sectoral bargaining

Part I: The Case for Sectoral Co-Regulation

Cynthia Estlund

Cynthia Estlund is the Crystal Eastman Professor of Law at the New York University School of Law.

This is part one of a three-part series.

What should we make of the “labor standards boards” that are popping up in worker-friendly states and cities across the US?  Consider California’s 2022 FAST Act, which created a tripartite Fast Food Council—with representatives of workers and worker organizations, employers (both franchisors and franchisees), and the public—with the power to raise labor standards in the industry. Standards approved by a Council majority, after  public notice-and-comment and barring legislative disapproval, would become binding on all California fast food employers. The 2022 FAST Act set off a flurry of legal and political jockeying; a revised law directly raised minimum wages for the state’s fast food workers while diluting some innovative features of the 2022 law. But the original FAST Act—which promised to give a greater voice to workers and to significantly improve working conditions in a low-wage industry with stubborn barriers to unionization—might yet chart a novel hybrid path for future reforms that we can call “sectoral co-regulation.”

Here (and at greater length elsewhere) I explore an emerging architectural innovation in the work law edifice that can supplement existing strategies for elevating terms and conditions of work at lower levels of the labor market. Part I of this post situates sectoral co-regulation relative to conventional forms of labor lawmaking and relative to “sectoral bargaining.” Part II assesses sectoral co-regulation along two dimensions—the mode and the level of standard setting—and discerns advantages along both dimensions. That is, sectoral co-regulation has some advantages over both collective bargaining and conventional regulation, and over both enterprise-based and jurisdiction-wide standards. Part III addresses several questions, and raises several more, about sectoral co-regulation before concluding.

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Since the New Deal, the two dominant pillars of US labor policy have been enterprise-based collective bargaining, grounded in the NLRA, and jurisdiction-wide minimum labor standards, originating in the FLSA. Those pathbreaking statutes established complementary strategies for raising labor standards: Collective bargaining enabled workers in more productive firms and sectors to form unions and bargain for themselves, backed by collective self-help. Minimum labor standards set a more-or-less universal floor on basic labor standards to protect workers who could not bargain collectively and to set a baseline for bargaining by those who could. This two-pillar strategy helped to reduce economic equality and spread prosperity for several decades. But private sector collective bargaining has sunk to historically low levels, and seems unlikely to regain a dominant role in workplace governance despite recent gains in organizing, bargaining, and public approval. As a result, workers without higher education or advanced skills have captured a shrinking share of national income.

These trends have drawn US labor scholars and advocates toward the idea of sectoral bargaining, in which collective bargains are struck at the sectoral level between unions and employer associations and extended across the sector, partially insulating them from cost-based competition. Sectoral bargaining is central to European corporatist social models, with their more coordinated industrial relations structures, stronger unions, and lower levels of economic inequality. Corporatism is often seen in the United States as the road not taken—or the road abandoned after the demise of the 1933 National Industrial Recovery Act and its industry codes of “fair competition.” That brief, failed experiment in corporatism largely gave way to the two-track model described above: enterprise-based collective bargaining and jurisdiction-wide minimum labor standards.   

Now sectoral bargaining is back in fashion among some labor cognoscenti. Given federal labor preemption, however, any sectoral bargaining framework would have to come from Congress, where labor law reform has gone to die over the past half-century. Moreover, sectoral bargaining doesn’t so much build union density and bargaining power as it requires them to get off the ground. In particular, it requires unions that represent a broad swath of workers in the sector. (Another chicken-or-egg problem, it seems.) 

More promising solutions might lie on the regulatory side of the bargaining-regulation dichotomy, or perhaps in strategies that straddle or reintegrate “labor law” and “employment law,” as some scholars have proposed. Regulatory strategies rely less on workers’ bargaining power, as they put state power behind workers’ interests. But that does not necessarily entail giving up on the goal of amplifying workers’ voices in standard-setting processes. Some regulatory processes directly and meaningfully engage affected workers and their organizations, often alongside employer and public representatives in tripartite structures. That is the crucial distinguishing feature of what I have elsewhere called “co-regulation.” But co-regulation has limited potential within a regime of jurisdiction-wide labor standards: First, it is hard to imagine credible institutional representation of workers across all sectors of the economy. Second, jurisdiction-wide standards must be viable across the whole labor market, whether federal, state, or local. Call it the lowest-common-denominator problem.

Sectoral co-regulation offers an alternative strategy for raising labor standards at lower levels of the labor market. As shown graphically below, sectoral co-regulation operates at the convergence of both mid-points identified above—that is, at the sectoral level (between the enterprise and the whole jurisdiction), and in the co-regulatory middle ground between collective bargaining and conventional regulation. Sectoral co-regulation—in tandem with enterprise-based bargaining and across-the-board minimum standards—could fill part of the gap left by union decline by giving workers a meaningful voice in devising and enforcing higher-than-minimum sectoral standards. Sectoral co-regulation might also ease the way for higher jurisdiction-wide labor standards and facilitate collective bargaining in some sectors by muffling labor-cost-based competition.

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One aim here is to reframe and rename developments on the ground—in particular, the tripartite wage boards that have been popping up across the US since at least 2015. While some proponents and some critics of the Act described those reforms, including the California FAST Act, as entailing sectoral bargaining, it is better understood as a form of sectoral co-regulation—a state regulatory process in which workers and their organizations play an integral part. As Kate Andrias has shown, it is both a high-profile novelty on the contemporary labor landscape—part of the “New Labor Law”—and a revival of 20th century regulatory experiments. For the conventional account of the New Deal labor model sketched above leaves out the sectoral wage boards that the FLSA established for several low-wage industries, and that both Andrias and labor historian Nelson Lichtenstein, writing separately, depict as home-grown American precedent for emerging sectoral strategies. The FLSA wage boards functioned alongside of and in harmony with, the NLRA and FLSA for a decade, and left a lasting legacy in the form of several state wage board statutes. The New York statute, dating from 1937, thus authorized the governor in 2015 to convene a tripartite wage board for the fast-food sector, which adopted a phased-in fifteen-dollars-per-hour minimum wage. 

Tripartite wage boards—under the FLSA, old state statutes like New York’s, and successors like the California FAST Act—might be precursors of sectoral bargaining, but they are not examples of it. They do not involve bargaining and do not reflect the parties’ respective bargaining power. Rather, they are examples of sectoral co-regulation, and they sit at the center of the grid sketched above. As a mode of standard setting, co-regulation straddles collective bargaining and conventional regulation; while sectoral standards split the difference between enterprise-based and jurisdiction-wide standards. As I’ll argue in the next Part, sectoral co-regulation has some advantages over both collective bargaining and conventional regulation, and over both enterprise-based and jurisdiction-wide standards.

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