Antacid
National Review’s Peter Kirsanow says EFCA’s arbitration provisions are no good:
As nervous as employers are about card check, it’s EFCA’s first contract mandatory arbitration provisions that have businesses ordering antacids by the truckload. Under EFCA, if the company and union fail to reach agreement on a contract within 120 days after the union requests bargaining, the matter will be referred to an arbitration panel that will actually write the contract. That contract is binding for two years. I’ve negotiated more collective bargaining agreements than I can remember, but I can’t remember too many times when an agreement was reached on an initial contract in four months. It sometimes takes that long just to agree upon the shape of the table.
What if an arbitrator mandates a wage scale that makes the employer uncompetitive? What if the arbitrator puts the company into a pension plan that renders the company unmarketable? Can the arbitrator require interest arbitration in exchange for a no-strike clause? The questions are interminable.
This seems like a somewhat silly worry. A national union that just invested a lot of time and energy in organizing a new workplace has no interest in acquiring a contract that simply drives the company out of business. Nor do the newly organized workers have any interest in acquiring such a contract. And, of course, corporate management won’t want such a contract. So why would an arbitrator come up with one?
As to the point that it’s rare for an agreement to be reached within four months, that’s kind of the point of the arbitration clause — to motivate both parties to try to reach a rapid agreement in order to avoid the arbitration process.
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October 22nd, 2008 at 2:26 pm
This isn’t the stupidest thing posted on the corner right now–it’s just standard-issue union fearmongering.
Check out the bit on Obama’s supposed ties to Raila Odinga.
October 22nd, 2008 at 2:31 pm
Thanks for attacking this argument.
Currently employers have every incentive to delay reaching an initial agreement. For instance, the NLRB will not process a petition to decertify the Union within one year of it being certified as representative. Therefore, employers frequently drag out negotiations by refusing to meet at appropriate times, refusing to agree to even minor terms (such as dues checkoff), demanding that the Union agree to ridiculous terms (such as, no right to arbitrate or appeal disputes concerning after contract interpretation or discipline), etc.
The more delay, the more discontent among the rank-and-file (discontent that the employer uses its resources and exclusive access to employees to blame on the Union) and the greater likelihood the employer/dissenters will seek to displace the union. This tactic undermines the express purposes of collective bargaining law, which were enacted to improve efficiency, labor relations and encourage collective bargaining.
Finally, the complaint that the EFCA raises more questions than it answers is a lame defense. Labor law has been built on incremental development by judges and arbitrators over the past 70 years. There also probably are studies about the effects of interest arbitration on bargaining, at least in public sector, where many jurisdictions permit or mandate it in certain circumstances (public safety context, etc).
October 22nd, 2008 at 2:35 pm
This isn’t the stupidest thing posted on the corner right now
I’m sure “poopy poopy poopy poop poop poo” wouldn’t be the stupidest thing posted on the Corner right now.
October 22nd, 2008 at 2:36 pm
A question glossed over by the NR piece as well as the TP summary is, how is the arbitrator selected?
It seems like that arbitrator will have a significant amount of power. If he is generally pro-union, it creates an incentive for the union to stonewall, knowing that it will get a better deal via arbitration than it could get via negotiation. The reverse becomes true if the arbitrator is generally pro-management. Given this incentive toward corruption, I would predict that it’s overly optimistic to assume that both parties will want to avoid arbitration.
Also, I’m sure the auto workers’ union didn’t think that the pension liabilities introduced in its union agreements with GM decades ago would put GM at a massive competitive disadvantage against foreign/non-union carmakers and thus drive it out of business, and yet here we are.
October 22nd, 2008 at 2:37 pm
A national union that just invested a lot of time and energy in organizing a new workplace has no interest in acquiring a contract that simply drives the company out of business. Nor do the newly organized workers have any interest in acquiring such a contract.
I don’t think this is an idle fear. The problem is that the union, the arbitrator and the corporation all have different levels of information about the viability of the company. The company is always going to argue that increases in compensation will increase the risk that the company will fail, and the union will always argue that the company is overstating the risk.
October 22nd, 2008 at 2:38 pm
patrick made essentially the same point in his second paragraph above, but i just want to emphasize that in this union lawyer’s opinion, the whole reason that it “sometimes takes that long just to agree upon the shape of the table” is because under current law employers have good reason to delay productive negotiations. if there’s a newly certified union, the parties have a year to negotiate a contract. after that, the union could be decertified.
any employer that doesn’t want to have a union and loses an election has every incentive to delay. delay both runs out the clock on the one year period and increases employee discontent with the union because without a contract the union hasn’t gotten them anything. if the employer can stall long enough, it’s usually quite easy to find disgruntled employees who want to file a decert. petition.
