The One Change I'd Make To The PRO Act

The forgotten duty to bargain deserves a resurgence in labor law.

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I recently wrote about the Protecting the Right to Organize Act and the sea change it would bring to American labor law. The PRO Act in its current form is, without question, the most comprehensive legislative attempt to strengthen workers’ rights to unionize and collectively bargain since the Wagner Act itself was passed in 1935. The labor movement and the broader working class would benefit tremendously from its passage by Congress.

The PRO Act is so good in part because of its chaotic formation in the House. The Committee Report of the bill demonstrates that major markups to the bill were thrown in essentially last-second, including the bans on unilateral implementation of terms after impasse and employer withdrawal of union recognition without a decertification election. The PRO Act was essentially a grab-bag of union wishlists, spontaneously filled with provisions to plug holes in existing doctrines. Many of the worst Supreme Court decisions on labor law are reversed, including Mackay Radio (1938), American Ship Building (1965), Hoffman Plastics (2002), and Epic Systems (2018).

If the PRO Act were to ever reach the Senate floor, there is thus plenty of reason to hope that it gets as little debate as possible. The bill would remain in the form passed in the House; additions here or there aren’t worth the possibility of opening the whole menu for negotiation. What we have would be what we get, and that is a very good law with transformative potential.

But in a hypothetical world where Democrats had 51 votes to (1) gut the filibuster, (2) pass the PRO Act, and (3) make even more improvements to the bill without frittering support, there is one area of labor law that I would strengthen which the PRO Act mostly ignores and the last 40 years of labor scholarship have seemingly admitted defeat on: the employer’s duty to bargain.


The Origin of the Duty to Bargain

Section 8(a)(5) of the National Labor Relations Act makes it an unfair labor practice for an employer to refuse to collectively bargain with a recognized or certified labor union representing the employer’s workers. For the first 12 years of the Act’s existence, the National Labor Relations Board construed this duty broadly to encompass most issues that a union raised at the bargaining table. The duty remained undefined by statute until 1947. Section 8(d) of the Taft-Hartley amendments declared that collective bargaining included the “mutual obligation” of the employer and union to confer “in good faith” with respect to “wages, hours, and other terms and conditions of employment.”

It is mostly forgotten now, but the “radical” features of the Wagner Act were not considered to be its bans on discrimination against union members or crackdowns on employer interference with union organizing. Those provisions had appeared sporadically throughout history in previous legislation or administrative agency rules, including the first National War Labor Board during World War I. Instead, the duty to bargain was the most fiercely opposed provision, both by employer groups and most labor relations experts. Even AFL unions did not necessarily fight for it. All of these parties were wary of possible government intrusion into the bargaining process, and few at the time thought the duty imposed anything more than an employer’s obligation to meet with its employees and hear their grievances. No requirement to bargain in pursuit of a contract had ever been imposed. (This history is meticulously detailed in Philip Ross’s 1965 book-length study of the duty to bargain, The Government as a Source of Union Power.)

Instead, the fight for the duty to bargain came mostly from past personnel of the National Labor Board and the “old” NLRB from 1933-35. All agreed, based on their experiences administering the flawed Section 7(a) of the National Industrial Recovery Act, that the other unfair labor practices listed in the Wagner Act—all of which protected employees as individuals—would ultimately be frustrated to fruitlessness without a collective right which redounded to all employees as one. A convinced Senator Robert La Follette said in defense of an explicit duty to bargain:

What boots it, Mr. President, if representatives are chosen by the employees or if elections are held as provided … if after those representatives are chosen the employer refuses to meet with them? In instance after instance, after representatives were chosen by the wage earners, employers have contended that they have complied with their obligations as to collective bargaining when they permitted representatives to enter their offices but have declined to consult with them further.

This is what the duty to bargain meant at its core. The employer could not simply ignore a union once organized; to do so would be an unfair labor practice. The parties instead must sit down across the table and attempt to reach agreement on the most glaring issues in the shop. This was the heart of Senator Robert Wagner’s vision of “industrial democracy,” and he agreed that unionization “will prove of little value if it is to be used solely for Saturday night dances and Sunday afternoon picnics.” Wagner eagerly included the duty to bargain in the final version of the NLRA over vigorous protest.


The Evolution of the Duty to Bargain

As mentioned, the Taft-Hartley Act eventually attempted to constrain the NLRB’s concept of bargaining by limiting the parties’ discussions to those pertaining to “wages, hours, and other terms and conditions of employment.” “Wages” were not difficult for the Labor Board to define; they included compensation in almost every conceivable format, from straight hourly pay to merit increases to pension plans. Similarly, “hours” came to mean the total number of hours in a day or a week, as well as the times of particular shifts and the scheduling of overtime.

“Terms and conditions” was far more open-ended. The task of deciding what fell into this phrase became more difficult when, in the infamous Borg-Warner case, the Supreme Court accepted the Eisenhower Board’s restrictive reading of Section 8(d) to mean that only those issues which fell under the “wages, hours, and other terms and conditions of employment” language were mandatory for the parties to bargain over. Anything else was simply permissive. The distinction is critical. Mandatory items, once insisted upon by one party, must be bargained to impasse, as either party can consider them a deal-breaker. The union can strike over such an issue while the employer can enforce a lockout. In contrast, neither party can insist on bargaining over a permissive issue. The employer can simply implement its proposal on the issue unilaterally.

This raised the stakes of the NLRB’s sorting routine, and it wasn’t long before the agency had to answer what the duty meant regarding the most pressing issues in all of labor law: subcontracting, plant closures, plant relocations, automation of operations, and other “capital allocation” decisions which touched upon asserted managerial rights to control its investments versus employees’ interests in continued employment. The Kennedy-Johnson Boards of the 1960s delighted unions and incensed employers by holding that employers were obligated not only to bargain about the effects of such capital allocation decisions upon the workforce (e.g., the amount of severance pay to terminated workers), but employers first had to bargain about the decision itself. Consider this rather stunning passage from a case called Ozark Trailers, 161 NLRB 561 (1966), which dealt with the topic of “partial” closings (i.e., the closure of a single plant within an employer’s broader, multi-plant enterprise):

[W]e do not believe that the question whether a particular management decision must be bargained about should turn on whether the decision involves the commitment of investment capital, or on whether it may be characterized as involving “major” or “basic” change in the nature of the employer's business. True it is that decisions of this nature are, by definition, of significance for the employer. It is equally true, however, and ought not be lost sight of, that an employer’s decision to make a “major” change in the nature of his business, such as the termination of a portion thereof, is also of significance for those employees whose jobs will be lost by the termination. For, just as the employer has invested capital in the business, so the employee has invested years of his working life, accumulating seniority, accruing pension rights, and developing skills that may or may not be salable to another employer. And, just as the employer’s interest in the protection of his capital investment is entitled to consideration in our interpretation of the Act, so too is the employee’s interest in the protection of his livelihood.

In short, we see no reason why employees should be denied the right to bargain about a decision directly affecting terms and conditions of employment which is of profound significance for them solely because that decision is also a significant one for management.

This, in my estimation, is the closest the Labor Board has ever came to channeling the NLRA’s original intent of establishing industrial democracy in America. The Kennedy-Johnson Board had appropriately slotted the employees’ statutory rights to bargain regarding the very existence of their jobs over management’s vague, non-statutory property rights. Section 8(d)’s “terms and conditions of employment” was now rightfully being read to include continued employment as a definitional issue.

Unsurprisingly, Ozark Trailers and other such decisions, such as the Fibreboard case dealing with subcontracting of bargaining-unit work for independent contractors, created a firestorm of controversy among employers, their lobbyists, and conservative politicians. Management asserted that the NLRB was attempting to impose an anti-capitalist regime of “codetermination” upon American industry. Congressman Phil Landrum (of Landrum-Griffin Act fame) introduced a bill to transfer the Labor Board’s jurisdiction over unfair labor practices to the federal courts. Pulitzer-Prize winner Arthur Krock of the New York Times opined that the very notion of “free enterprise” in the United States was now “at stake.”

The Nixon Board moved quickly to blunt this case law, doing so mainly by elevating Justice Potter Stewart’s concurrence in the Fibreboard case over Chief Justice Earl Warren’s majority opinion, which had upheld the Board’s determination that subcontracting was a mandatory issue of bargaining. Stewart had agreed with Warren’s conclusion, but only in the narrowest sense. Stewart declared that vast swaths of other capital allocation decisions rested firmly in the employer’s “core of entrepreneurial control” to which no sort of “decision bargaining” obligation would attach. One gets the sense from this opinion that these management rights were inherent, seemingly bestowed from nature or deigned from above.

Stewart cited no case law nor any legislative history for these broad proclamations, but his reasoning soon became immortalized as the governing rule of bargaining policy. In First National Maintenance, a more conservative composition of SCOTUS Justices than the one that had decided Fibreboard held in 1981 that partial closings did not constitute a mandatory issue of bargaining, citing Stewart’s concurrence as authority and effectively abrogating the Ozark Trailers case. “[I]n view of an employer’s need for unencumbered decisionmaking,” Justice Harry Blackmun reasoned for the majority, “bargaining over management decisions that have a substantial impact on the continued availability of employment should be required only if the benefit, for labor-management relations and the collective bargaining process, outweighs the burden placed on the conduct of the business.” With that statement, employee interests were permanently subordinated behind their employer’s newfound right to eliminate union jobs without discussion. An employee’s expectation of continued employment had essentially been read out of the employer’s statutory obligation to bargain about “wages, hours, and terms and conditions of employment.”

First National Maintenance remains good law today. It has never been seriously targeted by Congress for legislative reversal, including in the PRO Act.


Academic Views of the Post-FNM Duty to Bargain

Surprisingly, scholarly reaction to First National Maintenance was rather muted. All labor law experts agreed that Blackmun’s opinion was poorly reasoned and anti-union in nature, but many posited that the case wouldn’t have much of an effect on the broader labor relations landscape. Professor Thomas Kohler, for example, reasoned that because FNM upheld the employer’s duty to conduct effects bargaining about a partial closing, employees had not lost much from the case. It was not an unreasonable argument. The law was unclear exactly when an employer had a duty to bargain about the decision to close a plant (or any other event affecting employees’ continued employment) versus when it had to bargain about the effects of the closing upon the employees. The difference in time may indeed be very small, and “decision” bargaining anyway was mostly misleading. Under NLRB case law, the union did not get to participate in true joint decision-making about capital allocation matters. The employer simply had an obligation to notify the union after coming to a decision of its own and give the employees a chance to propose alternatives which may change its mind, such as offering concessions in wages or work rules that made an employer’s economic forecast less harrowing. As experience shows in the era of 1970s-80s deindustrialization, this exercise often proved futile and ritualistic. Anything the union could have extracted from the employer could often be done so through effects bargaining.

David Feller of Steelworkers Trilogy fame further argued in a famous symposium presentation that the legal distinction between mandatory and permissive issues of bargaining were unimportant and mostly academic. Strong unions can exact their will at the bargaining table on any issue of importance regardless of Section 8(d)’s criteria, and smart unions knew how to strike over permissive issues by packaging them within feigned demands for mandatory issues. Nothing in the NLRA could bootstrap a weak union into an artificial bargaining victory.

I believe those opinions represent the consensus today amongst union advocates and labor law scholars. But Professor Alan Hyde provided an interesting counterargument in his great chapter-length examination of First National Maintenance in the book “Labor Law Stories.” Hyde interviewed one of the Proskauer Rose partners who was involved in the briefing of the case for the Supreme Court on behalf of the Chamber of Commerce and provided the management bar’s perspective on FNM:

Saul Kramer was amused at hearing the academic controversy and explained the Chamber’s quite practical interest. “The Chamber did not spend all that money on a theoretical issue.” Any management decision that is a mandatory subject of bargaining, such as the subcontracting in Fibreboard, “moves up the time when you have to bargain.” The decision must be announced to the union early enough to permit what the Board calls “meaningful bargaining.” It cannot be announced, as FNM’s decision was, on the morning it was implemented. Management normally does not want to announce downsizing decisions in advance. Once such a decision is announced, there are possibilities of sabotage. “You have a period when everything goes crazy in your place, or at least there is a possibility of that, and nobody wants that in management.” After announcement of a downsizing decision, production will decline, partly from union slowdowns, partly from “people looking for other jobs.” The union will demand information, and this can delay or burden negotiations. The FNM case itself shows that, on the issue of the importance of the definition of mandatory subjects of bargaining, Kramer was right and Feller was wrong. A narrow definition of mandatory subject of bargaining gives an employer a device to avoid union recognition; it also permits the employer to control the information available to the union and thus its capacity for economic action. … Thus, it was “an important issue for the Chamber” to seek to get the Supreme Court to adopt the Fibreboard concurrence and squarely find a category of important managerial prerogatives that were, for that reason, permissive subjects of bargaining.

I found myself nodding along as I read this passage. It seems obvious to me that any further carve-outs from the duty to bargain serves to decrease labor’s negotiating leverage. Even if one accepts Kohler’s thesis that decision bargaining and effects bargaining can be seamlessly substituted in capital allocation matters, it is clear that emphatic pronouncements from the Supreme Court in favor of employers’ managerial rights will at least have negative spillover effects in other areas of the law. Indeed, the Reagan Board quickly seized upon the language in First National Maintenance to drastically reduce employers’ bargaining obligations in mid-contract negotiations and relocations of bargaining-unit work.

(As Hyde points out later in the chapter, the sting of FNM was somewhat tapered by the later enactment of the WARN Act in 1988, which took away some of the employer’s element of surprise in plant closings that narrow readings of the NLRA otherwise afforded them. But the WARN Act only applies to firm with 100 or more employees and to situations in which 50 or more employees are affected. Workers at small firms, especially prominent in the service industry, remain as vulnerable as ever.)


A Different View of the Duty to Bargain

Decision bargaining, even under the Ozark Trailers model, has never been a panacea for labor. It is true that employers did not really have to bargain about the decision itself, but only offer the union a chance to change its mind. This made the cries of coming codetermination from the management sphere seem ridiculous in hindsight.

But were the complaints really so farcical? Let’s try and contextualize the labor relations discourse of the 1960s. The Kennedy-Johnson Boards, under the leadership of Chairman Frank McCullough, had declared it the official national labor policy of the NLRB to further industrial democracy under an explicitly pro-collective bargaining agenda. Republicans had controlled the Labor Board for only eight of its 30 years at the time the Supreme Court upheld the Fibreboard ruling, and the Eisenhower Board, for all of its many faults, had not dramatically cut back on the expansion of bargaining issues seen under the Truman Board and the original Wagner Act. Pensions, for example, were once thought to be solely the prerogative of management, but their inclusion by 1948 as a mandatory issue of bargaining in the Inland Steel case led to their seemingly overnight assimilation into collective bargaining agreements.

I don’t mean to suggest that the NLRB would have ever instituted Soviet tribunals upon American industry if the McCullough Board had continued into the 1970s. I don’t even necessarily subscribe to Karl Klare’s theory that the Wagner Act contained the sort of radical potential that could reshape the American workplace and transform “the premises and institutions of capitalist society.” But cases like Inland Steel, Fibreboard, and Ozark Trailers challenged the status quo in labor relations by drastically circumscribing what had previously been unfettered managerial prerogatives. What properly fell into “terms and conditions of employment” was a moving target, and for decades it moved mostly in a direction that favored union input into decisions that Justice Stewart stubbornly believed remained in the “core of entrepreneurial control.”

In short, the duty to bargain was a fast-evolving concept in mid-century labor law. The odds of it ever maturing into an American breed of codetermination may not have been certain, or even likely, but I would argue that this was at least conceivable in a different political timeline. Hand-waving the modern distinctions between mandatory and permissive issues and assigning the employer’s duty to bargain a peripheral role to the union’s economic strength thus, I humbly submit, misses the point. It accepts the neutered version of Section 8(a)(5) that emerged in the post-industrial landscape and ignores its potential in the alternative historical paths that were available. And, with respect to David Feller, weak unions with little economic strength need some sort of statutory protection if they are ever to become strong unions. Indeed, the entire point of the NLRA was to foster unionism where unregulated market conditions were not permitting labor organizing to take hold. The duty to bargain was pivotal in the statute’s early successes.


The PRO Act and the Duty to Bargain

The PRO Act does not propose to amend the language of Section 8(a)(5). It would amend Section 8(d) of the NLRA by removing the employer’s right to unilaterally implement terms from its contract offer after impasse, by revoking the employer’s ability to revoke recognition of a union without a decertification election, and by constructing a system of compulsory interest arbitration for first contracts following a union’s certification. These changes are each immensely important in their doctrinal areas; moreover, employees’ bargaining power will undoubtedly be strengthened from the PRO Act’s expansion of economic weapons to unions and its restriction upon many such devices for employers. But these changes do not alter the terrain of the specific topic we’ve discussed: what issues employers may and may not be obligated to bargain over before eliminating union jobs.

The courts and the post-FNM Labor Board have largely written the termination of bargaining-unit work out of the meaning of “terms and conditions of employment.” I thus propose a simple legislative fix to the language of Section 8(d), bolded and bracketed:

“For the purposes of this section, to bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions [or termination] of employment, . . .”

Parties would remain free to waive this right through negotiation, but such a waiver should have to be clear and unmistakable. Howeve, the NLRB and reviewing courts would no longer be able to assume that the termination of employees’ jobs is an issue falling solely within management’s sphere of authority.

Alternatively, Congress could remove the limiting language altogether and render the mandatory/permissive distinction to the ash heap of history. This was the path advocated by Professor Theodore St. Antoine in the years following First National Maintenance:

Ordinarily it would be the union, not the employer, that would profit most from an expanded range of negotiations. The right to force good faith bargaining on any topic would enable the union to demand bargaining over those most sensitive of issues, basic business decisions now classified as managerial prerogatives.

The trimmed-down Section 8(d) would then read as follows:

“For the purposes of this section, to bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith . . .”