The fight that has broken out between the owners of KFC and their employees over their union contract symbolises the economic challenges of Bermuda and its people.But the company could have handled the situation differently.KFC's contract with the Bermuda Industrial Union expired in April, and negotiations for a new collective bargaining agreement have been going on since. It would appear that the talks have been unproductive, since they went into mediation in October and there has been no agreement.Normally when a collective bargaining agreement expires, it remains in force until a new deal is reached. If there has been a change in pay or benefits, this is then applied retroactively, or at a date agreed between the parties.In this case, KFC had told staff that it was unilaterally ending the agreement, having given notice to do so three months ago, and it will no longer collect union dues.The union is also claiming that the company is no longer recognising benefits determined by the collective agreement, but instead is applying the terms of the less generous Employment Act. In fact, the existing benefits will largely remain in force, although some may be restructured later.KFC, like all other businesses in Bermuda, is facing difficult times.The company said it recorded an operating loss of $100,000 and a $20,000 net loss in the first six months of its 2011-12 financial year.In the same statement it said it had now cut expenses as much as possible, and in its negotiations with the BIU was seeking cuts in benefits, having struggled to maintain employment levels since.Chairman Donald Lines said: “While the Company has successfully protected its workers' employment during the past two years of economic weakness, our ability to continue to protect employment going forward will be largely dependent on our employees' willingness to recognise difficulties we all face in this economic environment.”In other words, without being able to reduce benefits, the company would have to cut jobs instead.This trade-off is now common throughout Bermuda workplaces, and the union should recognise this too.So BIU Chris Furbert's declaration that benefits would be cut “over his dead body” is extreme, and a sensible negotiation would see some kind of trade-off.On that basis, KFC's frustration is understandable. But that does not mean it should have scrapped the previous agreement.The best option now is for the mediators to bring the two sides back to the table to reach an agreement that achieves what should be both sides' goal; that the employees surrender some benefits to ensure the company's viability and get some assurance of job security in return.The alternatives are worse. No one would win if the workers went on strike, regardless of the outcome. Failure to come to an agreement will no doubt result in layoffs and redundancies, at a time when there are too many people already unemployed.It should also be clear that this needs to be settled quickly. The first part of 2012 is likely to be exceptionally difficult economically, and while KFC does not seem to be in imminent danger of collapse, a worsening financial situation could do irreparable harm to the company and its employment prospects if steps are not taken now to avert problems.