COMMENT
PARTICIPATORY MANAGEMENT
SCHEMES, THE LAW, AND WORKERS'
RIGHTS: A PROPOSED
FRAMEWORK OF ANALYSIS
ANDREW A.
LIPSKY
INTRODUCTION
In response to years of industrial strife and social unrest, Congress enacted the National Labor Relations Act (NLRA) in 1939.1
1. National Labor Relations Act of 1935, Pub. L. No. 198, §§ 151-169, 49 Stat. 449
(codified as amended at 29 U.S.C. §§ 151-169 (1982));see Nash, TheNLRA atAgeFifty, 36 LAB.
LJ. 600, 601 (1985) (describing National Labor Relations Act's (NLRA) purpose as reducing
industrial strife in order to prevent interference with commerce). Various theories exist to
explain why Congress enacted the NLRA. Members of Congress stated that the NLRA's purpose was to reduce conflict between labor and management through the promotion of collective bargaining. See S. 1958, 73d Cong., 1st Sess., 79 CONG. REC. 7565 (1935), reprintedin 2
NLRB, LEGISLATIVE HISTORY OF THE NATIONAL LABOR RELATIONS ACT, 1935, at 2341 (1985)
[hereinafter LEG. HisT.] (statement of Sen. Wagner) (stating that "bill is designed to promote
industrial peace. The bitterness and the heavy cost of economic conflicts between employers
and workers in this country constitute a long and tragic story"). The courts consider this
theory as incontrovertible today as at the time the NLRA was passed. Compare Lingle v.
Norge Div. of Magic Chef, Inc., 108 S. Ct. 1877, 1880 n.3 (1988) (quoting Teamsters v. Lucas
Floor Co., 369 U.S. 95, 103-04 (1962)) (stating that "[tihe ordering and adjusting of competing interests through a process of free and voluntary collective bargaining is the keystone of
the federal scheme to promote industrial peace") with NLRB v.Jones & Laughlin Steel Corp.,
301 U.S. 1, 45 (1937) (finding NLRA's theory is "that free opportunity for negotiation with
accredited representatives of employees is likely to promote industrial peace.. ."). See Klare,
Workplace Democracy and Market Reconstruction:An Agenda for Legal Reform, 38 CATH. U.L. REV. 1,
3 (1988) (stating chief goal attributed to labor law is preservation of industrial peace);
Schlossberg & Fetter, U.S. LaborLaw and the Futureof Labor-ManagementCooperation, 37 LAB. L.J.
595, 599-600 and n.22 (1986) (quoting address by T. Schneider, "Quality of Working Life
and the Law," Harmen Lecture Series, Kennedy School of Government and Public Policy,
Cambridge, Mass.) (Nov. 19, 1981) (stating that NLRA was intended to promote industrial
peace by promoting equal bargaining power between labor and management).
The major competing theory concerning the intent of the NLRA derives from the "free
choice" school of thought, which postulates that the NLRA was passed to ensure that workers
retained the right to choose any type of organization or, alternatively, not to organize at all.
See Alexander, Worker Participationand the Law Once Again: Overview and Evaluation, 39 LAB. L.J.
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One of the NLRA's primary purposes was to facilitate and to protect
labor's ability to organize and to take collective action. 2 Specifically,
the NLRA requires that labor be free to organize and to bargain
3
collectively on equal terms with employers.
The NLRA was enacted during a period when the "scientific man696, 699 (1988) (describing free choice theory); see also infra notes 210-17 and accompanying
text (discussing same).
At the time of enactment, many individuals in the business community considered the legislation as government intrusion into the sphere of management relations. See A Bill to Equalize
the Bargaining Power of Employers and Employees, To Encourage the Amicable Settlement of Disputes
Between Employers and Employees, To Create a NationalLabor Board, andfor Other Purposes:Hearings
on S. 2926 Before the Committee on Education and Labor, 73d Cong., 2d Sess. 130 (1934) [hereinafter 1934 HEARINGS], reprintedin 1 LEG. HIsT., supra, at 27, 160 (statement of W.E. Hotchkiss,
President, Armour Institute of Technology) (finding creation of permanent Labor Board misgiving on part of Congress); id. at 342 (statement ofJames A. Emery, representing National
Association of Manufacturers and 38 state organizations) (arguing that legislation is designed
to prevent parties from exercising inherent balance of power in bargaining); id. at 462-72
(statement ofA.P. Mowitz, attorney) (stating NLRA will create unnatural organizations which
will dominate industrial relations and characterizing legislation as class legislation); id. at 484
(statement of Arthur Moriss Torrey) (stating NLRA is class legislation). Moreover, opponents
of the NLRA argued that the legislation abrogated the right to contract freely. Id. at 967
(statement of A. F. Thompson, secretary and manager of Manufacturers Association of Racine, Wisconsin) (arguing NLRA would hinder constitutionally protected freedom of contract). For the history of the labor strife preceeding the passage of the Act, see D. BRODY,
WORKERS IN INDUSTRIAL AMERICA: ESSAYS ON THE 20m CENTURY STRUGGLE (1980) (describing
history of industrial worker in twentieth century).
Congress specifically refuted this notion and provided assurances to the business community that this was not the case. See 79 CONG. REC. S7565-67 (daily ed. May 15, 1935), reprinted
in 2 LEG. HisT., supra, at 2341 (statement of Sen. Wagner) (rejecting imposition ofcompulsory
arbitration and settlement by government).
The debate over the role that the government should play in industrial relations still exists
today. Some scholars advocate the removal of government from the industrial relations
sphere. See generally Epstein, A Common Lawfor Labor Relations:A Critique of the New Deal Legislation, 92 YALE LJ. 1357 (1983) (rejecting New Deal labor legislation in favor of common law
approach drawing on contract and tort law); Posner, Some Economics of Labor Law, 51 U. Ctii. L.
REV. 988 (1984) (claiming current labor law helps "cartelize" labor markets thus creating
"dual-monopoly"). Others support increased government intervention in labor-management
relations. See generally Harper, Reconciling Collective Bargainingwith Employee Supervision of Management, 137 U. PA. L. REV. 1 (1988) (proposing governmental efforts to mandate minority role
for employees in supervision of managers); Herrnstadt, Time Once Again to Climb to the Industrial
Mountain Top: A Call for Labor Law Reform, 39 LAB. LJ. 187 (1988) (arguing for legislative
reform of NLRA to provide unions tools needed to carry out their role under NLRA); Kohler,
Models of Worker Participation:The Uncertain Significance of Section 8(a)(2), 27 B.C.L. REV. 499
(1986) (advocating recognition of purpose of NLRA to promote employee participation in
management).
2. See National Labor Relations Act § 1, 29 U.S.C. § 151 (1982) (stating purpose of
Act). Section 7 of the Act guarantees that "[e]mployees shall have the right to self organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of
collective bargaining or other mutual aid or protection ..
" 29 U.S.C. § 157 (1982). These
rights were originally granted in the National Industrial Recovery Act (NIRA), but were soon
found ineffectual. See 1934 HEARINGS, supra note 1, at 7-10, reprintedin I LEG. HIST., supra note
1, at 3640 (statement of Sen. Wagner) (discussing failure of § 7(a) of NIRA); U.S. DEPr. OF
LABOR, BUREAU OF LABOR-MANAGEMENT RELATIONS AND COOPERATIVE PROGRAMS, U.S. LABOR
LAW AND THE FUTURE OF LABOR-MANAGEMENT COOPERATION 46-47 (First Interim Report) (Feb.
1987) [hereinafter LAws PROJEcT FIRST INTERIM REPORT] (finding Wagner Act response to
failure of NIRA).
3.
Murrmann, The Scanlon Plan Joint Committee and Section 8(a)(2 ), 31 LAB. LJ. 299, 300
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PARTICIPATORY MANAGEMENT SCHEMES
669
agement" theory of industrial relations dominated the workplace. 4
During the past thirty years, however, there has been discussion
about shifting away from scientific management toward a more humanistic behavioral approach to labor relations. 5 As management
employs an increasing number of humanistic techniques in response
to the changing competitive environment, 6 scholars have questioned whether the NLRA has become anachronistic. 7 For example,
the NLRA has been criticized for stifling the flexibility of both labor
and management, 8 perpetuating the philosophical differences between labor and capital, 9 and hindering democratization of industrial relations.' 0
Through an analysis of various provisions of the NLRA and section 8 of the Clayton Act," this Comment contends that the adversarial model, based on scientific management theories, and the
(1980); see infra notes 160-77 and accompanying text (describing broad construction of § 2(5)
to include all employee organizations under NLRA).
The NIRA failed to encourage collective bargaining because company-dominated unions
fell within the permissible guidelines of that Act. LAws PROJECT FIRST INTERIM REPORT, supra
note 2, at 48; see infra notes 183-92 and accompanying text (describing company union). Senator Wagner, in a radio address shortly after the introduction of the NLRA, stated that there
had been a "virtual collapse of section 7(a)" of the NIRA because employers had "set up a
masquerade type union which is really the creature of the employer rather than the representative of the employee, and have taken advantage of the lack of adequate enforcement power
behind section 7(a) ..
" 79 CONG. REc. 6183-84 (1935), reprintedin 2 LEG. HIsT., supra note
1, at 2283.
4. See infra notes 12-22 (outlining scientific management theory).
5. See infra notes 23-26 (explaining humanistic theory of management).
6. See Stepp, New Directions in Labor-Management Relations, 37 LAB. L.J. 454, 454-56
(1986) (listing four major factors in changing environment: foreign competition, deregulation, domestic nonunion competition, and new technology).
7. See Special Project, The Future of Labor-Management Cooperative Efforts Under Section
8(a)(2) of the National Labor Relations Act, 41 VAND. L. REV. 545, 574 (1988) (claiming tradi-
tional evaluation criteria of NLRA seem outdated); Alexander, supra note 1, at 697 (remarking
that movement toward participatory management has become more prevalent since early
1970s); id. at 699 (finding strict interpretation of §§ 2(5) and 8(a)(2) of the NLRA anachronistic).
Some circuit courts have accepted this theory as well. See NLRB v. Streamway Div. of Scott
& Fetzer Co., 691 F.2d 288, 293 (6th Cir. 1982) (joining minority of circuit courts in finding
adversarial model of industrial relations anachronistic); see also infra notes 210-13 and accompanying text (describing courts' use of free choice theory).
8. See Bahrami, Productivity Improvement Through Cooperation of Employees and Employers, 39
LAB. LJ. 167, 176 (1988) (finding that past labor laws have become rigid obstacle to
cooperation).
9.
See LAws PROJECT FIRST INTERIM REPORT, supra note 2, at 2 (comment of A. F. Kuhn,
Corporate Coordinator of Labor Relations at Penzoil Co., Houston, Tx.) (predicting that continued confrontational atmosphere will lead United States into second rate economic status);
id. at 5 (comment of Dean Robert E. Doherty, Cornell Univ. School of Industrial Relations)
(proclaiming that "[i]f those features of the NLRA that unnecessarily get in the way of cooperation can be eliminated, what a better world it would be").
10. Bernstein, NLRB Blocks IndustrialDemocracy's Path, L.A. Times, Oct. 29, 1986, Pt. IV,
at 1, col. I (noting that "[t]he more democratic a worker-participation program is in this coun-
try, the more trouble it faces from the NLRB and the Supreme Court").
11.
15 U.S.C.
§§
15, 17, 26; 29 U.S.C. § 52 (1982).
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cooperative model, based on humanistic theories, are not mutually
exclusive. Rather, an integration of these models into a new analytical framework will accommodate both innovative styles of management and the protection of workers' rights. Part I of this Comment
discusses the changing trends in workplace management and focuses on behaviorist models of participation. Part II discusses the
rights, protection, enforcement, and remedies provided under the
NLRA. Part III examines legislation that affects these new behavioralistic techniques, along with the judicial and administrative interpretation of those laws. Part III also demonstrates how these laws
and their judicial interpretation have abrogated workers' rights and
then recommends remedies to the problems. Part IV argues for the
adoption of a "two-tier" scheme of labor-management cooperation
and explains how this scheme could be enacted through a combination of legal presumptions to be used when analyzing participative
programs and suggests certain statutory changes to the current labor laws. The Comment concludes that these proposed changes to
the NLRA can and must occur at the judicial and legislative levels in
order for labor to reap the full intended benefit of the NLRA as well
as the behavioralistic management styles.
I.
TRENDS IN LABOR-MANAGEMENT RELATIONS
A.
Scientific Management of Labor
The roots of the scientific management approach can be identified
as early as 1776 in Adam Smith's The Wealth ofNations.'2 In his treatise, Smith described how "natural" market forces can meet society's needs with maximum efficiency. 13 In a particularly illustrative
passage, Smith described the minute division of labor during the
production of pins.' 4 Each worker performed one particular task,
while working within a system oriented toward the production of a
single product.' 5 Over 130 years later, Frederick W. Taylor incorporated this method of production into what has commonly become
16
known as "scientific management."'
12.
2 A. SMrrH, AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS
239 (1776) [hereinafter WEALTH
OF NATIONS].
13. Id. at 239 (arguing increased demand for product may raise price in short-run, but
will always decrease price in long-run).
14. Id. at 6.
15.
Id.
16. F. TAYLOR, THE PRINCIPLES OF SCIENTIFIC MANAGEMENT (1911). The basic tenets of
scientific management include: subdividing and routinizingjobs to cheapen labor and reduce
skill level; separating conception and execution; appropriating workers' production knowledge by management; coordinating all operations by direction; monitoring work processes;
and enforcement by threat of discharge. Klare, The Labor Management Cooperation Debate: A
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PARTICIPATORY MANAGEMENT SCHEMES
The scientific management theory postulates that talent and experience should reside exclusively in management, and that law and
property rights support the idea that management should make all
decisions concerning deployment and utilization of capital and productive resources.' 7 This management technique exacerbated the
division between labor and management, which many felt was inherent in a market economy.18
Scientific management was the dominant theory of industrial relations in the United States for many years and still exists today in
diminished proportions.' 9 A changing economic and social envi-
ronment, however, has challenged its applicability.20 Small and
large companies have begun to break down the traditional division
between management and labor in an effort to maintain competitiveness and to increase productivity. 2 1 Moreover, accompanying
Workplace Perspective, 23 HARV. C.R.-C.L. L. REV. 39, 57 nA9 (1988). See generally M. WEBER,
THE THEORY OF SOCIAL AND ECONOMIC ORGANIZATIONS (1979) (exploring scientific management as applied in modem industry).
17. Alexander, supra note 1, at 696.
18. For a Supreme Court discussion of this "adversarial model," see PackardMotor Co. v.
NLRB, 330 U.S. 485, 494 (1947) (Douglas, J., dissenting) (stating that NLRA is based on
labor-management dichotomy).
19. See Current Developments, 186 Daily Lab. Rptr. (BNA) at A-9 (Sept. 27, 1989) (examining proliferation of participative management schemes). Most other employers utilitized
traditional management styles. Id. Over 80% of the Fortune 1000 have some type of participative scheme in place. Id. The study, conducted by the American Productivity and Quality
Center, received responses from 476 companies who employed over 9 million employees
combined. Id.; see Office of Economic Research, New York Stock Exchange, People and Pro-
ductivity: A Challenge to Corporate America 40 (1982). As early as 1982, over one-third of
the Fortune 500 had some type of participatory scheme in place. Id.
20. See Bahrami, supra note 8, at 169 (asserting Taylorism not responsive to changing
environment). Many factors, such as increased domestic and foreign competititon, have contributed to the need for a reevaluation of management styles. Id. at 167 (citing high domestic
labor costs as aid to foreign competition).
21. See Alexander, supra note 1, at 696 (identifying quest for greater efficiency as reason
underlying changing management philosophy); see also H. STRINER, REGAINING THE LEAD: POLICIES FOR ECONOMIC GROWTH (1984) (arguing for development of industrial policy based on
new types of relationships between government, labor, and management in order for United
States to remain competitive in world economy). In general, competitiveness refers to the
ability of domestic producers to compete with foreign firms. See U.S. COMPErrrvENEss IN
THE WORLD ECONOMY 3 (B. Scott & G. Lodge eds. 1985) (noting that national competitiveness
refers to a country's ability to create, produce, distribute, and/or service products in international trade while earning rising returns on its resources). Others have maintained that the
United States does not suffer from a competitiveness problem. Adkins, Can IndustrialRelations
Improve Competitiveness?, 39 LAB. LJ. 542, 543 (1988). Adkins has identified many other factors
that affect competitiveness, such as management policies, government policies, levels of research and development, and effectiveness of the educational system. Id. at 544. But see Adkins, supra, at 545-46 (arguing that advantages of cooperation will be seen only in firms that
are not currently efficient).
Many blame the apparent fall in U.S. productivity on outdated management styles, but
other factors have been identified as just as significant. See Bahrami, supra note 8, at 167
(finding productive techniques, creative work force, and innovative management styles necessary for increased productivity); see also Bahrami, supra note 8, at 167 (stating current industrial relations system cannot respond to increased foreign competition); Barkin, An Agendafor
the Revision of the American IndustrialRelations System, 36 LAB. LJ. 857, 858 (1985) (finding new
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the easing of traditional areas of management control, labor increasingly has had an opportunity to participate in the decision making
processes. 22
B.
The Behaviorist Approach to Labor Management and the Concept of
ParticipatoryManagement
The organizational behaviorists school of thought, of which Elton
Mayo was considered the leading proponent, has put forth a theory
of management which starkly contrasts with the scientific management school of thought.23 The organizational behaviorists' theory
postulates that for management to achieve its goals, it must induce
employees to accept those goals and to cooperate with management. 24 According to the behaviorists, in order for management to
obtain labor cooperation in achieving its goals, management had to
be more responsive to labor and strive to remove the common lacompetitive pressures as cause for management interest in cooperation); Goulet, The Role of
Labor-ManagementCooperationin Economic Development, 29 LAB. LJ. 538, 538 (1988) (noting that
external international pressures have caused structural transformations in industry). As of
1986, the Department of Commerce had identified 341 of 450 specified categories of goods
manufactured in the United States facing direct foreign competition. Stepp, supra note 6, at
454. In addition, the United States' share of globally manufactured goods has fallen from
29% to 14%. Id.
The structure of the workforce has also changed. See Klare, supra note 16, at 40-43 (discussing structural change in work force and identifying increased presence of women and minorities, switch from manufacturing to white collar jobs, increased utilization of part-time labor,
and increased specialization as present and future trends).
Moreover, government deregulation has changed the rules of business. See Bahrami, supra
note 8, at 167 (stating that current industrial relations system cannot respond effectively to
deregulation of many industries); see also Stepp, supra note 6, at 454-56 (recognizing deregulation as contributing factor to failure of labor relations scheme); Heckscher, Crisis and Opportunityfor Labor, 38 LAB. L.J. 465 (1987) (describing deregulation as one factor which has caused
decline of unionism).
Furthermore, rapidly changing technology has necessitated a change in management styles. See Bahrami, supra note 8, at 167 (stating industrial relations system in United
States is not applicable to changing technology); Stepp, supra note 6, at 455 (recognizing new
technology as factor contributing to current labor relations turbulence).
Other factors have been identified as causes of the shift in industrial relations policy, including the political climate under the Republican administration from 1980 to the present. See
Page, The Rise, Decline, and Resurrection ofAmerican Labor Law: A CriticalAssessment of the NLRA at
Age Fifty, 36 LAB. LJ. 594, 595 (1985) (arguing that President Reagan's appointees transformed NLRB into system that unravels workers' rights).
22. See T. KOCHAN, H. KATZ, & N. MOWER, WORKER PARTICIPATION AND AMERICAN UNIONS: THREAT OR OPPORTUNITY? (1984) (analyzing case studies of worker participation in
American industry).
23. See, e.g., E. MAYO, THE POLITICAL PROBLEMS OF AN [ADAPTIVE] INDUSTRIAL CIVILIZATION (1947) (studying problems of large collectives of workers and tension between efficiency
and increasing social disintegration); E. MAYO, THE SOCIAL PROBLEMS OF AN INDUSTRIAL CIVILIZATION (1945) (stressing importance of groups whether formed by management or otherwise); E. MAYO, THE HUMAN PROBLEMS OF AN INDUSTRIAL CIVILIZATION (1933) (outlining
theory of scientific management).
24. See Bahrami, supra note 8, at 169 (describing socialization process where managers
induce employees to attain "base of shared attitudes, habits, and common values").
1990]
PARTICIPATORY MANAGEMENT SCHEMES
673
borer's feelings of alienation and powerlessness. 25 These concerns
led to the participatory management style. 26
For the most part, participatory management schemes assume no
unique form. 2 7 Whether embodied in shop floor committees, supervisory committees, or alternative channels of communication
with top management, these schemes seek to expand employee influence in management's decisions. 28 The participation plan most
frequently instituted requires that management organize groups of
workers on the shop floor to discuss production processes and the
work environment. 2 9 These groups are commonly led by a person
trained by management to facilitate group participation.3 0 There
are typically three types of groups organized by management: Quality Control Circles, Quality-of-Work Life groups, and Board of Director Participation groups. Each group tends to focus on different
areas of concern.
Quality Control Circles focus on the production processes and
the end product. 3 ' The express goal of these groups is to improve
productivity and product quality.3 2 Quality Control Circles are cus25. See Alexander, supra note 1, at 696 (indicating that cooperation results in increased
efficiency but also provides labor with more control over work environment, decreases alienation, and increases job satisfaction); Craver, The Vitality of the American Labor Movement in the
Twenty-first Century, 1983 U. ILL. L. REV. 633, 652 (claiming aesthetic environments created by
behaviorists tend to decrease worker dissatisfaction and allegiance to trade unions).
