On December 5, badly hurt by the long housing slump and having maxed out its line of credit with Bank of America, the Republic Windows and Doors factory of Chicago announced that it would close and lay off its employees. In response, most of its 250 workers refused to leave the factory floor and announced through their unionthe United Electrical, Radio and Machine Workers (UE)that they would occupy the premises until they received severance pay. In the days that followed, activist supporters, including local left-wing and interfaith groups, waged a spectacularly successful public campaign: more than 4,000 news stories on the action have appeared so far on Google News, typically taking a tone highly favorable to the union cause. Support also came from local Chicago and Illinois politicians, including the citys most celebrated public official of all, president-elect Barack Obama. Fielding a question about the plant occupation two days after it began, Obama declared his support for the workers: I think theyre absolutely right. . . . if they have earned these benefits and their pay, then these companies need to follow through on those commitments.
Six days after it began, the occupation ended when Bank of America and JPMorgan Chase agreed to pay the union $1.35 million and $400,000 respectively. The union declared victory, and sympathetic voices hailed the occupation as an event that might usher in a new era in labor relations. THE 1930S ARE HERE AGAIN! rejoiced The Activist, which describes itself as the online magazine of the Young Democratic Socialists. And indeed, physical occupations of buildings in order to force negotiated settlements, while still familiar in countries like France, have been relatively rare in United States labor relations since the days of the famous UAW sit-down strikes at GM in Flint, Michigan, in 1936.
One should note at the outset that the UE is no ordinary union. Small and leftist-oriented, its often confused with the much bigger and better-known IUE (International Union of Electrical Workers, now combined with the Communications Workers of America as the IUE-CWA), and unlike the larger union is not part of the AFL-CIO. As historians of the labor movement know, the UE back in the 1940s was the largest of a number of unions expelled from the Congress of Industrial Organizations during the great battle over the role of Communism in American public life. The newly merged AFL-CIO then assisted in the rise of the more mainstream IUE, working with considerable success to push the UE toward the margins. Since the rise of the New Left in the 1960s, left-labor academics who bemoan the victory of the Walter Reutherled forces of anticommunism have often romanticized the UE and other Old Leftrun unions.
No one bothered to deny that the UEs occupation of Republics plant was unlawful. Though federal labor law gives unions and workers many rights, the right to seize an employers premises is not among them. (As a former professor of law, Obama might have taken care to express a wish that both sides in the dispute act legally, butas some on the union side observed with pleasurehe said no such thing.) At any rate, the banks speedy capitulation ensured that no legal consequences would bedevil the workers or the union, whose muscle had just delivered the better part of $2 million to its constituents in less than a week. The message, in short, is that lawbreaking can pay handsomely.
As many in the press recognized, the Republic affair presented a novel twist on the typical labor/management showdown: here, the workers levied their demands not against the plants owners but against what conventionally would be regarded as third-party bystandersBank of America as outside lender, and Chase as a minority stockholder, since it owned 40 percent of the window company. Current labor law makes it abundantly clear that neither lenders nor minority investors are ordinarily responsible for paying the wage bills of a failing business. But the union drew on public anger over the financial bailouts, which had taken the form of (forced) federal investment in the two banks (both relatively healthy). Wasnt the point of the federal plan to lift banks up so that they could go back to making loans? Then it stood to reason that the banks should extend loans for the purpose of enabling the Republic owners to pay a decent severance. It wasnt hard to spot the flaw in that logic: whatever bipartisan advocates of the federal bank-rescue plan may have wanted, they certainly hadnt proposed that banks begin throwing money randomly at borrowers with poor prospects for repayment. Indeed, in todays continuing credit crunch, all sorts of businesses cant find loans, though they have sound balance sheets and can make robust showings of likely repayment. Should Bank of America really have allocated money to the failing Republic concern at the expense of other employers with more promising futures?
Press accounts often failed to correct the widespread misimpression that Republic had shut down and left its workers unpaid. The law has long been appropriately severe on companies that try to skip town without handing workers their final paychecks, but the Republic dispute was more complicated. The unions main contention was that the company owed money under the Worker Adjustment and Retraining Notification (WARN) Act, a federal law passed in 1998 that requires many businesses to offer a severance payment if they have not given either 60 days notice of a plant closing or, in certain circumstances, such shorter notice as may be reasonable.
Though some labor advocates might wish that the WARN law created a broad entitlement to severance following abrupt plant closings, the law in fact doesnt work that way. Faced with tough opposition from business, lawmakers inserted into the WARN Act a major exception: plants wouldnt owe automatic severance if their closure resulted from unforeseeable business circumstances. The courts have confirmed that this clause exempts many (though by no means all) plant closings from the laws reach.
At Ohio Employment Law Blog, Jon Hyman notes that Republic Windows entitlement to the exemption might hinge on facts as yet not established. Was the closing off of its access to further credit in some sense reasonably foreseeable? Hyman is skeptical: Despite (or maybe because of) the current credit crunch, a court would most likely not require Republic Windows to accurately predict Bank of Americas actions. . . . my best guess is that Republic Windows is probably on right side [sic] of the unforeseeable business circumstances exception. And yet countless reports made it easy to assume that the company had simply tried to waltz off with its workers final paychecks. (There was a separate dispute about whether vacation pay would be owed.)
Had the dispute dragged on toward an eventual day in court, its likely that details of this sort would have complicated the media picture pitting a virtuous union against heartless bankers. But with amazing alacrityalmost as if wired by especially skilled Electrical Workerslocal politicians assumed combat positions to announce a wide range of coercive pressures on the banks. Democratic Illinois governor Rod Blagojevichonly a day or two before his spectacular arrest and disgrace on suspicion of trying to peddle Obamas senate seatvowed to yank all state business from Bank of America unless it forked over the money. Cook County Commissioner Mike Quigley announced that he would press for an ordinance to the same effect: Im usually cautious, but this is an extraordinary example at an extraordinary time, Quigley told an interviewer. At the same time, Chicago officials made clear that they had no intent of enforcing any time soon the plant owners legal right to reclaim their premisessurprising, you might think, given that the officials have taken an oath to uphold Illinois state law.
The Republic episode puts business owners on notice that if they are so rash as to do business with or in the city of Chicagoor a city or state governed like itpublic authorities will not protect their legal rights, and might instead twist whatever legal materials are at hand into a blackjack with which to compel their cooperation. Chicagoans have gotten yet another confirmation, if they needed one, of how their city is run.
In activist and left-academic circles, meanwhile, the Republic action has sparked excitement. Plant occupations are what they used to call facts on the ground in support of social changemore radical change, even, than some of us may have realized we were in for. Once familiarized with tactics like sit-in strikes, some in the 1930s business community came to believe that even the union-friendly labor laws of the New Deal were a preferable alternative. Faced with building occupations by radical students, university presidents in the 1960s tended to fold and began exploring anticipatory surrender to activists demands. As Washington prepares for an Obama administration, a gigantic fight loomsone business group calls it Armageddonover the union-sought Employee Free Choice Act, which would provide for imposing unionization on a workforce without the pesky need for a formal election. The Act would abolish workers current right to a secret-ballot vote on unionization and force union contracts on unwilling employers through legally imposed arbitration.
Its not clear whether the unions have the votes on Capitol Hill to push through such measures by persuasion alone. The question is whether actions like that at Republic Windowsand we ought not doubt that more are intendedwill add to the persuasion an element of fear and force.
Walter Olson is a senior fellow at the Manhattan Institute and the author of several books, most recently The Rule of Lawyers. He is at work on a book about the influence of law schools.