“Preventive Labor Relations”
By Management Labor Relations and Employment Law Attorney J. D. Thorne*
“The New Representation Election Rules”
While union representation election activity at the National Labor Relations Board is hardly 10% of what it was at one time, any private sector employer entity can become a union organizational campaign target at any time. The question remains what can management do to be ready for one if it happened?
The main feature of the new regulations is to limit management response time to communicate to their employees about the election vote for or against a union. There are already limits on what management can say and do in such situations. But now in addition to these restrictions, there will be very little time to communicate with employees on what is a very important issue to everyone involved even within those restrictions.
“Preventive Labor Relations”
By Management Labor Relations and Employment Law Attorney J. D. Thorne*
“Labor Strikes at Kohler”
In an epoch of time when labor contract negotiation strikes are rare, there is an economic strike by the United Auto Workers (UAW) union at Kohler Company going into its first week as of this writing. There has not been a labor strike at Kohler since the early 1980’s. What is happening? Does it signify broader issues? Which side has the high moral ground?
The history of labor relations at the Kohler Company in Wisconsin is a long, and sometimes bitter one. According to labor historian Robert Ozanne in his book, The Labor Movement in Wisconsin, “Another exception to the general success of unionism [at the time] . . . was the effort . . . to establish collective bargaining at the Kohler Company, a plumbing supply firm . . . just west of Sheboygan. In July and August, 1933, “Federal Labor Union, No. 18545,” was formed in what proved to be the beginning of a thirty-year struggle for union recognition.”
“When an AFL Federal Labor Union (FLU) was formed in 1933, the company responded by setting up a rival company union, the Kohler Workers Association (KWA).
The company stated its willingness to meet with the FLU, but made it clear that it was equally willing to meet other individuals and members of the KWA. This was unacceptable. In 1934 FLU called a strike, “further progress seeming hopeless.”
This strike did not officially end until 1941 when the company wanted to hire union construction workers to help construct an expansion of the factory, and approached the union President who agreed to a settlement proposal. But in 1934 the Union’s mass picketing kept the company from operating. To protect itself, “the company hired 250 deputies and armed them with tear gas and guns. . . . Tension rose. On the evening of July 27 a mob, estimated at 4,000 to 5,000, began stoning company buildings, breaking hundreds of windows. . . . The deputies first used the tear gas to repel the strikers and strike sympathizers. Then they opened fire, killing two workers and injuring forty-two.”
* * *
There were another series of serious labor disputes in the 1950’s. This is the understatement of the new millennium.
Here we are in late 2015. It is always a good idea for management to have the contract terminate in colder weather. The union objects to the idea coming from the Company negotiators that to remain competitive in the market, containing labor costs requires a continuation of the established “two-tier” wage system the union had agreed to before in prior agreements
“Preventive Labor Relations”
By Management Labor Relations and Employment Law Attorney J. D. Thorne*
“Raising the Minimum Wage”
It is widely reported that the issue of the federal government mandating what private business owners must, at a minimum, pay the people they choose to employ remains an issue to exploit politically.
Historically, our country’s greatest job growth is through smaller businesses. So how can raising costs on smaller business induce increased employment opportunity? A memorable quip about the importance of costs to business came from a friend and client who owned a fried chicken franchise. He said, complaining about costs to his enterprise, “You know J. D., there is only so much you can charge for a piece of chicken!”
This past weekend an article composed for and circulated to newspaper media for publication by the Associated Press (“AP”) syndicate articulated its analysis of the controversy. In its opinion, pressure for an increasing of the minimum wage continues despite the belief that doing so will decrease opportunity of employment for those already working at that wage. I agree there remains pressure to increase the minimum wage. But in my opinion, the “AP’s” analysis of the arguments pro and con about doing so was incomplete about the impact of this policy change.
