Tag: wages

September 17, 2025

Negotiating Union Contracts in a High-Inflation Economy

Although inflation has cooled from its 2022–23 peak, it remains a defining factor at the bargaining table. Workers feel the cumulative effects of rising prices over the past several years. At the same time, employers face higher labor costs, escalating healthcare expenses, and demands for greater flexibility around where and how employees work. For employers with unionized workforces, these challenges are amplified. Negotiating union contracts is no longer just about splitting the difference on wage percentages—it is about balancing long-term financial stability with short-term employee expectations, preserving operational control while accommodating workplace changes, and finding creative ways to deliver value without locking in commitments that may become unsustainable if the economy shifts again.

This article offers employers practical strategies for negotiating union contracts in a high-inflation environment, focusing on three of the most contentious issues: wages, healthcare costs, and remote-work arrangements.

Inflation and Collective Bargaining

Inflation directly drives bargaining pressure. When the cost of groceries, housing, and transportation goes up, employees expect their wages to rise at least enough to maintain their standard of living. Unions will highlight members’ real-wage erosion and push for agreements that provide protection against continued volatility.

Employers have been here before. During the late 1970s and early 1980s, when inflation often hit double digits, cost-of-living adjustment (COLA) clauses became widespread in union contracts. As inflation moderated in the 1990s and 2000s, most employers phased out automatic COLAs, viewing them as too unpredictable and costly to maintain. Now, with inflation stabilizing but still running above the Federal Reserve’s 2-percent target, unions are again pressing for some form of inflation protection.

When preparing economic proposals, employers should:

Model affordability over the life of the agreement: Do not just budget year-to-year; understand what a multi-year wage pattern will cost when layered with healthcare, overtime, pensions, and roll-up effects.
Benchmark against industry peers: Unions will bring comparables to the table. Employers should know where they stand and avoid commitments that dramatically exceed local or industry norms.
Avoid long-term overcommitments: Be cautious with front-loaded increases or open-ended COLA clauses. What feels manageable today can become a liability if the economy slows and competitors are not living with similar terms.

Structuring Wage Increases

There is no one “right” way to build wage proposals, but employers should consider the following tools when negotiating union contracts:

Multi-year structures: Contracts can front-load or back-load increases. Front-loading provides workers with immediate relief but may leave employers paying above-market wages if inflation falls. Back-loading defers costs but risks resentment if inflation stays elevated. Many employers blend the two approaches, offering a strong first-year increase followed by smaller annual raises.
COLA triggers with caps: Rather than reinstating open-ended COLA provisions, employers can negotiate limited formulas. For example, wages could increase by a fraction of CPI, subject to a maximum percentage each year. This acknowledges inflation without handing over full control of wage growth to external forces.
Lump-sum bonuses: One-time payments can provide meaningful cash to employees without permanently raising base wages or compounding overtime, pension, and other benefit costs. Employers should, however, expect pushback from unions that prefer base-building increases for long-term earnings stability.
Tiered or differentiated increases: Wage increases can depend on seniority, skill level, or job classification. This can be a way to reward critical skills or long-service employees while moderating costs elsewhere. But employers should watch for morale issues and potential legal risks if disparities are too wide.

In every case, employers must ensure compliance with wage-and-hour rules, including minimum wage and overtime requirements under federal and state law. A wage package that looks good on paper can create compliance problems if it doesn’t account for legal requirements.

Managing Healthcare Costs When Negotiating Union Contracts

Healthcare costs are a perennial concern, and they are often one of the toughest issues in negotiating union contracts, especially in today’s environment of rising claims and specialty drug expenses. Employers are projecting annual cost increases well above general inflation. Unions know this and will often resist cost-shifting measures, framing them as benefit reductions rather than necessary adjustments.

Practical approaches include:

Employee cost sharing: Adjusting premium contributions, deductibles, or copays spreads costs more evenly. Employers should pair these adjustments with clear messaging that changes are designed to preserve overall benefit levels, not cut them.
Plan design changes: Options such as high-deductible plans, spousal surcharges, or dependent eligibility audits can provide meaningful savings. These changes, however, must be bargained carefully and communicated clearly to avoid perceptions of unilateral takeaways.
Wellness and preventive programs: Initiatives that encourage healthier lifestyles can reduce utilization over time. Framed correctly, these programs can be seen as joint investments in employee well-being.
Reserve funds or cost-sharing formulas: Some employers negotiate contract language that sets aside reserves or defines how future spikes will be shared. This can reduce conflict down the road when costs inevitably rise.

