Healthcare Insights: The Kaiser Permanente Labor Management Partnership is 25 Years Old

The Kaiser Permanente Labor Management Partnership (LMP) had its 25th anniversary this year. Formed out of acrimony and a threatened national strike in 1996-1997, 26 separate local unions united in a coalition made up of 56,000 healthcare workers from across the nation, and signed a partnership agreement with Kaiser Permanente avoiding the strike and beginning what is now the longest running, most complex, and most successful labor management partnership in U.S. history. Today, there are 35 local unions made up of 134,000 union members in the LMP. In this same period, Kaiser Permanente has nearly doubled in size, today caring for 12.5 million patients, making it the largest not-for-profit health plan in the nation. 

During this period of labor-management partnership:

• There have been no strikes among the unions that are signatory to the Labor Management Partnership (it should be noted that there are other unions which represent workers in Kaiser Permanente, not part of the LMP, and strikes have occurred among them). 
• The unions have more than doubled in membership growth due to both enterprise growth and the ability to organize non-union workers without opposition from the employer, a rarity in American labor-management relations. Opposition to employees organizing unions by employers generally includes sophisticated and well-funded opposition, including threats, firings, and disinformation campaigns designed to discourage unionization. 
• Union members in the LMP enjoy among the highest wages, benefits, and conditions of employment in the health care industry with defined benefit pension plans, retiree healthcare, and access to education funds for career advancement. There have been no reductions in these benefits during the time of the LMP 
• Kaiser Permanente has evolved to be among the nation’s premier health plans and health delivery systems. Some of its accomplishments include:
  • As of this year, all 39 of Kaiser Permanente’s hospitals were considered to be in the top 10-20% of U.S. hospitals based on the high performance ratings they achieved as ranked by U.S. News and World Report.
  • For many years, including 2022, all Kaiser Permanente Health Plans have been rated 5 Stars by CMS for their care of Medicare beneficiaries.
  • Diversity, Inc. places Kaiser Permanente in its Top 50 Hall of Fame for creating among the most diverse and inclusive workplaces in the nation. In 2016, it ranked #1 in the nation.

It would seem there is much to celebrate:

• Labor peace
• High performance healthcare
• Union growth
• Successful and diverse workforce planning and development

True.

But there is much more to consider.

Today there is much discussion about an increase in union organizing activity as well as new polls which suggest that the inclination by the average American worker to join a union is at an all-time high: 71% as recorded by recent Gallup polling. 

There is recent news about a new initiative in California, which would create a statewide industry council for the fast-food industry. Such a council would establish higher wages and job protections for a whole class of workers. The council comes as a result of a near decade long struggle among fast food workers and others, part of the fight for $15/hour. While not exactly sectoral bargaining, such an industry council represents steps in that direction, a condition that has not existed since the demise of the major national and regional collective bargaining agreements in the last century which covered millions of workers across whole industries in auto, steel, construction, communications, and transportation.

After decades of increasing income inequality, union membership today remains at the lowest levels since the 1920’s, and with an increased awareness of the added inequities and disparities in income and wealth based on race and ethnicity, many suggest that the experience of the global pandemic exposed these and other features of an unacceptable status quo in the world’s richest nation. As a result, new and sustained efforts by people to organize have become a much discussed, much observed, and much more central feature of American life in our present and foreseeable future.

So, let’s make the connection between the success of the Kaiser Permanente LMP and the current wave of union activity in the nation. Why is it so important and so relevant? 

While there is increased attention to high profile union organizing today at places like Amazon, Starbucks, and among Yale graduate students, as examples, the fact remains that as a percentage of the workforce, unionization rates continued to fall last year:

• “Union membership rate declines in 2021, and returns to 2019 rate of 10.3 percent. The union membership rate declined by 0.5 percentage point to 10.3 percent in 2021, offsetting the increase in the prior year and bringing the rate back to what it was in 2019. In 2021, the rate decreased due to a decline in the number of union members (−241,000, or −1.7 percent) and an increase in the number of wage and salary workers overall (+4.2 million, or +3.2 percent). The 2020 increase in the unionization rate was due to a disproportionately large decline in wage and salary employment (mostly among nonunion workers) at the onset of the COVID-19 pandemic compared with the decline in the number of union members.” (Bureau of Labor Statistics, January 25, 2022).
• “He (Jarrett Skorup, the senior director of marketing and communications at the Mackinac Center for Public Policy) also noted that although union organizing has experienced an uptick this year, the trend has been a steady decline. The number of unfair-labor-practice and new representation cases filed has dropped since 2015 — from 2,822 to 1,638 in 2021, according to data from the National Labor Relations Board.” (Farah Stockman, “Even With Biden as a Pro-Labor Champion, Unionizing Is Still a Grind”, New York Times, September 5, 2022).

