By STEPHEN A. YOKICH
In 1993, United States House of Representatives passed legislation, H.R. 5, which would have prohibited the use of permanent replacements by employers during strikes. While a majority of Senators also favored the legislation, it was stopped by a filibuster and never reached the desk of President Clinton, who had promised to sign it. The next year, the Republican Party captured control of Congress. Consequently, the issue has not been debated seriously since that time.
This essay reviews the arguments advanced to justify passage of H.R. 5. The arguments that supported this legislation more than a decade ago are still potent. Moreover, it is now apparent that labor's loss of the strike weapon is a factor contributing to the stagnation of working class incomes, which continues even as the rest of the economy moves ahead. Thus, if anything, the case for the legislation is even stronger today.
On the first day of Labor Law I, law students learn that the National Labor Relations Act (NLRA) gives employees and their unions the right to organize, the right to engage in collective bargaining and the right to strike in support of their demands. (1) They also learn that the national policy is to encourage the practice and procedure of collective bargaining. (2)
Congress created these rights for two reasons. First, it believed that the process of collective bargaining would take labor disputes out of the streets and the courts and allow them to be resolved by good faith negotiations between employers, their employees and their unions. Substitution of negotiations for industrial strife would reduce the chance that labor disputes would choke the nation's channels of commerce. Second, the legislation was intended to give workers more power. This power was needed, in the midst of the Great Depression, to ensure that workers received their fair share of the national wealth. Congress believed that a fairer distribution of national income was just and that it was also the best way to prevent future Depressions. (3)
The idea was to level the playing field and to let the process of collective bargaining do the rest. In other words, the NLRA and the National Labor Relations Board (NLRB) do not set the terms and conditions of employment. Those terms are set by the free play of collective bargaining. If employees and their unions are strong, either because the employees possess important skills or great solidarity, they can extract favorable terms from an employer through the threat of a strike. If the employer could easily operate during a strike, either because employees would cross a picket line or because they could easily be replaced by temporary unskilled labor, the employer could extract favorable terms and conditions of employment.
The primary weapon of workers and their unions in this paradigm is the right to strike and the threat to exercise their right. Employers have the right to lock out their employees or to unilaterally change the terms and conditions of employment if negotiations become deadlocked. These rights balance each other and encourage the parties to reach agreement through the bargaining process. Moreover, both parties know that they will have to continue to co-exist after the labor dispute is over and the contract signed. This factor restrains each from extreme conduct that might threaten the entire relationship. A “balance of power” encourages the parties to come to an agreement without a work stoppage. Moreover, the increased strength that employees and their unions have by virtue of their collective effort ensures that employees receive their fair share of the nation's economic growth.
Later in Labor Law I, law students learn some of the intricacies of labor law. The NLRA prohibits employers from firing employees who go on strike. However, an employer may hire replacement workers if it desires to continue to operate during a strike. (4) Furthermore, the employer has the right to make these replacements permanent at any time during the strike. Once the employer makes the replacements permanent, employees have no right to return to their jobs if they decide to end the strike. Likewise, employees who crossed the picket line and filled the jobs of strikers are entitled to keep those jobs after the end of the strike, even if the “crossover” employees have less job seniority than returning strikers.(5) Instead, strikers have the “right” to be placed upon a preferential hiring list which entitles them to be rehired if vacancies open at the employer. These principles mean that a striking employee with decades of seniority risks both his or her job and all the benefits of that seniority.
There is one important limit to an employer's right to hire permanent replacements. If the NLRB finds that the employer's unfair labor practices caused or prolonged the strike, strikers are entitled to return to employment if they decide to end their strike and make an “unconditional offer to return to work.” Thus “unfair labor practice strikers” are entitled to reclaim their employment; purely “economic” strikers are not.
A remarkable tension exists between the core purposes of the NLRA and the right of employers to use permanent replacements. There is very little difference between the right to fire an employee for striking and the right to “permanently replace” him or her. Those outside the legal profession—and even beginning lawyers—are usually surprised that the law draws such a distinction. The use of permanent replacements and the threat to use permanent replacements greatly undermines the ability of workers to strike and weakens the bargaining leverage of unions. This weakened leverage minimizes the benefits of organizing in the first place. An employer intent on ending its obligation to collectively bargain can use the hiring of permanent replacements to completely end the collective bargaining relationship.
The right to use permanent replacements and the core purposes of the NLRA co-existed in an uneasy truce for over 40 years. Permanent replacements were rarely used or even threatened by major employers. Employees had to worry about the financial consequences of striking, but knew that their jobs would be there when the strike was over and the contract settled. Strikes were wars of attrition, which tested the ability of workers to go without a paycheck against the ability of employers to cope with no (or diminished) production.
