Why should UAW monopolize worker-management dialogue?

February 14, 2014: 12:03 PM ET

Volkswagen seeks Chattanooga vote on the UAW due to 1996 veto by Bill Clinton.

By Doron Levin

140214112657-volkswagen-tennessee-uaw-620xaFORTUNE -- This week's vote whether to recognize the United Auto Workers union at a Volkswagen AG plant in Chattanooga, Tenn. is the latest twist in a long dispute over the ground rules for managers and workers to solve problems and promote better ideas -- and what role, if any, the unions must play.

If the UAW gains recognition, as some of VW's own executives have predicted will happen, the union will have gained control over formation of a "works council" that will dictate many aspects of how VW operates the plant. The UAW also will have the exclusive right to bargain on behalf of workers for wages and benefits.

VW plants have works councils in Germany and at most of its other plants worldwide. Many German VW executives wish to see a works council in Chattanooga and thus favor UAW recognition, though the company's stance, officially, is neutral.

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In VW's model, much of what happens in the factories is reviewed by a "works council," a group to which workers and managers belong. Sounds reasonable, no? U.S. manufacturers in the 1980s, studying the success of Japanese manufacturers like Toyota (TM), began to experiment with worker-management teams. They had names like "kaizen committees," referring to the Japanese word for "continuous improvement."

But an obstacle to these groups arose: U.S. federal law, which many say is antiquated, preventing or at least limiting companies from forming such committees. The restrictions pertain to the National Labor Relations Act of 1935. Back in the 1920s and 1930s, some employers formed company-dominated unions to thwart organization of their workers. The pro-union NLRA prohibited such company-dominated groups.

As American business in the 1980s began to confront the reality of global competition, a nagging question arose: Why must the UAW or any union monopolize a management-worker group that explores solutions to problems as varied as smoking policy, bonuses, and the pace of production? Unions argued that managements could hand-select the worker representatives friendly to their viewpoint, instead of allowing peers to select them.

In 1992, the NLRA's restriction was tested in the famous Electromation Inc. decision, covering an Indiana company that had formed "action committees" to address worker grievances. The Teamsters, which were trying to organize Electromation, filed a complaint to the NLRB. The NLRB ruled in favor of the Teamsters.

The U.S. Chamber of Commerce and conservative law professors, plus Republicans in the U.S. Congress, argued that the NLRA unnecessarily and impractically tied the hands of companies wishing to consult their own workers. Both Houses of Congress passed the Teamwork for Employees and Management (TEAM) Act, which would have allowed companies to form committees. But President Bill Clinton, responding to pressure by organized labor, vetoed the TEAM Act.

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The UAW has a much larger agenda than promoting works councils. It aims to organize more plants, rebuild its ranks, and then raise wages and benefits in all southern transplant factories, perhaps to the level prior to the collapse of Detroit's automakers and the two-tier wage system meant to provide relief.

VW management may believe it will be getting a works council in Chattanooga, similar to the one that rules in its German factories. The history of the UAW, however, is marked by eruptions of acrimony, work stoppages, and confrontation against managements. Are we seeing at VW a new UAW, free of strikes and inflammatory rhetoric? Perhaps.

The UAW's many opponents, including politicians who welcomed VW to Tennessee with financial incentives, don't think so; they see something sinister: A Trojan Horse.

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