The Battle Over the Board and the Future of Employee Voice in the U.S.

After years of laboring in relative obscurity, the National Labor Relations Board (NLRB) has recently become the target of frenzied attack. Three recent Board actions—the new notice-posting rule, the new election procedures, and the Boeing complaint—were particularly controversial. Let us briefly consider these three actions before turning to some of the larger implications for the future of unions and the future of employee voice more generally

Much Ado Over Notice Posting and Election Timing

Employers are now required to post notices informing employees of their rights under the National Labor Relations Act (NLRA), much like the notices employers already post under every other major federal workplace law. The storm of controversy surrounding this simple requirement just goes to show that the NLRA is not like any other major federal workplace  law. Informing employees of their rights under the NLRA is controversial because employee rights under the NLRA—over seventy-five years after its enactment remain controversial.

The hullabaloo over the Board’s new election rules is equally revealing. Employers characterized the battle over the Employee Free Choice Act (EFCA) as “a firestorm bordering on Armageddon.”1 And they won. In hindsight, the campaign for card check under EFCA was perhaps too easy to caricature and too hard to defend—even to some of labor’s natural allies.

What could be wrong, after all, with letting workers cast their ultimate vote about unionization secretly, avoiding even the appearance of pressure from organizers?

The Board’s new election rules do just that: they preserve the secret ballot while wringing a few weeks of delay out of the representation process that precedes it. Yet the Board’s modest action was portrayed as tantamount to enacting EFCA by agency fiat, and led to calls for shutting down the Board altogether by denying it a quorum. One almost suspects that the fight over EFCA was less about preserving the secret ballot than about preserving employers’ power over the timing and the workplace setting for employees’ choice about unionization.

Ironically, the new rules are likely to make little difference in the success rate of union organizing, for they are unlikely to reduce, and might even increase, the overall volume of anti-union activity and expenditures. Employers will have less time for “crisis intervention” once they become aware of active union campaigns. But that will be all the more reason to take “preventive” anti-union measures in the many more workplaces in which employers fear future union activity. The message from labor relations consultants will be: “Don’t wait ‘til it’s too late!”

A serious question for unions is why that message is so effective. Why do U.S. employers so desperately resist unionization and collective bargaining (as well as labor law reforms that make those things more possible)? That brings us to the recent dust-up over Boeing, which illustrates one major plot line in the complex story of falling union density.

Boeing and Union Decline: The Tip of the Iceberg

Falling union density has at least four dimensions. First, in the normal processes of “creative destruction” in a capitalist economy, some business operations die every year, freeing up capital for new operations. Some of those that die are unionized; all of the new ones are born non-union and remain so until a majority of employees choose union representation. So even without employer resistance to unions, constant new organizing would be required just to keep union density from falling.

Second, among the operations that shrink or die each year, the attrition rate will be higher for union operations that compete with non-union operations in the same product market. That is because unions generally increase labor costs more than they increase productivity (and therefore reduce profits). We know that unions bring higher wages and benefits—that is, after all, a major source of their appeal to workers. Moreover, after decades of empirical research, labor economists generally agree that unions have little net impact on productivity. That means that, on average, union firms will have higher prices, lower profits, or both; they will be less successful in competitive product markets and capital markets; and their attrition rate will tend to be higher through the normal operation of market forces.

This is not to deny the much-touted possibility of labor-management partnerships that raise both productivity and wages. Achieving these productivity gains requires mutual trust, a cooperative labor relations climate, and skilled and creative management—a combination that is too rare these days to show up in the aggregate data. It takes two to tango.

Third, union operations are even more likely to shrink or die if firms deliberately direct investment and production away from union facilities and toward non-union facilities. And they do: union avoidance as such is a major, routine consideration in employer decisions regarding where to locate facilities and production, and whether to invest in modernization or expansion of existing facilities.

Fourth, employers fight very hard, both within and beyond the limits of the law, to avoid new union organizing.

