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The Case against EFCA
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Richard A. Epstein
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Synopsis |
 Richard A. Epstein is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago, Peter and Kirsten Bedford Senior Fellow at the Hoover Institution, and a visiting professor of law at New York University Law School. This article is excerpted from his forthcoming book The Case Against the Employee Free Choice Act, published by the Hoover Institution. Reprinted with permission. |
April 27, 2009
The Employee Free Choice Act’s (EFCA) liberal defenders have attacked the current structure under the National Labor Relations Act (NLRA) as inhospitable to unions. Thus EFCA contains three provisions, which, if enacted into law, would transform the institution of collective bargaining.
The first proposal would allow either party the option to substitute a card check system for the current electoral system. To be sure, EFCA leaves in place the present NLRA provisions that allow unions to proceed by filing a representation petition supported by 30 percent or more of employees in an appropriate bargaining unit and then holding elections. Nonetheless, it seems clear that in virtually all cases the card check will displace the secret ballot. As a matter of current practice, virtually all major unions choose to file representation petitions only after they have accumulated signed authorization cards from well over 50 percent of unit members. They need that cushion because they know from experience that worker defections will take place during the course of any election campaign in which management can present its own case of the tradeoffs, costs and disadvantages of representation. It follows therefore that no rational union would risk the election if they have in their possession authorization cards from just over 50 percent of the members of the unit they seek to represent. As a practical matter however, EFCA would wholly displace union elections with the new “card check” procedure. No union is likely to file for an election with over 30 but under 50 percent of signed authorization cards in the hopes of improving its position during a campaign. The conversion to the card check system is likely to prove well-nigh complete.
Compulsory Interest Arbitration
EFCA’s second major provision would introduce a system of compulsory interest arbitration that leads to a first “contract” of two years duration. The term contract is put in quotation marks because an actual agreement that obtains the assent of both parties is not required during the initial period in question. This mandatory first contract, moreover, is not limited to wage matters but must cover all the issues that are typically hammered out by agreement under the current system.
Increased Penalties for Employer Unfair Labor Practices
The third major change of EFCA, which ties in closely with the adoption of the card check system, substantially increases the penalties imposed on employers with respect to violations of section 8(a)(3) of the NLRA, which prohibits discrimination against employees for their union activities. This section also requires the NLRB to give priority to charges of unfair labor practices that arise in the course of an organizing campaign, in order to backstop the advantage that unions expect to receive from the addition of the card check alternative.
EFCA’s Economic Consequences
The legislative adoption of these provisions, taken together, would radically alter the balance of power between management and labor. Its impact would extend to virtually all businesses, except from some small business that fall below the “interstate commerce” thresholds that the NLRB applies in exercise of its own jurisdiction. But even those exemptions have little relevance to any new firm that hopes to grow over time. The bottom line, therefore, is that the passage of EFCA will create huge dislocations in established ways of doing business that will in turn lead to large losses in productivity. Small businesses, which as a group are the largest source of new jobs in the country, will find themselves besieged with insistent demands for unionization, for which they are ill-equipped to cope. These businesses often operate on small budgets, without the assistance of full-time lawyers. Under EFCA, their first exposure to unions could come at the conclusion of a secret campaign, which requires them to both hire and acquire expertise on contentious matters for which they are ill-equipped to deal, at a cost which they can ill-afford to bear. These calls for unionization will divert management from the essential tasks of product development, marketing and sales, on which their business models necessarily depend. The likely consequence of EFCA will be to retard the formation of small businesses, as fledgling entrepreneurs will reassess their prospects of success to take into account the danger of derailment at an early stage in the process. In the long term EFCA will reduce the rate of firm formation, and thus deprive the economy of a central driver of new job creation and technology growth.
Large firms face a different set of difficulties. Like their smaller compatriots, they will face the heavy costs of meeting simultaneous multiple threats of unionization. Since they operate through far-flung, geographically dispersed divisions, they face the risk of inconsistent arbitral decrees that will impede the development of firm wide practices. Given the uncertain scope of these decrees, it is quite possible that restrictions designed to preserve job security within a unit will limit the ability of the firm to reorganize non-unit employees who are closely connected with them. In addition, the prospect of multiple union arbitrations covering different locations could result in inconsistent first contracts under a system that offers no clear avenues for appeal or clarification. Faced with these constraints, a firm’s ability to shift and meet the rising competition from new firms could easily result in the loss of jobs from the failure of certain business lines, or the conscious redeployment by management of assets and new investment to locations that have lower costs and greater flexibility—traits most often associated with non-union operations.
