Risk & Compliance

Proposed Labor-Union Law Roils CFOs

Amid a political firestorm over the Employee Free Choice Act, finance executives are preparing for the possibility of increased unionization.
Kate PlourdMarch 19, 2009

The proposed Employee Free Choice Act, also known as the Card Check bill, has set off the first of what could be a series of labor-versus-business brawls in the now Democrat-controlled Washington.

While business-backed and union-supported lobbying groups attempt to sway lawmakers on the vices or virtues of the bill, which would essentially ease unionization at private companies, finance executives are preparing for the legislation’s possibly adverse effects.

“My biggest concern is that it will cause the proliferation of unions and make unionization easier,” says Bill Wettstein, CFO of Nussbaum Transportation, a Midwest trucking company. “I feel that the current laws give both the union and the employer a fair chance to state their position on unionization.”

The bill, introduced in the House and Senate last week, would enhance employees’ ability to form unions by altering the National Labor Relations Act. Currently, if 30 percent of a business’s employees sign a petition to form a union, the employer can either accept the union or allow employees to vote on it in a secret-ballot election. Employers tend to favor the latter; before the vote is held they take the opportunity to communicate to employees their views on unionization. Under the proposed legislation, however, employees would be allowed to unionize by signing cards from a union representative without the company knowing.

“Usually when a petition is filed, employers are able to talk to employees about the whole collective bargaining process,” says labor attorney Joel Cohen, a partner at McDermott Will & Emery LLP.  “This bill would allow unions to wrap up the employee support before the employer knows that there’s a union campaign going on.”

Moreover, the bill would change the bargaining process for first-time contract negotiations once employees have been unionized. If an agreement is not reached within 130 days of union formation, the National Labor Relations Board would appoint a panel of mediators and arbitrators. Additionally, the bill would increase the penalties for companies that violate NLRA standards such as unfair treatment or firing of a union organizing leader.

Unions that support the bill argue that because the productivity of American workers has grown in recent decades while American wages have declined or stayed flat in real economic terms, union representation is needed to help buttress the middle class, said Stewart Acuff, special assistant to the AFL-CIO’s president.

At many companies, finance executives and corporate legal teams are already devising plans to implement should the bill become law. For example, Hobby Lobby, the Oklahoma City-based arts-and-crafts retailer, has begun educating supervisors and managers about the legislation.

“We had an organized effort in our distribution center about six years ago,” says Jon Cargill, Hobby Lobby’s CFO. “The vote for the union was soundly defeated in a secret election. Communicating to employees was vital then.”

Wettstein agrees that educating employees is critical. “We are definitely going to make efforts to be more proactive in communicating to our employees about why we feel our current situation is the most positive,” he says.

Experts advise companies to start preparing now by establishing a company-wide position on unionization. “Let employees know that you believe things work best when you have an opportunity to work directly with them and that a third party coming between you is not in the best interest of the company or the employees,” says Todd Steenson, a partner in the law firm Holland & Knight LLP.

If the bill passes, companies should train managers and supervisors at every level to spot signs of a union campaign, to know the company’s policy on what to say to employees, and whom within the organization should be informed of the unionization efforts.

“When employees that start challenging your policies, or non-employees are seen hanging around your facilities, are some subtle signs of unionization that managers need to be aware of and know how to report,” says Steenson.

Another big concern for corporations is the change that the law’s passage would impose on collective bargaining. The costs of organizing against a union campaign and time and energy spent negotiating with unions don’t compare to the frightening threat of a government arbitrator having a say in what the company pays employees, say Cargill and Wettstein.

“The idea that a government arbitrator could come in and make a binding decision on a business and not even understand what goes on in that business is concerning,” says Hobby Lobby’s Cargill. “That really would takes the teeth out of the stance that a company can take in a negotiation.”