Appearing in newspapers on Sunday, November 15, 2015, the AP postulated that “Demands for higher pay may be resonating with more Americans because typical household incomes have been stagnant since the mid – 1990’s.” My question to that is would it be the same people whose wages are stagnant or is it about the same percentage of the populace that earns an income in the so-called stagnant range? The AP analysis does not say, but “the writing figure having writ, moves on.”
Does raising the minimum wage cost jobs? The AP says that is a matter of “nearly religious dispute among economists for years.” There may be some dispute, but unlike climate change the economic science is pretty settled. Despite referencing one old, out-dated and discredited “study,” it glosses over the fact the nearly 2/3 of all the economic “studies” show that it does harm job retention and growth.
The current administration’s own economists in the Congressional Budget Office projected the loss of ½ million jobs if the minimum wage were increased to $10.10. Indeed, the impact on the economy of an increase to $15 is considered to possibly be so negative, its negative impact is incapable of being accurately projected. The article concedes economist Alan Krueger, one of the authors of a 1990’s study it cites as showing a minimum impact of an increase in the minimum wage, now is of the opinion expressed as recently as last month to the effect that a $15 minimum wage “would put us into uncharted waters, and risk undesirable and unintended consequences.”
Cannot some jobs pay less? Is it wage slavery to accept a lower paying job if you need it and the employer has it to give to you at a wage you can accept?
To me, it makes economic sense that raising the costs of employment is going to make employers, especially smaller employers, think twice about adding more employees, or even keeping all they have now? This is borne out with economic analysis of the recent results at the liberal city of Seattle. In Seattle the minimum wage was artificially hoisted by government fiat to $15 per hour. In the first six months the restaurant industry alone reports it has lost 700 employment opportunities instead of growing them for the first time in many years.
It makes a difference. The Seattle results were not reported in the overall AP analysis, but to me is the most recent verification of a logical, economic prediction. Raising the minimum wage has a negative impact on the number opportunities for employment. Drying up opportunity for lower wage work hurts the poorer classes the hardest. It seems to me many people want to work, and will work if the opportunity to do so presents itself. Raising the minimum wage by government fiat decreases opportunity for work for those wanting work. How is this responsible government policy?
So far, I think economic logic, as opposed to mob surface logic, has held sway. I hope it continues. Republicans opposing an increase in the minimum wage are protecting job opportunities for the poorer class. Those politicians are not the enemy, but the realists among us.
J. D. Thorne
*Author of “A Concise Guide to Successful Employment Practices”, soon to appear in a new, revised edition.
“Paid Family & Medical Leave”
Is Paid Leave an earned benefit like unemployment insurance, that will represent a savings for the economy and for the workers who today are footing bigger bill to take care of themselves or take care of their family, as it is according to Debbie Wasserman-Schultz. “We have to get to a place where elected officials actually walk the walk on the policies most important to middleclass Americans and their families,” she was quoted as saying. Milw. Jrn. Sent. 11-02-15
The “Working Families Flexibility Act” would allow private-sector employees to use their earned overtime toward paid time off, but it would also mean sacrificing time-and-one-half overtime pay. This is “flex-time” legislation.
Preventive Labor Relations
By Management Labor Relations and Employment Law Atty. J. D. Thorne*
“New Overtime Regulations”
The current administration is proposing to reinvent the law of overtime compensation. Again, the principal target is smaller business, where the majority of job creation takes place. Designed to increase wages without changes of productivity or increased value, the added costs to business will smother and discourage employment.
The Fair Labor Standards Act since 1939 has regulated private sector wages. Many states also have their own regulations that model the federal law, and agencies to investigate complaints and conduct audits of employers. In theory, the law’s purpose during the darkest days of the great Depression was to spread employment by making it more expensive for an employer to give individual employees longer hours as opposed to just hiring more employees. It mandated a minimum wage, but more importantly required employers to pay time and one-half for all hours worked over 40 hours in any 7 day calendar week. The employer is free to define its work week of 168 consecutive hours at any interval it chooses, but once defined each work week stands alone in measuring the number of hours worked.
