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OpenMarket: Labor and Employment

  • A Majority of States Now Right to Work

    February 12, 2016 3:16 PM

    For the first time, in a majority of states, workers can’t be fired from their job if they choose not to financially support a union. A much needed policy since most workers never voted for the union that represents them. Today, West Virginia’s legislature overrode Governor Earl Ray Tomblin’s veto of right-to-work legislation.

    Right to work will help the Mountain State’s struggling economy and increase worker freedom. Right-to-work laws make sure workers do not have to pay union dues as a condition of employment—they do not impair collective bargaining. Other than giving workers a choice, right to work is a boon for the economy.

    A state’s status as right to work influences industry location. An economic development consultant David Brandon explains, “More than half of our companies either make [right to work] a threshold or a very important factor in making a decision on where to locate a factory and other operations."

    A dire concern in West Virginia is the state is losing population faster than any other. Right to work will likely stem that trend. As Competitive Enterprise Institute research shows, “According to Census data, during 2000-2009, more than 4.9 million native-born Americans moved from non-RTW to RTW states—an average of more than 1,450 persons per day.”

  • Overtime Rule Is a Threat to Workers and Small Business

    February 4, 2016 9:58 AM

    By statute, Congress delegated to the Secretary of Labor “the authority to define and delimit the terms of the [overtime] exemptions.” But that doesn’t mean it is good policy to dramatically modify the exemptions.

    On June 30, 2015, the Department of Labor submitted a notice of proposed rulemaking to significantly modify the exemptions in the Fair Labor Standards Act’s overtime rules. Most notably, the proposed rule greatly increases the minimum salary threshold for exempt workers.

    Currently, under the FLSA, overtime regulations require time-and-a-half pay for every hour above 40 that an hourly employee works in week. Workers may be exempt from overtime pay if they are salaried employees who perform executive, administrative, professional, and outside sales activities and make more than $23,660. The exemption targeted by the DOL’s proposed rule is the salary exemption threshold. The agency plans on raising the threshold 113 percent from $23,660 to $50,440.

    Currently, the DOL is reviewing hundreds of thousands of comments and plans on finalizing the rule in the summer of 2016

    DOL officials claim that the proposed rule is intended to give workers a raise. Yet, a number of unintended consequences will arise if the rule is finalized and has little chance of giving workers a sizeable pay increase.

  • West Virginia Set to Enact Major Labor Reform with Prevailing Wage Repeal

    February 3, 2016 8:51 AM

    West Virginia, which appears poised to become the nation’s 26th right to work state, may soon enact another major labor law reform. The state Senate is set to vote on a bill repealing the state’s prevailing wage laws. The legislation, HB 4005, was voted out of the Senate Government Organization Committee on Monday, February 1, and now moves to the full Senate.

    Prevailing wage laws set price floors for contractors working on government-funded projects. This often turns out to be the union wage, which hampers nonunion contractors’ ability to bid for such projects.

    Prevailing wage laws—along with project labor agreements, which impose prevailing wage and other requirements that favor union contractors on a per-project basis—disproportionately affect minority contractors, many of whom are not unionized. That impact may be unintended today, but it wasn’t always so. The federal prevailing wage law, the Davis-Bacon Act, was intended to disadvantage African American workers on federal construction projects. Davis-Bacon’s shameful history should make other laws like it similarly suspect.

  • West Virginia: Prospect for a Right to Work Majority

    February 1, 2016 3:54 PM

    West Virginia may soon become the nation’s 26th right to work state—making the number of right to work states a majority for the first time. The West Virginia Senate passed the right to work legislationSenate Bill 1, on Thursday, January 21. The state’s House of Delegates, where Republicans hold a 64-36 majority, held a public hearing on the bill last Friday, January 29.

    Republican lawmakers made passing right to work a priority after gaining control of both chambers of the legislature in 2014, in an effort to revive the state’s economy. “We’re the only state in the nation to have lost population,” said Senate Majority Leader Mitch Carmichael (R-Jackson). “If this bill providing workers the freedom to join a union or not join a union, if it gives one person a job, it’s worth doing.”

    Carmichael’s characterization may be an exaggeration, but it isn’t far off the mark. West Virginia is only one of six states to lose population from 2013 to 2014, and second only to much larger Illinois in total numerical population decline. And as Ohio University economist Richard Vedder and researcher Jonathan Robe find in a CEI study, approximately 4.9 million people moved from non-right to work states to right to work ones during 2000-2009 (p. 11). Vedder and Robe also found that while real total personal income grew by an average of 123 percent during 1977-2012, it grew by 165 percent in right to work states and by only 99 percent in non-right to work ones.

  • Lyft Drivers Remain Independent Contractors

    January 28, 2016 3:25 PM

    A California class-action lawsuit against ridesharing company Lyft has been settled without trial. In the settlement, Lyft agreed to pay its drivers, their lawyers, and government a total of $12.25 million, and to adjust some of its terms and conditions as well as adding some features to its app (such as a “favorite driver” feature to enable repeat reservations). The settlement also means that Lyft drivers will remain classified as independent contractors rather than employees.

    This was an important test case for the sharing economy. Platform apps create two-sided markets whereby independent contractors can find customers more easily. They also provide a trust system for contractors and customers, and a payment conduit. I discuss these roles in more detail here.

  • NLRB's Joint Employer Ruling Challenged in Court

    January 25, 2016 1:22 PM

    CEI applauds Browning-Ferris’ stand against the National Labor Relations Board's upending of employment liability and flexibility, otherwise known as the new joint employment standard. 

