Friday, Feb. 15, 2002 | 5:08 a.m.
WEEKEND EDITION
Culinary Union and casino industry leaders, dealing with a post-Sept. 11 slumping economy, are gearing up for the most important contract talks in two decades.
"(The gaming) industry is the backbone of Las Vegas," said John Wilhelm, international president of the Washington-based Culinary Union. "The outcome of these negotiations will be crucial not only to the (Las Vegas) economy, but to the future stability of the industry and the city."
And the union, too.
On May 31 the union's five-year collective-bargaining agreements expire at 36 area casinos, most of which have suffered layoffs in the aftermath of the terrorist attacks.
Among those participating in the talks, which are expected to get under way next month, will be four of the biggest gaming companies in the world -- Park Place Entertainment, MGM MIRAGE, Mandalay Resort Group and Harrah's Entertainment.
They'll be pitted against the largest and most influential union in the state, a 50,000-member organization that has come to symbolize the revitalization of the American labor movement under AFL-CIO President John Sweeney.
The negotiations could turn into a game of high-stakes chicken. While no one wants a strike, union leaders are bitter about the layoffs that followed Sept. 11 and fear the casinos want to cut costly health benefits. Casino executives, though, point to falling bottom lines and the poor economy and say they can't afford anything more.
University of Nevada, Las Vegas professor Bill Thompson, a gaming industry expert, said a breakdown in the negotiating process could have a serious impact on the city's struggling economy, slowed by the post-Sept. 11 recession and stiff competition from Indian casinos in Southern California.
"That would flatten us out and push back our recovery for six months to a year," Thompson said. "It's vital that these talks be peaceful and that we get a resolution without work stoppages."
The Culinary Union, which has had a tough time organizing the new megaresorts on the Strip, the Venetian and Aladdin, also stands to lose prestige within the business world if it fails to reach an agreement with the casinos.
The union's rise to national prominence within organized labor has been directly linked to its friendly relationship with the casino industry since 1989, the beginning of the megaresort era on the Strip.
Together the union and the industry have forged an unwavering political alliance that has made them an impressive lobbying force in Washington, where gaming often finds itself under attack.
That strong bond, however, will be threatened as both sides head into the contract negotiations looking for financial security in the post-Sept. 11 era.
Thousands of Las Vegas union members, mostly hospitality and restaurant workers, were let go after the terrorist attacks while union leaders could only stand by and watch, and that changed -- maybe forever -- the labor-management dynamics on the Strip.
"We've had an unprecedented economic problem here because of Sept. 11," said Wilhelm, who was the union's western region director before being elected to the top leadership position in 1998. "If this was an ordinary recession, it wouldn't be as hard to deal with."
But Wilhelm said he expects the upcoming talks will be the "most difficult" since he became the union's lead negotiator in 1989.
Howard Cole, a labor lawyer expected to participate in the negotiations on behalf of several Strip casinos, underscored the daunting task that lies ahead.
"Both sides have to be ready to accept that they're just not going to get everything they want," he said last week during a panel discussion at the American Gaming Summit at the Bellagio. "It's going to be a give-and-take process."
Contracts shaped by Wilhelm have given Culinary members and their families generous health benefits rarely seen today in corporate America because of soaring costs. Casinos bound by those contracts still pay the full cost of medical insurance for family members.
Free dependent coverage, however, hangs in the balance in the upcoming negotiations as the casinos -- most facing declining profits in the aftermath of Sept. 11 -- look for ways to trim benefits.
Health care issue
Some observers believe the health care issue has potential to make these negotiations as troublesome as the faltered talks that led to the violent 1984 strike on the Strip. That walkout brought unwanted national attention to the industry and paralyzed the Las Vegas economy for 75 days.
"It's my sense that neither side wants a strike," former Sen. Richard Bryan, D-Nev., said. "But obviously this is a very critical time for the community, the industry and its employees."
Bryan, who was governor during the 1984 strike, recalled that health benefits were a major stumbling block, and the strike dominated his political agenda for weeks.
"Oftentimes the benefit package rather than the salary package is the most contentious issue in labor-management negotiations, and that could very well be the case this time," Bryan said.
Wilhelm said maintaining the quality of health benefits for his members is his No. 1 priority and he intends to push for continued free dependent coverage.
"We feel strongly that workers with income levels of most of our members need employer-paid medical coverage for themselves and their families," he said.
But the casinos see things differently.
Late last month, Park Place Chairman Tom Gallagher told investors the company has undergone a massive effort to cut as much as $15 million in health care costs in 2002 and plans to trim even more next year.
"One of the most important areas we've identified for savings is in health benefits," he said.
Mike Sloan, a Mandalay Resort vice president, was more blunt.
"The hotels are looking to have Culinary Union employees do what most other employees do: pay for dependent coverage and a higher contribution rate for the cost of their own medicine," he said in an interview.
