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Union Takes Aim at Private Equity Buyouts

May 4, 2007
Related Topics: Mergers and Acquisitions, Compensation Design and Communication, Labor Relations, Latest News
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The Service Employees International Union has set its sights on a new target: private equity firms. Late last month, the union launched a Web site and published a paper expressing its concerns about the wave of private equity deals taking over corporate America and the implications for workers. The SEIU has 1.8 million members.

"If private equity continues to grow even at half the rate that it has over the past five years, in five years one in eight private-sector workers will be working for one of these firms," Stephen Lerner, assistant to the president of the SEIU, said in an April 24 conference call announcing the new initiative. "In all of these deals, the workers had almost no voice, no information about the plans that could impact there lives."

The initiative falls in line with the SEIU’s strategy to organize employers from the top down—meaning that the union uses corporate campaigns to persuade employers to allow organizing among its employees, says Gerald Hathaway, a labor and employment attorney with Littler Mendelson. Whether this strategy will work with private equity firms remains to be seen, he says.

"Some firms won’t tolerate corporate campaigns, others would," he says. "It’s a philosophical issue."

In its paper, "Behind the Buyouts," the SEIU discusses examples of private equity buyouts where workers lost benefits, jobs or both and didn’t have any say in the process. The union lays down major principles that it would like to see the private equity buyout industry abide by. These principles include increased transparency about the businesses and their deals, elimination of conflicts of interest and giving the workers and community stakeholders a voice in the deals.

Littler Mendelson generally advises its private equity clients to meet with the union before a potential buyout is completed, Hathaway says. Currently, however, the National Labor Relations Board is being urged to review whether such talks are legal since they could be construed as premature bargaining, he says.

But barring that, Hathaway believes it’s a good practice for private equity firms to sit down with unions in good faith. "Every company wants happy employees, because happy employees mean productive employees," he says.

That, however, doesn’t mean that firms will bend to unions’ demands. "If the current collective bargaining agreement doesn’t make sense to the buyer, they would be crazy to take it on," he says.

And the SEIU’s request for greater transparency isn’t going to happen, Hathaway says. "Private equity means what it says," he says.

The SEIU hopes to use the paper as a starting point for discussions with private equity firms, analysts and even Congress about potential regulation, Lerner said during the conference call.

The union, however, is stopping short of seeking partnerships with other labor organizations, according to John Adler, director of private equity for the capital stewardship program of the SEIU. Adler also spoke during the call.

Right now the SEIU believes it makes more sense to focus on the part of the economy that is not as threatened by globalization. "Seems like there is a lot of money and opportunity to make things better," he said. "There are much more complicated issues in other sectors, like the auto industry."

The United Auto Workers probably wouldn’t be amenable right now to joining forces with the SEIU anyway, given the fact that the union is already negotiating what it can get if a private equity firm buys Chrysler, says Gary Chaison, a professor at Clark University in Worcester, Massachusetts.

"I don’t think the UAW wants to make a case against private equity right now," he says.

Jessica Marquez

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