"Card Check:" What's Wrong with Arbitration?

The part that nobody much is talking about in the debate over the “Card Check” legislation is the fact that once the union is recognized, if the union and the employer do not reach agreement, their dispute goes to arbitration.  I’ve done more arbitrations than most people in America and I’ve done real, adversarial interest arbitrations, the kind of arbitration this bill mandates.  There aren’t a lot of people who can say that.

The following is from a manuscript I’m working on about running a government.  It reflects my experience with the labor arbitration process under American labor law.  It is a part of a much larger work so there are a lot of missing antecedents and a lot of missing references, but I think you’ll get the drift.  Executive Summary: If you own or run the enterprise, you really, really, really don’t want to deal with arbitration.  Read and learn:

There is a vast body of law concerning labor grievances and arbitration.  The seminal law is articulated in the so-called Steelworkers Trilogy of U. S. Supreme Court decisions from the sixties.  The fundamental thrust of the Trilogy is that the parties have voluntarily agreed to forego their economic and legal rights to enforce the contract for the life of the agreement and have submitted themselves to the authority of labor arbitrators to which they will be bound.  The SC said that courts were to give great deference to arbitrators and not substitute their judgment in any decision that did not involve fraud or gross error, and should even tolerate what the court might see as gross error if it concerned a question of contract rather than law.  That is all fine in the private sector, where if your name is on the door, you can do pretty much anything you want.  It is just plain wrong in the public sector where in the executive branch, that which is not permitted by the legislative body is prohibited to the executive body.  That distinction is adamantly opposed by arbitrators and not yet effectively observed by courts, though we have been successful in Alaska in nudging our courts that way.  In fact, we were successful enough that some luminaries in the National Academy of Arbitrators wrote complaining about us in their journal.


While the Trilogy Court was at pains to say that the arbitrator was to be constrained by the “four corners of the agreement” and was not empowered to “dispense his own brand of industrial justice,” the opposite has largely been the case and arbitrators have become peripatetic angels of equity flitting about setting the world right as they are given to see the right.  Unaccountable arbitrators exercising sweeping equity powers in legally binding decisions are a major cause of the demise of unionization in the true private sector.  In the simplest example, Acme Enterprises makes a deal with a union that it thinks it can afford and probably exchanged something of value with the union to get it. Some dispute arises over a term of that deal that proceeds to arbitration.  The angel of equity does not like the deal for whatever reason and completely reforms the contract in a manner that Acme cannot live with or cannot afford, and Acme is bound by the decision.  No court will disturb the decision unless it was procured by fraud, violates a clearly articulated public policy, or, maybe, is blatantly wrong as a matter of law.  Acme then either goes bankrupt to get out of the contract or flees to Malaysia.  And you were wondering what had happened to American industry?


Here’s the beef: State bargaining laws came about thirty or forty years after the federal bargaining law and took many of the lessons of that period of time.  Where the federal law does not even mention them, State laws usually expressly compel a grievance procedure that ends in binding arbitration.  Nor does the private sector quid pro quo of a no-strike or lockout promise in exchange for binding arbitration of grievances apply, since most public bargaining laws only allow strikes in pursuit of an agreement.  State governments and political subdivisions have not voluntarily relinquished any remedy; they are compelled to a particular course of remedy.  Since the executive body of a government can only execute that which has been prescribed or proscribed by the legislative body, a person, in this case the arbitrator, acting on or on behalf of the executive body can have no more power than the executive itself has.  The arbitrator as a creature of state law or local ordinance is limited by that state law or local ordinance and is entitled to no deference from the courts when he or she applies state law or local ordinance or interprets a contract entered into under that law or ordinance.


The real issue with arbitrators is the same issue that real Americans have with courts; arbitrators are lawyers.  Lawyers have to go to law schools, and most law schools are just not a part of America.  There is that nagging piece of the Constitution about powers not explicitly delegated to the United States are reserved to the people and the states.  Law school professors have a lot of trouble with this notion.  Under our Constitution, judges cannot make law; that is reserved to the people and their representatives.  I do not want to get into a Con Law debate here, but the issue is the same; can a judge make law or does he just apply and interpret law[1]?  The question is the same for arbitrators, and they are almost all lawyers who definitionally went to law schools where this debate began.  It is telling that the bible of modern arbitrators is entitled, The Common Law of the Workplace.  There is majesty in common law, the judge made law of torts and real estate and contracts and most of everyday civil life.  There is no place for common law in the world of codified law.  State bargaining laws and labor agreements entered into under those laws are codified; the arbitrator is charged with interpreting and applying the words of that codification.  It is unsatisfying for the law student turned arbitrator to conclude that no matter the equity on one side or the other, the words of the contract just will not allow her to decide the dispute.  She cannot say “grievance denied” because she cannot find authority in the agreement, so she engages in contract formation to achieve the result she desires.  It does not matter whether the question is whether Susie should have been reprimanded for being late for work or whether there are sufficient penumbras and emanations of unexpressed rights to find the right to privacy that is said to underlie Griswold v. Connecticut or Roe v. Wade, the question is the same: can a judge or arbitrator make the law or rule?  I suspect this dispute will go on for a while.


