Saturday, December 13, 2008
- David C. Yamada, Workplace Bullying and Ethical Leadership (428).
- James A. Wooten, A Legislative and Political History of ERISA Preemption, Part 3 (109).
- David C. Yamada, Human Dignity and American Employment Law (105).
- Michael H. LeRoy, Crowning the New King: The Statutory Arbitrator and the Demise of Judicial Review (102).
- Anup K. Basu, Alistaire Byrne, & Michael E. Drew, Dynamic Lifecycle Strategies for Target Date Retirement Funds (93).
- Patrick Macklem, Indigenous Recognition in International Law: Theoretical Observations (91).
- Edward A. Zelinsky (left), Employer Mandates and ERISA Preemption: A Critique of Golden Gate Restaurant Association v. San Francisco (91).
- David J. Doorey, Union Access to Workers During Union Organizing Campaigns: A New Look through the Lens of Health Services (84).
- Mark N. Mercer, Roth Retirement Accounts: A Practitioner's Approach (80).
- Katherine Van Wezel Stone (right), John R. Commons and the Origins of Legal Realism; or, the Other Tragedy of the Commons (78).
Friday, December 12, 2008
According to a BNA report (subscription required), and Akin Gump's Washington Labor & Employment Wire, yesterday's meeting at the EEOC was rather contentious. The Commission met to discuss proposed regulations in response to the ADA Amendments Act, which will take effect in January. The Office of Legal Counsel had been working on a proposal since August and had met with members of the groups that had crafted the compromise bill in Congress. Some objections had been raised by disability rights groups, and so rather than issuing an interim final rule, the Chair, Naomi Earp, had agreed to implement the rule through the formal notice and comment rulemaking procedure. The content of those rules was the subject of yesterday's Commission meeting.
The Democratic members of the Commission (there are two of them, and two Republican members, one of which is Chair Earp), objected that the public meeting on the content of the proposed rules was still premature because the proposed rules were not finished--not every member was comfortable with them. The Republican members argued that the Commission had a duty to get the rule in place as quickly as possible because of the January 1, 2009 effective date of the Act, while the Democratic members argued against rushing to put out a document that was not ready and urged that it was more important to take the time to get it right. The vote on whether to approve the proposed notice tied 2-2 along party lines. According to Commission rules, a tie results in the motion not being approved.
The transcript of the meeting is not yet available on the EEOC's website, and I was not present at the meeting, so I can't provide any insight on the content of the proposed rules. To the extent that the ADAAA brings the statute back into line with how the EEOC had interpreted it before Sutton and Williams, it would seem less vital to rush to make new rules. At the same time, it would seem that a good draft of regs already would exist on at least some of the changes, and so continuing to work on the draft would seem less important. But I don't know what the sticking points are--whether there is also dissatisfaction with the earlier regs or uncertainty about the statutory changes that weren't already embodied in the prior regs.
Hat tip: Paul Secunda
See the update to Jeff's post yesterday on undocumented employees cleaning the house of Department of Homeland Security Director David Chertoff. Don't DHS employees have anything better to do? In any event, I'm glad DHS folks are reading Workplace Prof Blog. Perhaps they'll learn a thing or two.
Meat cutters at the world's largest pork plant in Tar Heel, North Carolina, voted to be represented by the United Food and Commercial Workers union, a decision that should end more than 10 years of bitter fighting between the union and the plant's owner, Smithfield Foods In . . . .
While negotiations for an initial contract can be troublesome, the Tar Heel workers may be helped by the fact that the UFCW already has contracts with other Smithfield plants, said Jeffrey Hirsch, associate professor of law at the University of Tennessee.
"Getting the first contract is often pretty difficult," Hirsch said. "My guess is what the UFCW will do is try to use the contracts with the other plants as a starting point."
Next, an AP story which ran prior to the Smithfield election, which ran in Business Week:
"There's been a long, long history of tension between the union and Smithfield," said Jeffrey Hirsch, a law professor at the University of Tennessee who specializes in labor relations law and used to work at the NLRB. "Problems often equal workers being in favor of unions." . . . .
While Hirsch and other observers think a union victory could set an example within the meatpacking industry or to workers in the little-unionized South, one industrial site, even one this size, is "not big enough to cause ripples in the economy, broadly," Hirsch said.
"I think it would be a symbolic victory for the union," he said. "Certainly for the workers it would matter."
Finally, Employment 360 article ran a piece on the Laurel Baye case, and whether two-member NLRB decisions are valid:
"The board is very open about what it did here," said Jeffrey Hirsch, an associate professor at the University of Tennessee College of Law. "It said, 'We know we're going to turn into a two-member pumpkin soon, and we think this gives us the authority [to keep issuing decisions], and that's what we're going to do.'"