In short, in a decentralized collective bargaining system like ours, in which union operations are nearly all in competition with non-union operations (even within the same firm), and given the consequences of unionization for costs and profits, employers will predictably seek to resist and avoid unions—and they may be punished by product and capital markets if they fail to do so.

So if the question is whether economic factors or employer resistance is a bigger cause of declining union density, the answer is “yes.” Employer resistance is largely (though not entirely) fuelled by economic factors, especially as more product markets are exposed to greater competition through deregulation and globalization.

Some of the actions that management takes to avoid and resist unionization (parts 3 and 4 of the story) violate the NLRA. The law of union organizing permits a good deal of employer speech that predictably discourages unionization; even when employers do cross the line, they face paltry remedies that predictably under-deter illegality.

Some forms of union avoidance in capital allocation decisions are also unlawful under the NLRA—and they may be unlawful even if they are economically rational. Firing union activists may be rational, given the higher wages, constraints on managerial discretion, and greater potential for work stoppages that unions bring; but it is still unlawful. Similarly, moving production to a right-to-work state to avoid those same costs may be both rational and unlawful.

Of course, the NLRA does not prohibit employers from considering labor costs—even costs associated with unionization—in making capital allocation decisions. It is not easy to draw the line between lawful economic motives and unlawful anti-union motives even when existing union jobs are eliminated through relocation or partial shutdown. Deliberate channelling of new production to non-union or union-unfriendly locations presents a tougher case, for it is harder to identify employees whose union activity was discouraged, and harder to show an intent to discourage union activity… unless the employer announces it, as Boeing more or less did.

Boeing repeatedly stated that a new production line was being directed away from Washington—where it would inevitably be unionized—to South Carolina, mainly to avoid the cost and disruption of strikes. These statements and actions quite plainly discouraged Boeing’s Washington employees from exercising their Section 7 rights. But the greater impact may have been on Boeing’s South Carolina employees, who voted to decertify their union in 2009, according to one employee, in order to make “North Charleston” look more appealing to Boeing when its location for the second assembly line is selected.”

So the case against Boeing was quite strong under existing law. The fact that it provoked such controversy is just further evidence of the tattered consensus over labor rights. More important and troubling, however, is the fact that cases like Boeing are just the tip of a gigantic iceberg of union avoidance decisions, most of which are either not actionable or not provable.

Hope for Union Revival?

So how and where can unions thrive? Obviously, unions can thrive only if unionized employers can thrive; and unionized employers operate within product markets and financial markets that reward profits. Several lessons follow.

First, as unions well understand, they can help make unionization sustainable by raising the floor on cost-based competition, for example, through legislation that takes some wages and benefits (health and pension benefits, e.g.) out of competition, at least within the relevant jurisdiction. If these standards are enforced (a big if), they can put a floor on how low low-road employers can go in undercutting decent labor standards.

Second, unions must help enable high-road employers to compete successfully on the basis of higher productivity so that they can afford to pay for higher wages over the long haul. The more often one sees collective bargaining going hand in hand with productivity and profits, the less incentive employers will have to avoid, escape, and resist unionization (and the more willing they will be to enter into voluntary recognition agreements, for example).

Third, unions and other worker advocates should help ensure that responsible employers get reputational and other rewards. Responsible employers are those that treat employees well, pay decent wages and benefits, and respect their rights—whether or not their employees are represented by a union. If “good employers” can command higher product prices, share prices, or both, they can better sustain higher wages (and that makes unionization more viable in both those companies and their competitors). This has been an animating premise of the decades-long movement for corporate social responsibility (CSR).

The reality of CSR is clearly less luminous than its public relations depiction; yet it is more substantial than many skeptics thought possible. That is especially true if one includes under the CSR umbrella the corporate commitment to equal opportunity and workforce diversity. Major corporations’ diversity policies and practices go far beyond the commands of anti-discrimination law, and are judged both internally and externally against a rising benchmark of “best practices.”

