One of the great blunders of American history was the New Deal decision to institute a legal framework for labor relations that did away with the older common law rules of contract, property, and tort that applied equally to all parties, replacing them with a highly coercive, asymmetrical scheme intended to help labor union leaders achieve their aims. Much has been written on this subject generally.1 My intention here is to discuss two recent developments in labor law that underscore the folly of having abandoned the neutrality and freedom of the common law. (See "What Caused the Great Depression?")
Labor unions have never hidden their desire to eliminate–by nearly any means available–competition from firms and workers who choose to operate independently. The flow of dues money into union treasuries would be larger and more steady if only consumers could be deprived of the option of contracting with lower-cost, nonunion firms. A recently developed tactic known as salting shows the lengths to which unions will go to achieve, through manipulation and abuse of the legal system, objectives that they cannot achieve through peaceful means.
Salting entails an attempt by unions to get nonunion firms to hire pro-union workers or even paid union organizers. If one of the union’s applicants for a job (let’s say, an electrician, since thus far salting has mainly been used against nonunion construction firms) is rejected by the employer, the union then files unfair labor practice charges against the company with the National Labor Relations Board (NLRB), claiming that the applicant was discriminated against because of his union sympathies, a violation of the National Labor Relations Act (NLRA). There may or may not be any truth to this charge–the manager who made the decision may have just thought that another applicant seemed better qualified, or he may have known or suspected that the individual was a union salt and decided against him on that ground. As far as the union is concerned, he truth of the accusation does not matter. There is no penalty for filing baseless charges with the NLRB. Nor is there any cost to the union to file; it has staff attorneys who can handle this paperwork very easily. However, defending against the charges will prove costly to the company. It will have to hire an attorney to defend itself and that can absorb a lot of a small firm’s funds. That is precisely the union’s objective.
On the other hand, if the salt is hired, he then can and will foment trouble internally. Should the company fire him for his trouble-making, destruction, insubordination, and so forth, he then happily goes back on the union payroll and files charges for discriminatory termination. Again, the company will have to incur legal costs to defend itself.
The point of salting is to wear a company down with repeated legal charges, not one of which was brought by an individual who actually had any intention of working for the firm and earning his pay.
Construction unions have launched salting campaigns against many nonunion construction companies in recent years. For example, Toering Electric Co. of Grand Rapids, Michigan, has been forced to pay out more than $31,000 to compensate pro-union salts whom it declined to hire and, in an effort to bring peace, has agreed to hire pro-union electricians for the next five journeyman positions that come open. The union’s newsletter brags about putting a big hurt on this company, as if the abuse of legal processes and coercion were something to be proud of.
Can this be legal? you may be wondering. Alas, yes. Last year, the Supreme Court reversed a court of appeals decision that union organizers weren’t entitled to special legal protection if they apply for work at a firm they are targeting. The NLRA is vague on many points, including this one, but the Supreme Court chose to give it an interpretation at once hostile to freedom of contract and encouraging to this unscrupulous abuse of governmental processes. Salting has been given the green light. The unions are gleeful that their nasty harassing tactic may continue. It certainly will.
Why It Matters
Why should we care about this? For one thing, if unions succeed in driving out nonunion competitors with this kind of coercive harassment, the cost of construction (and other things) will rise. Nonunion firms are despised by unions because they are able to make more efficient use of labor without the union’s wasteful work rules, and thus often underbid unionized firms. In the absence of that competition, people would have no choice but to deal with unionized firms. Union leaders, as they sometimes candidly admit, are businessmen. They sell labor. If there are only union construction firms, they will have cornered the market.
Second, there is the question of justice. Is it right for any group to use (or abuse) governmental processes to injure or destroy competitors? Isn’t it wrong to use the law as a sword to impose ruinous costs on rivals just because you can get away with it? The unions would scream if their opponents used the same might makes right tactics against them, but philosophical consistency cannot be expected from statists.
Salting is only possible because of the coercive power invested in regulators by the NLRA–the power to punish firms for engaging in behavior that is not in breach of any contract, is not tortious, and violates no one’s property rights. When such power is created, it will be used by people who like to get what they want through coercion rather than peaceful, voluntary interactions with others.
The Attack on Employee Involvement
In recent decades, there has been a marked shift in the United States away from the old-fashioned management style of just telling workers what to do, and toward using the observations and ingenuity of employees to assist in running the business better. Employee involvement (EI) works very well under most circumstances and is necessary to the survival of most American businesses in the intensely competitive global market.
It is undoubtedly in the interest of both business owners and employees to have the freedom to find the optimal ways of cooperating for mutual gain. There is no set formula for EI. There are so many different businesses faced with so many different and changing circumstances that no one can possibly specify the ideal way to handle EI programs. There isn’t an ideal. Each firm has to seek its own.
Unfortunately, again owing to the National Labor Relations Act, managers and workers are not entirely free to experiment with EI. One section of that statute prohibits the management of a company from dominating or assisting any labor organization. The original purpose of that section was to prohibit company unions back in the 1930s. It was organized labor’s way of coercively restricting the range of options in labor relations. (Union spokesmen routinely say that company unions are sham unions, but if that were true, why wouldn’t workers readily and willingly choose representation by real unions?) Today, organized labor, eager to guard its turf and appear useful, contends that the kinds of groups established under EI programs constitute management-dominated labor organizations and are thus illegal.
There has been a lot of litigation over this issue. The leading case, Electromation v. NLRB, decided by the NLRB in 1992 and upheld by the Seventh Circuit Court of Appeals in 1994, broadly restricts EI programs in nonunion workplaces. They may not discuss any issues that involve terms or conditions of employment. Electromation Inc. was ordered to disband five action committees that dealt with the following subjects: absenteeism/infractions, no-smoking policy, communications, pay progression, and attendance bonuses. Most Americans would find it astounding that it can be illegal for managers and workers to sit down and discuss any aspect of work. Welcome to the Orwellian world of the NLRA.
Some subjects are clearly legal to address in an EI program. For example, managers and workers can discuss the implementation of a workplace attendance policy, but, as Electromation says, they may not discuss absenteeism. That may seem like a nonsensical distinction, but that is exactly what happens when you get lawyers battling back and forth over the meaning of a vaguely written statute. The problem for employers is that some potentially fruitful areas for EI programs are now taboo, and a cloud of uncertainty hovers over many others. As Howard Knicely, executive vice president of TRW Inc., said in testimony before the U.S. Senate, It is virtually impossible for an employer and its employees to know what they can and cannot do under current law.
Organized labor doesn’t like EI because it may (and often does) lead to more satisfied workers, who are unreceptive to union organizers. AFL-CIO official David Silberman, for example, claims that the teams established by Electromation were a bald-faced effort to stop union organizing. Never mind that the NLRB specifically found otherwise. The right question to ask is, So what? What on earth is wrong with management taking perfectly peaceful steps to increase the level of worker satisfaction? Union leaders talk as if they were entitled to interfere with the liberty of others to ensure that there will be a large pool of dissatisfied workers for them to entice into unions–and then collect dues from.
One of the most annoying aspects of the legal battle over EI is the fact that we are talking about speech here. The courts are remarkably eager to extend First Amendment protection to all sorts of symbolic speech (dancing, apparel, flag-burning), but they do nothing here to protect actual speech. The American Civil Liberties Union does not enter cases like Electromation with a brief arguing that freedom of speech is being infringed upon, and I would suppose (though I admit that I have not read the briefs) that the attorneys for the embattled firms do not even bother to raise First Amendment arguments. The courts, largely indifferent to employer freedom, have always turned a blind eye to the First Amendment in labor cases.
Cutting the Gordian Knot
The vile salting tactic and the legal attack on EI programs are both consequences of abandoning the freedom and neutrality of the common law in favor of the one-sided, authoritarian special-interest statute that is the NLRA.2
Both are egregious examples of harnessing the power of the state to accomplish ends that would be crimes or torts if the interest group members tried to do the same things on their own. If the union that was so incensed at the Electromation Action Committees (the Teamsters, which had lost a representation election there) had burst into the plant and demanded that the committees be disbanded or else, that action would have been illegal. The NLRA spares unions the expense and danger of having to directly violate the rights of others. The government does the dirty work for them.
If I had a magic wand to repeal bad federal statutes, I would put the elimination of the NLRA right at the top of my list. Many would accuse me of throwing out the baby with the bath water, but the truth is that there is no baby here. The NLRA is coercive interference with liberty and property rights from start to finish.
1. Richard Epstein, A Common Law for Labor Relations: A Critique of the New Deal Labor Legislation, 92 Yale Law Journal, 1357; and George Leef, Legal Obstacles to a Market for Employee Representation Services, 9 Cato Journal, 663.
2. The NLRA is also unconstitutional; there is nothing in Article I, section 8 that gives Congress power to regulate labor-management relations. (No, the commerce clause won’t do. See Professor Epstein’s The Proper Scope of the Commerce Clause, 73 Virginia Law Review 1387.