Verizon Workers Strike over Contract

The 2016 Verizon workers' strike was a labor action in the United States involving about 40,000 Verizon Communications landline and Verizon FiOS workers. The strike, which began April 13, was organized by two trade unions: International Brotherhood of Electrical Workers and the Communications Workers of America (CWA), and represents the biggest labor action in the United States since the Verizon strike of 2011 when 45,000 workers walked out. Picket lines were established along the East Coast of the United States, from Virginia to Massachusetts. Verizon workers had been without a contract since August 2015 due to a disagreement about support services being outsourced to call centers in the Philippines, Mexico, and the Dominican Republic, a cap placed on pensions, and cuts to their benefits.

Verizon Communications Inc. was formed on June 30, 2000 and it is one of the worlds leading providers of technology, communications, information and entertainment products and services. Verizon is a multinational telecommunications conglomerate having multiple subsidiaries such as Verizon Communications landline, Verizon FiOS, Verizon Wireless, Verizon Media etc. Most of the striking workers belong to the company's landline phone business and FiOS broadband network and do not belong to the much larger Verizon Wireless network. As the Wireless business of Verizon is growing and profitable, therefore the Wireless network workers did not participate in the strike and nearly all Verizon Wireless workers are nonunionized. The Verizon Wireless workers belongs to another subsidiary of Verizon that is different from Landline and FiOS business, which are on strike. The wireless subsidiary is performing well and Verizon says Wireless workers make the company huge profits; therefore, they have not participated in the strike.

Union leaders refused to accept a new contract citing multiple issues, including pensions, healthcare, work assignments, job security, and wages. According to Verizon, employees received $130,000 a year in wages and benefits but union leaders claimed that the they have received average total of $74,000 a year, which is $56000 less than the original amount promised in the contract. Verizon offered workers a 7.5 percent salary increase. Union leaders responded by stating that the increase would be negated because workers would have to pay an increased amount for deductibles and premiums, prescriptions, and co-pays.

The Union leaders said the concessions are unjustified and harsh, given that Verizon is highly profitable. The unions were receiving $200 million in concessions on health care benefits before the strike. These concessions include higher premiums, deductibles, and out-of-pocket expenses. The company's revenue rose 2.8 percent to $27.5 billion in the second quarter of 2016 and its growth was largely attributed to its wireless business. But Verizon said its wireline business has been in decline for more than a decade; therefore, it is asking for changes in the contract to strengthen the unit. The company said union employees from Verizon Landline and Verizon FiOS business (two subsidiaries of Verizon communications) contribute nothing to their health care premiums.

Verizon activated a contingency plan to ensure customers experienced "limited disruption in service" for the length of the strike. Verizon has advertised for and hired a large number of replacement workers in response. The union's list of complaints is a long one: Verizon has outsourced 5,000 jobs to workers in Mexico, the Philippines and the Dominican Republic. Verizon is hiring more low-wage, non-union contractors, the union says.

"The main thing is that it's taking good-paying jobs and taking them away from the American public," said Ken Beckett, a technical telecommunications associate for Verizon and union board member, as he picketed with colleagues outside a Verizon office in Manhattan. The union also claims Verizon won't negotiate with people who work in Verizon stores and is closing call centers and Verizon is asking workers to work out of state, away from their homes, for months at a time. Meanwhile, the union says Verizon is cutting costs as its profits have soared. "Verizon's corporate greed isn't just harming workers' families, it's hurting customers as well," the CWA said in a statement.

It's true that Verizon continues to post record profit, but most of that is coming from its wireless business. The "wireline" business that most CWA workers serve is in decline. Wireline sales have been steadily falling over the past several years. Last year sales fell by nearly 2%, and Verizon lost 1.4 million voice customers. To help make up for the losses, Verizon continues to offload some of its wireline assets, and it has been offshoring some of its workers overseas. The company says it saved $300 million in employee costs in 2015.

Still, Verizon managed to post an $8.9 billion operating profit in its wireline business last year. That was down slightly from 2014, but not by much.

Even as traditional landlines and DSL continue to fall out of favor, Verizon's FiOS broadband business has continued to grow, making up an increasingly large part of Verizon's wireline business. FiOS now represents 79% of Verizon's wireline sales to consumers, up from 76% in 2014. FiOS sales grew by 9% last year. Verizon (VZ) said that it has worked with union leaders in good faith since June.

"It's regrettable that union leaders have called a strike, a move that hurts all of our employees," said Marc Reed, Verizon's chief administrative officer. "Unfortunately, union leaders have their own agenda rooted in the past and are ignoring today's digital realities. Calling a strike benefits no one, and brings us no closer to resolution."

Verizon said that it is prepared to serve its customers despite the strike. It said that thousands of non-union workers have been trained to cover new assignments in the event of a strike.

Question: What was the impact of the actual actions, events and arrangements described in the case on Verizon employees and customers mentioned in the case? Explain the associated moral/ethical concerns. (300-400 words)