US Unions Can Wield New Weapon as Europe Targets Labor Violators

A wave of European supply chain laws aimed at cracking down on labor violators is poised to help US unions grow their ranks.

A first-of-its-kind German law—the first of more than two dozen set to take effect across Europe—will soon give US labor groups a slate of more favorable venues to challenge elections. The policies have already piqued the interest of the Biden administration, which pressured the German government to investigate complaints against Mercedes at the urging of the United Auto Workers.

In the first test, Germany is said to be investigating complaints that Mercedes Benz Group AG illegally pressured workers in Alabama—nearly 5,000 miles from Mercedes headquarters—against unionizing, putting the company at risk of more than $8.5 million in fines. Workers at the plant voted last month against joining the UAW.

The policies raise thorny questions about the reach of global labor standards and who’s responsible for enforcing them.

“The bottom line is this, German law is a big deal, and the fact that the UAW is using this is a really big deal,” said Stefan Marculewicz, an international labor law attorney for management-side firm Littler Mendelson P.C. “This law is setting up for a clash between US labor law and international standards for the first time since I’ve been doing this, and I’ve been doing this a long time.”

Due Diligence

The German law, which took effect at the start of 2023, seeks to stop employers from dodging labor standards by moving work to other countries with weaker labor protections—including the US.

Unlike the US, where unions negotiate contracts with individual employers, German unions typically negotiate with entire industries—rather than individual employers—usually leading to more favorable outcomes for workers. Many companies also have works councils that give employees a direct say in company affairs.

European nations tend to have a stronger union presence than the US. About 16% of German workers were represented by unions in 2019, compared to 10% of workers in the US, according to the most recent datafrom the Organisation for Economic Co-operation and Development. In Denmark, more than two-thirds are unionized, and in Belgium nearly half are.

Under the German supply chain law, the Federal Office for Economic Affairs and Export Control can take action against employers with at least 1,000 workers in the country. About 4,000 businesses currently fall under the law, according to Moody’s. They include German automaker Volkswagen AG, which recently voted to unionize in Tennessee, and Daimler Truck AG, whose North American subsidiary reached a labor agreement with the UAW last month, both meet that criteria.

Violators can be fined up to €8 million or 2% of their annual revenue.

The EU Parliament approved a directive in April to expand a similar policy to all 27 member states, which will have to write and implement their own laws.

The effect will be a bloc of nations enforcing their own labor laws abroad. In addition to large European companies, the requirements will apply to non-EU based companies with a net turnover of more than €450 million inside the EU, meaning it could apply to US firms, too.

Murky Process

Enforcement of the German law will offer an early look at how it will work, though questions remain.

The country’s export agency, known as BAFA, can inspect and demand documents from employers suspected of violating the law. The agency says it investigates every complaint as a matter of procedure. The UAW announced May 16 its complaint was under investigation.

Little else is known about the government’s investigatory process, which has been kept largely behind closed doors, said Miriam-Lena Horn, head of the Division for International Value Chains for the German Trade Union Confederation, an umbrella organization made up of eight large unions.

That’s partially because the law is so new, but it’s also by design. There is an effort “not to name and shame companies” before complaints have been substantiated, Horn said.

Horn said she’s not aware of any fines that have been made public. Spokespeople for BAFA, the German Chancellery, and the UAW didn’t respond to requests for comment.

Once all the laws are up and running, the goal will be to create a “globally harmonized market that would set a standard under which all companies would have to operate,” Horn said.

As for Mercedes, company spokeswoman Andrea Berg said in an email that management “has not interfered or retaliated against any Team Member in their right to pursue union representation,” and “firmly denies it has made any adverse employment decision based on union affiliation.”

The UAW remains in a precarious place in its campaign to organize foreign automakers. The loss in Alabama was a stark reversal from a few weeks earlier when workers at Volkswagen, another German automaker, overwhelmingly voted to unionize in Chattanooga, Tenn.

It was the first major union election since the German supply chain law took effect. The company remained largely neutral, and the union passed with 73% of the vote.

White House Takes Interest

The US has long had a tense relationship with global labor standards.

It has never ratified two key conventions of the International Labour Organization—an arm of the United Nations that emerged after World War I—that guarantee freedom of collective bargaining.

That’s mainly because the guarantees also apply to public-sector unions that are regulated by states and municipalities, said Marculewicz, the international labor attorney. The federal government is prevented from regulating those entities under the 10th Amendment, he said.

The ramifications of the German law haven’t escaped the Biden administration, however. US National Security Adviser Jake Sullivan recently prodded Germany to investigate the allegations brought by the UAW at the urging of the union’s president, Shawn Fain, Bloomberg Law previously reported.

The union filed the German complaints ahead of the Alabama election, alleging seven violations of the German law, including firing a union supporter with cancer for using his cell phone to communicate with his doctor.

One of the people familiar with the call said it demonstrated Sullivan’s commitment to a White House order last November, which adopted a “whole of government” approach to advancing workers’ rights globally. It also underscored how closely the White House and UAW are aligned now that the union endorsed Biden’s re-election.

The union also filed unfair labor practice charges with the US National Labor Relations Board, which could lay the groundwork for the union to challenge the election under a 2023 doctrine that can impose bargaining orders on employers—essentially an automatic win for the union—in cases where management has violated workers’ rights in the run-up to an election.