Magazine article Management Review

Legal Traps in Employee Committees: Although Quality Circles Are a Popular Vehicle for Improving Productivity, They Can Violate Labor Laws

Magazine article Management Review

Legal Traps in Employee Committees: Although Quality Circles Are a Popular Vehicle for Improving Productivity, They Can Violate Labor Laws

Article excerpt

We have entered a critical period in our nation's labor history. Archaic patterns of labor-management conflict are crumbling as employers and employees discover the power of teamwork. As leading U.S. companies have sought to improve quality and productivity, they have experimented with various forms of employee involvement in an effort to sustain a competitive edge.

These programs, known as quality circles, employee participation programs or employee improvement teams, have become a popular vehicle for improving productivity throughout U.S. workforces. In fact, almost 9 million full-time employees are involved in some type of employee involvement committee program, according to a 1988 study by the U.S. General Accounting Office.

While different approaches have been tried, all employee involvement programs share certain common attributes: Workers meet on company time to discuss workplace issues and make recommendations for changes.

Many American businesses will attest to the success of these employee committees, but they also must be alerted to the legal restrictions that surround such efforts. If an employer fails to adhere to legal restrictions, it may be forced to dissolve such groups should they classify as "labor organizations" under the National Labor Relations Act (NLRA).

History Lessons

A look at the history of labor is necessary to understand why programs that clearly are beneficial to both employers and employees could be considered unlawful. When the NLRA was approved in 1935, Congress defined a labor organization very broadly. Section 2(5) defines a labor organization as any organization of any kind, or any agency or employee representation committee or plan (1) in which employees participate; (2) that exists for the purpose, in whole or in part, of dealing with employers; and (3) that deals with concerns, grievances, labor disputes, wages, rates of pay, hours of employment or conditions of work. Section 8(a)(2) makes it unlawful for an employer to interfere with, support or dominate a labor organization.

Half a century ago, the aim of these provisions was to prevent employers from setting up sham unions, referred to as "employee committees" or "company"' unions. The broad sweep of this definition was upheld by the Supreme Court in 1959, in NLRB (National Labor Relations Board) vs. Cabot Carbon. In that case, an employer had formed participatory committees at the suggestion of the War Labor Board to provide a "procedure for considering employees' ideas and problems of mutual concern." Those committees were found to be unlawful employer-dominated labor organizations by the NLRB and ultimately the Supreme Court. Cabot Carbon was ordered to disband the committees.

Since that decision, the NLRB and various courts have had repeated opportunities to further develop the meaning of a "labor organization" within the framework of Cabot Carbon. Unfortunately, cases since then, while often purporting to rely on Cabot Carbon, have taken a number of seemingly unrelated routes of analysis in examining the labor organization status of employee committees. Moreover, all recent decisions have failed to consider current developments in employer-employee relations.

The determination of whether an employee committee is unlawful under the Act is based on a two-fold inquiry. First, does the employee group meet the definition of a labor organization? Since the purpose of employee committees is to generate employee participation, the first two elements of the statutory definition of labor organizations almost always are present in any employee involvement system. The third element, however--the "dealing" concerns grievances, labor disputes, wages, rates of pay, hours of employment or conditions of work--is more problematic and reflects the nature of the group the employer has formed.

If the employee committee meets the definition of a labor organization, the second inquiry is whether the employer has dominated or interfered with the formation or administration of the committee, or contributed support to it. …

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