All Commentary
Tuesday, October 1, 1996

Freedom-for-Labor Day in New Zealand

New Zealand's ECA Boldly Eliminated Forced Union Membership and Dues

May 15, 1991, is a day that shall live in glory in the history of the world-wide struggle to free working men and women from the shackles of compulsory unionism. On that date the New Zealand Parliament enacted the Employment Contracts Act (ECA), a piece of legislation that, notwithstanding its two faults, could be used as a model for the rest of the world. It would be an excellent substitute for the American National Labor Relations Act (NLRA).

Section 1(c) of the ECA declares that a purpose of the Act is


To enable each employee to choose either—(i) To negotiate an individual employment contract with his or her employer; or (ii) To be bound by a collective employment contract to which his or her employer is a party (emphasis added).

New Zealand workers can choose to represent themselves in the sale of their labor services or to be represented by an agent. Furthermore the agent does not have to be a labor union. Unions represent only those workers who individually choose them as representatives. There is no forced representation.

Under the NLRA American workers are forbidden to designate representatives of their own choosing. The decision to unionize or not is decided by majority vote. Individuals are not free to choose for themselves. Moreover, American workers can be forced to join (or at least pay dues to) unions that have been certified by majority vote. The First Amendment to the U.S. Constitution forbids government to abridge the freedom of association of any individual. Yet, with the blessing of the U.S. Supreme Court, Congress has given unions the right to force workers to pay tribute to them as a condition for those workers to keep their jobs.

In 1991 the New Zealand Parliament boldly eliminated forced membership and forced dues altogether. Section 6 of the ECA guarantees that membership is totally voluntary. Section 7 of the ECA proscribes any discrimination for or against a worker for membership or nonmembership in a union. Under Section 8(a)(3) of the NLRA employers are forbidden to discriminate for or against any worker on the basis of membership or nonmembership in a union except an employer can agree with a union to compel union membership.

Section 1(d) of the ECA makes all collective bargaining voluntary. In contrast, under Sections 8(a)(5) and 8(d) of the NLRA employers are forced to bargain in good faith with certified unions on a long list of mandatory subjects of bargaining. Case law has defined good faith bargaining as being willing to make concessions. If an employer does not make sufficient concessions to prove that he is bargaining in good faith, he can be found guilty of an unfair labor practice and forced to accept the union’s terms.

This is an excellent example of what Ed Vieira calls the apartheid of American labor relations law. In every other area of the law, in order for contracts to be valid they must have been entered into freely by all of the parties involved. Parties are not forced to bargain, they must choose to bargain. Contracts that are the result of coerced bargaining are not enforceable. But in American labor relations law all collective bargaining contracts are coerced and enforceable. All U.S. collective bargaining contracts are based on involuntary exchange.

The two faults in the ECA I alluded to above are: (1) it prescribes mandatory unjustifiable dismissal restrictions in all employment contracts whether individual or collective, and (2) it gives jurisdiction in employment contract disputes to a specialist court made up of judges who served on the old Labour Court under the compulsory unionism regime that preceded the ECA. First, the stated aim of the ECA is to restore the common law of property, contract, and tort to labor relations—i.e., to stop treating labor relations as a special case. Under the common law of employment, all employment relationships were at-will unless otherwise agreed to by both the employer and the employee. There is no room in the common law of employment for mandatory unjustifiable dismissal restrictions in employment contracts. Second, labor relations cases should be tried in generalist courts rather than in courts that are dedicated to treating labor relations as a special case.

Nevertheless, the ECA has abolished all forms of compulsory unionism in New Zealand. Next to that, its faults pale in significance. Compared to New Zealand, America is not the land of the free, at least not in labor relations.

—Charles W. Baird

Guest Editor

Forty Years Ago in The Freeman . . .

Most people want commodities to be sold in free markets, but many doubt if such markets are suitable for the determination of wage rates. They insist that workers should be permitted, or even encouraged, to organize and bargain collectively with their employers. They believe that just wages can be had only if workers are permitted to collectively decide the minimum price at which they will sell their services. . . .

By definition, a free market for labor is one in which no monopoly power is exercised by either employers or workers. In such markets, how much will a prospective worker receive? The amount of the offer cannot be predicted, but this much is evident:

1. The employer will not offer more than his estimate of the value to him of the worker’s services.

2. The worker will not accept any offer that is less attractive than he can get from some other firm.

With these limits, if he is to work for the firm in question, a wage must be agreed upon. If there is a more just method of determining wages, I have yet to hear of it.

—Glenn Hoover

A Just Distribution of Wealth

(Reprinted from The Freeman, October 1956.)

  • Charles Baird is a professor of economics emeritus at California State University at East Bay.

    He specializes in the law and economics of labor relations, a subject on which he has published several articles in refereed journals and numerous shorter pieces with FEE.