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Reflecting on the Rand Formula as Ontario’s Tories Target Their Union Foes

In the Ontario Conservative Party’s policy paper on labour relations, there is a lot of talk about bringing in a new law that would prohibit employers and unions from bargaining a contract term that requires employees to (1) become union members and (2) pay union dues.  

The Conservatives lump both of these together under the slogan “forced unionism”.  But mandatory membership and mandatory dues are very different things, raising different concerns and arguments, and should not be lumped together.  The “Rand Formula” which is often cited in these debates rejected mandatory union membership, but accepted mandatory union dues.  The former is harder to justify. That the latter is sensible,  fair, and equitable has never been questioned by politicians of any stripe in Canada, until the far right incarnation of the current Ontario and Federal Conservative parties.

The U.S. Situation

In most US states, there is no prohibition of mandatory dues or membership.  In 24 states, laws prohibit contract terms that require union membership and/or mandatory dues.  Most states passed these laws decades ago, but Republican controlled governments in Indiana and Michigan did so last year.   Here’s the relevant text of the Michigan law:

Michigan’s New Ban on Mandatory Union Membership and Dues Collection:

(1) AN INDIVIDUAL SHALL NOT BE REQUIRED AS A CONDITION OF OBTAINING OR CONTINUING EMPLOYMENT TO DO ANY OF THE FOLLOWING:

(B) BECOME OR REMAIN A MEMBER OF A LABOR ORGANIZATION.

(C) PAY ANY DUES, FEES, ASSESSMENTS, OR OTHER CHARGES OR EXPENSES OF ANY KIND OR AMOUNT OR PROVIDE ANYTHING OF VALUE TO A LABOR ORGANIZATION.  

(2) AN AGREEMENT, CONTRACT, UNDERSTANDING, OR PRACTICE BETWEEN OR INVOLVING AN EMPLOYER AND A LABOR ORGANIZATION THAT VIOLATES SUBSECTION (1) IS UNLAWFUL AND UNENFORCEABLE.

All through the U.S., unlike in Canada, unionized workers have the ability to opt out of a portion of their dues that would be used for “political activities”.  That right derives from a court decision, not any particular piece of legislation.  I haven’t seen a study that explains what percentage of workers bother to exercise this right, but the basic law on this opt out option is explained nicely in Ben Sach’s (Harvard Law School) paper available at this link. It would be possible for a Canadian government to legislate some sort of opt out of a portion of dues that goes towards political campaigns, or to require that portion of dues to be reassigned away from political activities and to collective agreement administration or to a charity, for example, like we do with religious objectors.  No government has done that yet.

False Claims About the Economic Impact of Laws About Union Membership and Dues

Republicans (and now the Tories)  argue that these laws have a direct positive impact on employment levels.  However, these arguments are political smokescreen that smart people should ignore.  A nice assignment for labour law students would be to go find peer-reviewed articles by independent scholars (i.e. researchers that are not working for anti-union, corporate funded think tanks) who look at the impact of these laws.  They refute the big claims that simply changing a law about union security can alter the aggregate economic landscape of a state.   This is summarized nicely in a non-partisan report prepared for the U.S. Senate, which concludes after surveying the many studies on the impact of what American’s call “Right to Work” (RTW) laws:

In assessing the potential effects of expanding RTW, existing empirical research is inconclusive. Comparing outcomes in states with and without RTW laws can provide limited perspectives on possible effects of these laws, but states’ economies are extremely complex and even the most sophisticated studies are unable to fully isolate the effects of varied union security policies. Furthermore, the variation in findings among researchers suggests that no consensus will be reached in the near future. As such, the ongoing debate on RTW may be driven by factors other than rigorous empirical evidence.

The ”other factors” includes politics, principally the desire by Republicans and now Canadian Conservatives to silence a voice that criticizes them, often effectively, during political election campaigns.

The Ontario Conservatives reference two studies in their policy paper, both of which were published by anti-union corporate funded think tanks (the Pacific Research Institute (p.  8) and the Cato Institute (p.  9).  These ‘studies’ have no credibility to real researchers and would never pass peer review in a respected economic journal.  Some of the claims in these papers are just looney. For example, in the paper published by Cato, the author observes long time population growth in the Sunbelt States that ban mandatory dues, and concludes that the explanation lies in the fact that people move because they love the extra personal freedom of being able to opt out of union dues!  The vast majority of American workers will never work in a unionized workplace, regardless of the state they live in (union density in the private sector is 6%).  So union dues laws are very far from people’s minds when the decide where to live.   Republican states that ban union dues collection also tend to have very low taxes.   Many also happen to be in sunny warm climates, and have low housing prices.  And so on.  However, according to the Cato paper, the ability to opt out of paying union dues in the highly improbable event they get a job in a unionized workplace is so important to people that they are prepared to work for far less money–average wages in states that ban mandatory dues are 16% less than in states that allow it–and pack up their families and move to new states.