26. See Straus & Rosenstein, Workers Participation:A Critical View, 9 INDUS. REL. 197, 197
(1970) (describing American participatory schemes as developing from human relationist
models).
27. See Alexander, supra note 1, at 696 (listing types of participation schemes). Employee
participation, employee involvement, quality circles, quality-of-worklife, job enlargement, job
enrichment, and labor-management cooperation programs are all types of participatory
schemes included in this Comment. There are numerous forms of participation plans, but
most theorists have identified particular characteristics common to all, including attempts to
provide a channel of employee influence outside the collective bargaining arena. Sockell, The
Legality of Employee-ParticipationProgramsin Unionized Firms, 37 INDUS. L. REL. REV. 541, 542-43
(1984). The schemes also stress relationships between management and employees. Kohler,
supra note 1, at 503. Management, however, tends to retain ultimate decision-making authority. Id. at 503, 550.
28. See Pincus, Employee Involvement Programs as Alternative Dispute Resolution Strategies, 37
LAB. LJ. 520, 521 (1986) (defining participation programs as "long-term comprehensive
processes that... enable workers to participate more fully and effectively in problem-solving
and decision-making through structured and institutional changes.. ."); Schlossberg & Fetter, supra note 1, at 616 (explaining that past industrial relations allowed little or no labor
input in decisions, but current trends provide for worker participation). The effects of such
programs have been characterized differently. See Hatch, U.S. Labor Law and the Futureof Labor-ManagementRelations, 38 LAB. LJ. 3, 4 (1987) (noting blurring of delineation between management and employees).
29. See Kohler, supra note 1, at 505-10 (discussing common participation schemes).
30. J. HRNNAC & K. BRANNEN, THE WHAT, WHERE, & WHYS OF QUALITY CONTROL CIRCLES 68 (Lee & Shewendmen eds. 1987) (describing training process in quality control
circles).
31. W. OUCHi, THEORY Z: How AMERICAN BUSINESS CAN MEET THEJAPANESE CHALLENGE
261 (1981).
32. J. HRNNAC & K. BRANNEN, supra note 30, at 67.
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tomarily limited to a particular department or group of workers involved in a single task and only consider departmental issues. 3 3
Because the nature and goal of these programs potentially may lead
to an increase in company profits, management will be more likely
to implement unilaterally this scheme than any other.3 4
Quality-of-Work Life programs, on the other hand, focus primarily on the work environment.3 5 The main focus of these schemes is
to improve the employees' perception of the work environment and
to allow the individual workers to have a limited quantum of control
over their environment.3 6 Through this scheme, employers should
be able to generate greater employee commitment to the production process.3 7 These types of schemes, therefore, work indirectly
to improve and to increase productivity of the work place.3 8
The final form of participation involves placing a union member
or other worker representative on a company's board of directors.
Although Board of Director Participation programs are mandated
by law in most Western European countries, they are uncommon in
the United States.3 9 Domestic labor generally does not participate
in corporate strategic planning; however, an increasing number of
employers are experimenting with this method of participation. 40
Typically, companies in need of substantial concessions from labor
employ these programs. 4 1 It is also quite important to note that for
purposes of maintaining protections afforded by the National Labor
33. Kohler, supra note 1, at 506.
34. Note, ParticipatoryManagement Under Sections 2(5) and 8(a)(2) of the National Labor Relations Act, 83 MICH. L. REv. 1736, 1741 (1985) (noting rapid development of this type of participative scheme, particularly in unorganized setting).
35. Goodman, Realitiesof Improving the Quality of Working Dye, 31 LAB. L.J. 487,487 (1980)
(defining quality-of-working life programs as "an attempt to restructure multiple dimensions
of the organization and to institute a mechanism [employee participation groups] which induces and sustains change over time").
36. Id.
37. Note, Rethinking the Adversarial Model in Labor Relations: An Argument for the Repeal of
Section 8(a)(2), 96 YALE LJ. 2021, 2025 (1987) (noting increased productivity may reflect increased satisfaction and commitment to work).
38. See Goodman, supra note 35, at 489 (reviewing effects of quality-of-work life circles).
39. Note, Labor Unions in the Boardroom: An Antitrust Dilemma, 92 YALE LJ. 106, 106 (1982).
Historically, both labor and management have opposed labor representation on the corporate board of directors. Id. The first example of a union member on a board of directors
occurred less than twenty years ago at the Providence and Worcester Railroad. Union Pact with
Small Providence Road Grants Concessions Denied Penn Central,Wall St. J., Feb. 16, 1973, at 8, col.
2; see Hatch, supra note 28, at 5 (stressing that organized labor's coequal status in management
is exception rather than rule in United States).
40. See Klare, supra note 16, at 68 (noting that even in participative schemes, employees
rarely participate in strategic decision making processes).
41. See Note, supra note 39, at 107 (maintaining that union and corporation interest in
participative schemes is derived from economic difficulties); see also Craver, supra note 25, at
674 (finding "dire economic circumstances" necessary prerequisite for implementation of
participative schemes that allow employees increased control).
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675
PARTICIPATORY MANAGEMENT SCHEMES
Relations Act, the activities of an employee representative on a
board of directors is often limited to those areas which do not con42
cern the bargaining process.
It often becomes very difficult to categorize the participatory programs by function or result because they tend to be hybrids of the
principle prototypes of programs. 4 3 This in part accounts for the
mixed reaction to participative schemes by labor, management, the
courts, and the National Labor Relations Board (NLRB). In addition, the benefits of participatory schemes are often difficult to specify or to quantify precisely. 44 Nevertheless, various benefits such as
increased productivity, increased worker satisfaction, and renewed
innovation have been attributed to the use of participative management styles. 4 5 Increased opposition from labor, however, has ac42. Sharp, Codetermination:A Postmortem, 40 LAB. L.J. 323, 324-25 (1989). Some union
officials are convinced that companies simply use participative schemes to avoid or dump collective bargaining agreements. Alexander, supra note 1, at 701. Management retains basic
control because of organized labor's collective bargaining strategies. See Klare, supra note 16,
at 73-74 (finding acquiescence of labor to managerial control over most important areas of
labor-management relationship); see also Spector, Blurring the "P'operSeparation" Quality of
Workife and Contractual Agreements, 37 LAB. L.J. 857, 857 (1986) (noting that United Auto
Worker's (UAW) participative agreements do not waive parts of collective bargaining agreements). Spector also contends, however, that unions lacking the collective power of large
unions such as the UAW will be unable to separate issues that are traditional bargaining issues
from those that become issues in participative schemes. Spector, supra, at 857-58.
43. See Schlossberg & Fetter, supra note 1, at 599 (noting that hybrid schemes do not fit
easily into existing labor laws and labor management theories). The scheme may also assume
a different format if it is initiated in a professional environment. See generally Lee, Collective
BargainingandEmployee Participation:An Anomalous Interpretationof the NationalLabor Relations Act,
38 LAB. LJ. 206 (1987) and 38 LAB. L.J. 274 (1987) (arguing that professional employees
receive less protection than nonprofessional employees). The participative scheme may also
assume a different format in an organized as opposed to unorganized setting. See Kohler,
supra note 1, at 510-13 (finding differences in structure and effect of programs due to differences in bargaining power in organized and unorganized settings).
44. The argument concerning the actual link between productivity and participation is
an ongoing one. Compare Cooper, Morgan, Foley & Kaplan, ChangingEmployee Values: Deepening
Discontent?, HARV. Bus. REV., Jan.-Feb. 1979, at 117, 125 (finding direct correlation between
productivity and participation schemes) with S. PARNES, PRODUCTIVITY AND THE QUALITY OF
WORKING LIFE 4 (1978) (finding correlation but no proof of relationship between productivity
and participation schemes).
Nevertheless, accolades extolling the effectiveness of participatory schemes have been propogated. See, e.g., DEPARTMENT OF LABOR, COOPERATIVE PARTNERSHIP: A NEW BEGINNING FOR
NATIONAL STEEL CORPORATION AND THE UNITED STEEL WORKERS OF AMERICA
(1989) (discuss-
ing success of participative scheme implementation at National Steel Corp.); DEPARTMENT OF
LABOR, SAVING JOBS AND PUTTING DEMOCRACY TO WORK: LABOR-MANAGEMENT COOPERATION
AT SEYMOUR SPECIALTY WIRE, LABOR MANAGEMENT COOPERATION BRIEF, No.
11
(Sept. 1987)
(describing success of participative scheme at Seymour Specialty Wire Co.); DEPARTMENT OF
LABOR, NEW UNITED MOTOR MFG., INC., AND THE UNITED AUTOMOBILE WORKERS; PARTNERS IN
TRAINING, LABOR MANAGEMENT COOPERATION BRIEF, No. 10 (Mar. 1987) (discussing success
of participative schemes at New United Motor Manufacturing, Inc. (NUMMI)).
45. See Schlossberg & Fetter, U.S. LaborLaw and the Futureof Labor-ManagementCooperation,
37 LAB. LJ. 595, 602-03 (1986) (describing success of labor management cooperation program at General Motors plant). After the introduction of the participative scheme, absenteeism at NUMMI was reduced from 20% to 2%, previously frequent wildcat strikes were
eliminated, and formal labor grievances were reduced from 1000 to nearly none. Id. at 596.
676
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 39:667
companied the rising popularity of these management styles. 4 6
II.
RIGHTS, ENFORCEMENT, AND REMEDIES UNDER THE NATIONAL
LABOR RELATIONS ACT
The following questions are inherently important when analyzing
the NLRA: who is protected by the NLRA, which rights and activities are to receive protection, and which activities against which persons are protected? If an organization or individual does not fall
within the precise definitions that answer these questions, it or she
will not receive NLRA protection. This section, therefore, will explore the NLRA's definitions.
An individual or organization seeking to invoke the rights and
protections of the NLRA must qualify statutorily as an "employee"
or a "labor organization." 4 7 The NLRA defines an employee not
only as one employed by an employer as defined in section 2(2),48
but also one "whose work has ceased as a consequence of ... [a]
labor dispute or because of any unfair labor practice ....
"49 This
definition expresses the congressional policy of protecting the right
to strike by extending the NLRA's protections and rights to those
who are out on strike or have been discharged for organizational
activity. 5 0
Section 7 of the NLRA embodies the basic rights conferred by the
NLRA. 5 ' This section is a simple statement of congressional policy
46. See M. PARKER & J. SLAUGHTER, CHOOSING SIDES: UNIONS AND THE TEAM CONCEPT
(1988) (expressing distress over advent of participative schemes and providing case studies of
adverse side-effects of such schemes). Disagreement over the union stance regarding such
programs has caused dissension within the United Auto Workers leadership. See Current Developments, 180 Daily Lab. Rptr. (BNA) at A-13 (June 26, 1989) (reporting dissident UAW
faction "New Directions" efforts to gain control of union and reverse trend toward acceptance
of participation schemes). The New Directions faction of the UAW plans to concentrate its
efforts to end participative schemes in manufacturing plants during the 1990 auto industry
negotiations between the UAW and the Big Three automobile manufacturers. Id,
47. See National Labor Relations Act § 2(2) & (3), 29 U.S.C. § 152(2) & (3) (1982) (defining "employer" and "employee" for purposes of NLRA). Both of these qualifications are
reviewed extensively in this Comment. See infra notes 79-119 and accompanying text (discussing legislative history and judicial interpretation of § 2(3) and its application to participative
schemes); infra notes 125-165 and accompanying text (discussing legislative history and judicial interpretation of § 2(5) and its application to participative schemes).
48. Section 2(2) of the NLRA defines an employer to include those acting as an agent of
an employer as well as the actual employer. National Labor Relations Act § 2(2), 29 U.S.C.
§ 152(2) (1982).
49. National Labor Relations Act § 2(3), 29 U.S.C. § 152(3) (1982).
50. See 79 CONG. REC. 7675 (1935) (statement of Sen. Wagner) (explaining that protection of striking workers in NLRA is analogous to protection provided to workers under Norris
Anti-Injunction and Railway Act). It should also be noted that action against or interference
with labor, prohibited by section 8(a)(2), requires the threshold finding of a section 2(5) labor
organization. See infra notes 125-38 and accompanying text (discussing threshold finding of
§ 2(5) labor organization necessary to find domination).
51. National Labor Relations Act § 7, 29 U.S.C § 157 (1982).
1990]
PARTICIPATORY MANAGEMENT SCHEMES
favoring the unfettered right of employees to organize for the purpose of collective bargaining.5 2 Specifically, section 7 confers three
sets of rights: first, employees have "the right to self-organization,
to form, join, or assist labor organizations"; 5 3 second, employees
are granted the right "to bargain collectively through representatives of their own choosing"; 5 4 and third, employees have the right
"to engage in other concerted activities for the purpose of collective
bargaining or other mutual aid or protection. '5 5 Each of these
rights is designed to facilitate collective bargaining by protecting
employees from employers who interfere with labor organizing
56
efforts.
Congress designated five employer activities as "unfair labor
practices" in order to protect employees' right to organize and to
join collective bargaining groups. 5 7 First, employers are forbidden
from interfering with, restraining, or otherwise coercing employees
who are exercising their rights to organize. 58 Second, employers
are prohibited from dominating or interfering with either the "formation or administration of any labor organization. ' 59 Third, un52. Id.
53. Id.
54. lId
55. Id. This portion of section 7 protects rights other than those associated with labor
organizations. See, e.g., NLRB v. City Disposal Sys., Inc., 465 U.S. 822, 830 (1984) (holding
employee refusal to drive unsafe vehicle absent organizational support protected activity
under § 7); NLRB v. Washington Aluminum Co., 370 U.S. 9, 15 (1962) (declaring discharge
of employees who spontaneously walked out due to substandard working conditions protected activity under § 7 although no organizational activity was ongoing or organization in
place); NLRB v. Pepsi-Cola Bottling Co., 449 F.2d 824, 829-30 (5th Cir. 1971) (finding strike
unrelated to union activity protected under § 7), cert. denied, 407 U.S. 910 (1972).
56. See 79 CONG. REC. 9699 (1935) (statement of Rep. Marcantonio) (noting that to argue against § 7 is to argue against collective bargaining); see National Labor Relations Act § 1,
29 U.S.C. § 151 (1982) (recognizing that "[t]he inequality of bargaining power between employees who do not possess full freedom of association or actual liberty of contract, and employers who are organized in the corporate or other forms of ownership association . . .").
Congress believed that this inequality led to interference with commerce, recurrent depressions, and lower wages in the domestic economy. 79 CONG. REC. 9714 (1935) (statement of
Rep. Truax). The cure, Congress believed, was to provide legal protection for employees'
right to organize and bargain collectively. Id. When this Comment refers to the protection or
loss of employee rights, it is referring to these section 7 rights.
57. National Labor Relations Act § 2(8), 29 U.S.C. § 152(8) (1982).
58. National Labor Relations Act § 8(a)(1), 29 U.S.C. § 158(a)(1) (1982). Although
phrased broadly, the section has been narrowed over time, and the courts generally require
the employee activity to meet four general criteria in order to be protected. Shelly & Anderson Furniture Mfg. Co. v. NLRB, 497 F.2d 1200, 1202-03 (9th Cir. 1974). The employee
activity must be legal, involve a "work-related grievance," further a common interest, and the
remedy sought must result from the activity. Id.
59. National Labor Relations Act § 8(a)(2), 29 U.S.C. § 158(a)(2) (1982). Preventing
employers from this type of activity is absolutely necessary if the purposes of the NLRA are to
be achieved. It is also one of the most important provisions of the NLRA when analyzing the
effects that participating schemes have on employee organizational rights. This Comment,
therefore, examines this provision in detail. See infra notes 179-224 and accompanying text
(discussing provision).
678
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[Vol. 39:667
fair labor practices proscribe employers from engaging in activities
that discourage or encourage membership in a labor organization
"by discriminating in regard to hire or tenure of employment or any
term or condition of employment." 60 Fourth, employers are prohibited from retaliating against employees who seek to enforce the
protections of the NLRA. 6 1 Finally, employers are prohibited from
bargaining with any group other than the appropriate representa62
tives designated by the employees.
To ensure enforcement of the NLRA, Congress established the
National Labor Relations Board. 63 The basic functions of the NLRB
are to prevent unfair labor practices, to provide remedies for those
that do occur, and to determine which organizations shall be exclusive bargaining units. 64 Under the latter function, the NLRB must
evaluate petitions for certification filed by employee organizations
and determine if that organization is the proper unit for the purpose
of collective bargaining. 65 If the NLRB finds a proper unit, it must
authorize an election and certify the results. 6 6 Through this process, a labor organization with which an employer must bargain is
created.
Section 10 of the NLRA authorizes the NLRB function of preventing unfair labor practices and providing remedies for those that do
occur. 67 The NLRB is authorized to conduct inquiries and hearings
and to issue rulings concerning various charges filed by employers,
employees, or labor organizations. 68 The NLRB is also authorized
60. National Labor Relations Act § 8(a)(3), 29 U.S.C. § 158(a)(3) (1982). This provision
expresses congressional intent to allow employees to form or not to form unions of their own
accord and to protect against employer manipulation of union organizational activity by
favoring certain unions through superior collective bargaining agreements. See H.R. Rei,. No.
1147, 74th Cong., 1st Sess., at 21 (1935) (noting § 8(a)(3) operates regardless of closed shop
or open shop agreements and prevents employer favoritism).
61. National Labor Relations Act § 8(a)(4), 29 U.S.C. § 158(a)(4) (1982). For example,
this section prohibits employers from discriminating against or discharging employees for
bringing charges against the employer. Id.
62. National Labor Relations Act § 8(a)(5), 29 U.S.C. § 158(a)(5) (1982). Without this
section, employers could avoid unionism simply by refusing to bargain with the employee
organization. See 29 U.S.C. § 158(d) (1982) (outlining duties and obligations of employers,
employees, and unions to bargain collectively). Congress recognized certain failings of this
provision, and, in 1947, amended the NLRA to require employers to bargain "in good faith
with respect to wages, hours, and other terms and conditions of employment ..... Id.
63. National Labor Relations Act § 3, 29 U.S.C. § 153 (1982).
64. National Labor Relations Act § 10(a), 29 U.S.C. § 160(a) (1982); see L. MODJESKA,
NLRB PRACTICE 7 (1983) (noting functions are adjudicative which enforce and protect public
rights). The NLRB's power to determine issues involving employee representation, in the
context of this Comment, is concerned with the NLRA's guarantee of exclusive
representation.
65. National Labor Relations Act § 9(a)-(c), 29 U.S.C. § 159(a)-(c) (1982).
66. National Labor Relations Act § 9(c)(1), 29 U.S.C. § 159(c)(1) (1982).
67. National Labor Relations Act § 10, 29 U.S.C. § 160 (1982).
68. National Labor Relations Act §§ 10(b) & 11, 29 U.S.C. §§ 160(b), 161 (1982); see
1990]
PARTICIPATORY MANAGEMENT SCHEMES
679
to pursue whatever remedial action is necessary to cure the unfair
69
labor practice.
When Congress created the NLRB, it granted the Board broad
remedial powers. 70 Courts have subsequently acknowledged that
the NLRB possesses the expertise to effectuate congressional policy;
therefore, courts are reluctant to review or overturn NLRB rulings
and orders. 7 ' The Supreme Court has emphasized the breadth of
the NLRB's power when it declared that the NLRB has the "freedom ... to attain just results .... -72 The proposed framework of
analysis in this Comment relies on this broad remedial power, particularly because the new issues raised by participative schemes require innovative remedies in order to ensure that management
73
techniques are consistent with the policies underlying the NLRA.
NLRB v. Indiana & Michigan Elec. Co., 318 U.S. 9, 18 (1943) (stating that NLRB jurisdiction
is invoked when unfair labor practice charge is filed). Unfair labor practices filed by employees against employers are only those delineated in section 8 of the NLRA. See supra notes 5762 and accompanying text (describing unfair labor practices under § 8).
69. National Labor Relations Act § 10(c), 29 U.S.C. § 160(c) (1982). The NLRB is also
empowered to reinstate, with back pay, employees unfairly discharged by the employer. Id.
In addition, Congress not only provided the courts with the power to review all NLRB orders
and decisions, but also granted the right to seek enforcement in the courts. National Labor
Relations Act § 10(e)-(j), 29 U.S.C. § 160(e)-(j) (1982).
70. See National Labor Relations Act § 10(c), 29 U.S.C. § 160(c) (1982) (granting NLRB
authority to "take such affirmative action" needed to remedy unfair labor practice); see also
Phelps Dodge Corp. v. NLRB, 313 U.S. 177, 188-90 (1941) (recognizing NLRB's broad remedial powers and affirming power of NLRB to reinstate employees discharged and compensate
those who were denied employment due to union affiliation).
71. Beth Israel Hosp. v. NLRB, 437 U.S. 483, 501 (1978). The Supreme Court noted
that:
The judicial role is narrow: The rule which the Board [NLRB] adopts is judicially
reviewable for consistency with the Act, and for rationality, but if it satisfies those
criteria, the Board's application of the rule, if supported by substantial evidence on
the record as a whole, must be enforced.
Id. With the NLRB's unguided power, courts have upheld NLRB orders requiring reinstatement of discharged employees. Phelps Dodge Corp., 313 U.S. at 188. Courts have also required
the disestablishment of dominated unions. See, e.g., NLRB v. Tappan Stove Co., 174 F.2d
1007 (6th Cir. 1949) (upholding order disestablishing dominated union and requiring public
statement of employer's intent to cease bargaining with dominated unions); Kansas City
Power & Light Co., 1 I1 F.2d 340 (8th Cir. 1940) (discussing same); Continental Oil Co. v.
