Binding Arbitration Provision Will Likely Scare Congress Away From LRFCA

June 19, 2013

On January 4, 2013, Rep Gene Green proposed a bill called the Labor Relations First Contract Negotiations Act of 2013 ("LRFCA"), which would amend Section 8 of the National Labor Relations Act ("NLRA") to require the use of mediation if the parties have not reached an initial collective bargaining agreement within 60 days after the union was certified. If the parties issues after 30 days of mediation, a party may unilaterally transfer those issues to the Federal Mediation and Conciliation Service ("FMCS") for a binding arbitration resolution.

This provision is similar to the mandatory arbitration provision in the "Employee Free Choice Act" ("EFCA"), which had been proposed to Congress several times since 2007. The EFCA provision required that an employer begins negotiating with a union to reach a collective agreement within 90 days, and if not, the two sides would be referred to compulsory mediation, and if mediation failed, the FMCS would refer the dispute to an arbitration board. The arbitration decision then would bind the parties for two years.

This meant in essence that the FMCS would set the terms of all new labor contracts in the United States that could not be resolved been employers and unions. They would have the authority to pick the arbitration panel, which would have the power to draft on its own initiative detailed contract provisions, tables, and appendices. The arbitrators' decision would be final with neither employers nor unions able to appeal decisions to a neutral judicial body.

The bill has received support from across the political spectrum. In 2007, President Obama urged the Senate to pass the EFCA, stating:

"The Employee Free Choice Act offers to make binding an alternative process under which a majority of employees can sign up to join a union. Currently, employers can choose to accept--but are not bound by law to accept--the signed decision of a majority of workers. That choice should be left up to workers and workers alone."

The punk band Street Dogs also voiced their support, writing the song "Up the Union" which closes with the lyrics, "The pay up top is way too high while those in the middle barely get by E-F-C-A is higher pay, vote for it today."

The provision has had its detractors. Richard A. Epstein, a professor of law at the University of Chicago and a senior fellow of Stanford University's Hoover Institution, believes arbitration decisions likely to stem from the EFCA would have a disastrous effect on the expansion of small businesses and the continued success of major firms. He stated:

"Two businesses in the same market niche may have totally different modes of internal organization. Even if both FreshDirect and Peapod deliver groceries to people, each has a completely different strategy as to how to run the back end of its business. Imposing the work rules from the first business on the second could lead to an internal upheaval. It would destroy the diversity and creativity vital to private enterprise."

The EFCA's proponents never gained enough support to pass the bill and the power in 113th Congress has not significantly changed. The future for the LRFCA is uncertain at best and bleak at worst.