He said, however, that it's clear Congress was not thinking of this particular situation when it drafted Section 3(b) in 1947.
Instead, Congress wanted to allow the NLRB to appoint three-member panels, much like the federal appeals courts do, according to Hirsch . . . .
During oral arguments Thursday, Judges David S. Tatel and Stephen F. Williams of the D.C. Circuit seemed hostile to the board's position, according to Hirsch, who did not attend the hearing himself but said he talked to quite a few people who did.
"They're certainly cognizant of the fact that there are a lot of cases that might be vacated by this," Hirsch said. "But especially the D.C. Circuit, they're not necessarily shy about vacating stuff."
He said, however, that predictions are always dangerous and that his gut has been proven wrong many times.
How true. In any event, this is just the current batch of new stories with quotes by one of the most famous labor law bloggers out there. More certainly to come.
We're just happy he is part of our team here at Workplace Prof.
Employer reputational costs - that is, the loss in value of the firm's reputational assets if the firm reneges on its promises to workers, both express and implied, - has played an important role in the economic literature of employment contracts, but this factor has itself generated little sustained analysis. Reputation is often offered as a late-appearing deus ex machina explaining why opportunistic behavior by employers even in internal labor markets is likely to be relatively unimportant.
This standard explanation for the enforceability of implicit labor contracts in internal labor markets is problematic for at least three reasons. It assumes a well-functioning market in information about past and projected firm behavior, for a loss in employer reputation can only occur if job applicants from the external labor market are able readily to distinguish between "opportunistic" behavior (where, say, a termination of employment reflects an employer's reneging on implied promises of deferred compensation or late-career immunity from close monitoring of performance) and legitimate behavior (where a discharge reflects an appropriate response to shirking on the job or unforeseen business conditions). Second, the reputational-loss account is a static one; it assumes that employers in the first period (when they make the implied promise of deferred compensation or late-career job security) are in the same product market position in the later period (when they are expected to perform these implied promises). If the employer in the later period has disappeared, operates in a different product market, or has a need for workers with a different skill mix than in the first period, it will become even more difficult for job applicants in the external labor market to evaluate whether the firm's past behavior is a good predictor of their probable job experience with that firm. Finally, the explanation also makes certain problematic assumptions about how workers process information.
The deficiencies of the standard explanation require either a reconsideration of implied labor market theory, or implied labor market arrangements remain economically desirable an identification and possible strengthening of institutions that might enhance the firm's reputational costs in breaking promises to workers.
All this seems doubly true today, as rapidly deteriorating economic conditions cause rapid changes in both the product and labor markets.
Laura Cooper (Minnesota) has just published (83 Indiana L.J.1589 ) her article Privatizing Labor Law: Neutrality/Card Check Agreements and the Role of the Arbitrator. This article, based on a lecture given last year at Indiana-Bloomington, is particularly significant in light of the likely passage next year of some version of the EFCA. Here's a summary:
[N]eutrality/card check agreements  are usually administered by private arbitrators empowered to interpret and apply them. In the last six to eight years, the American labor movement has significantly bypassed the legal structure Congress created for employees to express their desires regarding union representation and instead privatized labor law. In entering into neutrality/card check agreements, unions have focused on their goal of increasing union representation. However, such privatization has the secondary consequence of placing in the hands of private individuals serving as arbitrators some powers that had previously been the exclusive province of the NLRB, and other powers that even the NLRB never possessed. While scholarly, political, and administrative attention has understandably been focused on the broad public policy implications of neutrality/card check agreements, scant attention has been directed to what neutrality agreements require of arbitrators and whether these expectations are consistent with the institutional capacity *1590 and role of arbitrators. Do arbitrators actually have the legal authority and administrative capacity to assume this role? Can neutrality/card check agreements achieve their intended objectives if arbitrators cannot perform that role? What role can and should arbitrators play when unions join with employers in agreeing to privatize labor law?
Thursday, December 11, 2008
Word has been released that the late-night attempt to revive the auto bailout deal in the Senate has failed. The sticking point was the degree to which workers would have to face wage cuts, which we've been posting about recently. According to the Washington Post:
An eleventh-hour effort to salvage a proposed $14 billion rescue plan for the auto industry collapsed last night as Republicans and Democrats failed to agree on the timing of deep wage cuts for union workers, killing the legislative plan and threatening America's carmakers with bankruptcy.
"We're not going to get to the finish line. That's just the way it is. There too much difference between the two sides," Senate Majority Leader Harry M. Reid (D-Nev.) announced after 10 p.m., concluding a marathon negotiating session that ended in gridlock. Reid warned that markets could plummet when trading begins this morning. "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," he said.
