How Obama Could Fix Labor Law

how obama could fix labor law

The LondonSchool of Economics and Political Science (LSE):

EMPLOYMENT RELATIONS AND ORGANISATIONAL BEHAVIOR GROUP PUBLIC LECTURE

May 26, 2009

The LondonSchool of Economics

London, United Kingdom

6:30 p.m.

New TheatreEastBuilding

William B. Gould IV

Charles A. Beardsley Professor of Law, Emeritus at Stanford Law School; Chairman of the National Labor Relations Board in the Clinton Administration (1994-1998); member of the National Academy of Arbitrators since 1970; Independent Monitor for Freedom of Association Complaints, First Group America, 2008-.

Almost a half century ago, as a young lawyer with service to the United Auto Workers in Detroit already under my belt, I winged my way across the Atlantic here to the London School of Economics to get a sense of how other systems resolved labor-management problems and to reflect upon my own American experience in this context. I can recall my tutor, Professor Otto Kahn-Freund, saying to me: “You Americans have too much law,” at a time when Britain was still under the spell of collective laissez-faire, as Professor Kahn-Freund called it. All of this was well before the ‘80s and ‘90s when Maggie Thatcher and Tony Blair plunged this country into the legal regulation, of labor management relations far more extensive than anything ever known in the United States!

Professor Kahn-Freund’s admonition notwithstanding, I, like most Americans in that period, thought that the system in which I had studied and practiced in on my side of the Atlantic was a pretty good one. Indeed, I tended to think of the National Labor Relations Act, born out of the union upheavals of the Great Depression and its protection of the right to organize and bargain collectively through both a system of representation and an unfair labor practice machinery as a kind of model – a Bill of Rights, if you will, not fundamentally impaired by the Taft-Hartley amendments which gave employees the right to refrain from such activity, given the fact that the Preamble to the Act retained as its central tenet the right of employees to not only freely associate with one another but also the promotion of the practice and procedure of collective bargaining as essential to American public policy.

But it was right around this time that a few writers like A.H. Raskin of the NewYorkTimes, Sol Barkin of the Textile Workers, and Paul Jacobs with the Fund for the Republic, all began to focus upon the fact that unions, having reached what was to be their zenith in 1955 representing 35% of the workforce were beginning to decline. And soon thereafter – indeed the Pucinski committee in the House of Representatives saw this early on in the ‘60s – it became clear that the National Labor Relations Act was not working quite as well as we had assumed with administrative delays promoted by statutory loopholes and ineffective remedies for statutory violations being the main culprits. (The delays caused by the National Labor Relations Board’s own inaction was a problem yet to develop in the ‘80s and ’90s!) Employers increasingly played out the string by utilizing the cumbersome and ineffective NLRB appeal machinery as well as taking some cases to the courts which meant that many cases could not be heard until 3 or 4 years after an unfair labor practice charge had been filed.

This erosion of the administrative process made evermore glaring the limited remedies contained in the Act (i.e., backpay and reinstatement for unlawfully dismissed workers minus interim earnings and earnings that could have been obtained with reasonable diligence)– in contrast to antitrust law which imposed treble damages for instance, for antitrust misconduct. The statutory preclusion against the imposition of contract terms of any kind upon offending parties made the duty to bargain in good faith more ephemeral than real in a goodly number of circumstances. Thus, the law, it was clear, had deficiencies which undercut the promises contained in the Preamble and aseries of proposals and debate about them, were brought forward in the Congress in both the ‘70s and the ‘90s and again in 2007. But the inability of labor law reform proponents to obtain a super majority of 60 votes made it impossible for either President Carter or for President Clinton to sign into law such legislation because cloture could not be obtained against the Senate filibuster. (In 2007, President Bush would have vetoed it even if the legislation had surmounted the Senate filibuster.)

