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U.S. Department of Labor Futurework
  Trends and Challenges for Work in the 21st Century
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What Do Nonunions Do?
What Should We Do About Them?

by
Daphne Gottlieb Taras, University of Calgary and Bruce E. Kaufman, Georgia State University
Task Force Working Paper #WP14
Prepared for the May 25-26, 1999, conference
“Symposium on Changing Employment Relations and New Institutions of Representation”

September 1, 1999

What Are American Firms Doing?

Given the Wagner Act ban on formal nonunion employee representation schemes, and the recent spate of NLRB decisions including the famous Electromation case, it is instructive to examine the impact of the NLRA on managerial practice in America.

Michael LeRoy recently surveyed employer-members of the Labor Policy Association (LPA) and located 131 participation groups throughout the US. Nearly 73 percent were established after the NLRB decided Electromation. He found that about half of the employee groups handle subjects (e.g. scheduling of work) that might lead to compliance problems with the NLRA. Further, on the dimension of employer domination in the composition of the committees, about half the sample was in potential violation of the NLRA. In fact, the majority of the participation groups were, in one way or another, operating outside the permissible bounds of the law.

We next excerpt a study by Kaufman, Lewin and Fossum of mini-case studies of employee involvement programs currently in operation at eight American companies. These companies come from a variety of lines of business, are located in several areas of the country, and range in size from approximately one hundred employees to over one hundred thousand. They are mostly or completely nonunion and have committed to EI philosophies and programs. Appendix 1 contains the details of the case studies.

The breadth and depth of employee involvement and participation activities undertaken by these eight companies is quite striking. There is a significant gap between what a strict reading of the labor law says is permissible and what several of these companies are doing in their EI programs. Most noteworthy in this regard are Company C (airline transportation) and Company F (missile manufacture). Both companies have employee representational bodies that are in a number of respects closely akin to the 1920s-era employee representation plans. In the former case, the In-Flight Forum and the Personnel Board Council are division-wide or company-wide representational bodies financed by the employer. They have written charters, elected or selected employee delegates, regular meetings with management, and agendas that include issues related to the terms and conditions of employment. In the case of Company F, the People Council spans five plants, has selected employee representatives that meet with management, and considers various aspects of the terms and conditions of employment. It should be noted that executives at both companies are well aware of the law regarding nonunion employee committees, have consulted labor attorneys on the matter, and have proceeded with their representation plans in the belief they meet all legal requirements of the relevant labor law (the Railway Labor Act in the case of Company C and the NLRA in the case of Company F). It can fairly be said that these parts of the EI programs at these two companies appear to push against the boundary of what is permissible under the NLRA.

Five of the other companies, Company A (detergent manufacture), Company B (auto assembly), and Company D (paper manufacture), Company G (janitorial equipment) and Company H (package delivery) also have employee representational bodies that in some respect raise Section 8(a)(2) compliance issues, but not to the same degree as Companies C and F. In Company A, for example, the Packaging and Work Process groups are composed of employee representatives and selected managers, focus predominantly on production and quality issues but also on employment matters related to scheduling and safety, have authority to deliberate and make decisions, and are company-financed and controlled. In Company B, the joint safety committees appear to be the part of the EI program that comes closest to infringing on Section 8(a)(2), given that the committees are composed of employee representatives and selected management personnel and are empowered to jointly make decisions on safety matters. In Company D, the department and mill core teams appear to most closely infringe on Section 8(a)(2)'s prohibitions, for even though the focus of the groups is on production issues the employee and management representatives on each team must occasionally consider employment subjects, such as work scheduling, job rotation, and safety, in the course of their deliberations. The EI body in Company G that appears most questionable from a legal point of view is the Plant Advisory Board, since it is an elected representative group and confers with management over some issues that are related to terms and conditions of employment. The employee committees at Company H also sometimes deal with management on issues related to terms and conditions of employment, although unlike the PAB at company G these employee committees tend to be one-time, more informally constituted project teams and thus less likely subject to legal challenge.

The only company of the eight that appears to clearly fall within the permissible boundaries established by the NLRA is Company E (photocopier service). The work groups are composed of all technicians assigned to that unit and thus are not representational in nature. These work groups correspond most closely to the small, production-oriented "teams" also known as “on-line” systems (as opposed to “off-line” systems that are more often representational and deal with issues beyond production and quality) and that are focused on in much of the contemporary management literature on high-performance workplaces.