I and thousands of other organizers spent many decades on the frontlines of organizing the unorganized, and it is an activity that I love and believe in. I led efforts in small units of less than a hundred to large strategic campaigns involving thousands. I was busy every single day, and had the privilege of struggling with workers in many industries and in all regions of the country. 

Nonetheless, from the 1970s to the present we have seen a drastic decline in unionization rates from 25% of the workforce to 10% today (with only 5% unionized in the private sector).

Employer opposition to unionization has always been and remains strong. Threats of and actual firings of workers, threats to close operations, anti-union captive audience meetings on paid time, along with legal delays, hearings, and refusal to abide by winning results, continues to make organizing extremely difficult in the U.S. Labor law reform, which would make all of these tactics unlawful, is long overdue. 

At the same time, workers will struggle for change. While the employer anti-union strategy and tactics will continue, so will the struggle. Labor history has taught us that from mass strikes, virtual civil wars in coalfields, lumber mills, railroads, agricultural fields, and more, the American traditions of union organizing have had waves that rival any nation on earth. Perhaps we are on the cusp of similar such waves in our history.

I think we can agree that based on both history and the complexity and difficulty of organizing, success will come over time. How long this will take, we cannot predict. 

And organizing is taking place in a very different world than during past times of union growth, which really has not occurred since the 1950s!

Let’s look at other factors and dynamics that are part of the story:

There is another dimension to organizing: what happens in the realm of collective bargaining once a union is established? And even more important, what is a strategy for collective bargaining that will create sustained success for society as a whole? After all, many observers have suggested that a social contract did exist in the U.S. from the post-World War II years until the late 1980s, nearly 40 years in which a majority of working class and middle class people enjoyed real security: wages that allowed for home purchasing; comprehensive health and retirement benefits, and paid time off for illness and substantial vacation and leisure.

Clearly, upon closer examination that social contract excluded millions of women, people of color, and immigrants. Sadly, just as women, people of color, and immigrants joined the ranks of the unionized base which enjoyed the benefit of the social contract late in that period, the nation began a serious and rapid decline in unionization and the security that went with it. It was often said in the 1980s that those who were last hired were the first fired. 

The factors which we most often attribute to this precipitous decline in both the size and density of the labor movement and the erosion of a semblance of security for American workers albeit in highly unequal erosion based on gender, race, and ethnicity, include:

• De-industrialization and failure of the largest manufacturing sector in the world to adapt to competition, new forms of production, and globalized labor 
• De-regulation of the nation’s major industries from trucking to communications, from banking to airlines, from mail to food processing and transport, rapidly forced “free market” approaches to what had been highly regulated sectors of the economy which for many decades provided the legal and operational structures guaranteeing service to the public, stable business environments, and fee and payment structures that supported the workforce’s decent standard of living.
• Increased and more sophisticated anti-union efforts by employers. Anti-union consulting became and remains a multi-billion dollar business in the nation. Along with weakened labor laws, anti-union campaigning to stop unionization has become the standard for employer responses to organizing activity
• Increased inequality of income and the deep polarization of political power that comes with vast inequality has made it increasingly difficult to restore aspects of the social contract or to protect the shrinking safety net created by government in the post-War years.

There is so much tragedy in this decline, because none of what was achieved by American workers was achieved without decades and decades of bravery and vision. I think most observers agree with the famous quote by A. Philip Randolph, who founded and led the Brotherhood of Sleeping Car Porters, the first major union of African Americans in the nation:

"At the banquet table of nature, there are no reserved seats. You get what you can take, and you keep what you can hold. If you can't take anything, you won't get anything, and if you can't hold anything, you won't keep anything. And you can't take anything without organization."

Back to collective bargaining and labor-management relations.

Experience has taught us that the bravery and vision that created unions and the labor movement carries over to the bargaining table. The industry-wide agreements of the 1940s to the 1980s and 1990s, often supported by various forms of government involvement and regulation really was a visionary period in American history. 

