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Employee Free Choice Act impacts employment

Management | April 1, 2009 | By:

What would this legislation mean to small businesses?

In 2007, the U.S. Senate narrowly failed to pass legislation that would have changed labor union organizing rules. This same issue was supported by President Obama in his recent presidential campaign, and likely will resurface in upcoming congressional talks. The Employee Free Choice Act (EFCA) is legislation that aims to “amend the National Labor Relations Act to establish an easier system to enable employees to form, join, or assist labor organizations, to provide for mandatory injunctions for unfair labor practices during organizing efforts and for other purposes.”

At the heart of the bill are two issues:

1) The card-check.

2) First contract mediation.

Changes in voting practices

Union organizing, in the form of majority sign-up and secret ballot elections, has been in existence since 1935. What the EFCA changes is that workers would be given the choice of forming a union through an election or through majority sign-up. In the latter case, secret ballots would not be used.

What are some of the possible effects of this process?

  • If not contacted by union organizers, workers have no say in whether their workplace organizes. If organizers have a majority in sign-ups, the remainder of employees may not be contacted or counted.
  • With guaranteed certification under card check, there is no need for a private vote.
  • Fees of 1 to 2 percent will be charged to all employees in dues.
  • With card checks, workers’ free choice is limited by a need to sign under potentially stressful open circumstances.
  • With card checks, how one votes is open to review by union organizers, allowing for possible added pressure from repeated contact by organizers.

Arbitration of contract disputes

The second issue involves a mandatory arbitration of disputes involving the terms of a first contract. Under this rule, if no agreement in union organizing is reached within 90 days, either party may refer the dispute to the Federal Mediation & Conciliation Service (FMCS). If the FMCS is unable to effect an agreement after 30 days, the dispute will be referred to arbitration and the results will be binding on both parties for two years.

What are the possible effects? It is not uncommon for more than 120 days to be used in arbitration of contracts. Without fully utilizing the time needed to come to terms, an arbitrator will figure out what a fair agreement should look like. We are putting control of wages and working conditions into the hands of unaccountable officials.

Arbitration can stifle competitiveness and innovation. In unique circumstances, the arbitrator would not be able to look to prior collective bargaining agreements for guidance. Without this baseline, a company with its own distinctive business model could be forced to adopt the practices of its competitors, forcing it to give up its unique approach to its business and its competitive advantages.

Both parties must adhere to the arbitration decision for two years.

The economic outlook

There are exceptions. NLRB will exempt businesses with a gross volume of less than $3.3 million annually. The NLRB also requires a union to consist of a minimum of three employees who have no supervisory authority, exempting many small businesses from EFCA.

But for many businesses, as stated by Richard A. Epstein (Visiting Professor of Law at New York University), “One of its (EFCA) chief weaknesses, most evident in bad economic times, is that the rigidity of collective bargaining agreements hampers any much-needed downward adjustments in wages and benefits. That rigidity in turn has led to the hemorrhaging of jobs in the unionized part of the automotive industry.

“EFCA does not address job losses in unionized industries. Instead, it hopes to promote union organization by two key steps that in fact pose a mortal threat to the job creation so desperately needed today. No economic wizardry is needed to recognize that the more costly it is to create jobs, the fewer jobs will be created. EFCA is a job killer,” says Epstein.

Patrick W. Hayes, CPP, is a founder and chairman of the board of Fabric Images Inc. in Elgin, Ill. He was elected to serve his first three-year term as a director on the IFAI board of directors in 2005. His concern about this piece of legislation, submitted to IFAI, is shared here with the rest of our readership. This month’s “Connections” column takes a different approach, in the form of an opinion on a current legislative issue in the U.S., from an experienced industry professional. If you’d like more detailed information on the topic, there are many online resources with explanations of, and arguments for and against, the EFCA. For basic coverage, visit or The Review also welcomes your letters to the editor on this topic.

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