NLRB, 113 F.2d 473 (10th Cir. 1940) (ordering disestablishment of dominated union and
prohibiting employer from taking part in formation of new union). Moreover, courts have
issued cease and desist orders to proscribe certain activities by the employer. See NLRB v.
Hunter Outdoor Prods., Inc., 440 F.2d 876 (1st Cir. 1971), enforcing, 176 N.L.R.B. 449 (1969)
(ordering employer to cease and desist bargaining with dominated union). Furthermore,
courts have issued non-majority bargaining orders. NLRB v. Gissell Packing Co., 395 U.S.
575 (1969).
72. Phelps Dodge Corp., 313 U.S. at 188. The Court noted that Congress could not "define
the whole gamut of remedies to effectuate these policies [the policies embodied in the Act] in
an infinite variety of specific situations." Id. at 194.
73. See infra notes 329-34 and accompanying text (summarizing various recommendations required to protect employees involved in participative schemes).
680
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III.
[Vol. 39:667
LEGAL ASPECTS OF PARTICIPATION SCHEMES
Since the enactment of the NLRA, scholars have debated whether
participation schemes are an acceptable form of industrial relations
under the United States statutory scheme. 74 For example, some
commentators have argued that Congress, in enacting the NLRA,
created a strict adversarial industrial relations system, 75 and that in
order to remain consistent with legislative intent, any form of cooperation outside the collective bargaining relationship is illegal. 76
Others have stated that the NLRA merely requires that labor and
management have the opportunity to determine the rules to govern
their relationship without eclipsing certain legal rights granted by
77
Congress.
The following section discusses each applicable piece of legislation and the judicial interpretation relating to participatory
schemes. This discussion illustrates that the resulting legal doctrine
has been both confusing and enlightening. 78 The analysis that follows each section argues that the developing jurisprudence has abrogated employee rights granted by Congress, through the NLRA.
Each section concludes with a framework of analysis intended to
ameliorate these deficiencies, to preserve the integrity of the NLRA,
and to foster participative schemes absent the threats which they
pose to employees.
74. See supra note 1 (identifying commentators who prefer increased legislation and those
who prefer decreased government intervention).
75. See Deitsch, ParticipatoryManagement and Labor Law: A Collision Course?, 38 LAB, LJ.
786, 786 (1987) (noting legal structure reinforces and sustains conflict-based system of labor
relations); Sharp, supra note 42, at 334 (describing current industrial relations system as one
that separates power to prevent concentration).
76. See Sockell, supra note 27, at 553 (concluding that congressional intent was to bring
all participative plans under purview of NLRA). Even those who agree that participation
plans are beneficial admit that they violate the NLRA. See Note, supra note 37, at 2024 n.17
(characterizing participation schemes as clearly illegal in non-union setting); Murrmann, supra
note 3, at 303-04 (finding Scanlon plan type participation scheme as falling within § 2(5) functional requirements and clearly in violation of NLRA).
Other commentators believe that participation plans are not illegal. See DEPT. OF LABOR,
BUREAU OF LABOR-MANAGEMENT RELATIONS AND COOPERATIVE PROGRAMS, U.S. LABOR LAW
AND THE FUTURE OF LABOR-MANAGEMENT COOPERATION 13 (Second Interim Report) (Oct.
1987) [hereinafter LAWS PROJECT 2D INTERIM REPORT] (comment of Mark Rigg, Southland
Corp.) (finding successful history of cooperative programs under NLRA conclusive evidence
of legality); id. at 16 (comment ofJ. Bruce Johnston, Executive Vice-President, USX Corp.)
(positing that no legal impediment exists to cooperation programs of any kind); see also Hatch,
supra note 28, at 10 (finding no support for thesis that participative schemes may be illegal).
77. See Note, supra note 34, at 1758-65 (finding participatory management schemes
within legislative history).
78. See Kohler, supra note 1, at 501 (noting debate has endured for 100 years). See generally, Alexander, Worker Participationand the Law Once Again: Overview and Evaluation, 39 LAB. LJ.
696 (1988) (discussing split in courts).
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PARTICIPATORY MANAGEMENT SCHEMES
A.
1.
681
Section 2(3) of the NLRA: Who Is Protected?
Legislative history
Section 2(3) of the National Labor Relations Act defines the
groups of individuals who qualify for protection under the Act. 79
Originally, the NLRA was intended to protect as many employees as
possible.8 0 Initially, only agricultural workers and domestic servants
were excluded. 8 1 In 1947, however, the Taft-Hartley amendments
broadened the exclusion to remove supervisors, subcontractors,
82
and others from the NLRA's protections.
The "supervisory exclusion" which developed pursuant to the
Taft-Hartley amendments is of particular interest in the context of
participatory schemes. By enacting these amendments, Congress
explicitly overturned PackardMotor Car Co. v. NLRB, 83 in which the
Supreme Court held that the NLRA made no distinction between
79. Wagner Act, ch. 372, § 2(3), 49 Stat. 449,450 (1935). At the time of passage, section
2(3) of the Wagner Act provided:
The term "employee" shall include any employee, and shall not be limited to the
employees of any particular employer ... and shall include any individual whose
work has ceased as a consequence of, or in connection with, any current labor dispute or because of any unfair labor practice, and who has not obtained any other
regular and substantially equivalent employment, but shall not include any individual
employed as an agricultural laborer, or in the domestic service of any family or person at his home, or any individual employed by his parent or spouse.
Id.
80. See Lee, Collective Bargainingand Employee Participation:An Anomalous Interpretationof the
National Labor Relations Act, 38 LAB. LJ. 274, 274 (discussing broad sweep of § 2(3)).
81. See Wagner Act, ch. 372, § 2(3), 49 Stat. 449 (1935).
82. Labor-Management Relations Act, 1947, ch. 120, 61 Stat. 136 (1947) (codified as
amended at 29 U.S.C. § 152(3) (1982)). The legislative history of the NLRA indicates that
employees who were involved in primitive forms of participatory schemes were to retain the
protection of the NLRA. See infra notes 125-38 and accompanying text (discussing legislative
history concerning employee participative schemes). Primitive forms of participation plans
include: company unions, grievance committees, and discipline committees. One of the earliest examples of company established participative schemes was Robert Owen's New Lanmark,
a company town where employees were able to control some aspects of their environment. R.
HEILBRONER, THE WORLDLY PHILOSOPHERS: THE LIVES, TIMES AND IDEAS OF THE GREAT EcoNOMIC THINKERS 107-14 (1986). This "utopian socialist" vision of the workplace lasted from
1815 until 1824 when Owen attempted to establish the same scheme in Posey County, Indiana, and failed. Id.
83. 330 U.S. 485 (1947). In Packard, over 1100 supervisors petitioned the NLRB for
certification as a unit for the purposes of collective bargaining. Packard Motor Car Co. v.
NLRB, 330 U.S. 485, 487-88 (1947). Although the foremen's union was not affiliated with the
rank-and-file union, the NLRB approved the unit and certified the union as the proper bargaining unit. Packard Motor Car Co., 61 N.L.R.B. 4, 26 (1945). When the employer refused
to bargain with the foremen, the union filed unfair labor practice charges. Packard, 330 U.S. at
488. The Board issued a cease-and-desist order, which the employer appealed. Id. The
Court approved the NLRB position that the NLRA should be extended to cover those employees who had been labelled as supervisors. Id. at 491. The Court concluded that even
supervisors were entitled to act in a concerted manner to improve wages and working conditions. Id. at 489-90.
Congress discussed Packard Motor Car before adopting the supervisory exclusion. See S.
REP. No. 105, 80th Cong., 1st Sess. 4 (1947), rqinted in 1 NLRB, LEGISLATIVE HISTORY OF
LABOR MANAGEMENT RELATIONS Acr, 1947, at 407, 410 (1959) (recognizing PackardMotor Car
THE AMERICAN UNIVERSITY LAW
REVIEW [Vol. 39:667
the status of a supervisor and an employee for the purposes of organizing and bargaining collectively.8 4 As a result of the amendments, supervisors, who were defined by reference to the duties they
performed rather than by their title, 8 5 were no longer able to organ86
ize into protected bargaining units under the NLRA.
Congress' reasons for excluding supervisors from the NLRA were
threefold. First, Congress wanted to ensure that employees' supervisors, who might also be union members, would not adversely influence or inhibit employee organizational activities.8 7 Second,
Congress did not want to place supervisors in a position that forced
them to divide their loyalty between the employer and the labor organization.8 8 Finally, Congress sought to prevent injury to the competitive production of goods which might result from unionization
of supervisors.8 9 Nevertheless, this supervisory exclusion was qualified in section 14(a) by allowing supervisors to organize at the employer's discretion.9 0
2. Judicialinterpretation
Courts and the NLRB have interpreted the supervisory exclusion
broadly. 91 The employee's theoretical duties, rather than the title
v. NLRB, 330 U.S. 485 (1947) and finding Court's inclusion of supervisors so as to be covered
by NLRA as interpretation of Act which had to be legislatively overturned).
84. PackardMotor Car, 330 U.S. at 497. The original section 2(3) made no mention of
supervisors. Wagner Act, ch. 372, § 2(3), 49 Stat. 449, 450 (1935).
85. Section 2(11) of the Act defines a supervisor as:
(an] individual having authority, in the interest of the employer, to hire, transfer,
[..
suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to
recommend such action, if in connection with the foregoing the exercise of such
authority is not of a merely routine or clerical nature, but requires the use of independent judgment.
National Labor Relations Act § 2(11), 29 U.S.C. § 152(11) (1982).
86. GORMAN, LABOR Law - BASIC TEXT 36 (1976).
87. Cox, BOK & GORMAN, LABOR LAw 101 (1986).
88. Id.
89. See H.R. REP. No. 245, 80th Cong., 1st Sess. 13-17 (1947), reprintedin 1 NLRB, LEGISLATIVE HISTORY OF THE LABOR MANAGEMENT RELATIONS Acr, 1947, at 292, 304-08 (1959)
(finding unionization of supervisors not conducive to competitive production of goods at
competitive prices).
90. National Labor Relations Act § 14(a), 29 U.S.C. § 164(a) (1982). Section 14(a) of
the NLRA states:
Nothing herein shall prohibit any individual employed as a supervisor from becoming or remaining a member of a labor organization, but no employer subject to this
Act shall be compelled to deem individuals defined herein as supervisors as employees for the purpose of any law, either national or local, relating to collective
bargaining.
Id. The ability of supervisors to organize has not been limited, but the employer's discretion
gives legitimacy to any such organization. GORMAN, supra note 86, at 35.
91. See Beasley v. Food Fair of North Carolina, Inc., 416 U.S. 653, 662 (1974) (allowing
no state law to override NLRA's supervisory exclusion). See also International Union, United
Automobile Aircraft and Agricultural Implement Workers of America (UAW-CIO) v. Russell,
1990]
PARTICIPATORY MANAGEMENT SCHEMES
683
or actual tasks performed, determine who falls under the supervisory exclusion. 9 2 For example, even if an employee has been engaged in normal production tasks or other common duties, the
employee may nonetheless qualify as a supervisor simply by being
authorized to effectuate management policies, 9 3 or by performing
duties identified by section 2(11) of the NLRA. 9 4
In addition to the NLRA's statutory exclusions, courts and the
NLRB have created two exclusions for managerial and confidential
employees. 95 Managerial employees are those who exercise independent judgment on behalf of management. 9 6 The NLRB has
never protected these employees. 97 The Supreme Court has
agreed, and in NLRB v. Bell Aerospace Company Division of Textron,98
356 U.S. 634, 644 (1958) (stating that no state may pass laws restricting rights guaranteed by
NLRA). But see Lee, supra note 80, at 275 (arguing that NLRB and courts have yet to define
exemptions strictly).
92. See Yamada Transfer, 115 N.L.R.B. 1330, 1332-33 (1956) (holding that employee
was supervisor although authority never used); United States Gypsum Co., 93 N.L.R.B. 91,
92, n.8 (1951) (reaching same conclusion).
93. American Cable & Radio Corp., 121 N.L.R.B. 258, 260 (1958) (finding power to
recommend discharge of employees sufficient to qualify as supervisor although considerable
time spent on routine duties).
94. See Ohio Power Co. v. NLRB, 176 F.2d 385, 388 (6th Cir. 1949) (defining employer
as supervisor under § 2(11) where duty was only inherent in position and rarely utilized), cert.
denied, 338 U.S. 899 (1949); NLRB v. Edward G. Budd Mfg. Co., 169 F.2d 571, 575 (6th Cir.
1948) (holding that although foremen are bound by their supervisors, they possess discretion
to direct those below), cert. denied, 335 U.S. 908 (1948); see also supra note 85 (listing supervisory duties ofsection 2(11)). The specific test for identifying a supervisor was provided by the
Fifth Circuit in NLRB v. Security Guard Service, Inc., 384 F.2d 143, 147 (5th Cir. 1967). In
this case, the court stated that in order to be found a supervisor, an employee must "1) have
authority 2) to use professional judgement 3) in performing such supervisory functions 4) in
the interest of management." Id. at 147. The court held these requirements conjunctive. Id.
The Sixth Circuit, however, has stated that the duties defined in section 2(11) are disjunctive;
if any of these section 2(11) duties or powers are found inherent in the employee's position,
the individual will be considered a supervisor under the NLRA. Edward G. Budd Mfg., 169
F.2d at 576.
95. See Lee, supra note 80, at 275-76 (discussing development of managerial exclusion);
Cox, BoK & GORMAN, supra note 87, at 102 (noting supervisory exclusion was NLRB created).
96. See NLRB v. Bell Aerospace Co., Div. of Textron, 416 U.S. 264, 286 (1974) (approving NLRB's definition of managerial employees as those who "formulate and effectuate management policies by expressing and making operative the decisions of their employer").
Managers have been excluded largely due to a perceived conflict of interest between union
members and managers. See Nowak, Worker Participationand its PotentialApplication in the United
States, 35 LAB. L.J. 148, 164 (1984) (arguing that managerial loyalty is necessary for economic
efficiency). The managerial exclusion is usually an issue when professional employees attempt to organize. Lee, supra note 43, at 208. Lee has argued that the NLRA affords professional employees less protection when a participation scheme coexists with a professional
union. Lee, supra note 80, at 275.
97. See Lee, supra note 80, at 277 (finding managerial exclusion as early as 1946); see also
Ford Motor Co., 66 N.L.R.B. 1317, 1322 (1946) (excluding executives from NLRA due to
managerial nature of position).
98. 416 U.S. 267 (1974). In Bell Aerospace, a group of buyers in the procurement and
purchasing department, who retained limited discretion when acting on behalf of the company, were certified as a bargaining unit by the NLRB. NLRB v. Bell Aerospace Co., Div. of
Textron, 190 N.L.R.B 431 (1971). The employer refused to bargain with the unit, claiming
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[Vol. 39:667
the Court stated that although the NLRA did not explicitly exclude
managerial employees, it did implicitly exclude them.9 9 Confidential employees-those privy to confidential information concerning
relations between a firm and its employees-have also been excluded from the NLRA's protections.1 00 The courts and the NLRB
have narrowed this exception, however, by scrutinizing the functions performed by the employee as well as the authority concerning labor relations that might be inherent in the employee's
position.101
Application of both exclusions affect participatory schemes by distinguishing the classes of employees who may bargain under the
NLRA.1O2 The application of these exclusions to those involved in
participative schemes has broadened. For example, in 1980, the
Supreme Court in NLRB v. Yeshiva University10 3 overturned an
NLRB decision that afforded University professors involved in a
faculty committee which operated in a manner analogous to a participative scheme protection under section 2(12) of the NLRA. 10 4
The Court concluded that the employee organization was excluded
from the NLRA's coverage because it constituted a managerial comthe employees were managerial in nature, and appealed the certification order. BellAerospace
Co., 416 U.S. at 272.
99. Bell Aerospace, 416 U.S. at 274-84 (discussing legislative history of Taft-Hartley
amendments). On remand, the NLRB defined managers as "those who formulate and effectuate management policies by expressing and making operative the decisions of their employer,
and those who have discretion in the performance of their jobs independent of their employer's established policy.. " BellAerospace, 219 N.L.R.B. at 385 (citing Eastern Camera &
Photo Corp., 140 N.L.R.B. 569, 571 (1962)).
100. See BellAerospace, 416 U.S. at 283-84 (including confidential employees with managers
as excluded from NLRA); cf. Westinghouse Elec. Corp. v. NLRB, 398 F.2d 669, 671-72 (6th
Cir. 1968) (upholding NLRB decision not to classify executive secretary with access to labor
relations information as confidential employee).
101. See GORMAN, supra note 86, at 39; see also ITT Grinnel Corp., 212 N.L.R.B. 734, 734
(1974) (concluding that secretary to manager of manufacturing engineering, who disputedly
formulated employer's labor policy was not confidential); Swift & Co., 129 N.L.R.B. 1391,
1393 (1961) (declining to define employee with access to confidential material unrelated to
labor relations as confidential).
102. See supra notes 91-101 and accompanying text (discussingjudicial and NLRB creation
and treatment of exceptions).
103. 444 U.S. 672 (1980).
104. NLRB v. Yeshiva Univ., 444 U.S. 672, 691 (1980). The NLRB found that the faculty
was not managerial because: (1) faculty authority is collective; (2) authority is exercised in the
faculty's own interest and not in the interest of the university; and (3) final authority rests with
the board of trustees. Yeshiva Univ., 221 N.L.R.B. at 1054 (1975). This analysis had been
used by the NLRB in every higher education case prior to Yeshiva. Lee, supra note 80, at 281.
Section 2(12) of the NLRA defines professional employees. National Labor Relations Act
§ 2(12), 29 U.S.C. § 152(12) (1982). It includes those employees who are engaged in work
characterized as intellectual, involving discretion and judgment, and other factors. Id. These
characteristics are often associated with managerial employees. See U.S. DEP'T OF LABOR, BuREAU OF LABOR MANAGEMENT RELATIONS AND COOPERATIVE PROGRAMS, VIEWS FROM THE COLLECTIVE BARGAINING FORUM: NEW DIRECTIONS OF LABOR AND MANAGEMENT 3-4 (1988) (noting
management's role and discretion).
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PARTICIPATORY MANAGEMENT SCHEMES
685
mittee.' 0 5 The Court noted that the interests of the faculty could
not be separated from those of the institution; therefore, the committee was not an appropriate bargaining unit.106
3.
Impact on participativeschemes
The Yeshiva decision has received substantial analysis and criti-
cism. 10 7 The Court's holding, which excluded from NLRA protec-
tion those employees whose interests are in concert with the
employer's, logically can be extended to those employees who participate in cooperative schemes.108 An employee's status under the
NLRA may change depending upon the addition of responsibilities
when joining a participative scheme.10 9 For example, an employee
given the power to act unilaterally on behalf of management while
functioning in the context of a participative scheme may be classified as managerial or supervisory for the purpose of the NLRA.' 1 0
In fact, cases following Yeshiva have used this reasoning to exclude
105. Yeshiva, 444 U.S. at 686. Justice Powell noted that the faculty made decisions relating
to the "product" which the University placed on the market. Id. If this test is extended to the
industrial setting or any other work-place, participative committees which have genuine input
into a product may also be managerial in function. Deitsch, supra note 75, at 789-90.
106. Yeshiva, 444 U.S. at 688.
107. See, e.g., Lee, supra note 80, at 275-86 (analyzing Yeshiva and discussing its impact on
professional unions); Deitsch, supra note 75, at 289-90 (discussing effects of Yeshiva decision
on participatory management); Address by William E. Brock, Sixteenth Constitutional Convention, AFL-CIO, Anaheim, Cal. (Oct. 30, 1985), at 13-15 (analyzing Yeshiva decision).
108. See Alexander, supra note 1, at 698 (concluding that Yeshiva laid legal foundation for
stripping employees of NLRA's protections concerning free organization and right of union
representation); Deitsch, supra note 75, at 789-90 (observing expansion of or adherence to
Yeshiva doctrine may remove employees who participate in management from NLRA's
protections).
109. See Deitsch, supra note 75, at 789-90 (predicting that if Supreme Court expands
Yeshiva doctrine, employees in cooperative schemes may be declared managerial).
110. The distinction between those employees who exercise routine discretion that may
affect company policy and those who exercise discretion in a managerial capacity is not well
defined. See FHP, Inc., 274 N.L.R.B. 1141, 1143 (1985) (finding physicians and dentists with
sufficient influence in facility to be considered managerial); Sutter Community Hosps., 227
N.L.R.B. 181, 182-87 (1976) (discussing distinctions between health care professionals). But
see Loretto Heights College v. NLRB, 742 F.2d 1245, 1255 (10th Cir. 1984) (holding faculty
members not managerial given lack of control over college divisions). Participative organizations that lack authority may encounter other problems. See NLRB v. Newport News Shipbuilding & Dry Dock Co., 308 U.S. 241, 249 (1939) (noting management domination of
participative scheme due to lack of authority). The NLRB has taken note of those participative organizations that have unilateral authority. See Sparks Nugget, Inc., 230 N.L.R.B. 275,
276 (1977) (holding that employee grievance committee with binding adjudicatory authority
was not labor organization); Mercy Memorial Hosp., 231 N.L.R.B. 1108, 1121 (1977) (noting
that near final authority of grievances committee disqualified it as labor organization). On the
other hand, courts have been much more receptive to participation schemes in which employee committees are granted some form of freedom from unilateral management review.
See Chicago Rawhide & Mfg. Co. v. NLRB, 221 F.2d 165, 168 (7th Cir. 1955) (finding "actual
domination," not potential domination, necessary to constitute violation of NLRA); see also
Alexander, supra note 1, at 699 (finding participation plans possessing full delegation of management responsibility not "dealing with" employers). But see Kohler, supra note 1, at 540
(arguing that participative groups theoretically have no members which exercise supervisory
686
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[Vol. 39:667
employees from protection."'
