The fear of losing management flexibility deters many employers from entering into collective bargaining relations. However, the loss of management flexibility is not an inevitable result of such relations and management can retain flexibility in many areas, even under a collective bargaining regime.
Delineating management prerogative
The main objectives of collective bargaining relations are to improve employees' working conditions, increase the remuneration payable to employees and protect them against arbitrary dismissal. Although the employer cannot refuse to negotiate with the employees' representative body on such issues – which are the core issues of collective bargaining agreements – it does not have to negotiate on issues which are within the 'management prerogative'.
Issues recognised as falling within the management prerogative include:
- the type of goods or services rendered by the employer;
- entry into new markets;
- the pricing of goods and services;
- defining positions and their requirements;
- the employment of employees in shifts;
- cost-cutting measures; and
- assessment of employee competence.
When collective agreements provide for such issues, they reflect a waiver of the management prerogative on the part of the employer.
There are consultation and negotiation obligations with respect to the ramifications on employees of decisions that are within the management prerogative, but the employer can retain the right to make relevant decisions itself and should safeguard this right.(1)
As the follow cases demonstrate, the delineation of the management prerogative has many additional practical implications – for example, in defining the issues in respect of which employees may lawfully declare a labour dispute or strike.(2)
The employees of one of Israel's major ports recently took industrial action, claiming that the division of overtime was unsatisfactory. The labour court enjoined the action, ruling that the division of overtime was a management prerogative and that the employees' representative could not intervene.(3) The issue of overtime is one that the employer may justifiably refuse to include in the collective agreement. However, if the applicable collective agreements provided that the employer must include the employees' representatives in decision making concerning the division of overtime, the result would have been different.
The budgetary allocation for employment purposes is another issue which the employer can justifiably refuse to include in the collective agreement. The collective agreements of the Israeli Medical Association are a notable exception in this respect, as for decades they have included provisions addressing budgetary allocations for physicians in public hospitals. This has direct legal and practical ramifications with respect to labour disputes in hospitals: such disputes may be lawful if declared by the Israeli Medical Association, but not if declared by a representative union of a different sector of employees.
Decisions to cut costs and improve profitability are further issues which fall within the management prerogative. Although the employer must engage in consultations and negotiations with respect to the ramifications of such decisions on its employees, decisions regarding employee terminations (eg, which employees will be terminated) and the conditions of termination remain within the employer's exclusive remit. Therefore, the employer may prevent a strike directed against such a decision – as opposed to a strike directed against the employer's reneging on its obligation to consult and negotiate.
Another issue is human resources management – the employer may decide on the conditions of acceptance and advancement of employees and apply entrance examinations as a condition for considering candidacy. The employer may waive this prerogative, but is not obliged to do so. Even if a duty to consult is recognised, as entrance examinations may have ramifications on employees, such an obligation is much less restrictive. This is not to say that the employer is exempt from exercising its management prerogative in good faith – which includes, in respect of entrance examinations, ensuring their relevance and reliability and the employees' and candidates' entitlement to privacy and equal opportunity.(4)
Even regarding issues where intervention by the employees' representative is obviously lawful (eg, dismissal), the employer can retain managerial flexibility. A wide range of protective mechanisms against arbitrary dismissal are available that do not lead to management paralysis. For example, in the case of redundancy termination, it can be agreed that unless the employees' representatives can propose different candidates within a given timeframe, the employer's termination list shall be considered as agreed upon.
The above list of issues is not exhaustive. During negotiations for a collective agreement, the employer must be aware that it is entitled to safeguard its management prerogative, and it would do well to master the issues that are within its remit.
For further information on this topic please contact Shoshana Gavish at S Horowitz & Co by telephone (+972 3 567 0700) or email (email@example.com). The S Horowitz & Co website can be accessed at www.s-horowitz.com.
(1) Justice Adler distinguishes between the obligation to negotiate – which usually refers to issues in respect of which an employer is obliged to be prepared to reach an agreement with the employees' representatives – and the obligation to consult, which usually refers to issues in respect of which the employer is free to act as it sees fit if no agreement with the employees' representatives has been reached. Collective Dispute Appeal 8/99, New General Federation of Labour v Tel-Aviv University (January 22 2004).
(2) Collective Dispute Appeal 400005/98, New General Federation of Labour v State of Israel (January 23 2000).
(3) Collective Dispute (B-Sh) 33096-11-15, Ashdod Port Company Ltd v New General Federation of Labour(November 22 2015).
(4) Labour Appeal (National Labour Court) 4-70/97, Tel-Aviv University v New Federation of Labour (January 22 2004).
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