Employee Free Choice Act: 2 Simple Rules

To help companies prepare for the Employee Free Choice Act I started doing a series of interviews with our former union organizer consultants. We’ll be posting some of these interviews over the next few months and they are wide-ranging discussions that offer a lot of insightful tips for managers and company leaders.

This week I did an interview with one of our newer former union folks from the grocery and retail industry. While she laid out a series of tips for managers on how they should respond to the proposed Employee Free Choice Act, we covered one of my favorites. Instead of worrying about what form the law will take, focus on what you can control: the employee relations environment you create.

As she laid out some of her tips on creating a great work environment I was reminded again about how you could boil down the best action plans into two simple rules:

1. Be Predictable: Communicate clearly and be consistent. Most employee relations problems come out of situations where an employee is surprised or feels “sneak-attacked” by their leader. This doesn’t mean that every situation must be lined out in a company policy manual (or a union contract). It also doesn’t meant that you have to ignore performance and treat everyone exactly the same (another union notion that has crushed many companies). However, you must deal with situations in a clear and predictable way to build trust and loyalty with your people.
2. Follow the Golden Rule: This one will sound trite, but it is a cliche because it is true. If you just treat people with respect and take some time to care for them as a fellow human being, it will do wonders for your work environment – not to mention your own work life.

As you think about your own Employee Free Choice Act action plan, remember to focus your energy on what you can control (your own work environment) and make sure you are teaching leaders to remember these 2 simple rules.

NLRB: Employee Free Choice Act Ace in the Hole?

Is the Employee Free Choice Act still alive? Al Franken is now officially seated and the 60-vote caucus needed to overcome a filibuster on the Free Choice Act is in place. But just when unions should be rejoicing in the streets, it’s getting fashionable to write Employee Free Choice Act obituaries, like the one this morning in the New York Times. I think companies should keep a very close eye on the NLRB, because the news of EFCA’s death is greatly exaggerated – but I’m getting ahead of myself.

The “EFCA is dead” narrative goes like this. Unions have once again snatched defeat from the jaws of victory. Unable to overcome their petty internal squabbles, the labor movement is splitting at the seams. The major unions are split in half and talk of reuniting is evaporating in the summer heat. Unions are raiding each other like never before, including the very public divorce of United Healthcare Workers West from the SEIU, and the swan dive into an empty swimming pool jointly performed by UNITE-HERE’s dynamic duo Raynor and Wilhelm.

The narrative continues that Andy “Darth” Stern and his SEIU are most to blame for all this infighting. So-labeled from his “brothers” inside the labor movement, Leo Gerard of the Steelworkers said in the Times interview, “Every division in the labor movement seems to have Andy Stern’s fingerprints on it.” Especially as the SEIU start gobbling up big chunks of imploding unions like UNITE-HERE, there is a real fear that Andy Stern has decided to unilaterally implement his vision of the labor movement and the rest of the movement be damned.

All this dis-unity is being blamed for the problems with EFCA. Moderate Democrats are looking for the exits and it is clear that EFCA as it is currently proposed has nowhere near the 60 votes needed for passage. Instead Tom Harkin and Arlen Specter are negotiating a derivative version of the current bill, one that they hope will get the other votes they need. The most likely provisions of the “derivative” version of EFCA are the following:

1. Quick Elections (14-21 days) instead of card-check;
2. Interest arbitration (baseball arbitration) as a remedy for bad faith bargaining;
3. Union access to employees (getting a voter list earlier in the process, possible access to employer property); and
4. Increased penalties

So let’s assume for a minute that unions can’t get 60 senators to support EFCA or an acceptable derivative version. What then? Well, the most likely compromises do not require ANY action from the Senate, not when unions are about to be hand-delivered the NLRB.

Wilma Liebman has made no bones about her support for reforming the nation’s labor laws generally, and she welcomes the debate on the Employee Free Choice Act specifically. Once she has a Board majority she will have the full power to implement massive labor law reform without the need for a single Senate vote.

Consider, for example, the vote period. The current 42-day vote window that unions complain about so wildly is completely Board created. The statute says nothing other than the Board will conduct an election. It could just as easily be 7-days or 14-days or 21-days after the petition is filed. The time limit is just a target, but the Board does a great job of meeting the 42-day target today and there is no reason to believe that they couldn’t meet a quicker target. So if unions can’t get a compromise on card-check, no problem. Just get the Board to shrink the vote window down to 7 or 14 days, which is effectively the same thing.