Furthermore, employee representation on the board of directors
will likely fall under the Yeshiva exclusion. 1 2 A board's job is to
establish company policy and direct its strategic course. 1 13 By participating on the board of directors, the employee representative
would fall within the managerial exclusion. 114 Nevertheless, some
employee representatives who have had access to labor relations information have been allowed to retain coverage under the NLRA. 115
Thus, if the employee representative does not take part in the company's decision-making on collective bargaining subjects, the employee may be able to avoid exclusion. 116
Courts and the NLRB have also failed to define specifically the
three classes of excluded employees-supervisory, managerial, and
confidential. 1 7 Nevertheless, NLRB decisions concluding that employees who perform routine duties and who lack authority over
subordinates do not qualify as supervisors may be helpful in determining whether a person is protected. 118 This precedent may reauthority); see also infra note 118 (discussing autonomous participative schemes); infra notes
142-43 and accompanying text (discussing definition of "dealing with").
111. See Lee, supra note 80, at 282-83 (describing cases where employees are excluded
from coverage because they act in concert with employer's interests).
112. The Court used an "industrial analogy" in the Yeshiva decision finding that the
faculty members determined "the product to be produced, the terms upon which it will be
offered, and the customers who will be served." NLRB v. Yeshiva Univ., 444 U.S. 672, 686
(1980). These basic strategic decisions routinely are made by company boards of directors.
See generallyJ. PEARCE II & R. ROBINSON,JR., STRATEGIC MANAGEMENT: STRATEGY FORMULATION
AND IMPLEMENTATION 3-68 (1988) (describing strategic management and function of corpo-
rate directors).
113. SeeJ. PEARCE II & R. ROBINSON, JR., supra note 112, at 3-68 (describing activities of
strategic planners). The board of directors of a corporation can also dismiss top management
if board policies are not effectuated properly. See, e.g., DEL. CODE ANN. tit. 8 § 142(b) (1983)
(noting that officers of corporation serve at discretion of board of directors). Practical authority, though, actually may be limited. See M.
EISENBERG,
THE STRUCTURE OF THE CORPORATION
139-48 (1976) (noting management may have more sway over directors than directors have
over management).
114. Yeshiva, 444 U.S. at 686 (stating that "[t]he controlling consideration in this case is
that the [employees] ... exercise authority which in any other context would be managerial").
115. See Westinghouse Elec. Corp. v. NLRB, 398 F.2d 669, 671 (6th Cir. 1968) (declining
to find employee with access to confidential labor relations material supervisory).
116. Id.
117. See Lee, supra note 80, at 275 (noting failure of NLRB and courts to develop model to
define managerial or supervisory authority). The NLRB has had trouble with the managerial
exclusion because it is not statutorily based. Id.
118. See, e.g., Advanced Mining Group, 260 N.L.R.B. 486, 507 (1982) (finding employee
without authority over subordinates not supervisor); Washington Post Co., 254 N.L.R.B. 168,
171-222 (1981) (reviewing dozens of positions within newspaper and finding most non-supervisory); Teamsters Local Union No. 574, 259 N.L.R.B. 344, 349 (1981) (finding employee's
routine direction of other employees not supervisory); Fisher Foods, Inc., 245 N.L.R.B. 685,
687-88 (1979) (finding employee without subordinates not supervisor); Washington Post Co.,
229 N.L.R.B. 490, 491-96 (1977) (finding same).
Under the managerial exclusion, if an employee's power is illusory, the employee will not
be considered a manager for the purposes of the NLRA. See, e.g., Maccabees Mutual Life Ins.
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PARTICIPATORY MANAGEMENT SCHEMES
687
strict the Yeshiva doctrine's extension to employees involved in
participative schemes if the employee's participation tasks are considered routine and are limited in discretion. 119 By increasing the
breadth of the exclusions, however, the courts and the NLRB have
excluded those employees who Congress otherwise intended to protect. Thus, by narrowing the scope of categories of employees the
NLRA protects, the courts and the NLRB have reduced the collective strength of employee organizations in direct contravention to
the explicit purpose of the Act.
4.
Recommendations
Congress has introduced legislation that would narrowly reverse
the effects of the Yeshiva decision as applied to faculty members. 120
By including only faculty members in the bill, however, this proposed legislation fails to address the broader problems of excluding
employees involved in participative schemes from protection under
the NLRA. Legislation is needed that will protect employees who
accept increased responsibility through involvement in participative
schemes from relinquishing their collective bargaining rights.
To accomplish this, Congress must overturn the Yeshiva doctrine.1 21 If participative programs are to become an integral part of
our labor relations system, the risks allocated between labor and
management arising from implementation of participation schemes
must be equalized. 2 2 Congress must reinforce the rights and protections originally granted by the NLRA so that effective and actual
23
participation ensues.'
v. NLRB, 757 F.2d 767, 769 (6th Cir. 1985) (finding discretionary power of claims examiners
illusory and therefore not managerial); NLRB v. Escambia River Elec. Coop., 733 F.2d 830,
832-33 (11 th Cir. 1984) (finding employee's discretion in conducting energy audits confined
by employer policy and federal regulation not managerial); Noranda Aluminum, Inc. v.
NLRB, 751 F.2d 268, 269-70 (8th Cir. 1984) (finding nurse's exercise of discrqtion incidental
to professional responsibilities, not managerial); Iowa Elec. Light & Power Co. v. NLRB, 717
F.2d 433, 435-36 (8th Cir. 1983) (finding inadequate discretion on part of quality control
inspectors not managerial), cert. denied, 466 U.S. 903 (1984); NLRB v. Retail Store Employees
Union Local 876, 570 F.2d 586, 592-93 (6th Cir.) (finding lack of managerial authority where
employee's decisions were required to conform with employer's established policy), cert. denied, 439 U.S. 819 (1978).
119. See Kohler, supra note 1, at 540-42 (concluding that routine duties assigned to participative employees do not lead to exclusion under NLRA); id. at 540 (characterizing participative tasks as routine and limited in discretion and thus not supervisory in nature).
120. H.R. 929, 101st Cong., 1st Sess. (1989). This bill amends section 2(11) to include
the phrase "except that no faculty member or group of faculty members in any education
institution shall be deemed managerial or supervisory employees .. ." Id.
121. But see LAws PROJECT FIRST INTERIM REPORT, supra note 2, at 14 (comment of Mark
Rigg, Southland Corp.) (finding Yeshiva doctrine inapplicable to participative analysis).
122. See Klare, supra note 16, at 67 (arguing that management must compensate workers
for risks of cooperation).
123. Some industry leaders have opposed any legislative change to the current labor law
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 39:667
688
Employee use of the collective bargaining process cannot effectively ensure these guarantees, because, as stated previously, it has
been the courts' and NLRB's determination on the basis of the duties and responsibilities of the employee that dictates an employee's
legal status under the NLRA. 124 Because courts and the NLRB have
been decreasing the scope of section 2(3), the responsibility to protect the original intent of the NLRA-providing protection for a
broad range of the work force-rests with the legislature. To accomplish this goal, Congress should amend the NLRA to protect
employees involved in participation plans, including employee representatives on company boards. Coverage should be guaranteed
regardless of whether a participative scheme is formal or informal,
or established by the employer or the employees.
B.
1.
Section 2(5) of the NLRA: What is a Labor Organization?
Legislative history
To receive protection under the National Labor Relations Act, an
organization must conform to the Act's definition of a "labor organization." 12 5 A labor organization as defined by section 2(5) of the
NLRA, is an organization that participates and exists for the purpose of "dealing with" employers on virtually all matters of concern
to workers. 12 6 This definition is important to the protection of employees' rights under participative schemes because in order to use
the NLRA to prevent a labor organization from being dominated by
27
management, a section 2(5) "labor organization" must be found.
A labor organization may be found under section 2(5) in one of
three ways: 1) by the form or structure that the organization asfor the purpose of accommodating the proliferation of participative schemes. See LAws PROJECT FIRST INTERIM REPORT, supranote 2, at 12 (statement of ErnestJ. Savoie, Director, Labor
Relations Planning, Ford Motor Co.) (opining that change in labor law would not promote
cooperative atmiosphere where one would not otherwise exist); id. at 13 (statement of Mark
Rigg, Southland Corp.) (predicting legislative change would be widely opposed).
124. See supra note 91-106 and accompanying text (describing court and NLRB treatment
of exclusions).
125. National Labor Relations Act § 2(5), 29 U.S.C. § 152(5) (1982). Section 2(5)
provides:
The term "labor organization" means any organization of any kind, or any agency or
employee representation committee or plan, in which employees participate and
which exists for the purposes, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work.
Id.
126. Id. See infra notes 140-44 (discussing judicial interpretation of term "dealing with").
127. Many commentators have argued that section 2(5) is one of the most important provisions if the NLRA is to prevent company dominated unions. See infra notes 179-92 and
accompanying text (discussing claims that NLRA sought to prevent evil of company dominated unions).
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PARTICIPATORY MANAGEMENT SCHEMES
689
sumes; 2) by the subject matter the organization considers; or 3) by
the function the organization serves.1 28
An employee organization may assume almost any structure and
still be considered a labor organization under the NLRA. 12 9 The
NLRA's predecessor, the Labor Disputes Act, broadly defined the
term "labor organization" to include more than traditional forms of
labor unions.13 0 Congress intentionally broadened this definition in
the NLRA by adding the phrase, "or employee representation committee or plan."' 3 1 This phrase was added to include any form of
labor organization in order to prevent employers from avoiding the
NLRA's sanctions by adopting non-traditional structures in their
32
company unions.1
A labor organization may also be defined by the subject matter of
its "dealings with" an employer.' 33 Among the topics to be dealt
128. See Murrmann, supra note 3, at 301 (noting that structural, subject matter, and functional characteristics are necessary to find § 2(5) labor organization); see also infra notes 139-65
and accompanying text (describing three-prong approach courts have taken in conducting
§ 2(5) analysis).
129. See National Labor Relations Act § 2(5), 29 U.S.C. § 152(5) (1982) (stating that any
organization that exists for purposes of dealing with employers concerning grievances, labor
disputes, wages, rates of pay, conditions of work, or hours of employment will qualify as labor
organization).
130. Labor Disputes Act, S. 2926, 73d Cong., 2d Sess. § 3(5) (1934). The Labor Disputes
Act defined "labor organization" as: any organization, labor union, association, corporation,
or society of any kind in which employees participate to any degree whatsoever, which exists
for the purpose, in whole or in part, of dealing with employers concerning grievances, labor
disputes, wages, or hours of employment. Id. Various members of the government and the
general public expressed concern as to whether this wording sufficiently would cover the most
prevalent forms of company unions-namely, the employer representation committee. See
1934 Hearings, supra note 1, at 241-42, reprintedin 1 LEG. HIsT., supra note 1, at 271-72 (state-
ment of Edwin E. Witte) (questioning whether language of proposed legislation includes most
prevalent form of company union).
131. National Labor Relations Act § 2(5), 29 U.S.C. § 152(5) (1982). This phrase first
appeared in the modified bill that Senator Wagner introduced in 1935. See S.1958, 74th
Cong., 1st Sess. § 2(5) (1935), reprintedin 1 LEG. HisT., supra note 1, at 1086. The committee
report explained that the word "plan" was absolutely necessary to close the loophole available to company unions. SENATE COMM. ON EDUCATION AND LABOR, reprinted in U.S. CODE
CONG. & ADMIN. NEws, Comparison of S. 2926 (73d Cong.) and S. 1958 (74th Cong.), reprinted in 1 LEG. HisT., supra note 1, at 1347.
132. See S. REP. No. 573, 74th Cong., 1st Sess. 7 (1935), reprintedin 2 LEG. HisT., supra
note 1,at 2306 (construing "labor organization" broadly to include employee-representation
committees); SENATE COMM. ON EDUCATION AND LABOR, COMPARISON OF S. 2926 (73D CONG.)
AND S.1958 (74TH CONG.), 74th Cong., 1st Sess. 22, reprintedin I LEG. HIST., supra note 1, at
1347 (comparing first and second draft and noting specific inclusion of "plan" as intended to
prevent certain non-traditional organizations from falling outside scope of NLRA). A company union is a labor organization whose membership is restricted to a single employer, and
often, a single plant, is typically initiated by the employer, and is particularly susceptible to
employer manipulation due to its lack of true leverage. See infra notes 183-92 and accompanying, text (describing tailoring of legislation to deal with problem of company unions). See
generally Kohler, supra note 1, at 519-30 (discussing history and impact of company unions in
United States).
133. National Labor Relations Act § 2(5), 29 U.S.C. § 152(5) (1982). The subject-matter
requirements are "grievances, labor disputes, wages, rates of pay, hours of employment, or
conditions of work." Id.
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THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 39:667
with between the employer and the labor organization, Congress included the term "conditions of work." 1 34 Congress intentionally
added this broad and often disputed phrase to guarantee liberal
coverage for all types of employee organizations which interact with
3 5
management. 1
Finally, the functional definition of a labor organization concerns
the manner in which the employee organization interacts with management.1 36 If an employee organization exists to represent its
membership, the NLRA requires that it be defined as a labor organization. 13 7 Under this broad definition almost all organizations in
which employees can participate would be defined as labor organizations, including participative schemes that share some of the characteristics of employee representation committees.' 3 8
2. Judicialinterpretation
Courts have inconsistently applied the three methods of defining
a labor organization under section 2(5)-function, structure, and
subject matter of dealings.' 3 9 In 1959, the Supreme Court's decision in NLRB v. Cabot Carbon140 broadly defined the functions of a
134. Id.; see Note, supra note 34, at 1765 (discussing how term may include nearly everything employee organization might raise with its employers, including changes in production
processes and plant temperature).
135. See S. REP. No. 573, 74th Cong., 1st Sess. 7 (1935), reprinted in 2 LEG. HisT., supra
note 1, at 2306 (recognizing definition as including participative schemes).
136. National Labor Relations Act § 2(5), 29 U.S.C. § 152(5) (1982). See Beaver, Are
Worker ParticipationPlans "Labor Organizations" Within the Meaning of Section 2(5)?: A Proposed
Framework ofAnalysis, 36 LAB. L.J. 226, 229 (1985) (recommending test for determining labor
organization status). At the threshold, the inquiry should be whether a worker group discusses section 2(5) topics. Id. If so, the inquiry should focus on whether the group acts in a
representative capacity on behalf of its members. Id.
137. See Beaver, supra note 136, at 229 (discussing representational aspects of employee
organizations).
138. See Kohler, supra note 1, at 533 (pointing out that Congress intended to limit types of
employee organizations that could legally bargain with employers). Professor Kohler argues
that the restriction on various participation plans was thus an effort to permit only autonomous bargaining units, which in turn would affect the way labor relationships would shape
society. Id. at 533-34.
139. See Beaver, supra note 136, at 218 (noting inconsistent application of § 2(5) analysis
by courts and NLRB); see also Murrmann, supra note 3, at 301 (describing three-prong analysis). One writer explains:
Section 2(5) is often summed up as containing three requirements for determining
that an employee group is a "labor organization" under section 2(5): (1) structuralemployees participate; (2) subject-matter-concern with items in section 2(5), i.e.,
"grievances, labor disputes, wages rates of pay, hours of employment, or conditions
of work,"; (3) functional-that the entity "exists for the purpose, in whole or in part,
of dealing with the employer."
Alexander, supra note 1, at 698.
140. 360 U.S. 203 (1959). In Cabot Carbon, the employer established employee committees with the express purpose of considering employee ideas and handling employee grievances. NLRB v. Cabot Carbon Co., 360 U.S. 203, 205-06 (1959). These employee
committees were challenged by The International Chemical Workers Union, AFL-CIO, claim-
1990]
PARTICIPATORY MANAGEMENT SCHEMES
labor organization. 14 The Court held that the existence of a labor
organization turned on whether an employee committee was "dealing with" an employer.1 4 2 The term "dealing with" was found to
have wider scope than the term "bargaining with" because it included topics considered by labor and management that did not
amount to collective bargaining. 143 Cabot Carbon did not, however,
clearly define "dealing with," and the case has not been strictly
44
followed.'
The structural analysis of a labor organization examines the composition, 4 5 selection, 4 6 and formal organization of the employee
ing that the employer dominated the committees. Id. at 206. Before reaching the question of
domination, the Court considered whether the committees were section 2(5) labor organizations. Id. at 210-11. This threshold determination is required prior to reaching the issues of
domination or violation of exclusivity. Id. at 214-15.
141. See Note, supra note 34, at 1746 (stating that decision left little room for employee
organization to qualify as something other than labor organization under NLRA).
142. Cabot Carbon, 360 U.S. at 213-14. The Court continued to examine the issue and
determined that if an organization was "dealing with" the employer, according to section
2(5), it would be a labor organization. Id.
143. Id. at 211-12; see Cabot Carbon, 360 U.S. at 213 (finding "dealing" despite no attempt
to negotiate formal contract); see also Ace Mfg. Co., 235 N.L.R.B. 1023, 1030 (1978) (finding
§ 2(5) labor organization although function of participatory committee was limited to presenting issues to management).
Justice Whittaker, writing for the Court in Cabot Carbon, considered the legislative history of
the term "dealing with" conclusive. Id. at 211-12. The Court also held that even where an
employee organization dealt with the employer only on grievances, it would qualify under the
NLRA. Id. at 213.
Other courts have helped to define the term "dealing." See, e.g., NLRB v. Ampex Corp.,
442 F.2d 82, 84 (7th Cir.) (finding mere discussion to be "dealing"), cert. denied, 404 U.S. 939
(1971); NLRB v. Stow Mfg. Co., 217 F.2d 900, 904 (2d Cir. 1954) (holding that asking questions is "dealing"), cert. denied, 348 U.S. 964 (1955). The NLRB has also considered the
phrase "dealing with," finding that committees which suggest changes concerning working
conditions, Ferguson-LanderBox. Co., 151 N.L.R.B. 1615,- 1620 (1965); discuss grievances, Hasa
Chemical, Inc., 235 N.L.R.B. 903, 909 (1979); or, make recommendations concerning employee
discipline and present demands involving wages and hours, American Tara Corp., 242 N.L.R.B.
1230, 1231 (1979), are labor organizations. See also Sparks Nugget, Inc., 230 N.L.R.B. 275,
282 (1977) (processing of grievances by employee committee found indicative of labor organization); North Am. Rockwell Corp., 191 N.L.R.B. 833, 837-38 (1971) (finding, despite limits
on problems that could be considered by committee, § 2(5) labor organization). If full autonomy is granted to a participation program, however, it would no longer be dealing with the
employer. Alexander, supra note 1, at 698. See General Foods Corp., 231 N.L.R.B. 1232,
1235 (1977) (holding that full delegation of managerial responsibility to employee committee
disqualifies it as § 2(5) labor organization); Mercy-Memorial Hosp. Corp., 231 N.L.R.B.
1108, 1121 (1977) (holding unilateral authority of grievance committee, indicating lack of
§ 2(5) labor organization, despite board of directors ability to override); see also supra notes
110, 118 and accompanying text (discussing treatment of committees with autonomy).
144. See Sockell, supra note 27, at 548 (examining vagueness of decision); Lee, supra note
43, at 212 (explaining that Court left issue open for NLRB and federal appellate courts to
explore); see also General Foods Corp., 231 N.L.R.B. 1232, 1235 (1977) (finding work teams in
job enrichment program not labor organizations); Mercy-Memorial Hosp. Corp., 231
N.L.R.B. 1108, 1121 (1977) (holding employee grievance committee not labor organization).
145. Lee, supra note 43, at 211. The committee must be composed of employees as defined by section 2(3) of the NLRA. Id.; see General Foods Corp., 231 N.L.R.B. 1232, 1234-35
(1977) (holding ad hoc structure of employee organization as factor in finding labor
organization).
146. See NLRB v. Thompson Ramo Wooldridge, Inc., 305 F.2d 807, 810 (7th Cir. 1962)
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 39:667
entity.' 4 7 One circuit court has consistently declined to designate
participative groups as labor organizations on the basis of their
form.' 48 Other courts have followed the broad language of the
NLRA 14 9 to find a labor organization even when there is no formal
structure, 5 0 constitution or bylaws,1 5 1 officers, 152 dues require154
ments, 53 or continuing existence.
Subject matter analysis inquires into the issues that the organization seeks to administer.1 5 5 Topics commonly considered by participative groups include grievances, productivity, work-life, and
production processes. 156 These issues, which are administered by
participative organizations, are often included in section 2(5) analy(finding fact that employees voted for committee representatives indicates labor organization); see also South Nassau Communities Hosp., 247 N.L.R.B. 527, 529-30 (1980) (holding
election of Nurses Advisory Committee to assist finding of § 2(5) labor organization); American Mfg. Co., 196 N.L.R.B. 248, 250-51 (1972) (finding election of representatives to shop
committee important to assist finding of labor organization); Fire Alert Co., 182 N.L.R.B. 910,
912 (1970) (finding same). But see Mercy-Memorial Hosp. Corp., 231 N.L.R.B. 1108, 1121
(1977) (holding election of committee could not establish labor organization).
147. See St. Vincent's Hosp., 244 N.L.R.B. 84, 85 (1979) (holding that payment of dues
indicated formality); Sunnen Prod., Inc., 189 N.L.R.B. 826, 826-27 (1971) (finding defined
electoral grouping to indicate formality); Fire Alert Co., 182 N.L.R.B. 910, 912 (1970) (holding that preparation of formal bylaws or written guidelines indicated formality).