October 22nd, 2008 at 2:40 pm
Clearly written by someone who hasn’t actually been through a union contract or arbitration process. On two separate occasions now I have been with a company that has gone to an existing union and said “this division is not competitive. It has not made a profit in X years. If we cannot change wages or change the work balance we will be forced to close the division.”
In both cases the union refused to negotaitate any change in the wages or work balance between divisions. And in both cases we have had to close the division, with the blessing of an arbiter from the NLRB, because businesses are not obligated to keep open non-profitable divisions. I’m not talking about closing a division just to get rid of a union – I’m talking about ending a 10 year drain on profitability when the union was unwilling to work with the company.
My direct personal experience is that union business agents will drive businesses to fold rather than accept lower wages than what they like. I don’t have a problem with unions – I think they’re existance is a necessary check on the rapacious aspects of corporate culture. But don’t fool yourself into thinking that they are an unalloyed good, or that they don’t make dumb decisions based on ideology rather than pragmitism.
October 22nd, 2008 at 2:49 pm
Matthew, you should check out Ontario’s experience in the 1990s. The NDP introduced card check and mandatory first contract arbitration, and the result was no new jobs until Ontario’s most right-wing government ever was elected in 1995 and repealed it all. Bob Rae, who would otherwise proably be Prime Minister of Canada, recanted, and is still quite possibly unelectable as a result.
October 22nd, 2008 at 2:53 pm
As to the point that it’s rare for an agreement to be reached within four months, that’s kind of the point of the arbitration clause — to motivate both parties to try to reach a rapid agreement in order to avoid the arbitration process.
You are too smart to say stuff like this. Whether the alternative to a negotiated agreement is arbitration or a strike, there is a potential gain if the parties can agree to avoid it — and reasons internal to the logic of bilateral monopolies that these gains are sometimes lost. What arbitration does is change each party’s threat position. There’s just no doubt that increases the risk and costs of employing people, which in turn means fewere people get employed.
October 22nd, 2008 at 2:54 pm
This isn’t the stupidest thing posted on the corner right now . . . Check out the bit on Obama’s supposed ties to Raila Odinga.
Are you suggesting that Barack Obama isn’t responsible for the post-election violence in Kenya?
October 22nd, 2008 at 3:00 pm
I am pro-union, but one need only look at the UAW’s negotiations with U.S. car manufacturers to see an example of short-sighted demands by labor. Union auto workers are very generously compensated and have job security that is a dream relative to workers in other industries. Despite overwhelming evidence that their companies are spiraling the drain, they have resisted any efforts to hold their compensation and benefits at just fantastic instead of unf*ckingbelievably great. In good times, I don’t begrudge an auto worker’s making nearly six figures a year, but these are not good times.
October 22nd, 2008 at 3:05 pm
Frankly, Matt, I’m surprised at the parallel universe you’re living in. Unions drive factories, divisions, entire companies under, primarily by negotiating agreements that are fine during good times, but terrible when times are bad.
Because, (big surprise here), the negotiators are focused on the short term benefit to their workforce, not to the long-term stability of their company. Very few people care about the long term – they’ll happily rape the future in order to avoid a gram of pain today. Witness Republicans on the environment and Democrats on economics. Witness the monstrously underfunded public pension plans that plague our cities coast-to-coast.
No one in politics, at any level, is concerned at all with anything beyond the next election or two. That you think otherwise is noble of you, but foolish beyond measure.
and the reason why is simple – the one who wins the election is the one who promises the most goodies for the people who elect him, not the one who promises to balance everyone’s concerns. This is why neither McCain or Obama are an attractive choice for me.
October 22nd, 2008 at 3:05 pm
Speaking from my public sector labor experience, reaching a collective bargaining agreement in 4 months is difficult unless the union is willing to take whatever is shoved across the table. Most arbitration clauses and statutes require you to reach impasse before requesting arbitration. While this is a fairly subjective standard, I think it is preferable to what seems to be this arbitrary 4 month limit.
Considering further that this would be the first CBA for the unit and it applies to private sector bargaining (where everything under the sun is mandatory), I think 4 months is even more unrealistic.
I disagree with the idea in the first instance that an arbitrator should determine wages, benefits and all other terms and conditions for an entire bargaining unit. An arbitrator resolving an impasse in an existing bargaining relationship is a necessary interference. This is something else entirely since an arbitrator can choose to simply not address pre-existing terms and conditions. Under the type of compulsory arbitration envisioned by the EFCA, both sides would be putting tremendous faith in this arbitrator (whose opinion is barely subject to judicial review unless this is modified in the EFCA) who may or may not have the expertise to work out this sort of thing. It’s hard enough to find one competent enough to resolve an impasse, let alone create a CBA from scratch. And lets not forget that from a labor perspective, interest arbitrators are usually under tremendous pressure from management to “do the right thing” for the sake of their career.
Count me as a union-side lawyer who doesn’t think this is the best idea. On the other hand, I understand the policy reasons for putting it forward, so when I come up with a better idea I’ll let you know.
October 22nd, 2008 at 3:13 pm
In full disclosure, I’m also a labor lawyer. I’ve seen plenty of companies under no threat of bankruptcy (hello, cable and other utilities!) fight vigorously against union organizing and against reaching an agreement. Many times, employers cry poor mouth AND refuse to share their financial information with unions so that the business agents can determine whether the employer is being honest or merely trying to increase profits through lower wages.
re: arbitrator selection: any arbitrator looking to get selected again (usually the parties get to eliminate options until there is at least one arbitrator who has not been rejected by either side) will not tip dramatically in favor of one side or another. Being known as pro-union or pro-mgt is bad for business. Not to say it doesnt happen. But many arbitrators “split the baby” and look to the health of labor relations and the enterprise.
I personally have no experience of a business agent or arbitrator trying to drive a company asunder. Companies do a fine job of going bankrupt all by themselves
October 22nd, 2008 at 3:17 pm
Because, (big surprise here), the negotiators are focused on the short term benefit to their workforce, not to the long-term stability of their company.
Actually, IIRC, a lot of the problems car manufacturers are having isn’t because unions negotiated too aggressively in the short term, but because they were willing to give up short term demands in exchange for benefits promises from the employers that would be fulfilled decades down the road, which the car companies now realize they can’t pay.
October 22nd, 2008 at 3:28 pm
they were willing to give up short term demands in exchange for benefits promises from the employers that would be fulfilled decades down the road
Exactly! Car companies padded bottom lines by holding down raises and now they’re asking unions to hand back the pension and healthcare IOUs the executives gave them. And acting like it’s the patriotic thing to do.
Oh please.
October 22nd, 2008 at 3:36 pm
It always helps to read the bill.
Here is the text of Section 3:
A few points:
(1) Resort to arbitration is not automatic. The bill gives either party the right, after 90 days of negotiation, to request mediation from the FMCS. In theory, the parties can continue to negotiate as long as they like.
(2) After 30 days of mediation, the dispute will be referred to arbitration, unless the parties agree to extend the mediation. The parties can in theory continue the mediation for as long as they like.
(3) The arbitration panel is “established in accordance with such regulations as may be prescribed by the [FMCS].” It is not clear whether the FMCS will use its already existing rules or will adopt new rules for this type of arbitration. The existing rules are here. Under the existing rules for selecting the panel, it does not appear that the parties would be able to determine whether their panel would be pro-union or pro-management.
October 22nd, 2008 at 3:48 pm
Very few people care about the long term – they’ll happily rape the future in order to avoid a gram of pain today. Witness Republicans on the environment and Democrats on economics.
Democrats on economics? It’s Democrats who are raping our economic future in order to avoid a gram of pain today? Have you looked at the national debt figures under Clinton and Bush? Perhaps you shouldn’t be accusing other people of living in parallel universes.
October 22nd, 2008 at 4:01 pm
Anyone who writes that “despite overwhelming evidence that their companies are spiraling the drain, they have resisted any efforts to hold their compensation and benefits at just fantastic instead of unf*ckingbelievably great. In good times, I don’t begrudge an auto worker’s making nearly six figures a year, but these are not good times…” did not pay attention to the UAW bargaining at Ford, GM and Chrysler last year.
Workers at those companies agreed to massive concessions. The responsibility of providing health care to retirees was shifted from the companies to the union through the new “Voluntary Employee Benefit Associations.” These were not pleasant decisions for the workers. Thousands of workers have taken buyouts to leave their jobs.
The UAW isn’t perfect, but to arguing that it hasn’t made any compromises with the Big 3 is like arguing that ACORN caused the financial meltdown.
October 22nd, 2008 at 6:37 pm
“Actually, IIRC, a lot of the problems car manufacturers are having isn’t because unions negotiated too aggressively in the short term, but because they were willing to give up short term demands in exchange for benefits promises from the employers that would be fulfilled decades down the road, which the car companies now realize they can’t pay.”
Actually it is both. The entry level UAW worker was never worth $25 (inflation adjusted to 2003) and the average pay with overtime should never have put the average UAW worker anywhere near $80,000 per year. ALSO, the UAW traded even more crazy demands for really bad pension promises.
