What you all had better really be thinking about!
Government-Imposed Union Contracts:
The Real Threat of the Employee Free Choice Act
and What Employers Can Do to Protect Themselves
Michael McMenamin
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EXECUTIVE SUMMARY
Most of the negative publicity about the proposed legislation given the Orwellian title of the “Employee Free Choice Act” (“EFCA”) has involved the elimination of secret ballot elections for union representation. That aspect of legislation is designed to allow unions to privately threaten and coerce individual employees into joining the union simply by signing a union authorization card.
Eliminating secret ballot union representation elections which have been the foundation of American labor law for over seventy years is bad enough.
A more ominous and potentially far more costly, provision of EFCA has not received as much publicity - government-imposed union contracts. This provision has the potential to make union-free companies far less competitive, if not drive them out of business altogether. That’s because once a union succeeds in coercing a majority of a company’s employees into signing union authorization cards, the union has no incentive under EFCA to bargain in good faith with the employer over an initial collective bargaining agreement.
Here’s why. EFCA provides that if a company does not agree to a union’s unrealistic demands within ninety days, a process is started whereby government bureaucrats eventually will impose a union contract on an employer regardless of a company’s ability to pay or how the government-imposed labor contract might impact the ability of a company to compete.
Most of the advice being given to companies on what they can do to prepare for the threat of government-imposed union contracts focuses on educating employees about unions and the dangers involved in signing a union authorization card. This is good advice. Walter & Haverfield labor lawyers help clients do this on a regular basis but, employee education is not the only thing, nor even the most important thing, a company can do to avoid the possibility of a government-imposed union contract.
The most important thing a company can do to maintain its union-free status is to create such a work environment for your employees that they will recognize what a good place your company is to work for and that a union is not needed to make their workplace better. Here’s how smart union-free companies do that:
•They regularly monitor wages and benefits to make sure they are the same, if not better than, their competitors in their industry and in their geographic area.
•They train their supervisors to treat their employees fairly and with respect and not to play favorites. They also evaluate their supervisors and foremen on this basis.
•They encourage their employees to keep the company informed about the wages and benefits being offered by the company’s competitor.
•They encourage their employees to report to HR personnel any unfair or disrespectful treatment of employees by foremen or supervisors.
•They formally institute alternative dispute resolution procedures to assure employees they will not be terminated unfairly.
In essence, these companies wage a “permanent campaign” to remind their employees they don’t need a union because their wages and benefits are competitive with others in the industry; that supervision will always treat them fairly; and ADR is available to ensure that they will never be terminated except for good cause.
WHAT IS THE LAW TODAY ON UNION ELECTIONS AND UNION CONTRACTS?
For over seventy years, the NLRB has guaranteed, with few exceptions, to employers and employees alike the right to a secret ballot election to determine if a union represents a majority of a company’s employees in an appropriate bargaining unit. In order to secure such an election, a union must obtain authorization cards from thirty percent of the eligible employees. Thereafter, a secret ballot election is conducted by the NLRB usually within six weeks of a union filing an election petition with the NLRB.
Thereafter, if the union wins the election, the company and union must bargain in good faith over an initial collective bargaining agreement. An agreement is typically reached nearly seventy percent of the time. This is because a union’s principal economic weapon is a strike by the employees, something unions find it difficult to persuade their members to do unless the company leaves them no choice. As a result, unions have an incentive to be reasonable in their demands.
Neither the NLRB nor any other government agency presently has the power to impose a contract on the company and union against their wishes.
WHAT CHANGES WILL EFCA BRING TO UNION ELECTIONS AND UNION CONTRACTS?
EFCA is specifically designed to do three things...
First, EFCA will take away one of the most basic American rights, the right to vote in a secret ballot election whether they wish to be represented by a Union.
Second, EFCA gives unions an incentive to threaten and coerce employees into signing a union authorization card. Typically, unions will do so in one-on-one confrontations so that it will be the employee’s word against the union organizer’s word as to whether any threats were made. Do Unions really utilize coercive tactics like this? Judge for yourself. Recently, the NLRB required a union which had engaged in tactics like this to post a notice to employees which contained the following language:
WE WILL NOT threaten to kill or inflict bodily harm, make throat slashing motions, make gun pointing motions, challenge or threaten to fight or assault employees, threaten to sexually assault non-striking employees or their family members, threaten to follow non-striking employees to their homes, use racial epithets or obscene gestures at non-striking employees....
