Reconciliation Bill Makes Small Businesses an Offer They Can't Refuse

COVID-19 and the lockdowns devastated small businesses. Now the reconciliation bill could increase their pain. The draft House bill contains little-noticed language that could cripple small businesses.  

Currently employers who commit unfair labor practices (ULPs) must make injured workers whole, but they do not pay punitive damages. The reconciliation bill fines businesses that commit up to $50,000 per violation. It also imposes personal liability on business owners and officers, along with the firm.

On the surface this seem like a minor change. It is already illegal to discriminate against union supporters. However, the reconciliation bill does not limit its penalties to serious ULPs. It adds fines for all unfair labor practices. National Labor Relations Board (NLRB) career staff would decide how big a fine to seek.

This matters because federal labor law is very technical. Many things that most Americans — and small business owners — would assume are legal violate the National Labor Relations Act (NLRA). For example, an employer facing a union drive generally may not ask employees about their frustrations and how the company could improve. That is “soliciting grievances.” Nor may they ask employees about their feelings toward the union. That is “interrogation.”

Worse, the rules change constantly. The Obama NLRB ruled common workplace civility policies were illegal. Under their rules employers could not tell workers to “be respectful of others and the company” or not to “make fun of, denigrate, or defame your co-workers, customers, franchisees, suppliers, the company, or our competitors.” The Trump NLRB reversed these policies. Now the Biden NLRB plans to bring them back.

Big businesses can afford expensive lawyers to navigate these requirements. Many small businesses cannot. They often trip over these complex and shifting labor rules. This is why businesses with fewer than 500 workers employ half the private sector, but get four-fifths of ULP complaints.

Currently, small businesses that commit technical ULPs need only repair any damage done. The House reconciliation bill hits them with potentially massive punitive damages. While the bill tells the NLRB to “consider” the “gravity” of the offense, it ultimately leaves the penalty determination to the Board. This puts small business owners in a squeeze.

Consider, a small business owner with 30 employees. During a union drive she asks them how she can improve their workplace. The union could file ULP charges. The House bill punishes soliciting grievances 30 times with up to $1.5 million in fines against her business, and as much again against her personally. The NLRB could show leniency, but she would be at the mercy of highly ideological career staff. And she would still owe $1 million even if the NLRB sought one-third of the maximum fine. She would also incur massive legal fees. This small business owner faces potential bankruptcy — unless the union drops the complaint.  

Therein lies the rub. Unions can make her legal problems disappear … for a price. These penalties would enable unions to pressure small businesses into giving up their rights.

Federal law does not require secret ballot elections before companies unionize. Rather, employers may request a vote when unions claim workplace support. In the 1990s unions shifted their organizing tactics away from persuading workers in these elections. They concluded it was easier to “organize employers, not employees” — as one union organizing guide put it — because “[e]mployees are complex and unpredictable. Employers are simple and predictable.”

Unions now try pressure employers to recognize them without an election. They do this by “making them pay for operating nonunion.” This strategy works. The AFL-CIO reports most new members unionize this way.

Civil monetary penalties for minor ULPs would provide unions enormous leverage. They would let them credibly threaten small businesses with massive fines. While big businesses can afford these damages, small business owners often cannot. Many would have to cave – denying their employees a secret ballot election.

Unions tried getting rid of secret ballot elections before. “Card check” was a nonstarter even for the supermajority Democratic Congress of President Obama’s first term. It was just too unpopular. Four-fifths of union members support secret ballot elections.

Adding penalties to all ULPs would advance card-check through the back door. They would not formally end elections. But unions could pressure small businesses into not requesting them. Notably the bill does not penalize union ULPs. Unions do not want in the same boat.  

These penalties could also become law. “Reconciliation” allows financial provisions to bypass the senate filibuster. Since these penalties would affect federal revenues, the senate parliamentarian may allow them into the reconciliation bill. If so, they can pass on a party-line vote.

Workers should have the right to unionize. But union representation should come through their free choice — not economic pressure to prevent an election. Unfortunately, the reconciliation bill may enable just that. Union organizers may soon be making small businesses an offer they can’t refuse.

Linda McMahon is Chair of the Board of America First Policy Institute (AFPI) and also serves as the Chair of AFPI’s Center for the American Worker. Previously she served in President Trump’s Cabinet as administrator of the Small Business Administration (SBA).