The National Labor Relations Act (NLRA) brought about a monumental change in American labor relations by overriding the role of courts. Prior to Congress enacting the NLRA in 1935, unions had a hard time organizing because courts were generally opposed to union activity and saw it as a violation of an employer’s property rights.
Conspiracy, Injunctions, and Antitrust
Before the 1935 NLRA, criminal conspiracy charges were sometimes brought against unions, as judges considered collective action both unlawful and harmful to society (see Commonwealth v. Pullis, 1806). Courts also issued labor injunctions as a means to end strikes. A famous case is that of Vegelahn v. Guntner (Mass. 1896), where the court held that picketing is intrinsically intimidating and coercive and could therefore be enjoined. The Court here followed the argument of Commonwealth v. Hunt (Mass. 1842) that while combination and agreement to strike were not per se criminal, a union must pursue lawful ends by lawful means. (Oliver Wendell Holmes famously dissented in Vegelahn.)
Courts then began enforcing antitrust law against labor unions, holding that the Sherman Act of 1890 prohibited secondary activity of unions (where unions would instigate boycotts against a party other than their primary employer). The Supreme Court approved this application of antitrust law in the Danbury Hatters’ case, Loewe v. Lawlor (1908).
The Clayton Act of 1914 attempted to restrict the application of antitrust law to union activity by limiting the use of labor injunctions. However, the Supreme Court still construed the Clayton Act unfavorably toward unions in Duplex Printing Press Co. v. Deering (1921), reading the Clayton Act’s protections narrowly and integrating the common law “lawful ends-means” test into antitrust.
Early Labor Legislation
Labor unions did not gain strength in America until after the prosperous 1880s in what is known as the “Progressive Era.” Seeing that courts were a major barrier to union activity, labor unions knew they needed legislation in their favor. The first attempt at such legislation was the Erdman Act of 1898, which facilitated unionization in the railroad industry. However, the part of the act that prohibited discrimination against union members was struck down by the Supreme Court in Adair v. U.S. (1908). Congress eventually enacted the Railway Labor Act of 1926 to govern unions in the railroad and airline industries.
The Norris-LaGuardia Act of 1932 was the first piece of legislation with broader unionization in mind. It prohibited federal courts from issuing injunctions in most “labor disputes,” and it made “yellow dog” contracts unenforceable in court. (These were contracts that employers required employees to sign, agreeing that they would not join a union. Employers used “yellow dog” contracts because violations allowed the employer to get a court injunction against the union.) However, court injunctions were not as commonly used during this period as is often claimed, as historian Thomas E. Woods explains:
Labor economist Sylvester Petro undertook a thorough study of the period from 1880 to 1932 and found injunctions to be exceedingly rare: federal injunctions were issued in not even one percent of all work stoppages, while state injunctions were issued in less than two percent of all work stoppages. And these few injunctions were issued not to thwart labor union activity per se but to put a stop to violence against persons and property. Now even this protection of the employer’s rights — yes, employers have rights, too — would henceforth be absent.
The Norris-LaGuardia Act also provided an exemption to labor unions under the Sherman Antitrust Act of 1890, but this was still not the pro-union legislation that many were hoping for. Congress attempted to pass such legislation in 1933 with the National Industrial Recovery Act (NIRA). However, the Supreme Court struck down the NIRA in Schechter Poultry v. U.S. (1935), holding that this was an unconstitutional delegation of power to the president and a violation of congressional power under the Commerce Clause.
The National Labor Relations Act of 1935
Congress then passed the National Labor Relations Act (also known as the Wagner Act) in 1935. The Supreme Court upheld this new labor legislation as “constitutional” in NLRB v. Jones & Laughlin Steel Corp. (1937), holding that Congress can regulate any activity that has a significant effect, even if indirect, on interstate commerce.
