As the stock market crashed, the country woke up to a decade’s worth of destructive speculation in the financial markets. The cause, many thought, was the rising wealth and power of corporate elites and the relative poverty of millions of rank-and-file workers who couldn’t afford to buy what business was selling.

With banks failing and the economy in collapse, voters abandoned Big Business and the Republican Party, electing a charismatic Democratic president and a strongly Democratic Congress. Quickly, Democrats pushed for laws strengthening organized labor, in retreat for years following a spate of big, unsuccessful strikes.

It sounds like a story ripped from today’s headlines. But it’s actually from the history books. Elected at the depths of the Great Depression, President Franklin D. Roosevelt and the new Congress enacted a series of pro-labor laws, culminating in 1935 with the National Labor Relations Act, better known as the Wagner Act. The law’s guiding philosophy was that union representation and collective bargaining for a greater number of workers would help to secure national stability and prosperityby paying higher wages and narrowing the gap between rich and poor.

Now, in the wake of the stock market bust of 2008 and the throes of a deepening recession, Democrats are again poised to strengthen labor’s hand after 30 years of decline and despite a growing chorus of Republican and business opposition.

A proposed federal law, the Employee Free Choice Act (EFCA; see description below), would ease the rules for union organizing, and for many of the same reasons as the Wagner Act. Congress is expected to vote on it this year.

With just 3.5 percent of its workers paying union dues, North Carolina is the least unionized state in the nation. For that reason, N.C. is in the crosshairs of EFCA debate. Businesses argue that unions will hurt them and the economy. Labor contends the act would merely restore labor organizing to what it was under the Wagner Actbefore a half-century of business pushback, especially in the South.

Corporate interests are targeting newly elected U.S. Sen. Kay Hagan, a pro-business Democrat during her years in the state legislature who is nonetheless siding with labor. They hope to reverse Hagan’s support for EFCA, possibly harming the bill’s chances in the Senatewhere the filibuster rules require that it have 60 votes out of 100, not just a simple majority. Meanwhile, her North Carolina Republican counterpart, U.S. Sen. Richard Burr, is a shoo-in for business: He recently attended a rally in Raleigh opposing EFCA.

(The House passed the bill in 2007 and is expected to do so again. President Barack Obama has promised to sign EFCA if it reaches his desk.)

For labor, EFCA represents the tip of a larger economic argument in favor of collective bargaining. Organizers want to persuade the country that the fundamental cause of the current recession is the same as it was in the Depression: Wages have stagnated for working people since the ’70s, while the rich have again grown richera phenomenon that tracks, in labor’s view, the fall of unions from their central place in the American system and the rise of a pernicious belief in free-market capitalism.

It’s an argument made with the help of labor historians like David Zonderman of N.C. State University and progressive economists such as the 39 (including Nobel Prize laureates Kenneth Arrow and Robert Solow) who signed a recent pro-EFCA statement issued by the Washington, D.C.-based Economic Policy Institute. EFCA’s enactment, the economists said, is “a critically important step in rebuilding our economy and strengthening our democracy.”

Against those claims, even if EFCA should become law, business interests want to blunt labor’s argument that more unions and collective bargaining would be good for the economy. They contend more unions would slow business growth, especially in the Tar Heel state.

Gregg Thompson, state director of the National Federation of Independent Business, says North Carolina company owners fear they’ll be a target for unions if EFCA passes. “I’ve been in the state 10 years and in politics for many, many years,” Thompson says, “and I have never seen an issue bring employers together the way this one has.”

EFCA is also called the “card check” law, because it would require companies to recognize a union when a majority of the employees in a given bargaining unita plant, for example, or the company’s driverssign union cards.

At a “Save My Ballot” rally in front of the General Assembly in Raleigh recently, Dallas Woodhouse, head of the conservative group Americans for Prosperity’s state chapter, told 150 listeners that the law would strip workers of the right to a secret ballot on bringing in a union, forcing them to declare where they stand by signing or not signing. Sen. Burr, who spoke and took a turn in the group’s mock voting booth, said the secret ballot is the bedrock of “the democratic fabric of America.”

In fact, Zonderman says, what EFCA would do is strip employers of the power to force a secret vote, returning the rules to the language of the Wagner Act. Under that law, the workers alone decided whetherand howto bring in a union. Typically, he says, workers would meet by themselves, argue the pros and cons of a union, take a vote in secret or openlytheir choice”and everybody else would stay out of the roomthat was the ideal.”

It was only in 1947 that the Taft-Hartley Act changed the law to give companies a role, allowing them to petition the National Labor Relations Board for a secret ballot under some circumstances, Zonderman notes. Subsequent decisions by the NLRB and the U.S. Supreme Court deemed the card-check process “unreliable,” however, and by the ’70s, elections by secret ballot became the norm.

When Taft-Hartley was enacted, Zonderman says, union strength was growing in industrial states, claiming more than 35 percent of the national workforce. Thus, business could argue that they’d become too powerful and a menace to free enterprise. Unions coerced workers into signing cards, business claimed, with intimidation tactics and threats of retaliation.