Third, EFCA actively encourages unions to negotiate to in bad faith and make unreasonable and unrealistic bargaining demands in contact negotiations. Why? This is because if a company does not agree within ninety days to an initial collective bargaining agreement with the union, the union can petition the government (specifically the Federal Mediation and Conciliation Service) to use one of its arbitrators to impose a union contract on a company. This is a radical and unprecedented change in American labor law. The law today is quite different. As the Supreme Court has noted: “the Government does not attempt to control the results of negotiations... When the employees have chosen their organization, when they have selected their representatives, all the [law requires] is to escort them to the door of their employer and say, ‘Here they are, the legal representatives of your employees.' What happens behind those doors is not inquired into..."
WHAT PRINCIPLES WILL THE FMCS APPLY IN IMPOSING LABOR CONTRACTS ON EMPLOYERS?
No one knows. As presently drafted, EFCA simply directs the Federal Mediation and Conciliation Service to “refer a dispute to an arbitration board established in accordance with such regulations as may be prescribed by the FMCS” (emphasis added).
This effectively gives FMCS a blank check to draft any regulations Big Labor dictates. For example, one possibility, taken from public sector legislation could involve “final offer arbitration” where the arbitrators choose which ever final offer from the employer or the union it considers most reasonable. The fact that EFCA does not include such guidelines is a strong indication that the interests of Big Labor behind EFCA will veto such a process because it would encourage both parties to make their final offers reasonable ones.
What is far more likely is that any federal regulations will give FMCS arbitrators the authority to write the contract pretty much as they see fit so long as the final contract that they create is within the parameters established by the parties’ final offers. Worse, none of the FMCS arbitrators have any experience in resolving private sector union contract disputes because, up until now, they have not been a part of American labor relations. Since many arbitrators tend to compromise between each side’s positions, a union which makes unrealistic rather than reasonable proposals has a better chance of securing a government-imposed union contract more to its liking if the arbitrator reaches a compromise between the two parties’ final offers.
IS THERE ANY PRECEDENT FOR GOVERNMENT-IMPOSED LABOR CONTRACTS IN THE PRIVATE SECTOR?
Not much. Almost all labor relations are governed by the National Labor Relations Act and hence there is little opportunity for the states to regulate private sector labor relations. One exception involves agricultural workers who are not covered by the NLRA. For example, California created in the Agricultural Labor Relations Act in 1975. In 2002, California implemented a process culminating in a government-imposed collective bargaining agreement. In doing so, the California legislature imposed the following standards for an arbitrator to take into account in creating the terms of a collective bargaining agreement:
(1) The financial condition of the employer and its ability to meet the costs of the contract in those instances where the employer makes a plea of inability to meet the union's wage and benefit demands.
(2) Comparison of corresponding wages, benefits, and terms and conditions of employment in collective bargaining agreements covering similar agricultural operations with similar labor requirements.
(3) Comparison of corresponding wages, benefits, and terms and conditions of employment in comparable firms or industries in geographical areas with similar economic conditions, considering the size of the employer, the skills, experience, and training required of the employees, as well as the difficulty and nature of the work.
(4) The average consumer prices for goods and services, commonly known as the Consumer Price Index, and the overall cost of living in the area where the work is performed.
While some of these standards appear reasonable, members of the FMCS are appointed by the President and it is unlikely they would create regulations opposed by Big Labor. Moreover, while the California standards, which were legislatively imposed, are not as reasonable as they might appear. The fact that a company’s financial condition and ability to pay can only be considered if the company claimed an inability to meet the union demands does not permit the company to claim it would make them uncompetitive and cause them to lose market share to companies with lower labor cost. Under labor law today, such a plea of inability means the company must open all its financial records for union inspection. This won’t change under EFCA.
IS EFCA CONSTITUTIONAL?
Probably. There is nothing in the Constitution which arguably guarantees the rights of employee to have a secret ballot election for union representation. That right is only guaranteed by the NLRA which is a law passed by Congress. What Congress can giveth, Congress can taketh away. Passage of EFCA is some months away and it is possible that secret ballot elections will be retained in the final bill with a much shorter time - five to ten days - between the filing of the petition and the holding of the election.
Government-imposed labor contracts provide a more difficult, but not insurmountable, constitutional hurdle. As it presently stands, EFCA may be an unlawful delegation of authority from the legislative to the executive branch in violation of Article I, Section 1 of the Constitution. As recently as 2001, the Supreme Court has held that the Constitution permits no delegation of legislative powers and that Congress must, at a minimum, “lay down by legislative act an intelligible principle to which the person or body authorized to act is directed to conform”. Inasmuch as EFCA does not do this, and gives the FMCS a blank check to write regulations, it is likely unconstitutional. On the other hand, once the FMCS does come up with regulations to govern federal arbitrators assigned to impose union contracts on the parties, all Congress would have to do to eliminate the present unconstitutionality of EFCA would be to amend EFCA and incorporate in the statute the regulations established by FMCS.
WHAT CAN BE DONE TO STOP EFCA?
