IRI Intelligence Briefing

News and Developments Affecting the Workplace

Volume Number & Date: 
Vol. 1 No. 9 - June 24 2009

You Ain't Seen Nothing Yet

Service Employees International Union President Andy Stern recently proclaimed, "SEIU is on the field, it's in the White House, it's in the Administration." No hyperbole there. From the Economic Recovery Advisory Board to the federal stimulus bill to the NLRB, unions already are regaining influence in Washington, none more so than SEIU.

SEIU Lawyer is NLRB Nominee

The labor movement has scored two more seats on the National Labor Relations Board, the agency that oversees federal law governing almost all employee relations in the private sector. The President's first choice to fill a vacant Board seat was Craig Becker, who currently serves as associate general counsel to both the SEIU and AFL-CIO.

Becker is a skilled lawyer with sterling credentials. He graduated summa cum laude from Yale in 1978, and received his law degree there in 1981.

Becker's labor philosophy slants sharply pro-union. In a 1993 Minnesota Law Review article, for example, Becker argued that traditional tenets of democracy should not apply in union representation elections. He wrote that employers should be barred from attending NLRB hearings about elections, from challenging election results even with evidence of union misconduct, and from "placing observers at representation elections to challenge ballots." According to the Wall Street Journal, Becker has gone so far as to argue that that any "captive audience" meeting a company holds ought to be grounds for overturning an election.

Also nominated to the NLRB is Mark Gaston Pearce, who has represented labor unions for his entire career, much of which has been in private practice. Pearce is on the Board of Directors of the Lawyers Coordinating Committee of the AFL-CIO.

Assuming Senate confirmation, Becker and Pearce will join Peter Schaumber and Wilma Liebman on the Board. Schaumber, a Bush 43 appointee whose term expires in 2010, is a respected former assistant U.S. Attorney. The President has not yet nominated a candidate to fill the fifth seat on the Board.

Former Union Attorney Named NLRB Chair

Wilma Liebman, a former labor counsel for the Bricklayers and Allied Craftsmen and the International Brotherhood of Teamsters has been appointed NLRB Chair by President Obama.

First named to the Board in 1997 by President Clinton, Liebman is an outspoken proponent of labor unions, as the following passage from the Journal of Labor and Society1 illustrates:

[A]n exclusive orientation toward an individual-rights regime could have troubling political and social consequences. Workers may view the employment relationship in purely individual terms and may fail to grasp common economic interests and the potential of collective action at work, as well as in the public sphere.

Without a functioning collective bargaining system, fundamental economic issues are placed off the table: distribution of wealth, control, and direction of economic enterprises. What institution will be as effective in efforts to minimize the randomness of fortune of democratic capitalism?

And without a strong independent trade union movement, what institution will stand effectively as a counterweight in our democracy to the growing political influence of corporations? What in situation will speak for working people-indeed for the middle class-as effectively?

Labor Department Direction Changing Fast

President Obama's highest-profile pro-labor appointment to date is Labor Dept. Secretary Hilda Solis. She was first elected to Congress in 2000, defeating a nine-term Democratic incumbent 69 percent to 31 percent by focusing on labor and environmental issues.

A strong supporter of the original Employee Free Choice Act, she served as treasurer of American Rights at Work, the only member of Congress to hold a leadership position with the pro-union group. While in Congress, she had a 99 percent "liberal quotient" from Americans for Democratic Action.

The Obama/Solis agenda includes:

  • Plans to add 250 new investigators to its Wage and Hour Division, the first step in what's expected to be a major crackdown on employer wage-and-hour violations. According to Human Resources Executive, the Labor Dept. estimated last year that as many as 70 percent of employers were not in full compliance with the Fair Labor Standards Act.

    The president's nominee to head the division is Lorelei Boylan, currently director of strategic enforcement in the New York Labor Department's Labor Standards Division.

    While in New York, Boylan instituted an initiative that deputizes nonprofit community activists - mostly either members of unions or union-connected groups such as the Association of Community Organizations for Reform Now (ACORN) - to monitor private-sector employer practices. The state trains volunteers, assigns them geographic territories to patrol, and lines them up with contact persons to whom they can report apparent wage and hour violations.

  • A proposed budget increase of $600 million in discretionary spending for enforcement of laws and procedures governing businesses, and sharp reductions in funding to the DOL unit that investigates union misconduct.

Unions in the Administration

Just below the Cabinet level are a number of critical, union-member appointees, including:

  • Anna Burger, SEIU executive vice president, and Richard Trumka, secretary-treasurer of the AFL-CIO, have been appointed to the President's Economic Recovery Advisory Board. They join such notables as former Federal Reserve Chairman Paul Volcker, Harvard economist Martin Feld-stein, former SEC Chairman William Donaldson, and the CEOs of GE, UBS Americas, Caterpillar and Oracle.
  • Michael Kerr, who oversaw finance and administration at SEIU, was confirmed as Assistant Secretary for Administration and Management in the Labor Dept.
  • Patrick Gaspard, SEIU Local 1199's former executive vice president of politics and legislation, is now director of the White House Office of Political Affairs.
  • Ellen Moran, a former AFL-CIO staffer who coordinated the union's corporate campaign against Wal-Mart, stepped down from the White House communications director position to become chief of staff to Commerce Secretary Gary Locke.
  • John Sullivan, SEIU associate general counsel, was appointed to the Federal Election Commission.

SEIU, CNA "Bury Hatchet"

SEIU and the California Nurses Association (CNA/NNOC) have set aside a long-standing, contentious rivalry, bringing together two of the most influential labor voices in healthcare. The two unions announced plans to collaborate on organizing healthcare workers and lobbying Congress to pass pro-labor legislation.

In a joint announcement, the unions said they agreed to:

  • Coordinate organizing efforts, with the CNA/NNOC focusing on registered nurses and the SEIU on other health-care employees
  • Pool resources in support of legislation that will make it easier to organize employees and implement a broad range of workplace regulations
  • Refrain from raiding each other's members
  • Create a new joint RN organization in Florida

The détente of sorts may serve to burnish labor's public image after several much-publicized incidents of union infighting and rivalry. With labor's candidate in the White House and Washington controlled by Democrats, unions are allocating millions of dollars and human capital to forward their political agenda.

EFCA up in the Air

The Employee Free Choice Act continues to be a subject of intense debate, even though Senate leaders shelved it temporarily when they saw they didn't have the 60 votes to overcome a Republican filibuster.

A variety of suggested compromises have been floated, including proposals to remove the bill's card check provision and replace it with expedited elections. Under this provision, election campaigns would last only five or 10 days instead of the now-standard six weeks.

However, many EFCA opponents believe that the bill's provision to institute mandatory arbitration of labor contracts could cause more far-reaching damage to employers than card check. A Wall Street Journal2 op-ed written by a former director of the Federal Mediation and Conciliation Service and a former NLRB chair laid out the case:

Mandatory arbitration is devastatingly bad policy - it throws a monkey wrench into the collective bargaining process. Nothing would more certainly make private bargaining a waste of time. Why make concessions at the bargaining table that would simply move the starting point for arbitration? An arbitration panel's power to dictate terms is virtually limitless. Such panels could impose uncompetitive wage rates and unworkable work rules. Arbitrators could also impose mandatory union dues and discharge for failure to pay. Collective bargaining strikes a balance between the normal desires of management to keep costs down and retain flexibility, and the union's desire to deliver on promises made to employees. Current law provides that bargaining parties are not required to make concessions. Thus, resolving these differences takes time, since sometimes their goals are unrealistic.

As of now, the fate of EFCA is entirely up in the air. The bill's lead sponsor, Sen. Tom Harkin (D-IA), has threatened to force a vote and "let lawmakers vote their conscience" if opponents aren't willing to work with him on a compromise. Without the mandatory 60 votes, however, Republicans could knock it back to the sidelines with a filibuster.

The Cost of Unionization

From the micro level - individual employers - to the macro - the American economy - the business costs of unionized workplaces are considerable. With some form of the Employee Free Choice Act in place, the costs are expected to climb sharply.

America's northern neighbor has had decades of experience with one form or another of card check organizing. Until 1976, every Canadian province3 had only card check organizing - no secret ballot elections. Subsequently, the provinces began moving away from mandatory card check and experimenting with labor elections similar to those in the U.S. As of now, 68 percent of the Canadian workforce is covered by mandatory election laws, with 32 percent covered by card check.

Canada has a union density (percentage of the workforce that's unionized) of 30.3 percent, which is 2.5 times the 12 percent U.S. density. According to the Canadian LabourWatch Association4, card check in Canada has created a fertile field for unions - and has cost the country plenty.

Studies suggest that amid such pervasive unionization, businesses there have experienced a three percent reduction in share price and a 15 percent dip in profits after becoming unionized. Similarly, unionized Canadian businesses have experienced roughly 3.8 percent slower growth than their nonunion counterparts.

Pluses and Minuses

Why are American unions pushing so hard for EFCA? Follow the money.

Andy Stern has estimated that EFCA would increase union membership by 1.5 million a year for the next 10 years. Using a conservative estimate of $425 yearly union dues per member, EFCA could grow union income by more than $637 million each year for the next decade.

But if Stern is right, what would the cost of that bonanza be to American businesses?

