The novel and movie “The Perfect Storm” chronicled the tragic loss of a sword fishing boat and its crew due to the simultaneous occurrence of severe weather events off the coast of New England in 1991, each of which would have been less powerful than the storm created by their combined forces. The election of a presidential candidate strongly committed to unionization, with the backing of all of the major trade unions, combined with a recession economy and its necessary layoffs and wage freezes or reductions, and the real possibility that the Employee Free Choice Act will be enacted, should create a perfect storm of union organizing. Employers need to assess their vulnerability to a unionization drive and initiate pro-active steps to defend against the coming storm.
THE THREE DRIVERS OF THE STORM
President-elect Obama spoke often and openly during the campaign about unions being a key to prosperity for the middle class. In his standard stump speech, as well as in the many debates, Mr. Obama spoke positively about unions in an effort to strengthen his populist credentials and appeal to traditional Democratic voters. In a speech to the AFL-CIO in Philadelphia last April, Mr. Obama said, “we’re ready to play offense for organized labor. It’s time we had a president who didn’t choke saying the word ‘union.’ A president who strengthens our unions by letting them do what they do best: organize our workers.”
This ringing endorsement of unions should not be underestimated. When President Reagan fired illegally striking air traffic controllers in 1980, he in effect told small and large businesses everywhere that they could stand up to union pressures. His actions energized employers across the country to take a fresh look at how they react to unions and to possible unionization. By talking about unions so openly, President-elect Obama may have the same energizing effect on union organizers and on employees who are not presently working under union contracts. This will be one driver of the storm.
You should expect that the present recession will also push unorganized workers into seeking unionization out of mistaken belief that this will give them power over layoffs and wage cuts. While employees ordinarily shy away from change, the fear that their jobs will evaporate or that benefits will be reduced may make them especially vulnerable to union organizing. Of course, no union can guarantee jobs, nor do unions pay wages. But that does not mean that union organizers and business agents won’t propagandize by promising workers that their jobs will be more secure if they have union representation. The 9,000 employees at DHL who were represented by the Teamsters union and are losing their jobs because that company is leaving the U.S. might disagree, but the truth has never stood in the way of effective propaganda.
The final “weather event” of this perfect storm for union organizing may be the misnamed Employee Free Choice Act. This proposed law, in its current form, would do away with secret ballot elections among nonunion workers and require employers to bargain with unions solely on the basis of signed authorization cards. The EFCA also has provisions for dramatically increasing the damages obtainable from an employer for certain unfair labor practices, and would also turn over the terms and conditions of employment in a first union contract to a neutral arbitrator, rather than the give and take of negotiations between labor and management. The EFCA has long been the number one objective of the major unions, mainly because of their inability to win free elections among workers. The EFCA passed in the House of Representatives, but has never come to the floor of the Senate for a vote. President-elect Obama has been quoted as saying, “I will make it the law of the land when I am president of the United States.”
Whether the EFCA really becomes law is the topic of much speculation. Its proponents would have to have the 60 votes necessary to cut off debate in the Senate, and the Democrats do not appear to have 60 members in the Senate. On the other hand, Republicans such as Senator Arlen Specter have spoken out in favor of the EFCA, so its passage is certainly a possibility during 2009.
THE EFCA WILL TILT THE BALANCE IN FAVOR OF UNIONS
The basics of union organizing have been largely unchanged since the late 1940’s. Union organizing is initiated either by a union seeking members, or by disgruntled employees seeking representation, leading to the signing of union authorization cards. Once the union has obtained signed cards from at least 30% of the workforce, the union may petition the National Labor Relations Board to hold a secret ballot election. Once the petition is filed, the NLRB Regional Office processes the petition and typically holds an election 38 days after the filing. Ninety-five percent of all initial representation elections are held within 56 days from the filing of the petition. Employees vote by secret ballot.
During the period October 2007 through March 2008, unions won 62% of the 700 secret ballot elections conducted by the NLRB. This is an increase in favor of the unions, who won only 50.4% of the elections in 1975, 48% of elections in 1985, and 56.8% of elections in 2005. Unions are also entitled to bargain on behalf of employees where the employer voluntarily recognizes the union based upon a belief that a majority of its employees want to be represented, or in the construction industry where an employer can sign a contract with a building trades union and compel its employees to join the union. But for the most part, there is a period of time between one month and two months in which both the employer and union are allowed to communicate their views about unionization to the employees, who then vote by secret ballot. The Labor Board has elaborate rules concerning what may or may not be said during an election campaign, and has the right to reverse the results of a union loss for egregious employer misconduct.
Organized labor seeks through the EFCA to make its “win rate” 100% by avoiding elections entirely. Under the EFCA, when a union obtains signed authorization cards from more than half of an employer’s workforce, the union submits the cards to the National Labor Relations Board, which then issues a certification granting the union legal bargaining status. Under the EFCA, the employees would not have the right to vote, and the authorization cards alone would carry the day, even if they were forged, even if the unions made misrepresentations when obtaining signatures, and even though the union used pressure tactics to obtain signed cards.
The EFCA also solves the problem for a union of negotiating a contract. Presently, once a union is certified as the bargaining representative of a company’s employees, the company and the union engage in collective bargaining with the goal of reaching a fair contract. For a period of one year, the union is presumed to be the representative of the employees and most contracts are completed within a few months of certification by the Board. The EFCA would change that and give the union the right to have the terms of the new collective bargaining agreement determined by an arbitrator. Under the EFCA, bargaining would have to commence ten days after the union submits a written request for bargaining. After the expiration of 90 days from the commencement of bargaining, either party is entitled to request mediation through the Federal Mediation and Conciliation Service. If mediation fails to produce an agreement on a contract within 30 days, then both the non-economic and monetary terms of the agreement are submitted to an arbitration board. This is called “interest arbitration,” and has existed in the public sector for many years, especially with regard to police and firefighters. Interest arbitration is rare in the private sector, because employers understandably do not want their wages, fringe benefits, and contract terms to be decided by a third party, as opposed to the give and the take of negotiations.