148. See infra notes 158-65 and accompanying text (discussing NLRB v. Streamway Div. of
Scott & Fetzer, 691 F.2d 288 (6th Cir. 1982)); see also Airstream, Inc. v. NLRB, 877 F.2d 1291,
1295-98 (6th Cir. 1989) (finding employee advisory council not § 2(5) labor organization).
149. See NLRB v. Ampex Corp., 442 F.2d 82, 84 (7th Cir. 1971) (finding typical employee
committee to be § 2(5) labor organization given broad construction of NLRA).
150. NLRB v. Stow Mfg. Co., 217 F.2d 900, 904 (2d Cir. 1954) (finding informal monthly
employee meeting indicative of § 2(5) labor organization), cert. denied, 348 U.S. 964 (1955).
151. See NLRB v. Indiana Metal Prods. Corp., 202 F.2d 613, 620-21 (7th Cir. 1953) (rejecting contention that lack of constitution or bylaws, among other factors, prevented finding
of § 2(5) labor organization).
152. See NLRB v. Pacemaker Corp., 260 F.2d 880, 883 (7th Cir. 1958) (rejecting contention that lack of officers in employee committee prevented finding of § 2(5) labor
organization).
153. See NLRB v. Wyman-Gordon Co., 153 F.2d 480, 482 (7th Cir. 1946) (finding labor
organization despite absence of dues); St. Vincent's Hosp., 244 N.L.R.B. 84 (1979) (reaching
same finding).
154. NLRB v. American Furnace Co., 158 F.2d 376, 378 (7th Cir. 1946) (finding labor
organization despite lack of continuity). Cases discussing other factors held indicative of a
labor organization include Sunnen Prods., Inc., 189 N.L.R.B. 826 (1971) (recognizing defined
electoral grouping) and Fire Alert Co., 182 N.L.R.B. 910 (1970) (dealing with existing written
instrument).
155. See Murrmann, supra note 3, at 302-03 (discussing subject matter requirements).
156. See NLRB v. Cabot Carbon, 444 U.S. 203, 207 (1959) (concluding that because employee committee discussed "seniority,job classifications,job bidding, makeup time, overtime
records, time cards, a merit system, wage corrections, working schedules, holidays, vacations,
sick leave, and improvement of working facilities and conditions" as well as grievances and
other topics of mutual interest indicated § 2(5) labor organization); G.Q. Sec. Parachutes,
Inc., 242 N.L.R.B. 508, 512 (1979) (finding committee formed to discuss grievances,
problems, and suggestions to improve communications to be § 2(5) labor organization). But
see NLRB v. Streamway Div. of Scott & Fetzer, 691 F.2d 288, 294-95 (6th Cir. 1982) (arguing
that mere discussion of coordination between employers and management and sharing of
ideas for improving operations did not create § 2(5) labor organization).
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PARTICIPATORY MANAGEMENT SCHEMES
sis, thus qualifying the entity as a labor organization under the
NLRA.
The interplay of the three methods of defining a labor organization has led to a split among the circuits since the Cabot Carbon decision. 157 The landmark case that led circuit courts to depart from the
traditional section 2(5) analysis is NLRB v. Streamway Division of Scott
& Fetzer.158 In Scott & Fetzer, the employer established a committee
comprised of elected representatives from various departments
within the company. 159 The stated purpose of this committee was to
promote the exchange of ideas concerning the operation of the facility.1 60 The participation scheme was established during the time
period between two United Auto Workers (UAW) certification elec-
tions.1 61 After failing for a second time to gain majority representation and bargaining status, the UAW filed unfair labor practice
charges, and the Administrative Law Judge and the NLRB found
62
that the participative employee committee violated the NLRA.1
On appeal, the Sixth Circuit reversed. The court distinguished
Cabot Carbon, stating that there was no ongoing association between
management and the employees.1 65 The court weighed several factors-rotating membership, lack of employer hostility, lack of nexus
between the creation of the committee and an outside campaign to
organize employees, and the subjective satisfaction of the workersto conclude that the committee in question should not be considered a section 2(5) labor organization.164 Although some of the factors identified by the court had been expressly rejected in the past,
the court hesitated to label the committee a labor organization so as
not to interfere with what it considered an "enlightened personnel
policy."1 65
157. See supra notes 148-54 and accompanying text (discussing Sixth Circuit's interpretation of definition of labor organization and departure from past judicial analysis).
158. 691 F.2d 288 (6th Cir. 1982).
159. NLRB v. Streamway Div. of Scott & Fetzer, 691 F.2d 288, 289-90 (1982). The employees were elected on a rotating basis, with no employee serving more than three months a
year. Id. at 290.
160. Id. at 289.
161. Id. at 290.
162. Streamway Div. of Scott & Fetzer, 249 N.L.R.B. 369 (1980) (affirming findings of
administrative law judge and ordering disestablishment of employee committee).
163. Scott & Fetzer, 691 F.2d at 294.
164. Id. at 295. Many of these factors previously had been expressly rejected. See supra
notes 125-38 and accompanying text (discussing traditional analysis for finding § 2(5) labor
organization).
165. Scott & Fetzer, 691 F.2d at 295. At least one commentator criticized the court for
reinterpreting section 2(5) to further its policy and preferences. Note, Collective Bargaining as
an Industrial System: An Argument Against Judicial Revision of Section 8(a)(2) of the National Labor
Relations Act, 96 HARV. L. REv. 1662, 1670 (1983).
694
3.
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Impact on participativeschemes
Courts and the NLRB must determine as a threshold matter
whether an employee group is a labor organization under section
2(5) before they can proceed to analyze whether an employer has
violated other provisions of the NLRA. 166 Employee participation
committees implemented by employers are, by their nature, amenable to employer domination and control. 167 Employers have used
participative schemes as a technique to avoid or bust unions. 168
Therefore, when discussing participation schemes, the importance
of section 2(5) cannot be overstated.
Under the reasoning of Cabot Carbon, practically any employee
committee established by a participative scheme would have been
found to be a section 2(5) labor organization. 16 9 The Sixth Circuit's
divergence from that reasoning in Scott & Fetzer, however, casts
doubt upon the success of potential challenges to participative
schemes.' 70 The focus in defining a labor organization now appears
to have shifted from the three-pronged analysis established by Congress to an analysis based on the subjective intentions of the employer and the satisfaction of the employees. 17' By reducing the
breadth of section 2(5), this latter interpretation has allowed participative organizations, and the employees within them, to be excluded from the NLRA's protections.
166. National Labor Relations Act § 8(a)(2), 29 U.S.C. § 158(a)(2) (1982); see supra note
127 and accompanying text (noting that § 8(a)(2) requires finding of § 2(5) labor organization
prior to inquiring into whether violation occurred).
167. See Kohler, supra note 1, at 542 (arguing that participative schemes are type of employee organization Congress intended to eliminate and prevent through NLRA); see also Lee,
supra note 43, at 215 (arguing that issue of domination is critical in employee participation
programs). Many programs are initiated, structured, financed, and easily can be dominated
by employers because of their proximity to information, generally higher level in manage-
ment, and greater familiarity with the problem solving process. Id.
168. See Craver, supra note 25, at 674 (noting union-busting tendencies); Alexander, supra
note 1, at 701 (noting that employers use for-hire consultants to implement participatory
schemes in companies in order to "eliminate or forestall unionism"); see also Kohler, supra
note 1, at 548 (noting unorganized firms' use of participative schemes to prevent organization); Murrmann, supra note 3, at 299 (discussing some unionists' view that Scanlon plans and
other participative minagement schemes are used to avoid unionization or to supplant unlawfully need for union).
169. See supra notes 140-44 and accompanying text (discussing Cabot Carbon analysis).
Under the Cabot Carbon analysis, little room was left by the Court for any other type of employee organization to exist. Id.
170. See Kohler, supra note 1, at 536-38 (discussing impact of change in other circuit
courts' definition of labor organization).
171. See supra notes 157-65 and accompanying text (discussing shift by Scott &Fetzer). This
shift is directly contrary to the Supreme Court's analysis in which the Court found the subjective perceptions of the employees irrelevant to labor organization analysis. NLRB v. Newport
News Shipbuilding& Dry Dock Co., 308 U.S. 241, 251 (1939); see infra notes 193-96 and accompa-
nying text (discussing Newport News analysis).
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4.
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695
Recommendations
To prevent further erosion of the NLRA's protections, measures
must be taken to ensure that employee committees, that lack true
authority and participate in cooperative programs do not lose their
status as section 2(5) labor organizations. Concurrently, shop floor
level participative entities should not be found to be "dealing with"
the employer and thus be declared a labor organization, because, as
labor organizations, the NLRA does not allow them to coexist with a
certified union. 172 Any "dealing with" should be restricted to
higher level participative groups, particularly those that deal with
the employer during collective bargaining or involve employee representation on the board of directors. 73 Existing worker organizations should closely monitor the topics discussed and decisions
made in these shop floor participatory groups; however, any discussion of terms and conditions of work within the participatory
scheme should not automatically be excluded for fear of achieving
section 2(5) labor organization status.' 74
In addition, management should not have the ability to deny unilaterally decisions made by these groups. The delegation of respon75
sibility will enable the scheme to avoid domination charges
because employee committees, delegated complete authority, are
rarely found to be "dealing with employers", and thus independent
from employers.' 76 Furthermore, a section 2(5) labor organization
should not be found if the organization is deemed to be
77
nonrepresentational in nature.
On the other hand, the circuit court split must be resolved in
favor of viewing labor organizations according to the traditional,
172. In most circumstances, the NLRA requires an employer to bargain exclusively with a
union certified by the NLRB. National Labor Relations Act § 9(a), 29 U.S.C. § 159(a) (1982).
See infra notes 225-63 and accompanying text (discussing § 9(a) and exclusivity doctrine).
173. See Lee, supra note 43, at 219 (explaining that this will remove possibility that groups
will be deemed representative by courts or NLRB).
174. Currently, discussion of anything within the broad category of "terms and conditions
of work" will indicate the existence of a labor organization. See supra notes 172-74 (discussing
breadth of topics under phrase "terms and conditions"); see also infra notes 256-60 (discussing
relationship between "terms and conditions" and exclusivity).
175. See Lee, supra note 43, at 219 (arguing that recommendations should be limited to
subjects not addressed by § 2(5)). This is consistent with judicial and NLRB analysis. See
supra notes 110, 118, 143 and accompanying text (describing court and NLRB approval of
participative schemes that delegate complete authority).
176. Sparks Nugget, Inc., 230 N.L.R.B. 275, 282 (1977) (holding that complete delegation of management function precludes employee committee from "dealing with" employer).
See supra notes 110, 118, 143 and accompanying text (discussing delegation of authority).
177. See Lee, supra note 43, at 214 (discussing how absence of representational capacity
prevented employee committee from dealing with employer); see also General Foods Corp.,
231 N.L.R.B. 1232, 1234-35 (1977) (finding lack of agency relationship).
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 39:667
696
strict Cabot Carbon analysis.' 78 A strict reading is necessary to ensure
that cooperation is not illusory. This interpretation will also ensure
that when a labor organization is challenged as dominated, the focus
will be correctly placed on domination, not diverted to the form or
function of the labor organization.
C.
1.
Section 8(a)(2) of the NLRA: Domination or Support
Legislative history
At least one author has dubbed section 8(a)(2) of the National
Labor Relations Act the cornerstone of the Act.' 79 By deeming an
employer's interference or domination of employee labor organizations an unfair labor practice, this section ensures that entities participating in collective bargaining will be completely separate and
autonomous from the employer.' s0 When enacting the NLRA, Congress recognized that true collective bargaining could not occur if
an employer were represented on both sides of the bargaining table. 1 1 Congress thought it imperative that labor organizations be
free from employer influence. 8 2 Achieving this goal required the
eradication of the company union, 8 3 which represented the most
178. See Lee, supra note 43, at 215 (noting that split within circuits has weakened favoritism toward collective bargaining). Upholding participative groups as free choice arguably is
contrary to the Act's presumption in favor of collective bargaining. Id.
179. Kohler, supra note 1, at 518.
180. National Labor Relations Act § 8(a)(2), 29 U.S.C. § 158(a)(2) provides:
It shall be an unfair labor practice for an employer to dominate or interfere with the
formation or administration of any labor organization . .. [pfrovided, [that . . . an
employer shall not be prohibited from permitting employees to confer with him during working hours without loss of time or pay ....
Id.
181.
See Labor DisputesAct: Hearingson H.R. 6288 Before the Committee on Labor House of Repre-
sentatives, 74th Cong., 1st Sess. 15 (1935), reprintedin 2 LEG. HisT., supra note 1,at 2489 (statement of Sen. Wagner) (arguing that "[clollective bargaining becomes a sham when the
employer sits on both sides of the table or pulls the strings behind the spokesman of those
with whom he is dealing").
182. See Macey, Does Employer Implementation of Employee Production Teams Violate Section
8(a)(2) of the National Labor Relations Act?, 49 IND. LJ. 516, 529 (1974) (describing purpose of
NLRA as allowing employee organizations to have opportunity to exert economic pressure in
order to achieve demands). If an employee organization is dominated or supported, the effectiveness of employee pressure is nullified. Id. at 530.
183. See Note, supra note 37, at 2023 (identifying four characteristics of early company
unions). Early company unions possessed the following attributes: first, membership was
restricted to employees of the individual company; second, representatives of the union were
chosen strictly from the employees of the company; third, management provided financial or
physical assistance to the organization; and, fourth, management usually retained ultimate
veto power over union decisions or recommendations. Id. at 2025. Senator Wagner identified the company union as one where the employer initiates, takes part in determining rules,
procedures, and policies, has veto power over the union, is able to terminate the union at will,
and has power to restrict the union to a single employer unit. 1934 HEARINGS, supra note I, at
9, reprinted in 1 LEG. HIsT., supra note 1, at 39.
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PARTICIPATORY MANAGEMENT SCHEMES
697
184
formidable barrier to employee freedom.
The term "domination" did not become part of the bill until Senator Walsh, Chairman of the Committee on Education and Labor,
redrafted it. 185 Senator Walsh's redraft served as the basis for Senator Wagner's 1935 version.186 The purpose of including "domination" was to meet the challenge of the company union by preventing
employers from utilizing a form of employee representation that
87
was not truly free from employer control.'
The same committee that added the term "domination" eliminated the terms "initiate" and "influence."'' 8 8 Those in favor of
company unions expressed the concern that "initiate" implied that
even the most subtle communication with employees would be prohibited.189 The term "influence" was challenged because of the
184. See 78 CONG. REC. 3443 (1934), reprintedin 1 LEG. HisT., supra note 1, at 15-16. During the introduction of the bill Senator Wagner stated that:
it]he greatest obstacles to collective bargaining are employer dominated unions,
which have multiplied with amazing rapidity since the enactment of the recovery law
[National Industrial Recovery Act] .... The Bill which I am introducing today forbids an employer to foster or participate in or influence any organization which deals
with problems that should be covered by a genuine labor union.
Id. Company unions were the subject of much debate. See Alexander, supra note 1, at 697
(stating that elimination of company unions was foremost on agenda of legislators); see also
LAws PROJECT FIRST INTERIM REPORT, supra note 2, at 41 (recognizing Sen. Wagner's concern
with company dominated unions). Some commentators have indicated that one of the
NLRA's original intentions was to strengthen unions so as to equalize the bargaining power
between the employer and union. Herrnstadt, supra, note 1, at 188 (1988). This may have
been necessary to bring about the end of the depression. See 78 CONG. REC. 3678-79 (1934),
reprinted in 1 LEG. HIST., supra note 1, at 18-19 (address of Sen. Wagner) (discussing inability
of National Industry Recovery Act to raise economic demand). Senator Wagner believed that
requiring autonomous bargaining units would empower employees to have the ability to demand higher wages. Id. Wagner thought that this theory would bring the country out of the
depression. Id.
185. S. REP. No. 1184, 73d Cong., 2d Sess. § 3(3) (1934), reprinted in I LEG. HIsT., supra
note 1, at 1087. See also, Special Project, supra note 7, at 550.
186. Compare S. REP. No. 73d Cong., 2d Sess. § 3(3) (1934) (introducing use of term
"domination"), reprintedin I LEG. HiST., supra note 1, at 1087 with 79 CONG. REC. 7565, 7570
(1935) (discussing term "domination"), reprintedin 2 LEG. HIsT., supra note 1, at 2321, 233335.
187. See 1934 HEARINGS, supra note 1, at 12 (noting approximately 70% of cases before
NLRB's predecessor at time bill was introduced included charge of company domination of
union), reprintedin I LEG. HIsT., supra note 1, at 42. Senator Wagner believed that company
unions by their very nature must be dominated. 79 CONG. REC. 7565, 7570 (1935), reprintedin
2 LEG. HIsT., supra note 1, at 2321, 2333-35. Many proponents, however, saw company unions as a form of bargaining within the integrative model, rather than the adversarial model
supposedly proposed by the Wagner Act. See 1934 HEARINGS, supra note 1, at 404, reprintedin
1 LEG. HIST., supra note 1, at 438 (statement of Henry S. Dennison) (suggesting that participation would bring about ultimate goal of combining business organization into single organism
of broad social value); 1934 HEARINGS, supra note 1, at 653, reprintedin 1 LEG. HisT., supra note
1, at 691 (statement of L. L. Balleisen) (arguing that elimination of company unions would
forego beneficial side-effects of such participative schemes).
188. S. REP. No. 1184, 73d Cong., 2d Sess. § 3(3) (1934), reprinted in 1 LEG. HIsT., supra
note 1, at 1087. See also, Special Project, supra note 7, at 550.
189. See 1934 HEARINGS, supra note 1, at 354-55, reprintedin 1 LEG. HisT., supra note 1, at
388-89 (statement ofJames A. Emery) (expressing concern over use of term "initiate").
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[Vol. 39:667
contention that collective bargaining involves the use of each party's
unique strengths to influence the other and, hence, the employeremployee relationship. 19 0 Opponents of the term "influence" argued that to prohibit influence would essentially prevent bargaining.' 9 ' Elimination of these terms demonstrates two congressional
objectives: the desire that employees and employers cooperate in
an effort to achieve mutually agreeable terms of employment, and
that negotiations be channeled through collective bargaining that,
92
in turn, requires independent bargaining units.'
2. Judicialinterpretation
In 1939, the Supreme Court rendered the most significant interpretation of the domination provision. In NLRB v. Newport News
Shipbuilding & Drydock Co.,1 93 the Court upheld an NLRB order disestablishing an employer-assisted representation plan.1'9'
The
Court stated that in order to maintain consistency with the NLRA,
the plan must be discontinued, regardless of employees' subjective
beliefs concerning the benefits or drawbacks of the scheme.'19 The
Court further stated that the employer's motive in establishing the
plan, as well as the degree of employer involvement, was irrelevant.' 96 Fourteen years later, however, in Chicago Rawhide Manufacturing v. NLRB,' 9 7 the Seventh Circuit refused to enforce a similar
NLRB disestablishment order. 198 The Seventh Circuit, establishing
a precedent setting distinction, noted that "support" did not necessarily preclude "cooperation."'' 9 9 Contrary to Newport News, the
190. See Harper, supra note 1,at 7 (1988) (stating that two presumptions underlying
§ 8(a)(2) are: 1) independent representative of employees can best represent employees' interests; and 2) management-dominated associates can be easily influenced by management in
manner contrary to their best interest); see also 1934 HEARINGS, supra note 1, at 354-55, reprinted in 1 LEG. HisT., supra note 1, at 388-89 (statement of James A. Emery) (expressing
concern over use of term "influence").
191. See 1934 HEARINGS, supra note 1, at 530, reprintedin 1 LEG. HIsT., supra note 1,at 564
(statement of Ralph F. Foster) (suggesting that bargaining between employer and employee
would be violation of NLRA).
192. See Note, supra note 165, at 1663 (stating that purpose of § 8(a)(2) was to preserve
autonomy of bargaining representatives).
193. 308 U.S. 241 (1939).
194. NLRB v. Newport News Shipbuilding & Dry Dock Co., 308 U.S. 241, 251 (1939)
(upholding NLRB's decision ordering employer to cease and desist from dominating union).
195. Id. at 251. The record demonstrated that the employees expressed satisfaction with
the plan and that employer interference had occurred with good motives. Id. The Court,
however, considered these facts irrelevant in the context of the NLRA. Id.
196. Id. The Court explained that "[iln applying the statutory test of independence it is
immaterial that the plan had in fact not engendered, or indeed had obviated, serious labor
disputes in the past, or that any company interference in the administration of the plan had
been incidental rather than fundamental and with good motives." Id.
197. 221 F.2d 165 (7th Cir. 1955).
198. Chicago Rawhide Mfg. Co. v. NLRB, 221 F.2d 165, 170 (7th Cir. 1955).
199. Id. at 167.
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PARTICIPATORY MANAGEMENT SCHEMES
699
court in Chicago Rawhide placed primary emphasis on the employer's
motive. 20 0 Moreover, the court explained that because cooperation
between labor and management was a primary goal of the NLRA,
plans such as those in Chicago Rawhide fostered that goal. 20 ' The
court concluded that "actual" domination was distinguishable from
"potential" domination, and that in this instance, only the potential
for domination existed.20 2 Thus, the participatory scheme did not
violate the NLRA.
Since Chicago Rawhide, the First, 20 3 Sixth, 20 4 and Ninth Circuits, 20 5
as well as the NLRB, 20 6 have followed suit, establishing the new
domination or support doctrine. 20 7 As a result, courts have upheld
or refused to disestablish participatory plans for occurrences such as
lack of anti-union animus 208 and lack of employee dissatisfaction in
express contradiction to the Supreme Court's analysis. 20 9
200. Compare Newport News, 308 U.S. at 251 (holding that good motives by employer were
irrelevant to statutory test of independence) with Chicago Rawhide, 221 F.2d at 167 (holding
motive determinative).