The decision to send more activities offshore is also a distinct likelihood. Any efforts to stem that flow could easily lead to a collapse of the entire firm in the face of effective foreign competition. Non-unionized firms are able to make these decisions in anticipation of a union threat. Firms that are currently bound by collective bargaining agreements, of course, remain subject to the core obligations under the NLRA, which include the duty to bargain in good faith, without any anti-union animus. Unions may try to challenge some of these decisions before the NLRB, but the powerful and economic rationales for taking these measures will reduce the chances of union success. Yet if EFCA were in place, the level of labor tension and strife is likely to increase the frequency and intensity of public protests, political campaigns, and work slowdowns or stoppages in response to decisions to relocate or outsource. The key union leaders who link these key business decisions to “the senseless slaughter of the good American job,” which are tantamount to “wanton acts of physical violence,” will not to take kindly to wholly lawful decisions to set up shop elsewhere.
The same can be said of officials like Andy Stern, who is intent on the restoration of the American dream and is not likely to pull in his horns if EFCA does not meet his expectations. The next round direct action and new legislative fixes offer them the path of least resistance. The economic dislocation under EFCA will lead to further strife, not industrial peace. Of course, the exact pattern of union threats, maneuvers, and responses is difficult to predict owing in part to the huge gaps in EFCA. But regardless of how these play out, it is certain that these devastating effects would arise chiefly from the synergistic effects of the first two provisions mentioned above. Taken together, they allow a union that acquires a sufficient number of signatures through a largely unregulated card authorization process to force management to accept a first “contract”—in reality an arbitral decree—that lasts for a two-year period. Step one under EFCA would routinely displace the long-established system of union elections by routinely allowing any union that presents a majority (e.g., 50 percent plus one) of the cards signed by workers in an appropriate bargaining unit to become the bargaining agent for all the workers, including those who had no knowledge of the campaign from either coworkers or the employer. For some workers at least, the misnamed EFCA would leave them no choice at all if they are not approached during the campaign.
EFCA’s second provision introduces a system of “interest arbitration”—in reality compulsory arbitration—under which the failure of the two sides to reach an agreement within as little as 130 days after union recognition—a short time for any first-time collective bargaining agreement that starts with a blank sheet of paper—results in the appointment of a panel of arbitrators to impose by decree the first two-year contract. Under the proposed timetable, negotiations are supposed to begin within ten days after union recognition. On the other hand, the union knows in advance the targets of its card check drives and can have its negotiation team in place before the results of the card check are computed. The element of surprise thus gives them a huge strategic advantage over small business firms, which may not be even able to find a lawyer to represent them during this short period. Large firms suffer from the same tactical disadvantage. Yet even if they take the costly step of having some negotiation teams in place, they could still be besieged by multiple claims at the same time, which could leave them short on vital resources. These difficulties are aggravated by the remainder of the statutory cycle. In the second stage the parties would have 90 days—a short time for addressing the multiplicity of issues in play—to reach a voluntary settlement. If an agreement is not reached by this time, then a mediator from the Federal Mediation and Conciliation Service (FMCS) would work with the parties for 30 days before the matter goes before a panel of arbitrators. Once again, it is quite possible that just scheduling meetings for the relevant negotiators—all of whom are likely to have multiple commitments—could be difficult within the statutory period. The entire time for negotiation could easily be consumed by collateral matters that drive the case quickly to arbitration, at which point it is anyone’s guess what will happen. EFCA provides no limitation on how long the arbitration panel may take to make its decision and does not indicate what happens to the various open issues for the bargaining unit that were left unresolved during the interim period. Its basic procedures and powers are all to be determined by regulation under the statute, none of which will be drafted when EFCA takes effect. Any effort to participate in the process whereby these regulations are drafted imposes additional costs, which are likely to prove especially large for small businesses that have no direct experience with the administrative process.
Ron Moore responds to Richard A. Epstein.
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