August 25, 2014 11:01 AM
Earlier, we discussed President Obama’s recent Executive Order 13,673, which “will allow trial lawyers to extort larger settlements from companies, and enable bureaucratic agencies to extract costly settlements over conduct that may have been perfectly legal.”
But it turns out that President Obama’s executive order (which allows the Labor Department to cut off firms’ government contracts over state or federal employment law verdicts or fines against them) has another, more ironic effect: It penalizes companies based in states like California that vigorously enforce labor and civil-rights laws, leading to employers in those states racking up more fines and verdicts against than similarly-behaving employers in other states. That’s the conclusion of Warren Meyer, the head of a campground-operation company based in Arizona, who recently closed his operations in neighboring California to avoid lawsuits.
He says that “government contractors would be insane to operate in California,” given its “regulatory and judicial culture that assumes businesses are guilty until proven innocent. If state labor violations or suits lead to loss of business at the national level, why the hell would a contractor ever want to have employees in California?”
Whether a large company is sued for discrimination or labor law violations often has more to do with its location than whether it violated the law. A recent study shows that “California has the most frequent incidences of [employment-practices] charges in the country, with a 42 percent higher chance of being sued by an employee for establishments . . . over the national average. Other states and jurisdictions where employers are at a high risk of employee suits include the District of Columbia (32% above the national average) [and] Illinois (26%).” It’s because of their location, not because California employers are more racist or anti-union than employers in other states (indeed, California employers spend more time and money on compliance mechanisms than employers elsewhere).
The president probably thought his order would incentivize compliance with federal labor norms (it allows contracts to be cut off for violations of federal labor laws and roughly “equivalent” state laws). But in effect it punishes employers in states that vigorously enforce civil-rights and labor norms through state laws that ban the same thing as federal law, but through much harsher penalties. (For example, federal law bans sex discrimination in hiring, but caps emotional distress and punitive damages for even the largest employers at $300,000 under Title VII of the Civil Rights Act. But California’s Fair Employment and Housing Act allows unlimited compensatory and punitive damages for the same exact discrimination, leading to multi-million dollar damage awards in some seemingly ordinary discrimination cases.)
The variation between California and other states in how often workers sue reflects the fact that some parts of the country are much more generous to workers who sue their employer than other parts of the country. How many lawsuits an employer faces is a function of how much workers and their lawyers expect to recover if they win a lawsuit.
August 20, 2014 4:42 PM
Does it make sense to require a park campground operator that has a few hundred employees at 120 different locations to come up with 120 separate affirmative-action plans, one for each site? Just because it also receives a measly $52,000 federal contract to clean bathrooms used by tourists (which it does very cheaply, at cost, in order to make its nearby concessions more attractive)?
To any economist, the answer would be “no.” But to the Obama administration, the answer is “yes.” If a federal contractor gets $50,000 annually from the federal government, or “serves as a depository of Government funds in any amount” or has “government bills of lading” worth $50,000, it generally has to have a separate affirmative action plan for “each of its establishments,” under a regulation issued by the Department of Labor in March 2014.
July 30, 2014 4:12 PM
A new CEI study by economist Lowell Galloway and public policy expert Jonathan Robe demonstrates the harmful economic effects of unionization on a state-by-state basis.
Among the states most adversely affected by unionization, Michigan has suffered the most with a 23.1 percent loss in real per capita income because of unionization since 1964. Michigan is the latest state to abandon forced unionism by passing a right to work law, and Michigan workers are probably kicking themselves for not passing one sooner.
July 28, 2014 9:55 AM
Coauthored with Alex Bolt.
President Barack Obama spuriously claimed, "These so-called right-to-work [RTW] laws, they don't have anything to do with economics," when he futilely attempted to thwart Michigan’s enactment of a right-to-work law.
A new study by the Competitive Enterprise Institute demolishes Obama’s spurious claim by showing how RTW laws, which free workers from a mandate to join a union in order to be employed, benefit states. RTW laws produce better income, population, and job growth than in forced-unionism states.
July 21, 2014 12:17 PM
Sadly, but unsurprisingly, it appears that former Secretary of Labor Hilda Solis may have violated the Hatch Act—which prohibits federal employees from engaging in political activity while on duty—by soliciting funds for President Obama’s reelection campaign during work hours.
The House Oversight Committee, chaired by Rep. Darell Issa (R-Calif.), broke the story when it released a voicemail of Solis calling a Department of Labor subordinate “off the record” to get help for Obama’s 2012 campaign. The release of the voicemail came as a result of a larger investigation into the Obama administration’s political activity during the 2012 election cycle.
