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The Encyclopedia Americana (1920)/Arbitration, Industrial

ARBITRATION, Industrial. This is the process by which an authoritative decision is obtained in the case of a controversy arising between one or more employers and a group of employees, or between two or more groups of employees, when such controversy cannot be settled by direct negotiations between the parties concerned. In such cases it is customary to refer the questions at issue to one or more persons, called “arbitrators,” who are appointed to investigate the facts and to render a “decision” or “award.” Conciliation and mediation are less formal methods of settling industrial disputes, and consist merely of endeavors on the part of some person or group of persons, not a party to the dispute, to promote amicable negotiations between the disputants, which may lead, either to an immediate settlement, or to an agreement to submit the matter in question to arbitration.

Statutory provision for the formation of permanent omcial or semi-official boards of arbitration is made in many countries and smaller political subdivisions. In some instances the submission of matters in controversy is compulsory, but more often it is provided that upon application of one or both of the parties the board shall provide for the holding of hearings, at which testimony is taken, and following which the board shall render an award. Where arbitration is voluntary, it is customary for both parties to enter into a formal agreement to abide by the decision of the arbitrators.

In the settlement of controversies with reference to wages, hours of labor and general conditions of employment, voluntary arbitration has proved very effective, and in many instances disastrous strikes and lockouts have been averted or brought to an end by this means; but where questions of principle or general policy, such as recognition of the union, exclusive employment of union labor, use of union label, etc., are involved, the parties frequently decline to voluntarily submit the question at issue to arbitration, when, therefore, it becomes necessary for public authorities in the interest of public welfare to insist that the matter be so submitted. Such compulsory arbitration may be limited merely to the reference of the dispute to arbitrators for investigation, during which period hostilities shall be suspended, as in Canada; or, in addition to such reference, the arbitrators may be empowered to compel the attendance of witnesses and the production of papers, as in Germany; or it may be even further provided, as in New Zealand and other Australian states, that the disputants shall be compelled by law to abide by the decision of the arbitrators, under specific penalty for non-observance of the terms of the award.

In the following paragraphs several important systems of industrial arbitration provided for by law are briefly described. Purely unofficial boards of arbitrators, most of which are formed merely in connection with a single controversy, are not, because of the great variety of such boards, included within the scope of this article.

France.— The first definite provision for the settlement of industrial disputes appears to have been the tribunal established before the French Revolution at Lyons, France, for the settlement of disputes in the silk industry. Although this tribunal was abolished with the trade guilds in 1791, it had proved so effective that, in 1806, Napoleon created the councils of experts (Conseils des Prud'hommes) having quite similar functions. The councils, at first established in only a few cities, are now found in ail of the important industrial centres in France, and similar councils have been established in other countries. For many years these councils considered only controversies between employers and individual employees, and it was not until the passage of the Conciliation and Arbitration Act in 1892 that provision was made for the settlement of collective disputes, that is, disputes between one or more employers and a group of employees. To the extent that application has been made for the settlement of industrial disputes under the provisions of this act, its operation has been fairly successful; but unfortunately only minor matters are thus referred for settlement, and it does not appear that the act has, to any great extent, served to prevent strikes and lockouts, which during very recent years have been both numerous and important.

Germany.— Industrial courts having jurisdiction in the manufacturing industries (Gewerbegerichte) had been established in various localities in Germany since the first quarter of the 19th century, and previous to 1869 three states — Prussia, Saxony and Saxe-Weimar — had passed laws providing for the establishment of such courts. By a provision of the industrial code of 1869 local authorities were authorized to establish such courts, provided employers and employees were equally represented thereon. In 1890 an imperial act was passed establishing uniform regulations governing the form and procedure of the local courts and extending their functions so as to provide for the arbitration of collective disputes. An act passed in 1901 amended in certain important particulars the act of 1890, especially with reference to the settlement of collective disputes, which prior to that date had not been arbitrated with any large measure of success. The act of 1901 authorized the courts to act on their own initiative without waiting for either party to the dispute to make application for its services, and provided that the arbitrators should be appointed by the parties concerned in the controversy. The appearance of the parties to the dispute was made compulsory and a penalty was provided for non-attendance. When both parties ask for arbitration the court then ceases to be a board of conciliation and becomes a board of arbitration; and if only one party makes application it is the president's duty to urge arbitration upon the other party. Decisions in cases of arbitrations are rendered by a majority of the arbitrators, but the president may abstain from voting in case of tie. The acceptance of the decision is not compulsory except when both parties have previously agreed to abide by the award. The act of 1901 further provided for the compulsory establishment of industrial courts in all cities having a population of over 20,000, and they may be formed elsewhere at the option of the state or upon joint application of employers and wage earners. In 1904 mercantile courts (Kaufmannsgerichte) for the settlement of disputes between merchants and their employees were established. Although the records for recent years show that there has been a growing disposition to refer industrial disputes to the courts, nevertheless the number of disputes thus referred has constituted only a very small percentage of the total number arising.

