VERIZON TO REHIRE MORE THAN 2,300 AFTER LOSING ARBITRATION
Verizon will reinstate more than 2,300 N.Y. employees it laid off in Dec. as a result of an arbitrator’s decision last week, a spokesman confirmed Mon. The arbitrator, Shyam Das, ruled Fri. that the company’s action wasn’t permitted under its labor agreement with the CWA. The spokesman said that although there were cases when an arbitration decision could be argued, “it’s not applicable in this case. Even though we disagree with the decision,” which will cost Verizon $25 million, “we believe it was made right. We expect to go ahead and do what the arbitrator told us to do.”
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“Now that the decision is on the table,” job security will be a “principle issue” for the CWA, IBEW and Verizon, which are negotiating a new contract for 75,000 employees that expires Aug. 2, the spokesman said: “The decision is based on the language of the contract, which is now expiring… We'll meet with the CWA soon… to get the language that will allow us to manage our work force in the new telecom environment… We can’t be restricted from downsizing.” He said other principle issues under discussion were: (1) The cost of health care. (2) The ability to move people, which now is “severely limited.” He said such flexibility would “end up saving jobs, as we wouldn’t have to downsize less busy call centers.” (3) Absenteeism. A CWA spokesman said the union and Verizon were “still a long way from reaching a settlement” on the new contract.
Verizon said “the same conditions that caused the layoffs all remain.” It said an additional 1,129 employees had been laid off in other states, and those layoffs were awaiting arbitration in those states.
The current labor agreement between Verizon-N.Y. and its unions says the company may lay off employees due to “significant external events that directly reduce the need for a large number of employees,” but not due to company- initiated process changes developed to improve efficiency, it said. It said it explained to the arbitrator that it had followed the contract, as the layoffs were due to the “external events of a tough economy, increasing competition, customers’ substituting new services such as wireless and broadband for landline service, adverse regulatory rulings and structural changes in the telecom industry.” However, the arbitrator said those external events were “not discrete events that resulted in the reduction of particular, identifiable work,” and therefore didn’t satisfy the “external event” criteria in the contract.
The CWA called the decision “very welcome news for thousands of workers and their families,” as well as for customers. Verizon has eliminated 17,000 jobs throughout its 12 eastern states in the last 2 years.
UBS Securities interpreted the arbitrators’ decision as one of several factors that could cause Verizon’s shares to underperform over the next few months. Noting that Verizon was waiting for the results of similar arbitration action in other states, UBS said the rehires could add to earnings pressure. “This appears to be the first real fallout from the labor issues now facing the company,” UBS said in an investment report Mon. Labor contracts that cover 75,000 union employees are set to expire Aug. 2 and while it’s difficult to judge the likelihood of a strike, “a prolonged one would impact earnings and may cause the company to adjust its outlook,” the report said: “Considering the recent [arbitration] decision and the potential rehiring of up to 3,400 employees (likely to be considered off the books when guidance was provided) the company’s failure to change the job security provisions in the current contract may also cause the company to fall short of current earnings forecasts. Ironically, Friday’s ruling will likely cause the unions’ position on the issue to harden.” UBS maintained its Neutral 1 rating on Verizon but said “we now believe SBC to be a better way to invest in the near term as these issues are worked through.”