Recently in Labor Law Category
Five years ago today, we discussed San Francisco's sweeping Proposition F, imposing huge sick-leave administrative requirements on small employers, including families that hire babysitters. So how has it worked? Press coverage, building off of a left-wing thinktank survey, has been uniformly positive, with one employer admitting that the law imposed an additional $110,000 cost on him, but that he still liked the law. The Monitor didn't interview anyone who opposed the law, but the fact that two thirds of employers claim to support the law means that one third don't, and it's the marginal effects of the law that are important for public-policy purposes, yet no one has measured those.
The study is further double-edged, as it shows that many employees are not aware of the law, suggesting that the full cost has yet to be realized; too, the study does not interview the unemployed workers who do not have jobs because the sick-leave law made them unprofitable to hire. One reason that the law's effect may be muted is because there doesn't seem to be enforcement of the more draconian aspects of the law—which can change on a dime through public or private enforcement. Moreover, the press coverage does not mention that San Francisco's unemployment rate has more than doubled since the law was passed. Of course, there are confounding factors in the rise in the unemployment rate (I wouldn't contend that Prop F is the sole cause of the rise), but surely a $1000/employee/year increase in mandated benefit expense has some effect.
As I've noted before, these sorts of mandates are not free to employees. If San Francisco mandates an additional $1000/year in benefits to employees, employers are simply going to pay employees $1000/year less in wages. The effect will be heaviest on low-skill workers, who may be unprofitable to hire at the high combination of San Francisco's high minimum wage and benefits requirements, and thus lose jobs. These effects are very real, but aren't going to be captured in surveys. The press and the academic community have fallen short on the job here.
Under a recent amendment to the federal Fair Labor Standards Act, employers must reconfigure their offices to create a dedicated disturbance-free space for breast-feeding mothers "that is inaccessible to other employees, and, in most cases, enable nursing mothers to refrigerate the expressed milk." Bathrooms don't count. The Department of Labor has started issuing citations enforcing the law, but employers need not worry about the additional expense says activist Danielle Rigg, because "Employers stand to win big from employees breastfeeding. Making it a top priority promotes less absenteeism, fewer healthcare costs and happier moms who are employees." [HuffPo via ABAJ] Which raises the question why, if it's so beneficial for employers to spend extra money on breast-feeding mothers, one needs a federal law imposing this practice upon employers.
These sorts of regulations are not free. Every time Congress or the courts or regulators impose an additional burden upon employers relating to employees, it increases the marginal cost of hiring employees: not just the compliance cost of the additional real estate in this case, but the additional costs of a legal and HR bureaucracy that has to keep track of all of the requirements and ensure compliance, and the additional taxes that go to enforcement. That comes directly out of the wages and other benefits employers are willing to pay employees, and means that, at the margin, some jobs will be lost as employers look for other ways to get productivity without more expensive employees. If Congress decided that every employee working eight hours a day should get a free $5 Starbucks gift card, employers will respond by reducing wages $5/day—or hiring fewer workers at the 8-hour/day mark. Congress may think it's benefiting employees when it mandates perks, but this is not a wealth transfer from employers to employees. Employees' marginal benefit must still exceed their marginal cost or they won't be employees. Instead it is a wealth transfer from all employees to breast-feeding mothers and non-productive bureaucrats, with a deadweight loss to society.
Now, certainly, we as a society can decide that this is a cost we should bear—though if there is social demand for this, one wonders why societal disapproval for businesses unfriendly to mothers is not sufficient to achieve this result without inefficient top-down enforcement that might be unduly Procrustean. And if Rigg is right, businesses will be excited to incur these additional marginal costs in exchange for the marginal benefits. But in an era of 8.5% unemployment, voters and policymakers should be looking closer at the question of whether it's better to have legislators or bottom-up voluntary transactions decide what employee benefits are worth wage and job cuts.
In his piece Obama EEOC Wipes Out Jobs By Making Hiring More Difficult featured on examiner.com, Hans Bader, senior attorney and counsel for special projects at the Competitive Enterprise Institute, outlines his position that President Obama's Equal Employment Opportunity Commission appointees are expanding the agency's enforcement authority via overly broad statutory interpretation. Such interpretation, according to Hans, in effect creates a Catch-22 where businesses attempting to avoid EEOC suits by taking compliance measures get sued anyway for violating other conflicting laws or regulations in their effort to employ those very compliance measures. Such aggressive enforcement has already deterred businesses from hiring new employees.
Hans points to some interesting examples, such as the following:
The EEOC has sued employers who sensibly refuse to hire as truckers people with a history of heavy drinking and alcoholism. It has done so even though if employers do hire alcoholics for such safety-sensitive positions, they will be sued under state tort laws when the alcoholic driver has an accident. The EEOC's demand that such employers disregard histories of alcoholism is based on an extremely expansive, and dubious, interpretation of the Americans with Disabilities Act.
The EEOC is suing employers over the use of criminal histories in hiring, and harassing employers who conduct criminal background checks, even though employers who hire criminals end up getting sued when those employees commit crimes while on the employer's payroll. The EEOC's demands thus place employers in an impossible dilemma where they can be sued no matter what they do.
