Toward a free-market union law.

• Author: Baird, Charles W.

F. A. Hayek and W. H. Hutt wrote extensively about the malign economic and social effects of the special privileges and immunities granted by governments to labor unions, but they wrote much less about what a free-market unionism might look like. They argued that all legislation that has conferred coercive powers on unions should be repealed, but they did not propose any specific free-market union legislation to take its place. Perhaps they thought that if all offending legislation were repealed there would be no need for any union-specific legislation. The common law of property, contract, and tort would suffice. Nevertheless, it is difficult in American politics to replace something with nothing. Therefore, I think it is useful, albeit constructivist, to propose a free-market alternative to the Norris-LaGuardia Act of 1932 (NLA) and the National Labor Relations Act of 1935 as amended in 1947 (NLRA). Perhaps the chief value of such a proposal is to make explicit what the ordinary law of property, contract and tort implies for the labor market and the role of unions therein. New Zealand's 1991 Employment Contracts Act (ECA) is a good, but imperfect, guide in this endeavor.

A free market is one in which interactions between people take place in the context of voluntary exchange. The principal role for government in a free market is to enforce the rules of voluntary exchange. In what follows, I will set out my formulation of the criteria for voluntary exchange in any market, including the labor market, and consider what these criteria imply for strikes and "yellow-dog" (union-free) contracts. Next, I will show how the NLA and the NLRA violate those criteria. Then I will briefly examine what Hayek and Hutt had to say about voluntary unionism. Finally, I will examine some of the provisions of the ECA as possible components of an American free-market union law. I have examined the usefulness of the ECA as a guide to building voluntary unionism elsewhere (Baird 2001). Here I do so in a bit more depth.

The Criteria for Voluntary Exchange

An exchange is a reciprocal giving and receiving of goods and services among two or more people. An exchange is voluntary if four criteria are met (Baird 1988):

1. Entitlement, All parties to the exchange must either own that which they are offering to exchange, or they must be acting as the authorized agent of the owner(s). There is no such thing as voluntary exchange of stolen property.

2. Consent. All parties to the exchange must (a) agree to enter into the exchange relationship (i.e., to bargain with each other), and (b) accept the terms at which any actual exchange takes place (i.e., the final outcome of the bargaining). No forced bargaining can result in a voluntary exchange contract.

3. Escape. All parties to the exchange must be able to turn down any offers they do not like and walk away without losing anything to which they are entitled. This requirement is really implicit in the consent criterion, but I state it as a separate criterion for emphasis.

4. No misrepresentation. No party to the exchange may defraud any other parties (i.e., no one can tell a lie). This stipulation leaves room for honest error. I can make any claim that I believe to be true when I make it, even if it turns out later to be incorrect. Moreover, this criterion does not require the parties to tell all they know. It merely proscribes any person saying something he knows to be false.

Hayek (1960, 1973) often asserted that the primary responsibility of government in a free society is to enforce the "universal rules of just conduct." I suggest that those rules are nothing more or less than the rules of voluntary exchange. In the NLA and the NLRA, the U.S. government not only failed to enforce those rules, it discarded them.

The Voluntary Exchange Right to Strike

If a strike is defined as a collective withholding of labor services by workers who find the terms and conditions of employment offered by an employer to be unacceptable, then there is a legitimate fight to strike. It is legitimate so long as no one's voluntary exchange rights are violated. In the absence of an extant employment contract with a worker, an employer has no entitlement to the worker's labor services. Similarly, in the absence of an extant contract, any individual worker has a right to withhold his labor from an employer for whom he does not consent to work. (1) He is free to walk away without losing anything to which he is entitled. Each worker is entitled to his own labor services, not the job. If he chooses to withhold his labor from his employer, the employer is free to sever the employment relationship. The employer owns the job in the sense that he provides the complementary inputs with which labor services of willing workers are mixed in the production process.

Now, if every worker has a fight to withhold his own labor services, each of them can choose to exercise the right simultaneously. But that is the end of it. Each worker can withhold his own services from the strike target; but no worker, or any group of like-minded workers, has the right to withhold, or interfere with, the services of any other worker who chooses to accept the terms of employment offered by the strike target. Nor does any worker, or group of likeminded workers, have the fight to withhold or interfere with the strike target's suppliers and customers who choose to continue to do business with him. Informational picketing, not on company property, may be permitted; but since even "peaceful" picketing by large numbers is inherently intimidating, the number of picketers must be strictly limited and their actions must be strictly circumscribed.

When unions claim that there is a right to strike, they mean something very different from the voluntary exchange fight to strike. They assert that union leaders, or union members by majority vote, can force workers who do not want to strike to withhold their labor. In addition, they claim the fight to prevent employers from hiring replacement workers during strikes and to prevent suppliers and customers from continuing to do business with struck firms. In other words, they claim the right to prevent people who do not support a strike from exercising their voluntary exchange rights with strike targets. Unions exercise these extraordinary rights claims through picket line intimidation and violence. (2) Current law permits mass picketing of a strike target by striking employees together with huge numbers of people who have no relationship to the target. Such mass picketing is designed to intimidate replacement workers, suppliers, and customers who seek to exercise their voluntary exchange rights.

Yellow-Dog Contracts

A yellow-dog contract is an agreement between an employer and a worker that, as a condition of obtaining and continuing employment, the worker will abstain from any involvement with a labor union (i.e., the worker will remain union-free). Unions, of course, abhor such hiring contracts. They coined the term "yellow-dog" to imply that any worker who entered into such an agreement was cowardly and a traitor to the working class. A more accurate label for such agreements is "union-free" contracts. The NLA made such agreements unenforceable in 1932. Section 8(a)3 of the NLRA made them illegal in 1935. Nevertheless, union-free contracts can be voluntary exchange contracts, and as such they are legitimate exercises of individual entitlements. (3)

Under the rules of voluntary exchange, an employer can make any nonfraudulent job offer to any worker who is willing to listen. A job offer consists of terms of compensation and a job description. The job description includes time, place, and manner rules in accordance with which the worker works. These rules include what must be done mad what must not be done. A rule that requires a worker to remain union-free is merely part of the job description. So long as there is no misrepresentation, and the worker is free to accept or reject the job offer, no one's voluntary exchange rights are violated. A worker may count the union-free requirement as a negative, but if he accepts the job offer it must be that he is willing to trade that negative off against other components of the job offer he finds attractive. In fact, as revealed by the record in Hitchman Coal and Coke Co. v. Mitchell (245 U.S, 229 [1917]), sometimes employees themselves asked their employers for union-free agreements as a way of insulating themselves from union harassment. In its decision the Court wrote, "The employer is as free to make non-membership in a union a condition of employment, as the workingman is free to join the union, and ... this is a part of the constitutional rights of personal liberty and private property" (at 251). This was when the Court still enforced the understanding of rights as enunciated in the Declaration of Independence that rights are antecedent to government, and it is the duty of government to enforce those rights. The NLA and the NLRA trample on those rights.

The Norris-LaGuardia Act

In American Steel Foundries v. Tri-City Central Trades...