Santa Clara University


Business Ethics in the News

Back to Blog

KELLOGG: Is the Two-Tier System Ethically Problematic

Wednesday, Feb. 12, 2014
Image Source: Flickr
Image Source: Flickr

The 226 workers at Kellogg’s Memphis plant have been “locked-out” from their jobs producing Frosted Flakes and Froot Loops for over 3 months. Company management and the union representing the workers — the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union — reached a stalemate in negotiations in October, resulting in the lockout. The primary issue is Kellogg’s demand of dramatically increasing the amount of temporary workers, who would earn $6 less and be entitled to much fewer benefits: effectively creating a two-tier system at the plant. Under the current agreement, Kellogg has the right to use temporary workers for up to 30% of the workforce, but the union claims Kellogg is now pushing for 100%. The workers, who have had their health insurance suspended by Kellogg, fear that their jobs will either be replaced entirely by temporary workers, or they will be forced to take lower wages. Kellogg, in the midst of a 4-year cost reduction effort labeled, “Project K,” claims that the change is necessary to remain competitive and that current employees will be unaffected by the change. Are two-tier systems ethically problematic?

  Kirk: Kellogg has ignored lessons learned by the airline industry that dividing employees into two classes of citizens won’t work for very long. American Airlines, with a host of others, started a plan in 1983 that instituted a two-tier system separating current employees from future hires into different pay scales. By 1987, the company had to significantly overhaul the program. Two-tier systems create tension between the employees, resentment of management, higher turnover, and further complicate union relations. In the long run, these programs are not sustainable. They undermine the concept of shared sacrifice, shared reward, and make development of a strong corporate culture exponentially more difficult.

  Patrick: I don’t think tiered systems are inherently unethical, although it is largely a matter of fairness. In the case of American Airlines, and most likely the Kellogg lockout, new hires will be doing the same job as existing employees but will get paid significantly less. “Treat similar cases similarly” goes a long way here. Anything else will create an imbalance and undermine the company in the long run. On the flip side, Google famously uses a tiered system, assigning different color “badges” for full-time employees, contractors, and interns. Yes, they create divisions between the groups, but they also strengthen the group identity of the subgroups and incentivize employees to “climb the ladder.” It’s Darwinian, but fair.

Labor Battle at Kellogg Plant in Memphis Drags On (NY Times)

A Framework for Thinking Ethically (Markkula Center for Applied Ethics)



Comments Comments

Sandra Labate said on Dec 9, 2014
For those that do not know a two tiered system is a pay structure in which different wage scales are set for senior workers and for new workers. The Kellogg's brand company was using a tiered system which is considered unethical because of the way they deliberately treat their long time workers poorly. With the increase of their hiring of new temporary workers there other full time employees fear the loss of their jobs due to the employers being able to underpay the temporary workers a smaller wadge and provide them with less benefits. This is unethical because it demonstrates a business that only focuses on itself and its success and does not respect its hardworking employees. - Like - 6 people like this.
Post a Comment