201. Chicago Rawhide, 221 F.2d at 167-68 (stating that principle purpose of Act was cooperation between management and labor). The court noted that although the employer's
assistance and cooperation with the employee committee provided the opportunity for domination, the employer never took any action which would constitute domination. Id. at 168.
See Alexander, supra note 1, at 698 (describing Seventh Circuit's justification for ruling).
202. See Chicago Rawhide, 221 F.2d at 168 (requiring "actual domination" before violation
is established); see also Kohler, supra note 1, at 543 (discussing court's analysis).
203. See NLRB v. Northeastern Univ., 601 F.2d 1208, 1214 (1st Cir. 1979) (finding
"changing conditions in the labor-management field seem to have strengthened the case for
providing room for cooperative employer-employee arrangements as alternatives to the traditional adversary model"); Coppus Eng'g Corp. v. NLRB, 240 F.2d 564, 570-73 (1st Cir.
1957) (finding that additional evidence of discrimination against other labor organization was
necessary to find support or domination for employee committee).
204. Modern Plastics Corp. v. NLRB, 379 F.2d 201, 204 (6th Cir. 1967) (finding need to
show that employer assistance actually creates company domination).
205. Hertzka & Knowles v. NLRB, 503 F.2d 625, 631 (9th Cir. 1974) (declaring that condemnation of cooperative arrangement which reflects free choice would mark approval of
adversarial model of labor relations), cert. denied, 423 U.S. 875 (1975). The Hertzha &Knowles
decision has been dubbed the most extreme extension of the Chicago Rawhide-Free Choice
theory. See Kohler, supra note 1, at 545 (declaring Hertzka & Knowles decision as "tantamount
to the judicial repeal of Section 8(a)(2)").
206. SeeJanesville Prod. Div., Amtel, Inc., 240 N.L.R.B. 854, 857-60 (1979) (discussing
past NLRB decisions that used free choice analysis).
207. See Alexander, supra note 1, at 698 (dubbing Sixth Circuit approach as permissive and
noting circuits which have followed). The remaining circuits have followed a more traditional
"strict" approach. Id. at 699; see Irving Air Chute Co. v. NLRB, 350 F.2d 176, 180 (2d Cir.
1965) (noting that "[i]t has been consistently held that employer support of an 'inside' or
'independent' labor organization, even absent company domination, constitutes unlawful interference with employees' freedom of choice within the meaning of section 8(a)(2)").
208. See Modern Plastics, 379 F.2d at 204 (suggesting that lack of anti-union animus demonstrates cooperation rather than domination); see also Alexander, supra note 1, at 699 (stating
that lack of anti-union animus was factor that weighed against finding of domination or support under § 8(a)(2)).
209. Modern Plastics, 379 F.2d at 204; see NLRB v. H & H Plastics Mfg. Co., 389 F.2d 678,
681 (6th Cir. 1968) (noting need for adequate representation satisfied). Despite the Cabot
Carbon and Newport News decisions, very few cases have attempted to distinguish the Supreme
Court cases, but instead have ignored the line altogether. Note, supra note 37, at 2028 n.46,
700
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Impact on participativeschemes
Current proponents of the circuit court departure from the Newport News analysis have been dubbed the Free Choice Theorists. 2 10
Their argument is based on the idea that the NLRA was intended to
promote employee free choice concerning the form of representation, not prevention of participatory schemes. 21 1 As Senator Wagner stated over fifty years ago, however, "[t]o argue that freedom of
organizing for the worker must embrace the right to select a form of
organization that is not free, is a contradiction in terms .... 202
Changing the NLRA's domination and support provision through
judicial mandate assumes a basic shift in the requirements that orn.63; see Alexander, supra note 1, at 699 (recognizing that absence of employee opposition was
factor that weighed against finding of domination or support).
210. See generally Schlossberg & Fetter, U.S. Labor Law and the Future of Labor-Management
Cooperation, 37 LAB. LJ. 595 (advancing concept of labor-management cooperation rather
than conflict); Fulmer & Coleman, Do Quality-of-Work-Life Programs Violate Section 8(a)(2)?, 35
LAB. LJ. 675 (1984) (setting forth connection between Quality of Working Life Act of 1975,
51 U.S.C. § 2401, and § 8(a)(2) because both mandate cooperation between labor and management); Behrens & Sollenberger, The National Labor Relations Act. A PotentialLegal Constraint
Upon Quality Circles and Other Employer-Sponsored Employee Committees, 34 LAB. LJ. 776 (1983)
(examining possible legal constraint of participatory management in light of § 8(a)(2) language proscribing interference with formation or administration of labor organization);
Klaper, An Enlightened View of Employee Committees under the Taft-Hartley Act, 1983 EMPLOYEE REL.
LJ. 474 (stating NLRB v. Streamay represents an enlightened view of factors that should be
considered in interpreting § 2(5)); Stone, The Post-War Paradigmin American Labor Law, 90 YALE
LJ. 1509 (1981) (arguing that industrial pluralism theory-management and labor share
equal power--does not correspond with reality); Sangerman, Employee Committees; Can They
Survive Under the Taft-Hartley Act?, 24 LaB. LJ. 684 (1973) (stating that employer-employee
committee can be effective communications tool in labor-management relations).
Strict interpretationists are also widely published. See generally Alexander, Worher Participation and the Law Once Again: Overview and Evaluation, 39 LAB. LJ.696 (1988) (maintaining that
strict interpretation of §§ 2(5) and 8(a)(2) should continue until statutorily modified to reflect
minimized role of unions); Schmidman & Keller, Employee ParticipationPlans as Section 8(a)(2)
Violations, 35 LAB. LJ. 772 (1984) (stating that withdrawal of strict enforcement of § 8(a)(2)
against employee participation plans encourages illegal antiunion activity and undermines
employee's ability to organize); Note, Collective Bargaining as an Industrial System: An Argument
AgainstJudicialRevision of Section 8(a)(2) of the NationalLaborRelations Act, 96 HARV. L. REv. 1662
(1983) (concluding that judicial interpretation of § 8(a)(2) allowing employer-sponsored representation plans erred by relying on preservation of employee free choice rather than focusing on autonomy of organizations or importance of collective bargaining).
211. See Alexander, supra note 1, at 699. A good summary of the Free Choice theory is as
follows:
Employees should be free, if they choose, to select non-union forms of employee
organization even if established by the employer. And the law should not stand in
the way of labor-management cooperation, which was the original goal of the NLRA
and which holds so much potential for the good of the economy and society.
Id. These theorists posit that the primary goal of the NLRA was to promote free choice. Id. at
700.
212. NLRB AT 50: LABOR BOARD AT THE CROSSROADS (BNA) at 18 (1985). Some free
choice theorists posit that the conditions that section 8(a)(2) were supposed to prevent no
longer exist, and preventing cooperation based on those conditions would be a mistake. Alexander, supra note 1, at 700. Others recognize that if a participative scheme coexists with a
union, it could be used to influence the employees' vote during union elections, and thus,
actually limit employee free choice. Lee, supra note 43, at 210.
1990]
PARTICIPATORY MANAGEMENT SCHEMES
701
ganized labor needs in order to effectuate the goals of the NLRA. If
valid, this is a shift that should be evaluated by the legislatures, not
21 3
the courts.
It is important to the success of any participatory scheme that
groups participating in bargaining or dealing with management be
independent and autonomous. 2 14 Independence and autonomy,
however, should not preclude friendly working relationships that
seek to further a common goal. 2 15 Nevertheless, judicial abrogation
of the right to an autonomous bargaining unit is creeping into the
interpretation of the NLRA.2 16 If the Chicago Rawhide proponents
continue to gain support, they will frustrate the NLRA's premise of
promoting worker empowerment through collective bargaining. 2 17
Consequently, the worker will be in a less favorable position because often the employees' subjective views and employer's hidden
objectives, rather than the actual ability of the employer to dominate, will determine whether an organization is dominated or
218
influenced.
4.
Recommendations
Domination or support analysis should be limited to areas crucial
to the independence of participatory organizations. Where a participative scheme is merely a substitute for a true, independent labor
organization, courts or the NLRB should issue disestablishment orders.2 1 9 As a result, employee organizations to which an employer
delegates ultimate authority would not be considered dominated.
On the other hand, if an organization "deals with" an employer, a
superseding collective bargaining agreement should establish the
213. See NLRB v. Newport News Shipbuilding & Dry Dock Co., 308 U.S. 241, 251 (1939)
(stating "[ilt was for Congress to determine whether, as a matter of policy, such a plan should
be permitted to continue in force. We think the statute plainly evinces a contrary purpose,
and that the Board's conclusions are in accord with that purpose").
214. See Klare, supra note 1, at 4 (stating that "[a]t least so long as massive inequalities of
power in the workplace exist, employees will have a need for autonomous organization to
aggregate their interest and voices, and to identify and articulate their collective needs independent of employer domination").
215. See Alexander, supra note 1, at 700 (stating that "employer-established employee organizations should not affect the chances of whether employees will or will not choose to be
represented by a genuine union, i.e., an organization separate and apart from the employer").
216. See supra notes 210-13 and accompanying text (discussing free choice circuits).
217. See Kohler, supra note 1, at 545 (asserting that expansion of free choice analysis
would cause reversion of labor law to pre-NLRA circumstances).
218. This is a dangerous position in which to place employees, because employers' motives can easily change or be hidden from employees. See Alexander, supra note 1, at 701.
219. See Murrmann, supra note 3, at 304 (advocating legislative changes to allow employee
participation in determinations of bonus formulas and changes in working conditions incidental to productivity). But see Alexander, supra note 1, at 701 (stating that reform of § 8(a)(2) on
free choice grounds is improper because freedom of choice is provided in other sections of
NLRA).
THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 39:667
limits of the dealings between management and the organization
prior to the creation of the participative scheme. This procedure
allows participative schemes to exist while preventing domination of
true labor organizations.
This framework implies that the section 8(a)(2) rights of labor are
waivable because the employee organization is contracting to establish a dominated employee organization. 22 0 As previously discussed, some circuit courts of appeals and the Supreme Court have
held that the subjective view of employees is not relevant to the application of the section. 22 1 Accordingly, if the courts and the NLRB
analysis were strict with regard to the participatory organizations absent the waiver ability, the schemes summarily would be found in
violation of the NLRA. 2 22 Were the domination protection considered waivable, however, the domination provision of the NLRA
would become a bargaining chip whereby a union or other labor
organization, incoming or in place, could trade certain shop floor
protections for a greater voice in management.2 23 The trade-off
must afford the necessary protections against "actual domination"
while allowing the benefits of participatory schemes to accrue.2 24
D.
1.
Section 9(a) of the NLRA: The Exclusivity Doctrine
Legislative history
Section 9(a) of the National Labor Relations Act guarantees that
duly elected bargaining units approved by the NLRB will be the only
organizations permitted to bargain with employers on behalf of employees. 22 5 The legislative history demonstrates that the purpose of
220. See Perline.& Poynter, The Effects of Worker ParticipationPlans on Union Views of ManagerialPrerogatives,40 LAB. L.J. 37, 40 (1989) (stating that union could give up traditional base of
power in return for greater information and influence over management).
221. See supra notes 195 & 207 and accompanying text (discussing courts following strict
analysis).
222. See supra note 214 and accompanying text (discussing importance of independent
participatory scheme).
223. The union may want to bargain away the ability to claim "dual-unionism," which
arises when more than one bargaining representative exists at a particular location. See LAws
PROJECT FIRST INTERIM REPORT, supra note 2, at 43; see also infra notes 225-77 and accompanying text (discussing exclusivity).
224. See Lee, supra note 43, at 219 (listing factors that must be met to find participative
program not violative of NLRA).
225. National Labor Relations Act § 9(a), 29 U.S.C. § 159(a) (1982). Section 9(a) provides in pertinent part:
Representatives designated or selected for the purposes of collective bargaining by
the majority of the employees in a unit appropriate for such purposes, shall be the
exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other
conditions of employment....
1990]
PARTICIPATORY MANAGEMENT SCHEMES
section 9(a) was to ensure that employers would not attempt to circumvent the ability of certified employee organizations to achieve a
collective bargaining agreement by bargaining with other non-certified employee organizations. 2 26 The genesis of the exclusivity doctrine, section 10(a) of the committee print, 22 7 provided that
employees, by majority rule and NLRB certification, shall determine
the bargaining representative for all employees in the appropriate
unit. 228 The original version of the doctrine specified, however, that
employers retain, at all times, a unilateral right to establish contacts
with employees regarding grievances. 2 29 This provision seemingly
gave the NLRB discretionary power to determine the appropriate
bargaining unit while simultaneously allowing the employer to establish contacts with any other employee group at will.230
Section 9(a), in its current form, was included in the reintroduction of the bill in order to ensure that a properly elected unit would
be the exclusive bargaining unit on behalf of the employees. 23 ' This
provision guarantees that an employee majority will have the sole
right to represent all employees in the bargaining unit.23 2 A proviso
was included, however, limiting the ability of an employee bargaining unit to restrict the ability of its members from initiating contact
with the employer. 23 3 This caveat provided, contrary to the original
226. See Labor Disputes Act: Hearings Before the Committee on Labor House of Representatives on
H.R. 6288, 74th Cong., 1st Sess. 16 (1935), reprinted in 2 LEG. HisT., supra note 1, at 2473,
2490 (statement of Sen. Wagner) (discussing role of § 9(a) in preventing employers from
bargaining with minority representatives).
227. S. REP. No. 1184, 73d Cong., 2d Sess. § 10(a) (1934), reprintedin I LEG. HisT.,supra
note 1, at 1095. It is interesting to note, however, that Senator Wagner's original version of
the bill did not include the exclusivity doctrine. See S. 2926, 73d Cong., 2d Sess. § 207(a)
(1934), reprintedin I LEG. HisT., supra note 1, at 11 (allowing NLRB to conduct elections to
determine bargaining unit, but not guaranteeing exclusive status of bargaining unit). The
section was derived from debate over certain provisions of the original draft. See 1934 HEARINGS, supra note 1, at 62-63, reprintedin 1 LEG. HIsT., supra note 1, at 92-93 (statement of Dr.
Sumner Slichter) (arguing that § 207(a) would allow employers to choose between negotiating with company labor organization and other labor organizations).
228. S. REP. No. 1184, 73d Cong., 2d Sess. § 10(a) (1934).
229. Id. In relevant part, section 10(a) provided "that nothing in this Act shall be construed to prohibit an employer from discussing grievances with an employee or groups of
employees at any time." Id.
230. See id. (stating that "[t]he Board may determine that representatives agreed upon by
the majority of employees ... shall represent the entire unit for the purpose of negotiating
agreements").
231. S. 1958, 74th Cong., 1st Sess., § 9(a) (1935), reprintedin I LEG. HisT., supra note 1, at
1300.
232. See Labor Disputes Act: Hearings on H.R. 6288 Before the House of Representatives Comm. on
Labor, 74th Cong., 1st Sess. 16 (1935), reprintedin 2 LEG. HIsT., supra note 1, at 2490-91 (statement of Sen. Wagner) (finding that majority rule was only means by which true collective
bargaining could be achieved).
233. National Labor Relations Act § 9(a), 29 U.S.C. § 159(a) (1982). The proviso states
in part:
[t~hat any individual employee or group of employees shall have the right at any time
to present grievances to their employer and to have such grievances adjusted, with-
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[Vol. 39:667
version, that employees, rather than employers, possess the absolute right to discuss grievance matters with employers. 23 4 By inverting the right to establish contact, Congress demonstrated its
concern about relations between non-elected employee representatives and employers outside the formal collective bargaining fo-
rum. 23 5
The
philosophical
debates
surrounding
section
9(a)
focused on two polar concerns: first, that unions would establish
labor monopolies, 23 6 and, second, that a single representative is required to prevent the spread of company unionism.2 37
In 1947, during a subsequent revision of the NLRA, Congress further reinforced the exclusivity doctrine. 23 8 The proviso was expanded to include the phrase "provided further that the bargaining
representative has been given the opportunity to be present. ' 23 9
This phrase clarified congressional intent that all activity be channeled through the union or other certified representative. 24 0 As a
result, parties involved in collective bargaining were assured a continued flow of information concerning individual employee-employer relations.
2. Judicial interpretation
Judicial interpretation of section 9(a) prevents an employer from
bargaining with any party other than a certified bargaining unit. 24 1
out the intervention of their bargaining representative, as long as the adjustment is
not inconsistent with the terms of the collective-bargaining contract or agreement
then in effect....
Id.
234. Id.
235. See 79 CONG. REc. 7571 (1935) (stating that majority rule prohibits employers from
frustrating collective bargaining by dealing with non-majority representatives).
236. See National Labor Relations Board: Hearings on S. 1958 Before Senate Comm. on Education
and Labor, 74th Cong., 1st Sess. 348 (1935), reprintedin 2 LEG. HIsT., supra note 1, at 1734
(suggesting that majority rule principle would lead to labor monopoly).
237. See 79 CONG. REC. 7571 (1935), reprinted in 1 LEG. HisT., supra note 1, at 2337 (supporting concept of majority rule because of potential for employee loss of control over company union).
238. Labor Management Relations Act, ch. 120, 61 Stat. 136 § 101 (1947) (codified as
amended at 29 U.S.C. §§ 151-168 (1982)). Organized labor's success after the passage of the
NLRA and through the Second World War led to the Taft-Hartley Amendments, also known
as the Labor-Management Relations Act (LMRA). B. SCHWARTZ & R. KORErZ, STATurORY
HISTORY OF THE UNITED STATES: LABOR ORGANIZATION 548 (1970).
239. National Labor Relations Act § 9(a), 29 U.S.C. § 159(a) (1982).
240. Sockell, supra note 27, at 552. During the LMRA debate, a proposal which would
have allowed non-certified representatives to discuss grievances directly with the employer
"without the intervention of the bargaining representative if the settlement is not inconsistent
with the terms of a collective agreement then in effect.. ." was rejected. See H.R. 3020, 80th
Cong., 1st Sess. § 9(a) (1947), repinted in 1 NLRB, LEGISLATIVE HISTORY OF THE LABOR MANAGEMENT RELATIONS ACr, 1947, at 58 (1958). It has been suggested that this demonstrates
congressional intent not to allow separate non-majoritarian representation. Sockell, supra
note 27, at 552-53.
241. See Alexander, supra note 1, at 697 (identifying "exclusivity doctrine"). Courts have
1990]
PARTICIPATORY MANAGEMENT SCHEMES
This interpretation is troublesome for participative programs in a
unionized environment. 24 2 As a result of the judicial interpretation,
the sole method by which an employee participation scheme may
operate outside the currently existing bargaining unit would be
243
through the proviso allowing discussion of grievances.
The Supreme Court provided insight into the breadth of the
grievance proviso when it was presented with the issue in Emporium
Capwell v. Western Addition Community Organization.244 In Emporium
Capwell, the Court narrowly interpreted the proviso and held that
employee picketing activity in response to the allegedly discriminatory promotion policies of the employer was not a protected activity.24 5 Emporium Capwell clarified the implications of the proviso for
participative programs. First, the Court apparently was unwilling to
create exceptions to the exclusivity doctrine even in the event that it
has a chance to further civil rights. 24 6 Second, the Court found that
the proviso failed to require all employers to examine, consider, or
entertain any employee grievances, 247 rendering the unilateral nature of the proviso meaningless in terms of granting employees an2 48
other route of grievance.
Following another line of cases, however, it may not be a violation
of the NLRA for an employee or group of employees to enter into
separate agreements with the employer if the agreements do not
conflict with the current collective bargaining agreement or derogate the union position concerning the issues in an existing collective bargaining agreement. 249 Consistent with this line of cases is
interpreted this exclusivity doctrine strictly. See NLRB v. Boss Mfg. Co., 107 F.2d 574, 577
(7th Cir. 1939) (holding that employer could not limit union representation to those who
actually voted for union).
242. Schlossberg & Fetter, supra note 1, at 609.
243. See Allied Chem. & Alkali Workers Local Union 1 v. Pittsburgh Plate Glass Co., 404
U.S. 157, 178-80 (1971) (discussing how § 8(d) places limitation on subjects that may be
negotiated outside collective bargaining unit).
244. 420 U.S. 50.(1975).
245. Emporium Capwell v. Western Addition Community Org., 420 U.S. 50, 60-62
(1975). In Emporium Capwell, two employees were dismissed for picketing the retail establishment where they were employed. Id. at 56. The employees claimed racial discrimination by
the employer and picketed because they believed the union that represented them was incapable of handling the problems effectively. Id. at 54-56. After the dismissal, the employees
claimed that they had been exercising their rights to present grievances within the proviso of
section 9(a) of the NLRA, and, therefore, were protected. Id. at 59.
246. Id. at 70. The Court stated that a union "has a legitimate interest in presenting a
united front on this as on other issues and in not seeing its strength dissipated and its stature
denigrated by subgroups within the unit separately pursuing what they see as separate interests." Id. See also Sockell, supra note 27, at 544.
247. Id. at 68-69. The Court found that the collective bargaining agreement effectively
had precluded employees from presenting such issues to the employer. Id.
248. See Sockell, supra note 27, at 554 (stating that proviso has been interpreted to prohibit non-majoritarian representatives).