After dire warnings earlier in the day that prospects for a bailout had all but disintegrated, the high-stakes talks had initially produced significant progress. Senators and their aides had spent more than eight hours trying to reach a last-minute deal, exiting the talks after 8 p.m., hopeful that a deal could be reached. . . .
The negotiations were based on a plan advanced by Sen. Corker (R-Tenn.). His proposal sought to reduce the wages and benefits of union workers by requiring the automakers' total labor costs to be "on par" with those in nonunion U.S. plants of foreign automakers such as Toyota and Honda, according to a summary of the bill. The proposal would have required automakers to reduce their debt obligations by at least two-thirds through an equity swap with bond holders. Payouts to workers who are laid off or temporarily furloughed would be terminated. . . .
Entering a critical meeting of Senate Republicans to present a revised version of the plan last night, Corker told reporters one "major" issue separated the two sides. Industry sources, who spoke on condition of anonymity, indicated that the sticking point related to how deep wages would be cut. . . .
He and other Republicans had revolted against the earlier plan because they thought it did not go far enough in forcing contracts on the UAW. GM officials have told Congress, for instance, that under the most recent contract, wages would be about $62 per hour in 2010, including about $30 per hour in wages and more than double that in benefits to current workers and retirees. . . .
Not coincidentally, the Chattanooga area recently landed a new VW plant and Tennessee has been attracting foreign car companies for a while. This highlights that some of the dispute is based on region rather than political party. Also, if the concern is American jobs, "foreign" automakers may be more important than the Detroit automakers.
Finally, Reid's comment about the markets looks to be true. I just checked the Dow futures and at around midnight, they're down 333 points. Before the final collapse, key Republicans stated that this was the final chance for this Congress. Whether that's true remains to be seen, but it certainly doesn't look good for now.
We've posted many stories on the government's crackdown this year against companies using undocumented workers (see here for one example). The Washington Post today is reporting on a story so ironic that it would be comical but for the serious consequences affecting the people involved. Apparently, the Secret Service had been screening domestic employees of a company that cleaned the home of Department of Homeland Security Secretary Michael Chertoff, whose ICE division is responsible for the workplace immigration raids. The problem? Several undocumented employees still got through and were working at Chertoff's house. The person held responsible? The owner of the cleaning company (in addition to the workers of course). According to the Post:
Every few weeks for nearly four years, the Secret Service screened the IDs of employees for a Maryland cleaning company before they entered the house of Homeland Security Secretary Michael Chertoff, the nation's top immigration official. The company's owner says the workers sailed through the checks -- although some of them turned out to be illegal immigrants.
Now, owner James D. Reid finds himself in a predicament that he considers especially confounding. In October, he was fined $22,880 after U.S. Immigration and Customs Enforcement investigators said he failed to check identification and work documents and fill out required I-9 verification forms for employees, five of whom he said were part of crews sent to Chertoff's home and whom ICE told him to fire because they were undocumented.
"Our people need to know," said the Montgomery County businessman. "Our Homeland Security can't police their own home. How can they police our borders?"
Reid admits he made mistakes but called the fine so excessive that it may put him out of business. Several of his workers moved after ICE agents showed up at their homes, he said. . . .
The Secret Service uses workers' ID information to conduct security checks, not immigration checks, much like most police departments do when they pull over people for traffic stops. . . .
Department of Homeland Security spokesman Russ Knocke said that in this type of investigation, ICE focuses on the employers, not where employees are dispatched. He said that contractors have the responsibility of ensuring that their workers are legal, and that the Chertoffs were assured by Reid that workers sent to their home were legal. Upon learning that Reid might have hired illegal immigrants, the Chertoffs fired him, and the secretary recused himself from the department's subsequent enforcement actions, Knocke said.
There are obviously differences in the Secret Service's function and that of ICE, but this just looks bad (although I'm not particularly sympathetic to the employer here). I'm curious whether the Secret Service knew the workers were undocumented. If they did, I'm heartened by a law enforcement agency not automatically report immigration problems, as undocumented status doesn't necessarily pose a security risk and always reporting these problems can often undermine law enforcement goals.
[Following the original publication of this post, we received the following response from DHS, which we agreed to publish here:
The Department of Homeland Security saw that Workplace Prof Blog was covering today’s Washington Post story about Secretary Chertoff's employment of a cleaning service that hired illegal immigrants. The DHS Press Office would appreciate it if you would consider including the response of DHS spokesman Russ Knocke in your coverage:
"Every contractor in the United States has the responsibility of ensuring their workers are legal. As customers, the Chertoffs obtained assurances from Mr. Reid that any personnel he dispatched to their home were authorized to work in the United States.