Another modification to “card-check” is the “postcard-check” proposal floated by Diane Feinstein. It simply says that instead of secret ballot elections held at the employer’s premises, there will be mail ballot elections where employees mail their ballots to the NLRB. Again, mail ballots are allowed and used under the current statute and there is nothing in the law that prevents the Board from changing its current practice and requiring mail ballots for all elections. It doesn’t take too much imagination to look at these ballots as authorization cards and realize that organizers will just show up at people’s homes to “encourage” them to vote the right way – the same way they “encourage” employees to sign a union card today. Bam – you’ve got card check.

What about interest arbitration? This one is a little trickier, but I still believe an activist Board could easily take a crack at this as well. Under current law there is something called a Gissel bargaining order. That is a Board created (and Supreme Court approved) order for a company and union to bargain in good faith, even in cases where the union failed to be certified in an NLRB-supervised election. The basic premise is that the Board is given authority under Section 10(c) to “take such affirmative action … as will effectuate the policies of this Act.” The idea behind a Gissel order is that the employer can be required to bargain – even if a union technically isn’t certified and the majority representative – where the Board concludes that the employer’s actions make a fair election impossible. The Gissel order is a way to force the parties into a situation they would have been in had the employer been operating in good faith.

Why couldn’t an additional remedy for bad-faith bargaining include an order for the parties to submit their dispute to binding, baseball-style arbitration? There is nothing in the Act that prohibits this remedy. Employers would certainly argue that this is overstepping the bounds of the Act (the same as they would if an arbitration provision were included in the Free Choice Act), but if it is constitutional in the one case it is probably constitutional as a Board remedy. After all, the only thing the Free Choice Act does is amend the National Labor Relations Act – if the mandatory arbitration provision of EFCA is constitutional, then the remedy under the current statute almost certainly is constitutional too.

Union access? This is also well within the Board’s power today. Unionized companies are already forced to provide union access at reasonable times and places, so the statute clearly allows such a provision. Many companies in the retail, healthcare and gaming sectors already have organizers on their property during union campaigns. It is easy to envision the Board trying to create some structure around the way employee meetings are held during election campaigns, including perhaps the requirement for equal time and equal access.

And granting the access to employee homes using the “Excelsior” list is also Board created. While today the list is only handed over after the filing of a petition, there is nothing that prevents the Board from requiring the list to be handed over much sooner (perhaps at the 30% point of support, maybe even sooner than that).

Finally, the fines against the employers. There is nothing in the Act that prohibits the Board from issuing fines – the remedy power is vague and says the Board can “take such affirmative action” as will effectuate the purposes of the Act. Most people would be surprised to learn that the Board already has the ability to fine persons who “willfully resist, prevent, impede, or interfere with any member of the Board or any of its agents or agencies.” That certainly could be interpreted more broadly to include egregious unfair labor practice activity. The current fine is $5,000 (and imprisonment of up to one year) but it is not clear whether that could be interpreted as $5,000 per incident. Not quite as good as a $20,000 fine per incident, but it’s a start.

Understand that I’m not arguing that each of these expansions of Board power would fly through without incident (and I’m the first to admit that the idea of adding fines or imposing mandatory arbitration as remedies would face a tough legal challenge). But the fact remains that nearly everything unions hope to accomplish with the Employee Free Choice Act can be accomplished without one single change to the current statute.

Board imposed changes won’t be permanent (but then again, neither is a legislative change – after all EFCA is an attempt to re-write the current statute) but they can at least start the ball rolling. They also might make legislative change that much easier down the road. But in the end the Employee Free Choice Act – or at least its key provisions – appear far from dead. Not when you have the NLRB as your ace in the hole.

Employee Free Choice Act: The Teamsters Want You!

The Employee Free Choice Act may be stalled, but that’s not stopping the Teamsters. On Monday they posted an “all hands on deck” memo seeking 1,000 new organizers to help them deal with the “deluge” of organizing requests they expect after EFCA passes.