249. See, e.g., J.I. Case Co. v. NLRB, 321 U.S. 332, 339 (1944) (noting that Court has
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[Vol. 39:667
the doctrine that defines the subjects which must be bargained over
exclusively with the certified representative. 250 The leading case in
this doctrine is NLRB v. Wooster Division of Borg-Warner Corp.,251 in
which the Supreme Court established a distinction between those
topics of collective bargaining that are mandatory, permissive, or illegal. 25 2 Mandatory subjects of bargaining are those subjects over
which the employer and the labor organization must bargain in
good faith. 253 Permissive subjects of bargaining, on the other hand,
are those that the employer and labor organization may discuss, but
upon which they may not make the collective bargaining agreement
recognized nothing to prevent separate agreement as long as it is not inconsistent with existing collective agreement); Heheman v. E. W. Scripps Co., 661 F.2d 1115, 1122-23 (6th Cir,
1981) (holding separate agreement, which added benefits and was not inconsistent with collective bargaining agreement, valid), cert. denied, 456 U.S. 991 (1982); Dries & Krump Mfg. v.
NLRB, 544 F.2d 320, 326 (7th Cir. 1976) (holding that employee can initiate contact with
employer provided purpose is to induce group activity seeking to enforce collective bargaining agreement).
250. See infra notes 252-54 and accompanying text (discussing distinction between
mandatory and permissive bargaining subjects).
251. 356 U.S. 342 (1958). In this case, the employer insisted on including a ballot clause
that required employees to submit to a secret pre-strike vote and a recognition clause which
failed to recognize the NLRB-certified International Union as the employees' exclusive bargaining agent. NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 343 (1958). After
the union declined to accept these two clauses and the employer refused to remove them from
the contract, the employees accepted the contract. Id. at 346-47. The union subsequently
filed a section 8(a)(5) failure to bargain in good faith charge. Id. at 347.
252. Id. at 349-50. The Supreme Court found that neither clause was a subject of
mandatory bargaining; therefore, the employer could not condition assent on acceptance of
the clauses. Id. Although the doctrine is actually derived from section 8(a)(5) and 8(d), in the
context of participative schemes, it is appropriately analyzed in the context of section 9(a).
Section 8(a)(5) of the NLRA declares that it is an unfair labor practice to fail to bargain collectively with the appropriate employee organization pursuant to the provisions set out in section 9(a). National Labor Relations Act § 8(a)(5), 29 U.S.C. § 158(a)(5) (1982). Section 8(d)
defines the obligation to bargain collectively for the purposes of section 8(a)(5). Id. § 8(d), 29
U.S.C. § 158(d) (1982). The nexus of the two sections provides the test for the determination
of whether the employer is bargaining collectively. NLRB v. American Nat'l Ins. Co., 343 U.S.
395, 409 (1952). These provisions are necessary because the doctrine would imply that there
would be no need to bargain exclusively, or at all, if a participative scheme were not a subject
of mandatory bargaining.
The limits of mandatory and permissive subjects of bargaining have been reviewed extensively elsewhere and are beyond the scope of this Comment. See generally 1 THE DEVELOPING
LABOR LAw 757-869 (C. Morris 2d ed. 1983) (detailing mandatory-permissive subjects of bargaining); Heinsz, The Partial-ClosingConundrum: The Duty of Employers and Unions to Bargain in
Good Faith, 1981 DUKE LJ. 71, 72 & n.9 (listing mandatory bargaining subjects); Note, Employers Duty to Bargainwith Respect to PartialTermination of Business: First Nat'7 Maint. Corp. v. NLRB,
36 Sw. L.J. 793, 801-05 (1982) (discussing First National Maintenance Corp. v. NLRB, 452
U.S. 666 (1981) (holding that bargaining over partial closing not mandatory bargaining subject)); Note, Labor Law - An Employer's Decision to Terminate Partiallya Business Operation Is Not a
Mandatory Subject of Bargaining, 56 TUL. L. REV. 1065, 1065-82 (1982) (discussing First Nat l
Maint. Corp. v. NLRB); Note, The Scope of Collective Bargaining, 74 YALE L.J. 1472, 1472-81
(1965) (discussing scope of mandatory-permissive bargaining subjects). This Comment will
limit its discussion to the effect that the distinction between mandatory and permissive bargaining subjects has on participative schemes.
253. Borg-Warner, 356 U.S. at 349-50.
1990]
PARTICIPATORY MANAGEMENT SCHEMES
707
conditional. 25 4 Accordingly, employees involved in participative
schemes that discuss only permissive bargaining subjects with employers arguably would not abrogate the exclusivity doctrine. 2 55
The distinction between mandatory and permissive bargaining
subjects also helps to define the term "conditions of work" 2 56 over
which the NLRA mandates that employers bargain with employees. 25 7 Thus, any topic which the courts or the NLRB do not determine to be a permissive subject of bargaining cannot be included in
the category "conditions of work." 2 58 At the current time, neither
employees nor employers can insist on a participative scheme that
allows employees substantive control over managerial decisions. 259
In this context, either party may request bargaining over the subject, but the collective bargaining agreement may not be made contingent upon agreement concerning the subject. 2 60 This
arrangement demonstrates that the subject of participative schemes
is discretionary for both the employer and the certified bargaining
unit.
If a participative group deals with issues that are mandatory subjects of bargaining outside the collective bargaining agreement, the
program presumably could be successfully challenged under section
9(a). 26 1 Consistent with this concept, the Supreme Court has declared it a violation of the duty to bargain if an employer bargains
over wages, hours, or terms and conditions of work with any other
254. Id.
255. See Lee, supra note 43, at 209 (arguing that scheme could only be challenged if it
extended to mandatory subjects of bargaining).
256. See National Labor Relations Act § 8(d), 29 U.S.C. § 158(d) (1982) (stating that
"[for the purposes of this section, to bargain collectively is... [to] confer in good faith with
respect to wages, hours, and other terms and conditions of employment. . ."); see also Note,
Employer's Duty to Bargain with Respect to Partial Termination of Business: First NationalMaintenance
Corp. v. NLRB, 36 Sw.L.J. 793, 795 (1982) (noting that NLRB has taken case by case approach
to classify subjects of bargaining).
257. National Labor Relations Act § 8(d), 29 U.S.C. § 158(d) (1982).
258. See Latrobe Steel Co. v. NLRB, 630 F.2d 171, 178 (3d Cir. 1980) (classifying issues
outside "core of wages, hours, and other terms and conditions of employment" as nonmandatory subjects of bargaining), cert. denied, 454 U.S. 821 (1981).
259. Fibreboard Paper Prods. Corp. v. NLRB, 379 U.S. 203, 223 (1964) (StewartJ, concurring). Justice Stewart stated:
Nothing the Court holds today should be understood as imposing a duty to bargain
collectively regarding such managerial decisions, which lie at the core of entrepreneurial control. Decisions concerning the commitment of investment capital
and the basic scope of the enterprise are not in themselves primarily about condi-
tions of employment....
Id.
260. NLRB v. Wooster Div. of Borg-Warner Corp., 356 U.S. 342, 349 (1958) (finding that
§§ 8(a)(5) and 8(d) make it unlawful for party to insist upon terms outside "wages, hours, and
other terms and conditions of employment").
261. Lee, supra note 43, at 209.
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unit other than the certified bargaining unit. 2 62 The continuing
threat of sanctions creates an environment in which discussions between participation groups and management become increasingly
2 63
prohibitive.
3. Impact on participativeschemes
The exclusivity doctrine poses some interesting questions when
examined in the context of participatory schemes. Any analysis
must accommodate the various environments in which a participative scheme will arise. The two predominant environments are the
organized employer and the unorganized employer. 2 64
In an unorganized environment, the exclusivity doctrine will not
adversely affect the ability of a participative scheme to communicate
with the employer. 2 65 In the absence of a union or other certified
organization representing the employees, conflict will not exist
when employees discuss issues with employers.2 6 6 As previously
noted, however, the issues discussed, the form of the employee
scheme, and the function of such discussions can be factors that de262. See National Labor Relations Act § 8(d), 29 U.S.C. § 158(a)(5) (1982) (stating that
"[ilt shall be an unfair labor practice for an employer to... refuse to bargain collectively with
the representatives of his employees . . ."); J. I. Case Co. v. NLRB, 321 U.S. 332, 339-40
(1944) (holding that bargaining with any group or individual other than certified bargaining
unit constitutes refusal to bargain).
263. See Address of William E. Brock, Sixteenth Constitutional Convention, AFL-CIO,
Anaheim, Cal. (Oct. 30, 1985) (discussing effect of Borg-Warner on cooperative schemes). The
flow of information from the participative scheme to management is crucial to the success of
these schemes. Id. at 24 (quoting address by W.Johansen, "A View from the National Labor
Relations Board - Current Board Developments," Second Annual Conference on Labor and
Employment Law in the United States, Tampa, Fla. (Feb. 7, 1986)). In NLRB v. Truitt Mfg.
Co., 351 U.S. 149 (1955), the Supreme Court declared that the exchange of information for
purposes other than verifying company claims at the bargaining table was permissive, not
mandatory. Id. at 153. This may have an adverse effect on participative schemes, which require an adequate flow of information between the parties involved in order to be successful.
See Fasman, Legal Obstacles to Alternative Work-Force Design, 8 EMP. REL. LJ. 256, 274 (1982)
(arguing that broad employee disclosure of information without ability to receive reciprocal
disclosure from employer may be detrimental to success of participative schemes).
264. Kohler, supra note 1, at 510.
265. See National Labor Relations Act § 9(a), 29 U.S.C. § 159(a) (1982) (providing exclusive representation only for "unit appropriate for such purposes ... of collective bargaining
.... "). The "appropriate unit" is defined by section 9(b), which states that the NLRB "shall
decide in each case whether, in order to assure to employees the fullest freedom in exercising
the rights guaranteed by [the Act], the unit appropriate for the purposes of collective bargaining ....
National Labor Relations Act § 9(a)-(b), 29 U.S.C. § 159(a)-(b) (1982). Accordingly, if the employees are unorganized and not certified for representation by the NLRB, the
organization has no right to exclusive bargaining, nor any statutory right to bargain at all.
266. See Note, supra note 34, at 1737 n.10 (recognizing that participation plans in unionized settings run afoul of exclusivity doctrine, unlike those implemented in non-unionized
settings); see also Address of William E. Brock, Sixteenth Constitutional Convention, AFLCIO, Anaheim, Cal. (Oct. 30, 1985) (recognizing exclusivity problem only in unionized
workplaces).
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PARTICIPATORY MANAGEMENT SCHEMES
709
termine whether a section 2(5) labor organization exists. 267 Thus, if
the NLRB finds that the participative scheme is a section 2(5) labor
organization, the employer may be forced to bargain with the employee representative in the traditional manner prescribed by the
NLRA, or risk domination charges. 268
Conversely, in an organized setting, the employer is completely
precluded from discussing any issues outside the collective bargaining process with an employee participative committee or group because of the narrow interpretation of the grievance proviso. 269 In
order for employee committees to discuss issues of production,
work environment, or any other issue, a union representative must
be involved in the process. 270 This presents two options. First, the
collective bargaining agreement may strictly delineate the issues
dealt with between the participative committee and the employer. 271
Second, members of the certified employee organization would have
to lead the employee representative committees. 272 Neither of these
options, however, provides the flexibility needed and supposedly
provided by the participative scheme. 273
Moreover, the artificial mandatory-permissive bargaining analysis
has stifled the necessary development of creative bargaining techniques that participative schemes require. 274 If a participative program does not provide the intended results, neither party may
mandate bargaining over that topic. 275 Instead, due to the judicial
267. See supra notes 125-78 and accompanying text (discussing § 2(5) labor
organizations).
268. See NLRB v. Cabot Carbon Co., 360 U.S. 203, 212 (1959) (finding that participation
scheme was § 2(5) labor organization, was dealing with employer, and was dominated).
269. See Sockell, supra note 27, at 554 (arguing that NLRB and courts will likely view participative schemes as violating union's exclusive status even where union demonstrates sup-
port for scheme).
270. See National Labor Relations Act § 9(a), 29 U.S.C. § 159(a) (1982) (stating "[tihat the
bargaining representative has been given the opportunity to be present.. ." when individuals
discuss grievances with employer outside collective bargaining arena).
271. This is the current practice of many unions which coexist with participation schemes.
See Spector, supra note 42, at 857 (describing UAW's collective bargaining agreement).
272. This is consistent with the intent of section 9(a) of the NLRA. Seesupra notes 225-40
and accompanying text (describing legislative history of § 9(a)).
273. See Sockell, supra note 27, at 541-42 (identifying purpose of participative schemes as
providing channel of communication to management outside formal collective bargaining
structure).
274. See NLRB v. Textron Div. of Borg-Warner Corp., 356 U.S. 342, 359-60 (1958)
(Harlan, J., dissenting). Justice Harlan recognized this problem and stated:
The bargaining process should be left fluid, free from intervention of the Board
[NLRB] leading to premature crystallization of labor agreements into any one pattern of contract provisions, so that these agreements can be adapted through collective bargaining to the changing needs of our society and to the changing concepts of
the responsibilities of labor and management.
Id.
275. Schlossberg & Fetter, supra note 1, at 611.
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THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 39:667
interpretation of the language and intent of the NLRA, the limitation imposed by the delineation of bargaining subjects must be construed narrowly so as to exclude all subjects that would not be
considered under the rubric of "terms and conditions," many of
which are the subjects of participative groups. 27 6
This narrowing of the employee bargaining units' ability to demand bargaining over subjects crucial to the work relationship detrimentally affects the power of the employees. 27 7 The fewer issues
that an employee organization is able to influence, the less control
they are able to wield in the collective bargaining process. The narrow construction of the section 9(a) proviso, combined with the narrow construction of the terms of mandatory bargaining,
demonstrates the limits of employees' ability to challenge employer
policy, both collectively and individually. By declaring these activities outside the protections of the NLRA, the Court has limited the
protections provided for employees.
4.
Recommendations
Congress should release employers from any requirement to bargain with organizations created under participative schemes. 2 78 Instead, courts and the NLRB should employ the following
presumptions in lieu of the piece-meal analysis created by the current treatment of participative schemes. The courts and the NLRB
should invoke these presumptions to prevent employer abuses that
may occur when implementing participative programs. There are
three settings in which these presumptions could be used with each
presumption tailored to the situation. These settings are: organ276. Typical issues with which participative schemes deal usually fall within the permissive
subjects of bargaining category, and therefore need not be discussed by management. See M.
PARKER, INSIDE THE CIRCLE: A UNION GUIDE TO QWL 47-48 (1985) (finding that only 50% of
subjects typically handled by participative schemes may be labeled mandatory).
Others believe the mandatory-permissive delineation is not an impediment to participative
schemes. LAws PROJECT 2D INTERIM REPORT, supra note 2, at 9 (comment of Prof. Richard N.
Block, Michigan State Univ. School of Labor and Industrial Relations) (noting that "[d]espite
the First National Maintenancecomment, I find it difficult to believe that ... cooperative programs would not be viewed as permissive subjects of bargaining under [Borg-Warner].. ");
Barkin, supra note 20, at 859 (finding that mandatory bargaining subjects should include
changes in business structure, relocation of operations, plant closings, subcontracting, consolidation, and asset disposal). Others have been quick to point out that the legislative history
concerning the phrase "terms and conditions of employment" is so sparse as to make the true
meaning difficult to ascertain. Note, Labor Law - An Employer's Decision to Terminate Partiallya
Business Operation Is Not a Mandatory Subject of Bargaining,56 TUL. L. REv. 1065, 1067 (1982).
277. See Fasman, supra note 263, at 256 (discussing Truitt doctrine and limitation on management's obligation to disclose information to employee organizations). See supra note 263
(discussing Truitt doctrine, which categorizes exchange of certain information as permissive
subject of bargaining).
278. See supra notes 172-78 and accompanying text (recommending no duty to bargain
with participative groups).
1990]
PARTICIPATORY MANAGEMENT SCHEMES
ized settings, settings in which an outside organizational campaign
27 9
is under way, and wholly unorganized settings.
When a party challenges a participative program in a wholly unorganized setting, the court should declare the program presumptively in violation of the NLRA. In order to overcome this
presumption, an employer must show: that there was no union organizing campaign in process when the participative scheme was implemented; 28 0 that the power granted to the employee participants
is not illusory; 28 1 and, that the participants will not lose their protected status due to changes in employment duties.2 8 2 This presumption gives section 8(a)(2) rights true "value." In other words,
absent immediate enforcement, the protections offered by the
NLRA have limited capability to deter the ills the Act sought to prevent. This presumption enhances the value of section 8(a)(2) and
allows employees to use the section as a bargaining chip to gain
additional protections.
If a participation plan is established in the context of a union organizing campaign, the NLRB should issue majority bargaining orders allowing the unions who are attempting to organize the
employees bargaining unit status for a period of one year.2 83
The
presumption of an employee majority in favor of organization,
which the NLRA's majority rule principle, embodied in section 9(a),
requires, is derived from the willingness of the employees to involve
themselves in participative schemes. 2 84 As a result, unions would be
able to bargain with employers on behalf of employees concerning
the issues to be dealt with by the participative scheme, as well as
other collective bargaining issues. This furnishes the employee or279. Lee, supra note 43, at 207. Challenges to participative programs come predominantly from an incumbent union or a union attempting to organize employees. Id.
280. See LAws PROJECT FIRST INTERIM REPORT, supra note 2, at 30 (recognizing labor concern that participatory schemes in unorganized setting can be used as sham to avoid
organization).
281. See supra notes 110, 118, 143 and accompanying text (discussing NLRB and court
treatment of employee organizations which can make unilateral decisions).
282. See supra notes 121-24 and accompanying text (recommending legislative revision of
§ 2(3)).
283. Lee, supra note 43, at 219; Note, New Standardsfor Domination and Support Under Section
8(a)(2), 82 YALE LJ. 510 (1973). But see LAws PROJECT FIRST INTERIM REPORT, supra note 2, at
24 (comment of Prof. Herbert R. Northrup, The Wharton School, University of Pennsylvania)
(asserting that forcing workers into unions would be "indecent travesty").
284. See NLRB v. Gissel Packing Co., 395 U.S. 575 (1969) (outlining presumptions of
employee majority in bargaining order context). This presumption in section 9(a) may operate similarly to a Gissel bargaining order where, although a majority of the employees had not
voted for a union representative, the court may certify the representative in the face of illegal
employer activities. Id. at 610-16. But see LAW PROJECT FIRST INTERIM REPORT, supra note 2, at
20 (comment of Sen. Orrin G. Hatch, Chairman, U.S. Senate Labor and Human Resources
Committee) (criticizing those who advocate cooperation with organized labor as essential ele-
ment of success).
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THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 39:667
ganization with the collective power to protect against feigned employer motives.
In an organized setting, the employer overcomes any presumption of anti-union animus associated with developing participative
schemes by bargaining with the appropriate union representatives
as to the scope and functions of the scheme. 28 5 This agreement
could be included in the collective bargaining negotiations and
would be subject to a reformed mandatory-permissive bargaining
2 86
subject doctrine.
This recommendation of loosening the mandatory-permissive
bargaining subjects doctrine is more appropriately mandated judi-
cially rather than legislatively, simply because the doctrine is judicially created. 28 7 Requiring employers and labor organizations to
bargain collectively over the terms of a participative scheme guarantees employees the opportunity to protect themselves from adverse
effects of the scheme and to determine the form, functions, and effects of the scheme. A proactive, not reactive, judicial system would
more efficiently provide certainty and protection of the basic rights
granted by the NLRA. 28 8 Moreover, requiring employers to bargain
with appropriate representatives regarding the effects of participative schemes will help to achieve the goals of the NLRA.
A second method by which an employer may overcome any presumption of anti-union animus in the organized context is to appoint a duly elected representative to the board of directors of the
company. Ideally, a participative scheme would take place at all
levels of the employment relationship. 28 9 Accordingly, a participatory scheme that allows employees true influence over management policies throughout the company, including the board of
directors, must be free from legal attack. 29 0 Because industry
285. See Alexander, supra note 1, at 701 (contending that employer motive easily is concealed or changed over time).
286. See infra notes 287-88 and accompanying text (recommending loosening of BorgWarner doctrine).
287. See Sharp, supra note 42, at 336 (noting that bargaining over seats on board of directors is permissive, not mandatory). Reformation is crucial to ensure that a two-tier system of
cooperation will be something more than a voluntary action on the part of the employer. Id.
288. See Houseman, American Labor Unions: Dependant Upon But Not Fairly Protectedby the Law,
36 LAB. L.J. 716, 718-22 (1985) (discussing labor law's failure to protect organized labor).
Members of Congress have recognized the failure of labor during the past decade. See The
Failure of Labor Law-A Betrayal of American Workers, Hearings before the Comm. on Education and
Labor, Subcomm. on Labor-Management Relations, 98th Cong., 2d Sess. (1984) (transcribing contents of series of hearings describing failure of domestic labor law).
289. See Craver, supra note 25, at 676 (arguing worker input to all levels of management is
necessary for true cooperation to take place).
290. The NLRA is not the only legal basis on which participative schemes can be challenged. As demonstrated in this section, the antitrust laws can be used for this purpose as
1990]
PARTICIPATORY MANAGEMENT SCHEMES
unionism creates ties between employees of competitors, however,
the placement of a union representative on a board of directors can
2 91
create possible antitrust liability.
The potential for an antitrust violation exists when a union has
representation on more than one board of directors in the same or
competing industries. 2 92 The government has prohibited these socalled "interlocking directorates" since the passage of section 8 of
the Clayton Act. 293 In order to prevent potential anti-competitive
behavior, section 8 proscribes a single "person" from sitting on the
board of directors of two competing companies. 29 4 Congressional
concern underlying section 8 was so compelling that the courts have
interpreted the Clayton Act as a per se rule against interlocking
2 95
directorates.