As soon as the Chertoffs learned that Mr. Reid deceived them by employing some unauthorized workers, they fired him. Further, Secretary Chertoff recused himself from any involvement in immigration enforcement actions that could follow.
The United States Secret Service maintains a round the clock security presence at the residences of protectees, and screens individuals who enter a residence or have business to conduct on the property.
This matter illustrates the need for comprehensive immigration reform, and the importance of effective tools for companies to determine the lawful status of their workforce.
More 91,000 employers have enrolled in E-verify, and there were more than 6.6 million workers checked last year. E-verify is free, fast and available online for employers. It is unfortunate that Mr. Reid did not acknowledge his own personal responsibility and check the eligibility of his work force."
Assistant Press Secretary
Department of Homeland Security]
I'll certainly second the notion that this is yet another reminder that we need comprehensive immigration reform.
Soon after we posted a story about Andy Stern and the SEIU's wish-list for the new Obama administration, the Gov. Blagojevich scandal threats to undermine some of the union's efforts. Among Blagojevich's many alleged attempts at corruption was to get the SEIU to provide the governor with a job in exchange for allowing the SEIU to pick who would take Obama's senate seat. As the New York Times' Steven Greenhouse explains:
The federal criminal complaint filed against Mr. Blagojevich said his chief of staff, John Harris, had suggested to a service employees’ official that the union should help make the governor the head of Change to Win, the federation of seven unions that broke away from the A.F.L.-C.I.O. The complaint said Mr. Blagojevich was seeking a position that paid $250,000 to $300,000 a year.
In exchange, the complaint strongly suggested, the service employees union and Change to Win would help persuade Mr. Blagojevich to name Valerie Jarrett, President-elect Barack Obama’s first choice, as the state’s new senator. And the union would get help from the Obama administration, presumably for its legislative agenda.
Several union officials in Chicago and Washington said that the service employees official approached by Mr. Harris was Tom Balanoff, the president of the union’s giant janitors’ local in Chicago and head of the union’s Illinois state council. Mr. Balanoff, one of the union officials closest to Mr. Obama, is widely seen as an aggressive, successful labor leader, who has helped unionize thousands of janitors not just in the Chicago area but also in Texas.
Reached by telephone on Tuesday, Mr. Balanoff said, “I can’t comment on anything right now.”
The Illinois branch of the service employees issued a statement on Wednesday night saying, “We have no reason to believe that S.E.I.U. or any S.E.I.U. official was involved in any misconduct.” It added that the union and Mr. Balanoff “are fully cooperating with the federal investigation.”
Greg Denier, Change to Win’s spokesman, said the federation “had no involvement, no discussion, no contact” with Mr. Blagojevich or his staff. “The idea of a position at Change to Win was totally an invention of the governor, and his stance has no basis in reality,” Mr. Denier said. Mr. Denier noted that the presidency of Change to Win was an unsalaried position. . . . Service employee officials said that the criminal complaint does not allege that the unnamed “S.E.I.U. official” did anything wrong. All he did, they said, was listen to Mr. Blagojevich and his chief of staff and ferry some messages for them.
What remains to be seen is whether Blagojevich was simply engaging in wishful thinking or whether there was more substantial discussions with a receptive union official. None of this helps the SEIU, but if it's the latter, then the union movement as a whole may take a hit. I would expect Johnny Sack to be replaced by Blagojevich and to hear more about unions being responsible for the downfall of the American auto industry and others (for instance, Sen. DeMint last evening on NPR made an extremely blunt accusation that the UAW was the party responsible for Detroit's financial problems, despite much evidence showing that there are many other significant contributing factors).
In short, as unions are preparing to make significant lobbying on the legislative front, this has the potential to be a real black eye. Only time will tell for sure though.
We don't do much wage and hour stuff on this blog because these cases tend to come down to whether nurses on standard-size ambulances are exempt from overtime pay. But Wal-Mart sure got another lesson on why it should not ignore the Fair Labor Standards Act (FLSA) (Marica previously wrote about this case here).
According to the BNA Daily Labor Report:
Wal-Mart Stores Inc. . . . announced that it has agreed to pay up to $54.25 million to settle a class action lawsuit that had alleged that it had violated Minnesota's labor laws by requiring employees to work off the clock during training (Braun v. Wal-Mart Inc., Minn. Dist. Ct., No. 19-CO-01-9790, settlement announced 12/9/08).
In addition to a multimillion dollar payout to workers, the settlement . . . includes terms providing that the retailer will pay the state a civil penalty, an amount that is expected to be the largest wage and hour civil penalty in state history . . . .
I'm sure this settlement does not sit will with the cheap-skates over at Wal-Mart, but they got more where this one comes from, with an estimate of 80 such pending suits in 2007.
