July 28, 2014 SIGN IN | REGISTER
Roll Call

Negotiations, Mediation Key to First Contract Arbitration

The highly charged debate between business and labor over how to reform labor law now is focusing on how to negotiate a first contract once a majority of employees have demonstrated they want union representation.

A just-completed study by the Massachusetts Institute of Technology’s John-Paul Ferguson shows that even after a majority of employees vote for union representation, they only get a first contract about 56 percent of the time. And if an employer resists by engaging in illegal labor practices, the chance of getting a contract reduces by 13 percent. Something is drastically wrong with a labor law when an employer can ignore and thwart the will of the majority of its employees.

The Employee Free Choice Act currently before Congress addresses this problem by assuring time for negotiations and mediation as the first step in the process and arbitration when agreement is blocked.

The bill has led to a misguided debate and mistaken information about the role played by arbitration in a well-designed and professionally administered dispute resolution system. This has made the current bill 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. So it is time to get serious and outline the design of an integrated negotiation, mediation and arbitration system that builds on public and private sector experiences and evidence of the past 40 years. It fits the unique needs of employers and unions negotiating a first labor agreement and addresses each of the arguments against arbitration put forward by its critics.

If passed, the Employee Free Choice Act would assign a mediator by the Federal Mediation and Conciliation Service as soon as a new unit is certified to support the negotiations by offering the full range of mediation, education, and facilitation services helping the parties reach a voluntary agreement. The vast majority of cases are likely to be resolved through negotiations and mediation.

In fact, settlements are reached more than 90 percent of the time in public sector jurisdictions that provide mediation prior to arbitration. So, contrary to those who argue every case will go to arbitration, the presence of arbitration encourages and enhances the ability of the parties to reach voluntary agreements in negotiation and mediation — and incidentally does so without imposing on employees or employers the risks and costs of a strike to get a contract.

If an agreement is not reached in negotiation or mediation, the FMCS would provide the parties with a list of experienced arbitrators of interest who had previously been vetted and judged by a panel of business and labor representatives to be qualified to serve as neutrals. Note these will not be “government arbitrators” or individuals appointed at the whim of the FMCS. To get on this panel, arbitrators would have to meet the standards of experience, expertise and mutual credibility and acceptability by business and labor leaders.

The employer and union in a particular case could select their own arbitrator or, if unable to agree on one, would choose their neutral arbitrator from this list. They could appoint their own arbitrators in a tripartite structure and in discussion of decision options, thereby building more opportunities for input and mediation 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. Experience shows that these tripartite deliberations often produce agreement between the parties.

The scope of issues to be considered would be limited to wages, hours and working conditions — the same issues that currently are mandatory subjects of collective bargaining. The arbitrators would be required to consider standard criteria in reaching their decisions, including the financial and competitive situation of the employer and comparisons with others in the same occupation and industry. Because these would be first contract negotiations, both the employer and the union would have ample opportunity to provide ideas and evidence on how changing, state-of-the-art practices and current competitive conditions should shape the outcome.

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

Experience, reinforced by evidence from econometric studies, demonstrates that the results of this type of arbitration system mirror negotiated settlements in comparable bargaining units in an industry and occupation. Moreover, 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. So there is no factual basis for claims of critics 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, not some made up scenario painted by those who oppose designing a proven, fair system for resolving first contracts if one or both parties are unwilling to negotiate an agreement on their own. Unlike last best offer or baseball arbitration where one side would win all at the expense of the other, on an issue or whole contract, this approach would seek to find the agreement the parties should have reached had they bargained to finality.

Most importantly, it would ensure an agreement will be achieved, something that has been out of reach under the current failed law for more than 40 percent of employee groups that vote for representation. It is time to build these provisions into the labor law bill before Congress and debate them on their merits and track record.

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. Arnold Zack is past president of the National Academy of Arbitrators. Both are faculty members at the Harvard Law School Labor and Worklife Program.

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