Each and every collective bargaining event has its own forms of struggle, creativity, vision, advances and setbacks. 

Less well known and less understood is a decades long period of efforts in labor-management partnership from the 1970s to 1990s. It is in this context that I wish to suggest that the LMP at Kaiser Permanente with its longevity and success is the most important model we have of another essential component of rebuilding the social contract.

What is labor-management partnership? In my view, it is not labor peace; it is not a series of projects. One major and successful type of labor-management partnership has been in the realm of workforce planning and development, from early and continuing apprenticeship programs in the building trades and in manufacturing to more recent developments in joint efforts in new technologies and health care as examples. 

There is yet another and most comprehensive realm of labor-management partnership which has an important history defined as follows:

“Partnership is a form of labor management relationship that affords workers and unions strong participation in a broad range of decisions from the top to the bottom of the organization. “Strong participation” means that workers and /or their representatives are active participants in decision making, as distinct from either being consulted or being informed after the fact. Partnership involves workers directly and via their union representatives in a broad range of decisions, specifically, strategic and workplace-level managerial decisions, and not only decisions concerning terms and conditions of employment that are the normal purview of collective bargaining. Partnership can thus be contrasted with most forms of “employee involvement” which allows participation only in workplace operational issues and usually only in consultative form; and it can be contrasted with “corporatist” structures where union leaders participate in top-level decision-making, but participation at lower levels is weak”. (Kochan, Adler, McKersie, A. Eaton, Segal, Gerhart, “The Potential and Precariousness of Partnership: The Case of the Kaiser Labor Management Partnership”, Industrial Relations, Vol. 47, No. 1, January, 2008, pp.36-37) This article provides an expansive history of labor-management partnerships, their challenges and possibilities.

This above definition of Partnership incorporates a shared understanding by labor and management that the enterprise in which they operate contains within it the seeds of both mutual gain and mutual loss. This definition of Partnership advances the collective bargaining relationship from negotiation over terms and conditions of employment and seeks to have labor and management jointly confront the many externalities which impact the overall relationship: technology, competition, finance, changing consumer demands, changing demographics, and emerging workforce challenges. This type of Partnership recognizes these externalities as problems to be solved before they overwhelm the enterprise’s ability to remain viable, an inevitable source of conflict and instability.

This type of Partnership also welcomes the involvement of unions and employees into decision-making based on the long-standing belief in the inherent wisdom, knowledge, and experience of the workforce. Decades of experience, research, and implementation of innovative work systems have proved that without the engagement of these attributes, problem solving is quite impossible.

Solutions to these many external problems require a deep sense of collaborative re-design of the way work and production unfold. Many enterprises recognized the need to implement whole systems change to be able to solve the existential threats of competition and technology. Implementation of the Toyota Production System and Lean Management were attempted in many of these labor management settings. For many reasons, some of which are enumerated below, the risk of change was too often overwhelmed by myriad pressures to either achieve faster and better results, varying failures of accountability and spread of the new ideas throughout the organizations, leadership changes, extreme financial or competitive crises, and similar “pivotal challenges” to partnership.

In previous articles in this column, I have written about this history of labor-management partnerships in many industries. None have survived, not because the intentions were wrong or the methods insufficient. The article cited earlier by Kochan, Adler, McKersie, A. Eaton, Segal, and Gerhart suggest other reasons which are indicative of this “precariousness” they describe:

1. The introduction of partnership represents a considerable shift in power in both labor and management. The costs of change are high, and the risks considerable.
2. While the performance pay-off to this redistribution may be clear enough in the face of crisis (at least given other conditions noted in our discussion), once out of the crisis zone, the pay-off is ambiguous, in the short-term, and as a result, management commitment to partnership tends to decline.
3. While some lower-level managers may find partnership congenial and while local innovations may generate impressive partnership arrangements and results, these innovations cannot diffuse spontaneously across the organization or up the hierarchy given the ambiguous pay-off and the high costs of change

Finally, the authors conclude that: “Partnerships are unlikely to proliferate without strong buttressing elements from the external environment. The perspicacity and perseverance of enlightened management and union leaders working towards partnership in specific organizations will likely not suffice to make partnerships widespread and sustainable phenomenon in U.S. industrial relations. This is especially true if the labor movement remains as limited in scope and power as it is today, since the option of escaping from union status is available to so many employers. Changes in law and public policy may prove necessary to shift us from a lower-performing equilibrium to the highest performing one prefigured by Kaiser Permanente’s partnership”.

