Executive Summary

This report by the Secretariat of the Commission for Labor Cooperation responds to a request from the Council of Ministers for a study of the effects of plant closings on the principle of freedom of association and the right to organize in the three countries that negotiated the North American Agreement on Labor Cooperation (NAALC).

In February 1996, the Council of Ministers called for this report following ministerial consultations initiated by Mexico on a plant closing that occurred in the United States during a union organizing campaign. This is the first special report by the Secretariat under Article 14 of the NAALC, which provides for special reports on "any matter as the Council may request."

Under terms of reference for this report adopted by the Council, the Secretariat was asked to look at the implications of plant closings as related to (1) the right to organize, (2) how workplace closings are addressed in the legal systems and how laws related to closings are enforced, (3) the experience of labor tribunals and courts with this issue, (4) implications for labor market adjustment, and (5) other issues for future consideration. The Secretariat was instructed to complete its report in 6 months.

The introduction to the report provides general information on the background and terms of reference. Mexico requested ministerial consultations after a report issued by its National Administrative Office (NAO) expressed concern about the effectiveness of U.S. law in dealing with a plant closing related to union organizing. The Mexican NAO report followed a submission by the Mexican telephone workers union on the 1994 closing of La Conexion Familiar, a California-based division of the Sprint Corporation, 1 week before a union representation election was to be held ¹.

The notes on methodology describe the research plan for the report. The terms of reference called for a study of the effects on freedom of association and the right to organize. In an effort to develop a new factual basis to improve understanding of these issues, a research plan was developed to be as empirical as possible within the given time frame. The research plan was formulated in consultation with the labor departments of the three NAALC countries and was adapted to differences in the legal systems and the union organizing systems of the three countries. The plan also took into account differences in the availability of resources and research infrastructure needed to complete the study in the specified 6-month time frame. The research plan called for legal research into the different labor law systems, commentary and analysis by knowledgeable labor specialists, examination of the actions of labor boards and courts, review of literature, and a special survey of union representatives in the United States.

Part One of the report describes the relevant legal framework for resolving plant closing cases in the three NAALC countries. In the United States and Canada, plant closings or threats of closing motivated by anti-union sentiment are defined as unfair labor practices. As such, they are prohibited under law and are subject to remedial action when an employer is found to have committed an unfair labor practice. The Mexican labor law system does not use the unfair labor practice concept. Instead, Mexican labor law specifies the permissible reasons for closing a plant.

In all three NAALC countries, an employer may not close a plant or threaten to close a plant in reprisal for union activity, but may close a plant for valid economic considerations. In the United States, the law allows an employer to express "any views, argument, or opinion" about plant closings or other possible consequences of unionization, as long as such expression contains no "threat of reprisal or force or promise of benefit." However, an employer may close a plant, even for anti-union reasons, when the plant closing is at the same time a cessation of the entire business. U.S. labor law is enforced throughout the United States by the National Labor Relations Board (NLRB or Board).

Determining liability in an unfair labor practice (ULP) case is a multilayered procedure under U.S. labor law. After a ULP charge is filed in a regional office of the NLRB, the regional director decides whether or not the charge has merit. If so, the regional director issues a complaint. A hearing on evidence is held before an Administrative Law Judge (ALJ) of the NLRB. The ALJ decision may then be appealed to the NLRB in Washington, D.C., for a review of the record and an affirmation or reversal, in whole or in part, of the ALJ determinations. The NLRB's decision may then be appealed to a federal court of appeals, and that court's decision can be appealed to the U.S. Supreme Court.

In Canada, statutes generally permit employers to express views on unionization as long as the employer does not use "coercion, intimidation, threats, promises, or undue influence" (an example drawn from the Ontario statute—other provinces have similar rules). Canadian labor boards and courts generally prohibit an employer from acting, even in part, on the basis of anti-union motives, regardless of the existence of a valid business justification for the employer's actions.