Now that Al Franken will be seated as the 60th Senator in the Democratic caucus next week, it is likely we will see a major push by labor’s supporters to pass some sort of EFCA-derivative legislation in the next several weeks. Senator Harkin has threatened to call for a vote on something (either the current version of EFCA or “the son of EFCA”) right after the 4th of July recess.

Many companies have been sitting on the fence, waiting to see what the actual law is going to provide. Others are preparing for the worst while hoping for the best. Either way, events are likely to happen rapidly over the next month. Don’t expect a long debate on this legislation… whatever debate is going to happen has been happening between Senator Harkin and Specter. When they put this thing up for a vote – whatever form it finally takes – it will happen quckly. So stay tuned.

Employee Free Choice Act: Is Interest Arbitration a Good Thing?

The Employee Free Choice Act’s mandatory arbitration provision has received way too little attention in the arguments over EFCA. This week Thomas Kochan posted a spirited defense of interest arbitration on the Center for “American Progress” blog in his attempt to add some context. While I disagree with much of what he says, it certainly gets the discussion focused on the “how would this whole arbitration thing work” question. He identifies 6 points of a solid arbitration system, and recommends that they be used as the framework for interest arbitration under the Free Choice Act (which is a backhanded way of pointing out one of the many glaring weaknesses of EFCA: that it provides exactly no guidance on how this arbitration system might work… but I digress).

Kochan’s main argument is that the experience of using arbitration in the public sector and in Canada proves that it will work here. I have a few thoughts. First, the public sector experience is not equivalent, because you are not really dealing with a competitive market (this is also why union density is so much higher in the public sector). Further, it is not true to say that these public sector arbitration agreements do not result in unsustainable contracts. Many communities now outsource what used to be “public sector” jobs because of these increased costs.

Also, the idea that these arbitrators will only be able to deal with “mandatory” subjects and not management rights is ridiculous – wages, hours and working conditions deals in almost every way with the way the company chooses to run its business. Every word of a contract is an a restriction on these rights – and putting that decision in the hands of government appointed arbitrators (even if it is 1 neutral and 2 non-neutrals) is dangerous. Kochan says he is not aware of an example where interest arbitration has increased costs. Just look at the recent Wal-Mart case in Canada – the arbitrator imposed a huge 30% wage increase and wiped out that Tire and Lube unit based on costs.

And his last point is the most telling – the imposed agreements will mirror other agreements. That is exactly what unions want. In the short run this arrangement “levels the playing field” so all companies have a similar “industry” agreement (just like the UAW had with the auto companies). In the long run it is disastrous, and is the reason heavily unionized sectors of our economy are going bye-bye. Companies must have the ability to negotiate an agreement that best fits their business, and union members should have the opportunity to either accept or reject those terms. Putting the negotiations into the hands of arbitrators (whether qualified or not, they still don’t have “skin in the game”) is dangerous.

Kochan argues the “urgent need” for some type of arbitration framework based on the fact that first contracts are only achieved in 55% of cases. But does this statistic mean that there is a compelling need for mandatory arbitration? Lots of negotiations fail for all kinds of reasons.  Negotiations between companies and vendors fail. Negotiations between tenants and landlords fail. Negotiations between prospective car buyers and car dealers fail. Negotiations between spouses fail. Does this mean that the government should be called in to settle these negotiations without the agreement of both parties? I don’t think so.

Labor negotiations fail for a lot of reasons, and infrequently does it have anything to do with employer misconduct. Often these negotiations fail because of the union. Unions often promise employees the moon to get them to join, and when those promises don’t come true employees get upset. This forces the union to attempt to get what it promised, no matter how outrageous. The employer rejects these proposals and the union is put in a bad spot. Sometimes they convince employees that they need to be patient and wait for a future contract. Sometimes they just quit. But just because no contract is entered does not mean that the process doesn’t work.

Where bargaining fails due to employer misconduct there should be a penalty. But in cases where the parties bargain in good faith and fail to reach an agreement the government should not step in and force a contract on the parties.

Baby Boomers the Secret Key to Engagement?

A recent study by Boston College’s Sloan Center on Aging & Work, researchers found that employee engagement among younger workers has dropped significantly during this recent economic downturn. That’s not really surprising – as I discuss in my book The Next 52 Weeks, job security is one of the keys to job satisfaction.