Great Britain.— Several important acts with reference to the settlement of industrial disputes by conciliation or arbitration were passed in Great Britain during the 19th century, among which may be mentioned the Consolidation Act of 1824, the Conciliation Act of 1867, the Arbitration (Masters and Workmen) Act of 1872 and the Conciliation Act of 1896. Of these four acts, the last named may well be described briefly in this connection. This act provides for the registration of private conciliation or arbitration boards by the British Board of Trade. Registration is optional, but any board so registered is required to “furnish such returns of the proceedings and other documents as the Board of Trade may reasonably require.” Should it appear to the Board of Trade that no adequate conciliation board has been established to which may be submitted disputes which might arise in any locality or industry, the board is authorized to inquire into the causes and circumstances and to take such steps as are deemed expedient for the purpose of bringing the parties together with a view to conciliation and, on application of either party, to appoint one or more persons as conciliators, and on application of both parties to appoint an arbitrator. In 1911, following the great railway strike, an Industrial Council was established for the purpose of considering matters referred to it, especially with reference to disputes which would affect the principal trades of the country. The Industrial Council has no compulsory powers. Its primary function appears to be the encouragement of voluntary arbitration and the establishment of rules and regulations governing the procedure of unofficial boards. In 1915 and 1916 acts known as “The Munitions of War Acts,” providing for conciliation and arbitration of disputes arising in munition manufacturing industries, were passed, and in making awards under these acts it is held that the rights of employers and employees engaged in these industries may not be exercised as freely as in times of peace, and although parties to the controversies are not compelled to abide by any award, they are called upon and expected, during the continuance of the war, to forego certain principles, in order that harmonious relationships may be maintained and production continued without interruption. In the settlement of minor disputes the English system appears to have been quite successful, and undoubtedly the number of serious industrial disputes has been somewhat diminished, but a large number of very serious disturbances have arisen notwithstanding the provision which has been made for voluntary arbitration.

New Zealand— A statute enacted in New Zealand in 1894 provided for the compulsory arbitration of industrial disputes, and several other Australian states have since passed similar measures. An act of this character, passed by the commonwealth in 1914, was made applicable to disputes “extending beyond the boundaries of any one state.” Under the provisions of the New Zealand act district boards of conciliation are created, on which board associations of employers and of workmen are equally represented, and an “imperial chairman” is elected by each board. In 1909 the act was amended so as to provide for the appointment of three commissioners of conciliation. When a controversy arises one of these commissioners endeavors to bring about a settlement and, if successful, he organizes a council of conciliation, consisting of two or more representatives of each party, to whom the matter is referred. Should such council fail to effect a settlement of the dispute, it is then referred to the Industrial Court, which consists of three members appointed by the governor for a term of three years, one of whom (the presiding officer) is a judge of the Supreme Court, another a representative of the employers, and another a representative of the employees. Cases also may be referred directlv to the court without first having been referred to the council of conciliation. Pending consideration of a dispute by the court, strikes and lockouts are forbidden. The awards of the court are binding upon both parties and penalties are imposed for failure of either party to observe the conditions of the award. The factory inspectors are charged with the enforcement of the awards. For some years, under this system of compulsory arbitration, New Zealand was properly described as “a country without strikes,” but during recent years strikes have been wholly prevented in that state, even though rather neavy penalties have been imposed for failure to observe the awards of the court. Some of these controversies, however, which have resulted in open conflict, have not come within the scope of the law.

Canada.— The Conciliation Act passed by the Canadian Parliament in 1900, followed closely the phraseology of the British Act of 1896, which sought to encourage voluntary arbitration of labor disputes. The Railway Labor Disputes Act, passed in 1903, introduced the principle of compulsory investigation of railway disputes and recognized “the influence of an informed public oinnion upon matters of vital concern to the public itself.” In 1907, following a serious and protracted strike of coal miners in one of the Western provinces, the Industrial Disputes Investigation Act was passed, which provided for the compulsory investigation of all disputes involving 10 or more persons employed in mining, or in connection with public service utilities. This act has since been amended so as to include all controversies arising in connection with the manufacture of military supplies. Employers and workmen are required to give at least 30 days' notice of an intended change affecting the conditions of employment with respect to wages and hours, and a strike or lockout is prohibited while the matters in dispute are being considered by an official board to which they shall have been referred for investigation. Heavy penalties may be imposed for failure to observe the provisions of the law. It is the duty of such boards to endeavor to effect a settlement by means of conciliation and mediation, and, if unable to do so, they are required to investigate the questions at issue, to prepare a report and to render an award which shall be made public, but they are not empowered to enforce the provisions of their awards. Although strikes in the industries covered by the act have not been altogether prevented, nevertheless the operation of the act has been remarkably successful, and it has been found that the weight of public opinion, based on authoritative facts determined after thorough investigation by such official boards, has been sufficient in most instances to induce the parties to the disputes to accept the awards of such boards without resorting to strike or lockout.

