EFCA: The 5 Big Lies
EFCA: The 5 Big Lies
Here are the 5 Big Lies about EFCA that unions don’t want you to know:
Lie Number One: EFCA Doesn’t Get Rid of Secret Ballot Elections
This is one of the biggest lies of them all. Unions claim that EFCA does not get rid of secret ballot elections. Is this true? Here are the facts.
First, the place to start is with the actual text of the proposed legislation. Here’s what it says in the text of H.R. 1409 and S. 560:
If the Board finds that a majority of the employees in a unit appropriate for bargaining has signed valid authorizations designating the individual or labor organization specified in the petition as their bargaining representative and that no other individual or labor organization is currently certified or recognized as the exclusive representative of any of the employees in the unit, the Board shall not direct an election but shall certify the individual or labor organization as the representative described in subsection (a).
So for any situation where a union shows up with a majority of the cards the Board is prohibited from directing an election. In other words, elections are outlawed in these circumstances.
What about when the union shows up with at least 30% of the cards but less than a majority? This narrow situation is what unions use to justify their claim that EFCA doesn’t get rid of elections. Elections theoretically could happen in this situation, but in the real world this NEVER happens.
Unions today almost NEVER file a petition with less than majority support. Most unions require organizers to have a minimum of 65% or more before they can file. The ONLY time they will file with less than majority support (it is called “filing light” by union organizers) is if they are trying to get a listing of employees (this is called an “Excelsior List” and unions get this once they file a petition with at least 30% support). They do this only so they can mount a better campaign – they will withdraw the petition before there is a vote.
How do I know this? Our consulting team is made up of many former union organizers and every one of them confirms this is how it actually works. Most of them were strictly prohibited from “filing light” and the only time they ever did it was the exact situation I describe above.
So, while unions can claim that technically elections still exist, they are effectively banned under the EFCA. Certainly more than 99% of the time there will be no election after EFCA. An organizer who knows he can avoid a vote by just collecting a majority of the cards will do that EVERY time.
Lie Number Two: Employer Practices Make the Current Election Process Unfair
The main argument unions make to support the Employee Free Choice Act is that the current system makes it nearly impossible for unions to organize new members. They claim that vicious anti-union campaigns waged by companies make it impossible for employees to make a free and fair choice in union elections.
Unions further claim (also completely untrue) that employers fire union organizers in more than a quarter of all union elections. The actual number is less that 3%, and those employees are subject to reinstatement orders and back pay awards from the NLRB.
The latest numbers from the Bureau of Labor Statistics prove, once again, that unions are doing just fine without a “bailout” from the EFCA. Unions added nearly a half-million members last year (in a year when the economy got killed and millions lost jobs). Union membership has increased in each of the last 3 years.
Additionally, unions are winning NLRB elections at about the same rate they did in the 1970s – when their membership levels were near their peak – and some of the most outspoken supporters of EFCA (like the SEIU) win nearly 3 out of 4 of their elections.
The bottom line: Unions don’t need the employee free choice act. The main arguments in favor of EFCA are not borne out by the facts – employer intimidation during campaigns has not prevented unions from organizing new members. To the contrary, unions are doing a great job of it. While unions don’t need it, they do want the employee free choice act – it’s a bailout, pure and simple.
Lie Number Three: The EFCA and Increased Union Membership is Good for the Economy
Recently American Rights at Work issued a new “research report” arguing that the economy needs the Employee Free Choice Act now more than ever. The two main economic arguments the report makes are:
1. Unions increase wages and benefits of their members as compared to non-union workers.
2. “Living wages” will redistribute wealth and improve the economy.
These arguments are both false. The research on the “union benefit” is laughable. Even this report notes that when you start to account for things like experience and skills the so-called wage benefit of being in a union shrinks to around 15%. And I have yet to see one of these studies that accounts for probably the most important factor, which is geography.
Case in point: the report uses the fact that primarily non-union hospitality workers in Reno are paid less than unionized workers in Las Vegas as proof that the union benefit is real. But that is exactly the point. The cost of living (and headache factor) of living in Vegas, coupled with the competition for talented people there, is what makes the wages higher – even at the non-union properties in Vegas. When you add in the costs of belonging to a union this differential shrinks even further.