It’s that nutty argument that the Tories are citing when they claim on p. 9 of their Pathways paper that in the last decade, “more than 5 million Americans have moved from states where union financial support is mandatory to states where it is voluntary.  Modern union rules in these jurisdictions give individuals control over their paycheques and workers follow.”  This  suggestion that Americans decide where to live based on an obscure union dues laws that most Americans are not even aware of would be funny, if it weren’t being used by a serious political party to design Canadian public policy. The sorts of ‘studies’ the right wing think tanks disseminate are designed to promote a predetermined argument that favours the interests of their antiunion donors, not to advance knowledge.  But they serve their political purpose, which is to give the Republicans and corporations (and the Hudak’s of the world) something to point to as “evidence”  of how changing a simple rule about union dues collection can produce thousands of jobs.  Expect to hear Hudak, other Conservatives, and corporate spokespeople repeating this claim over and over again in the months to come.

The Mandatory Union Membership Issue

Our present law in Ontario doesn’t require employees in a bargaining unit to become union members, unlike for example the legislation in Saskatchewan.  Therefore, if workers are required to become members, it’s because a majority of the bargaining unit employees voted in a ratification vote for a collective agreement that includes a mandatory union membership clause.  Our entire labour relations system is based on the principle of majority rules. However, Hudak’s argument is that a majority of workers should not be able to force any single worker to become a union member against their will.  We don’t think a majority of workers should be able to impose a racist contract term on a minority,  so we prohibit that from happening in Human Rights statutes.  Similarly, the argument goes, we should not allow for mandatory union association against employee wishes, since a freedom ‘not to associate’ should be protected as much as a freedom to associate.  Do you agree with that argument?

Some collective agreements do have clauses that require union membership as a condition of continued employment.  I don’t know what percentage.  People with legitimate religious objections can opt out.

Many other collective agreements don’t require union membership. For example, when I was hired by York University, I was automatically covered by the collective agreement between York and the York U. Faculty Association. If I wanted the job, then that was the condition.  That means I have to pay union dues (about 1 % of my wages, tax deductible), for which I receive the whole range of collective agreement benefits and protections.   The extended benefits package YUFA bargained alone saves my family far more money each year than my union dues cost, so this is a very good deal for me. However, I have never signed a union membership card, nor was I ever asked to.  The collective agreement does not require union “membership”.  So a new law prohibiting contract clauses that require union membership would have no impact on me or YUFA at all.  Many other unionized workplaces would be the same.

But if forced union membership is the problem that the government is worried about, then it could pass a law banning it, like Section 1(B) in the Michigan law.  That would mean that workers could choose not to be a union member even if they are covered by a collective agreement.  By not becoming a  union member, workers might, depending on the governance structure of the union, forfeit the right to participate in the union’s democratic functions, like electing union leaders, participating in policy debates, and running for positions in the union.  They would not be entitled to any benefits the union offers its members outside of the collective agreement.  For example, some unions offer their members free or subsidized legal services, pension advice, dental services, or daycare. They would also not be governed by any rules that apply only to union members, including rules that prohibit or impose a fine for crossing a picket line, for example.  However, workers who declined to become union members would still be entitled to all of the benefits union members receive under the collective agreement, because Section 74 of the Labour Relations Act requires unions to administer the collective agreement on behalf of all bargaining unit members, even those who are not union members.

Mandatory Union Dues

The Tories don’t stop at complaining about union membership, however.  They also want to allow workers covered by a collective agreement to have the option of receiving the benefits in the collective agreement without having to pay anything towards the costs of bargaining, administrating, and enforcing those benefits.  That’s why these laws are often called “Right to Free Ride” laws. The proposed law presumably would ban contract clauses that require bargaining unit employees to pay union dues (like section 1(c) in the Michigan law), so that unions would have to manually collect dues from each worker.  This is designed to slow the flow of funds to unions, which help to elect opponents of Conservatives and Republicans. Attacking union revenue flows is the main purpose of laws preventing mandatory dues, which explains why it is always Conservatives and Republicans that push for these laws. These are highly politicized laws.

A law that bans only forced union membership would not address the real purpose of the law, which is to cut off union funds.  Republicans and the Tories don’t really care about union membership numbers; they do care about union funding. That is why they need to support a right of workers to free ride — to receive all of the benefits of unionization without paying for them.  No political party in Canadian history, until the modern day Harper and Hudak Tories, not even Mike Harris, have ever argued that allowing free-riders is a good idea for public or workplace policy.

