Weekend News & Commentary – May 2 & 3

On Thursday, a divided House of Representatives voted 228 – 192 to strike down a D.C. bill that would ban discrimination based on employees’ reproductive decisions. The New York Times reports that, while House Speaker John Boehner framed the legislation as an issue of religious liberty, Democrats criticized the Republicans’ votes against the bill as an infringement on women’s reproductive rights and privacy and an affront to the District’s right to self-governance. House Minority Leader Nancy Pelosi called the bill “an outrageous intrusion into workers’ personal lives,” noting the bill was inconsistent with the anti-government rhetoric “we hear around here morning, noon and night.” She called the vote “Hobby Lobby on steroids,” paving the way for employers to needlessly meddle in employees’ health-care choices.

Aetna, Inc., a health insurance company and a member of the Fortune 100, announced this week that it will spend $27 million per year to raise the pay of its low-wage workers to $16 per hour. NPR reports that CEO Mark Bertolini says he believes the raise will pay for itself, by making workers more productive. The raise will affect 5,700 of the company’s workers. Before implementing the raise, Bertolini had discovered that many of his lowest-paid employees were on public assistance to make ends meet. He reported he was shocked “that we, as a thriving organization, as a successful company, a Fortune 100 company, should have people living like that among the ranks of our employees.”

The Wall Street Journal reports that the decades-long trend of shrinking income for workers and growing profit for companies may be reversing. In the first quarter of the year, workers recorded the largest annual gain in pay since 2008, with total salaries and benefits rising 1.2%, while blue-chip companies are likely to record their steepest year-over-year drop in profits since 2009, with a 2.8% decrease from 2014. Labor’s gains over capital likely stem from employment growth and the relatively small pool of available workers. While the continuation of this trend may depend on how tight the labor market is in the short run, both the Federal Reserve and outside economists expect the trend to continue.

California’s low-wage workers are older and more educated than they were three decades ago, but they earn less, according to a UC Berkeley study released last Thursday. The LA Times reports that, according to the study, the state’s lowest paid quintile of workers has seen inflation-adjusted wages decline 12% since 1979, while the top 10% of California workers have seen wages grow 35%. This trend has persisted despite the fact that the low-wage workforce has grown more educated and has more work experience than their comparators three decades ago. The report indicates that the situation isn’t likely to change any time soon, as projections for California’s job market in 2022 shows that the mix of jobs in each industry will be relatively the same and that, of the ten occupations expected to add the most new jobs through 2022, seven are in low-wage positions making less than $12 per hour.

In a celebration of International Workers’ Day, May 1, an exhibition aiming to show the lives of the working poor opened at the Talk Shop Gallery in New York City. The photos featured in the exhibit have been taken by employees from chains like McDonald’s, Taco Bell, Subway, and Burger King.The photos depict scenes of workers’ poverty, portraying empty refrigerators and back-of-the-envelope budget calculations. The New York Times reports that Christin Fernandez, a spokeswoman for the National Restaurant Association, said that, while the exhibition “may be well intentioned, it does not paint the full picture of an industry that provides real pathways to achieving success.”

According to Business Insider, when Wal-Mart laid off 2,200 earlier this month, it provided its employees with a packet of information including “stress management tips.” Gawker has posted photos of the packet, which instructs workers, “Care for yourself by eating well, exercising, and resting when needed. Avoid stimulants such as caffeine, chocolate, and nicotine and depressants such as alcohol.” The packet goes on to caution workers that the layoff may provoke memories of “past transitions” and may result in “difficulty sleeping, nightmares, flashbacks, and feelings of being ‘hyper alert.’” Wal-Mart has responded to critics of the document, charged as “completely blind to the realities of many of its employees,” by emphasizing that the document is a standard resource provided to employees to help manage the difficulties of discussing work transitions with others.

Guest Post: Will Governor Rauner’s New Bankruptcy Proposal Break Chicago’s Pension Obligations?

Michelle Wilde Anderson is a Professor of Law at Stanford Law School.

Illinois Governor Bruce Rauner has decided that allowing his state’s municipalities to declare bankruptcy is an important arrow in his quiver to break “the corrupt bargain that is crushing taxpayers”—namely union influence and membership rates in Illinois.

Chicago, which he says “is in deep, deep yogurt” with pension obligations, seems to be his primary concern. The premise of his reform proposal is that a contract promising retiree pensions, as The Economist put it, “can be made cheaper only by breaking it.” And breaking a contract requires a Contracts Clause workaround. Enter Federal Bankruptcy. Enter Rauner too, who must enact law to authorize the state’s larger municipalities to file for Chapter 9 and to override any special state protections for worker contracts.

