Qwest’s Earnings: Employee Raises Depend on It

Qwest Communications International Inc. employees have plenty of incentive to help their company meet earnings projections: their raises depend on it.

A tentative contract agreement the Communications Workers of America reached last week with Qwest stipulates that union workers will receive a 1 percent to 3 percent raise next year and in 2005 if the phone giant reaches certain earnings milestones. The sweeping agreement, the CWA bargaining team told 27,000 members within the 14-state territory of Qwest, was a tough deal to broker.

A majority of the members have to ratify the contract by Aug. 1. The contract will become effective Aug. 17 and expire Aug. 13, 2005.

“CWA has never bargained with a major telephone company that faces so many financial and operational challenges,” the CWA bargaining team stated in a synopsis of the agreement, which is available at

Qwest also reached a tentative agreement with the International Brotherhood of Electrical Workers. The IBEW represents Qwest employees in Montana. 

“The major provisions of that tentative contract mirror the major provisions of the CWA settlement,” said Qwest spokesman Steve Hammack.  

Under the CWA agreement, workers will get a 1 percent lump sum of their salary next year if Qwest generates at least $3.961 billion in 2003 earnings before interest, taxes, depreciation and amortization (EBITDA). Workers will get a 2 percent lump sum of their salary if Qwest posts $4 billion in EBITDA, and the reward will jump to 3 percent if EBITDA totals $4.161 billion or more.

Qwest has not given EBITDA guidance for the year.

Under the agreement, employees also will receive lump sums in 2005 if Qwest meets EBITDA milestones in 2004.

The CWA says health care was the toughest issue during the negotiations. There are changes to co-pays and co-insurance for office visits, specialists and the prescription drug plan, but the union avoided a change that would have had employees pay part of the insurance premium.

The tentative agreement also provides changes designed to protect jobs. It limits outsourcing, making it more difficult for Qwest to hire people outside the company for temporary tasks. The language in the contract also makes it harder for the company to reassign work to non-union employees.

“This was a difficult situation. The weak economy and the downturn in our industry have significantly impacted Qwest’s financial position,” said Cynthia Kok, Qwest’s chief bargaining agent, in a statement released June 13. “The fact that we were able to reach a tentative agreement is a testament to the leadership of the CWA and their unwavering focus on their members and the commitment to providing great service to customers.”

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