Politics & Policy

National Labor Relations Bias

From the August 1, 2011, issue of NR.

The National Labor Relations Board has become a partisan issue of late. After trying — and failing — to destroy secret-ballot union elections via “card check” legislation, President Obama turned away from the democratic process, and toward the NLRB, as a venue for advancing Big Labor’s interests.

To date, Obama has placed three people on the NLRB. During a congressional recess, he installed Craig Becker, who’d served as a top lawyer for two of the nation’s largest unions (the Service Employees International Union and the AFL-CIO), as a member of the board. He selected Mark G. Pearce — who had worked in “union side labor and employment law,” as his official NLRB bio puts it — as another. And Obama chose Lafe Solomon, a career NLRB lawyer, as the board’s general counsel.

Solomon promptly filed a complaint against Boeing, claiming the company had illegally discriminated against a unionized, strike-happy plant in Washington State when it chose to expand production in South Carolina, a right-to-work state, instead. And the board is trying to change the rules governing union elections so that companies have less time to mount anti-union campaigns.

These moves go beyond anything the NLRB has done in the past. But the current behavior of the National Labor Relations Board is only the outermost layer of the true problem: the National Labor Relations Act. In addition to creating a labor system that hurts non-union workers, forcing contracts upon unwilling participants, and engendering corruption, the 1935 legislation violates the Constitution, gives the NLRB the power to function as all three branches of government at once, and allows each president to stock the board with flagrantly biased nominees. President Obama may have abused the NLRA more than his predecessors did, but the NLRA is built for abuse. It should be repealed, or at least reformed.

The NLRA is also known as the Wagner Act, after Sen. Robert F. Wagner of New York, its sponsor. Before its enactment, private-sector employers had basically complete freedom in how they dealt with unionizing employees. They could, for example, simply fire workers who tried to unionize. Only 13 percent of the non-farm work force was unionized, but strikes were disruptive, and they were growing more frequent.

The stated justification for the NLRA was that strikes had hindered the free flow of commerce, and that strengthening unions and giving them a federally protected right to strike would somehow fix that. In reality, of course, Congress supported the law as a way of tipping the power balance toward unions and away from management. The NLRA was just one of many New Deal laws that accomplished this.

Some of these laws addressed real problems — until the Norris–La Guardia Act, for instance, courts often issued injunctions to end strikes, essentially forcing people to work. The NLRA, however, was a mistake from top to bottom.

As it was originally enacted, the NLRA defined several “unfair labor practices” for businesses, but none for unions. (In 1947, the Taft-Hartley Act added some for unions.) Short of closing a plant entirely, management could no longer discourage workers — using such tools as hiring, firing, discipline, and promotion — from participating in union activities. The only significant exception, confirmed in a 1938 Supreme Court case, was that an employer could hire replacement workers during a strike, and was under no obligation to fire the replacements to make room for returning strikers. The strikers were still considered company employees, however, and had to be reinstated when positions opened up.

Further, the act set up the system through which unions are recognized: First, they have to get 30 percent of workers in the “bargaining unit” (typically, the workers at a given plant) to sign cards. Then, the NLRB supervises a secret-ballot election, and if the union wins, it has the right to represent the workers. (Alternatively, the union can get signed cards from 50 percent of workers and avoid an election, but only if the company voluntarily recognizes the union.) The company is required to negotiate in good faith with its union on a contract; if negotiations falter, the union may strike.

The logic here is simple and straightforward: We want workers to be paid more and treated better; therefore, we’ll arm workers with the weapons they need to gain concessions from employers. Unfortunately, it wasn’t until the 1950s that Milton Friedman proved the economic fallacy of this plan. Yes, unions often manage to get higher pay and better working conditions for their members. But in response, unionized businesses hire fewer workers. The workers who aren’t hired by union companies go to non-union companies — where their competition drives down wages — or remain unemployed. In other words, in the private sector at least, the gains of unionized workers aren’t gains for the working class as a whole; they’re gains by some workers at the expense of others. (In the public sector, which is not covered by the NLRA, higher wages simply come from taxpayers.)

And economics aside, the NLRA system involves a tremendous amount of coercion. Companies have to negotiate with unions — with the threat of a federally protected strike in the background — whenever their employees vote to make them. Businesses may not fire workers for union activities, including striking, regardless of what the relevant contracts say. And while the current case against Boeing involves a fresh issue — whether companies may factor in local labor laws and past strikes when deciding where to build new capacity — the NLRA has long been interpreted to mean that a business may not shut down a unionized plant and reopen it somewhere else (a “runaway shop”) in response to strikes or union demands. If a union loses an election, the NLRB may decide the employer engaged in “unfair labor practices” and force the company to bargain with the union anyway.