Another indication of the gap between actual practice among these eight companies and what is permissible under the NLRA is to compare their EI programs with the practices cited by former NLRB member and Electromation, Inc. co-author Dennis Devaney (1994) as legally permissible. Briefly, they are: to avoid structured groups in favor of EI conducted on an individual or unstructured group level; establish task-specific ad hoc groups focused on productivity, efficiency and communication; use irregular groupings of employees, such as at retreats; and use staff meetings to address communications issues, where all staff are present (to avoid representational issues). It is evident that only the EI program at Company E, the photocopier service provider, comes reasonably close to meeting these criteria. The EI programs at the other seven companies would all have to be modified, modestly at Companies A, B, D, G, and H and substantially at Companies C and F.

To gain further insight on the constraining effect of the NLRA on employee involvement programs in nonunion companies, in each interview at these eight companies Kaufman, Lewin and Fossum asked the management executive a series of open-ended questions about his or her opinion regarding the impact of the law on the company's EI activities and whether the company would use more employee representational EI structures if allowed. These matters were also explored in interviews with managers at three other companies who chose not have their EI activities included in the study. They also interviewed four labor attorneys on the management side who are familiar with EI programs and Section 8(a)(2), and two management consultants who specialize in the design and implementation of high-performance workplace systems. Their comments and observations are summarized and synthesized below. Obviously, they are anecdotal, in some cases speculative, and based on a small number of cases, so caution is required in generalizing from them.

They queried the managers regarding the extent to which they think their EI programs are within the legal constraints of the NLRA (or RLA). Reactions tended to fall into three groups. The first consists of several managers whose EI programs were clearly within the law, or close to it. Their perspective is that while the restrictions imposed by the NLRA may be counterproductive and out-of-date, this is of little practical concern since they do not have, and do not desire to have, the more formal systems of employee representation that might pose a legal problem.

The second response pattern was from managers whose EI programs come closer to the legal boundary established by the NLRA but who have taken pains to make sure the programs meet not only the spirit but also the letter of the law, such as those at Company A. Typically, they were more likely to follow the counsel of a management labor attorney in setting up the EI program and to structure it in ways that would pass muster with the NLRB. In this regard, the managers uniformly saw attorneys as a conservative and restraining influence on their initiatives in the EI area.

The commitment of these managers to a strict "better safe than sorry" approach to EI forces them to make certain compromises or changes in the program that are typically viewed as awkward or counterproductive. To avoid a charge of "dealing with" employees in a manner that would violate the NLRA, for example, companies resort to several stratagems. They may announce, for example, that all employment-related issues are "off-limits." Doing so, however, is seen by the managers as counterproductive on two counts. First, many aspects of efficiency enhancement and quality improvement inevitably require detailed, in-depth discussions with workers of various employment issues, such as work schedules, cross-functional training programs, and pay-for-knowledge incentive wage systems. Second, many employees see EI programs devoted only to productivity and quality issues as serving management's interests and thus desire as a quid pro quo that issues central to them, such as pay, benefits, and vacation time, also be put on the table for discussion. Paradoxically, say these management executives, Section 8(a)(2) actually works against employee interests in this regard since it provides nonunion companies with a convenient excuse to avoid dealing with issues that primarily affect the well-being and livelihoods of workers.

Alternatively, the companies may completely delegate authority to the employee committees so that there is no bilateral interaction between management and labor, such as making the decisions of a peer review panel final and binding. From a management perspective, this approach both satisfies the law and increases the credibility and legitimacy of the decisions made by the employee representational committee, but on the other hand it also makes the committees sometimes unpredictable and opens up the possibility that without upper management review a committee's decisions may substantially change company employment policy (an "unholy precedent") or contravene employment law. Or, finally, to resolve the "dealing with" problem the companies may limit the employee committee's role to communication and information exchange, reserving to management the process of deliberation and final decision. As an example, one manager said the employee committee investigated the feasibility of alternative shift schedules, developed a list of pros and cons, and then "heaved the information over the wall" to management, who then made the final decision. This approach reportedly satisfied neither management nor the employees, but was viewed as the price that had to be paid to stay within the law.

