A Seat at the Table: Sectoral Bargaining for the Common Good

A Seat at the Table: Sectoral Bargaining for the Common Good

We must once again imagine a legal regime that encourages workers’ collective activity and gives their organizations real power in the governing process.

Fight for $15 protesters in New York, where sectoral bargaining produced a major increase in the minimum wage (Erik Mcgregor/Pacific Press/LightRocket via GettyImages)

There is growing consensus among left-leaning union leaders, scholars, and public policy experts that fundamental labor law reform is necessary, not only to fix a broken labor and employment regime but also to address the nation’s staggering economic and political inequality. According to conventional wisdom, however, more social democratic approaches to labor relations—for example, enabling bargaining for all workers on a sectoral basis—are in deep conflict with American traditions.

A largely forgotten moment in U.S. history draws that conventional account into question. The Fair Labor Standards Act (FLSA), first enacted in 1938, a few years after passage of the National Labor Relations Act (NLRA), empowered tripartite industry committees of unions, business representatives, and the public to set minimum wages on an industry-by-industry basis. For about ten years, industry committees successfully raised wages for hundreds of thousands of Americans while helping facilitate unionization and a more egalitarian form of governance. Though the committees were limited in their scope and power, they were an important component of a broader struggle to democratize the economy, the workplace, and the government itself. Recovering this history can help inspire more ambitious alternatives in the future.

As many observers have noted, the rise of inequality over the last few decades is closely related to the decline of unions. More than a third of U.S. workers once belonged to unions, helping to raise wages and benefits throughout the economy and giving workers a collective voice in the workplace and in politics. Now, unions represent roughly a tenth of the labor market, and only about 6 percent of the private sector workforce. While any number of factors help explain the drop in union density, it’s clear that the U.S. system of labor law bears significant responsibility for the withering of unions in this country.

The NLRA promises to protect the right to organize, to bargain collectively, and to strike. But the statute fails to offer meaningful protection in practice: enforcement mechanisms are weak, penalties are minimal, delays are lengthy, and employers are legally permitted to engage in a wide range of anti-union activity, like “predicting” negative consequences of unionization, closing down in response to unionization, and permanently replacing striking workers.

Moreover, although the economy has become increasingly globalized and fissured, labor law still channels bargaining and concerted activity to the worksite level. Workers at a single workplace have little power when negotiating with multinational employers, and even less ability to transform conditions along a supply chain or throughout an economic sector. In addition, the law excludes from its protections many of the most vulnerable workers, including domestic workers, agricultural workers, and independent contractors, who make up a growing portion of the workforce, at least as classified by employers.

Employment law, which protects workers on an individual basis, doesn’t fill the void left by a broken labor law. Most non-union workers are employed “at will” with few rights at work and few protections against termination. Federal law and most state laws lack guarantees of paid family leave, vacation, or sick time; statutory minimums do not provide the wages or benefits necessary to keep a family out of poverty. Government enforcement of employment law is lax and violations are rampant, particularly in low-wage workforces. Effective private remedies are often unavailable because of mandatory arbitration clauses and the difficulties of class certification. As with labor law, many workers are excluded from employment law’s coverage. In short, both labor law and employment law have failed American workers.

Against this backdrop, there is growing support among union leaders, policymakers, and academics for a different approach to labor law—a system that would protect all workers’ rights to organize, strike, and bargain for a decent livelihood, not just at individual worksites, but across each economic sector. Scholars have shown through a number of comparative studies that power-sharing over decisions about wages, benefits, and the economy through comprehensive systems of sectoral bargaining achieves more egalitarian outcomes than firm-based bargaining alone.

Still, many argue that such a system is out of step with America’s more minimalist approach to labor relations. According to the conventional account, the United States has always been committed to government neutrality on unionization, required bargaining only at the enterprise level, and kept labor and employment law as distinct regimes (except briefly during wartime emergencies and under the failed National Industrial Recovery Act of 1933). It’s a system in which workers have little say over the direction of the political economy.

The history of FLSA challenges this account. Today, FLSA guarantees minimum wages and overtime rights. It is a relatively modest statute. But FLSA’s original ambition was much greater. The statute was designed to operate in tandem with the NLRA by implementing a system of tripartite industry committees. These committees were tasked with negotiating minimum wages on an industry-by-industry basis. In short, FLSA’s backers aspired not just to ensure subsistence wages, but also to empower unions to negotiate for all workers, to build a more egalitarian political economy, and to remake the very structure of American democracy.