These reform bills, consisting principally of sensibly crafted procedures to expedite the administrative process as well as to fashion better remedies (i.e., double or triple wages lost for workers unlawfully dismissed but discriminated against) thus languished in the halls of Congress and as they did, two developments figured in the reform debate. The first one, fueled by an even more precipitous decline in union representation – now down to 7% in the private sector and 12% overall attributable to effective employee organization where there is little employer resistance – created the urban myth that law was a dominant factor in decline and that its reform could remedy and reverse the numbers and indeed as some proponents said, could help create a middle class America. In fact, other factors like, globalization and imports from low wage countries decimated union organized manufacturing and enhanced the ability of American employers to relocate abroad, the rise of undocumented workers and the contingent workforce, the growth of the service sector of the economy, the union wage premium above the non-union sector and just plain union lethargy (which was responsible in part for the divide between the AFL-CIO and Change to Win) were more important. Law was and is a subordinate factor. Nonetheless, the rights of the workers to freely choose union representation is clearly harmed by the statute – ironically, opponents of reform have become the biggest supporters of the Act! But unions, ever essential to a democratic workplace, can gain more members through some reforms, and even if they don’t, the status quo promotes disrespect for law which all democracies can ill afford.

The other development in wake of the ‘70s and ‘90s – and the one which has put this subject back into the court of the public opinion– the Employee Free Choice Act passed overwhelmingly by the House of Representativesin 2007 and is now before the Congress began in ‘09. Though this legislation does not prohibit secret ballots it would effectively substitute for the ballot process compulsory recognition of the unions which can obtain majority support as evidenced by authorization cards. Second, once the union is certified on the basis of cards, the parties must meet within 10 days and if collective bargaining is not successful within 90 days of its commencement and30 days of mediation, binding arbitration will be the mechanism to resolve what the parties have not been able to resolve themselves through the negotiation process. Third, the NLRB is mandated to give priority to and seek injunctions in court against employer unfair labor practices engaged in a union organizing campaign – just as it has been obliged to do the same for union unfair labor practices. (This labor intensive litigation will require more than the modest appropriations increase already recommended for the Board by the Obama Administration.) And finally - most important, treble wages lost when discrimination is shown against workers, civil penalties of up to $20,000 for each violation as well as contempt sanctions are contained in the law.

My judgment is that the injunction process and enhanced remedies are appropriate and will promote law enforcement. But I am of the view that the other provisions(i.e., recognition on the basis of union authorization cards and the arbitration process) are either fundamentally flawed or so problematical that they need substantial change. The fundamental problem in 2009 is the delay – particularly in the representation process as well as one-sided employer propaganda in the form of employer captive audience speeches on company property and the like, which is heaped upon employees for at least a couple of months in the overwhelming number of instances and sometimes for a period longer than that! The card check system or “sign-up”, as the unions prefer to call it now (because of the successful public relations job done by employers against them on this issue) will not effectively deal with the problem of delay. This is so because delay in representation cases is attributable to and is sometime exacerbated by disputes over the question of what individuals are eligible to vote (or in this case sign the cards) and are employees as opposed to, for instance, supervisors. Also, disputes about differences over what unit of employees is appropriate for the purpose of collective bargaining frequently arise.

Nothing in a card system will change this because the same disputes and the potential for delay will still exist. And, notwithstanding, the ability of the NLRB to make new regulations about the propriety and language of cards and how unions may recruit employees utilizing them, the fact is that there will inevitably be more disputes about cards than there will ever be about ballots – thus far, the NLRB has not been confronted with the problem of “hanging chads” and the like that we witnessed in 2000 in Florida!

Recognition on the basis of cardsmay undercut the employers’ basic union message because in some circumstances the union will be able to reach the employees and sign the employees up before the employer knows that the campaign is going on. However, my own view is that this state of affairs will simply encourage more preemptive employer anti-union conduct designed to thwartpotential union campaigns – and the Act as now written, does nothing to deal with the basic problem lies in the fact that the biggest problem outside of delay, i.e., the exclusion of non-employee union organizers from the workplace. Employers may now continue to engage in the captive audience speeches and one-on-one meetings between supervisors and employees dissuading them from supporting the union– just as they have always done! In fact, the union has no ability, let alone parity, to present its message to workers ever since a divided Supreme Courtexcluded union organizers from company property in 1992. Congress can and should reverse this. But EFCA does not do so.

I confess a preference for the secret ballot which I think is more deliberative and effective if, as is the case in British Columbia and Ontario, elections are required to be held within 5 to 10 days subsequent to the filing of a union petition. This can be done under a procedure which my Board pursued on a limited basis and one which is followed by the Canadians, i.e., “vote now and litigate later”, under which disputes about who is eligible to vote are postponed until after the ballots are cast. For it is the ability of the employer to conduct the one-sided anti-union propaganda campaign during this period which has proved to be so devastating to unions. Under my approach the votes are in the bank long before any time-consuming litigation.