What is surprising is that the engagement of older workers has hardly budged during this economic downturn. The research team suggests that the reason for this difference probably lies in the greater experience of Baby Boomers – they have been through many downturns and know that there is light at the end of the tunnel. Due to their seniority and experience, it is probably also true that they are the least likely to lose their jobs in a layoff.

Younger workers – especially those Generation Y employees who have recently entered the job market (and in many companies are more likely to be laid off I might add) don’t have the same experience. These younger workers are more disengaged. Generation X workers fall somewhere in the middle (perhaps because they were working during the “Internet Bubble” and have at least that experience under their belts). You can view the whole study here.

This research has some interesting implications for people planning their employee engagement and Employee Free Choice Act communications. First, it makes sense to think about how to communicate to each of these three “cohort” groups or segments. It is really important to think about your messaging based on your audience. The message – and even the communication channel – may change based on the group you are trying to reach.

Younger workers are more likely to pay attention to things like websites, text messages and social networking platforms (like blogs, twitter feeds, facebook pages, etc.). Video content for Generation Y (and probably Generation X as well) should be bite-sized (think YouTube video clips). They are probably most interested in whether or not they are going to have a job. They may be motivated by the idea that this is an opportunity for them to pick up new skills.

Baby Boomers are more likely to digest information using more traditional channels (paper newsletters, meetings, longer form videos). They will be most concerned about how the downturn is going to impact their retirement nest egg. Many have lengthened their horizon for work and are hoping to ride the market up for a while before they leave. In addition to layoffs, these delayed retirements can also be a demotivator to Generation X employees who saw a potential promotion in their immediate future. This is another issue that must me managed.

One can read too much into “age-cohort” research, but it is powerful. If you have any interest in this subject I recommend taking a look at a book called Generations: The History of America’s Future, 1584 to 2069 (you can view it on Amazon here). This book is an exhaustive study (and I mean exhaustive – I’ll admit I skimmed a lot of the dense descriptions of each generation) of how the “frame” of your age cohorts has a major impact on world events. They go so far as to say that this historical understanding can also predict major events that will happen in future generations. It is a fascinating idea.

Whatever your belief about the predictive power of age-cohorts, there is no doubt that your “frame of reference” (I call this the prism which focuses – and distorts – how you view things happening around you) will dramatically impact how you feel about an event. Whether that frame is based on age, or based on other factors, it plays an important role in your response.

Today we recommend that our survey clients (you can get my free 54-page employee satisfaction survey guide here) segment their data based on the responses received and then divide work groups by levels of engagement. It is very important to action plan and communicate based on these frames. For example, people who are loyal and engaged in the organization are typically concerned about very different issues than employees who are “checked out” and disengaged.

Often the best strategy is to focus efforts on the groups who are neither engaged or disengaged if you want to really move the needle on employee engagement overall. As you plan your engagement strategy – and especially as you map out your Employee Free Choice Act communications – keep these frames in mind.

You should think about how you might alter your basic message and your delivery platform based on the relative engagement of these different groups. In addition, remember that union organizers will focus on your most disengaged groups. While the high-leverage employee engagement strategy is to focus on those who are “on the fence,” you should also think about how organizers might go after the least engaged of your workers. As I always say the very best “union avoidance” strategy is not really a union avoidance strategy at all – just create a great place to work and unions (not to mention your competitors) won’t have a chance.

IBD: Employee Free Choice Act Alive and Well

The Employee Free Choice Act is still alive and well according to an editorial in today’s Investor’s Business Daily. Here’s the key point they make about the “morphing” card-check bill:

But it hasn’t stopped Big Labor. Card check remains its top goal, and instead of dropping a bad idea, it’s switching tactics.

Card-check supporters have begun a new lobbying effort that targets a few wavering senators including Democrats Dianne Feinstein, Arlen Specter and Mark Pryor. The idea is to put the squeeze on Congress instead of taking the case to voters.

It may be one reason why card check has morphed into new incarnations, the latest a “compromise” bill from Feinstein. She has proposed a mail-in card-check format, which still amounts to a denial of secret ballot. Curiously, Feinstein backed away from her own compromise Thursday, raising questions as to whether she was being manipulated and wanted out.

