First Contract Arbitration and the Employee Free Choice Act

Author:Catherine L. Fisk; Adam R. Pulver
Position:Chancellor’s Professor of Law, University of California, Irvine; Law Clerk, U.S. District Court for the Central District of California

I. Introduction. II. Why Interest Arbitration Is Necessary Under The NLRA. A. The Problem of First Contract Negotiation. B. The Weakness of NLRB Remedies. C. Arbitration Is Desirable When Work Stoppages Are Not. 1. The Unavailability of Strikes. 2. Arbitration Is Widely Used When Strikes Are Undesirable. III. Interest Arbitration Will Work. A. Interest Arbitration Will Provide Incentives to... (see full summary)


Chancellor’s Professor of Law, University of California, Irvine.

Law Clerk, U.S. District Court for the Central District of California; J.D., Columbia University School of Law (2008). The views in this essay do not represent the official views of any member of the federal judiciary.

Page 47

I Introduction

One of the most significant failures of the law governing unions and collective bargaining is the catastrophic underenforcement of the statutory right of employees to bargain. About half of all newly certified or recognized unions are not able to persuade the employer to agree to a collective bargaining agreement.1 While both the employer and the union could in theory be blamed for the failure to reach an agreement, in practice the incentives are much greater for the employer to stall negotiations (and thus defeat the union) rather than for the union to refuse to accept an agreement (and thus ensure its survival for the term of the contract). Refusing to bargain for a first contract is a powerful weapon in the arsenal of employers determined to remain union free, as it prevents a nascent union from ever getting off the ground. While employers can and do thwart the statutory rights of employees simply by refusing ever to agree to a contract, the National Labor Relations Board (NLRB or "Board") lacks the power to remedy even the most egregious cases of refusal to bargain in good faith, except to order the recalcitrant party to bargain more.2 Page 48

One provision of the proposed Employee Free Choice Act (EFCA)3 would deal with this problem by requiring timely bargaining, mediation, and, if the employer and union cannot agree, arbitration of the bargaining dispute.4 It is an important reform in a critically dysfunctional aspect of federal labor law, and it will be a serious improvement over the status quo. While political and media conversations surrounding EFCA have largely focused on the so-called "card check provision,"5 the provision for first contract arbitration is just as important to the protection of the right to unionize. And, as of this writing, Congress appears more likely to enact the first contract arbitration provision than the card check provision.6

This Article argues that some form of mandatory interest arbitration for first contract disputes is an appropriate means of stabilizing employee-management relations given the extraordinary difficulties that unions currently experience in negotiating first contracts, the weakness of current NLRB and economic remedies, and the rippling effects of these difficulties on nascent unions. Part II of this Article explains the need for interest arbitration given current trends in labor relations. Part III demonstrates that interest arbitration would increase the incentive for employers to negotiate in good faith and make reasonable proposals without placing themselves at a systemic disadvantage. This would be particularly true if arbitrators used the final offer method, which requires the arbitrator to choose one of the parties' final offers rather than to split the difference between the two positions.7 Mandatory interest arbitration would encourage the collective bargaining process that the drafters of the National Labor Relations Act (NLRA) initially had in mind. Furthermore, none of the criticisms of the first contract arbitration provision of Page 49 EFCA have merit. Empirical studies of interest arbitration show that it will facilitate rather than hamper bargaining,8 and it will remove the incentive to engage in illegal surface bargaining. Finally, Part IV illustrates that a statutory requirement of first contract arbitration is well within Congress' power and does not represent an unconstitutional delegation of legislative authority as alleged by some critics.9

II Why Interest Arbitration Is Necessary Under The NLRA

Section 3 of EFCA proposes to give real meaning to a provision of the NLRA that has become almost a dead letter: the duty to bargain in good faith to a first contract.10 Section 3 of EFCA would amend Section 8(d) of the NLRA to do three things, two of which are extremely modest. The first would require the employer to meet to bargain within ten days after receiving a request for bargaining from the newly recognized union, but the time for the initial bargaining could be extended by agreement of the parties.11 This provision would end the common practice of stalling the commencement of bargaining for as long as possible after certification.12 The second provision would provide for Page 50 mediation, conducted by the staff of the Federal Mediation and Conciliation Service (FMCS), upon the request of either party if the parties have not reached agreement after ninety days of bargaining.13 Mediation of disputes in contract negotiation by the FMCS has a long history and is common throughout the private sector.14 The third provision of EFCA states that after thirty days of mediation, or such further time as the parties request:

If . . . the [FMCS] is not able to bring the parties to agreement by conciliation, the [FMCS] shall refer the dispute to an arbitration board established in accordance with such regulations as may be prescribed by the [FMCS]. The arbitration panel shall render a decision settling the dispute and such decision shall be binding upon the parties for a period of 2 years, unless amended during such period by written consent of the parties.15

There is no serious dispute about the propriety of requiring timely bargaining and mediation if three months of bargaining produces no agreement. Most criticism of Section 3 of EFCA focuses on the provision for interest arbitration.

Interest arbitration is nothing new: it is a time-tested process in which the terms and conditions of employment are established by a final and binding decision of an arbitrator or an arbitration panel.16Unlike grievance arbitration, a process that seeks to interpret and apply the rules of an existing contract to determine whether a breach has occurred, interest arbitration is designed to develop the contractual rules that will govern the relationship going forward.17Although interest arbitration is not common in the American private sector,18 it is widely used to resolve bargaining disputes for Page 51 public sector employees. In New York, for example, the Taylor Law authorizes the State's Public Employment Relations Board to begin interest arbitration proceedings when a public agency and a union have reached an impasse in collective bargaining.19 More than fifteen other states have similar provisions for at least some public employees.20 Some states require interest arbitration in the case of impasse,21 others allow the state employee relations agency to initiate interest arbitration,22 and some merely allow either party to request interest arbitration.23 Nearly all of these states either bar24 or limit25 strikes in situations where interest arbitration exists as an option.

EFCA is not the first proposal to introduce mandatory interest arbitration for the resolution of impasses in private sector disputes. In 2001, Republican Senators Lott and McCain included such a provision in their proposed Airline Labor Dispute Resolution Act.26 Page 52 In 1994, the Dunlop Commission proposed the creation of a tripartite "First Contract Advisory Board," which would review disputes between unions and employers and have the authority to order "binding arbitration for the relatively few disputes that warrant it."27 In 1970, President Nixon proposed a form of mandatory interest arbitration for "national emergency disputes" in the transportation industry.28 At the time of the enactment of the NLRA, some proposed that interest arbitration should be incorporated into the statutory framework.29 Though interest arbitration is not common in the private sector, the FMCS reports that it is actively involved in attempting to mediate first contract bargaining relationships.30 Hence, the agency is familiar with the problem of impasse in first contracts. It simply lacks any real power to address it. The idea that mandatory interest arbitration may provide a solution to bargaining impasses is thus hardly radical.

Although critics of EFCA have suggested that it is unprecedented to use arbitration to decide major aspects of the employment relationship,31 arbitrators in fact decide a huge number of the most financially and socially significant issues across the whole spectrum of private sector employment. As is well known, the business community has successfully invested millions of dollars in litigation and legislative advocacy surrounding compulsory arbitration in the employment and consumer context, trumpeting the wisdom of arbitrators and the adequacy of the arbitral forum as a dispute resolution mechanism to decide, both in individual cases and in huge class actions...

To continue reading