WHY UNIONS ARE STILL POWERFUL Romanticism and Interest-Group Politics Trump the Rule of Law* by David Y. Denholm**

Summary: Where do labor unions find the power to force employers and employees to accept unwanted union representation? The answer lies in a falsified history of the union movement and the unchecked influence of interest groups in politics.

Why do we tolerate laws that allow labor unions to speak for workers who don’t want to be represented by them? And why do we sanction contracts between unions and employers that compel workers to pay for this unwanted representation? Are unions somehow so essential to our nation’s prosperity that we owe them these special privileges and legal immunities? If not, how do unions get away with it?

When many Americans today talk about labor unions they often preface their remarks by saying, “They were needed once, and they did a lot of good, but….” The sentence then usually trails off because the speaker is too ashamed to articulate his skepticism about unionism. Moreover, the Gallup Poll consistently finds that when Americans are directly asked, “In general, do you approve of labor unions?” the majority respond in the affirmative.

Labor unions enjoy this tacit support and tap into the public’s fund of goodwill for several reasons. First, many of us have a romantic image of unions that is unrelated to reality. We are enthralled by the heroic picture of Sean Connery in “The Molly McGuires” or Sally Field in “Norma Rae.”

But then we complicate these unrealistic positive images with real fears. We know labor unions are politically powerful organizations, and this makes many of us reluctant to make a case against them. Politicians are particularly sensitive to union wrath and don’t want to be labeled “anti-union.” Labor activists and organizers have defined “anti-union” to mean anyone who opposes the special privileges and legal immunities that politicians first gave unions some seventy years ago. Unions have succeeded in capturing the definition of what constitutes “pro-worker” legislation.

But union membership has been in decline for the past fifty years. Yet our country’s fundamental structure of labor laws, practices and institutions survives almost unscathed. The “labor paradigm” still holds many employer-employee contracts within its grasp, and it casts a spell over too many of our politicians. How did this happen, and what are its consequences?

A History of Privilege

Our current labor “paradigm”—the set of assumptions that underlie national labor policy—was formulated during the Great Depression of the 1930s. This was a time of great economic uncertainty when unemployment was at record levels. Consequently, it was easy for many citizens to reach the conclusion that workers had no bargaining power when they dealt with employers. This assumption of worker powerlessness is reflected in the preamble to the Norris-LaGuardia Anti-Injunction Act of 1932: “[T]he individual unorganized worker is commonly helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby to obtain acceptable terms and conditions of employment.”

Even during the Great Depression, this assumption was debatable. Perhaps it applied to some employees, but it certainly didn’t apply to all of them. And economic conditions during the last 70 years have changed so much that it’s hardly accurate today. The condition of employees has steadily improved with or without union representation.

A second key feature of our labor paradigm is the assumption that “labor peace” is impossible unless the federal government regulates labor relations, including the requirement that employers must “recognize” unions. This assumption about the requirements of labor peace was needed so that Congress and the courts could stretch the Commerce Clause of the Constitution to justify the federal government’s power to regulate labor relations.

According to the National Labor Relations Act introduced by New York Senator Robert Wagner and signed by President Roosevelt in 1935:

Experience has proved that protection by law of the right of employees to organize and bargain collectively safeguards commerce from injury, impairment or interruption, and promotes the flow of commerce by removing certain recognized sources of industrial strife and unrest, by encouraging practices fundamental to the friendly adjustment of industrial disputes arising out of differences as to wages, hours or other working conditions, and by restoring equality of bargaining power between employers and employees.

In the 1930s it was generally believed that higher wage levels would generate increased consumption so that we could “spend our way” out of the Depression. That “high wage” theory has been thoroughly debunked, but the labor policies it fostered are still with us. So to secure peaceful employer-employee relations and increase wage and income levels, the federal government became an active proponent of forced unionism and collective bargaining.

Both of these assumptions led the federal government to grant unions the special privileges and legal immunities that survive today even though American society and its economy are so vastly different. These privileges and immunities, described below, include:

 

 

  • the power to compel contract negotiations with an employer who does not want to be a party to the contract;
  • the power to impose contract provisions on employees who are not a party to the contract;
  • the corresponding power to compel unwilling employees to join or support a union as a condition of continued employment;
  • exemption from federal prosecution for extortionate violence;
  • exemption from anti-trust laws.

Compulsory Contract Negotiations

Aside from labor unions, no institution of civil society has a legal right to compel you to negotiate. Imagine someone approaching you and announcing that he wants to negotiate with you about purchasing your home. If you don’t want to sell it, you can’t be compelled to negotiate about its sale. Or what if a supplier of some service were to tell a company that it wanted to begin negotiations with the company over its purchase of the supplier’s services? No company is required to negotiate if it doesn’t want to buy the service.

Of course, neither of these examples works when the party demanding to negotiate is the government. But unions are not government. Citizens do not elect union officials or give them the authority to compel negotiations. Unions are special-interest groups within civil society. Nevertheless, federal labor law makes it an unfair labor practice to “refuse to bargain collectively.”

Compulsory Union Membership

No special privilege for labor unions has caused more controversy, or been more misunderstood, than the issue of compulsory union membership.

In 1908, the case for voluntary union membership was famously made by Samuel Gompers, the first president of the American Federation of Labor:

The workers of America adhere to voluntary institutions in preference to compulsory systems which are held to be not only impractical but a menace to their rights, welfare and their liberty.

However, this statement needs to be put into historical context. In 1908 the AFL opposed contracts that forced workers to become union members as a condition of employment because it feared employer-controlled “company unions.” The federation also opposed “yellow dog contracts” in which workers voluntarily agreed not to join unions. That’s why the 1935 National Labor Relations Act—the “Wagner Act,” which was hailed as “Labor’s Magna Carta”—outlawed both company unions and the yellow dog contract. By contrast, Gompers had no quarrel with “closed shop contracts,” which require employers to hire only union members. The closed shop, which was sanctioned by the Wagner Act, gave enormous power to unions because it allowed them to decide who would work and who wouldn’t.

The Taft-Hartley Act of 1947 (bemoaned by unions as the “Slave Labor Act”) introduced two reforms. First, it outlawed the closed shop and replaced it with the “union shop.” In a union shop, employees can be hired even if they are not union members as long as they join the union within a specific time period after being employed—usually 30 days. The Taft-Hartley Act also permitted states to enact “right to work” laws, which prohibit contracts that require union membership at any time as a condition of employment.

Taft-Hartley had one interesting legal twist regarding compulsory union membership. One section of the law specifically permitted union shop contracts. But another section said an employee could only be fired for not being a union member if he or she failed to pay the dues and fees required of union members. In other words, employees didn’t really have to be union members as long as they pay the union as if they were members. This would be an important escape hatch for any employee who became subject to internal union discipline for such crimes as crossing a picket line or making statements that held the union in bad repute.

Still, there is something troubling about one law that forces a person to join an organization in order to keep a job. And there is something irrational about another law that allows employees to opt out of the organization as long they pay it fees as though they remained members.

The U.S. Supreme Court has wrestled with this injustice, and it has come up with some ingenious excuses for tolerating it. Even though compulsory unionism violates the constitutional right to freedom of association, the Court has discovered a “legitimate state interest” for allowing it.

The Supreme Court says that the state’s interest in “labor peace” and avoiding “free riders” is sufficient to justify the injustice. Compulsory unionism is labeled “union security.” In other words, workers must be forced to join a union so that the union will be secure, and secure unions lead to “labor peace.” Now in this context labor peace has nothing to do with preventing violence; instead, it means that unions do not compete with one another for members. When someone is forced to join or support a union it becomes more difficult for another union to raid it of members. It’s a mystery why this is in the interest of employees or, for that matter, the state.

It’s also a mystery why avoiding “free riders” is in the state’s interest. Union representation can actually harm a minority of employees who don’t figure high on the union’s agenda. So why should the High Court rule that all employees in a union shop must pay the union for its “services”? How does violating the Constitutional rights of those who don’t want the union’s representation serve the state’s interest?

No doubt, there are free rider employees who will take advantage of union representation and refuse to pay for it. Similarly, there are businesses that benefit from the lobbying activities of the U.S. Chamber of Commerce but refuse to pay dues. And many communities benefit from the activities of independent civic associations. But usually no one suggests that every town resident be forced join the Rotary or Red Cross and pay for its benefits.

Moreover, the National Labor Relations Act also mandates that a union that is chosen as a bargaining agent by a majority of employees within a workplace will be the exclusive representative of all the employees. In short, the terms and conditions of a union contract may be imposed on workers who have no desire for a particular union’s representation.

Why is monopoly representation so important for unions? In a famous 1946 essay “Some Reflections on Syndicalism,” the economist Henry C. Simons observed:

All bargaining power is monopoly power. Such power, once attained, will be used as fully as its conservation permits and also used continuously for its own accretion and consolidation. The closed shop, like overt violence, is an invaluable device for acquiring power and yet, as an explicit privilege or contract provision, is of almost no importance for the exercise of power once acquired and strongly held.”

Our contemporary, University of Chicago law professor Richard A. Epstein, explains a corollary:

A system that allows the employee freedom to deal directly with an employer or to join a voluntary union of his own choosing is far superior to a system in which the state selects the ‘bargaining unit’ under the usual set of complex and indeterminate criteria, which always work against the interests of a political minority.”(Simple Rules for a Complex World, Harvard, 1995)

Here’s the crux of our current labor paradigm. Can we meaningfully give individual employees the right to opt out of a union at the same time that we give the union the exclusive right to negotiate the terms and conditions of all workers’ employment, including that of non-members?

Both the unions and employers have their own reasons for rejecting any suggestion that an employee can pay union dues but not be a union member. The unions object that if the terms of a union contract don’t apply to all employees, the employer will undercut the union by hiring at less than union rates. Employers also object that if a single union isn’t the exclusive employee representative, they may have to negotiate with several different unions. But these objections rest on a flawed premise. Both unions and employers accept the current labor paradigm that assumes it is the business of government to regulate labor relations and compel collective bargaining. Neither is willing to allow an individual employee the freedom to decide whether to join a union or to authorize the union’s negotiations on his or her behalf.

Exemption from Prosecution for Extortion

The current labor paradigm violates the rule of law in a free society. But the powers of monopoly and compulsion it give labor unions are only a part of its social injustice. Current labor law also exempts unions from federal prosecution for crimes of extortion. The history of this exemption is another demonstration of how lawmakers and courts have shown unprecedented and unjustified deference to labor unions.

In 1934 Congress enacted the Anti-Racketeering Act to prosecute organized crime. The law applied to any person who, through interstate commerce:

 

  1. Obtains or attempts to obtain, by the use of or attempt to use or threat to use force, violence, or coercion, the payment of money or other valuable considerations, or the purchase or rental of property or protective services, not including, however, the payment of wages by a bona-fide employer to a bona-fide employee; or
  2. Obtains the property of another, with his consent, induced by wrongful use of force or fear, or under color of official right; or
  3. Commits or threatens to commit an act of physical violence or physical injury to a person or property in furtherance of a plan or purpose to violate (sub) sections (a) or (b).

 

You might think that the exemption for wages would satisfy union concerns. However, because the AFL feared that the law would be applied to union organizing activities, it successfully lobbied for an amendment which states,

“No court of the United States shall construe or apply any of the provisions of this act in such a manner as to impair, diminish or in any manner affect the rights of bona-fide labor organizations in lawfully carrying out the legitimate objects thereof, as such rights are expressed in existing statutes of the United States.”

The key word is “lawfully.” In 1942, the U.S. Supreme Court was given an opportunity to decide whether extortionate union activity was also exempt from the law. The case United States v. Local 807, International Brotherhood of Teamsters concerned a legal challenge to a common practice of members of Local 807. They would meet trucks at the New York City line and charge the non-union driver a toll, equal to a day’s wages for a Teamsters member, for the privilege of driving the truck into the city. Refusal to pay the toll was met by violence.

The Court reasoned that demanding pay for not working was a legitimate union activity! It compared the “toll” to “the ‘stand-by’ orchestra device, by which a union local requires that its members be substituted for visiting musicians, or, if the producer or conductor insists upon using his own musicians, that the members of the local be paid the sums which they would have earned had they performed.”

The Court continued:

If, as it is agreed, the musician would escape punishment under this Act even though he obtained his ‘stand-by job’ by force or threats, it is certainly difficult to see how a teamster could be punished for engaging in the same practice. It is not our province either to approve or disapprove such tactics. But we do believe that they are not ‘the activities of predatory criminal gangs of the Kelly and Dillinger types’ at which the Act was aimed, and that on the contrary they are among those practices of labor unions which were intended to remain beyond its ban.

The Supreme Court’s 1942 decision in Local 807 spurred a confused congressional reaction. The 1946 Hobbs Act was supposed to reverse the Supreme Court decision. But President Truman vetoed the original bill and several months later signed another bill that preserved the union special exemption.

The Supreme Court next considered the issue of union violence in 1973 in the case United States v. Enmons. During a strike against an Alabama power company union officials used a high-powered rifle to shoot holes in the transformers, draining the oil from them and causing them to fail. Once again, the Court ruled that the use of force wasn’t wrongful because the purpose of the extortion was a legitimate union objective.

 

Strangely, the Court noted that “Congressional disapproval” of its 1942 Local 807 decision was “swift”: “Several bills were introduced with the narrow purpose of correcting the result in the Local 807 case,” the Court claimed. But the Hobbs Act wasn’t signed until 1946 and it did not close the loophole. Apparently, the Supreme Court favored this interpretation in order to put its Enmons decision on new, safer ground.

Antitrust Exemption

Labor unions are also exempt from antitrust laws, which presents an interesting irony.

According to the Sherman Antitrust Act of 1890, the first antitrust law, “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal.”

But it further declares, “The labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor, agricultural, or horticultural organizations, instituted for the purposes of mutual help, and not having capital stock or conducted for profit, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof; nor shall such organizations, or the members thereof, be held or construed to be illegal combinations or conspiracies in restraint of trade, under the antitrust laws.”

Here’s the irony. If “the labor of a human being is not a commodity or article of commerce,” then how can the federal government justify regulating labor relations under the Commerce Clause of the Constitution? This may explain why Senator Wagner went to great lengths to include the patently absurd statements mentioned above in the preamble to the National Labor Relations Act.

A New Paradigm?

Congress has passed legislation and the U.S. Supreme Court has found constitutional laws that provide for monopoly union representation and compulsory union membership. This means the federal government has given labor unions the power to govern, which is a delegation of legislative authority. When the National Industrial Recovery Act made a similar delegation of governing authority to industry councils in 1933, the U.S. Supreme Court found those councils unconstitutional in 1935. Why does it avoid the same issue when it concerns labor unions?

Without its extraordinary special privileges and legal immunities, labor unions would not function as they do. But the current labor paradigm assumes labor union contributions to society are so vital that their extra-legal powers must be tolerated and even promoted.

The myths that prop up unionism pervade American intellectual life. Even Charles Murray defers to unions in his book What It Means To Be A Libertarian. Murray proposes a wholesale dismantling of the modern state, yet in a chapter entitled “Removing Government from Economic Life,” he writes that the government will need to preserve “some special protections of collective bargaining” because employers enjoy disproportionate power.

But other economists have recognized the negative influence of labor unions for some time. In his 1977 book The Economics of Trade Unions, labor economist Albert Rees says that unions “benefit most those workers who would in any case be relatively well off, and while some of this gain may be at the expense of the owners of capital, most of it must be at the expense of consumers and the lower-paid workers.”

Labor economist Morgan Reynolds, in his 1987 book Making America Poorer: The Cost of Labor Law, finds that “Labor [union] monopolies are a serious disharmony that keeps production, employment and economic expansion below their potentials here and around the world.”

And in 2002, labor economists Richard K. Vedder and Lowell E. Gallaway concluded that,

“While there are no doubt many individual members of labor unions who feel that they have benefited from collective bargaining, the overall evidence is overwhelming that labor unions in contemporary America have had harmful aggregate effects on the economy”(http”//nlpc.org/olap/lrev/economy.pdf).

What we need is a new labor paradigm. Union organizers say they want one. But what they really want are even more union special privileges and legal immunities. Indeed, the Clinton Administration’s Commission on The Future of Worker-Management Relations, also known as the Dunlop Commission, sketched such a paradigm in 1993. The Bush Administration has the opportunity to do something very different. If it understands that unions and collective bargaining are not indispensable to employees, then it should develop a strategy that pulls government out of the business of regulating labor relations. If it understands that monopoly and compulsion are unacceptable, then it should educate citizens, employers and employees about the social injustice of federal enforcement of union power.

“So long as the powers that the unions have been allowed to acquire are regarded as unassailable, there is no way to correct the harm done by them but to give the state even greater arbitrary power of coercion,” wrote F.A. Hayek in The Constitution of Liberty. “We are indeed already experiencing a pronounced decline of the rule of law in the field of labor. Yet all that is really needed to remedy the situation is a return to the principles of the rule of law and to their consistent application by legislative and executive authorities.”

*This article was first published in Labor Watch, a publication of the Capital Research Center of Washington, DC, in October 2003, and is published herein by permission.Back to Text

** David Denholm is president of the Public Service Research Foundation in Vienna, Virginia, which publishes this journal, the Government Union Review.Back to Text