Labor Law and Corporate Concentration

Smart thinkers on the Left disagree on whether we should decrease centralization of corporate power. The NLRB's experiences put things in perspective.

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I should preface this post with a disclosure: while I think I have a decent grasp of labor law, I am relatively clueless when it comes to corporate structures. I never had an interest in practicing corporate law or any of its variations, but I’m not sure I could have cut it even if I did.

So when smart people on Labor Twitter talk about corporate power, I try to listen and learn. An ongoing debate between some in this realm has concerned whether it is better for unions to organize in an environment of relatively concentrated or dispersed corporate power—i.e., in a monopsonistic or  anti-monopsonistic labor market.

I’ll do my best to briefly summarize the positions. In the view of those favoring decreased corporate power (featuring antitrust scholars like Marshall Steinbaum and Sanjukta Paul), large firms in a centralized market behave like an oligopoly and push labor standards downward. Their size and power make organizing inherently difficult, especially when factoring in firms’ natural tendency to merge. Smaller employers can be more easily cornered by unions and herded together in pursuit of pattern bargaining.

On the side favoring increased centralization in the labor market is usually Matt Bruenig. Bruenig argues that dispersing corporate power also disperses union leverage, as unions can only exert maximum pressure on an industry when strikes affect the core of production. This is harder to do when the labor market is spread out across a series of smaller and less powerful firms. Organizing thus becomes a game of whack-a-mole under the National Labor Relations Act’s model of facility-specific enterprise bargaining.

There is a historic attractiveness to Bruenig’s argument. Arguably the most famous concerted job action in American history, the Flint Sit-Down Strike at General Motors, involved a few thousand workers bringing the largest and most powerful employer in the world to a grinding halt by ceasing production in merely one of the company’s several hundred plants. GM eventually capitulated and signed a labor agreement that officially birthed the UAW. (Ironically, this act of union recognition by GM would likely be considered illegal under today’s interpretations of the NLRA, as there was never any showing by the UAW that it actually represented anything close to a majority of GM’s 136,000 workers.)

This strike, unfortunately, is ancient history. In the modern era of nearly limitless capital mobility, we must evaluate recent events to determine whether unions can more easily organize large or small employers. I don’t pretend that I possess the expertise to answer this question empirically, but I think we can get closer to the answer by observing the outcomes of the two most sweeping cases of litigation in the National Labor Relations Board’s history. The first case, the 1990s Caterpillar-UAW labor dispute, is an example of the breakdown of a “mature” collective bargaining relationship between two established parties, while the second case, the Teamsters’ nearly decade-long organizing campaign at Overnite Transportation, involved an all-out, national attempt to unionize an industry leader in trucking.  

Caterpillar and the UAW

I discussed the Caterpillar-UAW dispute in an earlier post, but I will briefly summarize it again as it pertains to this topic. Caterpillar, long the world’s leader in construction equipment manufacturing, was one of the few American industrial titans to emerge from the 1980s having withstood the influx of foreign competition. Caterpillar was unique because not only had it survived, it’d thrived; the company had actually increased its market share over Japanese rival Komatsu after some initial slippage in the early parts of the decade. This left Caterpillar so far ahead of domestic competitors that it began to view itself in purely global terms.

The UAW’s agricultural implement (“AgImp”) department had long conducted its contract negotiations with unionized employers through a system of pattern bargaining, which required that all companies in the same industry pay the same wages and benefits. Typically the UAW would pick a target company, negotiate an agreement with it, and then demand other companies in the industry accept the terms of that agreement, thus setting the “pattern.” This arrangement dominated the AgImp landscape for nearly 40 years and included, at various times, Caterpillar, John Deere, International Harvester, Allis-Chalmers, J.I. Case, Massey-Ferguson, and more.

By the 1990s, all of those companies besides Caterpillar were either bankrupt, bought out, or greatly diminished in market presence from their mid-century heyday. Caterpillar was adamant that it would no longer participate in the UAW’s system of pattern bargaining and, true to its word, refused the union’s demands that it adhere to the contract recently negotiated with John Deere in the fall of 1991. The union, seeing decades of work in taking wages and benefits out of competition now at risk, fought tooth and nail on the picket lines, on the shop floor, and in NLRB hearing rooms to preserve this way of life. It didn’t matter. The company successfully resisted the union’s most disruptive efforts and only agreed to a contract in 1998 (almost six-and-a-half years after the initial strike) when its NLRB liabilities became too cumbersome. Even then, the UAW could only extract a contract that the entire labor relations community viewed as a backbreaking loss for the union. The pattern was forever broken.

How did Caterpillar crush its union? The UAW had been recognized by Caterpillar since 1948. Its central Illinois locals were well organized and often a beehive of militancy, engaging in no less than 12 economic strikes and numerous wildcat actions over the prior 40 years in furtherance of their annual bargaining demands. The International Union had a massive strike fund and possessed institutional prestige in the eyes of politicians and city officials. Caterpillar-UAW, in essence, was as “mature” a collective-bargaining relationship as any in American manufacturing.  

