Employee Free Choice Act Will Hurt Both Businesses and, Eventually, Employees and The Unions That Demand Its Passage
By By Bob Heiferman & Joe Martin
December 15, 2008

Despite the U.S. and world economies in turmoil, organized labor is continuing to pressure Congress to pass the Employee Free Choice Act (“EFCA”) to “save” the day. According to the unions, implementing the Act would stimulate the economy by allowing unions to organize workers more easily and this would result in a boost to the economy. Unfortunately, organized labor is sadly mistaken.

Aside from denying employees the right to a secret ballot, something protected since the enactment of existing legislation, EFCA contains a mandatory arbitration provision that has received little attention. This arbitration provision carries economic consequences that run contrary to labor’s assertions that the bill would rehabilitate the economy.

The bill would permit a government-appointed third party – who has no stake in an employer’s business and may not have any understanding of the company’s operations – to impose a binding two-year collective bargaining agreement upon a company.

A quick review of history shows why this is a bad idea. In Canada, all 10 provinces once operated under a law similar to EFCA. Today, that law has been abolished in all but four provinces. Recently, an arbitrator in one of the Canadian provinces still operating under the free-choice-act-like law increased wages by 33 percent. The company eliminated jobs. Basic labor economics show that when jobs are eliminated, unemployment increases and demand for goods and services decrease. Labor claims that an increase in wages would be good for the economy. However, this is true only if the employer can afford to pay them.

EFCA would compel mandatory arbitration in all cases if a contract were not agreed to in a very short period of time – 90 days. The Act provides unions little incentive to reach an agreement before placing a first contract in an arbitrator’s hands. Arbitrators would not be subject to any limitations, and employers could not appeal their decisions. Companies would be placed in an environment of uncertainty that could paralyze corporate plans for the future.

The congressional hearings involving the Detroit automakers suggest what a disastrous impact EFCA could have on the economy. The Big Three carry heavy employee pension and health-care fund obligations. Under the Act, an arbitrator may compel a company to participate in a multi-employer union pension and health care fund, regardless of whether the employer can afford it.

In addition to possibly eliminating jobs, companies may be forced to raise their prices, resulting in increased inflation. Worse, because being subject to EFCA’s arbitration provisions seems so onerous, businesses may move or open operations overseas that they otherwise would have opened in the United States.

EFCA also drastically increases penalties and imposes high fines on employers who misspeak, effectively chilling the exercise of free speech long guaranteed under the current statute. This is simply another attempt by unions to prevent employers from talking to their employees about unions – similar to the neutrality statutes enacted in recent years in several states, including New York, which federal courts have thrown out and invalidated.

Yet labor insists the Act would stimulate the economy. Maybe they need to think again, because in the long run, when jobs leave the country and companies are unable to pay the higher wages and layoff more employees, even unions will suffer from EFCA’s passage!

Bob Heiferman and Joe Martin are partners in the White Plains office of Jackson Lewis LLP, a national workplace law firm with over 500 attorneys in 40 offices, devoted exclusively to representing the business community. Jackson Lewis LLP is an RBA member company.

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