Wilhelm acknowledged he's under more pressure this time around because the Culinary Union's $300 million Health and Welfare Fund has been facing an enormous financial strain since Sept. 11.
The fund's income declined dramatically with the layoffs because employers began making fewer contributions, he said. At the same time the fund was obligated to pay benefits to unemployed workers who decided it was time to take care of medical problems while they were still covered.
Dipping into reserves
As a result, the fund -- which devotes 60 percent to 70 percent of its financial resources to Las Vegas union members -- has spent millions more than it has taken in and has been forced to dip into reserves.
Also complicating matters is the collapse of the economic stimulus package in Congress. The bill would have helped laid-off workers, especially those in Las Vegas, pay for health insurance and provide some relief to the fund.
Wilhelm said he was "extremely disappointed" in the measure's failure. Both the union and the casino industry were among those who lobbied heavily for the extra benefits.
Without the anticipated federal aid, Wilhelm said, there's going to be even more pressure during the contract negotiations to make sure the struggling fund remains financially sound.
Both sides sighed with relief recently when a coalition that included the union and casinos reached an agreement with area hospitals to hold down costs to roughly an 8 percent increase in the next three years. The hospitals had been seeking as much as a 20 percent hike.
Wilhelm said he has set a goal of reaching collective bargaining agreements with the casinos by June 1 to avoid placing the fund in jeopardy. The union, he said, doesn't have the luxury of extending talks for months after the contracts expire, as it did five years ago.
"We really have to settle this by June 1," he said. "After June 1, if the contracts are not settled, the reserves of the fund will get dangerously low."
Mark Hechinger, the fund's director of operations in Las Vegas, said it has about four months of reserves beyond June 1 and conceivably could make it even longer if necessary.
"It's not like on May 31 we're going to fall apart," he said.
Wilhelm said he's optimistic a strike can be avoided.
"I believe the union and the companies, if we put our minds to it, can find a way to resolve the contracts in a way that does not disrupt the industry," he said. "It would be extremely foolish for the union and the companies to get into a situation of a labor dispute on June 1."
At the same time Wilhelm and other union leaders are talking tough.
"Our members are extremely unhappy," he said. "They feel that the reductions in the work force have been driven by bottom-line considerations and not by actual volume of work to be done. I'm concerned about that, and I believe our members are justified in their anger."
Culinary Staff Director D. Taylor, who as a union organizer was arrested more than 30 times during the bitter 1984 strike, echoed those words.
"The level of anger and frustration by our members is particularly high," he said. "The workers have felt that when times were tough, a lot of the companies turned their back on them."
Taylor said the casinos continue to fuel that wrath by refusing to rehire hundreds of union members, even though workloads essentially have returned to pre-Sept. 11 levels.
Good relationship
"We've had a very good relationship with the casinos over the years," Taylor said. "But relationships are tested not only in good times, but in tough times, and this relationship is being tested now."
Taylor said he's expecting the contract talks will be "trying" and that the casinos will want to negotiate on their earnings in the past six months rather than the entire five years of the current contract.
"All of sudden they're going to have amnesia about what they've earned in 4 1/2 of those years," he said.
But Sloan countered: "You can only negotiate off of what your current situation is. You have to try and reflect the economic reality.
"You would be an idiot to try and ignore what happened after Sept. 11. Air traffic is down, revenues are down and profits are nonexistent for many companies."
Like Wilhelm, Sloan said he likes the chances of reaching an accord without a strike.
"I think the union leaders are smart enough to know that we're in this together," he said. "The ultimate success of their union and their members are tied to the success of this industry. I'm confident we'll work this out."
Last week both Taylor and Sloan were conciliatory during a panel discussion at the American Gaming Summit, and both acknowledged that the road to a new contract will be full of obstacles.
But Taylor made it clear that if the two sides can't come to an agreement, the industry will miss the union's muscle in its political fights in the nation's capital.
"With the attacks in Washington the industry faces, it makes sense for the casinos to have as many allies as possible," he said.
Anti-climactic
Casino mogul Steve Wynn, who has played a key negotiating role in the last three contracts, suggested talks this time will be anti-climactic.
Wynn, who opened the Strip's first real megaresort, the Mirage, in 1989, is credited with helping usher in the era of detente between the union and the industry.
This time Wynn won't be directly involved in the contract talks because his newest Strip megaresort, Le Reve, isn't set to be completed until April 2004.
But that hasn't stopped him from predicting how the negotiations may end up.
"I don't see a big fight here," Wynn said. "Neither side is going to do anything stupid."
Wynn said the leading casino executives are "very pragmatic" businessmen who aren't inclined to be antagonistic toward the union.
"They all recognize that the union is an extension of their own work forces, and that's a great control over their behavior," he said.
The union, Wynn added, also has become more sensitive to management's position in recent years.
"Both sides know what each other can afford."
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