Employers should remember that health benefits are a mandatory subject of bargaining. Unilateral changes—even well-intended—can lead to grievances or unfair labor practice charges.

Remote Work and Flexibility

Remote work has emerged as one of the most complex bargaining issues since the pandemic. For many employees in relevant positions, the ability to work from home is now viewed as a standard benefit, not a temporary privilege. Unions may seek to embed remote-work guarantees in contracts.

Employers, however, must think carefully before committing. Remote work implicates productivity, supervision, safety, and even cybersecurity. Once written into a CBA, these arrangements can be hard to adjust.

Strategies for handling remote-work demands while negotiating union contracts include:

Pilots with sunset clauses: Agree to trial programs with defined end dates. This allows both sides to evaluate productivity and employee satisfaction without permanent commitments.
Clear management-rights language: Preserve employer discretion over work locations. Where possible, limit contract language to procedures (such as how requests will be considered) rather than entitlements.
Distinguish accommodations from entitlements: ADA or state law may require remote work as a disability accommodation in some cases. Those obligations should be addressed separately, not written into the collective agreement as universal rights.

Handled carefully, remote-work provisions can be structured in a way that provides employees with flexibility while ensuring employers retain control over core operational decisions.

Leaving Room to Adapt

In high-inflation environments, union proposals tend to be more ambitious. Employers need mechanisms that provide flexibility over time:

Side letters or MOUs: Use these for experimental provisions. They provide flexibility to test new ideas without locking them into the core agreement.
Reopener clauses: Tie reopeners to inflation thresholds, healthcare cost increases, or legislative changes. This ensures that both sides can revisit the contract if conditions change dramatically.
Strong management-rights clauses: Explicitly protect employer discretion on operations, staffing, technology, and scheduling. These clauses become especially valuable when economic conditions shift mid-contract.
Non-economic benefits: Consider creative alternatives—training, scheduling input, vacation flexibility—that can be highly valued by employees without carrying heavy ongoing costs.

Employers should also pay close attention to past practice and industry comparables. Arbitrators frequently rely on these benchmarks when interpreting disputed contract terms.

Practical Approaches to Negotiating Union Contracts at the Table

The bargaining process itself can shape outcomes as much as the proposals on the table. Employers should:

Be transparent but strategic: Share enough financial context to build credibility, but avoid “opening the books” in ways that limit flexibility later.
Prepare detailed costing models: Understand the true cost of each proposal, including wage roll-ups, overtime, and pension implications. A one-percent wage increase often costs far more than one percent once these effects are included.
Use interest-based bargaining where appropriate: Focusing on mutual interests—such as stability, recruitment, and sustainability—can sometimes open the door to creative solutions that meet both parties’ needs.
Stay consistent and credible: Bargaining is as much about trust as economics. If management develops a reputation for following through on commitments and maintaining consistent positions, unions are more likely to engage constructively.

For employers, negotiating union contracts during high inflation requires not only careful costing but also a clear communication strategy that builds credibility with both union leaders and employees.

Conclusion

High inflation creates challenges for both sides of the bargaining table when negotiating union contracts. Unions want to protect members’ purchasing power; employers must guard against unsustainable cost growth. But with careful planning, creativity, and a willingness to use flexible tools, employers can negotiate agreements that provide meaningful improvements without jeopardizing financial stability.

The most effective strategies combine structured wage proposals, proactive healthcare cost management, cautious approaches to remote work (where applicable), and adaptive bargaining mechanisms such as side letters and reopeners. Employers who enter negotiations prepared, consistent, and transparent are best positioned not only to reach agreements in this inflationary environment, but also to build stronger long-term labor relationships.

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May 4, 2019

EEO-1 Compensation Data Update

In April 2019, a federal judge ruled that all employers required to file the annual EEO-1 report must include 2018 compensation data by September 30, 2019. The court ruling left some open questions for employers regarding the EEO-1 compensation data requirements. The U.S. Equal Employment Opportunity Commission (EEOC) has answered some of those questions, as we’ll explain here.

What Is the EEO-1?

U.S. employers with at least 100 employees and some smaller companies with federal government contracts must file the EEO-1 each year. The annual reports identify numbers of employees by job categories and demographic characteristics.

