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THE SMITH CENTER | for Private Enterprise Studies |
by Charles W. Baird
Emeritus Professor of Economics and Director of the Smith Center
California State University, East Bay
Unions have been losing market share in private sector employment since 1953, and the decline has accelerated in the last twenty years. They have responded to their declining fortunes by demanding that politicians and the National Labor Relations Board (NLRB) bail them out by making it easier for them to capture dues payers. Once again the NLRB has complied.
Under the doctrine that the Constitution is a "living document" that must constantly be reinterpreted to keep up with the times, the Supreme Court often ignores the plain text of the Constitution to impose what it considers to be good results. In August 2000, in a consolidated decision involving two cases - M.B. Sturgis, Inc and Jeffboat Division - -- the NLRB showed it wants to play that same game with respect to the National Labor Relations Act (NLRA).
One way that employers have learned to adapt efficiently to rapid technological and market changes is to contract with other firms to provide temporary employees to fill jobs of various lengths. These "supplier firms" specialize in recruiting, evaluating, training, and deploying workers where they are needed and handling all of the paperwork involved. "User firms" contract with the supplier firms for the services of the employees. Typically the supplier firm charges the user firm and then pays the workers. Sometimes a user firm will pay a flat per diem fee per worker to the supplier and pay the temporary workers directly. Legally both supplier and user firms are "employers" for at least some aspects of the employment relationship.
Unions have found it very difficult to organize the employees of supplier firms. One reason is that there is no well defined community of interest among such workers. They have different skills, levels of education, workplace experiences, and interests. It makes little sense for such workers to submit to a uniform collective bargaining agreement, and it makes even less sense for a supplier employer to agree to any one-size-fits-all compensation scheme for its very diverse employees.
Although temporary workers in user firms often work along side permanent workers and do the same work, unions have hitherto found it impossible to organize them as employees of user firms. In the case of a union-free user firm (e.g., M.B. Sturgis) a union could try to organize the permanent workers in the usual way (collecting signatures and winning a certification election); but the temporary workers could not be included in the same bargaining unit. The same is true in the case of an already-organized user firm (e.g., Jeffboat Division). Temporary workers could not be accreted to the same unit as the permanent employees. Section 9(b) of the NLRA gives the NLRB power to determine appropriate bargaining units, but it specifies that the Board must make such decisions on the basis of "whether the unit appropriate for collective bargaining shall be the employer unit, craft unit, plant unit or subdivision thereof." No units consisting of employees of more than one employer are permissible. For example, the assembly line workers at GM must be in a separate bargaining unit from the assembly line workers at Ford. While the United Auto Workers union can organize both units, the units must be separate. There can be multiemployer bargaining with a union that has organized the workers of two or more employers, but that can only be done if all the employers involved agree to it.
Until the August 2000 decision of the NLRB it was well established that since temporary workers deployed to user firms by supplier firms legally have two employers, both employers had to agree to collective bargaining with a union before it could take place. Clearly, multiemployer bargaining involving supplier and user firms is inherently more problematic from the employers' view than regular multiemployer bargaining involving firms that are competitors (e.g., GM and Ford). The relationship between a supplier and a user firm is that of seller and buyer, not of competitors. Multiemployer bargaining involving competitors amounts to taking labor costs out of competition. It is legalized cartelization. The interests of supplier and user firms are not so easily aligned, so they are unlikely to agree to multiemployer bargaining.
For example, if a union could organize the temporary workers at a user firm and obtain a collective bargaining contract with the user, the supplier firm would be bound by the terms of the contract without having anything at all to say about it. The NLRA is supposed to facilitate agreement among employers and unions. It was never intended as a means to impose collective bargaining or its terms on third parties. In the words of J. Robert Brame, the lone dissenter in the NLRB decision, and who is no long a member of the Board, "An employer's bargaining obligation under Section 8(d) of the [NLRA] requires only that the employer meet and bargain in good faith with the union, not that it adopt wholesale the agreement that the union has negotiated with another employer."
The majority decision of the Board changed all the rules by an interpretive slight of hand. It stipulated that since temporary employees and permanent employees of a user firm have "a common" employer (the user) that is the same as having "the same" employer. Therefore they can be in the same bargaining unit and the union can bargain for all of them with both the user and the supplier firm whether the supplier firm likes it or not. The basic rule that all involved employers must agree to multiemployer bargaining before it can take place is not applicable. Under this decision temporary workers, even against their will, may be automatically accreted to existing bargaining units at already-unionized user firms, and temporary workers deployed to hitherto union-free firms must be included as voters in any certification elections at those firms. In the former case a union automatically gets additional dues payers. In the latter, if the union wins the certification election, it too gets additional dues payers.
John Sweeney, president of the AFL-CIO, hailed the decision claiming that temporary workers had been "relegated to second class status and rights" by being excluded from collective bargaining. This is a bit ironic because in the Sturgis case the union wanted the temporary workers excluded from the bargaining unit in order to increase the probability it would win a certification election. The union realized that most workers in the temporary employment market are not interested in unions. In the Jeffboat case the union wanted to have the temporary workers accreted to the bargaining unit against their will simply because those workers became additional dues payers. So much for the myth of union solidarity.
Although The Washington Post proclaimed that "temporary workers win benefits ruling," the truth is that only some unions won. Even this may be a Pyrrhic victory because unless this ruling is reversed supplier firms are going to avoid doing business with unionized firms and firms that are likely to become unionized. In the private sector there are many securely union-free user firms to take their place. This will be yet another handicap imposed by the market on firms that unionize.
The most disturbing aspect of this decision to me is that it shows that the NLRB no longer feels bound by the provisions of the NLRA as they were originally understood by Congress when they were adopted. The only reason the majority gave for its willingness to reverse these long standing rules on multiemployer bargaining was that the temporary employment market has grown. Since the market is bigger the NLRA, a living document, had to be reinterpreted to keep up with the times. The NLRB has here declared that it shall not be limited to enforcing the statute as written. It has claimed the right to make up the law as it goes along. This is yet another assault on the rule of law.