Besides being aided by bad labor law, the answer is simply that Caterpillar had grown too big and too powerful. Caterpillar had essentially infinite resources to fight the union. It could divert production from struck facilities to any number of its non-union plants in the U.S. and abroad, the existence of which were owed to the company’s prodigious growth (and thus prevented any sort of Flint-like weak spot). Foremen taught white-collar office staff how to utilize the newly automated machinery Caterpillar had invested in to keep production humming.  And management ferociously lobbied state and federal lawmakers to resist unions’ attempts to amend the labor laws in their favor.

When the dust had settled, it became clear to observers that when a company as big, sophisticated, and peerless as Caterpillar didn’t want to treat its unionized workers as equals, there was nothing anyone could do to stop them. The UAW’s future existence at Caterpillar seemed contingent on the union being in the company’s good graces.

Overnite Transportation and the Teamsters

If the Caterpillar labor dispute represents a marriage gone sour, the Teamsters’ Overnite Transportation saga was a relationship doomed from the start.

Overnite was the largest open shop LTL (less-than-load) trucking company in the country and had a proud anti-union history. It had successfully resisted unionization even during Jimmy Hoffa’s strongest years as Teamsters president. The purchase of Overnite in 1986 by a large unionized transportation company, Union Pacific, caused concerns among Teamsters leadership that union work would flatline at the expense of Overnite’s expansion, leading to a renewed effort to organize the mostly southern-based LTL company in the 1990s.

The Teamsters invested a tremendous amount of resources into a nation-wide organizing campaign. The effort bore fruit: NLRB election wins at 22 terminals, plus another 17 losses that the Clinton Board overturned through Gissel bargaining orders on the basis of Overnite’s “outrageous” and “pervasive” unfair labor practices committed during the various campaigns. Any organizer would recognize this as an amazing accomplishment. Nearly 40 individual locations had either voted the Teamsters in or demonstrated clear majorities through authorization cards that were only lost due to wanton employer misconduct.

But Overnite had 166 individual terminals. The Teamsters hadn’t even organized a quarter of them. When Overnite stalled negotiations with the unionized terminals for years and appealed the NLRB’s bargaining orders to the Gissel-hating Fourth Circuit, the Teamsters called for a company-wide strike in 1999. The results were disastrous. By the union’s count, 2,000 of the 13,000-plus Overnite workers heeded the strike call; the company pegged the number at less than 1,000. Participation was virtually nonexistent at the unorganized terminals.

Things soon went from bad to worse for the union. Decertification petitions were filed at half of the union shops. The Fourth Circuit overturned the NLRB’s bargaining orders, instead requiring the Teamsters to win re-run elections at the 17 affected shops. And where the strike got violent, Overnite successfully sued the union in multiple state courts for hundreds of thousands of dollars in property damage and for violations of picket-line injunctions.

After three years out in the cold, at which point the strikers numbered only a few hundred, the Teamsters called off the strike. Within a year, decertification elections were held at the 22 union shops and all voted out the union. The Teamsters didn’t appeal these losses, nor did they attempt to hold re-run elections in the terminals that they originally won bargaining orders at. By 2004, Overnite was again virtually union-free.

This was a stunning union failure, more dramatic and comprehensive than perhaps any in recent history. What had the Teamsters done wrong? No one could question their resolve. The union had basically run an old-school Teamsters campaign, including the use of illegal secondary boycotts, corporate shaming tactics, and widespread violence and property damage (according to state-court litigation and a 2003 NLRB settlement).

Like the UAW at Caterpillar, the Teamsters had run into a foe too big to beat. Even though they had won NLRB elections at 22 terminals, this covered only 14 percent of Overnite’s national workforce. Crucially, Overnite did not have one massive hub or headquarters that the Teamsters could swing the balance at. Overnite was a 166-shop operation whose corporate structure prevented any single location from being critical. It was thus predictable that Overnite refused to ever consider the Teamsters’ demand for a nation-wide contract and instead insisted—as it was within its right to do—that it bargain on a single-terminal basis, meaning 22 different contracts with 22 different termination dates.

This is the dilemma that unions face in trying to organize massive anti-union employers like Wal-Mart or McDonald’s; there is no fulcrum of production that unions can squeeze like the Flint Sit-Down Strikers did at GM. Modern supply-chain operations have long evolved past the point where such a job action could be so effective.

Those favoring centralization may argue that enterprise bargaining has outlived its usefulness, but under any system of voluntary unionism the Teamsters would need to individually organize a critical mass of the 166 terminals to force Overnite into a nation-wide contract. Corporations will naturally disperse their production without dispersing their power. The only proper response, then, is to prevent them from accruing so much power in the first place.