This case was decided in April 1937, only two months after President Franklin Delano Roosevelt threatened to expand the Court in an attempt to get his legislation rubber-stamped. However, in March of 1937, the two swing-vote justices, Owen Roberts and Charles Evans Hughes, began siding with the liberals in permitting the president’s New Deal legislation (including the NLRA and the Social Security Act). This shift prevented the need for FDR’s court-packing scheme, a move that is known as “the switch in time that saved nine.”
The stated purpose of the NLRA was to “promote industrial peace” (among private sector, not public sector unions). It attempted to do this by protecting employee rights to form unions (section 7) and prohibiting “unfair labor practices” by employers (section 8). The NLRA was modified in 1946 by the Labor Management Relations Act (also known as Taft-Hartley), in which Congress overrode President Truman’s veto with a super-majority.
Taft-Hartley amended the NLRA so as to add “unfair labor practices” of unions, including secondary boycotts. Taft-Hartley also allowed states to pass right-to-work laws that ban union security agreements. (A union security agreement is where the employer and union agree to compel non-union employees to pay minimum union fees for the benefit of union representation.) While the NLRA strengthened unions, Taft-Hartley scaled back union tactics.
Whose Freedom of Association?
Many labor union advocates have defended the NLRA as necessary to protect the worker’s right to associate. However, while workers certainly have the freedom to associate with one another, association alone is not what empowers unions. Union activity is only effective if workers interfere with employer property rights and the rights of non-union workers.
The NLRA violates employer rights and non-union worker rights with three legal doctrines: (1) exclusive union representation, (2) mandatory bargaining, and (3) protected picketing and striking. Each doctrine will be discussed below.
Under the NLRA, if more than 50 percent of employees vote in a union, that union exclusively represents all the employees, even those who did not support the union. (While unions can choose to be member-only unions, they almost always choose exclusive representation.) No other unions can be formed to compete with the first union.
Further, unions often negotiate security agreements with the employer, which means that even non-union employees have to pay a partial fee to the unions to cover union bargaining on their behalf. (The justification is that non-union employees would otherwise be free riders.) However, Taft-Hartley allowed states to pass laws that prohibit such security agreements, in what are called “right to work” laws. Exclusive union representation may be under threat following the 2018 Janus v. AFSCME ruling (which prohibited public-sector security agreements) and the growth of right-to-work states.
Once a union is formed, it not only has exclusive representation of all employees, but the employer is also legally required to bargain with the union in good faith (known as mandatory bargaining). This is one of the chief problems with the NLRA, as it compels an employer to bargain with the union. While it is not required that an agreement be reached, the employer must make a “good-faith” effort in bargaining (the standard of which is determined by the National Labor Relations Board, a creation of the NLRA). This situation involves the government forcing employers to recognize and deal with unions. Union advocates love to speak of the freedom of association of employees. But what about the freedom of association of the other parties involved, namely employers and non-union employees?
Monopoly Pricing and the Strike
Exclusive representation and mandatory bargaining create an environment where employers are forced to deal with unions. However, this alone does not provide unions all the employment benefits they want. An employer could make a “good faith” effort at bargaining and still refuse to meet the union’s demands. The union must therefore put pressure on the employer, using what union advocates call “economic weapons.” The greatest of these weapons is the strike.
Employers certainly find it inconvenient when union employees refuse to work because of unmet demands, but employers can usually find substitute workers willing to take their place. The union response to this is to seek to prevent such workers (termed “scabs” by the unions) from taking the union employees’ jobs. Thus, the union employees not only refuse to work until their demands are met, but they also picket the employer’s property in order to prevent non-unionized workers from replacing them. Unions have often resorted to violence in order to prevent the crossing of picketing lines by replacement workers. Economist Thomas DiLorenzo explains how violence against competitors has always been inherit to unions:
Historically, the main “weapon” that unions have employed to try to push wages above the levels that employees could get by bargaining for themselves on the free market without a union has been the strike. But in order for the strike to work, and for unions to have any significance at all, some form of coercion or violence must be used to keep competing workers out of the labor market.