Expanding Outlets for Employee Voice (and Reconsidering “Company Unions”)

Could the realization of “employee voice” become part of the social responsibility of responsible employers? The corporate workforce diversity movement suggests a model by which it could. And it should. Employees want a greater voice at work, and they need a greater voice, in part to enable them to realize the statutory rights and labor standards to which the law entitles them.

For these and other reasons, all employees should have a right to participate meaningfully in decisions affecting their working lives. And they should not have to struggle to get that right. Indeed, unions should lead an effort to define responsible corporate behavior to include institutions of “employee voice,” including but not limited to unions. In other words, it is time to open the door to some non-union forms of employee representation that are currently unlawful under Section 8(a)(2).

Section 8(a)(2) bans employer domination of or assistance to “labor organizations.” The latter term is defined extremely broadly to include not only organizations that purport to bargain collectively, or that employers use to fend off the bargaining demands of independent unions that claim a majority, or that are instituted in the wake of union organizing activity. It is unlawful for employers to assist or set up virtually any organization through which employees might meaningfully raise workplace concerns with their employer.

The history of company unionism, against which 8(a)(2) was directed, is complex. It included many practices—such as discrimination against union activists and refusal to recognize majority-backed independent unions—that would violate the Act even apart from Section 8(a)(2). Many company unions were a sham (and some of those sowed the seeds of independent union organizing); others were genuinely valued by employees. All in all, it seems important to revisit these issues in the modern era, and in light of developments over the past seventy-five years.

First, it is worth observing that nowhere in the world does the law broadly prohibit voluntary forms of employee representation as it does in the U.S. (Indeed, in many developed countries, the law now mandates some form of employee representation at the workplace.) That alone should cast some doubt on the assumption that allowing non-union representation structures will necessarily impede union organizing.

Second, consider what U.S. workers say they want. Among non-union employees, 30 to 40 percent say they would like to have a union. But over 80 percent say they would like to have jointly-run employer-employee committees of a sort that violates Section 8(a)(2).19 Indeed, when asked whether they preferred an organization with which management cooperated even if it had no power, or an organization that had more power but that management opposed, respondents chose the former by a margin of nearly three to one (63 to 22 percent).

Employees’ apparent preference for cooperative non-union forms of representation is partly an “adaptive preference”: employees know that employers vehemently oppose unions, and that makes unionizing difficult, risky, and less likely to bring gains. But that is the world that these employees live in, and no imaginable change in labor law is going to change that. Employees want some collective voice at work, even if it is a less powerful voice than unionization and collective bargaining would bring.

Consider also some intriguing data on what U.S. workers say they have. In one recent study, 34 percent of non-union respondents reported having some form of management established representation structure at work.

These are not identity-based affinity groups (which were separately tracked); nor are they mere “quality circles.” Nearly 80 percent of these representative bodies consulted with management over wages and benefits at least to some extent. Employee participants rated these representation schemes highly in terms of consulting with workers (54 percent) and standing up for them (51 percent).

We know very little about how these management-established schemes function. (Although many employers appear willing to violate Section 8(a)(2) by creating these structures, few appear willing to discuss them publicly.) They operate in the shadows, with no regulation and no scrutiny of “best practices” or abuses.

Employee representation schemes should be brought out into the open, studied, and regulated rather than simply banned. How they should be regulated, and the politics of any such reform, are complicated subjects for another day.

Non-union employee representation structures are not a substitute for collective bargaining. Even with much-needed labor law reforms, U.S. workers will continue to have to struggle for the economic power that unions bring. (And employers will continue to struggle—probably quite successfully—to prevent or defeat their unionization efforts.) But employees should not have to struggle to achieve a modicum of participation in workplace governance. That should be among the rights that all employees enjoy, and it should be among the obligations of all responsible employers to afford it.

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