While the exact provisions of the derivative bill are still squishy (God forbid it includes mail ballot elections – the last one we were involved in had about a 20% participation rate…) there is little doubt that something is coming this summer.

Employers Support Employee Free Choice Act?

Today the AFL-CIO announced its latest PR blitz in favor of the so-called Employee Free Choice Act. They claim that over 1,000 employers support the Employee Free Choice Act and have launched a website to state the case called Fair Economy Now. I know you’ll find it shocking, but the Chairman of this front group is CEO of American Income Life Insurance Company whose employees – according to a quick LRI Online search – turns out are represented by OPEIU Local 277. It’s easy to see why once you’re stuck with a union why you’d want to make sure everyone else was too – but I wonder how many non-union employers are on the list of 1,000 Employee Free Choice Act Supporters? I’m guessing not many.

Employee Free Choice Act: When Should I Start Talking to my Employees?

This week we posted a blog item on an interesting study about the Employee Free Choice Act. In it a solid majority of employers (nearly 60%) say they think some form of EFCA will pass this year. This note is to them. The other 40% of company leaders in that survey are smoking crack … a compromise bill is being negotiated as we speak and will become law this summer. 

I’ve been doing a series of strategy calls with companies around the country over the last month. These calls are a blast (if you’re interested in doing a Free Choice Act strategy call for your company you can learn more here - until EFCA passes I’m doing them for free). The companies we’ve talked to range from large, multi-facility organizations who are already doing a lot of the right things to companies that are just learning that EFCA is coming. For the bigger companies we are able to really roll up our sleeves and work on advanced communications strategy. We work on a basic game plan for the smaller companies. But one question comes up in every call, no matter how big and sophisticated the employer: When should I start talking to my employees about EFCA?

It’s a great question. Most companies are reluctant to bring up EFCA for a variety of reasons. First, many say they think it might give disgruntled employees an idea they hadn’t thought of yet (note: this is a terrible reason to avoid the subject – in fact, it is a better reason to be talking about it NOW). Some are afraid to bring it up because they don’t want to violate election laws (this is an easy one to avoid – if you remember one simple rule that I talk about during the strategy calls).

But the best reason I’ve heard is the “crying wolf” problem. Since EFCA is a moving target, there is a fear that talking about it now might make an employer look alarmist (especially if you get specific about things like card-check and mandatory arbitration that are unlikely to make it into this year’s version of the legislation). This is especially true if you go back a few months later and talk about a different bill. One sophisticated employer I worked with a couple of weeks ago had this exact fear, and I think it’s legitimate. However, I do not agree that silence about EFCA is the “cure” for this problem. Instead, I recommend a “middle way” approach.

There is a tendency for employers (and consultants) to get caught up in the outrageous provisions of the proposed version of EFCA, like abandoning the secret ballot in virtually all cases and imposing “fast-track” contracts through mandatory arbitration. Focusing on the problems of EFCA diverts attention from what is really important: employees only choose to sign union cards when they believe (or are tricked into believing) that the union card will somehow improve their lives. The direct relationship between management and employees is what is blown up by unionization. This relationship is the key leverage point in any discussion about unions, no matter what version of EFCA eventually gets signed into law.

Since it is the direct relationship that is at risk, that is what should be the focus of communications now. The good news is that this discussion really doesn’t have to mention unions at all if an employer doesn’t feel comfortable bringing up the subject. The key point to communicate is the importance of this direct relationship, the competitive advantages of companies who maintain a direct relationship and, most important, how employees can take advantage of this direct relationship in their daily work life. There are many ways to illustrate and emphasize the benefits of a direct relationship, and right now this should be your main focus.

Some companies are more vulnerable to union organizing and are targets right now. For these companies it probably makes sense to talk about unions today, and perhaps to go into specifics about how EFCA proposes to change the way unions organize companies in the US. But for many companies, union organizing isn’t an imminent threat. I get that these companies might be a little reluctant to “join the battle” by talking to employees today about EFCA. In fact, that is why the first thing I cover in our strategy calls is going through a quick 3-part quiz to establish what a company should be saying right now.

But a lower level of union vulnerability is not a valid excuse to not communicate. Instead you should develop and communicate a message that emphasizes what is good about your current work environment, and the benefits employees receive by working directly with their manager.