It’s not just employers over whom the law grants unions immense power. When a union wins an election, workers who voted against it are forced to accept the union as their “monopoly bargaining” agent, and are forbidden to negotiate their own contracts with the business. Depending on state law and the specific contract, anti-union workers may also have to join the union or pay dues. Right-to-work laws help in this regard, but they do not solve the problem of coercion — and the NLRA banned even these laws until the passage of the Taft-Hartley Act. In a right-to-work state, workers at union shops don’t have to pay dues or join the union, but they’re still bound by the union contract even if they do not wish to be. Seen differently, they get to free-ride on union negotiating efforts without paying their fair share.

Most of the NLRA’s effects were completely foreseeable. Union membership exploded, almost tripling in the ten years following its passage. And the law failed to accomplish its supposed goal of curtailing strikes: Work stoppages continued to rise through 1937, fell off as the economy improved, and then soared, reaching their all-time high in 1943.

What many did not foresee was the spread of corruption through organized labor. This is a complex story — read Robert Fitch’s Solidarity for Sale for an excellent summary by a pro-union, leftist writer — but the bottom line is that it’s called “monopoly” bargaining for a reason. When a union doesn’t face competition and is entitled to dues from thousands of workers, it constitutes a massive opportunity for organized crime. To this day, if you read through the FBI indictments following a mob bust, you’ll find allegations of labor racketeering.

From its inception, the NLRA faced constitutional challenges. One involved the question of whether Congress has the authority to dictate how businesses interact with their workers.

The Constitution gives Congress the right to regulate interstate commerce, but during (and since) the New Deal, Congress took this to mean it could regulate anything that had anything to do with interstate commerce. The NLRA was one result of this interpretation: The employment policies of companies that are involved in interstate commerce are not the same thing as interstate commerce itself, and yet the legislation dictated the hiring practices of many large companies throughout the country.

As usual, the Supreme Court acquiesced to this abuse of the commerce power. In 1937’s NLRB v. Jones & Laughlin Steel Corporation, it ruled that “although activities may be intrastate in character when separately considered, if they have such a close and substantial relation to interstate commerce that their control is essential or appropriate to protect that commerce from burdens and obstructions, Congress cannot be denied the power to exercise that control.” Never mind that Congress has the authority only to “regulate” interstate commerce, not to “protect [it] from burdens and obstructions.”

The NLRA also raises First Amendment concerns. While the Taft-Hartley Act made it clear that employers have the right to speak their mind, company officials can still be punished if their statements are construed as threats — and even statements that are protected by the First Amendment can be used against employers in discrimination cases.

In 1969’s NLRB v. Gissel Packing Co., the Supreme Court ruled that “an employer may communicate to his employees any of his general views on unionism and his specific views about a particular union, as long as there is no ‘threat of reprisal or force or promise of benefit.’” (The Court was quoting language inserted into the NLRA by the Taft-Hartley Act.) An employer may even “predict the precise effects he believes unionization will have on his company if the prediction is based on objective fact to convey his belief as to demonstrably probable consequences beyond his control or to convey a management decision already arrived at to close the plant in case of unionization.” He may not, however, engage in “brinksmanship” or make “conscious overstatements.”

Threats, exaggerations, and honest predictions are indeed different things — if they’re communicated clearly and the underlying facts are not debatable. But in union elections, clarity isn’t the norm; rather, each side steps as close to the legal line as possible. This means that employers do everything they can to emphasize the economic disadvantages of unions, that unions try to paint these comments as implied threats or promises, and that the NLRB and the courts are expected to sort it out.

The Boeing case raises one such issue. As the general counsel’s complaint notes, Boeing executives made various public statements explicitly tying the union plant’s history of strikes to the decision to locate the new capacity elsewhere — and according to the general counsel, this means Boeing “threatened or impliedly threatened that the Unit would lose additional work in the event of future strikes.” Boeing, of course, denies that its statements were threats, and further says they are protected by the First Amendment.

It’s easy to take Boeing’s side. Workers at the Washington plant struck in 1977, 1989, 1995, 2005, and 2008, and it would be insane to expect the company to ignore that fact in deciding where to expand. The company officials were merely stating the obvious. But the statements did explicitly connect the action of striking with a consequence of lost work opportunities — which does arguably “interfere with” the right to strike, or discourage employees from exercising it. The law itself, which protects a “right” to shut down one’s employer’s operations without facing any consequences, is the problem.

Even in cases where it’s clear that speech is protected by the First Amendment, that speech can still be held against an employer under the NLRA. Typically, to prove discrimination, a union member has to demonstrate motive, or “anti-union animus.” This, however, runs into the same problem we see with racial anti-discrimination laws: If the business says it fired, disciplined, or refused to promote a worker for incompetence, how can an employee prove otherwise?

