Employee Free Choice Act: Who Wins, Who Loses

Apr 3, 2009
This article is part of a series called Opinion.

The first casualty when war comes is truth. – Sen. Hiram Johnson (R., CA), 1918

The looming passage of the Employee Free Choice Act has the business world in a frenzy. The EFCA, if you haven’t been paying attention, would make it easier for unions to organize and reduce employers’ leverage in contract negotiations.

Businesses act like sentries on the parapets of ancient castles, warning of the approach of barbarian hordes. Consultants, trade associations, and labor lawyers presage unions gaining strength and forcing onerous agreements, obliterating productivity and adding costs. All of this comes, of course, at the worst possible time from a business perspective.

Unions, on the other hand, see EFCA as leveling the playing field. Management has used the current certification process to its advantage, they argue, intimidating workers and pressuring them to reject union certification in secret ballot elections. Given that union membership is at historically low levels — just 7.8% of U.S. workers currently belong to one — the portrayal of management as having the deck stacked in its favor is believable.

The truth probably lies somewhere in the middle. What is undeniable, however, is that the EFCA will make organizing easier for unions (which is why they support it so enthusiastically). And that has employers wondering what the implications are for them.

How Much Is Your Organization at Risk?

The first question most employers ask is whether or not they are at risk of being targeted by a union. When you look at it from the unions’ perspective, some employers are better targets than others, and they will focus their efforts accordingly. Manufacturers, ironically, are not top targets because labor has learned that such firms can pack up their machinery and move to places less friendly to unionization.

Thus, place-based employers — health care, hospitality, retailing, retail banking, and government — are ideal targets for organizing. One cannot uproot a hospital or a restaurant to avoid unionization efforts without losing its customer base. Some businesses require that you have facilities where your customers are, even in today’s online world (it’s difficult to deliver a baby over the Web).

Employers in industries that have lots of low-paid hourly workers are also prime targets because such employees often have issues about pay, working conditions, or schedules. Health care, hospitality, and retail show up in this category, as well.

Organizations with records of poor employee relations are at greater risk for obvious reasons. Workers who have grievances — real or imagined — are much more open to the union’s case for collective bargaining and the EFCA will make it much easier for such people to act out their frustrations.

How Should Employers Prepare for EFCA?

Passage of EFCA is not certain, but with a pro-labor Congress and President the odds of it becoming law are better than they have been in a generation. So employers should prepare now for a new labor marketplace where unions will have more clout. Here are three things employers should do at a minimum to prepare themselves in advance:

Objectively assess the state of your employee relations. It is hard for employers to get an accurate fix on employees’ sentiments because workers are reluctant to criticize for fear of retribution. This is especially pronounced during tough economic times. Executives also tend to see themselves as far better at managing than their employees do. So it is important to assess the health of your relationship with your employees through objective measurements such as employee engagement or satisfaction surveys, exit interviewing those who quit to find out why, and monitoring external blogs and forums for comments about your workplace by current or former employees.

If it is apparent that you have points of chronic conflict, you need to address those quickly to reduce tension and relieve frustration.

Educate front-line supervisors and managers about the EFCA and its implications. There is truth in the old saying is that, “people join a company but quit because of a manager.” How your managers and supervisors work with their employees sets the tone for your organization and determines how well management and the rank and file get along. If the EFCA passes, you will also need managers and supervisors to be vigilant for signs of organizing efforts at your workplace. Nearly every expert advises strongly against union-bashing or fear-mongering: you are far better off clearly and dispassionately laying out the facts to your workers as to what the impact of unionization will be and letting them decide. If you have supervisors or managers who have significantly higher than normal turnover rates, you need to evaluate their ability to lead and inspire their people; if someone is unable to get people to do their jobs without threats or coercion, they shouldn’t be in such a role.

Communicate, communicate, communicate. Employers should communicate frequently and honestly in any case, but now more so than ever. The more those communications are in the form of dialogue — brown-bag lunches, town hall meetings, lively intranets, blogs, and wikis — the better your relationship with your employees will be. If a work site is targeted by an organizing effort, employers that already have open lines of communication will be able to present their side of the situation more proactively. If you react to the organizing effort, you will appear defensive, and workers will suspect ulterior motives. Indeed, a recent study found that people trust the opinions and attitudes of “people like me” twice as much as they do corporate CEOs. The sooner you can establish a positive relationship with your workers that encourages healthy two-way dialogue, the better off the organization will be regardless of what happens.

How Much Will It Cost?

New initiatives are hard to fund while organizations are cutting back. The question for employers, though, is whether the cost of preparation is outweighed by the cost of a union bargaining on behalf of its employees.

A review of the data about the impact of unions on business performance is fascinating. More recent data generally comes from the unions and their allies showing that worker productivity is, if anything, improved after a union is in place. The fact that contrary data is usually 20 or more years old shows how blasé business became about unions. Most research, though, agrees that labor costs will increase once an organization has collective bargaining in place. One study pegged the differential at 30% higher costs for union shops versus open ones.

Some may counter that if unions push wages higher, that will mean fewer jobs as employers try to keep labor costs in line with shrinking revenues. But if you are a service provider, that also means lower customer satisfaction and reduced sales because wait times increase and the customer experience degrades as harried employees try to please annoyed shoppers, guests, or patients.

Improve Your Odds of Success

The three actions recommended above need not be very expensive, and certainly they pale in comparison with significantly higher labor costs across the board. Some ideas can be implemented using existing staff and systems (schedule brown bag sessions using e-mail, for example). Any effort, though, will require the strong commitment of your leadership and your managers. If they are unwilling to take the time and make the effort to engage with your employees, you are probably too late to make significant change anyway.

You can take the chance that the EFCA doesn’t pass, and hope that all of this goes away. But if you bet wrong the biggest loser will be HR, which will be blamed for what happens next.

This article is part of a series called Opinion.