Now, under  Ontario law, a union dues clause of the sort Hudak would abolish also only makes it into a collective agreement if a majority of employees voted for it to be there in a mandatory ratification vote. There is no law in Ontario that requires unionized employees to pay union dues; it is a collective agreement term that requires that.  If a majority of bargaining unit employees wanted a dues opt out option, they could insist that one be included in the agreement, and refuse to ratify any collective agreement that doesn’t include this option.  I said earlier that forced membership might be justified as an exception to the normal rule that decisions for a bargaining unit are made by majority rules, on the basis that people should have  the freedom not to associate, not to become a member.  But what about the payment of a fee? Should a majority of workers be entitled to vote for a contract term requiring everyone who benefits from the collective agreement to pay the same small fee towards the costs of obtaining and enforcing those benefits?

This is a different sort of argument.  Paying a fee to a union for a service provided is no more intrusive on personal freedom than paying taxes to a government we don’t like and didn’t vote for.  Paying dues to a union doesn’t mean I support the union, anymore than paying Ontario taxes means I support the Liberal Party.  It’s just payment for a service.  The argument for personal freedom is far weaker for mandatory dues than for mandatory union membership.  Mandatory union dues clauses avoid the ‘free-rider’ problem in the workplace the same way that mandatory taxes avoid the free rider problem in our political system.  If people could opt out of paying taxes whenever they don’t like the party that wins the election, and yet still be able to access hospitals, roads, and schools for free, then our entire democratic system would break down.  We don’t take seriously the argument that taxes are undemocratic or a violation of liberty or personal freedom.  Is there something fundamentally different about a contract term, approved by a majority of workers, that requires every one to contribute the same small amount towards the cost of administrating the union that a majority of the workers chose as their representative?

What the “Rand Formula” Required

This whole debate comes back to the insights offered by Justice Ivan Rand way back in his famous 1946 interest arbitration award that have formed the foundation of Ontario’s approach to these issues for many decades.  The Rand Formula he devised in this decision was supported by Conservatives, Liberals, and the NDP alike as a sensible and fair balancing of individual and collective rights.  If you haven’t read that decision, you should.

Here is the 1946  decision that explained and defined the famous Canadian compromise known as the Rand Formula.

The context was a nasty strike at Ford in Windsor. The Union was trying to bargain a ‘union shop’ clause with mandatory dues checkoff. In other words, workers would need to become union members after they were hired, and pay union dues.  The company was refusing. A very nasty strike ensued that is part of Canada’s labour history.  The matter was referred to Justice Rand to resolve.

On mandatory union membership, Rand said this:

22   Basing my judgment on the principles which I think the large majority of Canadians accept, I am unable in the circumstances to award a union shop. It would subject the Company’s interest in individual employees and their tenure of service to strife within the union and between them and the union which, with extraordinary consequences, in one instance has proved a serious matter for the Company concerned: and it would deny the individual Canadian the right to seek work and to work independently of personal association with any organized group. It would also expose him even in a generally disciplined organization to the danger of arbitrary action of individuals and place his economic life at the mercy of the threat as well as the action of power in an uncontrolled and here an unmatured group.

So, Rand declined to include a mandatory union membership clause in the collective agreement.

However, on the question of mandatory union dues, he found that all bargaining unit employees covered by the collective agreement should have to pay their fair share of the costs incurred by the union:

 

On the other hand, the employees as a whole become the beneficiaries of union action, and I doubt if any circumstance provokes more resentment in a plant than this sharing of the fruits of unionist work and courage by the non-members. It is irrelevant to try to measure benefits in a particular case; the protection of organized labour is premised as a necessary security to the body of employees.But the Company in this case admits that substantial benefits for the employees have beenobtained by the union, some in negotiation and some over the opposition of the Company. It would not then as a general proposition be inequitable to require of all employees a contribution towards the expense of maintaining of maintaining the administration of employee interests, of administering the law oftheir employment.

Rand: "Entirely equitable" to Require Workers to Pay Union Dues

 

I consider it entirely equitable then that all employees should be required to shoulder their portion of the burden of expense for administering the law of their employment, the union contract; that they must take the burden along with the benefit.  The obligation to pay dues should tend to induce membership and this in turn to promote that wider interest and control within the union which is the condition of the progressive responsibility.  If that should prove to be the case, the device employed will have justified itself. The union on its part will always have the spur to justify itself to the majority of the employees in the power of the latter to change their bargaining representatives.

