Labor Relations and Healthcare Reform at GMFC

This case study examines the challenges faced by General Motors Food Corporation (GMFC) due to labor relations conflicts arising from healthcare reform. The company's decision to discontinue health care coverage sparks protests and demands for increased compensation from the labor union. The analysis delves into the role of labor unions in decision-making, the impact of the Cadillac tax, and potential solutions for GMFC to address these issues effectively.

Running head: HEALTH CARE BARGAINING
Health care bargaining
Name of the student:
Name of the University:
Author’s note

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Introduction:
Positive and cooperative relationship is necessary between employer and employee to
foster efficiency in business organization. Effective liaison and interaction between the HR
management and employees are critical in addressing labor relations issues in a business
organization. Common employ related concerns include minimum salary, compensation and
other benefits and equal pay and justified workings hours. Human resource laws and regulations
is necessary in these area (Ehrenberg & Smith, 2016). The issues related to labor relations is
further highlighted in this paper by the case study of GMFC. The main issue in the case is related
to the sudden discontinuation of health care coverage and resultant demand of increasing salary
by employees. This paper further gives insights into the benefit of health care benefits and its
relation with employee relation issues.
Issue at GMFC
GMFC is a multi-division company with about 50, 000 employees. Initially the company
was providing life time health insurance benefit of 2 million dollar per employee. However,
recently they decided to self insure their health care coverage and subcontract administration to
Vesuvius Health Care (VHC), one of the five largest health care insurance companies in United
States. The main challenge for GMFC in adapting the new healthcare plan was it was associated
with additional cost for the company. Hence, considering the high expense and rise in health care
cost, the company has decided to adapt the cost cutting strategy of discontinuing health care
coverage for employees. This move resulted in demand of salary hike and increased pressure of
the labor union of management to increase the compensation package for employees.
Alternative options for GMFC

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GMFC’s move of reducing their expenditure is correct considering huge competition in
business organizations. To retain the competitive advantage in business, it is critical for the
company to reduce irrelevant expense and take cost cutting measures. Hence, the decision is
beneficial for the company considering challenges in business and future perspective.
However, to implement the decision of implementing health discontinuation coverage
without any controversies, there is a need for active involvement of the human resource
department in resolving the labor union issues. Some the relevant actions that GMFC can take in
this scenario include the following:
 Accept the proposal to change coverage to new plan- The employer GMFC can go ahead
with new compensation structure proposed by PPACA. This is a relevant option because
compensation package are developed by the company considering the basis pay, medical
insurance options, different allowances and conveyances and retirement options for a
specific job position. Considering all the above factors can help employer to predict the
true total cost per employee and providing appropriate compensation package to
employees (Fatima & Ali, 2016). Focusing on appropriate compensation package is also
necessary to increase the satisfaction level of employees and decreasing the attrition rate. Paying the federal penalties- If GMFC decides to cancel the health benefit scheme, the
company will then have to proceed with the federal penalties according to the Cadillax
Tax (Elliott, 2015). By taking this option, the company can use the cost saving to their
advantage to fulfill other important business purpose. However, there are several
challenges for the company in going ahead with this option. This would seriously hamper
the brand image and reputation of the company (Elliott, 2015). The employees will
develop resentment against the company and this would ultimately affect productivity.

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The human resource department will also face challenges in recruiting suitable candidates
due to the loss of reputation of the company. Modification of the workforce- Another option available for GMFC is to opt for hiring
temporary employees. This move would reduce the compensation package as well as
health care benefit cost (Cahuc, Charlot & Malherbet, 2016). The recruitment process for
new employees can focus on hiring qualified and competent employees for a temporary
period and the rest employees can be motivated to increase their performance by adapting
several motivation techniques (Cahuc, Charlot & Malherbet, 2016).
Role of labor unions on compensation and benefits
The labor union has the power to bring changes in compensation and benefit packages for
employees in organization. They have exceptional negotiation skills to demand changes in
compensation package. Hence, in the context of the case scenario, they can go forward with
demanding salary hack for employees they are not eligible for employee health benefit scheme.
They try to continue with the process unless the organization accepts their demands (Bluestone
& Kochan, 2014). In this way, labor unions play useful role in managing professional issues of
workers and reducing problems related to inequality in wages.
The National Labor Relations favors the development of labor unions in various
organization and employees have all the right to form or join the labor organization (Scott &
Davis, 2015). They mainly engage in collective bargaining for the sake of employees and take
strong action against any unfair practice by the employer. Another that factors that increases the
chance of union’s bargaining is the random termination of employees by the employer during

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periods of economic distress (Bluestone & Kochan, 2014). Hence, organization required great
negotiation skills to terminate employees randomly as this would lead to labor union issues.
Cadillac tax
Cadilla tax is a form of health benefits given by the employers to their employees and it
mainly covers an excise tax of about 40% of the health care plans (Drake, 2016). Such system
encourages the company to do investment in other tax free benefits It also helps business
organization to save their expenditures and increase the take home package. This control
measure in the medical department was implemented in USA during the period of health care
reforms (Vistnes, 2014).
Course of action
Some relevant solution to the existing issues is as follows:
 The management of GMFC can consider the revised compensation structure and the
effect of the Cadillac tax on business. They can also find out other federal tax
subsides which employees can avail during the exchange process (Armstrong & Taylor,
2014).
 The company should critically analyze the proposed benefit structure and voluntary
benefits for the organization.
 Another effective strategy that the company can take include engaging in successful
negotiation with employees to maintain the workforce limits and reduce turnover rate
(Armstrong & Taylor, 2014).

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 The Company can also decide about benchmark compensation and benefits package for
the employees so that employees get inspired and feel that justified salary package has
been provided.
Conclusion:
The analysis of the case study of GMFC mainly pointed out to the issue faced by business
organizations due to the labor relations conflicts. The decision of GMFC to discontinue health
care coverage directly influences smooth work flow process in the organization. It was
associated with labor union protest and the demand to increase salary package for employees.
The paper suggested three possible course of action that the company could take in this situation.
The role of labor unions in decision making and Cadillac tax provisions has been discussed. The
relavant option for the company is to solve the labor relation issues urgently and come to a
common consensus on the discontinuation or discontinuation of the health care insurance. This
would be an effective step to promote smooth functioning of the organization and address labor
related resentment that has occurred in the case scenario.

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