The third response pattern is to be cognizant of Sections 8(a)(2) and 2(5) but nonetheless make a trade-off in favor of more effective EI programs at the risk of crossing the line and doing something that may be determined to violate the NLRA. Thus, the attitude in these companies is to avoid clear violations but otherwise proceed with their EI programs unless told to cease and desist. This attitude is the product of three convictions: that what they are doing is a win-win for the company and employees; that the restrictions imposed by Sections 8(a)(2) and 2(5) are out-of-date and counterproductive and, thus, if a legal problem exists, it is much more a negative statement about the law than their EI practices; and that the penalties in the NLRA for violating Section 8(a)(2) are quite small (typically, a “cease and desist” order), as are the chances of being charged with a violation (Rundle 1994, reports that between 1973 and 1993 the NLRB ordered disestablished less than two employee committees per year).

The study authors also interviewed two management consultants who specialize in designing "high-performance" work systems and four management attorneys who specialize in EI programs and Section 8(a)(2) cases. Both groups were unanimous in their opinion that the Electromation, Inc. decision initially cast a significant chill on EI programs, but that over approximately the last five years these fears have eased considerably but not completely (also see LeRoy 2000 and LeRoy 1997) .

Two factors contributed to the easing of concern over Electromation. One is a growing perception that the law still provides enough "wiggle room" to do EI and remain within the bounds of the law or not far beyond, albeit subject to some of the awkward or counterproductive constraints noted above. The second, and the more important according to the people interviewed, is that companies increasingly realize that the probability of being charged with a Section 8(a)(2) violation is very small. According to the attorneys, usually the only time a nonunion company gets into legal trouble with its EI programs is when a union begins an organizing campaign, discovers an in-house employee committee, and files a Section 8(a)(2) charge. But most companies view the probability of being a target of a union organizing campaign as quite small. Furthermore, several attorneys ventured the opinion that the NLRB under Chairman Gould deliberately backed away from prosecuting Section 8(a)(2) cases in an attempt to forestall passage of the TEAM Act, or other such legislation. And, finally, even if a company is ultimately found guilty of a Section 8(a)(2) unfair labor practice, the typical penalty, as previously noted, is quite modest.

For these reasons, the managers, attorneys and consultants believed that the restrictions contained in the NLRA on "company unions" are having a less adverse impact on legitimate EI programs than was initially feared after the 1992 Electromation decision. In effect, some companies have found ways, not always welcome or efficient but nonetheless serviceable, to live with the law, while others have chosen to quietly go beyond it, operating what one person described as "stealth" employee involvement committees.

It would, on the other hand, be incorrect to say that Electromation is having no effect on nonunion EI programs. Both managers and attorneys stressed that despite the small probability of being charged with a Section 8(a)(2) violation and the small penalties assessed if found guilty, most companies want to stay within the boundaries of the law as a matter of business ethics. Furthermore, most companies understandably want to avoid both the large financial costs and public embarrassment associated with litigation before the NLRB and courts. It was also noted that litigation of Section 8(a)(2) cases can drag out for years, should the company appeal an unfair labor practice charge, with significant costs of diverted management attention, organizational turmoil, and employee demoralization. Finally, some managers said they also did not want to provide unions with a pretext for filing an unfair labor practice charge, or for otherwise harassing the company, and thus they deliberately restrict the expansiveness and scope of their EI efforts.

The study authors then asked how the EI practices in nonunion companies would change if unencumbered by legal considerations. The majority of managers, consultants, and attorneys believed that a fairly large number of companies would modestly expand their EI programs in terms of the breadth and depth of activities delegated to employee representation committees. One manager, for example, said if the law allowed he would allow a plant compensation committee to determine, subject to certain policy guidelines established by top management, the size of the quarterly gain-sharing bonus for production employees. Another said she would allow greater interactions and input into final decisions in a joint employee-management team to investigate employee complaints about the plant's vacation schedule.