Canadian labor law is mainly within provincial jurisdiction and is enforced by the provincial governments. Provincial jurisdiction covers approximately 90 percent of the national workforce. Federal authorities enforce the law with respect to the other 10 percent of the workforce that come under federal jurisdiction.

Unfair labor practice cases in Canada are processed in more of a single-layered procedure. The relevant labor board or, in Quebec, the labor commissioner receives complaints, conducts investigations, holds hearings, and issues decisions in a single overall proceeding. Their decisions are generally not susceptible to appeal to the courts except on constitutional or jurisdictional grounds.

In general, U.S. law permits wider latitude for employers to close a plant or to make statements about plant closings in connection with a unionization drive by workers. Where both an anti-union motivation and an economic motivation exist, U.S. law looks for the predominant motive. Under Canadian law, any degree of anti-union motivation is generally sufficient to find an unfair labor practice.

Mexico does not use the unfair labor practice system, and anti-union motivation does not arise explicitly as an issue for administrative or judicial determination. However, a plant closing can be found to be unlawful in Mexico by labor authorities if the closing is not undertaken for specified, legally valid reasons as defined in the Federal Labor Law (FLL). Provisions for "collective conflict of an economic nature" in Mexico's FLL create a detailed procedural mechanism for determining whether a plant closing conforms to the legal requirements.

A plant closing threat is not unlawful in Mexico because the labor law addresses acts, not statements. Therefore, there are no administrative or judicial cases under Mexican labor law alleging anti-union threats of plant closing that can be included for study in this report. Such cases do arise in the United States and Canada. In both countries, the labor authorities determine liability on a case-by-case basis after analyzing alleged plant closing threats in the overall context of employer conduct. Thus, the same employer statement alleged as an unlawful threat may be found to be lawful in one case and unlawful in another, depending on the overall context.

Part Two discusses the typical process of organizing a union in each country. In the United States, workers may petition the NLRB to conduct a representation election if at least 30 percent of the employees request it. Unions normally wait until a majority of the employees have joined the union before petitioning for an election.

NLRB representation elections are normally held within 30–60 days after the filing of a petition for the election. Of all elections, 20 percent are held more than 60 days after the filing of a petition. The period between filing a petition and holding an election is often marked by vigorous pro- and anti-union campaigning in the workplace by employees and by management. Such campaigns appear to be the typical settings that give rise to plant closings or threats of plant closing in response to union organizing efforts.

The NLRB may certify a union as the collective bargaining representative where an employer's unlawful conduct has destroyed the union's majority support and made a fair election impossible. If a union is certified, the employer must bargain in good faith with the union.

In Canada, the federal jurisdiction and a majority of provinces provide for union certification on the basis of authorization cards signed by a majority of workers and without the need to hold an election. This is known as the "card-check" method of union certification. When an election is held, it is usually within 5 days of the union's application for certification. Both the card-check system and the rapid election procedure minimize the extent of sustained, aggressive campaigning in the workplace, although campaigning does take place.

Labor authorities may certify the union without an election when the employer's unlawful conduct destroys the conditions for free choice by employees. The employer must bargain in good faith with a certified union. Some provinces set forth conditions in which failure to achieve a first collective bargaining agreement in a newly certified bargaining unit can lead to binding arbitration for a first agreement.

In Mexico, any group of 20 or more workers may form a union without an election taking place. They need not be a majority of the workforce. There is not normally a campaign for or against union organization in the workplace. With some regional and sectoral exceptions, unions are generally accepted as a normal feature of Mexico's labor relations system.

After duly registering with the authorities, the union may demand that the employer sign a contract submitted by the union. If the employer signs, that union is considered to hold "title" to the collective bargaining agreement. If the employer refuses to sign, the union may strike to obtain a contract. The employer may then demand a strike vote to determine if a majority of workers support the strike. If not, the strike must end and workers must return to work. The union continues to exist, but without title to a collective agreement. If a majority of workers supports the strike, the employer must cease operations, and the relevant Conciliation and Arbitration Board (CAB) of the federal or state jurisdiction generally mediates a settlement leading to titularidad (the holding of title to the collective agreement) for the registered union.