This picture changed at the beginning of the 1980s. Many labor observers believe that a major cause of the change was President Ronald Reagan's decision to fire the aircraft controllers when their union, the Professional Air Traffic Controllers Organization (PATCO), struck the federal government in the summer of 1981. This action caused many employers to consider whether they too could bust their unions if employees went on strike.(6)
Employers discovered that the use (and often even the threat) of permanent replacements was a powerful tool to turn the tables in collective bargaining in their favor. Many strikers, unschooled in the difference between termination and “permanent replacement,” lost their jobs, even when their union tried to end the strike. Many others were deterred from striking because of employer threats.
Moreover, employers used the doctrine as a potent means to completely destroy their collective bargaining relationships. The drill was simple. Present the union with unacceptable contract demands such as substantial concessions in wages, benefits and other terms and conditions of employment. These demands would incite the union to strike. Once the strike began, the employer would hire permanent replacements. Since economic strikers are ineligible to vote in NLRB elections after one year, the replacement workers could sign and circulate a decertification petition after twelve months and remove the union in the election held pursuant to that petition.
If the union was savvy enough to avoid striking initially, employers had another move: they could present their demands and bargain with the union until deadlock occurred. This was often a straightforward task because the terms were predictably unacceptable. When the parties were deadlocked, the employer could implement the new terms. If the union struck in response, permanent replacements would be hired. If not, the employees would have to continue to work under the new terms and the employer would successfully obtain the sought-after concessions.
Many employers used these tactics with great success in the decade following the PATCO strike. The tactics enabled employers to end long-standing collective bargaining relationships or to rewrite their labor contracts to great advantage. In short, they enabled employers to turn the “level playing field” envisioned under the NLRA into an “uphill battle” for employees and their unions.
Unions were caught off guard by the aggressive use of such tactics by employers and their representatives after the PATCO strike. The human toll was great. One local union officer described the effect of the permanent replacement doctrine in testimony before Congress in 1990:
"I have seen firsthand what this vicious practice has done to hardworking and decent people. Members of our local have had their cars repossessed and their homes jeopardized because of mortgage payment problems. The financial and emotional distress of this tragedy has extracted personal cost as well, resulting in the break-up of the members' families through separation and divorce. The issue of permanent replacement of strikers is not some economic equation dreamt up by some company official who is only interested in the bottom line. It is not simply this debate in the halls of Congress. Rather it is real life that often carries devastating consequences for your constituents." (7)
In the 1980s, tens of thousands of employees were permanently replaced during strikes and hundreds of thousands more were threatened with permanent replacement.(8) The right and ability of an employer to use permanent replacements is now one of the most important factors—perhaps the primary factor—considered by unions and their members when deciding whether to engage in a strike.
The right to hire permanent replacements gives the employer the ultimate hammer in bargaining. Employees must agree to employer demands or strike and risk losing their jobs. This type of threat is one that makes even seasoned union leaders and activists blanch. It is particularly effective when coupled with the possibility that the entire workplace may later go non-union. Collective bargaining becomes a “one-way street” when one of the parties has no effective threat of economic action.
The aggressive use of the permanent replacement weapon has had its intended effect: the number of strikes has dramatically declined over the past 25 years. For the three decades prior to 1980, unions averaged approximately 300 strikes a year in units over 1000 workers. During the period from 1982 to 2000, the average annual number of such major work stoppages averaged 46. Thus far in the twenty-first century, the average is under 30, or less than 10 percent of what it was 25 years ago.(9)
While strikes are inconvenient to the public and disruptive to the operations of employers, they are usually a union's most effective weapon. Without the threat of an effective strike, employees and their unions have much less power in collective bargaining. This diminished power has concrete effects: employees get less at the bargaining table and employers keep more profits.
It is no coincidence that incomes of workers have lagged far behind the growth of the economy during the last 25 years. Between 1979 and 2005, business productivity grew 67 percent. The median wage for hourly workers during that time grew less than 9 percent. (10) Profits and CEO salaries have grown at a much stronger pace. And these trends have accelerated in the last five years. (11)
The result has been a substantial growth in income inequality. According to economic data released by the non-partisan Congressional Budget Office in 2003, the after-tax incomes of the bottom fifth of households grew approximately 9 percent between 1979 and 2000. The after-tax incomes of the next lowest fifths grew 13 percent, 15 percent and 24 percent during the same period. By contrast, the incomes of the top fifth grew 68 percent during the period—and incomes among the top 5 percent of households grew 113 percent. (12) In 2005, the average worker made approximately $42,000 per year; while the average CEO made almost $11 million. (13)
One commentator recently noted that a world free of strikes is not a good one for working class families:
"We may come to like today's strike free world even less well. For when workers lack the power to prod employers into bargaining with them, employers enjoy an advantage that too often translates into sagging real wages, reduced benefits and growing inequality for wage earners. We cannot tolerate trends like these indefinitely." (14)
In sum, the ability of employers to use permanent replacements undermines the statutory right of employees to successfully use the collective bargaining process to claim their fair share of national economic growth. In addition, the right to use permanent replacements undermines the process of collective bargaining in several other ways.
