First Contract Arbitration Doesn’t Hurt Businesses

by James Parks, Mar 30, 2010

Contrary to what opponents of the Employee Free Choice Act claim, first contract arbitration does not endanger the survival of businesses, according to a new study.

The study by the non-partisan Economic Policy Institute (EPI) shows when an arbitrator decides a first contract, a business survives at about the same rate as any other.

One of the key provisions of the Employee Free Choice Act would allow either the union or the employer the option of entering binding arbitration after 120 days of inconclusive bargaining. Similar rules already are on the books in several states in the United States and in eight of Canada’s 11 provinces.

The arbitration rule in Manitoba, Canada, most closely resembles the Employee Free Choice Act provisions. EPI’s survey of all the businesses in Manitoba with contract finalized by an arbitrator between 2001 and 2007 reveals that the arbitration had no effect on business success and survival. Of all the Manitoba businesses in which a first collective bargaining agreement was ruled on by an arbitrator, 87.5 percent were still in operation in 2009, compared with 86.2 percent of all businesses.

A recent study by John-Paul Ferguson of the Massachusetts Institute of Technology shows that even after a majority of employees vote for union representation, they only get a first contract about 56 percent of the time. And if an employer resists negotiating by engaging in illegal labor practices, the chance of getting a contract is reduced by 13 percent.

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