Even the BLS data (which doesn’t account for geography at all) shows that in some jobs non-union workers make more than unionized ones. In the following occupations in 2008 non-union employees in the following sectors made MORE money than unionized ones: Architecture and Engineering; Financial Activities and Finance and Insurance; Professional Business Services; and Federal Government Employees (that one surprised me quite a bit).
In the end I don’t think that these numbers accurate (for the same geography issue I mentioned above) but it proves that you can’t believe any of these statistics that unions and their supporters throw out as fact. Increasing the number of unionized workers will not automatically increase the income of working people.
The second argument for a massive wealth redistribution is the most dangerous. While I agree as much as anyone that CEOs who are paid huge wages while navigating their companies into the rocks is stupid, the market works if you give it time. And again unions don’t make this go away. The Detroit 3 is the best recent example but there are many others. These companies need to go out of business for their stupid actions. They will be replaced by better, smarter competitors.
And even if you grant that paying above-market rates for talent is good for the economy in the short run (which is silly, because as best I can tell CEOs consume at least as well as working people) it doesn’t work. Socialism failed. Again, look at Detroit – if you pay uncompetitive wages and benefits (oh, and make crappy cars nobody wants to buy) you lose.
You can get away with paying monopoly rents for labor for a short period of time, especially if you make it impossible for others to compete against those “favored” companies, but in the end the house of cards falls under its own weight. Meanwhile everyone else who does not receive the benefits of these monopoly rents suffers by having to buy over-inflated products. It is no different than the overpaid CEOs. And the best study on the subject by Professors Vedder and Galloway, estimates that the “dead weight” cost of unions on the overall economy has been trillions of dollars.
The current system, despite its flaws, will work if you let it. Bailing out companies that screwed up (and I include the financial services industry along with the automakers) is the worst thing you can do.
Lie Number Four: Interest Arbitration Is No Big Deal
The most egregious aspect of the EFCA (surprisingly) is NOT the effective elimination of the secret ballot election in union organizing campaigns. The mandatory arbitration provision is easily the most significant government intrusion on private businesses ever.
To recap, the mandatory arbitration provision provides that a contract must be negotiated within 90 days (light speed for negotiating a first contract – FMCS statistics show that on average it takes about one year to negotiate a first contract today). If not, then a federal mediator is assigned for one month and after that a panel of arbitrators is assigned to settle the contract.
On the surface, “mandatory arbitration” may not sound like such a bad thing. The simple definition of arbitration means that if two parties can’t agree on something, a disinterested third party is brought in to settle the dispute. Under current law, both parties still must agree in advance to have their dispute arbitrated.
This is fine under current law for two reasons: first, it is understood that the parties have no obligation to agree, only to negotiate in good faith, and if they’ve come as far as submitting to arbitration, they typically are negotiating in good faith and allowing for concessions to each other. Secondly, the members (employees) who have to live under the terms of the contract get a final chance to accept or reject the contract via vote.
Under the mandatory arbitration provisions of the Employee Free Choice Act, both of these elements disappear. If the union knows in advance that a contract will be awarded no matter the nature of negotiations, it is in their interest to set the bar so high that management would never agree, so that an arbitrator’s conclusion of middle ground is as far in the union’s direction as possible (thus – no “good faith” negotiating on the union’s part).
Second, the members are NOT given the opportunity to vote down the contract, and, knowing that the union negotiator can’t be held responsible either way, the unions have nothing to lose (the union will still collect their dues – no matter the outcome of the contract or the satisfaction of the membership with the contract). The employees lose both the fact that their representative will represent them in good faith, and that they will be stuck with the contract, written by someone who probably knows nothing about their business.
Unions say that interest arbitration already works in the public sector, so what’s the big deal? Well, the public sector is very different than private businesses. The most important difference is that states and municipalities are monopolies and don’t really compete with each other in a world market like most companies do. If tan arbitrator awards a pay increase they often are able to pay for it by raising taxes.
One might also argue whether the process actually “works.” Many citizens feel like they don’t get much for their tax dollars in terms of service from government, and many municipalities have had to outsource government services because of the cost savings and increased satisfaction. And remember the BLS numbers we discussed in Lie Number 3? Unionized federal government employees actually make less than unionized employees, so interest arbitration may not even be that great a deal for union members.
The biggest problem at this point is that the arbitration provision is so vague that nobody really has any idea what it provides. How many arbitrators are on the panel? How are they chosen? Are they forced to choose one of two final offers or can they pick and choose provisions out of each party’s final offer? Can they write their own provisions? None of these questions are answered in the current proposals.
The bottom line is that entrepreneurs invest in businesses (and create jobs and wealth in our country) because they believe they will get a return on that investment. Allowing federal arbitrators to come in and tell a business owner how to spend this capital is not just unfair, it also takes away a large amount of discretion from business owners.
Such a policy will discourage investment at a time when our economy is in deep trouble. At a time like this the US government needs to do everything it can to encourage investment and expansion of businesses. The massive uncertainty of EFCA’s arbitration framework does nothing but create uncertainty and risk for businesses.
Lie Number 5: EFCA Won’t Pass In 2009 Because Republicans Can Filibuster
On March 24th Arlen Specter announced his opposition to the Employee Free Choice Act and – most importantly – said that he would vote against cloture. On April 7th a Democratic Senator – Blanche Lincoln from Arkansas – also announced her opposition. So is that the death of the Free Choice Act until 2011 (after the next round of Senate elections in November of 2010)? Very doubtful, for two reasons:
1. Unions have two immediate goals. Return on the hundreds of millions they invested in the 2008 election cycle and knowing exactly where they need to invest in 2010. There is really one good way to do that: force a vote on EFCA in 2009. Not all Democratic Senators will do what Lincoln did and announce their position early (and people have been known to change their minds from time to time as well). If unions force a vote they can count noses and figure out who to go after in 2010 and then get some kind of compromise legislation (more on that in a minute). Then they’ll go to work on the Senate seats in 2010 so they can come back for the rest of their agenda with a (they hope) filibuster-proof majority in 2011.
2. Unions can’t leave the historical victory of 2008 with nothing to show for it. They’ve been left at the altar enough times to know that the only thing you can be sure about in politics is that you can’t be sure of anything. The opportunity to amend the National Labor Relations Act comes around about never. They’ll want some sort of compromise while they try to build on their 2008 victory.
Unions are currently sitting at around 58 votes for EFCA. Some may argue it is a vote or two less than that because some “Blue Dog” Democrats won’t support it but I think conservatively you must assume that all or nearly all Democrats will, in the end, do what labor says.
So being that close they only need a couple of Republicans to help them pass a compromise bill (by the way, one was already introduced in the House – you can download a copy of it at the end of this email).
Who might those Republicans be? Well, Specter is one of them. If you didn’t actually read or hear Specter’s speech you probably want to do that – he already listed a whole heap of amendments to the labor laws that he would sign on to support (you can also download those at the end of this message), and most of them would have nearly the same effect as the EFCA.
There has been speculation about some other “hardball” tactics to get EFCA passed in its current form this year (including blowing up the filibuster, a move threatened and nearly implemented in the 110th Congress) but I would look for some kind of compromise legislation sometime later this year. It most likely will include quick elections, but could also include “baseball” arbitration (that’s one of the things Specter mentioned he would support in his speech) and equal time provisions (in other words allowing union organizers onto your company property to meet with employees at work).
The bottom line? This thing is far from over. You should keep updated on a daily basis on what is happening and prepare your company leadership for the possible compromise proposals (being on this email list is a great way to do that). Don’t let your guard down. And keep educated.
Resources:
Here are some of the key things you should consider “required reading” on the Free Choice Act.
HR 1409 (the text of the EFCA of 2009) – http://www.lrionline.com/lri/wp-content/uploads/hr_1409.pdf
HR 1355 (the text of the EFCA compromise bill) – http://www.lrionline.com/lri/wp-content/uploads/hr_1355.pdf
Arlen Specter’s Law Review Article – http://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1153008_code911161.pdf?abstractid=1153008&mirid=1
View Arlen Specter’s Speech (plus a transcript and the appendix) – http://lrionline.com/lri/arlen-specter-efca-speech/
To your success,
Phillip Wilson
Next Time: Unions: Good or Evil?
Tags: 5 lies, Employee Free Choice Act
Employee Free Choice Act | admin | 
April 10, 2009 5:41 am
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