In the HR environment, unions represent an actual challenge to unionized companies and a potential challenge to companies that are not unionized. In companies with unions, the employer and the union sign a labor agreement that specifies compensation (wages and benefits), hours, and working conditions. This agreement limits the HR activities of supervisors and HR departments. For both, the challenge is to achieve company objectives without violating the agreement.A more recent challenge involves labor costs and competitiveness, especially when unionized firms compete against nonunion ones. Higher union wage rates have caused some employees to negotiate a two-tiered wage structure to avoid outright wage cuts and other “givebacks.” Current members get the old rate (and maybe a slight raise), but new workers start out at a much lower wage rate. This practice can result in two workers doing the same work at markedly different rates of pay. Besides the challenges of future contract bargaining is cussed more fully in Chapter challenges of motivation, morale, and employee turnover result from two-tiered wage rates Employers without unions are affected too. To retain the flexibility of nonunion status, HR departments implement compensation policies, hours of work, and working conditions similar to those found in unionized operations, resulting in what is known as a spillover effect. Here the HR challenge is usually determined by top management: try to operate so that unionization is discouraged. For example, major firms in the electronics industry, such as Motorola and Texas Instruments, are mostly nonunion.