Asset Restructuring and Union Bargaining

Abstract

In both the union and non-union sectors, firms restructure their assets and production, deciding continuously whether to make or buy an input (the subcontracting decision), as well as whether to continue or to exit a product line. The principal difference in the legal requirements applicable to restructuring in the union sector is the National Labor Relations Act’s (NLRA) obligation to bargain over the ‘terms and conditions of employment’. This has raised the legal question of when, in an asset restructuring, there is a duty to bargain with the union. The question has significance for asset restructuring in both the union and nonunion sectors because the regime of explicit contracting encouraged by the NLRA provides our clearest window into the less easily identified patterns of implicit contracting that prevail in the substantially larger nonunion sector. In this essay, we use labour economics to elucidate the nature of the question, the competing concerns, and, finally, to provide a positive theory of the law (sec Rock and Wachter 1993 and Wachter 1997).