Binding Arbitration 101, or Why We Must Stop Calling EFCA “Card Check”

The Employee Free Choice Act or, more appropriately, the Employee Forced Choice Act is bad for workers and employers alike. Many on the Right, who have been referring to the legislation simply as “card check,” have made great progress in exposing the anti-democratic elimination of the secret ballot, which not only hurts workers, but also makes bullying easier for union bosses. Pro-business organizations have run ads, paid for billboards and written op-eds, all in the name of making “card check” a household name with a negative connotation–and in many ways, they have succeeded.

With all the attention on cap and trade legislation and government-run health care “reform,” EFCA has taken a back seat on Capitol Hill. To date, Sen. Arlen Specter has said that even though he is a Democrat now, he will not support EFCA (I’ll believe that when I see it), but we have also added Sen. Franken into the mix, and he’s certain to support it. But we must never call it “card check” again.

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Like I say, by some accounts, the Right has done an incredible job of exposing card check–so much so that legislators might consider an EFCA compromise that would strip the card check portion of the bill, but retain the equally undemocratic and unreasonable binding arbitration language. But what is binding arbitration?

Mark McKinnon, a representative of the Workforce Fairness Institute and a former adviser to President Bush, explains:

One of the most egregious provisions in EFCA is called binding interest arbitration. This would allow the federal government to mandate contracts on businesses of any size without the consent or support of the employee or employer. Government arbitrators with no expertise about the business or industry would make decisions about wages, benefits, and workplace conditions.

EFCA hands the final decision of any business contract to a government arbitrator, who would draft and finalize the contract rather than simply interpret the provisions agreed upon by both parties. Instead of serving as a judge, the Employee ‘Forced’ Choice Act makes the arbitrator a dictator of sorts, imposing his will on the parties without their consent.

This is the key difference – under EFCA, government arbitrators would dictate and set the terms of a contract despite what either side wants. In regular arbitration, the arbitrator serves as an interpreter of a contract agreed upon by both parties.

The more I’ve learned about this, the more I’ve found myself wondering where binding arbitration even comes from. In what situation could this possibly be good? The way it was explained to me was that, in the past, binding arbitration has mostly been used for public safety officials. Because of the nature of their work, unionized public safety officials forfeit the right to strike in exchange for the protection of binding arbitration. Makes sense, seeing as we’d have quite the mess on our hands if police officers decided to strike. From my naive perspective, I can see how this might solve that single problem.

How it could help other workers though? The Heritage Foundation says it cannot:

Under the Employee Free Choice Act (EFCA, H.R. 800), if a union and management cannot agree to terms on the first contract after a union is recognized, either side could send the dispute into binding arbitration. This means that both workers and management must accept what is, at bottom, an arbitrator’s educated guess at what a fair and prudent contract might be. This has serious consequences for workers.

The most obvious consequence is that employees could be stuck working for less than they might get at another company. And because of the way that binding arbitration affects some obscure provisions of the National Labor Relations Act, workers would be stuck with the union that very well may have let them down, perhaps by not accepting a better offer from management when it had the chance or by putting on a poor presentation in front of the arbitration panel. And those workers would usually be stuck with paying union dues out of their disappointing wages. No matter how badly the union let them down, workers who believe they have lost an arbitration ruling would be unable to even attempt to remove that union for several years.

And what does this mean for businesses? For one, it’s very, very costly. So much so that Gary Shapiro, president and CEO of Consumer Electronics Association, calls EFCA “the ultimate innovation killer.” I’ve also heard a leader of Virginia’s Hispanic Chamber of Commerce call it “the American dream killer.” The Heritage Foundation goes so far as to say that EFCA authorizes government control of 4 million small businesses and, if you read my post from yesterday on government ownership, you know that brings with it a host of other problems.

Another explanation of binding arbitration comes from R. Theodore Clark Jr. and, while it is very much inside baseball from a law perspective, it’s a perspective that I haven’t read anywhere else. Beyond the legal analysis, Clark concludes:

In an economy where the only constant is the need for change, sometimes literally on a daily basis just to survive, the clearly predictable effects of compulsory arbitration of first contracts include the following:

*Lengthy delays lasting up to a year or more between the commencement of arbitration and the issuance of an award, during which the time the employer will not be able to make necessary changes but instead will be required to maintain the status quo on all existing terms and conditions of employment.
*The fostering of a “one size fits all” mentality, thereby stifling an employer’s ability to innovate and respond to new circumstances.

Even in the best of economic times, compulsory arbitration of first contracts poses serious risks to the economy. But for an economy in that is in dire straits and in desperate need of encouragement, it would be, in a word, disastrous.

A compromise is coming, according to Sen. Sherrod Brown of Ohio: “We’re going to do something this summer. Stuff’s happening. We’re getting closer.” That compromise is likely to include binding arbitration, but keeping it in the bill is just as damaging–if not more so–as keeping the card check provision. Let’s stop calling EFCA “card check” and focus our energy on proving that binding arbitration is bad for workers, bad for business and bad for the economy.

Cross-posted at CatherineFavazza.com.

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