In This Economy, Unions Engage in Fratricide

Here's a very nice and plausible explanation of the Hostess bankruptcy. Much of the reporting on this story simply noted that the bakers union was refusing to play ball with the employer and that this caused the company to go under. But the actual story is more complicated, and involves a calculated decision by one union to get itself as far away as possible from the greedy and inflexible clutches of another union.

Basically, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (I'll call them the "Bakers") crashed the company by refusing to alter its collective-bargaining agreement arrangements in order to get some kind of separation from the Teamsters and their incredibly onerous work rules, work rules that basically made it impossible for Hostess to continue operating profitably.  The Bakers readily calculated that there was sufficient demand for Hostess products to support their membership, with or without the Hostess brand.  but that profitable operation was absolutely impossible as long as the Twinkies and Devil Dogs were being delivered by Teamster members. The Teamster work rules were almost models of union imposed inefficiency, with drivers not being allowed to deliver different Hostess products in the same vehicle, and specialized employees required to unload and load trucks instead of the drivers themselves.

So the Bakers kissed their truck driving (but not unloading!) union brethren goodbye and took steps to let the company implode, secure in the knowledge that America's appetite for tasteless, manufactured sugar products would guarantee their membership jobs. And those Teamster fellas could fend for themselves.

How Much, Causation, Gets You Retaliation?

This is kind of a snappy little jingle if you recite it in the correct pentameter. The story behind it is fairly significant, however. The Supreme Court has agreed to hear a Title VII retaliation case in order to determine the standard of proof for retaliation claims.

Retaliation cases are typically much easier to prove than the underlying discrimination allegations that form the basis of a retaliation claim. As I've noted before, it's not uncommon to have juries reject claims of illegal discrimination, but find that an employer retaliated against an employee for making such a claim.

The Court agreed to examine the fundamental issue in a retaliation claim: how much proof is required to show that an employee's protected activity, e.g. filing a claim of discrimination or participating in an EEOC discrimination investigation, actually caused the employer to take an adverse employment action against her? The stricter standard, and the one favored by employers generally, is the so-called "but-for" standard, under which an employee has to show that the protected activity was the cause of the adverse action. In other words, a "but-for" standard requires the plaintiff to show that without the protected activity, the employer doesn't make the adverse employment decision. A much lower standard is the so-called "mixed motive" standard, which simply requires that the protected activity be a factor in the adverse employment decision.

Obviously the mixed motive standard is a nightmare for most employers. Invariably, a management decision maker will be aware that her employee has either filed a charge of discrimination or complained about discrimination in the past. Juries are quick to find that this knowledge of past protected activity means that it was considered in any kind of subsequent adverse action decision. Accordingly, it's very easy for juries to find retaliation under a mixed motive standard.

This particular case is on appeal from the federal Fifth Circuit Court of Appeals, which reversed the plaintiff medical school professor's basic discrimination claim on appeal, but upheld the retaliation claim using the mixed motive standard. The stakes are high for the employer community on this one, so I'll be watching closely for reports on the oral argument and, ultimately, the decision.

This Is Huge--Obama's NLRB Appointments Are Invalid

A federal Court of Appeals, in fact, THE federal Court of Appeals, the one that sits in the District of Columbia, has rejected the Obama administration's recess appointments of NLRB members, finding the appointments an unconstitutional exercise of presidential executive power.

“The manipulation of official appointments had long been one of the American revolutionary generation’s greatest grievances against executive power, because the power of appointment to offices
was deemed the most insidious and powerful weapon of eighteenth century despotism.”

The decision is expected to be appealed, but as it stands now, it means that literally hundreds of NLRB decisions, including several that overturn decades of precedent and significantly damage employers, are now invalid.

Here's a quick listing of the key decisions affected by the Court of Appeals ruling today (courtesy of the WashPo):

a) The NLRB’s “ambush election” proposal that would shorten the timeframe for union elections to less than three weeks and limit the ability of employers’ lawyers to challenge NLRB decisions about who votes in the election;

b) Forcing employers in all industries . . . to bargain with “micro-unions” that represent narrow groups of workers within a company (even workers of a single job title);

c) Limiting employees’ rights to not fund political activities by preventing workers from viewing auditors reports of union spending and by classifying lobbying expenses as “representational activities”’;

d) Preventing employers from ending payroll dues deductions when a collective bargaining agreement expires;

e) Restricting employers ability to limit off-duty access to a workplace in order – thus expanding access for union organizers;

f) Narrowing the definition of supervisors (who cannot be unionized) to expand the number of employees unions can organize;

g) Expanding the definition of “concerted activity” to include public complaints about an employer or boss in social media;

h) Asserting NLRB jurisdiction over public charter schools;

i) Requiring employers to give unions copies of sworn witness statements in investigations into workplace misconduct, chilling the ability of employees to speak freely without fear of repercussions.

The court's decision is here. Expect the fallout from this decision to continue for at least a year.

UPDATE: And of course, the Board plans to ignore this decision.  My counsel to employers who were affected by any of the Board's decisions since the unconstitutional appointment of the members should follow the Board's example and ignore any efforts by the NLRB to enforce its rulings.

UPDATE 2:  No surprise, the administration indicates that it will appeal the Court of Appeals decision directly to the Supreme Court.  I note that the Board did not seek an en banc review of the decision; I'm guessing it believed such a review would be a losing cause, and only further strengthen the authority behind the original decision.

UPDATE 3:  The Fourth Circuit joins the invalidation party as reported here.

Jurassic Park time for Unions?