The use of permanent replacements often makes labor disputes longer. For one thing, the use of permanent replacements often prevents the parties from reaching an agreement because they cannot agree on what to do with the replacements, even though they have agreed on the substantive terms of a new contract. The issue of whether strikers will return adds one more issue to negotiations that have already, by definition, become contentious and difficult.
In the same vein, many of the strategies unions have devised to counter the threat of permanent replacements make the process of bargaining a contract longer and more arduous. Since unfair labor practice strikers cannot be permanently replaced, a well-advised union will go to great lengths to try to discover, document and litigate unfair labor practice (ULP) charges. Many times the success or failure of these ULPs will prove pivotal to the outcome of the labor dispute. Litigation before the NLRB takes years. The contract dispute usually continues during this litigation and ends only when one party is too exhausted to continue.
Such prolonged wars of attrition are, of course, devastating for workers and their unions. Moreover, they also mean that the decision of an NLRB administrative law judge, the NLRB, or the U.S. Court of Appeals may tip the balance in a labor dispute at a time that cannot be predicted by either party. This uncertainty cannot be helpful when a corporation must make long-term plans and commitments to customers. The attorneys' fees in such wars of attrition may run into the hundreds of thousands (even the millions) of dollars.
The loss of the strike weapon also means that the union must do anything it can to avoid an impasse in negotiations. Instead of narrowing differences in the hope of reaching common ground on what remains, the union must strive to keep every issue open. A union may also focus on making numerous information requests during the course of negotiations. Thus, a union will often be reluctant to narrow the issues on the table to those over which the parties might reach impasse.
Finally, protracted labor disputes make the situation in the worksite difficult. The loss of the right to effectively strike means that workers must accept long periods of time when they must work without a contract. Since the right to arbitrate discharge and discipline commonly expires along with the contract, employees must take care to follow work rules to the letter (even when customary practices may have evolved at the jobsite) instead of focusing on their work. This attitude cannot be good for productivity.
In short, the use of permanent replacements and the credible threat to use such replacements over the last 25 years has changed the process of collective bargaining in the nation. Unions and their members have lost power at the bargaining table, and many disputes that used to be resolved as a consequence of the economic strength of the parties now turn on the decisions of the NLRB and the courts. These changes have undermined the system of free collective bargaining envisioned by the framers of the NLRA. If the nation and its leaders are serious about reclaiming the benefits of the system of collective bargaining, they should act to limit the right of employer to take advantage of the striker replacement doctrine.
1. Section 1 of the NLRA, 29 U.S.C. Section 151, states that one of the purposes of the Act is to remedy the inequality of bargaining power between employees and employers. Congress thought this inequality depressed wage rates and aggravated recurrent business depressions.
2. Section 1 also declares that the policy of the United States is to encourage the practice and procedure of collective bargaining (29 U.S.C. Section 151).
3. 29 U.S.C. Section 151.
4. Labor Board v. McKay , 304 U.S. 333, 345-46 (1938).
5. TWA, Inc. v. Flight Attendants , 489 U.S. 426 (1986).
6. The air traffic controllers were federal employees and not covered by the NLRA. All had signed papers when they began their employment acknowledging they did not have the right to strike. Prior to President Reagan's term, however, other federal employees had conducted strikes without being terminated.
7. House Report 103-116, 103 rd Cong. 1st Sess. 27 (1993).
8. House Report 103-116, supra, at 22-23.
9. These statistics are cited in J. McCartin, “Remembering the Day the Strike Died, 25 Years Ago,” Chicago Tribune , August 1, 2006. McCartin is a professor of history at Georgetown University and is writing a book on the PATCO strike.
10. “Wages, Facts and Figures,” Economic Policy Institute ( Washington , DC ), September 2, 2006. The economic data in this fact sheet derives from the Economic Policy Institute's book, The State of Working America .
12. “New Evidence of Extraordinary Growth in Income Inequality,” EPI Economic Snapshots , Economic Policy Institute ( Washington , DC ), September 3, 2003.
13. “CEO-to-Worker Pay Imbalance Grows,” EPI Economic Snapshots , Economic Policy Institute ( Washington , DC ), June 21, 2006.
14. McCartin, op. cit.
Stephen A. Yokich is a partner at the union-side labor law firm of Cornfield and Feldman. He also holds a part-time position as associate general counsel at the International Union UAW. In 1993-94, he was general counsel to the U.S. House Committee on Education and Labor.