Employers can designate which of its employees will be covered by the law, and which employees can be considered “exempt” from the law. To fit the designation exempt from overtime pay employers must design their compensation to be “salaried” and designs their job duties in nature to be executive, administrative, professional, computer based, or in outside sales. The “salary” currently required to be of an amount at a minimum of $23,680 per year or $455 per week.
For example, it may seem draconian that a manager of a gas station/convenience store outlet may be required to work as many as 12 hour days for six days in the work week. And such managers will receive the same pay each pay period. But he or she may not mind the longer hours, and the pay is enough for them to accept the work. Hotel managers at smaller locations may have similar arrangements satisfactory to them. Bar and Restaurant managers are common in this category, and many other occupations, such as fast food restaurants too.
Under the “new” proposed regulations however, these employment arrangements previously satisfactory to the parties will end unless the salary is $50,440 per year or more. Unless the “salary” is high enough to meet the threshold, all hours over forty in a work week will have to be paid at time and one-half the regular hourly rate. Since 1939 these employment relationships were all OK. But not when these regulations take effect. Now the exemptions will be too expensive to retain in many situations. The increased costs will only be expressed in higher prices or lower services.
Employers will have to adapt by redesigning employment relationships accordingly. Will these previously satisfied employees have more jobs available to increase employment, or will some good jobs have to be eliminated? Have employers been “cheating” these previously exempt employees or is it how these jobs can work? I believe employment opportunities will be reduced, not expanded. It will result in fewer opportunities for workers, not more. It will mean a continuation of the trend toward making otherwise usually “exempt” personnel to be paid on an hourly basis, and then be limited to no more than 40 hours in a work week.
The expansion of formerly exempt salaried managers now becoming non-exempt like hourly paid employees under the new rules would be dramatic. Indeed, currently approximately 11% of salaried employees are non-exempt. The 11% may be “salaried,” but do not qualify as having job duties that meet the criteria for being executive, administrative, professional, IT, or outside sales. Under the new regulations, according to the Economic Policy Institute, more than 47% or 6.1 million workers will now be entitled to time and ½ hours pay after 40 hours in work week. Will 6.1 million employees suddenly make more money?
It is being naïve to believe management will not adjust to administering these added costs. One easy way is simply lower the hourly rate of compensation to end up at approximately the same employee cost. Another is to adjust the schedule to eliminate extra hours of formerly exempt employees by mandating they work only a 40 hour shift. In most cases, especially for many health professionals, it does not mean fewer duties. It means doing what used to take 50 hours in 10 less hours by somehow improving efficiency.
The Director of “Economics21,” the economics portal of the Manhattan Institute for Policy Research, Diana Furchigott Roth suggests that employees, especially formerly exempt working parents, should think twice before applauding the proposed rules. She says many working mothers in particular would prefer flexibility of hours to balance home and work lives. Mandating overtime pay reduces their flexibility and limits the ability to ask for needed time off when necessary. If you push the “marsh mellow” in one place, it will have come out someplace else.
One measure, mentioned by new Speaker of House Paul Ryan, as a possible partial governmental remedy, is to allow in the private sector the practice allowed in the public sector of allowing “comp time.” This means that for hours over forty in a regular work week, the employee can take an equal amount of time off to make up for it in some future week. Many employees would like this flexibility. So far this is not an option the current administration wants to embrace. Ideas have consequences, and this idea raises costs on employers and reduces employment opportunities for many employees. Yet for the current political leadership in Washington it is full speed ahead.
*J. D. Thorne is the author of A Concise Guide to Successful Employment Practices, soon to be released in an updated edition.
Preventive Labor Relations
By: J. D. Thorne
“The NLRB Union Election Rules”
Make no mistake, politics affect labor relations. National Labor Relation Board rules, procedures and precedents can change from administration to administration. The party in power makes a difference. What could be expected if Vermont Independent Senator Bernie Sanders won his party’s nomination for President? What if Donald Trump runs as an independent siphoning republican votes allowing Sanders to win the election? The political possibilities that might impact labor relations are many.