If another registered union claims support from workers already represented by a union that holds title to the collective agreement, the labor authorities conduct an election to determine which union enjoys majority support. Thus, union representation elections in Mexico are held only when two unions compete for bargaining rights in an already- organized workplace.

Part Three reviews official records of labor tribunals in plant closing cases, yielding an appreciation of the frequency of cases in each country and how the labor law system deals with them. For the United States, additional survey research was undertaken. ²

United States

U.S. labor law authorities actively prosecute unfair labor practice cases involving plant closings and threats of plant closing. They demonstrate a high level of success in litigation before the NLRB and the courts. However, despite this effective enforcement, the incidence of anti-union plant closings and threats of plant closing continues with some frequency. There appears to be significant variation in the types of statements employers are permitted to make about plant closings in connection with a union organizing effort.

The Secretariat examined all 89 federal appeals court decisions in cases involving plant closings and threats of plant closing published between 1987 and 1993. Of the cases, 70 arose in the context of a new union organizing campaign. Closings or partial closings prompted 32 cases, and 57 cases involved threats of closing. Courts of appeals upheld NLRB determinations that employers unlawfully closed or threatened to close plants in 84 of the 89 cases.

The Secretariat studied 319 decisions of the NLRB between 1990 and 1995 involving plant closings and threats of closing. Of the total, 109 cases involved closings or partial closings, and 210 involved threats of closing. New union organizing campaigns in non-union workplaces were involved in 275 of these cases, while 44 involved existing unions. The NLRB found a violation by the employer in 283 of the 319 cases.

The Secretariat also looked at case files in two regional offices of the NLRB to determine the volume and disposition of cases that do not reach the level of a published determination by an adjudicator. Findings suggest that for every case that reaches a published decision, 10 cases are initiated at the regional office level. More than half of these are withdrawn or dismissed.

In more than 40 percent of cases where the regional office found merit in the charge, the NLRB General Counsel took the case to trial before an ALJ. This is 10 times the rate of enforcement in other cases of meritorious unfair labor practice charges against employers. These findings indicate that the NLRB takes plant closing cases very seriously and actively pursues them to a litigated conclusion. The General Counsel prevails in nearly 90 percent of such cases.

In the United States, resources were readily available to conduct survey research for information that could not be gleaned from administrative and judicial records. Union representatives surveyed reported what they believed to be plant closing threats occurring in half of the sampled union organizing campaigns during the 3-year period studied, with a higher incidence in industries more susceptible to closing such as manufacturing, trucking, and warehousing. Perceived plant closing threats were the largest single factor identified by respondents who decided to withdraw an election petition they had earlier filed, thus discontinuing the organizing campaign. When unions proceeded to an election, the overall union win rate where plant closing threats were reported to have occurred was 33 percent, compared with 47 percent in elections where no threats were reported to have taken place.

Canada

Canadian federal and provincial labor laws on union organizing have generally established rapid procedures for union certification, either by card check or by an election within 5 days. This minimizes the "campaign" aspects of union organizing where plant closings or threats of closing tend to arise.

Most Canadian jurisdictions hear and decide unfair labor practice cases in a single-stage proceeding before the relevant labor board or commissioner. Those decisions normally are not appealable to the civil courts. This single-stage approach makes for relatively prompt final determinations. Canadian law appears to be quite strict in limiting statements about plant closings made by employers during a union organizing effort. In general, enforcement appears to have a significant effect on anti-union plant closings and threats of closing in Canada.

The Secretariat examined 36 cases involving issues of anti-union closings and threats from 1986 to 1995. These were apparently all the cases on this subject decided by Canada's labor boards, labor commissioners, and civil courts combined during this 10-year period.

British Columbia and Ontario were the sites of 25 of the Canadian cases. In contrast to the U.S. experience, where most cases involved threats of plant closing, the majority of Canadian cases involved plant closings rather than threats. Among the Canadian cases, 21 involved new union organizing or first-contract bargaining, and 15 involved incumbent unions. Employers were found liable for unlawful conduct in 23 of the 36 cases.

