Government as workplace dictator

Trying to control every other aspect of an individual’s life just wasn’t good enough, so Democrats in charge in Washington — with their friends in Big Labor — want to tell hard-working Americans how to run their businesses. This includes where to set wages and benefits and even specifying day-to-day operations like who can work a particular shift. The misnamed Employee Free Choice Act (EFCA) will be the vehicle to accomplish all this through a process known as mandatory binding arbitration.

Before it is thrown overboard in the Senate in the hopes of fleshing out an EFCA alternative, most of the public attention has been focused on the “card check” provisions to end secret ballots in the workplace. Yet, perhaps just as nefarious and damaging to the American economy and the rights of employers is the mandatory binding arbitration provision, which has thus far avoided the Senate’s heave-ho.

The backroom secret deals are still in progress, but here’s how the arbitration provision in EFCA is currently constructed: If an employer and union representatives cannot reach agreement on a contract within 90 days of union certification, either party may request mediation from the Federal Mediation and Conciliation Service (FMCS). If an additional 30 days pass without agreement, a government-appointed arbitration panel will step in to “bail out” the negotiators.

It is most likely that these arbitration panels will consist of bureaucrats from the FMCS, a government agency run by a political appointee. While having no direct connection to the contract being negotiated, such a panel will have enormous latitude to impose contractual provisions. The panel members have no vested interest in whether the company turns a profit or survives, nor will they be forced to deal with the consequences of their decisions. Not surprisingly, there exists no avenue for employers or employees to appeal the arbitration panel’s decisions to an independent judicial body.

In a modern economy, businesses must be nimble, innovative and responsive to changing dynamics. At times, their very survival depends on the ability to remain flexible in cutting costs. Hence, the danger. Arbitration under EFCA will result in two-year binding contracts, making it nearly impossible for an employer to subsequently make necessary changes to the wages, benefits and terms set by the contract mandated by the arbitration panel.

This entire process will undermine “good-faith bargaining,” whereby employers and union representatives foster positive relationships and work for a compromise that satisfies both parties. Neither side has an incentive to make unreasonable demands. With mandatory binding arbitration, that sadly isn’t the case; it actually deters consent, as both sides are more likely to propose off-the-wall gambits before heading to an arbitration panel.

In the end, mandatory binding arbitration raises a host of problems for both employers and employees: What businessman in his right mind would let an uninformed third party come in and make critical workplace decisions regarding issues like grievances, overtime and transfers? What would prevent a labor-friendly arbitration panel from cutting-and-pasting an existing union contract and applying it like a template to other businesses? Why should employees pay union dues if their compensation is simply going to be dictated by a third-party arbitration panel, giving them no opportunity for input? And why, pray tell, should any business exposed to this remain domiciled in the United States?

Yet, despite all these problems and questions, Washington Democrats and Big Labor continue to push for mandatory binding arbitration. The fact that this form of arbitration simply will not work seems to make no difference.

Take the state of Michigan, for instance. Decades ago, Michigan instituted a similar form of compulsory arbitration for emergency personnel like policemen and firefighters. A 2006 task force examining arbitration concluded that costs for local governments in arbitration states are 3 percent to 5 percent higher than in comparison to their non-arbitration peers. This works out to millions of dollars in extra spending. That’s real money and additional costs. While governments might be able to write off the expenses, private businesses do not have the ability to make taxpayers pick up the added costs.

In the midst of an economic recession and millions of job losses under the Obama administration, the last thing we should be doing is to handicap the American workplace by instituting mandatory binding arbitration. The fair-minded employers of this country should not be forced to operate according to the dictates of unaccountable government panels. Congress would be wise to limit Washington’s role — not expand it — and encourage job and wealth creation by allowing more economic freedom.

Price is chairman of the Republican Study Committee and is the senior Republican on the Health, Employment, Labor, and Pensions Subcommittee.