Few may ever have encountered the name of Eugene V. Debs. But he is a hero in Senator Sanders’ pantheon of heroes. Indeed, in a recent article in Rolling Stone Magazine, the magazine mentions that there is a plaque featuring Debs in Sander’s office. It seems that Sanders himself provided Deb’s voice for some of his speeches and collected writings in a 1979 documentary. RS asked Sanders, “In the documentary you voice the part of Debs. . . Some of the language is jarring to hear his words in your voice, talking about wage earners as “slaves” oppressed by some “some capitalist parasite,” calling on workers to fulfill their “great historic mission” to “overthrow the capitalist system.” Sanders responded, “Those were Deb’s words, not mine. You are not quoting me as saying those things.”
Who was Debs? He first came to prominence as the American Railway union leader who led the 1884 Pullman Strike, a violent and dramatic strike which shut down railroad transportation from Chicago to the West Coast. Ultimately U. S. President Grover Cleveland authorized dispensing 2000 federal troops to run the trains following a legal injunction to restrain Debs and union. In a rare twist, the Illinois Governor John Altgeld called out the state militia on behalf of the strikers to preserve the peace and protect their right to strike, potentially pitting the two governmental military units against one another. Ultimately federal troops fired their arms on the striking workers, killing 13 and wounding 50. This act prompted workers in 26 states to join the strike resulting in more violence.
Starting in 1904 Debs ran as the Socialist Candidate for U. S. President five times. The last time was in 1920, running the campaign from his jail cell in a federal prison after having been convicted in 1918 of violating the “Espionage Act.” He had been sentenced to 10 years in prison. He still attracted 915,000 votes. After six months in jail he was pardoned by President Harding.
On April 15, 2015, under the guidance of the appointees of the current administration, on the National Labor Relations Board new union election rules went into effect. These make it easier for unions to prevail at the ballot box in union elections.
The process is that the union organizers can take as much time as they need to recruit employees. Once they are strong enough to file a petition for a representation election to establish that a majority of employees want the union, such an election will take place in less than half the time as before. Such an election will likely be held within twenty days or less. This is the new reality. And there are other changes too.
“Pre-election hearings,” when necessary, will be held within eight days of the filing of the petition. These hearings are for several purposes, including the raising of objections as to which positions should be included in the bargaining unit. Also, the employer will be required to post a federal poster about the election and election conduct rules concerning the rights and obligations of the employer and the union shortly after the filing of the petition. At such a hearing the employer may be limited in the evidence it can provide to substantiate its legal positions. Within just one week, the employer will have to develop and submit a “Statement of Position” form. This form will have to contain a list with contact information of prospective voters, with their job classifications, shifts, and work locations. Any issues not raised are forever waived.
Within two days after the “Direction of Election” a list of all employees must be filed electronically containing their home addresses, telephone numbers and email addresses so that it can be provided to the union organizer. Some employees may object to what they may consider an invasion of their privacy. Too bad.
Last but not least, the NLRB is no longer required to hear appeals of election issues. In other words, the employer should be prepared to win the election vote despite what union chicanery might take place. It will be difficult to otherwise delay a duty to bargain in good faith with a union that wins the election that establishes its majority status.
I figure the employer who wishes to stay union free should want to assess its vulnerability before this process starts.
Here is a check list management can use to self-assess its preparedness. There is nothing new about it.
1. If a union organizer asked an employee to sign a union authorization card, how long would it take for a supervisor to be made aware of it?
2. Would the employee know that it is management’s opinion that unions are not necessary for employees to have input into their wages and working conditions? How would an employee know this? Is it communicated in the employee handbook?
3. Does management communicate face-to-face in small group meetings with employees during working hours to keep them up-to-date on changes in the business?