Mexico

In Mexico, the labor law system and the union organizing system are fundamentally different from the systems of the United States and Canada in the treatment of plant closings and threats of closing. There are not union organizing "campaigns" in Mexico where employers might seek to deter unionization by closing or threatening to close the plant. The certification process of union formation that occurs in the United States and Canada through an election or other determination of majority status does not exist in Mexico. Threats of plant closing that are not followed by an actual closing are not unlawful. Thus, there is no opportunity for "threat" cases to emerge in Mexican administrative and judicial data as they do in the United States and Canada. Moreover, once a union is formed, the law makes it difficult to carry out a threat to close without the union's consent. The employer must turn to the relevant CAB to obtain approval for closing in a proceeding where the union can challenge the closing.

Mexican workers may normally form a union without elections, except where unions compete for representation rights in an already-organized workplace. With exceptions in some maquiladora regions, most medium and large employers in the formal sector of the economy accept unions as an inevitable part of the industrial relations landscape in Mexico. Controversies sometimes arise in connection with disputes over titularidad between two unions or leadership disputes within a union, but they generally do not give rise to legal cases or decisions where plant closings or threats of closing are at issue.

The Federal Labor Law creates a complex procedure called "collective conflict of an economic nature" where employers must secure the permission of a federal or state labor board before closing a plant. A closing is justifiable only for a specific cause defined in the law, and unions have the opportunity to appear before the board to contest the closing on the grounds that it does not meet one of the statutory causes for closing. The procedure involves extensive hearings and testimony by financial experts and other expert witnesses.

Secretariat researchers confirmed that this procedure is almost never used. In the Federal CAB and two state CABs visited by Secretariat researchers who examined thousands of case files, only five cases in 5 years involved the "collective conflict" plant closing procedure, which is contemplated in the law as the mechanism for undertaking a plant closing. In contrast, more than 1,000 cases followed an alternative "voluntary termination" procedure under other provisions of the FLL.

The most common alternative procedure in plant closings takes place under a provision for voluntary termination of the employment relationship through a "mutual consent" clause of the law. Workers and unions appear to prefer this more rapid, flexible procedure, which results in a faster provision of severance pay to affected workers in place of a long, complex, and costly procedure that delays receipt of severance pay. It must be noted that statutorily required severance pay in Mexico, which can equal 3months' pay plus 12–20 days' pay for each year of service, is significantly greater than customary contractual severance pay in the United States or Canada.

Part Four presents relevant contextual information on plant closings and worker displacement in labor markets in the three countries, and describes labor adjustment and social security systems to address such dislocations. This section discusses the constant "churning" in the labor markets of the three countries, reflected in frequent plant closings and high numbers of affected workers in all three countries.

The U.S. Worker Adjustment and Retraining Notification (WARN) Act requires advance notice of plant closings in large workplaces. Canadian federal and provincial statutes also provide for advance notice of closings. Many statutes in Canada compel the creation of joint committees through which employers are to cooperate with employee representatives to search for alternative solutions to mass termination or to minimize the impact of termination on employees. Mexican law contains a procedure requiring permission from the appropriate CAB before a plant can be closed, although an alternative procedure for "mutual consent" usually replaces it.

Part Five summarizes the report and offers, pursuant to the terms of reference, "important issues for future consideration regarding this matter." Issues for future consideration include possible improvements to the quality and accessibility of administrative data, particularly from dispersed regional, state, and local labor law authorities, which would help to advance prospects for comparative international studies. Possibilities for further research are also indicated.

Also to be considered are links to labor relations initiatives in each country and in international organizations such as the Organization for Economic Cooperation and Development (OECD) and the International Labor Organization (ILO). These models are variously known as "codes of conduct," "model business principles," "principles of ethics in labor relations," and "guidelines for multinational corporations."