Even assuming an Illinois city petitioned for bankruptcy and got the state and federal court go-ahead to open pension agreements, what impact would it have in practice? Under Chapter 9, a municipal debtor writes its own plan for the adjustment of debts. That means that any Illinois municipality to avail itself of a bankruptcy option would need to decide how and whether it would cut into pension obligations, as compared to other debts.

If Illinois cities followed in the footsteps of the two biggest city bankruptcies, they’d essentially cancel all health care benefits for retirees, but keep their pensions payments intact (as in Stockton) or mostly intact (as in Detroit). Eliminating health care was wildly unpopular, but it was more tolerable to retirees than the alternative of lost income. That preference turned on the existence of the Affordable Care Act, which meant that even an ailing 85-year old retiree would be able to find some kind of health care coverage. Will that ACA safety net still be there to catch Illinois’s retirees after a bankruptcy?

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Guest Post: Can They Get Away With This? The Fifth Circuit Tries to Rewrite the NLRA

Andrew Strom is Associate General Counsel of SEIU Local 32BJ.

On April 13th, the Fifth Circuit issued a decision in McKinney v. Creative Vision Resources, LLC, reversing a District Court’s grant of injunctive relief under Section 10(j) of the National Labor Relations Act. So far, the decision has not garnered a lot of attention, but in Texas, Louisiana, and Mississippi, it will make it much harder for the NLRB to rein in employers who flout the law.

The case involved a group of workers, known as “hoppers,” who work the back end of garbage trucks In an illustration of the fissured economy at work, the waste disposal company, Richard’s Disposal, Inc., did not employ the hoppers directly, but instead hired a contractor to provide hoppers. Then, in 2010, Richard’s replaced its contractor with a new entity, Creative Vision, owned by the son of Richard’s owner. Creative Vision hired the hoppers who had worked for the contractor, and under well-established labor law doctrine, was required to recognize and bargain with the hoppers’ union. But, Creative Vision refused to recognize or bargain with the union.

The union filed its charge against Creative Vision on June 17, 2011. Unfortunately, the NLRB Regional Director didn’t issue a complaint against Creative Vision until March 30, 2012, and the Board didn’t file its petition for injunctive relief until July 25, 2012. Then, the District Court waited until July 8, 2014 to issue the preliminary injunction. When the case got to the Fifth Circuit, the employer essentially conceded that that the Board had established a likelihood of success on the merits. The statute provides that the district court has jurisdiction to grant the Board “such temporary relief or restraining order as it deems just and proper.” While the circuit courts have applied slightly different tests, the Fifth Circuit agreed that the “just and proper” test incorporates general principles of equity. In other words, the “just and proper” test is consistent with the Supreme Court’s directive that a party seeking a preliminary injunction must establish “that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.”

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Today’s News & Commentary – May 1, 2015

The Wall Street Journal reports that labor costs have risen in the first quarter of 2015. Private-industry wages and salaries increased 2.8% in early 2015 in what has been termed the “strongest year-over-year growth” since the third quarter of 2008. At the heels of major companies such as McDonald’s and Wal-Mart announcing wage hikes for workers (though not for those employed by franchisees), more companies are contemplating wage increases. The data suggests that workers’ wages are finally beginning to climb after remaining at 2% annual growth for the past few years. However, some economists caution against sudden optimism. According to Ted Wieseman at Morgan Stanley, the apparent wage increase is due to a number of factors, including the fact that most of the increase seems to reflect the work of those whose pay includes incentives (like sales commissions). Wieseman notes that “[t]here’s been significantly less recent underlying acceleration in regular pay than suggested by the headline results.”

At the same time, unemployment claims fell to their lowest point in 15 years. The number of claims numbered at 262,000 and was the lowest level for initial claims since April 15, 2000. The number of unemployment claims is a reasonable proxy for economic health and varies widely from week to week. Still, many hope that the data will “help ease worries about the resilience of the U.S. job market.” For example, although nonfarm hiring has slowed considerably in recent months, the industry added 3.1 million jobs in 2014. In March 2015, the unemployment rate was 5.5% compared with 6.6% in March 2014 and 7.5% in March 2013.

According to Politico, Democrats are proposing a $12 minimum wage which has prompted debate amongst economists over whether such a rate would be too high. Sen. Patty Murray (D.-Wash.) and Rep. Bobby Scott (D.-Va.) propose incremental increases from now until 2020, after which “the wage minimum would be indexed to increases in the median wage.” The proposal would also eliminate the existing federal tipped minimum wage (currently $2.13) and would require employers to pay the same federal minimum wage for all workers. Politico argues that the bill “stands little chance of passing the Republican-dominated House and Senate” and would simply serve to “renew debate.” David Cooper, an economic analyst at the Economic Policy Institute argues, on the other hand, that the bill is appropriate because it would “restore the minimum to its level (after inflation) during the prosperous 1960s.”

