The Striker Replacement Doctrine as Seen by a Management Attorney
By JEREMY P. SHERMAN

An employer's right to hire permanent replacement workers to continue operations during a strike has been recognized by the Supreme Court since its Mackay decision in 1938. (1) Nevertheless, organized labor and its advocates have repeatedly called for repeal of the Mackay doctrine.

Overturning or limiting Mackay would likely be high on organized labor's legislative agenda if the Democratic party succeeds in retaking the White House in 2008, just as it was in the 1990s during the term of the Clinton Administration. On March 8, 1995, President Clinton issued Executive Order 12954, forbidding federal agencies from contracting with employers that permanently replace lawfully striking employees. The Executive Order, however, was struck down by the United States Court of Appeals for the District of Columbia Circuit, holding that “[n]o state or federal official or government entity can alter the delicate balance of bargaining and economic power that the National Labor Relations Act (NLRA) establishes, whatever his purpose may be.” (2)

This delicate balance of bargaining and economic power reflects almost 70 years of jurisprudence since Mackay . Proposals to repeal Mackay risk undermining this balance, with adverse consequences for collective bargaining and for the economy.

The NLRA's Delicate Balance

Many economic factors can influence a union's decision whether to strike as well as an employer's response. The right to strike is the union's ultimate economic weapon. Indeed, the mere threat that a union might shut down a business by withholding the labor of its members is a powerful weapon. The use of such a threat, along with the union's exercise of its strike weapon, is part of collective bargaining. As the Supreme Court has recognized, “a strike when legitimately employed is an economic weapon which in great measure implements and supports the principles of the collective bargaining system.” (3) That is because our collective bargaining system is premised upon the belief that economic pressure promotes industrial peace by encouraging compromises that are essential to the making of voluntary agreements. (4)

Mackay holds that an employer is not required to discharge a replacement worker, hired to fill a job vacated by a striker, in order to permit immediate reinstatement rights for the striker upon the end of the strike or the striker's election to return to work. The ability of an employer to offer jobs to replacement workers that are “permanent” (in the sense that the replacement workers are not faced with displacement whenever strikers elect to return to work) can be of critical importance to an employer's ability to continue operations during a strike.

A temporary job is far less attractive than a “permanent” job, making it easier for an employer to recruit permanent replacements. Given the training or technical demands of certain jobs, reliance on temporary workers to continue operations during a strike may be cost prohibitive or otherwise impractical. As such, an employer faced with the challenge of recruiting replacement workers to continue operations during a strike is competing in a very different labor market when hiring permanent as opposed to temporary replacements.

The Mackay doctrine is also a legitimate counter-measure to the strike weapon in the sense that a work stoppage is not limited to a particular period of time or duration. Under Mackay , a returning striker may have to wait indefinitely in order to resume working in the job he or she abandoned to participate in the strike. Similarly, for an employer, the length of a potential strike is uncertain.

In general, an employer may not offer employment to permanent replacements on better terms than it has offered to the union. (5) An employer, moreover, does not have the unlimited ability to hire (or threaten to hire) permanent replacements for strikers. Permanent replacements can only be hired if a strike is deemed an “economic strike,” i.e. , a strike intended to force employer compliance with the union's legitimate bargaining demands. An employer can't hire (or threaten to hire) permanent replacements in the context of an “unfair labor practice strike” or a lockout. Additionally, an economic strike can be “converted” into an unfair labor practice strike at any time during the labor dispute.

Also, an employer may face liability towards replacement workers for breach of contract if it promises the replacements “permanent” status and then breach that promise by displacing them in favor of returning strikers.(6) In short, just as the union contemplating a strike faces the substantial risk that its members may not be able to secure immediate reinstatement to their jobs if the employer hires permanent replacements, so too, the employer contemplating use of permanent replacements faces substantial risks not knowing in advance whether the strike will be found to be an “economic” as opposed to an “unfair labor practice” strike. Again, these countervailing risks result in a delicate balance that promotes collective bargaining and restrains the opportunistic resort to economic weapons.

As the possibility of a work stoppage approaches, it is virtually assured that a union will fire off a volley of unfair labor practice charges against the employer. This is a tactical maneuver aimed at deterring the employer from using its permanent replacement defensive weapon. Regardless of the substance of such charges, an employer must act cautiously as it may be weeks, if not months, before the National Labor Relations Board (NLRB) completes its investigation and makes a preliminary determination regarding the merits of the charges. In addition, even if the underlying reason for the strike is “economic” in the sense it is over wages or benefits, the NLRB will label the strike an “unfair labor practice strike” if the alleged unfair labor practice is a contributing cause of the strike (or its prolongation).

What this means is that employers who wish to preserve the option to hire permanent replacements are mindful of the importance of resolving doubts in favor of actions that demonstrate their good faith in bargaining and otherwise lawful conduct. Because the NLRB's unfair labor practice adjudication can take years, an employer that guesses wrong about whether the strike is an “economic strike” rather than an “unfair labor practice strike” in terms of the use of permanent replacements risks huge liability for back pay and other make-whole relief. (7) This exposure to potential liability is an incentive for pristine employer behavior at the bargaining table in the context of a labor dispute. The behavioral incentives that promote collective bargaining would not exist if the Mackay doctrine were repealed.

If a union knew in advance that an employer could only hire temporary strikers replacements, it would be more likely to risk a strike knowing that its members would be assured of immediate reinstatement. Suddenly, a statute based upon the free play of market forces would be redesigned to eliminate the check on the union's demands that is served by the counter-measure of permanent replacements. This would make labor settlements more difficult to achieve and would encourage opportunistic behavior.

Economic Weapons and Market Forces

The purpose of the National Labor Relations Act is to promote industrial peace within the context of the marketplace. The goal of a strike is to shut down an employer's operation. The law protects the right of workers to engage in strikes and other concerted activities for their mutual aid and protection. But workers who engage in such economic warfare are not free to do so without regard to the competitive forces at play in the marketplace.

If a union knows in advance that an employer cannot hire permanent replacements, labor disputes will be decided on a basis other than the free play of market forces. Such an outcome threatens to harm both collective bargaining and the economy.

Neither side is compelled to make concessions over wages, hours and working conditions under our system of collective bargaining. For that reason, it is vital to the economic accommodation that is at the heart of this system that each side weighs the other side's ability to employ its arsenal of economic weapons to extract concessions. Along these lines, the Supreme Court has stated:

"The presence of economic weapons in reserve, in their actual exercise on occasion by the parties, is part and parcel of the system that the Wagner and Taft Hartley Acts have recognized." (8)

Over the years, the National Labor Relations Board and the courts have repeatedly reaffirmed the Mackay doctrine. For all of these reasons, the Mackay doctrine should be preserved.

Notes

1. NLRB v. Mackay Radio & Tel. Co. , 304 U.S. 333 (1938).
2. Chamber of Commerce v. Reich , 74 F.3d 1322, 1336 (D.C. Cir. 1996).
3. NLRB v. Erie Resistor Corp. , 373 U.S. 221, 233-34 (1963).
4. NLRB v. American Nat'l Ins. Co. , 343 U.S. 395, 401-02 (1952).
5. NLRB v. Erie Resistor Corp. , 373 U.S. 221 (1963).
6. Belknap, Inc. v. Hale , 463 U.S. 491 (1983).
7. Mastro Plastics Corp. v. NLRB , 350 U.S. 270 (1956).
8. NLRB v. Insurance Agents International , 361 U.S. 477, 489 (1960).

Jeremy P. Sherman is national chairperson of the labor and employment law department at Seyfarth Shaw LLP.

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