Often, employees resort to anti-union statements made by managers that, while protected by the First Amendment, show that the management doesn’t like unions. Some circuits of the federal court system have decided to completely ban the use of these statements as evidence, but others have not. For example, in an often-cited 1963 case, the Fifth Circuit allowed statements in which a company “made no bones about its opposition to the Union” to be used as “background” in a case. To this day, the “circuit split” has not been resolved, and the NLRB allows these statements to be used in the cases it hears, regardless of which circuit the business is located in.

So, employers are left walking a fine line. To keep workers from unionizing, they have to provide information about the harmful effects of unionization, which can include plant closings and lost jobs. But these statements cannot be perceived as threats, and they cannot sound overly heated, lest they give credibility to a discrimination claim. American companies whose workers are considering unionizing have to watch what they say.

One reason the NLRA has been so vulnerable to constitutional challenges is that it was intentionally written in vague language. As the Supreme Court once put it, Congress “did not undertake the impossible task of specifying in precise and unmistakable language each incident that would constitute an unfair labor practice.” Which is to say, it failed to offer companies a way to predict which of their actions would later be considered illegal.

Of course, when the legislative branch passes a law that fails to forbid clearly some things and allow others, the other branches don’t have a policy to enforce. So, Congress created the NLRB, a three-member panel (now five members plus a general counsel) that would act as all three branches at once, subject to review by federal courts.

When the law is unclear, the NLRB makes policies up as it goes along. See, for example, the new union-election rules: The NLRA doesn’t specify the amount of time an employer should have to prepare for an election, so the NLRB gets to decide, and to change its mind at will. One would be right to say that the proposed rule — which could result in preparation times as low as ten days, compared with today’s norm of around 40 — is a bad policy, and that it’s a change so dramatic that Congress should be involved. But in 1935, Congress chose to delegate election procedures to the NLRB, and until Congress decides to do its job, the NLRB can and will do whatever it pleases.

Since the Taft-Hartley Act, the NLRB’s executive aspect has been headed by its general counsel, who supervises NLRB investigators and acts as a prosecutor before the board. When the general counsel files a complaint, the NLRB goes into judicial mode, deciding whether the alleged incident violated the NLRA and establishing precedents that guide future decisions. Like most judicial bodies, the NLRB can be overruled on appeal — but the federal court system gives the board a fair amount of leeway, siding with it in about 85 percent of cases that are appealed.

We will see just how politicized the current NLRB is when it reviews the general counsel’s Boeing complaint. There are reasons for pessimism. The same person who nominated Solomon — President Obama — chose two of the board’s four current members, and a third, chairwoman Wilma Liebman, is also a Democrat. This partisan imbalance is a predictable consequence of the structure created by the NLRA.

Whereas judicial nominees serve for life, NLRB members are nominated to five-year terms, with one member’s term ending each year. No more than three members of the board may be from the president’s party — Obama’s pending nomination for the vacant seat, Terence Flynn, is by necessity a Republican — so each time the White House changes parties, the new president gets to flip the majority as soon as a member of the opposite party leaves. In theory, the Senate has to approve the nominees — but if the Senate doesn’t like his choices, the president may make his appointments while Congress is in recess.

It’s tempting to complain about this, or to point at Becker’s close ties to organized labor and say that Obama has departed from a standard practice of nominating people without conflicts of interest. Right-leaning commentaries on the current board often mention how it’s “stacked” with Democratic union stooges. What they do not mention is that it’s actually common for presidents to make NLRB appointments while Congress is in recess, and for nominees to have a clear track record of taking a specific side in labor confrontations.

Just look at Obama’s predecessor. Bush recess-appointed seven of his nine NLRB selections. His picks included Peter Kirsanow, a friend of National Review whose law practice “focused on representing management in employment-related litigation,” according to an official government biography; Peter J. Hurtgen, who “represented employers in labor and employment matters,” according to Politico; Robert J. Battista, who also represented management in labor disputes; and Michael J. Bartlett, who was director of labor-law policy at the anti-union Chamber of Commerce. And while Bush’s NLRB never did anything so drastic as dictate to a company where it could add production capacity or introduce radical changes in the way union elections are handled, it did overturn various precedents, almost always pushing the law in a pro-management direction.

So, while Congress rarely changes the NLRA — the last significant update was in 1974, when coverage was extended to health-care workers — the law means something different every time a new party controls the White House. As Obama took office, the legal-news site Law.com ran a top-ten list of Bush-era precedents that an Obama-appointed NLRB would probably overturn. This makes a mockery of the rule of law.

The NLRA is a bad policy. It deserves to be repealed entirely so that businesses and workers can work out contracts as they see fit, using unions as intermediaries if they so choose. But failing that, Congress needs to restructure the law so that elected officials, not a politically appointed and ever-changing board, make the important decisions about labor law — decisions that include how elections are run, what constitutes an “unfair labor practice,” and whether companies may build new facilities wherever they want to.

— Robert VerBruggen is an associate editor of National Review. This article first appeared in the August 1, 2011, issue of National Review.


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