Most employees, when approached to sign a union card, don’t see any cost. Union organizers are trained to make the card-signing process seem like a “no-lose” proposition. When you communicate the advantages of a direct relationship and emphasize the positive aspects of your company you are also showing employees there is a tangible cost to signing a union card. This direct relationship is the one thing employees lose for sure whenever they sign a union card – it says so right on the card.

Your job right now is to make sure you are building up the case that giving up a direct relationship is costly. If you do this job well your company will be immune to organizing activity. Not because of some psychological trick (we’ll leave that to the union organizers) but because your employees will clearly understand that they enjoy their work because of their relationship with management. When asked to sign something to give up that relationship the organizer will be told, “no thanks, I like my job the way it is.” No matter what version of EFCA passes, if this is the answer from a majority of your employees you win. 

When should you start talking with your employees? Today. At some point we will know the exact provisions of EFCA and that will be when a company can speak intelligently about them. In the meantime talk about what is really the most important: your relationship with your employees.

Arlen Specter Switching to Democrat

Arlen Specter is expected to announce that he is switching parties according to the Washington Post. Not exactly clear what this means for EFCA (he has already suggested numerous compromises that he supports, but has said he will vote against cloture and against the bill). It does give Democrats a filibuster-proof majority in the Senate once Franken is sworn in. Stay posted.

UPDATE: Here is the text of Specter’s statement. Note at the end (highlighted) where he says his position on EFCA will not change.

Statement by Senator Arlen Specter

I have been a Republican since 1966. I have been working extremely hard for the Party, for its candidates and for the ideals of a Republican Party whose tent is big enough to welcome diverse points of view. While I have been comfortable being a Republican, my Party has not defined who I am. I have taken each issue one at a time and have exercised independent judgment to do what I thought was best for Pennsylvania and the nation.

Since my election in 1980, as part of the Reagan Big Tent, the Republican Party has moved far to the right. Last year, more than 200,000 Republicans in Pennsylvania changed their registration to become Democrats. I now find my political philosophy more in line with Democrats than Republicans.

When I supported the stimulus package, I knew that it would not be popular with the Republican Party. But, I saw the stimulus as necessary to lessen the risk of a far more serious recession than we are now experiencing.

Since then, I have traveled the State, talked to Republican leaders and office-holders and my supporters and I have carefully examined public opinion. It has become clear to me that the stimulus vote caused a schism which makes our differences irreconcilable. On this state of the record, I am unwilling to have my twenty-nine year Senate record judged by the Pennsylvania Republican primary electorate. I have not represented the Republican Party. I have represented the people of Pennsylvania.

I have decided to run for re-election in 2010 in the Democratic primary.

I am ready, willing and anxious to take on all comers and have my candidacy for re-election determined in a general election.

I deeply regret that I will be disappointing many friends and supporters. I can understand their disappointment. I am also disappointed that so many in the Party I have worked for for more than four decades do not want me to be their candidate. It is very painful on both sides. I thank specially Senators McConnell and Cornyn for their forbearance.

I am not making this decision because there are no important and interesting opportunities outside the Senate. I take on this complicated run for re-election because I am deeply concerned about the future of our country and I believe I have a significant contribution to make on many of the key issues of the day, especially medical research. NIH funding has saved or lengthened thousands of lives, including mine, and much more needs to be done. And my seniority is very important to continue to bring important projects vital to Pennsylvania’s economy.

I am taking this action now because there are fewer than thirteen months to the 2010 Pennsylvania Primary and there is much to be done in preparation for that election. Upon request, I will return campaign contributions contributed during this cycle.

While each member of the Senate caucuses with his Party, what each of us hopes to accomplish is distinct from his party affiliation. The American people do not care which Party solves the problems confronting our nation. And no Senator, no matter how loyal he is to his Party, should or would put party loyalty above his duty to the state and nation.

My change in party affiliation does not mean that I will be a party-line voter any more for the Democrats that I have been for the Republicans. Unlike Senator Jeffords’ switch which changed party control, I will not be an automatic 60th vote for cloture. For example, my position on Employees Free Choice (Card Check) will not change.

Whatever my party affiliation, I will continue to be guided by President Kennedy’s statement that sometimes Party asks too much. When it does, I will continue my independent voting and follow my conscience on what I think is best for Pennsylvania and America.

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?