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Recently in Labor Law Category

John Endean

What if America's labor law were more like Canada's? Were our Congress to enact into law a more union-friendly legal code of the sort long familiar to our northern neighbors, what sorts of consequences would we expect? At present, 29.4 percent of workers in Canada are represented by unions, as contrasted with 12.4 percent of workers in the U.S. Would adopting a more "Canadian" legal regime close much of that gap, or only a little of it? And what would be the consequences for employee well-being, for managerial efficiency, and for the health of the U.S. economy generally?

These questions are not new ones among those who follow labor policy, but they have taken on fresh interest given the enormous stir in Washington over the proposed Employee Free Choice Act (EFCA). The top legislative priority of organized labor, and potentially the most significant piece of labor legislation since the Wagner Act of 1935, EFCA consists largely if not entirely of policy initiatives that follow a "Canadian" path:

* "Card check". Today, in most cases, installing a union to represent workers at a place of business requires a majority vote of the workers by secret ballot. EFCA's best-known and most controversial provision would require recognition of a union upon its presentation of signatures on union cards from a majority of the workers in a proposed bargaining unit. (1) The card-check system has a long track record in Canada.

* Imposed arbitration of first contracts. Once organization is accomplished, EFCA would compel management to reach a first contract with the new union, by providing for mandatory arbitration and imposition of a contract by a government-appointed arbitrator should negotiations not result in a contract by a certain point. Some Canadian employers both public and private are subject to imposed arbitration at negotiation impasse; in the United States up to now, such requirements have ordinarily been imposed only on some public employers.

* "Quickie" elections. As the unpopularity of eliminating the secret ballot has become clear, organized labor and its supporters have begun to cast around for "compromise" EFCA provisions aimed at bolstering unions' organizing efforts in other ways. One such idea is to speed up greatly, perhaps to 10, 12 or 15 days, the holding of elections following a union petition, which currently in the U.S. are held a median of 39 days later. In Canada, by contrast, there is usually only a five-day window before elections. Shorter periods before a vote are generally considered unfavorable for employers because it gives them little time in which to assemble a case against unionization and make it known to workers; the union, by contrast, will ordinarily have had weeks or months to make its case to workers in private persuasion before it surfaces with its election demand.

Quickie elections, in contrast to card check, are often thought to have "moderate appeal". Thus, William B. Gould IV, an influential legal scholar, former counsel to the United Auto Workers, and former chairman of the National Labor Relations Board (NLRB), supports EFCA in general principle but has criticized card-check and recently proposed quickie elections as part of a "better approach" that might command bipartisan support:

Secret ballots to resolve union representation rights are the way to go, and Obama should meet the Republicans halfway by saying so - and then add this all-important coda: Elections should continue only if the law ensures that voting is conducted expeditiously - for instance, within one or two weeks of the filing for a union's petition seeking recognition. This is the case in Canada, whereas in the United States, the resolution of union drives currently takes months and sometimes years. Quick elections are the key to meaningful reform because delay is the principal way in which labor law stacks the deck against employees. It allows employers to engage in one-sided anti-union campaigns of intimidation and coercion, with little possibility for remedy. (2)

Of all countries that might provide examples for labor law reform, Canada is the most similar to the United States culturally and politically. It is also the most familiar to American managers (many of its firms, especially in the industrial heartland of Ontario, are owned by or affiliated with American corporations, the well-known cross-national integration of Big Three auto manufacturing being only one example.) How relevant is the Canadian labor experience, and what can it teach us about the achievability of EFCA's constituent parts and the costs and benefits they might bring? (3)

Not one but multiple systems. In contrast to our system of labor law in the U.S., in which the federal government occupies most of the field and sharply limits the 50 states' scope for divergence, Canada genuinely shares the regulation of labor relations and union certification between Ottawa and the provinces, with the provinces given the lead. (4) About ten percent of the total Canadian workforce is covered by federal labor law. This includes federal government workers as well as private workers in certain industries deemed national, which include banking, shipping, telecommunications, and inter-provincial trucking.

