A steady decline in union membership has led union organizers
and sympathetic politicians to introduce "labor reform" legislation
designed to make it easier for unions to gain representation rights
over more workers without becoming more accountable to those
workers. The main labor reform bill before Congress, the Employee
Free Choice Act (H.R. 800), contains two particularly problematic
provisions. "Card check" recognition, which has received the most
attention, would hurt workers by doing away with secret-ballot
elections for unionization. The second provision would force
"interest arbitration" on employers and unions, shifting their
right to negotiate contracts to unaccountable government officials
and increasing the risk of bad contracts. Congress should not force
employers and unions to take this gamble.
Short-Circuiting Fair Negotiations
Arbitration is a valuable way to resolve disputes and is
frequently used in labor relations to resolve grievances that arise
under existing contracts. But the Employee Free Choice Act would
use arbitration to create a contract when parties are unable to
agree. This is known as "interest arbitration," and it is a clumsy
approach seldom seen outside of government.
Currently, negotiations on an initial contract following union
recognition are treated just like those for any other contract. The
parties negotiate in good faith until they settle on terms. If they
fail to do so, the union can call a strike, or the employer can
implement its last offer. EFCA would short-circuit negotiations,
allowing either party to call for a government-appointed mediator
after 90 days. Either party could unilaterally submit the matter to
arbitration after 30 days of mediation, and the results of
arbitration would be binding on both parties for two years.
Uncertainty and Delays
In its current form, the bill specifies few details about how
arbitration would be carried out, but state experience provides
some guide. Michigan has been using a similar arbitration process
for police officers and firefighters since 1969. Michigan's process
is fairly typical among states that use interest arbitration to
resolve bargaining impasses with government employees. The results
are not encouraging for those who favor binding arbitration as a
solution to labor strife.
Based on Michigan's statute, arbitration is supposed to be
quick. Assembling the arbitration panel should take less than three
weeks. Once the panel is named, the first hearing should be held
within 15 days, and hearings are supposed to be wrapped up 30 days
after they commence.
In reality, the process is drawn out. In the early 1990s, only
one out of every six arbitration cases was resolved within 300 days
of petition filing. Since then, the pace of arbitration has
improved, but not dramatically. A review of 29 arbitration cases
resolved in 2005 and 2006 showed that only seven were resolved
within 300 days, fewer than one out of four. On average,
arbitration takes almost 15 months from the date that a request is
filed to the date that a decision is reached. This delay ties up
government resources because arbitrators' awards are retroactive,
meaning that pay raises awarded by arbitration often involve back
pay that local officials must set aside in advance.
This uncertainty about both future pay and back pay is a serious
burden on local governments. In the private sector, these delays
could do even more damage, as uncertainty over future wages and
working conditions would make it more difficult for companies to
recruit personnel or respond to changes in the marketplace.
Empowering Unaccountable Government
Officials
The proposed law does not specify how arbitration panels would
be set up, and federal regulators would have considerable leeway to
establish their own procedures. But one thing is certain: Binding
contracts would not result from management and labor working out
their differences and reaching compromises that they both can
accept. Instead, both sides would be bound by the decision of
arbitrators who are unaccountable and insulated from the results of
their handiwork.
The arbitrator would decide what weight to put on factors like
the financial health of the employer, the compensation levels of
competitors, and local costs of living with little oversight and
virtually no risk that his or her ruling would be overturned by the
courts. Interest arbitration for initial contracts could be even
less predictable, because arbitrators would not have prior
collective bargaining agreements to look to for guidance.
Allowing arbitrators to write their own economic terms could
also tempt them to take the safe path and avoid dealing with the
merits of the parties' arguments by splitting differences down the
middle. For example, if the union wants a 4 percent raise and the
employer would accept a 2 percent raise, the arbitrator might just
settle on the average, a 3 percent raise, without carefully
considering any other factors.
The arbitration process may or may not have the confidence of
both sides. The decisionmakers may be seen as fair and judicious,
or they may be distrusted by one side or both. It would not matter:
The arbitrators' decisions would almost always be final. And the
arbitrators themselves would not have to live on the low wages that
they might force on employees nor suffer layoffs or bankruptcy if
their awards prove too generous.
Conclusion
Interest arbitration is a gamble, one that unions and
private-sector employers seldom agree to take on their own. It is
intended to accelerate contracting but rarely works out that way in
the states that use it. It would put the power to set wages and the
terms of employment in the hands of unaccountable government
officials who would not have to live with the consequences of their
decision. Congress should not force employers and unions to take
that gamble.
Paul Kersey is senior labor policy
analyst at the Mackinac Center for Public Policy, a research and
educational institute in Midland, Michigan. James
Sherk is Bradley Fellow in Labor Policy in the Center for Data
Analysis at The Heritage Foundation.