Mmm, maybe they could be even more profitable by not ripping off their employees on wages and benefits and avoiding all of this endless labor and employment litigation.
Just a thought.
Yesterday evening, the workers, the company, and the Bank of America approved a $1.75 million agreement to end their six-day sit-in.
Although the workers still lost their jobs, they each receive eight weeks' salary, all accrued vacation pay and two months' paid health care, which works out to about $7,000 per employee.
Perhaps other employers will think twice before literally leaving their workers out in the cold when their financial fortunes go south.
Thanks to fellow blogger, Steve Rosenberg, for the follow-up on The Tribune Company ESOP story. He points us to the fact that it's even more egregious than that what we initially thought. Apparently, a group of employees essentially predicted this months ago:
[N]ot too long ago and in a very prescient move, a number of participants in the Tribune’s ESOP filed a breach of fiduciary duty suit related to Sam Zell’s use of the ESOP stock in the transaction by which Zell or entities he controlled acquired the Tribune; we now are learning that this apparently deeply flawed transaction (time will tell, but all indications suggest it was deeply flawed right from the get go) placed the ESOP plan participants’ holdings at greater risk than the assets of others involved in funding the transaction, including Zell himself.
Finally, Steve comments that in hindsight, at least, the allegations in the complaint suggest that a bankruptcy putting the esop assets at risk was a likely outcome, at a minimum.
Wednesday, December 10, 2008
The oral argument transcript in AT&T v. Hulteen has been posted (see the ScotusWiki page for more details on the case), which involves service credit for pregnancy leaves taken in the 1970s, which affected the retirement benefits granted employees who retired or left the company in the last fifteen years. Transcripts can be a poor substitute for seeing and hearing an argument, where a lot of meaning can sometimes be conveyed by inflection and body language, and so my reaction may be caused by the dryness of the words on the page, but the oral argument seems to have shed little light on the issues or analysis in this case. It could also be that the Justices were tired after the the first argument of the day on Cabinet-level officials' liability for maltreatment of detainees in the aftermath of September 11, 2001.
As noted in an earlier post, this case presents a number of complicated and technical questions on some very abstract issues, and it would have been great to have seen the issues put in their most basic terms. The argument was very bogged down in the technicalities, though. Counsel for AT&T began by focusing on the staleness of the claims here, presumably (although not explicitly) arguing that the plaintiffs' cause of action arose either 1. at the time of adoption of the policy that required employees to take personal leave (no service credit for seniority) for pregnancy-related leave while allowing employees to take disability leave for other disabilities (service credit); or 2. at the time that the employees took the leave. If that were true, the 180 day filing limit would have passed over 30 years ago. That made AT&T's argument flow a little strangely: first, the plaintiffs should have sued in the 1970s when they knew that something illegal had happened; but this wasn't a violation of Title VII then anyway.
Justice Ginsburg pressed him hard on whether the claims were even ripe until the plaintiffs suffered some adverse action through application of the seniority system. Justices Breyer and Souter followed up with questions on why this wasn't a situation like the discriminatory salary structure in Bazemore, where prior salary decisions based on race determined future salary even when race was taken out of the picture. The decision to perpetuate the effects of the prior discrimination violated Title VII. Justice Ginsburg also suggested that the policy may have been illegal when these women took leave, at least before the Supreme Court's decision in Gilbert, because all of the circuits before that case had ruled that discrimination on the basis of pregnancy was discrimination on the basis of sex.
The Assistant Solicitor General argued in more basic terms that the effect of the 9th Circuit's decision was to restore service credits that were lawfully denied at the time they were denied, and that this retroactive effect was not what Congress intended when it amended Title VII with the PDA. She further argued that to restore these service credits now would frustrate planning for retirement systems, something Congress generally avoided.
Justice Kennedy asked a very telling question about the grace period employers were given before the PDA would apply to fringe benefit plans and seniority systems. To me that suggests he may be thinking that employers had a sufficient grace period to alter their policies so as not to discriminate on the basis of pregnancy and to ensure that future pension obligations based on the change would be adequately funded. The Assistant Solicitor General glossed over that point, however, and Justice Kennedy did not press her. Justice Souter followed up on that and asked how anyone's expectations would be unsettled after the PDA went into effect, and Justice Ginsburg pointed out how long the company had before these plaintiffs were affected by the seniority system. In response, the Assistant Solicitor General focused primarily on pensions as a fixed pool--a zero sum game--where giving more money to one person would necessarily take it away from another, suggesting that to change things at this point would unfairly penalize the company and other retirees.
The Assistant Solicitor General also argued that the seniority system was not discriminatory--and on further questioning by Justice Roberts, she clarified that the discrimination was in the leave policy, which was changed as soon as the PDA took effect.