4. If lay-offs or reductions-in-force are necessary, is there a policy in place and communicated to employees to handle it?
5. Does the company involve its employees in safety training programs?
6. Are supervisors trained in union prevention skills? Would they know what to say legally to an employee who asked them about unions?
There are more, but this is a good starter list.
J. D. Thorne
*Attorney Thorne is the author of A Concise Guide to Successful Employment Practices, 3rd Ed. which is soon to be released in an updated new edition.
Preventive Labor Relations, Article 5.
By Attorney J. D. Thorne*
*J. D. Thorne is the author of A Concise Guide to Successful Employment Practices, soon to be available in a new ebook edition.
“Misclassifying Employees as Independent Contractors”
In an opinion appearing in the December 21, 2015 edition of The Wall Street Journal, Phil Gramm and Michael Solon (respectively former chairman of the U.S. Senate Banking Committee and the second author, formerly budget director for U.S. Senate Majority Leader Mitch McConnell and now a partner in U.S. Policy Metrics), it is observed that numerous Obama policies can be reversed just as easily as they were imposed.
Included among the policy changes listed was a decision by the National Labor Relations Board (NLRB) to the effect that individual franchisees can be considered “joint employers” with their franchisor. This is despite the historically recognized fact that although the franchisor may impose standards of practice, it did does not set, determine, or make local labor relations policy at each franchisee. The individual franchise owners and managers do that independently. The franchisor, for example, does not make, approve, ratify, or defend hiring, disciplinary, or discharge decisions for its franchisees. Yet the Labor Board is making the Corporate Franchisor equally and severely liable for alleged unfair labor practices.
But I do not foresee any change or reversal in policy in another common dilemma for employers. This is commonly referred to as the “misclassification” of workers as independent contractors when the government auditors deem otherwise. For example, the question is so prominent in the workplace in Wisconsin that the Unemployment Insurance Bureau has enough work auditing to justify the regular full-time employment for approximately 25 tax auditors across the State. This includes six officers in a Milwaukee office alone.
In 2011 the IRS announced a push to rein in misclassification. In the next two year it collected $9.5 million in back pay for over 11,400 employees. Some studies estimate that 10% to 30% of employers misclassify at least some employees as independent contractors.
Of course the independent contractor relationship has several advantages for business and non-profit operations. The individual performing the work is not eligible for coverage under worker’s compensation and unemployment insurance statutes. They cannot form a union and cannot sue for discrimination. This is because they are not deemed employees.
One disadvantage is the lack of direction and control an employer has over the behavior of an employee. With an independent contractor, who in theory is free to set his or her own schedule and method of working, a manager lacks the power of supervision. In theory the individual involved can control his or her own time to perform the work, how much time will be taken to do it, determine how a project is to be done, and set the price for doing it. The trade- off is that independent contractors are not subject to supervision in theory or in actual practice. Having merely the right to direct and control an individual’s work is just as viewed the same for an employer as actually exercising that right in practice too. Ignorance of the law is no defense to it.
For example, FedEx Corp. has fought this battle for years over its practices in classifying its delivery drivers as independent contractors. It has won some and lost some in various jurisdictions. For example in 2008 it agreed to pay $26.8 million to settle claims in a California lawsuit about the issue. Yet it maintains the position that “FedEx Ground independent contractors are properly classified as small businesses.”
How does a business manager self-audit these classifications to avoid mis-classifying these relationships? There are some obvious steps. If the employer wants to maintain an independent contractor relationship, it should pay compensation only on an invoice for services rendered. Avoid establishing an hourly rate, but pay by the project instead. Be sure to have an IRS form W – 9 from which to send an IRS Form 1099 Miscellaneous Income for all payments over $600 in the prior tax year. Do not allow the independent contractor on the group health insurance. Keep business cards from an independent contractor. The employer may set job standards, but must stay away from setting fixed hours of work. The means and methods of performing the duties should be left to the independent contractor. Let them use their own tools and equipment. They should have their “office” on their own, and not at the employer’s workplace, if possible. Insist upon a written contract confirming the independent contractor relationship. If performance is unsatisfactory, terminate the contract and offer no more work as opposed to “firing” the individual. Avoid asking a new hire if they would prefer being an independent contractor. It is not a “choice.”