Not much. The Democrats have controlling majorities in both houses of Congress and the President will sign anything on EFCA Congress gives him. EFCA has already passed the House of Representatives by a wide margin and a straight up or down vote in the U.S. Senate would gather a majority vote there as well. The only hope is that the Democrats will not secure the necessary sixty votes to cut off debate in the Senate in the event of a promised filibuster by Republicans. But, a failure to gather sixty votes to cut off debate does not mean EFCA is dead in this Congress. EFCA is likely to pass in some form and, while secret ballot elections may be preserved, some form of government-imposed labor contracts will most likely be included possibly in the form of “final offer” arbitration discussed earlier where FMCS arbitrators are limited to choosing the most reasonable between the parties respective final offers.
For now, companies should contact U.S. Senators in any state where they have employees and make their opposition to EFCA known. This can and should be done both directly to the Senators and through the U.S. Chamber of Commerce which is the largest business-oriented organization opposing EFCA.
CAN’T ANYTHING ELSE BE DONE?
Yes. All non-union employers should engage in proactive self-help programs to inoculate both them and their employees against the inherent dangers of coerced unionization and government-imposed union contracts. A permanent campaign.
WHAT’S INVOLVED IN CREATING A PERMANENT CAMPAIGN?
Generally speaking, companies should research, study and incorporate the “best practices” of union-free employers, especially those employers in industries where some of their competitors are unionized. Research issues of Fortune Magazine and its annual feature “Best Companies to Work For”. Read the articles and see what successful union-free companies do to retain and reward their employees. What successful union-free employers do may vary from company to company but they typically have a number of things in common.
Competitive Wages and Benefits. Successful union-free employers monitor wages and benefits of their competitors on a regular basis and make adjustments where necessary. They also monitor wages and benefits of other employers in their geographic region who have employee needs comparable to the skill sets possessed by their own employees and make adjustments where competitively possible. They keep their employees regularly advised of how their wages and benefits compare with others.
Fair treatment of Employees. Non-union companies which pay competitive wages and benefits yet end up being organized typically have one thing in common. Bad management. At some level within every non-union company that has been successfully organized you’ll find bad management. It may be at the top, middle management or front-line supervision. Somewhere in any successfully organized company, you will find employees being treated arbitrarily, unfairly or without respect. The best employers maintain a meaningful open door policy at all levels of management which encourages employees to bring forth incidents of unfair or arbitrary treatment of employees. If the unfair treatment comes from established policies, they can be revised. If it comes from front line supervision playing favorites or otherwise treating some employees differently from others who are similarly situated, management can correct this also by making it a part of the supervisors’ ongoing evaluation process.
Termination for Cause. If a company is otherwise paying competitive wages and benefits, the most a union can promise is that it will protect employees from being unfairly disciplined or discharged. A union will point to the fact that unorganized employees are “at will” and may be terminated at any time for any reason that doesn’t violate federal or state labor laws. The best employers don’t treat their employees as “at will” because the best employers don’t terminate employees arbitrarily. It’s not good for business because terminating an employee arbitrarily or unfairly impacts more than just the affected employee. It impacts those employees left behind who wonder if they will be next. Telling employees in an employee handbook that they will not be terminated without cause is good business, especially if it’s backed up by an alternate dispute resolution mechanism for employees who believe they were unfairly terminated.
Alternate Dispute Resolution. Many successful union-free companies go beyond telling their employees that they will be terminated only for cause. This is because termination for cause becomes a condition of employment and employees can arguably sue in court to enforce their rights. That’s not a good thing and, hence, one “best practice” of successful union-free employers is to provide a dispute resolution mechanism for employees who believe they have been unfairly terminated. Some companies utilize “peer review panels” where a panel of other employees listen to both sides and issue a binding determination as to whether the discharge was justified. Other companies provide and pay for mediation or arbitration by a third party. What such ADR mechanisms all have in common is they undercut a union’s claims that unions are necessary to in order to protect an employee from being unfairly discharged.
Union-free education. This can be an important element of a permanent campaign, i.e., regularly reminding employees of the peril of signing an authorization card; the coercive tactics union organizers often utilize; the financial obligations involved in joining the union, the competitive disadvantages faced by unionized companies; and the negative experiences of supervisors and other employees who are working in union plants. But, and this can’t be emphasized too strongly, any union awareness campaign is doomed to failure unless the employer has in place a proactive program containing the elements outlined above to make unions unnecessary.
Walter & Haverfield labor lawyers are available to assist you in analyzing and assessing such a proactive “permanent campaign” in your company. Call your regular W&H contact or any of our labor lawyers listed below.
Susan Keating Anderson
Marc J. Bloch
Christine T. Cossler
Morris L. Hawk
Eric J. Johnson
Michael McMenamin
Nancy A. Noall
Heather B. Vlasuk
Patricia F. Weisberg