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Arbitration: A Cautionary Tale

While much has been written about EFCA’s secret ballot provision, less ink has been spilled about the interest arbitration provisions. Arguably, this could be what really dooms businesses — the idea that government arbitrators with no experience whatsoever in your business are now going to decide your wages, health care costs, etc. should be unsettling to any business, large or small. The reality, however, is that this is exactly what EFCA would demand.

So, the recent news from Canada should offer a cautionary tale. Wal-Mart was involved in a long labor dispute with UFCW over representation of a handful of employees that worked specifically in a Wal-Mart tire and lube shop. Wal-Mart lost the case and the Court decided to impose a 33 percent wage increase for the workers. The end result: the workers have now lost their jobs.

Some might blame Wal-Mart, but they are not the villain here. As the Wal-Mart spokesman correctly points out, the company was left with unattractive options — raise their prices by 30 percent or keep open a store unit that was not turning a profit. Any rational business owner would make the same decision that Wal-Mart did.

Of course, we somehow doubt that UFCW told the unfortunate workers involved in this mess that this could be the end result of joining the union.

This story offers a cautionary tale — the people in the best place to make important HR decisions are first and foremost the owners of the company. To a lesser extent, the union involved can offer feedback too (some of this can be constructive, some of it isn’t). But the government is the last body that should be dictating to private businesses the exact wages, benefits, etc. of workers. If EFCA is passed, we will see a lot more situations like this Wal-Mart — businesses left with no good options. Don’t be surprised if many businesses decide to throw in the towel when faced with such untenable choices. The people hurt the most will, of course, be the workers that unions are supposed to help.

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