Canada's federal labor code is a card check system with first-contract mediation and binding arbitration. There are no secret ballot elections. Instead, if more than 50 percent of the workers in a proposed bargaining unit sign cards, the union is certified by the Labour Relations Board. In short, this system does prescribe something a lot like the EFCA's proposed regime for a tenth of the Canadian workforce.

What about the ninety percent of workers not covered by Canada's federal labor law? They are subject to the labor laws of the provinces in which they reside. Up until 1976, all of the provinces used card check. Beginning in that year, however, changing political and economic circumstances have led some provinces to rethink the methods of union selection.

Today, six of the ten provinces - Alberta, British Columbia, Newfoundland and Labrador, Nova Scotia, Ontario, and Saskatchewan - require a secret ballot. The four others - Manitoba, New Brunswick, Prince Edward Island, and Quebec - use a card check system. Six provinces also mandate in some form first contract mediation and binding arbitration: British Columbia, Manitoba, Newfoundland, Ontario, Quebec, and Saskatchewan. Overall, of workers in industries covered by provincial labor law, about 68 percent of the Canadian work force lives in provinces with a mandatory secret ballot, and the other 32 percent in provinces with card check.

The numbers fluctuate because card check can be a political football in provincial politics. New Brunswick, for example, first adopted a secret ballot and then reverted to card check as contending political parties succeeded each other in office. Similarly, British Columbia adopted secret ballot elections in 1984, returned to card check in 1993, then readopted the secret ballot in 2001.

There is thus no single "Canadian" model for union organization. If there is a "median" or "most typical" law among the diverging Canadian examples, it is probably the "expedited secret ballot" system that prevails in six provinces including the most populous, Ontario.

Ontario's expedited secret ballot. Ontario switched from card check to a five-day secret ballot certification process in 1995. This change was part of a larger program of tax, budget, and regulatory reforms called the Common Sense Revolution by its architect, Mike Harris, Ontario's conservative Premier.

Upon a showing that 40 percent of the workers in a proposed bargaining unit have signed cards expressing an interest in joining a union, a secret ballot vote must occur within five business days. That's not a lot of time, especially since unions have the initiative in triggering the process and can choose the time and circumstances they consider most favorable. Businesses may not even know an organizing effort is in progress until the union, having secretly obtained the number of signatures necessary to force an election, files its application for certification.

Once a union submits an application, companies must submit a formal response, including a list of relevant employees, to the Labour Relations Board and to the union within two business days. This mandated response can itself be a costly legal scramble and paper chase, and makes it even more likely that managers will be distracted during the few days that will be their only formal chance to make their case on the organization vote.

In that latter task, managers are far more limited by what they can say about the impact of unionization than are their American counterparts, a fact that often comes as a surprise to American companies with Canadian subsidiaries. In one notorious case, for example, from 1996, disgruntled employees of a Wal-Mart operation in Windsor, Ontario, approached the United Steelworkers of America seeking representation. Enough cards were signed to force an election. In the election, however, 79 percent of the employees voted against the union. The Employee Labour Relations Board proceeded to uphold union objections to Wal-Mart's American-style interference with the unionization process. Bizarrely, at least from an American perspective, the Board based its finding in part on Wal-Mart's silence when employees asked if the store would be closed if the unionization drive succeeded. The Board found the company's lack of comment to have had a "chilling effect" upon the union campaign. (5) By way of remedy, it did not (as one might have expected) merely throw out the election results that had gone against the union: it ordered the union installed to represent the workers, majority vote or no.

From a management standpoint, the Ontario system does have some mitigating features. For example, if a union loses an organizing vote, it must wait a year before trying to organize the same company again. The one-year ban applies not only to the losing union but to all other unions as well.

More important, Ontario no longer imposes mandatory arbitration automatically if a company and union cannot agree on a first contract. The 1995 legislation that supplanted card check with the five-day vote also modified the then-existing mandatory arbitration provision by putting in place a four-part test for evaluating first contract negotiations. This four-part test comes close to a bad-faith bargaining hurdle. In effect, if a company can show that it is bargaining with the union in good faith, it can avoid mandatory arbitration.