Labor and Employment Scorecard: Pension Smoothing as a “Pay-For” in Highway and Transportation Funding ActJuly 16, 2014 4:57 PM
On July 15, 2014, the Competitive Enterprise Institute (CEI) scored U.S. House of Representatives Roll Call Vote #414 on final passage of the Highway and Transportation Funding Act of 2014 (H.R. 5021), a bailout of the Highway Trust Fund and extension of the current federal transpiration law, MAP-21.
Critically, funding for this bill involved “pension smoothing,” a pernicious accounting gimmick that encourages deficit spending and increases the risk of pension insolvency.
The vote is included in CEI’s Congressional Labor and Employment Scorecard, which can be found at CEI’s labor and employment policy project, WorkplaceChoice.org.
The Competitive Enterprise Institute opposed final passage of the Highway and Transportation Funding Act of 2014 (H.R.5021):
July 9, 2014 11:32 AM
Today, the Competitive Enterprise Institute released the first installment of CEI’s new three-part series, The High Cost of Big Labor, which looks at the economic impact of labor policies on U.S. states.
In “Understanding Public Pensions: A State-by-State Comparison,” economist Robert Sarvis ranks the states based on their pension debt. This debt burdens labor markets and worsens the business climate. To get a clear picture of the extent of this effect around the nation, this paper amalgamates six studies of states’ pension debts and ranks them from worst to best. Today, many states face budget crunches due to massive pension debts that have accumulated over the past two decades, often in the billions of dollars. There are several reasons.
One reason is legal. In many states, pension payments have stronger legal protections than other kinds of debt. This has made reform extremely difficult, as government employee unions can sue to block any scaling back of generous pension packages.
Second, there is the politics. For years, government employee unions have effectively opposed efforts to control the costs of generous pension benefits. Meanwhile, politicians who rely on government unions for electoral support have been reluctant to pursue reform, as they find it easier to pass the bill to future generations than to anger their union allies.
A third contributing factor has been math—or rather, bad math. For years, state governments have understated the underfunding of their pensions through the use of dubious accounting methods using a discount rate—the interest rate used to determine the present value of future cash flows—that is too high. This affects the valuation of liabilities and the level of governments’ contributions into their pension funds.
July 1, 2014 3:53 PM
When you can’t win, change the players. That was essentially the strategy pursued by government employee unions in recent years. This week, it came to a halt.
Yesterday’s Supreme Court ruling in Harris v. Quinn put a brake on government unions’ efforts to expand the definition of “public employee” to any service provide who receives state assistance, such as home care workers who are paid by Medicaid. The Court ruled that “partial public employees” like home care providers cannot be required to pay for the costs of representation by a union—representation many didn’t ask for.
Today, the Court gave some home care workers who have been forced to pay dues a renewed opportunity to get those dues back. The Court applied Harris v. Quinn to Schlaud v. Snyder, a suit brought by a group of Michigan home care workers seeking class action certification in order to get back union dues taken from them unwillingly.
June 30, 2014 3:42 PM
The U.S. Supreme Court’s decision in Harris v. Quinn puts a brake on an ongoing effort by organize labor to expand the definition of “public employee” to just about anyone who receives any form of government assistance, such as home care workers paid by Medicaid (a phenomenon I pointed out in a 2009 Cato Institute study on public sector unions; see page 9).
However, the Court did not address the issue of whether government employees may be required to pay union dues in the first place. Workers who aren’t union members but work under a collective bargaining agreement can be required to pay “agency fees,” which are essentially dues in all but name.
That would have required revisiting the Court’s 1977 decision, Abood v. Detroit Board of Education, which upheld a Michigan law, “whereby every employee represented by a union even though not a union member must pay to the union, as a condition of employment, a service fee equal in amount to union dues.” Yet, Justice Samuel Alito, writing for the Court’s majority in Harris, offers some strong criticisms of Abood that could well open the possibility of future challenges to it.
June 30, 2014 3:20 PM
The Harris v. Quinn decision today by the U.S. Supreme Court is a major human interest story.
Congratulations to Pam Harris and her son, Josh, and family whose First Amendment freedom of association rights were vindicated.
In total, eight women petitioned for their rights before the Supreme Court against a state governor and two massive unions. What’s more, all eight of these women were participants in a Medicaid program that afforded benefits for their loved ones who have been ill.
Caring for chronically ill loved ones is a costly endeavor, financially, temporally, and emotionally.
In the Harris v. Quinn victory, thwarting Big Labor’s attack on these eight family women and the other women who predominantly provide America’s home health care and daycare (in the sister case of Parrish v. Dayton) is great news.