Today, CEI released a report on the Obama administration’s effort to pay back its union allies by way of federal labor agencies.
The National Labor Relations Board and Department of Labor are using their regulatory and adjudicatory powers to prop up labor unions that are experiencing a decades-long decline in membership. Not only do the agency actions serve as political payback to a special interest group, the rules and decisions severely disrupt the workplace and how companies do business. Further, the actions stand in stark contrast to the NLRB and DOL’s missions to protect worker rights, not benefit special interest groups like Big Labor.
And this regulatory barrage could not have come at a worse time. Currently, 6.5 million workers are seeking full-time employment, but federal regulations have subjected them to part-time work. In addition, labor participation rate is at a 38-year low of 62.6 percent. Worse, federal agencies upsetting common business practices via regulation is a surefire way to keep the below-average employment numbers where they are.
The report focuses on three significant actions coming out of the DOL and NLRB: DOL’s proposed overtime rule change, NLRB ambush election rule, and the upcoming NLRB joint employer decision.
The DOL’s proposed overtime rule would dramatically alter who is eligible for overtime pay. The Obama administration paints a rosy picture of the impact of the potential rule change, claiming that it will positively affect the wages of nearly 5 million workers and could add as much as $1.3 billion to workers’ pay in just the first year.
But the majority of research suggests this is not the case. Anthony Barkume, economist at the Bureau of Labor Statistics, finds that cutting wages would make up for 80 percent of overtime costs. While it is most likely workers will not receive a massive pay increase, workers will lose something they have become accustomed to—flexible work arrangements.
Here is one example from the report of how workers would lose their flexibility:
Some workers impacted by the rule will likely be forced into a rigid eight-hour workday where the employer demands them to report to the work site. This eliminates employees’ ability to take time off to pick up a child from school or run errands at convenient times. Making strict schedules the norm could mean a large portion of the 16 to 25 million workers who telecommute at least once a month could lose this benefit. Another unintended consequence of the rule is that salaried employees who are reclassified as hourly workers will lose pay if they take off unscheduled work. For instance, an hourly worker who has to leave work to attend to an emergency while on the clock will lose pay for the time away from the office.
The NLRB’s ambush election rule is already in place and already giving unions an edge in workplace organizing campaigns by severely cutting down the time workers have to contemplate on the question of unionization, which is a supremely important decision for any worker because it has a huge impact on their pay and work conditions. The Wall Street Journal reported yesterday, “The average election time has fallen by 40% since the rule took effect in April.”
Employees are at a disadvantage with the short-time frame between a union petition and election. Workers are bound to only hear the union-side of the story, which focuses solely on the benefits, not any of the harm (CEI’s “High Cost of Big Labor” study found that union presence has cost individuals more than $10,000 in income over the last 50 years). In many organizing campaigns, unions have been interacting with employees for months without employers even realizing it. This means workers do not get to hear the employer’s side of the story, leaving workers ill-informed to make such an important life decision.
Another harmful provision of rule weakens worker privacy. Under the ambush election rule, employers must hand over their employees’ private telephone numbers and email addresses. Workers are more likely to be subjected to identity theft and intimidation. Even the NLRB general counsel’s guidance memo recognized these privacy concerns.
Finally, the report criticizes the likely change to the current NLRB joint employer standard. Several NLRB cases could transform the current joint employer standard in a way that could potentially block entry into the market for many entrepreneurs. This would be a disaster, as these small business owners have been a boon to the economy and job creation. Franchise operations have make up 3 percent of U.S. GDP and $890 billion of economic output. In addition, franchises have accounted for 10 percent of all new jobs created in 2013 and 2014.
Here is how the current franchising system would change:
[T]he current joint employer standard, which defines when an employee is considered jointly employed by two businesses and when a business is responsible for the labor practices of another business… Currently, two businesses are deemed joint employers when they both exercise substantial, direct and immediate control over hiring, firing, disciplining, supervising, and directing workers.
Now the NLRB is proposing to expand the definition of ‘joint employer’ to include indirect control, unexercised potential control, and a fuzzy notion of ‘economic and industrial realities.’ The broader joint employer standard would make many franchisors, contractors and staffing agencies liable for franchisees with the mindset of making these employers more easily organized.
As with the ambush election rule, a primary reason for the change is to ease union organizing campaigns. Rather than organize one franchise at a time, the NLRB is trying to give unions the ability to drag the parent corporation to the bargaining table.
Noted in the report is one clear example how organizing could be made easier by redefining the joint employer standard:
The new proposed joint employer standard would make organizing much easier for unions. For example, three-fourths, or 180, of 240 Leadpoint workers support the Teamsters and vote to unionize. Under the new proposed joint employer standard, the Teamsters would not even need one vote from the employees directly employed by BFI to win representation over both workforces.
Not only is this bad for workers who would rather not unionize, it would the hurt the economy by causing many employers to bring outsourced business functions in-house. This is a cause for concern because the temporary workforce has been a bright spot for the economy in recent years. In 2014, temporary workers reached an all-time high of over 2 percent of the total workforce.
However, Congress can stop these federal labor agency actions—by simply doing nothing. Congress has the power of the purse and could simply not fund these regulatory actions that harm the economy and workers.
Read full report here.