Looting The Future: Union Bosses Violate Spirit If Not Letter Of The Law

Hostess’ union-induced shutdown captures the essence of the modern labor movement–more anti-employer than pro-worker. Workers are taking notice of unions’ negative impact on employers, for example, the loss of jobs in the auto, airline, and steel industries — and now at Hostess.

As a result of union bosses’ self-interest trumping the well-being of its beneficiaries or law, private sector unionization has dropped to an all-time low of 6.6 percent. This statistic should not be shocking when considering the conduct of the Bakery, Confectionary, Tobacco Workers, and Grain Millers union (BCTGM) officials, who represented 5,000 Hostess workers, throughout the bankruptcy proceeding that put the company’s 18,500 workers out of a job just in time for the holidays.

Since January when Hostess filed for bankruptcy, BCTGM officials drew a line in the sand — no concessions — even if that meant all their members would become unemployed and even if it was the several hundred union-negotiated wage, benefit, and work rules that factored greatly into Hostess’ demise.

In The San Jose Mercury News, Thomas Sowell provides an example of Hostess’ union collective bargaining woes:

The work rules imposed in union contracts required the company that makes Twinkies, which also makes Wonder Bread, to deliver these two products to stores in separate trucks. Moreover, truck drivers were not allowed to load either of these products into their trucks. And the people who did load Twinkies into trucks were not allowed to load Wonder Bread, and vice versa.

In addition to the work rules contributing to 18,500 employees losing their livelihood, Hostess suffers from $2 billion in unfunded liabilities from its union pension plans. Yet throughout contract negotiations, BCTGM urged its membership to reject all concessions. BCTGM President Frank Hurt wrote, “I would never sign this piece of crap,” in a union publication, a few weeks before BCTGM membership held a voice vote on Hostess’ last, best, and final offer.

Speculation suggests that union bosses felt refusing concessions would preserve the union’s power in negotiations at other employers, which was a priority over these particular BCTGM members’ employment. As Fortune reported:

[Hostess CEO Greg] Rayburn says those workers were led to believe both that Hostess would make a secret better offer and that there was a “white knight” ready to swoop in to buy the company. Rayburn says neither is true.

Once BCTGM officials decided coming to terms was not in the cards, the Hostess contract offer was put to a voice vote in union halls, a surefire tactic to suppress any insubordinate members.

When union bosses refused to renegotiate wage and benefits it sped up its members impending doom by instigating a nationwide strike beginning on November 9. Reports indicate the company incurred too much already from the strike to restart operations… and on November 15, Hostess announced it would close shop for good.

The behavior of the BCTGM bosses could be at odds with federal labor and tax laws regulating unions.

First, BCTGM officials’ activities clash with the spirit of the Labor Management Reporting and Disclosure Act of 1959 (LMRDA), which protects workers from union malfeasance. In particular, 29 U.S.C. 501(a) covers the fiduciary responsibilities of union officials. The text explicitly limits fiduciary obligations for union officers to union “money or other property.” However, the legislative history clearly indicates Congress intended union officials to take on a role similar to that of a trustee — where the primary duty is loyalty to the beneficiaries. Prior to passage, a House report on the then-bill explained, “the committee bill extends the fiduciary principle to all the activities of union officials and other union agents or representatives.”

It is hard to believe that BCTGM behavior could be construed as acting in sole benefit of its members, especially when it made a point not to negotiate, encouraged membership to do the same, and called a strike that all interested parties knew would cost all Hostess workers’ their jobs.

Second, for labor organizations to receive 501(c)(5) federal tax-exempt status from the Internal Revenue Service, unions must establish that “the organization is organized to better the conditions of workers, improve the grade of their products, and develop a higher degree of efficiency in their respective occupations.”

These laws normally protect workers against union bosses embezzling funds or misusing property. Yet in the case of Hostess workers, BCTGM’s self-interested behavior alone was far more devastating than the looting of union coffers — they looted the fortunes and futures of thousands of families.

If that doesn’t warrant investigation, what does?