At least in the private sector--membership is at its lowest in terms of numbers since 1950.

But public sector unions, along with their almost unanimous Democrat party votes, are going strong--they now have more members than their private sector counterparts.

Contracts, Promises, and Enforceable Agreements in Illinois

Think your Illinois employee handbook disclaimer language protects you from Illinois state wage claims? Think again.

The issue arose in this recent Illinois federal court decision --one of the most confusing opinions I ever read coming out of a federal court. Unfortunately for employers, its confusing conceptual analysis conceals a holding that results in virtually unavoidable coverage for employers under Illinois’ Wage Payment and Collection Act (“IWPCA”).

The case at issue is a relatively straightforward failure to pay wages claim on behalf of a class of cable TV installers. They alleged that their employer failed to compensate them for pre-shift work, post-shift work, and work during meal breaks. The employees allege that the company violated the Fair Labor Standards Act, the Illinois Minimum Wage Law, and the IWCPA as a result. The IWPCA requires employers to pay all wages earned to employees, where wages are defined to employees as compensation owed pursuant to “an employment contract or agreement between the two parties.” In other words, for there to be a claim under the IWPCA, the plaintiff must allege that wages were due under the terms of an employment contract or agreement.

The company defended the IWPCA claim by moving to dismiss it, noting that the employees were "at-will", and that there was no written or oral contract between them and the company.

The employees claimed that the employer failed to pay them overtime, and that this was a violation of an "agreement" that was documented by statements in the employee handbook describing its overtime policy. The employees also cited company statements in parallel litigation noting that the handbook required the employer to pay employees for all time worked, as well as company documents describing  its overtime policy and some other unspecified statements by employer management with respect to its obligation to pay overtime.

That the company would make such statements in its internal documents is hardly surprising – the Fair Labor Standards Act requires an employer to pay overtime. As an initial matter, I am wondering whether the employer’s attorneys raised a preemption argument that this type of a IWPCA claim was in fact preempted by, or at least totally duplicative of, the Fair Labor Standards Act claim in the case. Of course, the FLSA does not prohibits states from enacting their own minimum wage requirements, but I have some difficulty in thinking that this particular claim is not treading heavily on FLSA territory.

No matter--that was hardly the most confusing aspect of this case. The employer initially try to argue that it did not have a contract or agreement with these employees based on its handbook, because like most employers, the company expressly declaimed that its handbook could create a contract. This has been enough to void IWPCA claims with the Illinois federal court in the past, but not now. The judge in this particular case seized on the “agreement” term of the IWPCA and determined that an agreement to pay is different from a promise to pay, which in turn is different than a contract to pay.

Relying on some fairly sloppy language in an Illinois state proceeding, the federal judge held that parties can enter into an agreement without the formalities and accompanying legal protections of a contract. This appears to me to be a distinction without a difference – the legal protections of a contract are that its terms can be enforced; the judge was unclear as to what lesser protections attached to an agreement. The court determined that an enforceable agreement requires only a mutual “agreement” to an employer's policies and the obligations contain therein. This agreement effectively becomes an enforceable contract under the IWPCA. But the judge reemphasized at several places in his opinion that this was not a contract or even a promise, but merely an “agreement.”

The reader at this point is likely as confused as I was when I read the opinion. Further clouding the waters, the court noted that Illinois courts generally treat at-will employment relationships as contractual in nature with respect to wages, benefits, duties, and working conditions. Really? I have yet to see a case brought in Illinois by a plaintiff whose at-will job description was changed, who was then successfully able to sue for breach of contract. But that’s another blog entry, for some other time.

The end result of this holding is that employers are locked into coverage for IWPCA claims as long as they advise as their employees (and the statute requires them to do so) of the rate of pay and time and place of employment. Employers should understand that the requirement for an agreement under the statute does not require anything other than the parties having a mutual understanding of wage rates and time and place of employment. That’s enough to form a binding and enforceable “agreement” here in Illinois.

They Need Some Serious Management Training in China

The people in charge here sound like junior high vice-principals.  Two minutes for a bathroom break?  Where is the AFL-CIO?

Oh, yeah, I forgot.  The PRC is a dictatorship.  But it won't be for long if it keeps putting the lid (or closing the toilet seat cover) on these types of problems in the economy.

Work for a Male CEO?

Keep an eye on your paycheck when he starts having kids.

At a recent session at the American Economic Association, some members presented a paper indicating that the gender of a male CEO’s children is linked to the salary of his own employees.

Haven gotten your attention, let me give you the data. When a male CEO has a baby, his worker’s salaries drop an average of .2% per year. If it’s a boy, the drop is .4%. But if the first child is a daughter, employee wages actually go up and, surprisingly, female employees get a larger boost, with their salary tending to grow by 1.1%, compared with a .6% gain for male employees.

It gets more serendipical. In general, female workers do better when a male CEO has children, regardless of the child’s gender or birth order. When a male executive has a son, female employees' salaries shrink .2%, but their male counterparts drop .5%. When a son is a first born to a male CEO, female salaries actually go up .8%.

Why? The paper postulates a few explanations: becoming a father causes a male CEO to look favorably toward women generally (there is previous research to show that a man’s esteem for his wife rises after childbirth, and there may be some type of halo effect for female subordinates) or perhaps it's just that men start thinking more about other people’s well being after they have a daughter. Whatever the linkage, the research is based on a study of CEOs in Denmark, so there may be some old-world, Hamlet stuff playing out here, as well. But it wouldn't hurt to take extra care with that baby shower gift, just to mitigate any possible paycheck damage.