Getting Real About Interest Arbitration

The Six Steps of a Working Arbitration System

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Debate over the Employee Free Choice Act is turning to how to negotiate a first contract once a majority of workers demonstrate that they want union representation. This is a critical part of the proposed bill. One of the biggest failures of the current labor law is that even after a majority of employees vote for union representation, only 56 percent of them achieve a first contract after two years. And, if the employer resists negotiating by engaging in illegal labor practices, the chance of getting a contract goes down another 13 percent. Something is drastically wrong with a labor law when an employer can frustrate and indeed flaunt the will of the majority of its employees.

The Employee Free Choice Act solves this problem by providing a fail-safe and fair process for ensuring that once employees vote for a union they will get a first contract. It provides for negotiations and mediation as the first step in the process and arbitration for those that fail to reach an agreement on their own. But the current draft of the Employee Free Choice Act does not spell out how the arbitration system called for in the bill would actually work. This will have to be done as the bill is marked up in the legislative process or by rule making from the Federal Mediation and Conciliation Service.

The bill’s sparse wording makes it an easy target for opponents to argue that everyone will end up having a contract imposed by “government arbitrators” who know nothing about business or labor issues. These critiques belie the experiences accumulated in more than 30 years of arbitration in the public sector and similarly long experience with first contract arbitration in Canada. It is time to put an end to these ungrounded misconceptions about how arbitration would actually work.

Anticipating this day would come, Arnold Zack, one of America’s most respected and experienced neutral arbitrators and a past President of the National Academy of Arbitrators, and I worked together to review the accumulated evidence on interest arbitration. We used this evidence to spell out a set of design features that are consistent with the objectives and general framework of the Act and that address each of the arguments against arbitration put forward by critics of the bill.

Here’s a brief description of how the system should work. For the details see Arnold Zack’s March post, “Arbitration of First Contracts: Issues and Design Features,” on the Labor and Employment Relations Association blog.

1. FMCS would assign a mediator as soon as a new unit is certified and provide the full range of mediation, education, and facilitation services needed to help the parties reach a voluntary agreement and start their relationship off on a positive footing. The vast majority of cases are likely to be resolved in negotiations and mediation. In fact, settlements are reached more than 90 percent of the time in public sector jurisdictions that provide for arbitration. The same is true for first contract bargaining in the provinces of Canada that provide for arbitration. Contrary to those who argue every case will go to arbitration, the presence of arbitration encourages and enhances parties’ ability to reach voluntary agreements in negotiation and mediation.

2. If an agreement is not reached in negotiation or mediation, the employer and union must assemble a tripartite panel to arbitrate the first contract. The parties must select one neutral arbitrator from a list of experienced arbitrators provided by the FMCS. Arbitrators on this list should be vetted and judged by business and labor representatives to ensure that they are qualified to serve as neutral arbitrators and will meet experience, expertise, and mutual credibility standards. These will not be “government arbitrators” or individuals appointed at the whim of the FMCS as some critics have suggested.

3. The employer and union would each appoint their own arbitrator to join the neutral arbitrator in the tripartite panel, thereby building more opportunities for input in the process and giving the parties another way to inform the neutral arbitrator about how different decision options would affect the business and the workforce.

4. The scope of issues considered would be limited to wages, hours, and working conditions—the same issues that currently are mandatory subjects of bargaining. This guards against critics’ worry that an arbitrator would somehow intrude on so-called “management rights” to run the employer’s business.

5. The arbitrators would be required to consider standard criteria in reaching their decisions, including the employer’s financial and competitive situation and common practices within the occupation and industry.

6. Further opportunities for mediation and negotiation would be built into the tripartite process during and even after a draft award is written.

Experience and evidence from econometric studies demonstrate that arbitrated contracts will mirror negotiated settlements in comparable bargaining units in their industry and occupation. Arbitrators are inherently conservative and do not impose new ideas of their own that would turn out to be unworkable. The presence of employer and union arbitrators in the tripartite structure and deliberations provides further protection against such a possibility. There is no factual basis for critics’ claims that arbitrators will either inflate labor costs or impose decisions that are harmful to employers or workers.

This is the real world of collective bargaining under arbitration: a proven and fair system for resolving first contracts if one or both parties are unwilling to negotiate an agreement on their own. It’s not some made up doomsday scenario painted by those who oppose reform. Most importantly, it would ensure that an agreement will be achieved, something that has been out of reach under the current failed law for over 40 percent of worker groups that vote for representation.

Thomas A. Kochan is the George M. Bunker Professor of Management at MIT’s Sloan School of Management and co-director of the MIT Institute for Work and Employment Research.

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