If you will be under contract for a year or two after you take office, have your labor relations people start setting arbitrations up for appeal and look for a good one to take to court.  Look for one like I described earlier that will not pass the red face test even for Democrats and take it to the Supreme Court if necessary.  Look for the right court to take it too, however; judges went to law school too.  You’ll only have to get an arbitrator reversed once to get them to understand that there is a new sheriff in town and they’d best get it right.


When the contracts come up for re-negotiation, you want language changes.  There are several handbooks out there with model language, but your labor relations people can craft something to your circumstances as well.  What you want is language that limits access to the grievance procedure to disputes concerning the express terms of the agreement and you want the union to be the one that advances grievances to the higher levels, not individual employees.  That controls what can be grieved and who can grieve it.  It is a good thing to set up some sort of complaint process outside the grievance process that ends with the head of the agency’s response but cannot go to arbitration – it makes a good safety valve for you and the union and forms a reasonable check against error.


You also want language that limits an arbitrator’s authority to applying and interpreting the express terms of the agreement, prohibiting them from adding to, subtracting from, or modifying any term of the agreement, and prohibiting them from modifying a management decision unless they find a specific violation of the express terms of the agreement[2].  Language like this will clip the angel of equity’s wings or at least give you a basis for having a court clip those wings.  Once you have language like this, have your labor relations people start every hearing, every closing argument, and every brief by telling the arbitrator the limits of his or her authority; they don’t like it, but they take it.  You will have to indoctrinate your labor relations people about this a little.  Under Democrat rule, they will have been conditioned to be extravagantly deferential to arbitrators.  Tell them to get over it; arbitrators are hired help.  They are expensive hired help, but hired nonetheless.  Their job is to do what the parties have hired them to do; apply and interpret the written contract before them.  They are not judges with equity power and they do not get all the obsequiousness that Hizzoner gets.  This is especially true at the state level.  As an officer of the state government, I articulated the will of a sovereign and stood for the full authority of a sovereign people.  I may bow, at least a little, before the majesty of the law, but I damn well don’t bow for much else.


And lastly, you want the loser to pay for the arbitration.  Not all laws allow this, and some states have set up their own mediation and arbitration boards so everyone goes for “free.”  Arbitrators and unions hate “loser pays” agreements.  Loser pays makes the arbitrator make tough decisions and makes the union screen cases because arbitration is expensive.  Arbitrators charge a per diem rate for the hearing and their thinking and writing time.  West Coast labor arbitrators currently average about $1000 per day and usually each day of hearing means a day or more of research and writing.  Then they get travel and expenses, and many of them know how to live well.  Our 2005 budgeting figure for arbitrations was $4000 per hearing day.  Two skillful and experienced lay advocates before an experienced arbitrator can put on any case in less than three days, most cases can be put on in a day and the advocates and the arbitrator can be washing the day down by 5:00 PM.  Put a lawyer on either side of the table and the hearing time doubles, even if the lawyer isn’t working on billable hours.  Put a private practice attorney working on billable hours on either side of the table and the hearing time goes up exponentially.  In my advocacy days, I loved to see some well dressed, well coiffed lawyer with a couple of Harvard educated briefcase toters show up.  I could be pretty confident that I was going to eat his lunch, maybe have a little fun with his pretty briefcase toter back in my single days, and send his client one Helluva bill.


[1] See Justice Scalia’s “A Matter of Interpretation” for a brilliant debate on these issues.

[2] Even this is not enough to stop some of them.  If you read their bible, The Common Law of the Workplace, you will find the late Arbitrator Carlton’s Snow’s words on interpreting contracts.  Leaning on Corbin on Contracts, he opines that all human use of language has inherent ambiguity, so the learned arbitrator must give the language context and meaning.  That is just rationalization for substitution of judgment.