Accustomed as they are to campaign periods of about a month before an organizing election, most American managers would likely regard the Ontario secret ballot system, with its abbreviated, five-day campaign period, as a thumb on the scale in favor of union organization. According to a labor lawyer in Canada interviewed for this note, Ontario managers are not in revolt against the five-day system because "you get used to it." The possibility of quick organization becomes just one more "crisis management" issue, with all the transaction costs that crises inevitably entail.

Union "density" and the legal background. Union density - the percentage of total workers who belong to unions - is greater in Canada than in the United States. According to Statistics Canada, about 29.4 percent of all Canadian workers belong to unions. In the United States, the equivalent figure is about 12.4 percent.

In both countries there is a sharp disparity between union density in the public and private sectors. In Canada, 71 percent of public sector workers belong to unions, while only about 16 percent of workers in the private sector are organized. A similar ratio prevails, but at lower rates, in the United States, where union density is about 39 percent in the public sector and 7.6 percent in the private. The comparatively robust presence of unions in the public sectors of both countries reflects the disinclination of government managers to contest unionization, in part because the costs of organization - higher wages, expensive benefits, and restrictive work rules - are indirectly spread among the public at large. (6) It is also worth noting that the public sector employs a significantly higher percentage of the workforce in Canada than it does in the United States.

No one factor explains the overall density "gap" between Canada and the United States. Unquestionably card check has facilitated unionization north of the border, which tends to confirm the feeling of labor leaders in the United States that it would prove helpful to them here. (7) One often-quoted study, by Professor Susan J.T. Johnson of Wilfrid Laurier University, estimated that the greater use of card check in Canada accounts for somewhere between 17 to 24 percent of the difference in union density between Canada and the United States. (8)

Available evidence suggests that the adoption in some provinces of a secret ballot, even when accompanied by a relatively brief campaign period, has made organization more difficult. Perhaps the most striking example is in New Brunswick where the success rate of union organizing fell 19 percent when the secret ballot was put into place and rose by about the same amount when the card check regime was later restored. (9) A study of organization in Ontario found that "the overall proportion of successful certification applications [was] substantially lower under the mandatory vote than it had been under the card-check system." (10)

Note that there is surprisingly little backing for the sometimes-heard assumption that Canada (in supposed contrast with the U.S.) is a country where unionism is simply uncontroversial and popular with the broad populace. With a favorable legal framework in place for many years, a union movement that represents only 16 percent of private sector workers cannot exactly claim a decisive mandate from the Canadian working public. The Canadian experience following many provinces' introduction of secret ballot elections also suggests that when workers are allowed to vote on whether to join a union - when, in other words, they regard joining a union as a matter of individual choice in which competing considerations are brought to their attention - they are measurably less inclined to join. This is a difficult point for unions to accept.

The flagging spirit of Canadian unionism. Unionism in Canada's public sector appears for the moment to be secure. But only the growth in public sector unionization has kept Canada's overall density rate near 30 percent; Canadian private sector unions are struggling, by contrast, with what growth there has been in union membership outstripped by the greater proliferation of nonunion jobs. Pradeep Kumar of Queen's University, a sympathetic observer of the Canadian labor movement, has argued that in general "the data appear to portray a picture of a stagnant labour movement with declining density in a wide range of areas, particularly in private service industries with expanding employment, and with a false sense of security due to continuing union strength in the public sector." (11)

Even the most visible instance of new private unionization in recent years is indicative of this weakness. The giant auto-parts supplier Magna International, which had long resisted unionization, reached a 2007 agreement with the Canadian Auto Workers (CAW): in order to achieve this long-sought goal, however, the CAW gave up the right to strike, amended its grievance procedures, and permitted the company to screen candidates for union representative - so-called "employee advocates" -- at each plant before they are ratified by employee vote.

Some in Canada's labor movement are preoccupied with the hope of turning around this trend by prevailing on provincial governments to restore card check. (12) New Brunswick aside, they have had scant success. When the Liberals returned to power in Ontario in 2003, there were rumblings about restoring card check across the board. That did not happen, and instead the old system was restored in 2005 only for workers in construction workers (a move, oddly enough, condemned as "sexist" and an "atrocity" by one union because the construction industry has "a predominantly male workforce"). (13) Although Canadians are famously prickly about their social and cultural independence from the United States, it is probably true that the best boost for a return to card check in Ontario and other provinces would be the adoption of card check by the United States, Canada's largest trading partner.

