Last week, I highlighted what I see as one of the two key labor policy differences between the United States and Canada – the process by which unions are formed.  Today, I’d like to look at the other – how each country deals with the breakdown of first contract negotiations. (Both of these are discussed in greater detail in my recent report, “Protecting Fundamental Labor Rights: Lessons from Canada for the United States.”)

After employees at a workplace form a union, their work is really only half-done. The reasons for forming unions vary, but typically include improving working conditions, increasing pay and benefits, or simply having more say in the work environment. The way to do this is by negotiating a legally binding contract that spells these things out. Unfortunately, for those U.S. workers who are able to overcome the obstacles that employers place in front of them when they try to unionize, obtaining a contract appears to be getting more and more difficult.

Though both unions and employers are required to negotiate “in good faith,” the penalties for not doing so are minimal. Usually, of the two parties it’s the employer who drags their feet in negotiations and refuses to bargain in good faith, as can be seen by the filings of “unfair labor practices.” If these charges are found to have merit, the employer is typically just ordered back to negotiations, with no real punishment handed down for breaking the law. With union density – and thus workers’ bargaining power – at its lowest point in the past century, it should come as no surprise that research has shown that nearly half of newly formed unions are unable to negotiate a contract two years after they unionized. U.S. labor law, after doing little to help workers fight strong – and often illegal – employer opposition to their efforts to form unions, also does little to ensure that they are able to obtain a contract.

Canada, on the other hand, has a policy called “first contract arbitration” that provides a way through bargaining impasse. First enacted in 1974, first contract arbitration is now law in most Canadian provinces and covers approximately 85 percent of the workforce. Though researchers have identified four different models, the basic premise is simple: if negotiations have broken down between an employer and a union, either party can apply to the first contract arbitration process. If conciliation and mediation are unable to reach a voluntarily agreed-upon contract, an arbitrator (or arbitration panel) will impose one.

The Employee Free Choice Act would have brought first contract arbitration to the United States. Despite concerns from critics – that it would have discouraged voluntary collective bargaining or resulted in onerous conditions that would have put employers out of business – the experience of first contract arbitration in Canada has shown it to be a successful policy. In addition to workers getting contracts where they might otherwise not, research has shown that first contract arbitration is rarely sought and first contracts are even more rarely imposed, that it results in fewer work stoppages, and that there is no effect on business success or failure. Canadian employers – who first opposed FCA on similar grounds to U.S. employers today – no longer find it to be a controversial policy and often apply to the process themselves. If U.S. policy makers wanted to do something about the decline of the middle class, first contract arbitration would be a good example to follow.