EFCA Passage May No Longer Be A Sure Thing

January 20, 2009 Employment Law360

Despite months of discussion that a Democratic victory meant passage of the “Employee Free Choice Act” (H.R. 800) (EFCA), several recent factors suggest that the EFCA may no longer be a “sure thing.”

Although the EFCA landscape is still volatile, and employers are better off preparing for the worst, there are several hints that the business community is awakening to the possibility that, if enacted, the EFCA will include what could be the most significant change ever proposed for this nation’s private sector labor laws.


The EFCA as presently drafted would result in three major changes to the current labor laws. First, it would replace the traditional National Labor Relations Board (NLRB) conducted secret ballot election with a “card check.”

Once a union demonstrates majority status — usually through the use of membership or authorization cards that it has collected, almost always in secret, from members of the bargaining unit — the union will be certified as the collective bargaining representative of the unit employees.

Under current law, the collection of such cards (from a minimum of 30 percent of the unit) is merely a prerequisite to a secret ballot election. Many employers learn that they are a target of a union campaign when the union demonstrates that it has majority support and the campaign is over.

Second, the EFCA drastically changes the landscape for first contract negotiations. The long-standing rule is that no contract will be imposed upon an unwilling party, and that the failure to reach an agreement is resolved by an economic battle in the streets.

This will be replaced by final and binding arbitration by a neutral arbitrator to determine the terms of the initial contract in the event that the parties are unwilling or unable to reach an agreement within the time frames identified in the EFCA.

Third, the EFCA replaces the traditional “make whole” remedies available to unions and employees in NLRB proceedings with enhanced damages, including the potential for punitive damages and mandatory injunctions against employer interference in union campaigns.

EFCA Passage No Longer A Certain Result Of Democratic Victory

Because both President Obama and Vice President Biden both co-sponsored the EFCA, it has been anticipated that its enactment would be an almost certain result of a Democratic victory. Now that the election is behind us, the issue is no longer whether the EFCA will be enacted, but rather why it may not be.

Several factors suggest that the EFCA is in peril, at least as presently contemplated. However, smart businesses should not slow down their efforts to derail or at least modify the EFCA, and at the same time, should continue to prepare to deal with its potential enactment. Indeed, it is precisely these efforts that may be placing the EFCA’s passage in jeopardy.

The following developments suggest that enactment of the EFCA is no longer a certainty.

Business Leaders Have Awakened

Organized labor caught the business world napping when it successfully pushed the EFCA through the House of Representatives in March 2007 by a vote of 241 to 185.

Business groups, some long-standing, and some recently organized such as the Coalition for a Democratic Workplace, are now engaged in a full-court press lobbying effort opposing the EFCA.

The elimination of secret ballot elections provides a catchy rallying cry, but business leaders who learn about the EFCA are most notably stunned by the requirement of interest arbitration for first contracts when negotiations stall.

Elections versus card checks is (at least in theory) simply a change in process. The move to interest arbitration, however, is a substantive change in the law that will have a significant economic impact on small businesses.

The Economy Is In The Tank, But EFCA Brings Newly Organized Businesses Up To The Highest Common Denominator

Those of us who counsel employers currently spend most of our time taking clients through the minefields of reductions in force. Businesses large and small are threatened with demise, including (perhaps especially including) the Big Three American automobile manufacturers.

The EFCA’s requirement for interest arbitration for an initial collective bargaining agreement when negotiations stall is, in my view, the most significant single change ever proposed for this nation’s private sector labor laws.

Under the current framework, the employer usually has significant leverage during bargaining for an initial contract. That leverage will disappear when the union can simply go to interest arbitration if it does not get the contract it wants by mutual agreement. The EFCA is totally silent regarding the standards to be applied by this as yet nonexistent body of first contract interest arbitrators.

Developed by one of the major labor organizations, card check/neutrality agreements that provide for voluntary first contract interest arbitration set the following standard:

The arbitrator shall be guided by, but not limited to, the following considerations: (a) wages, hours and other terms and conditions of employment of the employer’s competitors; (b) the employer’s financial capacity (if the employer places this in issue); (c) cost of living as it affects the employees; (d) ability of employees to earn a living wage for the support of themselves and their families; and (e) regional and local market conditions.

Thus, not unlike a public sector interest arbitration, it can be anticipated that the union will appear at the hearing with a stack of contracts reflecting the terms in other mature bargaining relationships, and that they will ask the arbitrator to impose these terms on the newly organized employer unless it can establish an inability to pay.

Has anyone really considered the impact that this will have on small businesses in today’s economy? President Obama has designated a more conservative economic team than many had been expecting. Have any of them considered the impact of EFCA’s arbitration provision on small businesses in this country? This really is Joe the Plumber’s nightmare of redistribution of wealth.

The Sinking Economy Is Not Making Unions More Popular

Recently, representatives of the Big Three American automobile manufacturers where in Washington, D.C., to beg for a federal bailout.

Although industry leaders tread cautiously around this issue, many of our lawmakers identify strangling collective bargaining agreements with the United Autoworkers as one key reason these companies cannot compete.

And it’s not the wages and benefits, but the work rules and practices, such as a “jobs bank” that pays laid-off workers up to 95 percent of their salaries for years after their jobs are eliminated, that are the focus of criticism. With this as a backdrop, arguments against the imposition of union work rules through first contract arbitration may gain traction in Congress.

The Democrats Didn’t Get Their Senate Supermajority

Saxby Chambliss secured re-election, denying the Democrats their filibuster-proof majority of 60 votes to invoke cloture. This makes it less likely, although not impossible, for legislation such as the EFCA to be rammed through Congress and delivered to President Obama for signature.

The EFCA May Be Amended To Facilitate Its Enactment In Some Form

As the campaign against the EFCA’s elimination of secret ballot elections gains traction, there is talk of substituting expedited NLRB representation elections for the card check process currently set forth in the EFCA. This would hardly be a defeat for unions.

Statistics recently issued by the NLRB show that in the first six months of 2008, almost 67 percent of the representation elections it conducted were won by unions.(1) There is less discussion about eliminating the arbitration provisions of the EFCA, which is a mistake. As discussed above, it should be viewed as more problematic for employers than the card check.

The EFCA landscape, on this day of inauguration, is still volatile ground. Let’s all await further developments.

The opinions expressed are those of the author and do not necessarily reflect the views of Portfolio Media, publisher of Law360.

1 - Bureau of National Affairs. 2008. NLRB election Statistics — Mid-Year 2008 Report Washington, DC: BNA.