This problem was so vexing for the State of Wisconsin unemployment insurance department the state legislature required a statutory test. For an independent contractor relationship to exist, 7 of 10 criteria must be established as present.
1. The independent contractor holds or has applied for a Federal taxpayer I.D. number with the I. R. S.
2. The person independent contractor has filed business or self-employment income tax returns.
3. The independent contractor maintains a separate business with his or her own office, equipment, materials and other facilities.
4. The independent contractor operates under contracts to perform specific services for specific amounts of money and under which the independent contractor (i.e., not an “employer”) controls the means and methods of performing such services.
5. The independent contractor incurs the main expenses related to the service that he or she performs under the contract.
6. The independent contractor is responsible for satisfactory completion of the services he or she has contracted to perform and is liable for a failure to satisfactorily complete the services.
7. The independent contractor receives compensation for services under a contract on a commission or per-job or competitive bid basis and not on any other basis. (such as on an hourly rate like a regular employee)
8. The independent contractor may realize a profit or suffer a loss under contracts to perform such services.
9. The independent contractor has recurring business liabilities or obligations. (like rent on their personal office and for office supplies)
10. The success or failure of the independent contractor’s business depends on the relationship of business receipts to expenditures.
If a business can establish 7 out of 10 of these tests are met, then the
independent contractor relationship should pass muster.
J. D. Thorne
“Preventive Labor Relations”
By J. D. Thorne*
*Author and Speaker, Successful Employment Practices, soon to appear in an updated ebook edition.
Campaigning on the stump for his spouse in New Hampshire on January 2, former President Bill Clinton decried the “tone” of some of the political campaigning. He suggested words to the effect, “Shouldn’t choosing the next President be more like a job interview?” If so, this applies to both parties.
If it were a job interview, what kind of an interview should the decision-makers conduct? For employers, the first step in the process is developing a “picture” of the ideal applicant in mind before starting the search. Then a good idea is to review the job description of the position being filled to see if it still applies, and make any necessary modifications to it.
Smart employers then gather a pool of applicants. Sometimes this is accomplished through posting, advertising, and internet solicitations. This usually results in a more successful search then trying to sort out applicants one at a time in a “pass/fail” type review. There is no better way to avoid “hiring remorse” than comparison shopping. Once the field is narrowed, the actual personal interviewing can take place. Its purpose is to apply job-screening methods that attempt to match demonstrated past performance to the job being filled.
A new method to aid the sorting out process is called the “Blind Interview.” To many voters this might seem to be happening in the Presidential campaigns in both parties.
For example, according to a January 6, 2016 Wall Street Journal article, “Why Bosses Are Turning to ‘Blind Hiring’” Compose, Inc. of San Mateo, CA, a cloud storage firm, asks lots of questions. But one of them is not, “let me see your resume.” Their purpose instead is to judge people by their demonstrated abilities. At Compose, Inc. applicants will write a short story about data, spend a day working on a mock project, and complete an assignment. Some might be asked to spend four to six hours solving a soft-ware problem. A marketing firm asks their potential future employees to develop a marketing campaign. One firm asked candidates to create an Instagram campaign for a fictional Texas vodka. Out of some 50 candidates the firm found a recent college graduate not from any elite school, nor who had even studied marketing nor had interned at any major ad agency, but whose campaign showed real creativity and prowess. Had the company just looked at her resume she would surely have been passed over.
The hope with this approach is to judge people on their true abilities, not just what college they were fortunate enough to attend or for which brand name companies they may have worked.
Would not that help the choosing of a candidate too for whom to vote?
(To be continued)
J. D. Thorne