Wednesday, December 31st, 2008


With the advent of a new administration and a new Congress with heavy Democrat majorities in both houses, U.S. businesses can expect major changes in – and major challenges to – their ability to operate on a nonunion basis. 2009 is likely to be recorded as one of the watershed years in labor-management history, along with 1935, 1947, and 1958 – a year when the fundamental balance is shifted and new rules are established that will affect the U.S. economy and the competitiveness of American businesses for years to come.


In 1935, Congress passed the National Labor Relations Act as part of President Franklin Roosevelt’s “New Deal.” This legislation established a new federal agency – the National Labor Relations Board (NLRB). The NLRB’s mission was to promote collective bargaining and to help trade and industrial unions organize and bargain for American workers. At the time it was hoped that the process of unionization would improve wages and benefits and increase the purchasing power of workers – and thereby help pull the American economy out of the Great Depression. While this legislation was successful in dramatically increasing the strength of unions, there is little evidence that it had the hoped for positive effect on the U.S. economy.

By 1947, Congress was concerned with the power of labor unions to cripple the economy through strikes, and in response sought to restore some balance in labor-management relations. The Labor-Management Relations Act changed U.S. policy towards unions. Instead of promoting unionism, the NLRB was directed to take a “neutral” position by (1) protecting the rights of employees to decide for themselves whether they wanted to form or join unions without threats or coercion from either side – management or union, and (2) taking a “hands-off” approach to the collective bargaining process so as to allow economic forces to determine the outcome of union contract negotiations. Individual States were given the right to pass “right to work” laws that prohibited mandatory union membership, and many states (including Alabama) did so. Predictably, this policy shift – from having the government actively promote unionism to making the government neutral – slowed the growth of unions and actually started a long process of decline in the numbers and strength of America’s industrial and trade unions.

In 1958, in response to concerns about labor racketeering and the infiltration of labor unions by organized crime groups, Congress passed the Landrum-Griffin Act, officially known as the Labor Management Reporting and Disclosure Act. This law (1) made it a crime for a company to “buy” labor peace by bribing union officials, and (2) required unions to file financial reports with the U.S. Department of Labor so that union members could see where and how their dues money was being spent.

One result of this law was that it became clear that the overwhelming majority of members’ dues was spent on relatively high salaries for union officials and even more on political contributions.

The steady decline in union membership continued over the next forty years so that by the time President George W. Bush entered the White House in 2000, union membership in the private sector was below 10%.


The Bush Labor Department (DOL) infuriated unions in two ways: (1) the DOL was aggressive in enforcing a U.S. Supreme Court decision (Beck) that gave union members the right to “opt out” of paying that portion of their monthly dues that went to political contributions, and (2) the DOL required even more detailed financial reporting – greater transparency – about how unions spent their members’ money. The Beck decision recognized that in the majority of States (non “right to work” states), many employees must join the unions or pay dues in order to keep their jobs and that it was fundamentally unfair to force such people to contribute to political causes with which they did not agree. The more detailed financial reporting showed how much unions were spending on political activity versus collective bargaining and contract administration.


America’s unions spent over $400 million on behalf of Democrat candidates in the 2008 election cycle – the number is available in part because of the more detailed reporting required by the Bush Department of Labor. Now, with Democrats firmly in control in Washington, Big Labor is expecting – even demanding – a payback. Hence, 2009 is likely to be a year where we experience a fundamental change in labor-management relations.

Currently, there are three areas where Big Labor is seeking relief:


Watch for the new Secretary of Labor to move quickly to cancel the Bush Administration’s regulations on Beck rights and financial reporting. This can be done without Congressional approval and will allow unions to collect more money for political activities and to spend that money with less oversight.


This proposed legislation – which passed the House last year but stalled in the Senate – would effectively return the state of labor-management relations to where it was in 1935-1947 and then some. Employees would no longer have the right to vote on whether they want a union. Instead, unions would be allowed to organize workers privately by getting them to sign “authorization cards” – a process that the NLRB has found in hundreds of cases to be subject to coercion and unlawful threats. Second, the process of contract negotiations would no longer be subject to economic or market forces. If labor and management cannot agree on wages, benefits and other terms of employment, the government will step in and impose a “reasonable” settlement. Of course, “reasonable” is in the eye of the beholder and may or may not reflect the economic reality facing the employer.

The U.S. Chamber of Commerce has promised the fight this legislation tooth and toenail. Some even say that if this legislation is enacted it will be declared unconstitutional because it will impinge on companies’ free speech rights – the right to speak with employees about the disadvantages of unions. It seems unlikely, however, that such a challenge would be upheld because nothing in the proposed law keeps a company from talking with its employees about unions. Indeed, some forward thinking companies that are serious about maintaining nonunion status have already begun to include messages about union issues in new employee orientation sessions and in regular “tool box” employee communications – because they expect the Employee Free Choice Act to become law and want to be prepared.


Another union goal – being actively pushed by the Service Employees International Union that has especially close ties to the President Elect – is to require financial institutions that have received or will receive any form of financial assistance from the Troubled Assets Relief Program (TARP) to remain neutral (give up their free speech rights) in any union organizing campaign. The idea is that this change can be done through a Presidential Executive Order (as is done with Affirmative Action Plan requirements) without Congressional approval. Any company that has received or which seeks financial assistance (loans, investments, guarantees) from the federal government must pledge to remain silent in the face of a union organizing effort as a condition of receiving financial assistance. Reportedly, the Service Employees Union is making plans to begin organizing efforts at bank operations centers based on this anticipated Executive Order.


  1. 2009 will be a watershed year for labor-management relations.
  2. Every company that is interested in maintaining nonunion status (i.e., competitiveness) should join in and support efforts to slow down/modify Big Labor’s proposed changes.
  3. Those same companies should be making plans now to communicate with employees about the subject of unions because by waiting they may lose the right to communicate.

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Disclaimer regarding legal advice: The information in this newsletter should not be construed as legal advice. This information is not intended to create or constitute an attorney-client relationship. For more information or an explanation about the matters discussed in this newsletter, please contact an attorney in this practice group.