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Verizon, Unions Reach Tentative Deal

Verizon, the Communications Workers of America, and the International Brotherhood of Electrical Workers tentatively agree to five-year deal

September 5, 2003

7 Min Read

WASHINGTON -- Verizon Communications, Inc. and its employee unions, the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW), have reached tentative agreement on five-year contracts applicable to all Verizon facilities in the company's Northeast and Mid-Atlantic regions, according to the federal mediator in the negotiations, Peter J. Hurtgen, Director of the Federal Mediation and Conciliation Service (FMCS).

The contracts cover approximately 79,000 technicians, service representatives and operators in the Northeast and Mid-Atlantic regions. Company and union representatives disclosed details of the agreements today (September 4, 2003) after negotiating for more than a month with the assistance of FMCS mediators.

"I want to commend all the parties involved in these difficult negotiations. I think everyone was mindful of the enormous stakes, not just for labor-management in this situation, but for its potential effect on telecommunications in the Northeast and Mid-Atlantic," Hurtgen said. "I think everyone involved recognized how vital it was to reach agreement, and all the parties conducted themselves accordingly. The parties came to the table in good faith, and dealt responsibly with some very complicated issues on both sides, and they are to be commended for it."

Hurtgen quoted estimates by independent economists Tom Kochan of the Massachusetts Institute of Technology and Harry Katz of Cornell University that a strike would have cost a minimum of $16 million a day in lost wages. In 2000, an 18-day strike led to a backlog of 250,000 repairs and new phone orders that took months to process, the FMCS Director said. "It's very hard to quantify what the total impact of a work stoppage would be, but clearly, this is a situation that we wanted to avoid," he said.

"These are challenging times for both labor and management, and I can't say enough about the willingness of both sides to look for solutions to the tough issues that we see in telecommunications as well as other high-tech industries," Hurtgen said.

The Federal Mediation and Conciliation Service, created in 1947, is an independent agency whose mission is to preserve and promote labor-management peace and cooperation. Headquartered in Washington, DC, with five regional offices and more than 70 field offices, the agency provides mediation and conflict resolution services to industry, government agencies and communities.

In a separate release:

Verizon Communications announced today a tentative agreement on five-year contracts with the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) covering nearly 79,000 employees in 13 Northeastern and mid-Atlantic states.

“This landmark agreement is fair for employees and at the same time helps Verizon remain competitive in these very challenging times,” said Lawrence T. Babbio, vice chairman and president, Verizon Communications. “It achieves a creative solution to all major economic issues so that employees continue to receive industry-leading benefits and wages, and Verizon can better control its costs, especially when compared with past contracts. This five-year agreement, which is unprecedented, provides stability and certainty for both the company and our employees. In addition, the agreement maps out an annual process to balance increased wages against the company’s need to manage the size of the workforce.”

The Federal Mediation and Conciliation Service has been working with company and union leaders since July 29 to reconcile issues that were important to both parties. The tentative agreement will be presented to the union members as part of the ratification process, which is expected to take several weeks.

Contract Structure

By achieving a longer-term contract, Verizon has created stability and certainty for its employees, customers and investors. The agreement also gives Verizon cost savings and enables the company to significantly slow the growth rate of employee-related expenses over the life of the contract. While it preserves the existing job-security language and movement-of-work provisions in the former contract, the new agreement outlines the right to conduct structured discussions annually on job security and wages. This allows the parties to mutually assess changes in the economy and the competitive environment and to balance any basic wage increase above 2 percent against the needs of the company to reduce the size of the workforce. If the parties do not agree to alter the contract, the terms of the five-year agreement remain in force.

Economic Package

The agreement provides an immediate 3 percent lump-sum payment to union-represented employees in lieu of a base wage increase in the first year of the contract. Beginning in the second year, base wages will increase 2 percent annually, for a total of 8 percent over the five-year term of the contract. The company also agreed to cost-of-living increases if the Consumer Price Index for Urban Wage Earners rises above certain levels in years four and five of the contract. The wage package represents significant savings for Verizon when compared with previous contracts. In addition, there will be a pension-band increase of 2 percent effective Oct. 1, 2004, and 3 percent increases annually for the remainder of the contract, for a total of 11 percent – also a historically lower increase. A separate 5 percent pension-band increase will be available only for union-represented employees who retire in the fourth quarter of 2003.

Health Care

The agreement allows Verizon to significantly offset rapidly rising medical costs without diminishing the quality or range of services offered to employees, or unduly shifting costs. The bulk of the savings will come from Verizon's greater ability to negotiate directly with health care vendors, giving the company more leverage and flexibility in designing health plan offerings to manage costs overall. In addition, the company can now offer features such as a preferred provider network and better discounts for prescription drugs, with incentives for employees to choose less costly options. The agreement also calls for some increases in employees' co-pays and deductibles. In total, the changes agreed to, which are primarily related to active employees, represent approximately half a billion dollars in savings to Verizon over the life of the contract. This will enable the company to continue to offer no-premium health care coverage for employees for the next five years.

For associate retirees, Verizon will continue to offer no-premium health care for the term of the contract. Other than modest increases in co-pays and deductibles, retiree benefits will remain essentially unchanged.

Job Security

Current job security protections will remain but will not apply to union-represented employees hired after the contract takes effect. In addition, the existing rules regarding the company’s ability to move work will remain unchanged for the duration of the five-year agreement. To assist in reducing the workforce, the company will enhance voluntary separation incentives. The agreement will establish a window for union-represented employees who retire in the fourth quarter of 2003 to receive the 5 percent pension-band increase and to take their pension as a lump sum, if they wish. Since the lump sum is calculated on today’s low interest rates, the company expects significant numbers of employees to take advantage of this short-term opportunity. Under the terms of the new contract, the ability to take a lump sum pension payment will not be available again until the fourth quarter of 2004, and pensions for the following 12 months will be increased by only 2 percent at that time.

Absenteeism

The agreement calls for joint CWA/ IBEW/Verizon committees to be established to address incidental absence. The committees will be established on a geographic basis and will develop plans to reduce absence and improve administration, with particular attention to those employees with a record of excessive incidental absences.

Babbio said, “The involvement of Peter Hurtgen as chief mediator was extremely helpful as Verizon and the unions worked to resolve key issues. From the beginning, Mr. Hurtgen recognized that the issues facing us are complex and interconnected. We appreciate his insightful approach to these negotiations.”

Verizon Communications Inc.

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