Such claims were mostly a myth, Zonderman says. Nonetheless, the decision about unions was no longer the workers’ alone: “Now, the argument was between the employers and the employees.”

Since Taft-Hartley, labor and business groups have traded fire over the anti-union tactics of employers. Studies by the Center for Urban Economic Development at the University of Illinois-Chicago and by Cornell University economist Kate Bronfenbrenner, labor argues, indicate that employers routinely try to intimidate workersand frequently violate the lawin the run-up to a union election.

Employers are entitled, under Supreme Court “free speech” rulings, to require that workers attend information sessions (labor calls them “captive audience meetings”) at which the company makes its case against unionization. The Illinois-Chicago and Bronfenbrenner studies found that in a majority of union elections, employers illegally threaten to close down, cut wages or move away if workers approve the union. The two studies also found that in one-fourth to one-third of union organizing campaigns, employers were guilty of illegally firing pro-union workers or of showing favoritism, with raises or promotions, to anti-union workers.

The evidence in the two reports is largely anecdotal and is drawn, business groups counter, from union sources. Business also disputes labor’s interpretation of data from the National Labor Relations Board. In 2007, for example, the NLRB awarded back pay to 29,500 workers whose rights were violated by employers. The pro-labor coalition cites this as evidence of illegal anti-union activity. On its Web site, the pro-business Coalition for a Democratic Majority counters with a report from the conservative Heritage Foundation. It contends that back-pay awards don’t necessarily indicate anti-union activities. Even if they did, the study goes on, EFCA is no answer: “Companies can deliver illegal threats just as effectively whether employees vote in private or sign up for a union in public,” its authors note.

What’s not in dispute, however, is that employers have little to fear under current law for illegal firings. A Human Rights Watch report found that workers must wait an average nine months for an NLRB judge to rule on their claims, and three years if the company appeals the ruling to the NLRB board. And even then, winning entitles the fired worker to nothing more than reinstatement with back pay, minus any money earned in the interim in another job. Most fired workers never return.

There’s also little downside, Human Rights Watch concluded, for employers who stonewall the union in contract negotiationseven after workers have voted to approve it. “Surface bargaining” by employers is hard to prove, the study found, and the only remedy under current law is to order the employer to keep bargaining. According to Bronfenbrenner, talks between employers and a new union failed to produce a contract in the first year in one-third of 400 cases she studied.

EFCA would change the law by requiring mediation after 90 days in first-contracts talks and binding arbitration after 120 days if the two sides haven’t reached a deal. It would also stiffen the penalties against employers for illegal anti-union activity.

Labor’s case for EFCA often includes the organizing wars at the Smithfield Foods packing plant in Bladen County, N.C. In good economic times, the plant employs some 5,000 workers and slaughters more than 30,000 hogs a day. It’s the largest such facility in the world.

For 17 years, Smithfield fought off the organizing efforts of the United Food and Commercial Workers union, “winning” elections in 1994 and 1997 with illegal tactics that included, according to NLRB judgments, firings, intimidation and threats of deportation to Hispanic workers. In 2006, the Ninth Circuit Court of Appeals upheld the NLRB’s decision to order a third election; the court summarized Smithfield’s actions as “coercion and intimidation on a mass scale.”

In December, workers voted to accept the union. Talks toward a first contract began last week.

The UFCW’s struggles at Smithfield Foods, which operates many unionized plants elsewhere in the United States, epitomizes the rise and decline of labor’s power in the 20th century. Labor’s ascent, writes historian Nelson Lichtenstein in his book State of the Union: A Century of American Labor, began with the Progressive Era idea, articulated by leaders like President Woodrow Wilson and Louis Brandeis, a future U.S. Supreme Court justice, that a democratic society required, in Wilson’s words, “the genuine democratization of industry.”

It was, Lichtenstein writes, a liberal response to the socialism and communism taking root in Europe at the time. Brandeis argued that the American concept of life, liberty and happiness demanded that employers here pay their workers a “living wage,” not just whatever lesser wage the market would bear.

By mid-century, unions represented some 40 percent of private-sector American workers, and stable relations between industry and unions were a hallmark of the economy of the ’50s and ’60s. Not coincidentally, in Lichtenstein’s view, this was a period of enormous prosperity.

He links the unions’ decline over the last 35 years to the erosion of the middle class. From 1947 to 1973, he notes, living standards for the working class doubled. And since, average household incomes have barely budged, despite gains in productivity and profits for the overall economy.

Meanwhile, workers rights “have moved well into the shadows,” Lichtenstein writes. Numerous factors have been at play: a resurgent business community armed with political funds; the popularity of free-market theories; President Ronald Reagan’s decision to break the air-traffic controllers strike; and the availability of cheap labor abroad. Also at fault is labor’s own complacency. Lichtenstein writes: “Little in American culture, politics or business encourages the institutionalization of a collective employee voice.”

The South’s economic growth in the second half of the 20th century helped weaken labor. Timothy Minchin, in his book Fighting Against the Odds: A History of Southern Labor Since WWII, relates that Southern opposition to unions was “hostile and determined,” as business successfully resisted union drives led by the AFL-CIO in the ’40s and again in the ’70s.