In this context, calls for a return to card check may be a distraction from the more important matter of making union membership relevant for a new generation of Canadians who may not see belonging to a union as self-evidently desirable. Perhaps there is a lesson here for American labor unions as well.

FOOTNOTES

(1) In the first half of 2008, the union win rate in NLRB private sector elections was 66.8 percent. This win rate has been tracking upward, with one exception, for the last five years. In 2003 the union win rate was 58.3 percent; in 2004, 58.6 percent; in 2005, 61.3 percent; in 2006, 61.4 percent; and in 2007, 60.5 percent. See "Union Win Rate in NLRB Elections Increased Substantially in First Half 2008," BNA Daily Labor Report, 217 DLR, January 28, 2009, pp. C-1 - C-2.

(2) William B. Gould, IV, "How Obama Could Fix Labor Law," Slate, August 28, 2008.

(3) Recently three American companies sympathetic to labor law reform - Costco, Starbucks, and Whole Foods - formed an organization called the "Committee for a Level Playing Field for Union Elections." The Committee has as its centerpiece the maintenance of secret ballot elections with a shortened campaign period, along the lines of what Gould identifies as the Canadian model.

(4) Before 1925, collective bargaining legislation was the responsibility of Canada's federal government. In 1925, the United Kingdom Privy Council, in Toronto Electric Commissioners v. Snider established priority of provincial rather than federal jurisdiction over most labor and employment issues. Subsequently, the Constitution Act of 1867 delineated the separation of powers between the federal and provincial governments.

(5) See Douglas Gilbert and Brian Burkett, "Canada's Labor and Employment Laws," June 2001. Gilbert and Burkett are Canadian management-side labor lawyers and their piece can be found at http://www.shrm.org/nahrma/canada.asp

(6) In addition, government employment is by nature fairly static and captive in the sense that it cannot be "offshored." Unlike private sector workers, government employees are not buffeted by the pressures of international competition, mergers and acquisitions, technological change, or bankruptcy. Organizing government workers and bringing new members on board is thus fairly routinized and predictable. It is, in other words, easier.

(7) In addition, unlike the United States, Canada permits mandatory union membership in collective agreements as a condition of employment. And in contrast to so-called "right-to-work" states in the U.S., Canada also permits mandatory dues payments, again as a condition of employment. Jason Clements, Niels Veldhuis, and Amela Karabegovic, "Explaining Canada's High Unionization Rates, Fraser Alert, August 2005. This piece can be found at: http://www.fraserinstitute.org/researchandpublications/publications/3086.aspx

(8) Susan Johnson, "The Impact of Mandatory Votes on the Canada-U.S. Union Density Gap: A Note," 43 Indus.Rel. 356 (2004), quoted in Anne Layne-Farrar, "An Empirical Assessment of the Employee Free Choice Act: The Economic Implications," The Alliance to Save Main Street Jobs, March 3, 2009, p. 16.

(9) Chris Riddell, "Union Certification Success Under Voting Versus Card-Check Procedures: Evidence from British Columbia, 1978 - 1998," Canadian Journal of Economics, vol. 34, no. 2, quoted in Jason Clements, Niels Veldhuis, and Amela Karabegovic, "Explaining Canada's High Unionization Rates," Fraser Alert, op. cit.

(10) Sara Slinn, "The Effect of Compulsory Certification Votes on Certification Applications in Ontario: An Empirical Analysis," Canadian Labour and Employment Law Journal, vol. 10, no. 3.

(11) Pradeep Kumar, "Whither Unionism: Current State and Future Prospects of Union Renewal in Canada," June 2008, available online at: www.opseu.org/committees/equity/PradeepKumarWhitherUnionism.pdf. See also Pradeep Kumar, "is the Movement at a Standstill?", Our Times, vol. 27, issue 5, October-November, 2008.