Whether union representation on the board of directors of two
competing companies violates the antitrust laws has been inconsistently interpreted by the Department ofJustice (DOJ) and the Federal Trade Commission (FTC). In an attempt by the United
Automobile Workers (UAW) to gain seats on the board of directors
of two competing companies, 2 96 DOJ noted that the term "person"
well. See infra notes 292-308 (examining issue of legality of union members on corporate
boards of directors).
291.
See Comment, Labor Unions in the Boardroom: An Antitrust Dilemma, 92 YALE LJ. 105,
111-16 (1982) (discussing conflicts between American unions and antitrust policy).
292. Id. (describing potential antitrust violations for participative schemes which place
union member on company board of directors). This subject received substantial attention
following the election of UAW President Fraser to the Chrysler Corporation board of directors and the subsequent attempt of the UAW to gain another seat on the board of American
Motors Corp. Address of William E. Brock, Sixteenth Constitutional Convention, AFL-CIO,
Anaheim, Cal. (Oct. 30, 1985), at 28.
293. 15 U.S.C. § 19 (1988). In relevant part, this section provides:
No person at the same time shall be a director in any two or more corporations, any
one of which has capital, surplus, and undivided profits aggregating more than
$1,000,000, engaged in whole or in part in commerce... if such corporations are or
shall have been theretofore, by virtue of their business and location of operation,
competitors, so that the elimination of competition by agreement between them
would constitute a violation of the provisions of any of the antitrust laws.
Id.
294. Id.
295. See United States v. Sears Roebuck & Co., 111 F. Supp. 614, 616 (S.D.N.Y. 1953).
The Court stated that:
[A] fair reading of the legislative debates leaves little room for doubt that, in its
efforts to strengthen the antitrust laws, what congress intended by § 8 was to nip in
the bud incipient violations of antitrust laws by removing the opportunity or temptation to such violations through interlocking directorates.
Id. The Federal Trade Commission has adopted the same approach. See Perpetual Fed. Say.
& Loan Ass'n, 90 F.T.C. 608, 619 (1977) (fashioning per se rule from § 8).
296. Address by William E. Brock, Sixteenth Constitutional Convention, AFL-CIO,
Anaheim, Cal. (Oct. 30, 1985). The UAW requested advisory opinions from any interested
government agencies concerning the appointment of a union official to the board of American
Motors Corporation (AMC). Id. At the time, the UAW maintained a seat on the board of
directors at the Chrysler Corporation. Id. The Department of Justice-Antitrust Division
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[Vol. 39:667
in section 8 has been interpreted as a "corporation or association"
as well as an individual. 2 97 DOJ, therefore, focused its analysis not
on whether a single individual representing a union sat on the board
of directors of two competing companies, but rather, whether the
individual sitting on either board was representing the individual's
interests or those of the union. 298
The DOJ issued no opinion in the UAW case because of the lack
of factual specificity.2 99 DOJ did imply, however, that the case
raised serious antitrust issues.3 00 The DOJ questioned the method
by which the UAW was attempting to attain two positions on the
boards of competing companies. 3 01 DOJ found that the UAW had
gained the seats by using their leverage at the collective bargaining
table and interpreted this method as a signal that the representative
would be acting as an agent of the union,30 2 thereby creating an
incentive for anticompetitive behavior. 30 3
In its examination of UAW's attempts to gain positions on the
board of directors of competing companies, the FTC reached a conclusion different from the DOJ's position.30 4 The FTC believed it
(DOJ) and the Federal Trade Commission (FTC) both replied to the request with advisory
responses. Compare Interlocking Directorates-Union Representation, 5 Trade Reg. Rep.
(CCH) 50,425 (Feb. 26, 1981) (reporting DOJ response finding potential violation) with
International Union, United Automobile Workers of America, 3 Trade Reg. Rep. (CCH)
21,822 (May 8, 1981) (reporting FTC response finding no potential violation).
297. See Interlocking Directorates-Union Representation, 5 Trade Reg. Rep. (CCH)
55,967 (discussing interpretations of § 8 "persons").
298. Id. DOJ stated that the inquiry crystallized to the question of "will it be in fact the
UAW that sits on the boards" of the two competing companies, rather than the individuals
representing their own interests? Id. The report stated that section 8 should apply to unions
because unions have "an incentive to become aware of and influence ... the commercial and
financial affairs" of the firms for which they work. Id.
299. Address by William E. Brock, Sixteenth Constitutional Convention, AFL-CIO,
Anaheim, Cal. (Oct. 30, 1985), at 28.
300. Id. The DOJ cited the uncertainties with regard to origin, duration, and the potentially changing nature of the plan as factors which prevented a conclusive ruling on the case.
Interlocking Directorates-Union Representation, 5 Trade Reg. Rep. (CCH) 55,967.
301. Olsen, Union Experiences With Worker Ownership: Legal and PracticalIssues Raised by ESOPS, TRASOPS, Stock Purchases and Co-operatives, 1982 Wis. L. REv. 729, 807.
302. Interlocking Directorates-Union Representation, 5 Trade Reg. Rep. (CCH) 55,967.
The DOJ pointed out that it was "the union itself that has demanded and gained AMC's
agreement to nominate a UAW member acceptable to the UAW for election to AMC's board
of directors." Id.
303. Id. The DOJ relied on two cases to establish a theory whereby a union would be
considered a "person" under section 8. See id. (discussing United Mine Workers v. Coronado
Coal Co., 259 U.S. 344 (1922) (finding union as association when applying 15 U.S.C. § 17
(1988)) and United States v. Cleveland Trust, 392 F. Supp. 699 (N.D. Ohio 1974) (finding
corporation as "person" and sitting on boards of competing companies through representative as defined by 15 U.S.C. § 12 (1988)). The FTC expressly rejected this line of cases,
reasoning that no other court has followed this theory. International Union, United Automobile Workers of America, 3 Trade Reg. Rep. (CCH) 22,056.
304. International Union, United Automobile Workers of America, 3 Trade Reg. Rep.
(CCH) 1 21,822 (May 8, 1981) (reciting FTC findings).
1990]
PARTICIPATORY MANAGEMENT SCHEMES
715
contrary to congressional intent to apply antitrust strictures to
union representatives sitting on a board of directors. 30 5 The FTC
focused primarily on two aspects of the case: the construction of
section 8 of the Clayton Act, and whether union leaders, as directors, pose the threat that the Clayton Act was intended to prevent.3 0 6 The FTC found that UAW's intentions to separate the two
directors, thereby preventing any sharing of information,3 0 7 failed
30 8
to make the case the type Congress intended to be per se unlawful.
Other remedial measures exist to prevent union leaders from using their positions on boards of directors for anti-competitive purposes without rendering all such activity per se unlawful. 30 9 Union
leaders who violate antitrust laws are more appropriately punished
after the violation. Punishing mere potential violators too often will
310
sacrifice the advantages of participatory schemes.
As evidenced by the FTC's and DOJ's stances, organized labor's
31
participation on boards of directors is of questionable legality.
To prevent antitrust charges against labor organizations whose
members are directors of competing companies, Congress must
grant the NLRB power to review the placement and activities of
union members on boards of directors.3 12 Analysis should focus on
whether there is an actual conflict of interest, not whether a potential conflict exists.3 13 Absent a finding of actual conflict, the NLRB
305. Id.
306. Id. 22,055. The FTC stated that if section 8 were read to prohibit this type of
arrangement it would "preclude particular labor-management relationship which may not
present the risk of competitive harm at which section 8 was aimed." Id.
307. Id. 1 22,057.
308. Id. 22,055.
309. See Comment, supra note 291, at 111-12 (noting possible remedial actions). Examples of remedial actions include state corporate laws that prohibit the breach of fiduciary duty
to the stockholders, and the Sherman Antitrust Act which prevents conspiracies to limit competition. Id.
310. See Harper, supra note 1, at 14-17 (describing benefits produced by labor representation on board of directors).
311. See supra notes 296-313 and accompanying text (discussing application of antitrust
laws to participatory schemes).
312. The courts have recognized the often competing policies of labor and antitrust law.
See Connell Constr. Co. v. Plumbers & Steamfitters Local Union No. 100, 421 U.S. 616, 622
(1975) (noting that proper accommodation between collective bargaining under NLRA and
free competition in markets require that some collective bargaining agreements be accorded
limited nonstatutory exemption from antitrust laws); Local Union No. 189 v. Jewel Tea Co.,
381 U.S. 676, 689 (1965) (noting certain terms cannot be included in collective bargaining
agreement which would violate antitrust laws, but other terms are afforded exemption because of competing interests).
313. See Craver, supra note 25, at 687 (suggesting that "Chinese Wall" approach be implemented to prevent conflicts of interest from materializing). The Chinese Wall would limit the
flow of information to the employee representatives which otherwise would place the representatives in a potential conflict of interest situation. Id.
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[Vol. 39:667
should yield to labor's opportunity of achieving a broad level of participation and validate the plan.
IV.
A NEW FRAMEWORK OF ANALYSIS: PROTECTING
WORKERS' RIGHTS
The preceding analysis concludes that participatory programs of
almost any type are illegal under the current statutory scheme. The
developing split in participative jurisprudence, however, has created
uncertainty. 31 4 The analysis also demonstrates that the developing
labor law is narrowing the ability of employees to organize and to
protect their rights.3 1 5 If the United States is committed to protecting the rights of labor, Congress and the courts must adjust their
focus and value structure.3 1 6 The economic, social, and legal structures upon which Congress developed the current labor law no
longer exist.3 17 Moreover, developing industrial relations jurisprudence is doing little to assist labor in the long run.3 18 In addition,
the current collective bargaining scheme is remedial, not preventive.3 19 It has long been recognized that in order to protect itself,
314. See Beaver, supra note 136, at 237 (maintaining that judicial analysis of participative
schemes are without common method of inquiry or analysis); Perline & Poynter, The Effects of
Worker ParticipationPlans on Union Views of Managerial Prerogatives,40 LAB. L.J. 37, 43 (1989)
(contending that labor and management have trouble instituting participative schemes because of fear of legal challenge).
315. See supra notes 107-19 and accompanying text (arguing judicial and NLRB application of § 2(3) has narrowed scope of employees protected by NLRA); supra notes 166-71 and
accompanying text (arguingjudicial and NLRB application of § 2(5) has allowed participative
schemes which do not fit in legislative intent); supra notes 210-17 and accompanying text
(arguing judicial and NLRB application of § 8(a)(2) has allowed participative schemes which
would qualify as dominated unions under statutory intent); supra notes 264-77 and accompanying text (arguing judicial and NLRB application of § 9(a) has been construed to detriment
of employees); supra notes 290-312 and accompanying text (arguing agency application of § 8
of Clayton Act has prevented employee representatives from assuming positions of true influence in domestic corporations).
316. See Bahrami, supra note 8, at 168 (listing change in attitude and behavior of management and labor as fundamental prerequisite for successful cooperation); Deitsch, supra note
75, at 790 (listing accommodation by courts "within framework of traditional employee organizing and bargaining rights" as prerequisite for cooperation).
317. See Klare, supra note 1, at 70 (discussing structural changes); see also LAWS PROJE-r 2D
INTERIM REPORT, supra note 76, at 2 (comment of David B. Ellis, Esq.) (maintaining that NLRA
is out of touch with trends in labor relations). But see Wash. Post, Nov. 30, 1986, § H, at 6, col.
3 (interview with Sec. of Labor William E. Brock) (recognizing attitudes of management from
1930s are still in place); Alexander, supra note 1, at 701 (finding current use of participative
schemes by employers similar to use prior to passage of NLRA); Bahrami, supra note 8, at 176
(noting need for labor law reform because current system stands as impediment to cooperation and productivity improvement).
318. See Bahrami, supra note 8, at 168 (listing labor law reform as one prerequisite for
successful cooperation). Bahrami notes that cooperation is a "long-term and continuous process which does not pay off in a short period of time." Id. at 170. Moreover, Bahrami believes
that improved cooperation may bring about a change in labor law by itself. Id. at 177.
319. See Deitsch, supra note 75, at 787 (discussing remedial aspects of current collective
bargaining). The remedies provided, however, are almost totally ineffective due to the time
delay in having an unfair labor practice reviewed by the NLRB. See Weiler, Promises to Keep:
1990]
PARTICIPATORY MANAGEMENT SCHEMES
717
320
labor must be able to organize freely in autonomous affiliations.
As organized labor is on the wane, it becomes necessary for leaders
3 21
to take appropriate action.
The need for an increasingly flexible industrial relations system is
becoming ever apparent.3 2 2 Participative schemes have been beneficial to a limited extent and should assist the United States in the
drive to remain competitive in an increasingly global economic community.3 23 The losses that will be incurred, however, can only lead
Securing Workers' Rights to Self-Organization Under the NLRA, 96 HARV. L. REV. 1769, 1787-1803
(1983) (describing available remedies to unfair labor practices and their ineffectiveness because of time delay). Statistics have also been compiled to demonstrate the ineffectiveness of
remedies when granted:
There has been a geometric increase in the number of employees unlawfully discharged because of their labor organizations. In 1957, 922 Section 8(a)(3) discharges were directed reinstated in NLRB proceedings, while, by 1970, the number
of such illegally terminated individuals had risen to 3779. By 1980, the number of
such illegally terminated individuals exceeded 10,000. In fact, during 1980, one out
of every twenty employees who voted in favor of union representation in Labor
Board reinstatement orders was illegally discharged, presumably the primary organizers. Labor Board reinstatement orders are frequently ineffective, since only
about 40 percent of unlawfully terminated workers actually accept reinstatement offers, and of those who do, approximately 80 percent leave their employer within two
years. Although employers who engage in significant unfair labor practices during
organizing drives may find themselves encumbered by remedial bargaining orders
... only about 35-40 percent of labor organizations that obtain such remedial bargaining directives ever achieve collective contracts.
Craver, The NLRA at Fifty: From Youthful Exuberance To Middle-Aged Complacency, 36 LAB. LJ. 604,
612 (1985).
320. See LAws PROJECT 2D INTERIM REPORT, supra note 76, at 30-31 (listing benefits unions
have provided and asserting that unions are essential to pluralistic society); Klare, supra note
16, at 44 (describing organized labor as essential); see also Galeson, The HistoricalRole ofAmerican Trade Unionism, in UNIONS IN TRANSITION 39, 39 (Lipset ed. 1986) (finding unions to be
democratic force with role of dispersing power).
321. SeeJ. Dunlop, 194 Daily Lab. Rptr. (BNA) (Oct. 7, 1985) (asserting redesign of labor
law should not come from lawyers, but rather must come from labor and management, followed by public and legislative review).
322. See Bahrami, supranote 8, at 167. Bahrami points out the need for both static flexibility, such as the ability to adjust quickly in the near future, but also dynamic flexibility which
enables a company to maintain long-term competitiveness through increased productivity.
Id. at 170. Dynamic flexibility needs new technology and long-term orientations. Id. at 171;
see Barbash, The New IndustrialRelations, 37 LAB. LJ. 528, 529 (1986) (noting that management
will try to restore flexibility). The Office of Economic Research of the New York Stock Exchange found that by 1982, at least one third of the Fortune 500 companies had some form of
participation scheme in place. Perline & Poynter, supra note 279, at 39. The most recent
report on the extent of participatory schemes found over 80% of the Fortune 1000 had implemented some type of employee involvement program. See Current Developments, 186 Daily
Lab. Rptr. (BNA) at A9 (Sept. 27, 1989).
323. See LAws PROJECT 2D INTERIM REPORT, supra note 104, at 25 (asserting participation is
necessary element in future success of American industry).
Some have argued that the benefits of an overall improved industrial relations will diminish
as the focus shifts from the company level to the macro economy. See Adkins, supra note 21, at
543 (discussing labor aspects of shift to macro economies). Adkins also notes that the competitive position of the United States is not due to one factor. Id. at 544 (listing government
policies, research and design, management policies, educational systems, as well as industrial
relations, as contributing factors to competitive decline).
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THE AMERICAN UNIVERSITY LAW REVIEW
[Vol. 39:667
to a backlash of organization 324 and workers' rights legislation.3 25
Accordingly, although participative schemes should be permitted to
continue, there are steps that must be taken to minimize their adverse effects on labor and add a necessary level of democracy to our
3 26
economic system.
A new framework for NLRB and judicial analysis is necessary to
prevent the continued derogation of workers' rights. A framework
that promotes participative schemes that place labor representatives
on the board of directors of companies and institutes participative
schemes on the shop floor will accomplish these goals. 32 7 A two-tier
structure of cooperation that will allow employees to influence managerial decisions while preserving the benefits and flexibility that
participative schemes provide is required.3 28 The first tier would
embody the traditional adversarial relationship between labor and
management, with negotiations, bargaining, and agreements taking
place at the board of directors level; the second tier would be a
more cooperative, yet organized structure on the shop floor. This
structure permits labor representatives to influence traditional managerial prerogatives while simultaneously permitting the benefits of
participative schemes on the shop floor to continue to accrue.
To achieve this two-tiered scheme of cooperation, several steps
324. See Raskin, Organized Labor-A Movement in Search of a Mission: Implicationsfor Employers
and Unions, 4 LAB. LAw. 41, 45 (1987) (predicting social backlash due to mistreatment of organized labor); Sharp, supra note 42, at 353 (describing public sympathy which arose around
United Food and Commercial Workers strike against Hormel Co. in 1986 as evidence of radical unionism potential).
325. See Raskin, supra note 324, at 53 (stressing result of continued reduction of organized
labor credibility will result in increased legislation in labor relations); see also Craver, supra
note 25, at 652 (stating public backlash against unions might cause legislation abrogating
workers' rights); Bahrami, supra note 8, at 177 (predicting increased presence of government
will result from union avoidance); Sharp, supra note 42, at 53 (predicting increased intervention by government should labor movement falter); LAws PROJECT FIRST INTERIM REPORT,
supra note 2, at 31 (hypothesizing absence of unions would require legislation to fill void
currently occupied by union presence); Stepp, supra note 6, at 460 (arguing that "industrial
relations abhors a vacuum" and that government would surely fill vacuum created by weakened organized labor).
326. See Alexander, supra note 1, at 696 (claiming "participation can reduce basic contradiction between democratic ideology and work place authoritarianism"); Note, supra note 37,
at 2038 (noting that any change will have to account for diversified interest due to distribution
of capital in United States); Sharp, supra note 42, at 323 (considering recent participative
programs as attempts at achieving democracy). But see LAws PROJECT FIRST INTERiM REPORT,
supra note 2, at 26 (noting some commentators find cooperation undesirable); E. Mandel, The
Debate on Workers' Control, in WORKERS' CONTROL 345, 355-56 (Hunnius, Garson & Case eds.
1973) (identifying participation as another method of management control).
327. See supra notes 289-91 and accompanying text (recommending board of director level
participation by union leaders).
328. See Craver, supra note 25, at 676 (stating that if participation is to work, labor must
have representation from the shop floor to the boardroom). Irving Bluestone, former president of the AFL-CIO has noted: "[wie can be cooperative on the plant floor and adversarial
at the bargaining table ... ", quoted in Deitsch, supra note 75, at 789; see also Klare, supra note 1,
at 3 (arguing for democratization at upper tiers of firm's governance as well as lower levels).
1990]
PARTICIPATORY MANAGEMENT SCHEMES
719
must be taken. First, ensuring that those who Congress intended to
protect are not removed from the protections of the NLRA because
of their involvement in participative schemes will dissipate any wariness on the part of employee participants.3 29 Second, releasing employers from concerns involving whether shop floor committees
create a labor organization allows the flexibility needed to ensure
success of the enterprise and the program.3 3 0 Third, focusing on
the ability of the participative scheme to implement decisions unilaterally or to have their relationship with management predetermined
through the collective bargaining agreement will prevent domination, and employees may gain an extra bargaining chip in their relations with the employer.3 3 ' Fourth, ensuring that the organization
with which the employer is "dealing" is the appropriate bargaining
unit within the statutory scheme-the certified bargaining unit and
not the participatory groups-eliminates the need to expand the
proviso in section 9(a) and will prevent any scheme from falling
within the proviso.3 3 2 Fifth, removing participative schemes from
the mandatory-permissive bargaining structure will encourage true
dialogue to take place.3 3 3 Finally, imposing interlocking directorate
charges only against those labor leaders who actually violate the
doctrine allows the two-tier structure to progress absent artificial restraints on board of director participants.3 3 4 This framework forces
courts and the NLRB to examine the participative scheme as a
whole, rather than merely scrutinizing particular portions of the
scheme in a piecemeal method.
CONCLUSION
The analysis and suggestions contained in this Comment are intended to add new ideas to the current debate surrounding the legality of participatory schemes in the context of the United States
industrial relations system. Removing artificial restraints on true
participative schemes while simultaneously ensuring that the protections needed by employees are maintained promotes true coopera329. See supra notes 120-24 and accompanying text (recommending legislative change to
overturn Yeshiva doctrine).
330. See supra notes 172-78 and accompanying text (recommending release of potential
employer obligation to deal with shop floor participative schemes).
331. See supra notes 219-24 and accompanying text (recommending waivability of § 8(a)(2)
protections).
332. See supra notes 278-86 and accompanying text (recommending imposition of presumptions to protect employees during implementation of participative scheme).
333. See supra notes 287-88 and accompanying text (recommending judicial loosening of
Borg-Warner doctrine).
334. See supra notes 309-13 and accompanying text (recommending need for finding of
actual conflict of interest prior to finding of antitrust violation).
720
THE AMERICAN UNIVERSITY LAW REVIEW [Vol. 39:667
tion between labor and management. The key consideration to any
change in the statutory structure must focus on the workers. As a
result, the current trend in which participative schemes dictate
workers' rights must be reversed. Instead, concern for workers'
rights must inspire legislative revision of the laws affecting participative schemes.