Counsel for Hulteen argued that the discrimination took place when the seniority system was applied to the plaintiffs at the time they left AT&T, but he also argued that the plan was a violation of Title VII at the time the leave was taken because it had a disparate impact on women. That led to a rather lengthy colloquy on whether this was a disparate treatment or disparate impact case, and what the difference was. The issue that the Justices seemed most concerned about was whether AT&T's policy was legal before the PDA took effect, and this colloquy did not seem to clear up that answer for them.
The Court also got caught up in whether there was any difference between a policy that is "facially discriminatory" or "intentionally discriminatory" for purposes of the statute and in when the discrimination occurred or cause of action may have accrued. Justice Scalia pressed counsel pretty hard on this point, challenging counsel to point out where the seniority policy had any sort of facial classification, characterizing the policy as not providing credit "for periods in which the company lawfully deemed you not to be working for the company." Scalia also later in the argument distinguished between sex discrimination and discrimination on the basis of pregnancy, suggesting that he does not believe that discrimination on the basis of pregnancy is discrimination on the basis of sex.
Justice Stevens also pressed Counsel for Hulteen, but on whether Bazemore was really the application of a discriminatory system rather than new discrimination with each paycheck that paid different rates based on race. And Justices Souter and Kennedy asked questions about the parties' settled expectations--whether affirming would harm the members of the pension plan who weren't before the court. Counsel for Hulteen replied that this should not be much of a concern for a defined benefit plan (it's the company that bears the risk) for the relatively small increase in benefits to be paid to these plaintiffs. AT&T has a $17 billion dollar surplus in this plan, and the plaintiffs class' damages could total in the millions of dollars.
It's hard to predict (it always is, of course) what the Justices think about this case from the argument. I think it's fairly clear that Ginsburg, Souter, Breyer, and Stevens would side with the plaintiffs on this one, possibly finding that this was intentional discrimination that occurred at the time the plaintiffs separated from AT&T and the retirement benefits were awarded. It's possible that Ginsburg and Stevens would go farther and say that the policy was never legal. I also think it's pretty clear that Scalia would side with the employer on this, and I think Roberts might also, at least considering the expectations that employers might have in funding plans. Kennedy could go either way (as usual), on pragmatic grounds, and so could Thomas and Alito. There are some very appealing statutory language arguments on both sides for them. I am willing to predict that whatever the outcome, ultimately, this is going to be another very fact-based, context specific decision.
We've blogged a couple of times about the Republic Windows strike, but our posts are nothing compared to the press that this strike is getting elsewhere. A Google news search this morning showed roughly 3500 news items. In the latest news, JP Morgan Chase has pledged $400,000 toward the workers' $1.5 million in severance and vacation pay claims, according to the Chicago Sun Times. A subsidiary of Chase owns 40% of Republic Windows.
So why so much attention? Why did President-elect Obama support the strike so publicly? Why are so many other high-level politicians involved in negotiating, primarily on behalf of the workers? Why didn't the company ask the police to arrest the workers for trespassing when they refused to leave?
The consensus seems to be that this strike struck a nerve with the media and the public consciousness (see for example CNN, the Associated Press (hat tip Dennis Walsh), and Independent Street, a blog of the Wall Street Journal). It's too perfectly a symbol of popular sentiments about what's wrong with the economy and the bailout to be ignored by politicians or by regular folks. The company had lost business with the downturn in construction caused by the bursting of the housing bubble that came with the collapse of the subprime mortgage market, and then the bank, which had received billions in bailout money cut off the company's line of credit. Without cash flow, the company closed its doors--at least until it could reopen in a cheaper location in another state, where at least one of the owners has bought a window plant. The key concepts here sound like a list of top Google search queries for the last two months. And it certainly doesn't help that the closing happened during the holiday season.
It's too early to tell what the takeaways are going to be from the number of issues related to this strike and its resolution--Wall Street v. Main Street, banks forced to continue lending to poor credit risks, solvent but struggling companies forced into bankruptcy by the lack of credit available, national control of the economy, outsourcing, labor costs, the role of unions, etc. In the meantime we can watch it all play out in a sort of, "It's a Wonderful Life" meets "Norma Rae" daily drama.
"Broken Government" catalogues many of the major executive branch failures over the past eight years - including failures to protect Worker Safety.
The complete list is available at their site. You can find categories that labor-types might be interested in, for instance, by clicking on topics under Consumers & Workers.
Sounds like one could spend all day on this site reading about what is broken in American government these days (sigh).
Chicago is NOT the place to be these days - especially if you are a corrupt politician or a financially-stressed newspaper. On the newspaper side of things - Elizabeth Dale (Florida) writes to tell us that the ESOP angle of the The Tribune Company bankruptcy is truly a mess.
