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Robert Panzenbeck
Legal Intern, Manhattan Institute Center for Legal Policy

Last week, the NLRB issued a ruling that could potentially transform the landscape of college sports. In a 24 page opinion, NLRB regional director Peter Orh recognized Northwestern football players as employees of the university with the right to form a union and collectively bargain. Ohr imposed a three-part test that considered the amount of time players spend on non-academic pursuits, the nature of control exerted by non-academic coaches over the players, and the non-academic nature of the scholarships themselves. If the decision is upheld by the NLRB in Washington, it would mean that players could choose a union to bargain with the university on their behalf. That union would likely be the College Athletes Players Association, a labor organization founded with a focus on allowing college athletes to bargain for basic scholarship and injury protections. Kain Colter, the former Northwestern quarterback who initiated the petition, is a founding member.

The media response has been mixed. During the hearings, Northwestern cited its rigorous focus on academics, and its 97 percent football player graduation rate as indicative of a commitment to student athlete education. Bloomberg economist Allison Schrager has defended the current model, noting in her recent piece "In Defense of the NCAA", that from an economic perspective, the current system is preferable to a minor league for most athletes, providing them with an education and the opportunity to earn a degree that is far more valuable than any compensation they would likely get participating in any minor league. NCAA President Mark Emmerich somewhat echoed this sentiment recently on CNBC, noting that while a change might benefit 3 or 4 percent of the players who make it to the NBA, the opportunity for an all-expenses paid degree provides a greater incentive than a paycheck to the vast majority of players.

Even those who criticize the NCAA model are quick to point out the shortcomings of this ruling. Writing at Bloomberg, Megan McArdle writes that "given the realities, it's hard not to cheer the NLRB, but it isn't clear how much allowing football players to unionize will accomplish, as long as the NCAA is still allowed to make rules against paying them. Point of Law contributor Richard Epstein, who has in the past argued that "the NCAA enforces a cartel that denies earned benefits to college athletes," criticized the decision, noting Ohr's failure to examine the absence of the application of the common law standard for "employees" in any other labor related context, and takes Ohr's opinion to task for its notable vagary on issues like who is covered, the extent of negotiations, the conflict between choosing individual schools as bargaining agents and the coherent obligations of a league, and the chaos that might ensue.

Over the last decade, the NCAA has grown s to become a multi-billion dollar cash cow, driven primarily by lucrative television contracts related to BCS Football and March Madness. As the pot has grown without accompanying reform in the realm of player compensation, many have taken notice, and suits have been filed calling into question amateurism policies. The Northwestern ruling is the first to suggest a sea change is afoot. In February, U.S. District Court Judge Claudia Wilken allowed allowed a case brought by former UCLA player Ed O'Bannon challenging the NCAA's ability to profit off the likeness of current and former players without just compensation to move forward. Last week, anti-trust attorney Jeffrey Kessler filed suit against the NCAA seeking an injunction against enforcement of limits on financial aid available to athletes, which if successful would allow players to be paid for their performances. Even if NLRB in Washington should reverse the ruling, as some have suggested is likely, one thing is clear: this is just the beginning.

The Supreme Court of the United States issued two 5-4 opinions today to clarify provisions of Title VII of the Civil Rights Act of 1964.

In Vance v. Ball State University, the Court ruled that for an employer to be held vicariously liable in a Title VII hostile work environment claim, the employee accused of the harassment must be one empowered by the employer to take tangible employment actions against the plaintiff.

Justice Alito writing for the majority:

Under Title VII, an employer's liability for such [workplace] harassment may depend on the status of the harasser. If the harassing employee is the victim's co-worker, the employer is liable only if it was negligent in controlling working conditions. In cases in which the harasser is a "super- visor," however, different rules apply. If the supervisor's harassment culminates in a tangible employment action, the employer is strictly liable. But if no tangible employment action is taken, the employer may escape liability by establishing, as an affirmative defense, that (1) the employer exercised reasonable care to prevent and correct any harassing behavior and (2) that the plaintiff unreasonably failed to take advantage of the preventive or corrective opportunities that the employer provided. Under this framework, therefore, it matters whether a harasser is a "supervisor"or simply a co-worker.

It is important to note and reiterate the above quotation that a victim of workplace harassment can still sue an employer under Title VII for harassment by a co-worker rather than a supervisor. The effect of this decision is that the employer will not be strictly (automatically) liable in such a case, but instead will have an affirmative defense available to prove that they, the employer, were not negligent in responding to the complaint of harassing behavior when it was brought to their attention.

In University of Texas Southwestern Medical Center v. Nassar, the Court held that an employee alleging retaliation under Title VII must prove "but for" causation, not the lessened causation test that could be met by proving mixed motives which include retaliation.

Justice Kennedy writing for the majority:

In sum, Title VII defines the term "unlawful employment practice" as discrimination on the basis of any of seven prohibited criteria: race, color, religion, sex, national origin, opposition to employment discrimination, and submitting or supporting a complaint about employment discrimination. The text of §2000e-2(m) mentions just the first five of these factors, the status-based ones; and it omits the final two, which deal with retaliation. When it added §2000e-2(m) to Title VII in 1991, Congress inserted it within the section of the statute that deals only with those same five criteria, not the section that deals with retaliation claims or one of the sections that apply to all claims of unlawful employment practices. And while the Court has inferred a congressional intent to prohibit retaliation when confronted with broadly worded antidiscrimination statutes, Title VII's detailed structure makes that inference inappropriate here. Based on these textual and structural indications, the Court now concludes as follows: Title VII retaliation claims must be proved according to traditional principles of but-for causation, not the lessened causation test stated in §2000e-2(m). This requires proof that the unlawful retaliation would not have occurred in the absence of the alleged wrongful action or actions of the employer.

The two decisions have already prompted angry reactions characterizing these decisions as the Court taking the side of business against the American worker. However, as Walter Olson, senior fellow at the Cato Institute's Center for Constitutional Studies, explains, if SCOTUS came out the other way in these decisions, compliance would be impossible. The Supreme Court seems to have provided clarification where it was sorely needed and like Justice Ginsburg wrote in her dissent in Vance, "the ball is once again in Congress' court" if Congress thinks the Court's interpretation is incorrect.

San Francisco sick leave followup

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.

FLSA and breast-feeding

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.

NBA decertification and antitrust lawsuit

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.

"The Public-Union Albatross"

Ohio union vote

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.

"NLRB Postpones Worker-Notification Rule"

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]







Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.