Interest arbitration is a time consuming and expensive process, and can result in the imposition of unreasonable contract terms and expensive wage and fringe benefit requirements on the employer. The unions will want the arbitrator to require employers to contribute to underfunded union pension plans. Many of these plans are failing, and the employers could be exposed to increasing contribution rates to bail out the pension plans, or even withdrawal liability at a later date. The experience in the public sector is no endorsement of interest arbitration for the private sector. No management labor lawyer at Hinckley, Allen & Snyder or anywhere else would ordinarily recommend that a client agree to interest arbitration.
The EFCA also creates powerful and draconian weapons for the NLRB to use against employers. Under present law, if an employer discharges an employee for exercising rights guaranteed by the National Labor Relations Act, such as the right to engage in union organizing, the Board has the right to order reinstatement and full back pay after unfair labor practice charges are filed and proved. Under the EFCA, the Board could order back pay plus twice that amount as liquidated damages, for employees improperly discharged before the execution of a first collective bargaining agreement. In addition, the Board would have the right to order civil penalties of up to $20,000 for each violation of law where it determines that the employer acted willfully or repeatedly. These penalties bear no relation to the actual harm caused by violations of federal labor law, but are designed to make an employer think twice before taking any action against an employee, even where the employee engaged in misconduct and the discipline is wholly proper. Unfair labor practices are in the eyes of the beholder and the potential costs to an employer under this proposed law are daunting.
WHAT TO DO
There will be intense lobbying on both sides of the EFCA issue in the coming year. The U.S. Chamber of Commerce, the Associated Builders and Contractors, and other employer organizations can be expected to do their best to educate senators on the truth about this ill advised legislative proposal. Whether our clients participate in this lobbying effort is a matter of individual choice and the firm does not take a position on the subject. However, there are certainly steps that can be taken now to help defend against the brewing storm:
- Employee rules and regulations/employee handbook – are the rules governing employee conduct fair and equitable? Are they current? Does your company provide an avenue for employees to raise their concerns to management? Do you have a valid “no solicitation” rule to limit union organizing on premises?
- Wages and benefits – are your wages competitive for your industry and location? If there will be no wage increase this year, is this policy followed across the board or only for hourly workers? How have you communicated such decisions to employees, i.e. do they understand what you’re doing and why you’re doing it, or is it all a mystery? With regard to fringe benefits, are these consistent with what other companies in your industry and location are doing? Keep in mind that health care is of paramount concern to employees in this economy, even beyond more innovative fringe benefits. If your company is not paying bonuses this year or is not contributing to profit sharing plans for employees, have you developed a way of communicating these decisions to your employees so that they understand what has been done, why this has been done, and what to expect in the near and not so near future?
- Communication – employees in most companies will report on an employee survey that the company does not communicate often enough or well on matters of importance to employees. Executives who are focusing their attentions on holding a business together are not likely to be thinking about employee communications, but given the storm clouds ahead vis-à-vis union organizing, this should be a priority. If you have had layoffs, have you communicated to employees why there are layoffs or the likely length of the layoffs? Do the employees who are on layoff have a reasonable understanding of whether they will be returning to work? Do current employees know whether their heads are next on the chopping block? While no promises can or should be given along these lines, the more you talk to employees about the reasons for layoffs and the expected duration of layoffs, the more likely they are to be understanding. This is the time to increase your personal interactions with employees, not to curtail them.
UNION AVOIDANCE INITIATIVES
During an actual union organizing drive, employers need to educate their employees on the disadvantages of unionization, such as union dues and strikes. An employer in the throes of an organizing drive will typically hold small group meetings, communicate to employees in writing, show films, and have top management speak to the employees. This may not be advisable where there is no ongoing union organizing activity. An employer might inadvertently create questions about unions where none appear to exist. A program out of the blue aimed at employees generally could be misconstrued and actually be harmful to management’s goals.
By way of contrast, educating supervisors is an entirely different matter. Supervisors are the first line of defense in any union organizing campaign. Indeed, they can spot union activity long before senior management is aware of it and should serve as an “early warning system” for union activity. On the other hand, badly trained or insensitive first line supervisors can do a great deal of harm and drive employees to the point where they look to outside representation. Since supervisors can make or break a union organizing drive, or even generate one, we think this is the time for employers to be proactive with their supervisors. First line supervisors who have the right to hire, fire, responsibly direct the workforce or adjust grievances, etc., or recommend such actions, are ineligible for unionization under the National Labor Relations Act. They need to be educated as to what kinds of on site activities suggest that union organizing is ongoing. They need to understand the mechanics of union organizing, from the signing of authorization cards through the filing of an NLRB petition. They also need to understand the importance of fair and equitable implementation of rules and the avoidance of favoritism, as ways to make unionization less attractive to employees. Finally, they need to understand what conduct is prohibited to management during a union organizing effort, such as threatening employees, interrogating employees, making improper promises to employees, and engaging in illegal surveillance of employees.
Given what we expect to see in the area of union organizing over the next year, an early education program aimed at supervisors and other management employees who deal with rank and file workers makes a great deal of sense.