She points us to this story from the New York Times Deal Book:
The possibility of a bankruptcy filing at Tribune Company is an embarrassing development for Samuel Zell, the real-estate mogul who took the media company private last December.
But it is likely that Tribune’s employees — or, more specifically, the employees’ stock-ownership plan — would take the first hit.
Because of the unusual structure of Tribune’s $8 billion buyout, Tribune’s employee stock-ownership plan holds 100 percent of Tribune’s common equity, regulatory filings show. Common stockholders are generally the first to take a loss in a bankruptcy restructuring, and they usually recover next to nothing.
Mr. Zell, by contrast, supplied mostly debt in the complex transaction, putting him higher in line to get paid. His $315 million investment in the Tribune deal consisted of a $225 million promissory note; the rest was for warrants to buy about 40 percent of Tribune’s stock in the future.
Great, another self-centered corporate CEO looking out for himself and screwing the employees of his company. I guess we should be thankful that at least he is not asking for a bail out.
More about this story here.
Tuesday, December 9, 2008
I'd been trying to find some more info describing the real differences in labor costs between U.S. unionized auto plants and nonunionized ones, as labor costs have become one of the boogie men cited as a reason for Detroit's problems. The New York Times's David Leonhardt has the best explanation I've seen so far, explaining that the biggest problems are retiree benefits and bad cars. He explains the labor cost differences as follows:
Seventy-three dollars an hour. That figure — repeated on television and in newspapers as the average pay of a Big Three autoworker — has become a big symbol in the fight over what should happen to Detroit. To critics, it is a neat encapsulation of everything that’s wrong with bloated car companies and their entitled workers. To the Big Three’s defenders, meanwhile, the number has become proof positive that autoworkers are being unfairly blamed for Detroit’s decline. . . .
So what is the reality behind the number? Detroit’s defenders are right that the number is basically wrong. Big Three workers aren’t making anything close to $73 an hour (which would translate to about $150,000 a year). But the defenders are not right to suggest, as many have, that Detroit has solved its wage problem. General Motors, Ford and Chrysler workers make significantly more than their counterparts at Toyota, Honda and Nissan plants in this country. Last year’s concessions by the United Automobile Workers, which mostly apply to new workers, will not change that anytime soon. . . .
The $73-an-hour figure comes from the car companies themselves. As part of their public relations strategy during labor negotiations, the companies put out various charts and reports explaining what they paid their workers. Wall Street analysts have done similar calculations. The calculations show, accurately enough, that for every hour a unionized worker puts in, one of the Big Three really does spend about $73 on compensation. So the number isn’t made up. But it is the combination of three very different categories.
The first category is simply cash payments, which is what many people imagine when they hear the word “compensation.” It includes wages, overtime and vacation pay, and comes to about $40 an hour. (The numbers vary a bit by company and year. That’s why $73 is sometimes $70 or $77.) The second category is fringe benefits, like health insurance and pensions. These benefits have real value, even if they don’t show up on a weekly paycheck. At the Big Three, the benefits amount to $15 an hour or so.
Add the two together, and you get the true hourly compensation of Detroit’s unionized work force: roughly $55 an hour. It’s a little more than twice as much as the typical American worker makes, benefits included. The more relevant comparison, though, is probably to Honda’s or Toyota’s (nonunionized) workers. They make in the neighborhood of $45 an hour, and most of the gap stems from their less generous benefits.
The third category is the cost of benefits for retirees. These are essentially fixed costs that have no relation to how many vehicles the companies make. But they are a real cost, so the companies add them into the mix — dividing those costs by the total hours of the current work force, to get a figure of $15 or so — and end up at roughly $70 an hour.
The crucial point, though, is this $15 isn’t mainly a reflection of how generous the retiree benefits are. It’s a reflection of how many retirees there are. The Big Three built up a huge pool of retirees long before Honda and Toyota opened plants in this country.
Read the full piece, it's worth it (including the fact that labor costs are only about 10% the cost of the average car). The bottom line is that demonizing the UAW as the sole party responsible for this mess isn't very accurate and won't do much to help. The union can help bring down labor costs (and they're already trying), but Detroit needs significant restructuring of its production and business models to survive long-term.
We posted earlier on Anheuser-Busch, one of the NLRB September Massacre cases in which the Board (3-2) concluded that the employer did not need to give make-whole relief to employees who were caught using illegal drugs during the employer's unlawful surveillance. The Blog of the Legal Times is reporting that the D.C. Circuit has enforced the Board's order in an unpublished order (which I don't have yet). According to BLT, the court held that the NLRB “'offered an acceptable rationale for overturning its precedent' that an employer cannot discipline an employee if the misconduct was discovered unlawfully."