(12) See, e.g., Bruce Allen, "On and After the Magna Vote," New Socialist, www.newsocialist.org/index.php?id=1485. See also, Mine Mill598/CAW Organizing Report, April 27, 2005, www.minemill598.com/community-based-organizing/organizing-report.html

(13) The "sexist" and "atrocity" language can be found in a draft advocacy letter to members of the Canadian Parliament that is included in the "Labour Law Reform - Lobby Kit" created in 2005 by the United Steelworkers District 6. Available at: www.usw.ca/program/adminlinks/docs//LLR_Kit.pdf.



* * *

John Endean is the president of the American Business Conference, a Washington, D.C.-based coalition of leaders of midsize growth companies. This paper, original to Point of Law, was commissioned by the Manhattan Institute as the first in a planned series of Institute papers on labor policy. It was published November 9, 2009.

* * *



By Diana Furchtgott-Roth

This piece originally appeared at Real Clear Politics, 3-12-09. Diana Furchtgott-Roth is a senior fellow at the Manhattan Institute.

Stock markets are near their lowest levels in years, the federal budget deficit has shot to an all-time high, consumer confidence is at a record low, the unemployment rate has been rising and hit 8.1% in February, and over four million jobs have disappeared in the past year. Yet on March 10 congressional Democrats introduced in the House and Senate the misnamed Employee Free Choice Act.

Contrary to its name, the bill's main thrust is not to widen employees' choices, but to narrow them. It eliminates the secret ballot for union elections. Under the law now, if a sufficient number of workers petition the National Labor Relations Board to join a union, the Board conducts an election--by secret ballot--to see if a majority wants a unionized shop.

The Employee Free Choice Act would allow workplaces to be unionized without secret ballots. If a majority of the employees sign a card that says an employee wants to join a union, a process known as "card check," the workplace can be unionized. This process strips workers of the protection of a secret ballot and exposes them to coercion by union organizers and leaders.

With card check, workers can check in but they can't check out. For workers to leave the union, a secret ballot would still be required. This is the height of hypocrisy--that the so-called benefits of "employee free choice" only apply to join a union but not to leave it.

Equally harmful is the bill's little-publicized mandatory arbitration provision, which short-circuits collective bargaining. If the union and the employer fail to reach an agreement on pay and benefits after 90 days of talks, the bill would require them to submit to binding arbitration, with a mandated contract that would hold for the next two years.

That requirement would be unprecedented in American labor law. It would revoke the basic principle of free collective bargaining--that employers and unions may disagree unless they voluntarily accept arbitration.

The union-sponsored bill is intended to help unions reverse a long-term decline in membership. It would harm the economy by increasing unemployment, potentially making the economies of Texas and Oklahoma look more like those of Ohio and Michigan. And, despite his talk of fiscal responsibility, President Obama has promised to sign the bill if it reaches his desk.

Chairman George Miller of the House Education and Labor Committee offered this defense of the bill: "If we want a fair and sustainable recovery from this economic crisis, we must give workers the ability to stand up for themselves and once again share in the prosperity they help to create."

The problem is that the Employee Free Choice Act, if passed, would do just the opposite. It would slow economic recovery by increasing unionization, artificially raising wages, and therefore raising unemployment. It would turn states with below-average unemployment rates, primarily in the South, into states with high unemployment rates.

What Mr. Miller is asking for American workers is less than what he once sought for Mexican workers. In a letter dated August 29, 2001, coauthored with 15 other congressmen, Mr. Miller wrote to the arbitration council in Puebla, Mexico, "We feel that the secret ballot is absolutely necessary to ensure that workers are not intimidated into voting for a union they might not otherwise choose."

Why would Mr. Miller strip American workers of that protection? With union membership declining and now at a weak 7.6% of private sector workers, building up dues-paying membership is the unions' paramount goal, despite the harm it would do to the economy.

In the 2008 election cycle, unions gave millions to Democratic candidates for Congress. Now they want to collect on their investment.

But the deep slump in the economy has eroded support for the Employee Free Choice Act among members of Congress. The bill will pass the House, even though its number of cosponsors has slipped from 230 to 223.

The Senate, however, is a different story. Whereas the bill had 46 cosponsors in the Senate in 2007, it now has 40. If the bill does pass, President Obama has said that he will sign it.

Organized labor made repeal of the secret-ballot requirement a high priority because the intrinsic rationale for unions has been weakening.