The EEO-1 job categories are:

Executive/Senior Level Officials and Managers
First/Mid-Level Officials and Managers
Professionals
Technicians
Sales Workers
Administrative Support Workers
Craft Workers
Operatives
Laborers and Helpers
Service Workers

Within these job categories, employers must provide the number of employees based on sex and race/ethnicity from among these options:

Hispanic or Latino
White
Black or African American
Native Hawaiian or Pacific Islander
Asian
Native American or Alaska Native
Two or more races

EEO-1 Compensation Data Requirement

In February 2016, the EEOC modified the Form EEO-1 to include wage and hours data beginning March 31, 2018. In 2017, however, the Office of Management and Budget (OMB) informed the EEOC that it was suspending the new pay data collection requirements pending further review. This prompted litigation.

The plaintiffs in a lawsuit against the government prevailed. The judge is requiring the EEOC to collect the new EEO-1 compensation data from covered employers for at least two years. One of these years is 2018. The judge allowed the EEOC to decide whether the second year would be 2017 or 2019. The EEOC has selected 2017 as the second year.

For now, it’s not clear whether the EEO-1 compensation data requirement will continue beyond this year. It is possible that the EEOC will formally revise the forms going forward.

What Do Employers Need to Know?

1. What Is the Deadline for the 2018 EEO-1?

The filing period for the traditional EEO-1 survey (without the compensation data) ends May 31, 2019. Covered employers must submit the standard job category and demographic surveys by that date.

However, companies will have to submit separate new reports with the EEO-1 compensation data.

[Click here to file your EEO-1 or get more information directly from the EEOC.]

2. When Can We File the EEO-1 Compensation Data?

The EEOC expects to open filing for the new EEO-1 compensation data in mid-July 2019. When available, filers apparently will need to submit wage and hour information for both 2018 and 2017.

3. What Compensation Statistics Will We Need?

Employers will need to submit W-2 wage data and hours worked for employees within 12 specified pay bands:

<$19,239
$19,240-$24,439
$24,240-$30,679
$30,680-$38,999
$39,000-$49,919
$49,920-$62,919
$62,920-$80,079
$80,080-$101,919
$101,920-$128,959
$128,960-$163,799
$163,800-$207,999
$208,000+

Employers will report wages earned based on W-2 “Box 1” year-end earnings and hours worked.

Hours worked will be actual hours for non-exempt employees. For exempt employees, employers can report an estimate if they do not maintain actual time records. The estimate will be computed at 40 hours per week for full-time exempt employees and 20 hours per week for part-timers. Employers will report aggregate hours for all employees in each pay band and job category by ethnicity.

Employer Concerns

One concern many employers have is how much hassle it will be to satisfy this new filing requirement. That answer depends on factors like the size of the workforce and sophistication of the payroll system. Some companies will be able to generate the data quickly from computers. Others will have to analyze individual employee records to compile the necessary EEO-1 compensation data.

Another question is how the EEOC will use this new information. For various reasons, the limited aggregated payroll data might not give an accurate snapshot. Yet, the EEOC may use the numbers to evaluate potential discrepancies along gender, racial, or ethnic lines. Although the EEOC probably will not make every employer’s EEO-1 compensation data public, the reports could come out in litigation. This may include use by private plaintiffs whose attorneys could obtain the data from the EEOC by subpoena, for example.

Don’t Wait for July!

Employers who will have to file the new EEO compensation data should not wait until July to prepare. Companies should at least evaluate their ability to generate the information necessary when the filing period opens. Plus, employers should start analyzing whether the data is going to paint a picture that might cast their compensation practices in a bad light. If so, they might want to review and modify their practices or start preparing the explanation for why the EEO-1 report is misleading, as many will be given many statistical limitations in the way employers must report on wages.

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April 6, 2019

Recovering Overpaid Wages in New York

New York has restrictive prohibitions against making deductions from employees’ pay. For example, employers cannot deduct money from paychecks to recover the cost of damage caused by employees, cash register shortages, or even theft. However, special rules allow employers to recoup overpaid wages in some situations. But employers must comply with a series of procedural requirements to do so. These rules apply to all non-governmental businesses in New York.

Overpayment of Wages Due to Mathematical or Other Clerical Error

New York law only permits paycheck deductions for overpaid wages that result from “a mathematical or other clerical error by the employer.”

