Richard A. Epstein - The Case Against Employee Free Choice ACT

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Hoover Institution Press Publication No. 573

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During the summer of 2008, I was approached by my friend, James Franczek, senior partner at the Chicago labor law firm of Franczek, Radelet & Rose, about the proposed Employee Free Choice Act. EFCA had passed the House of Representatives in 2008, only to die in the Senate after a procedural vote to consider the bill failed to garner the necessary sixty votes. Franczek, and others with whom I met that summer, expected EFCA to be reintroduced in 2009, especially if the Democratic majority increased in the Senate and (as has turned out to be the case) Barack Obama was elected president of the United States.

President Obama, an outspoken supporter of organized labor, has taken office with solid labor-backed Democratic majorities in both the House of Representatives and the Senate. As a result, the pressure has escalated on Congress to revisit EFCA, which is surely the most controversial piece of labor legislation in the last sixty years, and perhaps since the passage of the Wagner Act in 1935. The source of the controversy lies in its three major components: an increase in the penalties for unfair labor practices (ULPs) by employers during union organization campaigns; the use of a card-check system to authorize a union for a particular bargaining unit; and a system of mandatory interest arbitration which allows a panel of federal arbitrators to set the terms of a first two-year contract if an overtly truncated time line of 130 days is not met. At the option of a union, EFCA would, in effect, bypass the protections of the secret ballot by allowing a card check to certify a union. It would thereafter deny any employer or employee the option to refuse to deal on the terms demanded by a union.

Having worked, written, and taught in the area of labor law since I was a third-year student at the Yale Law School in 1968, it took me little time to realize that this proposed legislation would have the worst possible consequences for the workplaceand through it for the overall economy. The brevity of the statute conceals many serious difficulties about its integration with existing labor laws, even as it gives evidence to the massive shift of power from private ordering to state control. Although I do not regard current labor law as ideal relative to more market-oriented approaches, it has been relatively stable on matters of collective bargaining over the past sixty years, during which it has provided a framework to which both management and labor have been able to adapt.

Shortly after I spoke with Franczek, I agreed to write a detailed study of EFCA. The task, however, was too large to do by relying solely on my own resources. I have had for several years a working affiliation with LECG consulting group, and I was able to enlist the support of one of its managing directors, Anne Layne-Farrar, with whom I have worked on many occasions. She in turn recruited one of LECG's crack research analysts, Sokol Vako, to assist me both in the collection of data and in a detailed review of the manuscript at every stage. Toward the end of the process, he was assisted by two other able research analysts, Dhiren Patki and Alina Marinova.

I have also received helpful comments from many individuals with long experience in labor law. In addition to Franczek, both David Radelet and Jennifer Niemiec of Franczek, Radelet & Rose provided me with useful background information on EFCA and card-check recognition and interest arbitration under Illinois law. Philip Miscimarra, a senior fellow at the University of Pennsylvania's Wharton School and a partner at Morgan, Lewis and Bockius, provided detailed comments on an earlier draft of this paper. Additional comments have been provided by Andrew Kramer and G. Roger King of Jones Day.

I am also grateful to my longtime friend, John Raisian, the director of the Hoover Institution, for quickly arranging the publication of this volume, and to Stephen Langlois, associate director of the Hoover Institution, for speeding this volume toward publication.

Finally, I have received financial support for this work from the Alliance to Save Main Street Jobs, which is comprised of the HR Policy Association (the leader of the Alliance), the Retail Industry Leaders Association, the Real Estate Roundtable, the American Hotel and Lodging Association, the U.S. Chamber of Commerce, the International Council of Shopping Centers, and the Associated Builders and Contractors. I am grateful for their support, and for their willingness to allow me complete freedom to write the book as I chose. I know that all members of these organizations understand that the passage of EFCA is fraught with perils not only to them as employers, but to everyone in this country, be they employer or employee. The stakes on this issue are too great to remain silent. I am honored to have this opportunity to write The Case against the Employee Free Choice Act.

HISTORICAL BACKGROUND

The Employee Free Choice Act (EFCA) is the most trans-formative piece of labor legislation to come before Congress since the enactment of the National Labor Relations Act of 1935 (NLRA). The NLRA marked the culmination of a systematic effort of the progressive movement that dominated so much of American intellectual life during the first third of the twentieth century. Its basic purpose was to displace the earlier judge-made regime that had previously governed labor relationships. That system did not carve out any special privileges, or impose any special burdens, on labor unions and their members. Instead, it applied the same general legal principles applicable to other forms of business and economic associations organized to advance the interests of their members. The first major departure from that model in American labor law was the passage in 1914 of section 6 of the Clayton Act, which insulated labor unions from the application of all antitrust laws insofar as their members were members of organizations instituted for purposes of mutual help. Subsequent changes took place within the framework of the collective bargaining regime set out under the Wagner Act. The most important one was the Taft-Hartley Act of 1947, which cut back on some of the main advantages that the Wagner Act had conferred upon unions. Its chief innovation was to make it clear that the NLRA respected employees' collective choice on unionization, but did not put its thumb on the scale in favor of unionization if the workers voted otherwise. The original language of section 7 in the 1935 Act showed a strong preference for labor organization: