February 17, 2009

The Employee Free Choice Act: A "Check-In" the Hospitality Industry Doesn't Want

Holland & Knight Alert
Kenneth A. Jenero | Phillip M. Schreiber

Unions have been particularly active in organizing hospitality industry employers in the past several years. During the summer of 2006, one of the principal unions seeking to organize hospitality employers, UNITE HERE, engaged in a systematic “Hotel Workers Rising” organizing campaign across the country. This led to unionization at hotels in traditional union strongholds such as Chicago, New York and San Francisco, but also to organization at hotels in Atlanta and Miami. UNITE HERE and the other principal union organizing hospitality employers, the Service Employees International Union (SEIU), are among the most well-funded and aggressive unions operating today. They are targeting areas that were not previously union strongholds and using new organizing techniques.
On top of all of this, labor unions across all industries and business sectors are pushing for passage of the Employee Free Choice Act (EFCA), which would fundamentally change the union organizing process in the United States to the detriment of employers and employees alike. If passed in its current form – which is much more likely given the election of Barack Obama and gains by Democrats in both the House and Senate – EFCA would substantially reduce the barriers to unionization by:

  • using union authorization cards, instead of secret-ballot elections, to determine whether employees want to be represented by a union
  • eliminating the pre-election campaign period during which employers typically communicate their position on unionization
  • enabling unions to guarantee that they will get a contract for employees, even without the employer’s agreement

As a result of these proposed changes, the frequency and success of union organizing activity is expected to increase dramatically. Hospitality industry employers who wish to remain union-free will have to find new and effective ways to combat this growing union threat. Communicating what’s at stake to industry members at every level is vital.

The Fundamental Changes

If passed, EFCA will eliminate an employer’s right to insist on a secret-ballot election supervised by the National Labor Relations Board (NLRB) and instead allow a union to become the employees’ exclusive bargaining representative based solely upon the presentation of signed authorization cards from a majority of employees in the proposed bargaining unit. EFCA also will eliminate freedom of contract by providing that if an employer has not reached a first contract with a union within 120 days, a federal panel of arbitrators will impose a contract that will be binding for up to two years. In other words, arbitrators hired by the government could tell a hotel (depending on the provisions of the management agreement, it might be the owner or the operator) how much to pay the employees, what benefits must be offered, and what rights the hotel has to manage its workforce and business operations. Think about what that could do to an annual budget!

What the Elimination of the Secret-Ballot Election Will Mean

Currently, before being unionized, an employer can insist that a union win a majority of votes cast in a secret-ballot election run by the NLRB after a campaign in which the employer has the opportunity to present its views about unionization. EFCA effectively eliminates secret-ballot elections. If passed, this law will have two fundamental impacts on the organizing process and employers’ efforts to remain union-free:

  • First, owners and operators will not have the warning of a union petition and the opportunity to communicate their position during a union election campaign. As such, ownership and management may not know that a union is seeking to organize the hotel’s employees until the union has already secured representational status by obtaining authorization cards from a majority of the employees in the bargaining unit.
  • Second, employees will not have the protection of a secret-ballot election to express their choice. As a result, they may be subject to pressure and intimidation to sign union authorization cards by co-workers and union organizers.

What the New Arbitration Requirement Will Mean

The arbitration requirement will have an enormous impact on both the bargaining and the organizing processes. Currently, there is no time limit set for initiating or concluding union contract negotiations. Indeed, there is no requirement that the hotel agree to a contract at all, as long as it bargains with the union in good faith. The 120-day period established by EFCA for completing contract negotiations is too short to reach an acceptable first contract. Unions will have no incentive to agree to a contract favorable to the hotel, knowing that there is a reasonable chance they will be able to get more from the arbitrators. Therefore, owners and operators will be faced with the lose-lose situation of agreeing to a bad contract or risking a contract that will be imposed by a panel of arbitrators who know nothing about their business. This outcome is not what industry-standard management agreements on collective bargaining
The arbitration provision also will have a significant impact on the initial organizing process. Currently, a major weapon in the hotel’s union avoidance arsenal is informing employees that the law does not require it to agree to any union demands and that the union cannot guarantee it will get a contract, let alone one with improved wages and benefits. However, under EFCA, unions will be able to guarantee a contract with wages, benefits and other terms that are not dependent on the employer’s agreement. It also will be much more difficult for employers credibly to assert, as they often do now, that because bargaining is a two-way street, the employees could end up receiving less than they previously had without a union. Absent compelling evidence of dire economic circumstances, arbitrators likely will be very reluctant to impose a contract with wages and benefits below those that the employer was providing before the employees secured union representation.

What Can Be Expected

It is likely that EFCA will become law in some form in 2009. In 2007, EFCA passed the House by a substantial majority and likely would have been passed by the Senate if not for a filibuster. Labor groups view EFCA as their number one issue and have vowed to keep pushing for its passage. With the new administration and Congress, labor is a giant step closer to achieving its goal. It is clear that a Democratic Congress supports passage of EFCA and Barack Obama has vowed to sign EFCA in its current form.
Even in the unlikely event that EFCA does not pass, employers – particularly in the hospitality industry – still can expect to see a continued increase in union organizing activity. We nonetheless expect Congress to enact other measures that will assist unions in the organizing process, including reducing the period between the filing of a union petition and the election from the current six weeks down to two weeks or 10 days. As noted above, UNITE HERE and SEIU have devoted substantial sums of money and other resources to organizing hospitality employers in virtually every segment of the industry. These unions have beefed-up their organizing staffs with more educated and business-savvy organizers. They are using the Internet and new technologies to contact and communicate with employees. And they are waging corporate campaigns – targeted, top-down efforts to force a company’s management to remain neutral in future organizing efforts and to recognize a union based on a card-check.
These techniques are working. Unions won nearly 60 percent of their representation elections in 2007, the highest percentage in years, and union representation rose by 311,000 jobs in 2007. The current economic conditions also make union organizing a continuing and expanding risk for employers in all industries, including the hospitality industry.

If passed, it can be expected that EFCA or other measures to make union organizing easier will have particular impact on hospitality employers. UNITE HERE and SEIU already have their organizing plans and budgets in place. They are ready to take full advantage of EFCA, which will only serve to make it easier and less costly for these unions to successfully implement their plans. Certain hospitality brands and major ownership companies may find it difficult to effectively advance a strong anti-union position consistent with their business models and community image. Furthermore, hospitality owners and operators lack the option of outsourcing their service jobs to lower-cost, less union-saturated areas.

What Can Be Done Now

Hospitality owners and operators need to start dealing with these heightened new union organizing risks now. Although we expect EFCA to pass, it is not the law yet. Legislators can be petitioned through industry groups such as the American Hotel and Lodging Association and the organization it helped to found, the Coalition for a Democratic Workplace, to oppose EFCA or have it amended to lessen its impact. If it passes, the NLRB could be petitioned in an effort to obtain rules implementing EFCA that are more balanced and fair toward employers.

Education is key. Polls indicate that a significant majority of respondents, including union members, favor the secret ballot. If the public actually understood what this bill would mean, it would pressure Congress. Even so union-supportive a politician as former Democratic presidential nominee George McGovern opposes the EFCA as undemocratic. Most Americans do not want to see the secret ballot eliminated from critical decisions such as unionization.
In addition, to combat the increased organizing risks with or without EFCA, every employer should consider implementing the following proactive measures:

  • regularly and positively promote its union-free position at all levels of the organization
  • train its managers and supervisors on the union organizing process, the impact of EFCA and the importance of early identification of warning signs of union activity
  • ensure that it has lawful employment policies in place that minimize its exposure to internal union organizing activity
  • analyze the current and evolving economic needs and concerns of the various segments of its workforce and ensure that its compensation, benefit and employment practices are meeting those needs and concerns
  • develop and implement a positive employee relations program (including active performance management, regular employee communications, prompt and effective complaint-resolution procedures, competitive wages and benefits, and fair and uniformly-applied disciplinary rules) designed to make a union unnecessary
  • analyze its organization to identify and address areas of vulnerability to union activity and take proactive measures designed to make it more difficult for a union to mount an effective organizing campaign
  • be ready to respond quickly and legally to any union organizing threat

Ignoring this problem will not make it go away.

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