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

by | Jun 23, 2009 | Employee Free Choice Act

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.


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