While most nonunion companies would probably expand their EI programs "on the margin," a smaller number, it was felt, probably would go further. All the people interviewed were asked whether companies would, if unconstrained by the NLRA, implement some equivalent of the formal, company union-like representational structures found in the 1920s-1930s, per the fears of the opponents of the TEAM Act. The common response was that most companies would not go this far, for four reasons. One is that these types of formal plant- or company-wide structures are too cumbersome, costly, and time consuming, particularly in today's environment where operational flexibility and decentralization of decision making is increasingly emphasized. Second, many respondents doubted that these company union-like bodies provide much additional benefit, either in improved efficiency and customer service or improved employee morale, over and above what can be attained from smaller scale, more focused EI activities. Third, many companies like to foster an organizational culture that emphasizes individual treatment and respect and thus shy away from formal systems of employee representation, which tend to create a sense of collective identity among employees and a collective approach to problem-solving. Fourth, managers worry that in-house employee committees may become the launching pad for union organization of the company -- the "pet bear" fear.

These negative features notwithstanding, the people interviewed believed that a small minority of firms would nevertheless choose to operate formal, plant- or company-wide employee committees and councils if permitted by the law. Examples cited were the formal employee representation plans at the Polaroid Corporation and Donnelly Corporation, both recently ordered disestablished by the NLRB (Commission on the Future of Worker-Management Relations 1994a; Kaufman 1999). Partly, it was felt, companies such as these adopt formal systems of employee representation due to the overriding importance attached by their founders or top executives to fair dealing with employees or the fostering of a "family" corporate culture. Also important, Kaufman, Lewin and Fossum were told, is that in very large companies, and especially those experiencing organizational stress, a formal system of employee representation can be an effective method to promote improved communication between top executives and shopfloor workers, separated as they often are by many layers of corporate bureaucracy and thousands of miles of travel distance, and to foster a collaborative approach to resolving potentially divisive issues.

A final issue discussed with the people interviewed was the role of employee committees and councils as a union avoidance device (also see Taras 1998; Summers 1997). All managers interviewed stated a desire to avoid unionization of their facilities and said their human resource programs, including EI activities, were operated with this goal (as well as numerous others) in mind. They did not see anything anti-social or illegal about this, however, as in their view their companies are avoiding unions by promoting win-win employment practices that yield additional productivity and quality for the company and more satisfying, highly compensated jobs for workers. Several noted, in this regard, that their facilities had not experienced a union organizing drive for many years, if ever, and were in general seen in the local community as highly desirable places to work.

A point made by a number of the people interviewed is that there are cheaper and effective ways, at least in the short-run, to avoid unions—such as targeting hiring and firing decisions to weed-out people more likely to favor unions and use of “hardball” attorneys and consultants at the first sign of union activity--than employee representation committees and the other high-involvement practices. They also noted that the companies most at risk of unionization are often also most likely to avoid establishing on-going employee committees and councils, except perhaps as a stop-gap device, because they do not wish to share power with employees nor give them an opportunity to develop a collective sense of grievance or forum for collective action.

In summary, the evidence suggests that the NLRA is a potentially significant constraint on what nonunion companies can do legally. The potential constraining effect of the NLRA on nonunion EI programs is mitigated, in practice, by the small number of Section 8(a)(2) cases are filed each year, the weak penalties for a Section 8(a)(2) violation, the uncertain legal boundary between legal and illegal practices, and the decision of some companies to move beyond what a strict reading of the law seems to permit with respect to employee committees. The Kaufman, Lewin and Fossum, and LeRoy studies conclude that the initial alarm over the adverse impact of the Electromation decision has dissipated to some extent over time as companies have adjusted their EI practices to conform with the law or chosen to practice “business as usual” on the expectation/hope that either their programs will escape legal scrutiny or, if challenged, pass such scrutiny. On the other hand, the evidence accumulated from the interviews with managers, attorneys, and consultants indicates that companies typically do not venture far outside the limits of the law for both ethical and practical reasons and, thus, the NLRA is a meaningful impediment for companies that choose to have extensive, advanced EI programs. A number are constrained only on the margin, but others would implement larger, more formal employee representation committees and councils if permitted and would choose to deal with employees on a wide range of issues related to terms and conditions of employment.

To Canadians in particular, the preceding discussion about American companies operating on the razor’s edge of unlawful practice is excessively legalistic and painfully mismatched to the realities of modern employment practices. The head of a federal Canadian task force on labor law reform, Andrew Sims, parodies the US situation, describing American “workers and employers walking around their plants with their attendant lawyers. . . looking much like pirates with parrots perched on their shoulders.”

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