìFederationî). However, there are no legal or other binding ties to the Federation or any other group or party in Japan. The Union is a typical company union in Japan in which certain exceptional employees of the Company rise through company ranks and, after serving as union head for a two to three year team, then move into management positions. As counsel for Mr. Tanaka, you want to be sure that he will not jeopardize his future with the Company by mis-handling this dispute. On the other hand, you want to make sure that the employees of the Company continue to have confidence in their Union and that the reputation of Unionís management is not damaged by allowing outside unionizing forces to take over the Union.

Mr. Watanabe, the most senior of the dismissed employees, is a member of the Japanese Communist Party. He has been a problem employee of WWP-Japan since shortly after his entry into WWP-Japan some 20 years ago. The Human Resources Department of WWP-Japan, working together with senior union representatives, has expended a good deal of effort over past years attempting to isolate Mr. Watanabe from influence with the general employees of WWP-Japan. The result has been Mr. Watanabeís position as head of his Section (which contributes little to the Company and which effectively isolates him from influence in the overall employee group). Management suspects that Mr. Watanabe is informing the Communist Party of Japan with respect to WWPís international activities, but has never been able to find concrete evidence of such conduct. Several of Mr. Watanabeís subordinates monitor Mr. Watanabeís activities on behalf of the Union and management.

Three of the terminated employees, Ms. Abe, Mr. Bando and Mr. Kato, have indicated to the Union that they wish to leave the Company following this incident. Mr. Tanaka suspects that they have found better jobs and, in any event, are tired of working in a non-productive section of WWP-Japan. Each of them, however, believes that they are entitled to a substantial supplemental termination payment and have requested a payment of 24 times their relevant monthly salary rate. Mr. Tanaka has been able to persuade them to expect a termination payment of only 12 months salary. Termination payments of this type in other industries (because of economic conditions) can be as little as 6 months, although the average is nearer 11 months. Of course, termination without cause (such as in this case) generally carries a somewhat higher level termination payment.

Mr. Nagano, Mr. Shimizu and Mr. Watanabe wish to be reinstated with WWP-Japan. It would be difficult for them to find alternative employment with another company (given their levels of seniority) for the same compensation they have been receiving from WWP-Japan. They believe that they are entitled to an apology from the Company. In addition, they desire a compensatory payment of some sort as consolation money for the trouble caused by Mr. Smith. They have asked for a consolation payment of ¥2 million each. However, Mr. Tanaka has persuaded them to accept as little as ¥500,000 each (assuming that they are reinstated).

The strike conducted by the Federation was clearly caused through intercession by Mr. Watanabe with his contacts in other unions. Mr. Watanabe has indicated to Mr. Tanaka privately that he will be able to stop the strike and related activities provided that a compensation payment will be paid by WWP either to the Federation or to the Communist Party of Japan (which has given considerable support to the strike in the media and with Japanese politicians). Mr. Watanabe has indicated that the Japanese Communist Party would be satisfied with a ¥5 million payment to cease its activities. Mr. Tanaka believes that such payment can be avoided as long as the individual claims of the dismissed employees are satisfied and appropriate apologies are made by WWP to the employees and Union representatives (together with development of new procedures for handling potential dismissals). He believes that the Union can persuade the Federation to terminate the strike without compensation provided the Union announces that it is satisfied with the overall settlement.

Earlier this week shop heads of the Companyís Union met together to discuss the labor dispute. Following this meeting, they presented Mr. Tanaka with the following starting demands to be presented to WWP-Japan management:

1. An appropriate written apology from the Chairman of the Board of WWP (or appropriate alternative person) promising to respect Japanese labor customs in the future.

2. The creation of appropriate procedures for future terminations of staff of WWP-Japan including preference reassignment to other sections of WWP-Japan.

3. The reinstatement of each of the dismissed employees of WWP-Japan, a compensatory payment of ¥2 million to each terminated employee, and a contribution to the Union of ¥10 million.

4. For any terminated employee not wishing to return to WWP-Japan, a compensatory termination sum equal to 24 months of their respective monthly salaries.

5. A contribution to the Communist Party of Japan of ¥10 million.

6. The immediate dismissal from WWP-Japan of Mr. Smith.
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