Inside Mondragon's labor-management relations

Should we add the Mondragon model to the labor-management relations discussion about Japanese and German-style participatory management?
Inside Mondragon's labor-management relations

Professor Ariana Levinson is sharing Dean Crawford's blog for the week of May 21, 2018. She is blogging from a research trip to Mondragon, Spain.

See her previous posts:

May 21, 2018: First day in Mondragon, Spain

May 22, 2018: What does Wakanda have to do with Mondragon?

May 23, 2018: A cooperatively owned university


Eroski, a grocery, is a business of Mondragon.

Today we visited the site of the Basque Government in Vitoria, where we learned about the work of the General Secretariat for Human Rights, Coexistence, and Cooperation. We also learned about the Laboral Kutxa, Mondragon’s cooperative bank, and their project, Gaztempresa, that helps young entrepreneurs create businesses. There are many issues I could write about relating to entrepreneurship or my interest in dispute resolution, but, informally, I had the opportunity to speak with Anders (our Basque leader) about the social councils and labor-relations in the Mondragon Co-ops. Anyone who knows me knows that I will not pass up an opportunity to write about labor-management relations!

Anders, the group's Mondragon guide.

In the United States, the traditional way for employees to have a voice in labor relations is through unionization of a particular business. In the 1990s, non-union businesses started to use a Japanese-style participatory management, in which employees worked in teams and provided input on a range of items through the teams, including terms and conditions of employment. A big debate followed about whether to revoke Section 8(a)(2) of the National Labor Relations Act, which prohibits employee committees assisted or dominated by an employer from dealing with an employer over terms and conditions of employment. But Congress did not amend the section, the National Labor Relations Board interpreted it in a way that is manageable for employers to follow, and the debated ebbed, although it continues to some extent to this day.

More recently, beginning in 2013 or 2014, Volkswagon considered implementing German-style work councils in its Chattanooga, Tennessee, Plant. German labor-relations focus around sectorial bargaining with unions, and work councils are used in individual plants. Initially Volkswagon determined that because of Section 8(a)(2), the arrangement would only be permissible if the employees voted in a union. Ultimately, the employees did not vote for unionization.

Like the Japanese model, Mondragon involves participatory management, and like the German one, the co-ops use councils.  A social council is elected by the employees of each co-op to address collective concerns and to establish a means of communication between cooperatives. While the Spanish law contains few sentences about the social council, Mondragon’s rules require a social council for all companies over 100 employees. Those with fewer employees can elect to have one. Social councils exist at the co-op level and also at the departmental level. The social council must study and meet about certain items and provide an opinion to the governing council and/or general assembly about them. These include the annual plan and the strategic plan (which is developed for a four-year period). They also provide an opinion on what the yearly calendar should be, including which holidays will be taken. They determine which particular causes will receive the 10 percent of net salary that each co-op must give to charitable causes. In co-ops with strong social councils, whenever the manager or governing council wants to make a change, such as a wage cut for the coming year, they will have to convince the social council or the change will back-fire. 

There are significant differences, however, from the Japanese and German model that suggest the Mondragon model may more effectively convey employees’ voice. First, workers who are not owners can unionize if they so choose, and some do. Eroski, the grocery workers, are unionized. Second, worker-owners not only present their collective concerns about terms and conditions of employment to the social council, but each worker-owner has a vote in the general assembly. This vote means they make the ultimate decision about labor-relations policies and terms and conditions of work. Third, because Mondragon is a humanistic-focused enterprise that puts workers before capital, their HR and companies appear to use problem-solving rather than correction and discipline to address work issues, such as tardiness or scheduling conflicts. Finally, because Mondragon worker-owners are limited to a six-to-one salary ration, meaning the highest-paid worker is paid no more than six times the lowest-paid, there may be less of a conflict between manager-owners and other worker-owners.

Finally, I would be remiss if I did not mention that Mondragon and the Steelworkers have entered into an agreement to develop worker-owned co-ops in the U.S. where a union substitutes for the social council.  You can read more about this model if you are interested in my forthcoming article, Union Co-ops and the Revival of Labor Law.