9-396-324
REV: MAY 13, 2008

KATHLEEN VALLEY
VICTORIA MEDVEC

Adam Baxter Company/Local 190
1985 Negotiation
Baxter Management Confidential Information

1

It is July 18, 1985, exactly one month prior to the expiration of the contract established in the 1978 labor agreement. In the 1981 wage negotiation between the International AFL/CIO and a number of the food processing companies including Baxter, the base wage rate was frozen at $10.69. Following significant changes in the industry, wages were renegotiated at nearly all of the food processing companies. In your 1983 negotiations with Local 190, wages were renegotiated and set at x.2
Since your last negotiation, relations between management and labor at the Deloitte plant have been increasingly acrimonious. Preliminary negotiations have produced no movement on either side’s part, and little evidence that an agreement will be reached soon. Both sides publicly acknowledge the likelihood of a strike when the current contract expires in August. Local 190 leadership is vocal and antagonistic in its clear “no concessions” stance. They have begun to prepare for a strike by getting finances in place and hiring a New York City public relations firm to tell their side of the story. In anticipation of increased acrimony, management recently purchased $80,000 of barbed wire to circle the packinghouse, claiming it was needed for protection of the plant and its workers. Part of the tension is due to the specific situation in Deloitte, but part is probably attributable to the climate of labor relations in general—throughout the nation, industrial relations are in turmoil. Some have gone so far as to claim that this era will see the end of organized labor in the United States.
On May 31, 1985, Baxter management announced that if the company and Local 190 have not come to an agreement by the expiration date of the current contract, it will terminate the current contract. Any employer in the United States has the right to terminate a contract when it expires, but

1 Endnotes (indicated by letters) are summarized in the final case, “Adam Baxter Company/Local 190 Debrief and Endnotes,”
HBS No. 396-326.
2 Use your agreed-upon wage here. If you did not come to an agreement, use the arbitrator’s decision: the arbitrator agreed with management that the “me-too” clause was applicable to falling wages as well as to rising wages. Thus, the arbitrator ruled that the base-rate wage be set at $8.67/hour, calculated by taking the three highest of the competitors’ wages and averaging them.
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Professor Kathleen Valley, Harvard Business School, and Professor Victoria Medvec, J.L. Kellogg Graduate School of Management, prepared this exercise with the assistance of Research Associate Julia Morgan, as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
Copyright © 1996-1998, 2008 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

396-324

Adam Baxter Company/Local 190 1985 Negotiation—Baxter Management Confidential Information

few do so because of the negative impact on bargaining and the likelihood that such a move would precipitate a strike; instead most companies continue to honor the previous contract during contract negotiations. During the early 1980s, with its high unemployment and negative legal climate for labor, unions have been reticent to strike and companies are beginning to terminate contracts with unyielding unions. Baxter’s termination of the contract could have three important and very