Union coercion ends up targeting competition in labor, namely non-unionized workers. DiLorenzo says, “Thus, strikes — and unions in general — represent a conflict between unionized and non-unionized labor much more than between unions and management.”
Theologian Robert Lewis Dabney recognized this role of the strike in 1891, 44 years prior to the NLRA — “The true logic of the strike system is this: It is a forcible attempt to invade and dominate the legitimate influence of the universal economic law of supply and demand … labor unions are rather conspiracies against fellow citizens and fellow laborers, than against oppressive employers.” (“The Labor Union, the Strike and the Commune” in Discussions, vol. 4, p. 298). That was in a day when courts were able to enjoin strikes. But thanks to the NLRA, the strike is now a legally favored act.
The NLRA protects union strikes by prohibiting employers from firing striking workers and then requiring the restoration of the jobs of striking workers if possible. This has created an absurd situation where employers have a legal obligation to restore the jobs of those who refuse to work for the pay offered by the employer. As Murray Rothbard says, “Their view is that the worker somehow ‘owns’ his job, and that therefore it should be illegal for an employer to bid permanent farewell to striking workers. … No one has a ‘right to a job’ in the future; one only has the right to be paid for work contracted and already performed. No one should have the ‘right’ to have his hand in the pocket of his employer forever; that is not a ‘right’ but a systematic theft of other people’s property.”
This is how unions raise employee wages, as they limit the supply of workers competing in their field. Unions do not increase wages through increased productivity but by driving out non-union labor. As Gary North explains, unions depend on monopoly pricing:
The economics of monopoly pricing is the foundation of all modern trade unionism. This is either not understood by the supporters of trade unions, or else it is rejected as irrelevant. You will search your days in vain trying to find a supporter of trade unions who is also a supporter of business monopolies, yet the economics of each is identical. The labor union achieves higher wages for its members by excluding non-members from access to the competition for the available jobs. In other words, those who are excluded must seek employment in occupations that they regard as second-best. They bear the primary burden in the marketplace; they are the ones who pay the heaviest price for the higher than market wages enjoyed by those inside the union.
It is important to recognize that unions do actually increase the wages of union employees. However, unions do this at the expense of other workers, as they rely on coercion to create monopoly pricing of their labor. Instead of protecting employers and non-union workers, the NLRA protects the violent behavior inherent to striking and picketing.
Repealing the NLRA
Union supporters often speak of unions seeking to equalize the “bargaining power” of workers to that of employers. However, this claim about disparate “bargaining power” between employers and workers is flawed. Workers have bargaining power if they have alternatives to employment at a particular workplace. In seeking to attract the best workers, employers compete with one another by offering higher wages.
Thomas E. Woods shows that workers have done just fine without unions, seen in the rise of wages prior to the NLRA: “Labor historians and activists would doubtless be at a loss to explain why, at a time when unionism was numerically negligible (a whopping three percent of the American labor force was unionized by 1900) and federal regulation all but nonexistent, real wages in manufacturing climbed an incredible 50 percent in the United States from 1860–1890, and another 37 percent from 1890-–914, or why American workers were so much better off than their much more heavily unionized counterparts in Europe. Most of them seem to cope with these inconvenient facts by neglecting to mention them at all.”
Unions are not necessary for economic prosperity. And while unions do raise wages, they do so through coercive means and at the expense of their competition. Unions are ineffective without special legislation like the NLRA that protects their violation of employer property rights and non-union worker rights.
The good news is that unions are on the decline in the United States, and many states have passed right-to-work laws that have weakened them further. Yet there is a long way to go in restoring the property rights of employers and the association rights of non-union workers. The NLRA’s government-mandated duty for employers to negotiate with unions, along with exclusive representation and the prohibition of firing workers for striking, are laws that have no place in a free society. The only solution is to repeal the NLRA.
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