Southern states took the opportunity presented by the Taft-Hartley Act to adopt “right to work” laws that freed workers from paying union dues even when union elections were successful. They also passed laws barring collective bargaining by public employees, only two of which remain in force todayin Virginia and North Carolina.

A combination of agrarian conservatism and church-going anti-communism caused Southerners to stand with the owners, Minchin adds: “There is, in short, something different about the South when it comes to unions.”

The current economic meltdown strikes conservatives and business people as a time to control costs, put the survival of their companies firstand keep unions out. Thompson, of the National Federation of Independent Business, says his member companies, all privately owned businesses with fewer than 500 employees, believe EFCA’s enactment is the wrong thing to do, and would increase their costs and result in major job losses in the state.

“The business coalition that’s come together in North Carolina is not out to bash unions,” Thompson adds. If employers exploited their workers in the past, he says, they don’t today. They pay as well as they can and provide fringe benefits if they can afford them, in order to retain employees. “If it were affordable [to offer more], they would provide it,” he argues.

Small business owners in particular are worried, Thompson says, “that if they have three employees and two want a union, they’ll get a union” and could be forced to swallow a contract they can’t afford.

Rob Black, a labor spokesman, and Willie Carey, who heads labor’s “Change to Win” coalition in North Carolina, say Thompson’s words are a scare tactic. As a practical matter, Carey says, unions won’t try to organize the smallest businesses. Black, who represents the Teamsters Union, says unions will focus on bigger shops with the lowest-paid workers, such as hotel workers andin the public sectorcafeteria workers and police.

Republican legislators in Raleigh, meanwhile, say North Carolina’s “economic advantage” in job growth and business recruitment would be lost if EFCA is enacted. “We all recognize what the unions did to cripple the auto industry … we surely can’t allow unions to do the same to North Carolina business,” read a statement issued jointly by House Minority Leader Paul Stam, R-Wake, and Senate Minority Leader Phil Berger, R-Rockingham.

Labor argues it was terrible decisions by American managementto build cars that people didn’t want to buynot workers’ wages, that crippled the auto industry.

The conservative campaign is designed to put pressure on Sen. Hagan to vote against EFCA; Hagan said through a spokeswoman last week that she is meeting with both sides but remains a supporter.

The campaign is also meant as a warning to Democrats in the General Assembly that if they support proposed legislation to lift North Carolina’s ban on public-sector collective bargaininga strong possibility this sessionthe GOP will try to make them pay a political price for it with voters.

It could be the vanguard for another push by labor into the private sector, though state AFL-CIO President James Andrews downplays that prospect. He sees little industry organizing under way in North Carolina, and for the foreseeable future, he thinks, it will be “up to the workers” to seek out union representation, not the other way around. “I don’t expect any drastic changes,” Andrews says.

Zonderman, though, say that EFCA, plus a renewed attention to the damage economic inequality has wreaked on the American economy, could eventually increase unionization, especially within the ranks of the lowest-paid workers, “to 15, 20, 25 percent of the workforceto rates we haven’t seen in decades.”

It’s no coincidence, he says, that while working families have struggled to maintain a middle-class lifestyle, wasteful speculation by the rich has led to another economic calamity like the ’30s.

“If we look closely at the lessons of the Great Depression,” Zonderman says, “we find that hard times are not the time to bash and destroy organized laborquite the opposite. If we continue to beat down unions, beat down wage rates, beat down the rate of workers with health insurance who earn enough to afford good housing, we’re beating down consumer spending, exactly what happened in the early ’30s that turned a serious recession into the Great Depression.”

Conservatives argued then, as now, that unions are bad for business and bad for the economy, Zonderman adds. “Fortunately, FDR believed the opposite.”

What is the Employee Free Choice Act?

  • A federal bill, EFCA would ease the rules for unions to organize. It would require employers to recognize a labor union when a majority of workers sign union cards, eliminating the company’s power to force a secret ballot.
  • Labor organizers can submit union cards signed by 30 percent of workers, triggering an election. Alternately, organizers can submit signed cards from a majority of workers, immediately gaining union recognition by the employer unless the company disputes the authenticity of the vote.
  • When cards are authenticated, negotiations between the union and company begin.
  • EFCA also would require mediation between the union and company if there is no agreement after 90 days. If talks stall, the law would force the parties into binding arbitration after 30 days of mediation, unless both sides choose to continue talks.
  • The arbitrator’s decision produces a two-year contract.
  • EFCA would also stiffen penalties for illegal conduct by companies or unions. For example, if a company illegally fires a worker for union organizing activities, the company would be required to reinstate the workerwith triple back pay.
  • Workers can still de-certify the union after one year.
  • Read the full text of the bill

What’s next?

  • In 2007, the U.S. House of Representatives passed the bill, 241-185; it is expected to pass it again this session. All of North Carolina’s Democratic representatives voted for the bill; all of the state’s Republicans voted against it.
  • The U.S. Senate must pass the bill in order for President Barack Obama to consider signing it into law. Sen. Kay Hagan, a Democrat from North Carolina, supports EFCA; Republican Sen. Richard Burr does not.
  • President Obama has promised to sign EFCA if Congress passes it.