Verizon, unions agree on new contract

Verizon and its unions this week hammered out new, five-year contracts after several weeks of intense negotiations.

The tentative agreement with the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) covers nearly 79,000 employees in 13 Northeastern and mid-Atlantic states. The previous contract expired Aug. 2.

“This landmark agreement is fair for employees and at the same time helps Verizon remain competitive in these very challenging times,” said Lawrence Babbio, Verizon vice chairman and president, in a statement.

The agreement provides an immediate 3% 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% annually, for a total of 8% over the five-year term of the contract.

Verizon 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 compared with previous contracts, the carrier says.

But the new agreement also includes the right for the parties to conduct discussions annually on job security and wages based on assessments of the economy and the competitive environment. It allows Verizon and the unions to balance any wage increase above 2% against the carrier’s need 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.

For healthcare, the agreement calls for some increases in employees’ co-pays and deductibles, as well as other changes that Verizon says will save it approximately half a billion dollars over the life of the contract and enable the company to continue to offer no-premium healthcare coverage for employees for the next five years.

Healthcare concessions were sought by Verizon because up to now, employees paid about 5% of their healthcare. The average in corporate America, meanwhile, is 26% to 27%, according to Verizon.

Health benefits for the 79,000 union employees costs $1 billion per year and are rising 12% annually, Verizon says.

On job security, the pact preserves the existing language and movement-of-work provisions in the former contract. Movement-of-work was a sticking point during the negotiations as union employees sought to maintain location stability while Verizon sought the flexibility to redeploy manpower where it was needed.

To assist in reducing the workforce, Verizon said it will enhance voluntary separation incentives through short-term increases in pension and the option for employees to take their pension in a lump sum. Verizon said it expects significant numbers of employees to take advantage of this offer.

In a statement, the CWA said the agreement “meets the union’s key goals of protecting members’ job security rights, health care and other benefits and provides fair wage and pension improvements.

“The agreement preserves the existing contract provisions protecting workers against layoffs and against the transfer of their work out of communities in the region – key issues for union members,” the union stated.

With regard to absenteeism – another area where Verizon sought some union flexibility – the agreement calls for joint CWA/ IBEW/Verizon committees to be established to address incidental absence. The employee absentee rate at Verizon is 6%, about twice the norm, according to the carrier, and costs $600 million per year.

The committees will develop plans to reduce absence and improve administration, with particular attention to those employees with a record of excessive incidental absences.

“We see this as a reasonable compromise for Verizon,” states John Hodulik, a telecom analyst at UBS Warburg. “Although it was not able to remove the job security or movement of work provisions, the company achieved savings on wages and healthcare expenses and avoided what could have been a prolonged and costly strike.