The EEOC is also suing employers who don't bend sensible workplace rules to accommodate the obese, claiming that obesity is a disability. And it is suing employers who take into account bad credit and financial histories in hiring, even though failure to take that into account can lead to lawsuits against banks and property managers by customers.
Even aside from the dumb economics of risking missing a season over a 10% pay-cut when the average career is less than ten years long, the NBA players are being poorly served by their lawyers and representatives in engaging in a decertification-and-sue-under-antitrust theory. None of the press coverage mentions the Norris-LaGuardia Act, 29 U.S.C. §§ 101 et seq., which prohibits injunctions "in a case involving or growing out of a labor dispute." The ploy of pretending not to be a union subject to the collective-bargaining exception while continuing to bargain collectively isn't going to fly unless courts in the Ninth Circuit refuse to follow the law. The Supreme Court already addressed this issue in Brown v. NFL, when it held that antitrust laws did not apply to suits over collective bargaining arrangements, and that those protections continued to apply immediately after the collective bargaining broke down. And it's ironic, because the players' attorney, David Boies knows this, having made precisely this argument on behalf of the NFL in their lockout labor dispute earlier this year. The NFL had a viable labor model, however, and the owners would lose a lot of money if the lockout continued; the parties were destined to settle. NBA players don't have a credible threat, because the NBA has over a dozen teams that would lose less money not playing than playing, even if that's largely because so many teams are poorly managed.
As Walter Olson notes, Ohio is likely today to overturn the public-sector-union reforms the Kasich administration achieved. But I'm similarly pessimistic about the persistence of what Governor Walker has achieved in Wisconsin.
The union special interests have a structural advantage that good-government types don't: the possibility of retroactively undoing the other's accomplishments. For all the political capital expended by Governor Walker in constraining union power over taxpayers, its effects are only prospective. But when the pendulum swings and union-beholden politicians are in the legislature and governor's seat, they can simply repeal these reforms—and worse, provide "makeup" benefits for those "lost" in the interregnum. This is not merely hypothetical: as Michael Greve notes, when Orange County (Orange County!) was able to use bankruptcy to reform its union pension problem in the 1990s, it took just seven years for politicians to agree to retroactively restore the lost benefits.
Unfortunately, the grass-roots movements on both sides of the political aisle—the Tea Party on the right, Occupy Wall Street on the left—are both asking for free ponies and show no inclination to make it easier for politicians to make the tough choices that could fix these problems. One worries that the problem will have to get much worse before it gets better; if so, it will be much more expensive to fix when a sudden run on T-bill interest rates spirals out of control.
In the face of a lawsuit from NAM challenging the law under the APA, the NLRB backs off of immediate implementation of a wrong-headed and one-sided proposal that exceeded their authority. [BLD; Shopfloor; Hayes dissent; earlier]
Update: earlier on Overlawyered.
Even the ABA objects to Department of Labor proposal to require disclosure of all consultants on labor-relations issues, something a Chamber of Commerce official calls the biggest giveaway to organized labor in this administration. The proposed rule would have broad implications, and would certainly lead to job-killing litigation over minor collateral issues relating to the edges of its scope. [WSJ; NLPC; ABA; Chamber of Commerce; Vorys]
ESPN has the NFL's opening brief appealing the preliminary injunction against the lockout and the document (with David Boies and Paul Clement on the brief) makes a persuasive case that the district court had no legal authority to enjoin the lockout. I hadn't heard anything about the Norris-LaGuardia Act in the press coverage to date. Oral argument is scheduled for June 3.
Richard Epstein, the Laurence A. Tisch Professor of Law at the New York University School of Law and libertarian thinker, had the usual multitude of interesting things to say this afternoon at a Cato Institute forum on F.A. Hayek, with the most topical -- and non-academic -- being his critique of U.S. labor law, with an added denunciation of the National Labor Relations Board's recent complaint against Boeing. The NLRB's action is travesty and a menace, Epstein said.
The comments followed remarks by Bruce Caldwell of Duke, a Hayek scholar and editor, and George Soros of the Open Society Foundations. The discussions were moderated by Cato's Ronald Hamowy, who received his Ph.D. at Chicago under Hayek and edited the new "The Constitution of Liberty: The Definitive Edition."
Others are better equipped to comment on the major themes, including Soros' attempt to synthesize Hayek and Karl Popper while claiming the political extremes have distorted their ideas.
But Epstein's remarks on modern-day progressives, the National Labor Relations Act, and the NLRB's move against The Boeing Company were definitely timely (and easy enough to grasp). We've been reporting at Shopfloor.org on the complaint filed by the NLRB's acting general counsel, Lafe Solomon, against Boeing for adding production facilities in South Carolina instead of Washington. By locating in the non-union South Carolina instead of the Puget Sound area, Boeing was supposedly retaliating against the International Association of Machinists and Aerospace Workers and therefore committing an unfair labor practice.
Now the last point I want to make is a vehement attack on the progressive movement, precisely because it refuses, at least in its current incarnation, to consider one viable element, which is the deregulation of various markets in which state monopolies have been created. ...