Today’s News & Commentary — April 30, 2015

In California, the Los Angeles Times reports that El Super supermarket chain is accused of preventing workers from participating in a boycott and failing to negotiate with the employees’ union. The United Food and Commercial Workers represents approximately 600 store workers, and claims that the store has refused to negotiate over a new contract for over a year. The store is facing a complaint by the National Labor Relations Board alleging multiple unfair labor practices. The supermarket chain is also accused of firing Fermin Rodriguez, an employee who is a union leader.

Koch Industries, where the well-known conservative donor Charles Koch is CEO, will no longer ask job applicants about prior criminal convictions, USA Today reports. Over the last year there has been a nationwide effort to encourage cities and states to “ban the box,” that is, to forbid employers from asking job applicants about criminal convictions until the applicant reaches the interview stage. The goal is, as USA Today reports, to give those with a criminal record a chance to explain their record without being rejected too early in the hiring process. Charles Koch has been outspoken in his support for criminal-justice reform in the current election cycle.

The American Federation of Musicians has sued Paramount Pictures, Warner Bros, and MGM for breaching a 2010 collective bargaining agreement, the Los Angeles Times reports. The union and the defendants had a contract requiring that films produced in North America also be scored in North America. The union alleges that the defendants violated that agreement by outsourcing the scoring work in several movies, including the blockbuster Interstellar.

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Have We Been Wrong About Mackay Radio All Along?

As observers of U.S. labor law and industrial relations well know, the rule of striker replacements has had profound and devastating consequences for the right to strike and hence for the power of unions.  In a nutshell, and ignoring some details, the rule of striker replacements is simple: employers have a right to permanently replace strikers.  And the legal origins of the rule are also clear and simple: the rule derives from the Supreme Court’s 1938 decision in NLRB v. Mackay Radio & Telegraph Co.

Or so we have assumed for many, many years.  

But Mark Kaltenbach, a third-year Harvard Law student and contributor to this blog, has just written a paper that sets out a critically important argument about the law of striker replacements. The full draft is absolutely worth reading and I recommend it to anyone interested in the present and future of the American labor movement.  In essence, though, Mark argues that the Supreme Court’s actual rule on striker replacements is narrower and less devastating than the NLRB has interpreted it to be. The upshot is that the Board should now revisit this issue in order to establish a new striker replacement doctrine that is more faithful both to the Court’s precedent and to the statute itself.

Although hugely important, Mark’s argument is remarkably straightforward and, in my view, clearly correct.  The paper shows that the Supreme Court has held that an employer does not commit an unfair labor practice when it hires permanent replacements for strikers “in an effort to carry on the business.”  The rule constitutes the Court’s effort to ensure a balance between employees’ statutory rights and employers’ business interest in “operat[ing] [their] plant during a strike.”  So, the Court interprets the Act as allowing employers to permanently replace strikers when doing so is necessary to maintain operations during a strike.

The NLRB, however, in its Hot Shoppes decision, holds that when an employer hires permanent replacements it need not show that it did so in order to preserve and carry on the business.  Instead, the Board presumes such a lawful purpose in the absence of a showing – by the union – that some “independent unlawful purpose” exists.  Continue reading

Today’s News & Commentary — April 29, 2015

A New York Times Magazine profile details a new app designed by Silicon Valley entrepreneurs that targets the income volatility and anxiety faced by many Americans in the low-wage workforce. The company, called Even, developed an app to “smooth[] the irregular, up-­and-­down paychecks of hourly workers into the steady flow of a simulated salary. On good weeks, when users outearn their Even salary, the company banks the surplus into a separate, Even-­managed savings account. On bad weeks, when users fall short, they still get their salary, thanks to past surpluses or to interest-­free credit from Even.” While the app can’t help those without a bank account or at least some form of income, it hopes to ameliorate the unpredictability caused by flexible scheduling and stagnant wages, especially for workers covering multiple jobs to make ends meet. The article points out how rare it is for a Bay Area tech company to be focusing on problems faced primarily by low-earners.

Lydia DePillis reports in the Washington Post on a new poll finding that most Americans support the right of fast food workers to unionize. The poll shows that Americans’ opinions on labor unions in general have recovered from the dip during the Detroit auto bailout in 2008, with 48% of Americans now viewing unions favorably (compared with 39% unfavorably). It also found that 62% of Americans support the right of fast food workers to unionize—though that figure was lower than retail sales workers (68%), public school teachers (71%), and manufacturing workers (82%). Continue reading