Fewer workers see the need to belong to unions because basic health and safety conditions have become standard. Many unions price their workers out of jobs, sending jobs overseas or to more efficient nonunion firms, while taking dues from members to spend on political campaigns and high salaries for union officials. Workers can see that unionized domestic auto companies, notably GM and Chrysler, are in worse shape than foreign companies with nonunion American plants, such as Toyota, Nissan, and Honda.

Nonunion firms have more flexibility to adapt to changing conditions than do unionized firms. States with laws protecting workers from being compelled to join unions saw increases in nonfarm employment of 47% over the past 20 years, double the 21% increase in states with no such worker protection.

With jobs at risk now and personal assets shrinking, people are scared. To enact a bill that is likely to make economic conditions worse would be both foolish and irresponsible.

By Michael Barone

This piece is copyright Creator's Syndicate and originally appeared 3-21-09.

The Obama administration's budget is full of proposals that threaten to weaken our staggering economy. Higher taxes on high earners and reduced deductions for their charitable contributions and mortgage interests. A cap-and-trade system that will impose higher costs on everyone who uses electricity. A national health insurance program that will take $600 billion or so out of the private-sector economy.

But the most grievous threat to future prosperity may be off-budget -- the inaptly named Employee Free Choice Act. Also known as card check, the legislation would effectively abolish secret ballots in unionization elections. It provides that once a majority of employees had filled out sign-up cards circulated by union organizers, the employer would have to recognize and bargain with the union. And if the two sides didn't reach agreement in a short term, federal arbitrators would impose one. Wages, fringe benefits and work rules would all be imposed by the federal government.

It's not difficult to see why union leaders want this. Union membership has fallen from more than 30 percent of the private-sector workforce in the 1950s to about 8 percent today. Union leaders would like to see that go up. So would most Democratic politicians, since some portion of union dues -- unions try to conceal how much -- goes directly or indirectly to support Democratic candidates. The unions and the Democrats want to put up a tollgate on as much of the private sector as they can, to extract money from consumers of goods and services.

They have already set up such tollgates on much of the public sector. In the 1950s, very few public-sector workers were union members. Today, nearly half of all union members are public-sector employees. In many states and central cities -- think California and New York City -- public-sector unions channel vast flows of money, all of it originating from taxpayers, to themselves and to Democratic politicians. The unions use that money to promote some public policies that are not obviously in the interests of public-sector employees -- restrictive trade regulations, for example, which appeal to nostalgic union leaders who would like to see millions of unionized autoworkers and steelworkers once again.

In the previous Congress, the unions got the Democratic House to pass the card check proposal and got every Democratic senator not only to vote for it but to co-sponsor it, as well. But the votes of all Democrats plus that of Pennsylvania Republican Arlen Specter were not enough then to overcome a Senate filibuster. This year, there is little doubt that Speaker Nancy Pelosi could again jam card check through the House. But moderate Democrats from districts where unions are unpopular have gotten her to spare them a vote until and unless the measure gets through the Senate.

There, its prospects are not so good, now that there is no longer a Republican president to veto it. Card check supporters have a list of 15 Democratic senators who have expressed some manner of unease about the issue. Does Arkansas Sen. Blanche Lincoln, up for re-election in 2010, really want to pass a law strongly opposed by her state's biggest business, Wal-Mart, long a target of union organizers? Do Democratic senators from right-to-work states where employees can't be required to join unions want to go along?

As for Specter, union leaders have publicly said they'll support him if he backs card check. His public response has been to hail the importance of the secret ballot and the undesirability of mandatory arbitration.

Politicians can read numbers. Pollster Scott Rasmussen reported last week that 61 percent of Americans think it's fair to require a secret ballot vote if workers want a union. Only 18 percent disagree. Congressional Democrats used to believe that themselves -- in the course of a trade debate in 2001, they urged that Mexico hold secret ballot unionization elections.

Rasmussen also reported an interesting difference between current union members and non-members. Union members by a 47 percent to 18 percent margin thought most workers want to join a labor union. But non-members believe by a 56 percent to 14 percent margin that most workers don't.

