Epstein on EFCA

Richard Epstein has written an op-ed piece in the Wall Street Journal on EFCA (hint:  he doesn't like it).  Epstein argues that EFCA is unconstitutional, for two reasons that I haven't seen presented very often.  The first is that it violates the First Amendment because it curtails employer speech to promote "unionization that justifies a clandestine organizing campaign which denies all speech rights to the unions' adversaries."  The argument isn't developed much more than that and doesn't seem particular strong to me.  I also have a hard time taking it seriously given that Epstein doesn't even mention the speech restrictions on unions, much less the fact that unions have significantly more restrictions on their speech than do employers (see, e.g., Section 8(b)).  His more interesting argument (and, not surprisingly, more developed) is that there is a Fifth Amendment takings problem:

The mandatory arbitration provisions of the EFCA are also constitutionally suspect. True, the takings clause of the Fifth Amendment today is quite lax when the state just restricts how an owner can use his property. But it imposes a firm duty to compensate someone whose property is occupied pursuant to a government decree. The Supreme Court also has established that any company subject to rate regulation (such as in telecommunications, transportation, insurance, etc.) may raise a judicial challenge to secure a reasonable rate of return on invested capital.

These Fifth Amendment protections apply to labor markets. The NLRA strips employers of basic common law rights, including the right to refuse to deal with the union. It imposes on employers (and unions) a duty to bargain in good faith toward a contract. But this duty does not force agreement. Either side is free to walk away from any deal it does not like. Unions can strike, and firms can lock out workers. Today's law, accordingly, restricts arbitration to interpreting existing agreements, not to making agreements from whole cloth.

The EFCA takes away the employer's right to walk. Now the successful union, backed by direct government power -- i.e., mandatory arbitration -- can force itself on the firm. Yet the proposed law does not let any court block the deal or ensure that the mandated terms offer a reasonable return on its invested capital. (Even modern rent control statutes require that much.)

The government-chosen panel could well impose terms that might cripple the firm competitively. Consider that the takings clause surely prevents the government from forcing any person to buy real estate for twice its market value from a seller. That same principle applies to this labor law: No government should be able to force a firm to hire labor at $50 per hour when the company is not willing to pay half that much.

Worse, the EFCA also permits the government arbitrator to strip the employer of all its standard management prerogatives on everything from subcontracting out to promotion policy. By flatly denying the employer any option to walk away, mandatory arbitration under the EFCA runs smack into the takings clause.

Several points here.  First, I'm not sure what he means by "block" or "ensure," but there is nothing in EFCA stripping courts of the power to review arbitration decisions.  Second, even if certain arbitral awards are so severe that they raise takings concerns, that's a far cry from suggesting that the act is facially unconstitutional (although this may be more of a quibble with the WSJ's headline writer than Epstein himself).  Third, EFCA's arbitration isn't your normal type of takings case.  This is not a situation where the government is directly regulating something or engaging in a physical takings--rather, it's acting to resolve a dispute between parties.  Moreover, Epstein is stretching things by saying that the arbitrator can "strip the employer of all of its standard management prerogatives."  My understanding of how arbitration would work is that it would be limited to mandatory subjects to bargaining, which still allow for significant managerial autonomy.

I'm not a takings expert (and would love to hear from others who are), and I know that a given award could result in a colorable claim, but I'm just not seeing a big takings problem here.  At least I'm not seeing a big problem under the Court's current takings jurisprudence.  This sounds more like an argument for a shift in that policy.  Either way, Epstein's piece serves as a good reminder that the card-check provision may not be the most important part of EFCA. 

I've had misgivings about EFCA, although I think there needs to be some significant changes to rectify the balance in union elections.  I'll also make this prediction:  I don't think EFCA is going to pass (this may be good news to supporters, as my predictions are often wrong).  The opponents have a simple and effective line against the bill--secret ballot v. union boss intimidation--that, while not being accurate or fair, is likely to win.  I think supporters of EFCA should be thinking hard about what they may want as a Plan B in case EFCA goes down or as an alternative to use in place of EFCA at the bargaining table.

Hat Tip:  Barry Hirsch

-JH