It may be argued that it is unjust to compel non-members of a union to contribute to funds over the expenditure of which they have no direct voice; and even that it is dangerous to place such money power in the control of an unregistered union. But the dues are only those which members are satisfied to pay for substantially the same benefits,  and as any employee can join the union and still retain his independence in employment, I see no serious objection in this circumstance. The argument is really one for a week union. Much more important to the employee will be the right which is being secured to his in the conditions to be attached to the check-off, to have a voice in that of which he is now a victim, the decision to strike. Whether the constitution of the union is sufficiently democratic in securing the powers of the member or such money power is dangerous are matters which concern the members and the public. The remedy lies essentially in the greater effectiveness  of control in the members; but outside interference with that internal management is obviously a matter of policy for the legislature. Apart from the strengthening of the union on which I have made observations in these reasons, I see no special interest of the employer as such in these possible dangers and in the present state of things, those who control capital are scarcely in a position to complain of the power of money in the hands of labour.

Questions for Consideration:

Rand resolved the Ford dispute by imposing a mandatory union dues clause, but not a mandatory union membership clause.  Do you agree that this is a sensible compromise?

Tim Hudak argues that while majority rules is a good system for most labour relations issues—like union certification, collective agreement ratification, strikes, and decertifications—it is not appropriate for deciding if workers should become union members or pay union dues.  In these two instances, majority rules democracy must be replaced by a system that gives each worker the individual right to decide. Do you agree with that position?

Hudak references European countries and New Zealand as countries that do not permit mandatory unionism.  The inference is that Ontario needs to ‘catch up’ to those countries.  What he doesn’t mention is that these countries do not condition access to collective bargaining on majority employee support.  Thus, one option that would solve Hudak’s problems with ‘forced unionism’ would be to follow the lead of the countries he cites and do away with majority unionism altogether.   If employees want a union, they can have one, and the employer must bargain with it.  If you don’t want a union, then don’t have one.  This New Zealand scholar estimates that if America changed its majority rules system (which is similar to Ontario’s)  to the New Zealand non-majority system Hudak references, unionization levels could increase by as much as 30 percent! What do you think of that model?

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5 Responses to Reflecting on the Rand Formula as Ontario’s Tories Target Their Union Foes

  1. Andy Reply

    January 25, 2013 at 8:02 pm

    A great read; thanks!
    I don’t know much about labour law, but I understand that an employer with a unionized workforce can’t hire non-union members outside the collective agreement (with lower wages and benefits) – right?
    Is Hudak proposing anything that would change that?

    • Doorey Reply

      January 26, 2013 at 9:37 am

      Andy, a unionized employer cannot enter into individual employment contracts with employees whose jobs fall within the bargaining unit covered by the collective agreement. So far, Hudak has not suggested he would change that.

  2. Don Jordan Reply

    January 29, 2013 at 9:37 pm

    Frankly , out here on the west coast, I was not fully aware of the extent of the “Pathways” suggestions. I would have thought that “free rider” issue was long resolved. There is really no sensible rejoinder to the assertion that if you are going to enjoy the terms and conditions established by collective bargaining you ought to help defray the cost of establishing and administering them. The far more difficult issue is what constitutes , to use Justice Rand’s language,costs properly payable by non-members associated with taking the burden of “administering the law of their employment”. Do those costs include donations to political parties, charitable donations, funding of studies etc. The intersting question for your students is whether Justice Rand would think that funds obtained under the “Rand Formula” from persons not electing to become members could be used ,under his analytic framework, for expenditures like this. I think the answer is that his whole analysis for requiring mandatory dues is premised on payment for the services rendered and not to support other causes which may be dear to the heart of those who elect to be members.

  3. Richard Reply

    February 1, 2013 at 2:21 pm

    The CPC is currently attempting to require that union financials be completely transparent. In the context of the above article,it now makes much more sense. If they can discern how much money is being contributed to political causes, it will make the notion of splitting/withholding a portion of union dues an easier sell to the public and likely union members.

    If only we could make “…those who control capital..” (to use Justice Rand’s words) as transparent and accountable. I wouldn’t be adverse to withholding the $/litre of gas that accounts for lobbying and political donations by oil interests.

  4. Fernando Reis Reply

    February 2, 2013 at 10:35 pm

    Thnks for this very thorough analysis. In the end, the right to work for less agenda has nothing to do with individual freedom but its only purpose is to starve unions financially. Recently, my labour organization spent 3 days studying the impact a right to work for less law would have on our organization. Out of our 66000 members, most staff believed that 60% of those we currently represent would opt not to pay dues, not because of anything our union did or din’t do, but simply bacause there would be no obligation to pay. If I could opt out of paying property taxes I certainly would (especially with Rob Ford as our mayor). Hudak is upset about the union movement and the working families group campaigning against him. The right only believes in democracy when it suits their needs.

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