A study submitted to Congress5 earlier this year estimated that for every three percentage points gained in union membership, the following year's unemployment rate would increase one percentage point and job creation would fall by 1.5 million jobs.

In other words, if EFCA - with card check or some other mechanism that makes organizing easier, faster and less expensive for unions - took effect in January 2010, and union density jumped from 12 percent to 15 percent next year - from 15.5 million to nearly 20 million members - then the number of unemployed Americans would grow by between 2.3 and 5.4 million by January 2011.

The same study also predicted:

  • An increase in employer wage costs, depending on the industry, of between eight and 22 percent
  • A decrease in plant output of 9.6 percent
  • A decrease in employee hours worked of between one and two hours each week
  • Unionized firms investing 10 percent less in the business than nonunion businesses

So, How Much Will It Cost Me?

Too many unknowns stand in the way of forecasting employer-specific effects of EFCA. Unions want it so badly because it would grow revenues. But even if the current card check provision falls by the wayside in Congress (not a sure thing), such other mechanisms as "quickie" elections also could be very effective.

If Congress passes legislation that makes organizing easier for unions, and if the NLRB and Labor Dept. change the way business and union labor relations are regulated, the impact on employer costs will be enormous.

With increased unionization:

  • Compensation costs will increase. One study of hospital wage costs6 found between five and nine percent higher wages after unionization
  • Non-wage costs will rise
    • Legal costs & additional staff involved with contract negotiations and administration, grievances, mediation, arbitration, lawsuits
    • Unfair labor practice fines of up to $20,000 per incident, plus legal fees and staff resources, plus treble damages for back pay
  • Productivity will drop
    • Unionized employees are given paid time off for union business
    • Lower morale, sick-outs, strikes and a "not my job" mentality
    • More staff required because supervisors are prohibited from performing work that's tasked to unionized employees
  • Flexibility will decrease
    • More rigid work rules
    • Change initiatives require union involvement & approval

"You Ain't Seen Nothing Yet"

Altogether, Washington is in the midst of a massive political realignment not seen in many years. As the political pendulum continues its leftward swing, the importance of the changes noted here will be magnified. For example:

  • The DOL is expected to make a major shift in interpreting the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA), the law that governs financial transactions and administrative practices of labor organizations, businesses, labor consultants - and possibly law firms - and the reports they are required to file. These reports cover activities related to persuading employees about exercising their rights to organize and bargain collectively. The shift is expected to result in much closer scrutiny of business activities and much less oversight of unions.
  • While not a certainty, it's likely the courts will call Al Fran-ken the winner in the bitterly contested Minnesota Senate race, giving Democrats a filibuster-proof 60 vote plurality and opening the door wide for extensive pro-union legislation beyond EFCA.
  • The pro-labor majority on the NLRB could erase all the business-friendly policy changes of the Bush years. Some have suggested that the Board's labor bias could become as pronounced as the Carter administration's in the 70s. Once President Obama's NLRB nominees are confirmed, the board will face a lengthy agenda of issues including:
    • Whether more workers whose jobs fall in the gray area between salaried management and hourly laborers should be allowed to unionize
    • How much freedom workers should have to use company email systems to promote union membership
    • How much access union organizers should have to workplaces
    • What constitutes unacceptable intimidation by employers seeking to oppose union organizing drives
  • The SEIU and AFL-CIO appointees in the White House, sure to be joined by others throughout the administration, could strongly affect employer issues not covered by the Labor Dept. and NLRB.
    n Despite its difficulties, EFCA - in some form - still appears to have a fighting chance to become law. Whatever its provisions, it will make union organizing much easier. Even without EFCA, however, expected actions by the NLRB and Labor Dept. will change the business landscape dramatically.
  • Another indication of what's ahead is the coalition of nursing unions - California Nurses Association/National Nurses Organizing Committee, the United American Nurses, and the Massachusetts Nurses Association - that recently urged Congress to pass legislation mandating national nurse staffing ratios. The unions' reasoning is that it's easier to persuade 535 federal legislators to pass a bill than thousands of state legislators to pass 49 bills (California already having ratios).

As President Obama recently said at a fundraiser in Beverly Hills, "You Ain't Seen Nothing Yet."

FOOTNOTES:

1. Working USA: The Journal of Labor and Society, Vol. 11, No. 1, March 2008
2. Wall Street Journal, March 13, 2009
3. The only nationwide labor laws in Canada govern such federally regulated industries as banks, railways, airlines and telecommunications. Most other businesses that operate in more than one province are governed by provincial laws.
4. www.labourwatch.com
5."An Empirical Assessment of the Employee Free Choice Act: The Economic Implications," Anne Layne-Farrar, LECG Consulting, alayne-farrar@lecg.com
6."Unionization and the Cost of Producing Hospital Services," Journal of Labor Research

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