    The NLRB regulators last year unilaterally changed the definition of who is a joint employer in a way that could expose tens of thousands of businesses nationwide to increased costs and liability by making one employer responsible for another’s actions. The NLRB’s action will block a path toward entrepreneurship, reduce job creation, expand employer liability, increase employment insurance costs, lead to a surge in lawsuits, and disrupt thriving business models. It's a move that aids labor union organizing at the expense of jobs and economic opportunity.

    Regulators also set a bad precedent. The Board overturned decades-old employment law that held a joint employer relationship existed when one company exercised “direct and immediate” control over another company’s workforce. But now, under the NLRB’s new definition, companies may be held legally liable for labor violations committed by other employers with whom they contract, even if they only exercise indirect control, unexercised potential control, and a vague notion of “economic and industrial realities.”

  • Labor Policy Developments to Watch in the New Year

    January 22, 2016 12:39 PM

    Labor policy reform was a fast-moving issue during in the past year. At the federal level, labor policy became more tilted in favor of union organizing, while state reform was a mixed bag.

    The National Labor Relations Board changed how union elections are conducted, made determining who your employer is a tough question, and made company email systems a union organizing tool.

    Outside the Beltway, Wisconsin became the 25th right-to-work state, giving workers the right to forgo paying union dues to a union they disagree with. Major cities around the country approved $15 minimum wages, including Seattle and Los Angeles.

    The coming year looks to continue rapid pace of labor policy changes. While 2015 was the NLRB’s year, it looks like the DOL is going to take the reins in 2016.

  • How Do We Give Workers a Fair Shot? Remove Regulatory Roadblocks

    January 13, 2016 12:16 PM

    In President Obama’s State of the Union address, he echoed a theme that has been constant throughout his tenure, saying, “how do we give everyone a fair shot at opportunity and security in this new economy?”

    One way President Obama could have a productive final year in office and work toward expanding opportunity is by directing the National Labor Relations Board to stop making it more difficult for employers to hire and entrepreneurs to get started. During Obama’s time in office, the NLRB has imposed costly regulations that threaten to disrupt workplaces around the nation and the greater economy.

    One example is the NLRB’s recent change to the joint employer standard.

    For decades, a franchisor and franchisee were considered two distinct entities. This is commonsense. A franchisee is an independent small business owner that hires and fires employees, creates their schedules, and is responsible for any labor violations against its employees. This business relationship benefited all involved—employers, consumers, and workers. It allowed entrepreneurs an easy way to strike out on their own. They are able to use the franchisor’s brand name, and benefit from the parent company’s marketing efforts and tested business methods. In return, the franchisee is liable for its day-to-day business practices and is their own boss.

    The franchise business model thrived under the decades old joint employer standard. Franchises employ millions of workers and account for 10 percent of new jobs in 2013 and 2014. Projections from the International Franchise Association show that the “gross domestic product (GDP) of the franchise sector will increase by $521 billion or 5.2 percent in 2015, an increase over the $496 billion generated in 2014.”

  • Union Subsidy Eliminates So-Called "Free Rider" Problem

    January 6, 2016 1:29 PM

    On January 11, the U.S. Supreme Court will hear oral arguments in Friedrichs v. California Teachers Association, a case that could provide right to work protections to state and municipal employees across the nation—meaning public employees cannot be required to pay dues to a union or risk being fired.

    At issue is whether government employee unions should be to compel non-members to pay “agency fees,” which cover the costs of collective bargaining, as a condition of employment, in lieu of dues. The current forced dues precedent was established under the 1977 Supreme Court case, Abood v. Detroit Board of Education.    

    This case is all about worker freedom. No worker should have to pay money to any organization in order to keep his or her job—especially inherently political organizations like government unions.

    It is also about the rights of voters and taxpayers. Many outcomes of collective bargaining should up to elected officials. Negotiations between unions and state and local government officials should not determine whether public funds go toward contributing to public employee pensions, other municipal needs, or necessitate the raising of additional funds. Those decisions should be left exclusively to elected officials, not private organizations like government unions.

    Further, a large number of public employees who are forced to pay dues never had a chance to vote on whether they desired union representation in the first place. Research finds that most public employees never voted for the union that represents them and collects dues from them. As Heritage Foundation labor policy analyst James Sherk notes, “Fully 99 percent of the teachers in Florida’s largest school districts had no choice about being represented by their union.”

    Labor unions contend that they need to collect agency fees because non-members still benefit from collective bargaining, contract administration, and grievance procedures. Therefore, union officials claim that if they were not allowed to compel non-members to pay agency fees, those workers would be “free riders” who benefit from union representation.

    This is a bogus argument for two reasons.

  • Will SCOTUS Friedrichs Case Lead to Member-Only Unions?

    January 5, 2016 8:25 AM

    Government employee unions have a lot at stake in Supreme Court case, Friedrichs v. California Teachers Association—especially access to millions of dollars in compulsory “agency fees” from non-members. Worried about the Court ruling for the plaintiff, some union leaders and left-leaning pundits are considering their options.

    One possibility is member-only unions, explored in a November 2015 Century Foundation paper, which notes the advantages for individual union members when unions try to attract them, rather than corral them through compulsory agency dues.

    “One benefit to the members-only approach is in order to survive, these unions must be built upon activism, involvement, and democratic governance,” note authors Moshe Z. Marvit and Leigh Anne Schriever. “Further, in order to remain in existence, a members-only union must keep the membership engaged, educated, and active.” (p. 9)


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