October 22nd, 2008 at 7:25 pm
A national union that just invested a lot of time and energy in organizing a new workplace has no interest in acquiring a contract that simply drives the company out of business. Nor do the newly organized workers have any interest in acquiring such a contract. And, of course, corporate management won’t want such a contract.
Building on what others have said, any union that is newly elected (either for a previously non-unionized workplace or when taking over for another union) has a strong incentive to demand significantly higher wages, benefits, etc. from the company to prove that it’s of value to employees. That incentive exists regardless of whether the company can pay those higher wages and benefits. If a union got elected and then did little to improve wages, that would be the talking point of the every other company the union tried to organize. Union leaders also will always argue that the company could cut costs elsewhere, or use some fabulous plan to increase revenues, to meet its demands. Even if union leaders know the contract is unaffordable, some would rather have it so they can re-negotiate a concessionary contract from a position of strength rather than weakness.
Workers presumably don’t want to drive the company out of business, but they have limited information about what the company can afford to do or the outlook facing the company. Moreover, union leaders will tell them that management is lying, the contract is afforable, etcetera. They’ll be told that any claim by management to the contrary simply is a negotiating ploy.
Finally, while I can’t say how often it happens, I’ve seen one time where mediators proposed a contracts that was plainly unafforable for a company in an industry that was in severe distress. The company filed Chapter 11 months later. Arbitrators under this act could do the same thing.
October 22nd, 2008 at 10:13 pm
A national union that just invested a lot of time and energy in organizing a new workplace has no interest in acquiring a contract that simply drives the company out of business. Nor do the newly organized workers have any interest in acquiring such a contract.
This presupposes that a national union has a good idea of what will actually make a business uncompetitive, as opposed to what management says will make it uncompetitive. My experience is that line employees themselves (and on more occasions than is healthy, managers and executives) don’t have a good sense of that. I think you’re being way too sanguine about this. Just because it doesn’t serve any one’s interest doesn’t mean it won’t happen.
October 23rd, 2008 at 12:13 am
Yet another labor lawyer here to offer my 2 cents, mainly regarding the folks who say that union’s drive companies out of business, etc. As to the argument that sometimes union’s don’t agree to certain changes and as a result, divisions are shut down or companies go out of business, this is clearly the exception rather than the rule. I won’t deny it happens, because like any other job sometimes your labor officials just aren’t that great. Generally speaking, though, people at the bargaining table (both Union and Management) aren’t stupid. Ideally, you want labor policy to provide the space for collective bargaining and pressure to get it done without putting the thumb too heavily on the scales in favor of one side. Basing policy on worst-case scenarios just isn’t helpful.
As to the UAW and the car industry, it amazes me that people will continue to blame the Union for pay, pension and health care agreements entered into by BOTH parties. It is not the primary responsibility of the Union to help management avoid making stupid long-term decisions. It’s certainly a factor, because a Union doesn’t want the jobs to disappear, but if management thinks it’s workable I don’t understand why we should assign the Union the responsibility to foresee problems the company hasn’t. As those problems have now become apparent, the UAW has made massive concessions.
Finally, it’s true that going to arbitration carries a risk for both parties. This is one of the reasons mandatory interest arbitration can be a good thing. As already said, it pressures both parties to reach an agreement. If an arbitrator ordered a contract that was so favorable to the union that it would result in a business closing down, the parties can agree to amend it. An advantage to management is that it lowers the risk of a strike.
October 23rd, 2008 at 12:30 am
I’m surprised all the experienced negotiators here haven’t made the obvious response to Kirsanow’s “4 months is too short” whine:
“Okay, you say 4 months is too little time. Make a counter-proposal.”
If the GOP wanted to put 6 or 8 months on the table, everyone in labor would be willing to sign off on that if it got the bill passed. The principle of having leverage against surface bargaining is the point here — the 4 month timeline is kinda arbitrary.
October 23rd, 2008 at 9:23 am
I’ve negotiated contracts and conducted arbitrations from the union side. Kirsanow is right that it sometimes takes four months to decide the shape of the table. That’s because it’s presently in the employer’s interests to delay everything, for any reason or no reason at all. Why rush through a process that decreases your “flexibility” and increases your cost when it ends?
Neither side is going to want to leave the contract’s formation to an arbitrator. Both sides will want to retain some control over what is in the contract. Besides, arbitrators are notoriously pro-company on economic issues (and far less so on discharge/discipline issues). I can’t tell you how many times I’ve seen arbitrators contort themselves to misread clear contract language in favor of the union because the company has raised the spectre of economic hardship. Every arbitrator drafting first contracts is going to draft gripped by the fear that they’ll be known as the one who put X Corp. out of business, and that their own business will dry up.
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