Norway.— During the year 1915 industrial unrest in Norway assumed alarming proportions and early in 1916 a lockout affecting approximately 20,000 employees in the metallurgical industries was declared by the mine operators and a general sympathetic strike in all branches of industry was imminent. This situation made it necessary for the government to take extraordinary action and Storting therefore passed, on 9 June that year, an act providing for compulsory arbitration of industrial disputes by an impartial commission, consisting of an equal number of representatives of employers and workmen. Provision is made for compulsory investigation and for a cessation of hostilities pending investigation and the rendering of an award. In this respect the act is similar to the Canadian Industrial Disputes Investigation Act of 1907, discussed above.

Sweden.— In accordance with the provisions of a law passed in 1907, Sweden is divided into seven districts, in each of which a “Conciliator,” appointed by the Crown, shall endeavor to promote the settlement of industrial disputes and to advise and assist in the framing of agreements designed to preserve amicable relations between employers and workmen.

United States.— At least 29 of the 48 States have statutory provision for conciliation, mediation or arbitration in the case of industrial disputes. New York State and Massachusetts each created such a board as early as 1886. In 15 States a special board has been created for this purpose; in 11 States these functions are performed by boards, commissions or departments having other duties, and in three States provision is made for the appointment of special boards when deemed advisable. In no case are the awards of such boards binding, but in several States the boards may initiate action and have powers similar to those of the lower courts as respects the summoning of witnesses, compelling testimony, production of records, etc.

A Federal statute passed in 1888, applicable only to disputes between railroads and other transportation companies engaged in interstate commerce, created machinery for voluntary arbitration of railway disputes at the request of either party and for public investigation of such disputes upon the initiative of the government. This act remained practically a dead letter, and it was superseded in 1898 by the “Erdman Act,” which provided for mediation and voluntary arbitration in the case of controversies ansing between railroad companies and those employees directly engaged in the movement of trains, namely, engineers, firemen, conductors, trainmen, switchmen and telegraphers. By this act the chairman of the Interstate Commerce Commission and the Commissioner of Labor were designated “Federal Mediators,” who, upon the request of either party, should first seek to bring about an amicable adjustment of controversies through mediation and, if unsuccessful, they should endeavor to have such controversies submitted to boards of arbitration to be established as provided for in the act. The “Newlands Act,” passed in 1913 and now in effect, established the United States Board of Mediation and Conciliation consisting of a commissioner, an assistant commissioner and two other officials of the government, all of whom are appointed by the President. In general the provisions of the Erdman Law were re-enacted and provision was made for the appointment of six-member boards of arbitration composed of two representatives of each party to a controversy and two members representing the public, instead of the former three-member boards on which the neutral member alone held the deciding vote. Since the organization of the board in July 1913 and up to 18 Oct. 1916, the services of the board were requested in 61 controversies between railroad companies and their employees. Of this number 46 were settled by mediation, 11 by arbitration and four by mediation and arbitration. Two of these controversies were of unusual importance — one in 1913 involving over 92,000 conductors and trainmen in the eastern section of the country, and another in 1914-15 affecting about 55,000 locomotive engineers and firemen employed on railroads west of the Mississippi River. In each of several other controversies over 25,000 railway employees were involved. It has been authoritatively stated that in railway controversies “the results which have been accomplished under the Newlands Law have been without a parallel abroad.” In only one case has the board failed to effect a peaceful settlement of a controversy referred to it. The recent refusal of the four large railway brotherhoods (Locomotive Engineers, Locomotive Firemen and Engineers, Railroad Conductors and Railroad Trainmen, together representing nearly 400,000 employees) to refer to arbitration the so-called “eight-hour” controversy, resulted in a deadlock, and in August 1916, a general railroad strike appeared to be imminent. In order to prevent such a public calamity President Wilson urged the immediate passage of legislation by Congress, then in session and early in September the Adamson bill was passed by a large majority in both Houses. The act provided that, beginning 1 Jan. 1917, eight hours should, in contracts for labor and service, be deemed a day's work and the measure or standard of a day's work for the purpose of reckoning the compensation for services of all employees engaged in the operation of trains (with certain specified exceptions), and further provided for the appointment of a commission which should observe the operation and effects of the institution of such eight-hour standard work day for a period of not less than six months, nor more than nine months, and within 30 days thereafter should report its findings to the President and Congress. It was also provided that, pending the report of the commission and for a period of 30 days thereafter, the compensation of railway employees covered by this act should not be reduced below the present standard day's wage, and, for all necessary time in excess of eight hours, such employees should be paid at a rate not less than the pro rata for such standard eight hours of work. Penalties for violation of the provisions of the act were also provided. This law not only regulated the hours of labor of railway employees but also determined wage standards. As a measure fixing wages, its constitutionality has been questioned, and pending a determination of its constitutionalty several railway companies declined to observe the provisions of the act. Accordingly the chiefs of the four railroad brotherhoods called a strike to begin on 17 March 1917 on certain eastern railroads and to extend successively to other railroads until a general strike on all important railroads should result. Conferences between the railroad managers and the brotherhood chiefs were held, but without resulting in concessions by either party. Thereupon the President, through a special committee of mediation, urged that in view of the gravity of the international situation at the time, the two parties to the dispute, as a patriotic duty, should reach an immediate settlement of the controversy. Through the efforts of the mediators a postponement of the strike for 48 hours was secured, and on 19 March the railroad managers agreed to establish the basic eight-hour day and the threatened strike was averted. On the same day a decision of the Supreme Court upholding the constitutionality of the eight-hour law was announced. This decision established the principle that Congress has authority not only to regulate the hours of labor of employees engaged in interstate commerce, but also to determine wage standards. It was further established by the decision that: “The public right to have interstate commerce uninterrupted is a basic principle paramount to the interests of the railroads or of their employers, both in public service, and subject to the supreme, unrestricted power of Congress to take any action necessary to maintain freedom and uninterruption of interstate commerce.” A precedent having thus been established, it remains to be determined whether or not the settlement, by special legislation, of controversies which seriously endanger the public welfare shall prove as satisfactory or effective as adjustments through mediation and voluntary arbitration. See Eight-hour Law; Labor Legislation; Labor Movement in America; Labor Unions.