Surprisingly, the extensive New York State Department of Labor rules on deductions for overpayments don’t further explain what “mathematical or other clerical error” means. Many examples are obvious. If payroll misinterpreted handwritten numbers or added or left off a digit, then it’s almost certainly a clerical error. But is it a clerical error if the company included overtime pay for an employee who wasn’t entitled to it?

What’s most likely not covered is any situation where the company knowingly paid an employee one amount and later decided they should have paid less. Employers can’t reduce pay after the fact, such as based on subsequent observations of performance or in light of business losses incurred by the employee.

Interestingly, the law also might not allow for recovery where wages were overpaid due to a mathematical or other clerical error by the employee. Or even outright employee dishonesty or fraud, such as the employee overstating their time worked through the company’s timekeeping system. Of course, the company can still discipline the employee and even ask for the money back or sue them, but they couldn’t lawfully deduct it from any future wages earned.

Rules for Overpaid Wage Recovery

Assuming recovery is allowed because the overpayment was due to a mathematical or other clerical error by the employer, the company must establish and follow specific procedures to make the recovery legal. Failure to satisfy all requirements could render the wage recoupment unlawful. That would subject the employer to civil and potentially even criminal penalties.

Timing, Duration, and Frequency

Employers can only use paycheck deductions to recover overpayments made in the past 8 weeks.

Only one recoupment deduction can be made per pay period. If necessary, the deductions can last for up to 6 years from the original overpayment to recover up to the full amount overpaid.

Method of Recovery

Employers can recover overpayments through wage deduction or by a separate transaction, as long as they satisfy all other requirements.

Periodic Amount of Recovery

If the overpayment was less than or equal to the net wages earned after other permissible deductions in the next wage payment, the employer can recover the entire amount in that next wage payment.

However, if the overpayment exceeds the net wages after other permissible deductions in the next wage payment, then the recovery may not exceed 12.5% of the gross wages earned in that wage payment. And, in this case, the recoupment deduction cannot reduce the employee’s effective hourly wage below the minimum wage.

Notice of Intent

Before making any recovery of overpaid wages, the employer must notify the employee. The notice must contain the total amount overpaid, broken down by pay period. It must also show the total amount of deductions intended and the date and amount of each deduction to recover the overpayment.

The notice must also inform the employee that they can contest the overpayment. This includes providing the deadline for filing a dispute and the relevant procedure for doing so.

If the entire amount will be recovered in the next paycheck, then the employer must notify the employee at least 3 days before the deduction. In all other cases, the employer must issue this notice at least 3 weeks before the deduction can start.

All notices may be in writing or electronic means, such as email. Employers must use “ordinary language readily understood.” Text can be no smaller than 12-point font.

Dispute Procedure

As mentioned in the notice requirement, the employer must establish a procedure for employees to contest a proposed recovery of overpaid wages.

Except where the employer proposes to make the full recovery in the next paycheck, the employee has one week from receipt of the notice of intent to contest any aspect of the recoupment. Then the employer must reply within one week of receiving the employee’s response.

The employer’s reply to the employee’s response must address all issues that the employee raised. If the employer disagrees with any point the employee raised, the employer must explain why it disagrees. The company must allow the opportunity for a meeting with the employee within a week to discuss any remaining disagreements.

Ultimately, the company must give written notice of its final determination. Any deduction to recover overpaid wages may not begin until at least 3 weeks after the final decision.

If the employer can make the recovery entirely in the next pay period, then the timing for this procedure changes. The employee only has 2 days to respond to the company’s notice of intent. Doing so will postpone the deduction during the above process.

Companies that recovery overpaid wages without following these procedural requirements will create a presumption that any challenged deduction was impermissible.

Be Cautious in Recovering Wage Overpayments

Having the option of recovery wage overpayments through payroll deductions is appealing. And this can work out beneficially for employers. However, missing any components of the procedural requirements could get companies in trouble.

New York law does not look favorably on employers who make improper deductions from employee wages. Even a single complaint from one employee could prompt a broad investigation from the state’s Department of Labor. The NYSDOL has jurisdiction over an extensive arrange of wage and hour requirements. Before tempting this fate, employers should ensure they’re proceeding lawfully. Working with an attorney familiar with New York labor and employment laws is the best way to do this.

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