Sounds like a case of agency deference, which I'm normally supportive of (and could've certainly benefited from more of as an NLRB attorney). Although I'm not a fan of the NLRB's decision in this case--at least its broad reversal of precedent on the general issue in that case--from an appellate court's point of view it's probably not so unreasonable as to warrant reversal.
Hat Tip: Paul Secunda
The Wall Street Journal's Matthew Kaminski has an article on the SEIU's Andy Stern. Much of the basic descriptions of the iconoclastic Stern will be familiar to many readers. However, Kaminski has some interesting quotes by Stern on the new political landscape:
"We just won an election. It's no secret." By "we," Andy Stern means "American workers." He also means Big Labor. Speaking on behalf of the fastest growing trade group in America, the Service Employees International Union -- and as one of labor's most powerful figures today -- Mr. Stern sets this simple bar for the Obama presidency: "I expect nothing less than what he said he was going to do, and we should hold him accountable." . . .
All the political signs are favorable for a "universal," government-run health-care system. Mr. Stern hails the appointment of Tom Daschle to lead the push from the Department of Health and Human Services, and he considers Montana Sen. Max Baucus's reform plan a big step in the right direction. Unlike the last time it came up in 1993, Mr. Stern says, "it's hard to find an outspoken voice against comprehensive reform." Mr. Obama takes office at "an unusual Washington moment" when business, labor and the politicians "see common ground" on the president's headline initiatives, health care above all. . . .
Another hot topic in the Democratic primaries was trade. Having backed trade liberalization in the 1950s, the unions today lead the charge to close borders. Mr. Stern plays down the opposition, saying the important trade deals have already been struck and ratified. The Korea, Panama and Colombia trade pacts now before Congress have little "economic impact." Though he won't endorse them, when I ask about a possible political trade-off, his eyes beam. "If they want to attach employee free choice to the Colombia free trade deal, I think we can work something out," he says, smiling again.
The current Washington preoccupation is the transition. Along with "200,000 others," the SEIU put forward a wish list for cabinet jobs as well as the alphabet soup of regulatory agencies. Aside from Mr. Daschle, the SEIU has close ties to Obama political director Patrick Gaspard and Mr. Stern "loves" Bill Richardson at Commerce. Mr. Stern wants an "an updating of our regulatory framework" at the National Labor Relations Board and the Occupational Safety and Health Administration to better "enforce its laws." That kind of talk fast gets the business community's hackles up.
Universal health care, widespread unionization, stronger regulations on business, profit-sharing for employees, higher taxes -- all that sounds like Western Europe. Mr. Stern considers that a worthy model. "I think Western Europe as much as we used to make fun of it has made different trade-offs which may have ended up with a little more unemployment but a lot more equality."
See the full article for all of Stern's thoughts, including his position on how EFCA should be negotiated (hint: he's not much into compromise).
Hat Tip: Dennis Walsh
Last week, President Bush issued an executive order barring certain federal workers from joining a union. The affected workers are those who perform intelligence gathering, investigation, and other types of national security work. According to the White House, application of the FLRA to such workers are inconsistent with national security. As described in the Washington Post:
Offices covered by the order employ about 8,600 people within the Energy, Homeland Security, Justice, Transportation and Treasury departments. About 900 of them are Bureau of Alcohol, Tobacco, Firearms and Explosives workers who have chosen to participate in collective bargaining and will lose their negotiated work rules, a White House spokesman said. Such rules typically cover working hours, scheduling and promotion procedures, for example.
The National Treasury Employees Union, however, said the order covers about 1,500 workers in the ATF bargaining unit at the Justice Department, plus about 50 in the Office of International Affairs at Immigration and Customs Enforcement in the Homeland Security Department.
Workers at other offices typically have not sought or were previously prohibited from collective bargaining.
White House spokesman Scott M. Stanzel said President Bush signed the order Monday to reflect intelligence and homeland security agency reorganizations since he took office and "to make sure we are able to effectively carry out those primary functions that are vital to our national security."
Executive Order 12171, issued by President Jimmy Carter in the 1979, allows the president to exclude workers engaged in national security from the Federal Labor-Management Relations Program. Bush's order marked its 12th amendment.
I just don't get the wholesale argument that this large group of workers can't unionize without jeopardizing national security--particularly when ATF employees had been unionized for decades. I know there may be certain instances where there's a conflict, but federal unions' inability to pressure for much of anything, especially in emergency circumstances, makes this argument seem more of an excuse to enact an anti-union measure in the waning days of the administration. However, it doesn't take a genius (this blogger being the prime example) to realize that this order is not long for the world.
Hat Tip: Dennis Walsh