It is very likely that the Employee Free Choice Act (EFCA) will become law in the first 100 days of the Obama presidency, and when it does, the balance between labor and management will be altered, and not likely for the better. That is, unless you are a union.

The union movement has been more and more marginalized, retaining strongholds in only a few places, like the Big Three automakers, but shrinking to insignificance over most of the country. It should be no wonder that they have pushed for this legislation, and no wonder that their creatures in the democratically-controlled Congress plan to deliver.

The EFCA

The following summary of the legislation comes from the House Committee On Education and Labor:

1. Certification on the Basis of Signed Authorizations (majority sign-up): Provides for certification of a union as the bargaining representative if the National Labor Relations Board finds that a majority of employees in an appropriate unit has signed authorizations designating the union as its bargaining representative. Requires the Board to develop model authorization language and procedures for establishing the validity of signed authorizations. Under current law, employers can require unions to go through one-sided, time consuming elections as a condition of being certified as bargaining representatives. Such elections become the focal point of employer efforts to frustrate the right of workers to organize.

2. First Contract Mediation and Arbitration: Provides that if an employer and a union are engaged in bargaining for their first contract and are unable to reach agreement within 90 days, either party may refer the dispute to the Federal Mediation and Conciliation Service (FMCS) for mediation. If the FMCS has been unable to bring the parties to agreement after 30 days of mediation the dispute will be referred to arbitration and the results of the arbitration shall be binding on the parties for two years. Time limits may be extended by mutual agreement of the parties. Under current law, employers have a duty to bargain in good faith, but are under no obligation to reach agreement. As a result, a recent study found that 34% of union election victories had not resulted in a first contract.

3. Stronger Penalties for Violations While Employees are Attempting to Organize or Obtain a First Contract: Makes the following new provisions applicable to violations of the National Labor Relations Act committed by employers against employees during any period while employees are attempting to organize a union or negotiate a first contract with the employer:

1. Mandatory Applications for Injunctions: Provides that just as the NLRB is required to seek a federal court injunction against a union whenever there is reasonable cause to believe that the union has violated the secondary boycott prohibitions in the Act, the NLRB must seek a federal court injunction against an employer whenever there is reasonable cause to believe that the employer has discharged or discriminated against employees, threatened to discharge or discriminate against employees, or engaged in conduct that significantly interferes with employee rights during an organizing or first contract drive. Authorizes the courts to grant temporary restraining orders or other appropriate injunctive relief.

2. Treble Backpay: Increases the amount an employer is required to pay when an employee is discharged or discriminated against during an organizing campaign or first contract drive to three times back pay.

3. Civil Penalties: Provides for civil fines of up to $20,000 per violation against employers found to have willfully or repeatedly violated employees’ rights during an organizing campaign or first contract drive.

Under current law, remedies are limited solely to make whole remedies: backpay (minus any additional interim wages the employee did or should have earned), reinstatement, and notice to that the employer will not engage in violations of the NLRA. Many employers conclude that, even if caught, it is financially advantageous to violate the law and pay the penalties rather than to comply.

What the EFCA Means

Aside from the arbitration on first contracts and the various monetary provisions, which work to prop-up and enforce the first provision, the most important aspect of this legislation—and the most troubling—is the fact that instead of an election to certify a union that rests upon a secret ballot, union votes under the first provision of the bill would be public. This is the card check system that folks have been talking about and it is specifically designed to make it easier to unionize a business.

The current system, where these cards are used to show interest, allows for a vote when 30% of the employees have signed the cards. The votes in this election are cast in secret with neither the employer nor the union knowing who voted to unionize or not. This protects the individual workers from retaliation from either side since no one knows who voted for or against. The unions say that this election becomes the focal point of anti-union activity by the company, making it harder for the union to come into a business.

That may be true. On the other hand, if employees have the right to unionize, which they clearly do by law, then doesn't it follow that the employer, who usually has a vested interest in remaining non-union, has the right to resist that move? Right now, if you go by the elections won by organized labor, the balance is tipped slightly in their favor already. Unions win about 60% of the elections. By allowing this bill to become law, and there is little doubt that it will, the costs for America would be frightening.

The Cost of Organized Labor

According to the National Center for Policy Analysis, the cost of unionization in this country is already staggering:

While there are no doubt many individual members of labor unions who feel they have benefited from collective bargaining, the overall evidence is overwhelming that labor unions in contemporary America have had harmful aggregate effects on the economy.

• The economic cost of unions (determined by combining lost income and output over the period 1947 to 2000) exceeds $50 trillion, according to estimates by economists Richard K. Vedder and Lowell E. Gallaway.

• Unionization lowers incomes for all, albeit more in the relatively higher income states that on average have higher levels of unionization.

• A state with a 10 percent unionized work force can expect a 0.7 percent increase in its unemployment rate.

• For each four additional workers who become unionized, one less person works.

In the final years of the 1990s, the decline in union density in the private sector has been sharp, adding to the vitality of the economy at the beginning of the new century. As a result, there has been renewed economic growth and a rising proportion of the working age population that actually works.

Consider for a moment the United Auto Workers and the millstone-like drag they have exerted on the Detroit automakers. Union workers at GM make over $81.00/hour in salary and benefits, including a retiree healthcare plan that is destroying the company. If the company pays its share of that, as per the union contract, GM will, for all practical purposes, be bankrupt. If it doesn't pay, union problems. The UAW answer to that little problem? Ask Washington for a bailout of the automakers. Heaven forbid they give up anything.

The Bottom Line

The Employee Free Choice Act will affect businesses of all sizes and as a small business owner you need to know what you can do protect your business. Small business creates jobs, and that needs to be encouraged as much as possible. Unions ultimately cost jobs and drive up the price of employment. It is bad for businesses that might be affected by the increase in unionization and it is bad for employees—both those who don't want to be union members and those who do. Neither side in this has a monopoly on strong arm tactics.

Before it happens, though, there is one thing you can do to head off troubles. You can, in a word, union-proof your business, but how do you arrange that without running afoul of the law? Here are some pointers from labor relations strategists Adams, Nash, Haskell & Sheridan:

Employers often ignore the early warning signals of union organizing… huddles that disperse when a manager approaches, an increase in union oriented terminology – seniority, work load, equalization of overtime – new friendships forming or old ones dissolving, increased complaining about long-standing issues. Untreated union organizing is not like good red wine. It does not get better with age.

• If addressed early on potential organizing can often be averted. You cannot lose an NLRB election that never happens.

• Well-trained and comfortable managers are the best defense. They must be confident in their understanding of legal boundaries and how to communicate with their subordinates within them.

• The appropriate application of information is the art of the game. Poorly designed or executed plans can often create interest in the union. 

• After the threat passes you can put in place The Union Free Privilege™ to make sure it never returns.

You can play offense too:

• If you have a union you can create an environment to make it become unnecessary.

• If your employees are tired of paying dues you can explain the deauthorization process to them that allows them to stop.

• If they want out of the union the NLRB has a process known as decertification. It’s not easy but it can be done.

Remember employees become the victims in any labor relations conflict. It is a noble process to protect them from unwittingly putting everything on the line.