Labor unions are commonly associated with big business and giant industries, but many small business owners find that unions are not limited to the government sector or to corporate behemoths such as General Motors, UPS, and Boeing. Labor unions are not as powerful or as plentiful as they were a few generations ago. But they remain a vital component of the American business landscape, and many small businesses rely on union employees for their operations. Indeed, all small business owners who employ workers should have a basic familiarity with the fundamentals of U.S. labor laws, since they offer protections to union and nonunion employees alike.

The likelihood that a small business will employ a unionized work force is predicated on a wide range of factors, including industry, geographic location, traditional strength of union presence, and the nature of the work involved. A Midwest-based business involved in the transportation industry, for example, is more likely to utilize union employees than a restaurant nestled in the heart of the traditionally non-union American South.

But whether the business is unionized or not, owners must recognize that they and their employees are, to some degree, destined to exist in what Marc J. Lane, author of Legal Handbook for Small Business, characterized as a state of conflict. "You and your coowners …are dedicated to effecting cost economies wherever you can, and, as owners of capital, you may claim both the right and the obligation to decide how best to use that capital," wrote Lane. "Your rank-and-file employees, on the other hand, are striving for the best compensation package and working conditions they can, and, since their jobs may be lost to business reverses, they may feel that they are entitled to have some influence on decisions." It is this desire for compensation and influence that are the underpinnings of labor unions' attraction, for as Lane noted, "generally speaking, no one employee can usurp managerial authority, but a united organization of employees can effectively bargain with employers to gain a major role in business decision making."


Hundreds of U.S. laws have some bearing on employee and employer rights and obligations in one area or another, but experts agree that six cornerstones of American labor law are the National Labor Relations Act of 1935 (NLRA), the Labor Management Relations Act of 1947 (LMRA), the Fair Labor Standards Act of 1938 (FLSA), the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA), the Civil Rights Act of 1964, and the Occupational Safety and Health Act of 1970.

THE NATIONAL LABOR RELATIONS ACT This act, which created the National Labor Relations Board (NLRB), gives employees the right to organize and bargain collectively with their employers—in essence, it gives them the right to unionize. Importantly, it also confers legal protection on employees who try to organize their fellow workers into a union. It is worth noting, however, that this legislation also protects nonunion employees from being forced or otherwise coerced into joining a labor organization or engaging in collective bargaining. The act ensures that employees can choose their own representatives for the purpose of collective bargaining, establishes procedures for secret-ballot elections, and defines unfair labor practices, to which both employers and unions are subject. This law is also known as the Wagner Act.

LABOR MANAGEMENT RELATIONS ACT Also known as the Taft-Hartley Act, this legislation amended the National Labor Relations Act in ways that are generally thought to benefit business owners and management. While it forbade businesses from launching unwarranted or sudden lockouts of union employees, it also imposed restrictions on some union activities in the areas of organizing, picketing, striking, and other activities. It also outlawed the "closed shop" (which required that employers hire only union members) and gave the government the power to obtain injunctions against strikes that "will imperil the national health or safety" if they take place or continue.

FAIR LABOR STANDARDS ACT This act, also known as the Wage-Hour Act, "establishes fair labor standards in employments in and affecting interstate commerce, and for other purposes," wrote Donald Weiss in Fair, Square, and Legal. "It protects all workers, including children and women, by establishing minimum hourly wages and distinguishing between non-exempt employees (those to whom you must pay overtime for hours in excess of forty hours a week) and exempt (those to whom you do not have to pay overtime)." Weiss noted that many employers view this law as pro-worker, but he added that the Act does provide employers with a significant freedom to shape "specific forms of compensation or benefits not covered by the law," including gifts, special bonuses, travel and other reimbursable expenses, retirement/pension plans, and insurance plans.

LABOR-MANAGEMENT REPORTING AND DISCLOSURE ACT The Landrum-Griffin Act, as this legislation is sometimes known, was in large measure shaped to regulate the internal affairs of unions and to provide additional safeguards to ensure that the rules laid out in the Labor Management Relations Act of 1947 were adhered to.

CIVIL RIGHTS ACT OF 1964 This landmark legislation prohibited employers from discriminating in their hiring practices on the basis of race, religious beliefs, gender, or natural origin.

OCCUPATIONAL SAFETY AND HEALTH ACT OF 1970 This legislation, which created the Occupational Safety and Health Administration (OSHA) established guidelines and regulations to make workplaces safer and healthier for employees. "Each employer shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his [or her] employees," read one portion of the Act.


"If workers exercise their right to organize, employers should know what their rights are," wrote Harrison G. Darby and Margaret R. Bryant in HRMagazine. Indeed, some analysts believe that smaller business establishments may be more likely to encounter union organizing activities in the late 1990s than in previous years, given the AFL-CIO's stated intentions of approaching the work forces of smaller firms with greater zeal.

Historically, most business owners have not greeted unions with open arms because of concerns about their impact on bottom-line profitability and operational control. This viewpoint remains prevalent today, which has led consultants to make a number of recommendations to small- and mid-sized business owners hoping to ward off union organizers. "Employers need to make preparations now—before there are any signs of union activity—and teach their managers how to immediately and lawfully respond to union organizing efforts," wrote Darby and Bryant. "As union leaders commit serious money, time, and attention to organizing new members, employers should heed any warning signs and take steps to prepare for a union campaign. The best preparation is to anticipate issues that a union would be likely to raise and minimize the potential for union support. By identifying and correcting vulnerabilities, employers can blunt the edge of a union's strategy."

