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Year in Review 2019: Labor and Employment

The Competitive Enterprise Institute had a busy year in the labor and employment space. Much of the work focused on expanding worker freedom, ending wasteful subsidies, and promoting individuals’ right to earn a living. Below are selected examples of CEI’s work to promote employee freedom of choice and flexible work arrangements.

National Mediation Board Finally Establishes Formal Decertification Rules

In 2019, the National Mediation Board finalized a rule to formalize union decertification procedures. In the over 90-year history of the Railway Labor Act (RLA), until now, workers lacked a direct path to remove unwanted union representation.

CEI organized a coalition and submitted a comment letter in support of the rulemaking. Prior to the board’s final rule, unionization under the RLA was similar to Hotel California: workers may easily form or join a union, but it was nearly impossible to leave. The final rule is a win for worker freedom and fulfills the congressional intent for the RLA to provide for the “freedom of association among employees.”

Executive Order Curtails Union Official Time

CEI has long criticized the practice of union “official time.” It is a wasteful subsidy granted to federal employee unions, which allows employees to conduct union business instead of their governmental duties. The latest data finds the practice costs taxpayers $178 million annually, with federal employees spending 3.6 million hours conducting union business. However, federal agencies do a poor job tracking and recording hours spent on official time and the costs, as a Government Accountability Office report found.

But, for the likely the first time in history, the cost and amount of official time used will decline. In 2018, President Trump issued an executive order that curtailed official time use. Shortly after the orders were issued, multiple labor unions filed lawsuits against the orders and won a temporary injunction. That ended on October 2, 2019, when a federal appeals court lifted the injunction on the executive order.

The Trump administration is moving to swiftly implement the order. On October 4, 2019, the Office of Personnel Management issued updated guidance to agencies that the policies “are in full force and effect” and federal agencies should “ensure that they are fully compliant with all requirements or are taking steps to become compliant with requirements at the soonest feasible opportunity.”

Homecare Providers Union Dues Skim Ends

Since 2000, state governments have diverted $1.4 billion from homecare providers and handed it to labor unions, according to the Freedom Foundation. As I previously wrote:

For over a decade, states automatically deducted union dues payments from Medicaid payments intended for homecare providers who care for the elderly or disabled. Worse, most homecare providers care for family members on Medicaid. No one should be forced to fund a union when simply caring for a loved one.

Thankfully, this outrageous scam ended in May of 2019 when the Centers for Medicare & Medicaid Services (CMS) within the Department of Health and Human Services issued a final rule, called the “Reassignment of Medicaid Provider Claims,” that prohibits state governments from automatically deducting union dues from Medicaid checks meant for homecare providers.

As CEI explained in a comment letter in support of the CMS rule, the Social Security Act does not delegate authority to CMS to allow for the diversion of Medicaid payments to anyone but the individual who is providing care for Medicaid recipients.

Further, labor unions went about organizing homecare workers in an underhanded manner. Many homecare providers were unionized without their knowledge. Organized labor conducted stealth organizing campaigns to unionize homecare providers, which in “no state did more than 42 percent of caregivers participate in the unionization election.”

The final rule ensures homecare providers are paid in full and the right to determine how they spend their earnings.

California Effectively Prohibits Independent Work

The California legislature managed to pass a near statutory prohibition on independent work in misguided bid to “protect workers.” Assembly Bill 5 passed in September, and effective on January 1, 2020, redefines the critical legal distinction between an employee and an independent contractor.

As I previously wrote:

It imposes a new test to determine whether a worker is an employee or independent contractor. In summary, a worker must satisfy all parts of the so-called ABC test to qualify as an independent contractor. The worker must:

(A) be free from the hirer’s control and direction;

(B) perform work that is outside the usual course of the hiring entity’s business; and

(C) be established in a trade that is the same nature as the work performed for the hiring entity.

In short, the ABC test is nearly impossible to satisfy and effectively makes “employee status” the default classification of workers in California. And the fallout from the legislation has already started. This week, Vox Media’s sports site SB Nation notified 200 freelance writers they would be let go due to AB 5.

According to recent CEI research, AB 5 will likely negatively impact rideshare drivers and riders. The report finds:

The report estimates that a driver who now costs Uber $31,776 annually as an independent contractor would cost the company $53,088 annually in exchange for driving the same number of hours. And the price of a typical Uber/Lyft ride will increase substantially, perhaps by 30 to 50 percent.

Beyond the costs to rideshare companies, many rideshare drivers indicate they do not want to be employees. The Los Angeleno spoke with Uber drivers in California and “the consensus among the rideshare drivers waiting for pings from an LAX holding lot on a recent Friday said, thanks but no thanks.”