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Exclusive: Verizon Extends Union Contract, Avoiding Possibly Tough Labor Talks Next Year

July 19, 2018, 4:45 PM UTC

Verizon and its largest unions agreed to extend a hard fought 2016 contract covering about 34,000 employees for another four years, avoiding potentially contentious negotiations next year.

The Communications Workers of America and the International Brotherhood of Electrical Workers agreed to additional wage increases totaling 11% over the additional four years, while maintaining job protection provisions included in the prior contract. The telco giant, which has seen its profits bolstered by the big corporate tax cut, got a promise of labor peace, after numerous strikes that occurred during past contract talks. Instead of expiring in August, 2019, the deal now extends into 2023. The covered workers still must ratify the agreement, with a vote expected in a few weeks.

“This is a home run for our workers,” Dennis Trainor, vice president of CWA’s District One, tells Fortune. “We felt we had a very successful 2016 contract after the strike.”

The original four-year contract was approved in 2016 after a bitter seven-week strike by Verizon workers. They had been on the job without a contract for months after their prior contract expired in August 2015. The strike wasn’t resolved until then-Labor Secretary Tom Perez intervened to bring the two sides back to the bargaining table.

This year, Verizon (VZ) has been under pressure from Wall Street to reduce its debt load and find new areas for growth. The company bought AOL and Yahoo to enter the online advertising business and plans to roll out new faster 5G wireless networks over the next few years. But its stock price is about unchanged this year, trailing the 5% gain in the Standard & Poor’s 500 Index.

Avoiding a possible replay of 2016’s strike is probably smart business for Verizon. The strike ended with workers getting a better deal than the company’s “final offer” during negotiations. The conflict escalated quickly, leading up to an armed confrontation in the Philippines where U.S. strikers had gone to meet with call center workers, before Perez stepped in.

The labor action also influenced CWA workers at AT&T (T), who went out on a short weekend strike last year, before coming to agreement on new contracts.

Extending the agreement also clears the decks for incoming CEO Hans Vestberg. Unlike outgoing CEO Lowell McAdam, and prior leaders at the company, Vestberg is an outsider, new to the U.S. telecom market and its complex history of labor relations.

From the CWA’s point of view, the political climate towards labor changed completely in Washington, D.C. over the past two years. The Obama administration and Secretary Perez were relatively pro-labor, while the Trump administration and new Labor Secretary Alexander Acosta are seen as far more pro-management. But Trainor says that “didn’t really” figure into the union’s thinking on the extension agreement.

A separate agreement will also extend the contract that covers a few dozen employees in Verizon Wireless retail stores who have voted to join the CWA union, and about 90 wireless technicians similarly will get the 11% wage increases.