After 25 years, the LMP at Kaiser Permanente continues to perform quite well. I recently had the opportunity to review recent developments of the Kaiser Permanente LMP with the help of statisticians and program leads within the LMP. Here are some key findings:

• As of August 1, 2022, based on Unit-Based Team (UBT) self-reporting of organizational savings, $602,656,955 in savings has been achieved. 

•  It seems quite clear that a major success of the LMP and the UBTs is high engagement in very broad swaths across the enterprise, likely between 40-60%, which is higher than national averages. 
• Up-to-date data shows indices of specific improvement in employee biometrics, among the key indices of improved population health. More importantly, the organization has developed a culture of population health which is driven through frontline engagement, learning, dialogue, and attention to the issues of health of employees. 
• In 2000 Kaiser Permanente and the unions in the Coalition set up a Taft-Hartley Trust to fund Partnership -related staff and activities. The fund is supported by all employees diverting nine cents per hour from wages with a commensurate employer contribution. Today, 22 years later, these commitments remain in place and the Trust Funds have $45 million to spend each year in support of the activities of the LMP.

Unlike previous efforts at partnership, the Kaiser Permanente LMP has not only outlived them all, it has done so while experiencing many of the kinds of “pivotal events” which have contributed to the demise of so many others:

• Leadership changes among KP high level executives, including 4 CEOs
• Leadership changes and schisms among the unions
• Potential “whipsawing” of the partnership unions vs. the non-partnership unions
• Perhaps most important, continuous financial and competitive pressures that exist throughout the healthcare industry

The Kaiser Permanente LMP has established a consistent vision that is a shared vision: to make high quality healthcare affordable to all. That shared vision is carried out each day in 3600 work units in which a diverse group of frontline staff work together to choose improvement projects based on the unifying messages in the Value Compass:

The labor-management relationship at Kaiser Permanente, one of the largest employers in the country provides a critical dimension that we should add to and consider profoundly as we think about organizing and the growth of worker voice and power in the nation. That critical dimension is PURPOSE.

If we can agree that “high quality health care for all” should be an expectation of the people of the country, along with rebuilding our physical infrastructure, readying the nation to build a truly sustainable future of renewable energy sources, and American supply-chain for goods and services that we must have, building the workforce of the future at high wages and benefits, then the Kaiser Permanente LMP stands as a central example of what is necessary to rebuild strength and the voice of workers in our society.

 ILR Scheinman Institute Director Harry Katz recently published an article in Forbes Magazine which adds immediacy to the discussion about PURPOSE and vision in collective bargaining in relation to organizing:

“To get to mutually beneficial solutions, the parties need to exchange ideas and take everyone’s concerns seriously. Inevitably, there will be some differences in interests, particularly with regard to pay and staffing levels. But even those issues would benefit from looking at hard data on relevant comparable jobs and the cost of living, for example.

The field of labor relations shows that the employment relationship is fundamentally a mixed-motive one: there are both zero-sum and win-win issues at stake.

The task facing both labor and management bargainers is to promote their side’s interests while finding ways to expand the pie for everyone. Amazon and Starbucks should seize this opportunity to simultaneously improve their business and worker rights.” (“Unions are having a moment. Here’s how that can be good for labor and business.” Forbes Magazine, May 2, 2022, by Harry C. Katz) 

The Kaiser Permanente LMP’s 25th anniversary provides an historically unique and impressive set of accomplishments for all to understand and apply to the current discussion of the widely discussed new labor movement . We must build sustainably as we aspire to have a better future. How we approach the purpose and structure of collective bargaining will have much to do with what the future looks like and its impact on the life of most Americans.

John August is the Scheinman Institute’s Director of Healthcare and Partner Programs. His expertise in healthcare and labor relations spans 40 years. John previously served as the Executive Director of the Coalition of Kaiser Permanente Unions from April 2006 until July 2013. With revenues of 88 billion dollars and over 300,000 employees, Kaiser is one of the largest healthcare plans in the US. While serving as Executive Director of the Coalition, John was the co-chair of the Labor-Management Partnership at Kaiser Permanente, the largest, most complex, and most successful labor-management partnership in U.S. history. He also led the Coalition as chief negotiator in three successful rounds of National Bargaining in 2008, 2010, and 2012 on behalf of 100,000 members of the Coalition.