Bibliography.— Books and Articles.— Academy of Political Science, Vol. VII, No. 1, article on “Labor Disputes and Public Service Corporations” (New York, January 1917); Adams and Sumner, ‘Labor Problems’ (New York 1905); American Academy of Political and Social Science, Annals, articles on “The Settlement of Labor Disputes” (Philadelphia 1910); American Yearbook, 1916, articles on “Arbitration and Conciliation” (New York and London 1917); Barnett, G. E., and McCabe, D. A., ‘Mediation, Investigation and Arbitration in Industrial Disputes’ (1916); Oilman, N. P., ‘Methods of Industrial Peace’ (Boston 1904); Lloyd, Henry D., ‘A Country without Strikes’ (New York 1900); Mote, Carl H., ‘Industrial Arbitration’ (Brooklyn 1916); Robbins, E. C., ‘The Trainmen's Eight-Hour Day’ (in Political Science Quarterly, Vol. XXXI, No. 4, December 1916).

Government Reports.— Canada, “Ninth Report of the Registrar of Boards of Conciliation and Investigation of Proceedings under the Industrial Disputes Investigation Act, 1907” (Ottawa 1916); Germany, “Statistiches Jahrbuch für das Deutsche Reich” (annual, Berlin) and “Reichsarbeitsblatt” (monthly, Berlin); Great Britain, British Board of Trade Labor Gazette, articles on “Recent Conciliation and Arbitration Cases” (monthly, London); France, “Bulletin du Ministère du Travail et de la Prévoyance Sociale” (monthly, Paris); United States Industrial Commission, Vol. XVII (Washington 1901); United States, Department of Commerce and Labor Bulletin No. 60, “Government Industrial Arbitration” (Washington 1905); United States Bureau of Labor, Bulletin No. 98; four articles: “Mediation and Arbitration of Railway Disputes in the United States”; “Canadian Industrial Disputes Investigation Act of 1907”; “Conciliation and Arbitration in Great Britain”; and “Industrial Courts in France, Germany and Switzerland” (Washington 1912); United States Senate Document No. 493, 64th Congress, 1st Session, “Railroad Labor Arbitrations” (Washington 1916).

Director Massachusetts Bureau of Statistics.