The enactment of the FLSA’s industry committees followed a multi-decade effort by unionists, feminists, socialists, and progressive intellectuals to resist turn-of-the century laissez faire economics and to democratize the political economy. They were convinced that political problems and economic problems were inextricably linked, and that treating the latter required addressing the former. In their view, democracy could not function in the context of great disparities in wealth and required institutional commitments that went beyond the franchise. To that end, Progressive Era reformers sought to rebalance the power of labor and capital. They believed that the working class needed to be organized and that the state needed to ensure the ground rules to enable such organization.

FLSA’s industry committees grew out of these ideological commitments. The bill’s strongest backers in Congress and the executive branch saw the minimum-wage law as a way to ensure a system of basic equality that extended into the political, economic, and social realms. Tripartite industry committees were one way to further this goal; they would engage unions in governing the political economy, while helping to expand the reach of union-negotiated rights to unorganized workers, particularly in the non-union South.

The American Federation of Labor (AFL) had previously resisted universal minimum-wage laws on the ground that labor conditions, at least for “able-bodied” men, were better left to private negotiation than to governmental supervision. But the organization eventually came around to support the bill. Meanwhile, the newly founded Congress of Industrial Organizations (CIO), welcomed a more universal approach to labor relations. Leaders of industrial unions, like Sidney Hillman of the garment workers union, embraced the idea of intertwining labor and employment law; in Hillman’s view, the FLSA could serve as a mechanism to enhance collective bargaining and help reduce downward wage pressure on organized shops and the related problem of capital flight.

Unsurprisingly, industry groups like the Chamber of Commerce and conservatives in Congress, many of whom objected to any legislation on wages, vigorously opposed using FLSA to support tripartite bargaining. They argued it would create a morass of government bureaucracy and would be controlled by particular interests that could not possibly provide fair representation for all.

Despite business opposition, FLSA passed by a vote of 291 to 89 in the House and a similar margin in the Senate. President Roosevelt signed the bill into law on June 27, 1938. The new statute required the administrator of the Department of Labor’s Wage and Hour Division to define different sectors of the economy, and then to appoint representatives from labor, business, and the public to committees that represented each of these sectors. The committees were tasked with proposing industry-specific minimum wage standards, which could be greater than the universal minimum though they could not exceed the upper bound set by the statute. The committees were to be evenly divided among labor, business, and public representatives.

In practice, the industry committees’ work was a mix of bargaining and administrative decision-making. The committees conducted fact-finding missions and grounded their conclusions using statutory criteria. But the decision-making emerged from compromise between business and labor, with the public committee members acting as referees, albeit usually ones supportive of labor. Committee recommendations did not have the force of law until the administrator approved them after a public hearing, but the scope of his power was limited. He could not alter a recommendation; he could only veto it, and only for failure to meet statutory standards. Public hearings were collective events, with union members and business leaders showing up and testifying in large numbers.

In the end, the industry committees were a great success at their admittedly limited task. They were widely deemed efficient and effective. Seventy industry committees were established between 1938 and 1941, and their wage orders covered 21 million workers. Unions used the process to launch organizing campaigns and to raise awareness about workers’ plight. They took seriously their responsibility to represent non-union workers, viewing the process as a way to undertake a form of collective bargaining for unrepresented workplaces. For example, when a forty-cent minimum went into effect in the millinery industry, Max Zaritsky, president of the United Hatters, Cap and Millinery Workers International Union, AFL, commented that he considered it “one of the most significant gains of our organization and our people in recent years.” The forty-cent minimum wage spurred a new organizing drive among the hatters. Union organizers visited homes of workers and “pointed out that for the enforcement of the order they must depend not only on the government whose facilities are limited, but upon a strong union which would see to it that there were no violations or that if there were violations, those guilty would be punished.” The CIO was similarly aggressive in capitalizing on FLSA to promote organizing. Its weekly newspaper regularly featured stories about FLSA, and locals created a system for educating workers about the wage orders and enforcing them. They urged workers to submit any FLSA complaints through the union, emphasizing that such a method would trigger protections provided by the NLRA. The CIO initiated wage recovery suits on behalf of large groups of employees and organized picket lines and strikes to oppose violations of FLSA.

By the mid-1940s it looked like the United States might expand its tripartite system to give unions formal bargaining power over an array of economic and social welfare policy questions. War boards established during the Second World War provided a potent model. But the AFL revived its longstanding opposition to governmental involvement in labor relations and opposed making the National War Labor Board’s tripartite sectoral bargaining permanent. Business and conservative forces, particularly white Southerners hostile to the empowerment of black laborers, mobilized even more forcefully in opposition. In 1947, Congress decisively changed the statutory and regulatory landscape by passing the Taft-Hartley Act over President Truman’s veto, significantly curtailing labor rights.

Against this background, a proposal to expand FLSA’s industry committees was soon rejected. In 1949 the tripartite approach was abandoned. FLSA’s industry committees were not accused of self-dealing or inefficiency, as had been the case with committees under the earlier National Industrial Relations Act. But rising hostility to unions, the opposition of Southern Democrats to the extension of labor rights to African-American workers, and divisions within the labor movement meant that there was insufficient support for a continuation or expansion of government-facilitated sectoral bargaining. A weakened Democratic Party and an embattled, divided labor movement were willing to trade the committee system for a new minimum wage increase. Tripartism and sectoral bargaining all but disappeared from core federal labor and employment statutes.

The FLSA industry committees show us that within the broad statutory framework that still exists today, worker organizations were once granted formal power in policymaking and the capacity to bargain for all workers in an industry. Their history also blurs the line that today exists between labor and employment law. At the outset, unions were given a role in the implementation of FLSA, and FLSA was seen as a way to advance unionization. In the current moment, which bears so much similarity to the vast inequality, concentrated political power, and corporate-friendly judiciary of the Gilded Age, we should revisit the ideas that workers, sympathetic political leaders, and intellectuals advanced during the New Deal.

For now, it’s unrealistic to expect any move to empower workers to negotiate over expansive labor and social welfare regulation at the federal level. But reforms along the lines of the early New Deal are possible at the state and local level. Federal labor law preemption forecloses nearly all state and local labor law legislation, but employment law does not face the same hurdles. Several states, including California and New York, already have tripartite commissions vested with the power to set wages and other standards. These commissions have existed for generations and have intermittently operated to bring labor and management together under state administrative supervision to set standards on an industry-by-industry basis. For example, in 2015, after growing protests and strikes organized by Fight for $15, the New York labor commissioner exercised his authority to impanel a wage board to recommend higher wages in the fast-food industry. The board members—representatives from labor, business, and the general public—held hearings over the next forty-five days across the state. Workers organized by Fight for $15 participated in great numbers at these hearings. On July 21, the board announced its decision: $15 per hour for fast-food restaurants that are part of chains with at least thirty outlets, to be phased in over the course of six years, with a faster phase-in for New York City. The wage board order was a significant victory, followed by another victory: a bill to raise the state-wide minimum wage to $15.

Support for such reform is growing across the country. Since 2012, over two dozen states and many more localities have raised their minimum wages. Even during the election that brought President Trump to victory, minimum-wage increases prevailed when they were on the ballot. So too have regulations providing for paid leave and other benefits. These new laws have emerged out of organizing campaigns that frame the demand for better employment rights and social welfare benefits as part and parcel of the demand for union rights. Some, like the 2015 restaurant worker wage increase in New York, have even emerged from sectoral bargaining among unions, employers, and the state.

Meanwhile, the recent teacher strikes in Los Angeles, West Virginia, Arizona, Colorado, and Oklahoma represent another form of worker-driven sectoral bargaining. Teachers are organizing not just at one school, or in one neighborhood, but across their cities and states. Like the early New Deal efforts, the new teacher union movements collapse traditional divides between areas of law while offering an ambitious vision for reform. That is, the teachers demand not just fair wages and good benefits for themselves, but also adequate education funding for their students. And they demand the right to negotiate about those matters on a sectoral basis. Hotel workers, Google employees, and airport workers also are engaging in broad-based collective action at levels not seen for several decades. These movements, too, are not just seeking better conditions at individual worksites; they are demanding change across their sectors, while challenging the basic assumptions underlying current workplace law. From this on-the-ground organizing, the outline of a new, or revitalized, model of labor law is emerging that would allow workers to build strong unions at their worksites while also giving them a seat at the table in decisions about the direction of the broader political economy.

The precise contours of any future labor law remain uncertain, but the need for reform is clear. Taking a cue from the early twentieth century, we might once again begin to imagine a legal regime that both encourages workers’ collective activity and gives their organizations real power in the governing process. We might begin to imagine a more enduring democratic and egalitarian political economy.

Kate Andrias is a Professor of Law at the University of Michigan Law School.

This essay draws from an article, “An American Approach to Social Democracy: The Forgotten Promise of the Fair Labor Standards Act,” originally published by The Yale Law Journal Company, incorporated in the Yale Law Journal, vol. 128, pp. 616–709 (2019).