Darby and Bryant also noted that there are certain solicitation and distribution rules that union organizers and supporters must adhere to, but they added that such rules "must be promulgated before the start of union activity to avoid a charge of unlawful retaliation." These rules include bans on union literature, restrictions on internal efforts to convince employees to sign union authorization cards, and prohibitions expressly forbidding outside organizers from any activity on company property.

UNIONIZATION BIDS AND POSSIBLE MANAGEMENT RESPONSES If a union is able to garner sufficient interest from a business's employees (30 percent of the work force is a rule of thumb), then it may petition the National Labor Relations Board for an election by secret ballot to determine whether the work force will join the union in question (a 50 percent response may result in union recognition even without the holding of an election). Writing in the Legal Handbook for Small Business, Lane indicated that "if you [the small business owner] and your lawyer have any reasonable doubt that the union is the collective bargaining choice of a majority of the workers in a legally organizable bargaining unit, he will draft a refusal to recognize the union. Although your refusal to recognize a union that legitimately represents a majority can lead to later charges of unfair labor practices, recognizing a union that does not represent the majority is also illegal. When in doubt, opt for the refusal and let the NLRB conduct a secret election to determine the union's true status."

In instances where an agreement is made to hold a union election, consultants note that anti-union business owners do have certain rights to make their case to the workers in their employ, provided that they do not violate any laws. "Be careful to avoid any unfair tactics," wrote Lane. "Improper conduct can induce the NLRB to set aside a management victory; and your repeated violations of the National Labor Relations Act can force union recognition even without an election." Darby and Bryant point out that according to U.S. labor law, "management personnel have the right to express their views on unionization when answering questions or making statements about the union, its supporters, or its campaign communications…. [But] despite this broad right to free expression, managers and supervisors must never threaten or interrogate employees, promise them benefits or improved working conditions, or place employees' union activities under surveillance." Other tactics held to be unfair, said Lane, include the following:

In the weeks leading up to a union election, small business owners may also communicate the advantages of the current non-union arrangement with their employees, provided they do so in a lawful manner. Lane pointed to several factors that might be used to the owner's advantage (provided, of course, that they actually exist in the business):

DEALING WITH ELECTION OUTCOMES Once the NLRB-supervised election has been held, the small business owner is confronted with one of two outcomes, each of which come with their own unique challenges. The outcome that most small businesses would prefer to deal with is a management victory in which the union organization effort is defeated. But even in this situation, management will likely have to deal with disappointed employees who had hoped for unionization and the lingering residue of what is almost always a stressful event. In addition, the election does not necessarily conclude the episode; the union may apply for a nullification of the results (based on allegations of unfair labor practices, etc.) or simply regroup and make another attempt down the line.

If the unionization drive is a successful one, the small business owner can proceed in one of four ways, according to Lane:

The collective bargaining agreement is basically a contract between the business and the union that explicitly states how workplace issues between management and employees will be handled.


As indicated above, many businesses and industries try to avoid unions, convinced that their presence too often results in unwelcome sacrifices in the realms of profitability and control. But analysts point out that thousands and thousands of businesses that feature a unionized work force are tremendously successful. They note that the primary determinants of business success continue to be in the realms of business planning, marketing strategy, operational capabilities, technological advancement, and other areas, not in whether or not the business is unionized.

In fact, some observers contend that labor unions can provide often-unappreciated benefits to both individual companies and larger economies. "It may take some creative thinking and strategy, but unions can be a valuable ally when it comes to keeping top management aware of production issues," wrote Jim Treace in Production. "Outside the company, unions have political clout as well. At a time when state governors are delighted to shower tax breaks, training funds, and other goodies on anyone bringing a new factory into their state—even a direct competitor of yours—the unions' voting power can be a useful agent to make sure your existing plant gets its share. Second, union officials from the top down have an interest in some of the issues that can improve your operations: safety programs, ergonomics, and worker education."

The Economist concurred with this evaluation, noting that "by giving workers a collective voice, unions do not just push up wages. They can also improve a plant's, and hence an economy's, productivity and efficiency. They do this by establishing grievance procedures, helping to reduce staff turnover, and promoting stability in the work force. They can be an effective mechanism through which employers can consult workers, and can help to organize the training so crucial for honing the work force's skills."


Black, John, Anne-Marie Greene, and Peter Ackers. "Size and Effectiveness: A Case Study of a Small Union." Industrial Relations Journal. June 1997.

Chapman, Elwood N. Human Relations In Small Business. Menlo Park, CA: Crisp Publications, 1994.

Dannin, Ellen, and Terry Wagar. "Impasse and Implementation: How to Subvert the National Labor Relations Act." Working USA. Fall 2000.

Darby, Harrison G., and Margaret R. Bryant. "When Unions Knock, How Should Employers Answer?" HRMagazine. July 1997.

"The Future of Unions." The Economist. July 1, 1995.

Lane, Marc J. Legal Handbook for Small Business. Rev. ed. New York: AMACOM, 1989.

Schupp, Robert W. "When Is a Union Not a Union? Good Faith Doubt and its Limitations in Collective Bargaining." Labor Law Journal. June 1997.

Treece, Jim. "On Unions." Production. April 1994.

Weiss, Donald H. Fair, Square, and Legal: Safe Hiring, Managing & Firing Practices to Keep You & Your Company Out of Court. New York: AMACOM, 1991.

SEE ALSO: Employee Strikes ; Grievance Procedures ; National Labor Relations Board

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