Finally, the arbitration process presents a great challenge. In the first place, most arbitration in the United States is so-called grievance arbitration involving disputes over the terms of existing collective bargaining agreements and interpretations of them by a third party neutral jointly selected. Interest arbitration which is contemplated by EFCA, i.e., the resolution of new contract terms, exists primarily in the public sector where the strike is prohibited or limited and in emergency disputes in the private sector as well as in printing. The Canadians have been very successful with the adoption of this first contract arbitration where the relationship is embryonic and fragile. So-called surface bargaining where one side goes through the motions but does not seriously engage in give and take, frustrates the collective bargaining process. Professor Thomas Kochan has written about how difficult it is for first contracts to be struck in a timely fashion. Among the bargaining units able to make the showing of support that is necessary for a certification petition to be filed, only 20% reach a first contract, with merely 12.9% doing so within a year of certification. Only 56% of newly certified bargaining units are successful in reaching a first contract, and 38% are able to conclude such a contract within a year. Moreover, the presence of unfair labor practices reduces the chances of getting to an election by 25% and striking the first contract by 30%. One of the major deficiencies in the American system (i.e., the inability of the Board to impose contract provisions) would be reversed by the law.

But EFCA itself is flawed on this issue as well. First, the statute contains no criteria for the arbitrator to follow, creating bad policy as well as constitutional problems. Second, the Canadian provinces have not established, as did EFCA, a specific time period in which arbitration would kick in 130 days after the union is certified. The Canadians have recognized that this would encourage the party that wantsarbitration to simply sit back and playout the string, undercutting the collective bargaining process which remains a dominant feature of American labor law. The Canadians have provided that arbitration can be triggered through use of a mediatory “screen” before the parties can proceed to arbitration. The availability of arbitration must remain uncertain if the collective bargaining process is to flourish. The conundrum is that it must be available if there is a real potential for a contract notwithstanding evasive behavior, impasse, or misconduct. But, at the same time, the process must be sufficiently expedited so that workers do not lose hope and confidence in the negotiation of the collective bargaining agreement.

One possible answer is to adopt so-called baseball arbitration where in the context of that industry, the arbitrator is required to accept the final offer of either side and cannot compromise between the two. This diminishes the tendency of labor and management to refuse to compromise, believing that the more rigidly they each adhere to their own position the more likely it is that the arbitrator will find a middle ground that is slanted toward their position. The practical significance of final offer arbitration is to make each side compromise, anticipating that their reasonableness will induce the arbitrator to pick the offer put forward by them. The general result is that the parties become more reasonable and are able to negotiate their differences voluntarily without resort to arbitration.

But baseball arbitration involves one issue, i.e., the salary to be awarded to the player. I have been involved in a number of these cases in the ‘90s and I can testify that it has worked well. The difficulty here is that there are numerous issues in most collective bargaining processes where each side may be rigid on some matters and flexible on the others, compounding the difficulties for the arbitrator. Final offer arbitration has not worked as well in, for instance, public sector disputes where a number of states have mandated this approach. My own sense is that, if Congress adopts this procedure in the private sector, it must be careful to allow the parties to voluntarily negotiate for a fixed period of time in the wake of the award itself so as to allow the parties to take account of any arbitral misstep.

There is one other problem with arbitration of this kind. I have advocated that an expedited ballot be substituted for EFCA’s reliance upon authorization cards. If cards are retained, there will be a tendency and temptation for employers to re-litigate defacto the issue of majority status in the arbitration process even after recognition has been accorded because a substantial proportion of management will not view union recognition as authentic. This will have the effect of jamming up the arbitration process and creating delays because of the heavy volume of cases and, in the process the erosion of collective bargaining.

Conclusion

The reform process has been discussed for most of this past half century. It is truly a work in progress which conceivably may be realized in 2009, 2010, or 2011.

The chance for legislative reform is a rare one. This time around the United States must get it right, recognizing that law reform may not alter the basic socioeconomic ills which ail our society. But we must get it right. Labor law reform must be enacted with a substantial overhaul of the approach adumbrated in the Employee Free Choice Act.

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