Playing the Union Card

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By DAVID M. SMITH


Unions marched across Los Angeles and on Capitol Hill in Washington last month calling for action on the proposed Employee Free Choice Act. With the support of President Obama and his new labor secretary, Hilda Solis, it is all but certain that the bill will go before Congress sometime this year.

Given the timing and the provisions of the legislation, the passage of this bill could have serious implications, especially in California.

Until now, employees were protected by a measure of confidentiality in union elections by the secret ballot. The Employee Free Choice Act would strip away that 74-year-old process and instead let signed cards be recognized as a vote for the union.

In the card-signing process, union representatives will have greater liberty to team up and confront individual workers in the effort to convince them to sign cards. If 50 percent or more of employees sign a card, the union will represent all employees. During the election period, the new law imposes fines of up to $20,000 on businesses offering any type of increase in salary or benefits. Essentially, it only allows the union to compete for votes. The bill effectively takes away management’s right to present its side.

Once workers sign cards and union representation is declared, union negotiators can call for collective bargaining to begin within 10 days. One probable scenario is that a union would purposely fail to reach an agreement with management in 120 days. At that point, the federal government has sweeping power to force contract terms no negotiations whatsoever. This forced contract will bind both parties for two years. The unions themselves acknowledge that a pro-labor administration makes it likely that unions will prevail with stronger terms.

I believe the impact of such a bill in California would stunt any near-term growth in employment and hinder top line recovery for the economy.

Should the bill pass, it will change the playing field and give the unions an unfair strong hand in organizing across the public and private sector. In California, the most likely target for unions will be in service industries such as hospitality and health care in addition to government.


Labor boost

When the economy slows, union membership trends higher this recession is no different. In fact, according to the U.S. Bureau of Labor Statistics, California unions added 250,000 members in 2008.

However, there is a tradeoff to increasing union membership. Costly negotiations, the restraint of market forces, and the overall higher labor and benefit costs will impede investment in the very industries that we need to lead the way out of the recession. Some businesses will be forced to simply close their doors in California.

Politically, eliminating the secret ballot and spending significant time on a risky bill should be anathema for elected officials. In fact, the unions have already agreed to some concessions in the bill, such as not contesting tax abatements, easing off zoning disputes and not to picket. It remains to be seen if lawmakers will acknowledge the other flaws in this bill.

At the end of the day, it is up to only legislators to hammer out compromise legislation. Legislators would do California a huge favor by declaring a truce and make it clear they will not bring this legislation forward this year. At least give the economy a chance to gain its footing before burdening companies and employees with the provisions of the bill.

At the same time, California managers would be wise to communicate with greater transparency, bearing in mind management and workers issues equally. It is quite possible that as soon as the end of the year that right will be taken away completely.


David M. Smith is the associate dean of academic affairs and an associate professor of economics at the Graziadio School of Business and Management at Pepperdine University.

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