Are non-union members deluded? Why don't they want the supposedly higher wages and job protections unions purport to give them? Maybe it's because the adversarial unionism promoted by the Wagner Act of 1935 is out of date. It made some sense when employers used time-and-motion study to speed up assembly lines and squeeze the last quantum of energy out of workers and could lay off workers at will.

But today's employees have unemployment compensation and are protected by various anti-discrimination laws. There is a whole raft of employment law that didn't exist in 1935, and corporate human resources departments are disciplined by that law.

As the Detroit automakers' troubles show, the adversarial work rules insisted on by the United Auto Workers -- a relatively enlightened union in this area -- made them unable to compete in quality or cost with foreign automakers who employ cooperative management techniques and treat their workers as intelligent partners rather than as dumb animals, the way the time-and-motion study managers did in the 1930s.

Card check would give coercive union organizers the chance to impose on large swaths of the private-sector economy the burdens the UAW imposed on the Detroit automakers. It would set up tollgates to channel the money of consumers as well as taxpayers to the Democratic Party. You can see how that would be good for union leaders and Democrats. But good for America?

By Richard A. Epstein

This piece was originally published by the New York Post, 10-21-08.

THE financial crisis has unfortunately deflected attention from our next major meltdown: ordinary labor markets. The early days of an Obama administration will likely see passage of the so-called Employer Free Choice Act—which will put a union noose around the neck of every US business, large and small.

Union membership has dropped relentlessly from about 35 percent of the PRIVATE work force in 1954 to about 8 percent today. The main factor is the massive attrition in failed unionized industries such as steel, automobiles and rubber. A chorus of labor advocates falsely attributes this collapse to management's alleged unfair labor practices of management in union elections, about half of which labor wins anyway.

The true explanation lies in a simple fact: Unions are a bad deal for most workers. They get some added bargaining leverage, but pay heavy dues, give up prospects for advancement in the firm and face higher odds of layoffs by hamstrung employers who can't compete in ever-more competitive global markets.

The false diagnosis leads to the bill's two-part "cure" to the nonexistent problem:

* It eliminates the need for a union to win an actual election to become the workers' representative. Instead, gaining a simple majority of the targeted work force—in the form of signatures on cards—would make the union the official bargaining agent for all workers, including those who had no knowledge of the union's activities.

* Worse still, the act lets a government-created arbitration panel impose the first two-year contract over the employer's objections if the two sides don't reach agreement within 130 days after union certification.

Barack Obama is a strong supporter of this effort to turn all US workers into civil-service employees. But he never admits how the law would wreck the small businesses he has sworn to promote.

EFCA allows aggressive unions like the Service Employees International Union to pick their targets and ambush them. E.g.: Imagine a new firm preoccupied with product development, credit arrangements, inventory control and marketing—suddenly approached with this chilling message: "Our signed cards let us represent for two years all your employees, including future hires."

The hard-pressed employer has to hire immediately professional legal counsel to steer it through a legal thicket that could end in work rules and layoff restrictions that make liquidation or bankruptcy the firm's only viable alternatives.

Why bother to go into business at all—if a few card checks, even when obtained by intimidation or misrepresentation, can make a union your involuntary partner at the most vulnerable time of your business?

The unions pooh-pooh these objections by claiming that card checks and compulsory arbitration work for public unions. Not so. The only sense in which these arrangements "work" is to substitute surrender for strikes.

In fact, mandatory arbitration dooms many public employers to offering the same wretched or overpaid service in the future that they have offered in the past. Innovation is out of the question, because a dominant union can veto any intelligent structural or wage reform.

And private businesses don't operate the same kinds of protected niches as public unions—they face real competition. The employer groups that I've represented know full well any private firm that succumbs to unionization won't be strong enough to survive adversity or nimble enough to advance. Yet EFCA would enable labor unions to muscle their way into an involuntary partnership with the firm's owners.

So a future President Obama will face a hard choice: Show abject fealty to the labor unions, which have done so much to promote his candidacy. Or avoid decimating the small businesses he has promised to help.

With the economy wobbly, we don't need a massive government intervention to disrupt the balance between management and labor.

Richard A. Epstein is a professor of law at the University of Chicago, a visiting professor at NYU Law School and a Manhattan Institute adjunct fellow.

 

 


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Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.