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Working Class Heroes

Summary: From a lift truck driver for a cold storage warehouse, to a worker at a peach farm, to an autoworker turned activist, to a teacher who helped create a local only union—in workplaces across the country—Americans are waking up and taking power into their own hands, no longer standing idly by while unions abuse their power.

Today, more and more workers are discovering that, yes, they can stand up to unions that waste their dues money on big salaries or on providing support to politicians. Here are some stories of people who’ve fought back, with varying degrees of success.

Karen Cox

Karen Cox is a lift truck operator who works for Americold Logistics in Rochelle, Illinois. Based in Atlanta, Americold operates more than 175 temperature controlled warehouses around the world.

Cox came to work one day and discovered, to her surprise, that she was now a member of a union—specifically, the Retail, Wholesale and Department Store Union. RWDSU is a semiautonomous division of the United Food and Commercial Workers that represents service, clerical, sales, and maintenance workers, as well as employees in the citrus, food processing, tobacco, jewelry, and novelty and toy industries.

Karen Cox, a lift truck operator, and yet another union member forced into union membership.

Karen Cox, a lift truck operator, and yet another union member forced into union membership.

This was the union’s third attempt at the plant. A union representative, Roger Grobstich, said, “We have some workers there who were part of previous attempts to organize. They stayed at Americold despite opportunities for great jobs elsewhere. We have a leader there who said he was going to stay at Americold until they had a union there, and that’s what has happened.” The 111 workers at the facility were unionized using “card check,” a process in which workers are asked to sign cards supporting a union.

Often, a worker will sign under pressure, or will sign because he or she has been misled about the effect of signing the card, or will sign based on the belief that the collection of signatures will result, at most, in an election to decide whether the workplace is unionized. In fact, the cards can be used to unionize a workplace without an election.

“It was like spring of 2012, and rumors started going around about union trying to come in,” Cox said. “I didn’t take that seriously because my co workers that I knew, we were all pretty content with our jobs. I came into work one day and the union was just there. A lot of people that signed those cards were told that by signing they are just going to get information about the union that is, you know, possibly going to be representing them.

“A lot of people didn’t know that if the union got enough of those signatures—50 percent plus one—that the company could recognize them and they come in without an election. So many people that felt the same way I did, and didn’t want the union there. . . . The new people were just tricked into signing their name to something that in the end became their vote, their unwilling vote, which brought in a union that they were unable to even educate themselves about, before wanting it or not wanting it.”

Cox fought back, seeking decertification of the union. She and her coworkers petitioned the National Labor Relations Board (NLRB) for an election by secret ballot. Cox told an interviewer: “I was actually on my way back from filing my first petition for decertification, and I got a phone call from my father. A union member called him, telling him that I need to settle my grievances with the union, and he made some mention of people losing their jobs, and my dad said be careful and watch your back because that was a threat.”

McClatchey Tribune Business News reported that, when Cox started collecting anti-union petition signatures off the clock in the company’s parking lot, management threatened to fire her if she didn’t stop.

According to the National Right to Work Legal Defense Foundation (NRWLDF), which took up the cause of Cox and her coworkers, “Americold management discriminately enforced its policy to bar Cox and other independent minded employees from collecting petition signatures while off duty, even threatening to fire Cox from her job if she continued—while non-employee union organizers are given wide ranging access to company facilities to counteract Cox’s efforts. The charges allege that Americold Logistics is discriminating against workers like Cox and giving union organizers unlawful support and assistance to squash the workers’ efforts to remove the union from their work place—in violation of NLRB precedent.”

The Foundation’s president, Mark Mix, said in 2012 that “Americold Logistics management gave union organizers license to browbeat employees into acceding to unionization but is discriminating against workers who wish to remain free from union affiliation and dues payments. Unfortunately, companies like Americold all too often sell out workers in exchange for short term concessions from union officials.”

Nevertheless, Cox obtained the signatures of the required 30 percent of workers in order to force a vote. The vote was held in August 2012. The union sued to impound the election results on the ground that, union president Daniel Williams said, “Some of the workers that were terminated, we wanted them to be allowed to vote, because they were in the grievance procedure.”

The NRWLDF stated that, following the election but before the results were known, “union officials posted a notice in the workplace demanding workers become full dues paying union members, or they will be fired. The notice did not inform workers of their rights to refrain from union membership and full dues payments, rights long upheld by the U.S. Supreme Court. Also, the union falsely stated that the workers must fill out a union dues deduction authorization form as a condition of their employment, although workers cannot lawfully be required to fill out such a form to pay union dues.”

Cox said in 2013, “We went ahead and had our [decertification] election, but then it’s in limbo. The results are locked in Peoria at the office there, and we’re waiting for the NLRB so it’s been over a year now since the election.”

In April 2015, some 20 months after the secret ballot election on whether to decertify the union, the Obama controlled NLRB ruled that the ballots would be destroyed.

The rationale: that, when a workplace is organized by “card check,” workers cannot attempt to kick out the union until at least a year after the union starts bargaining with management. (In contrast, when a workplace is organized in a secret ballot election, the clock starts ticking as soon as the union is recognized as the bargaining agent.)

The NLRB’s decision in the Americold case means that a union is actually better off to organize by “card check” than by election, because union officials can hold up the bargaining process and delay any effort to get rid of the union.

Prior to a 2011 ruling by the NLRB, workers had a 45 day window to decertify a union following a “card check” drive.

A “card check” mandate has been repeatedly rejected by Congress, even when Democrats had solid control of both houses, yet the Obama controlled NLRB is solidly behind the practice. “Congress rejected legislation that would have mandated card check recognition because of the intimidation, coercion, and harassment inherent in bypassing secret ballot elections,” said Mark Mix of the NRWLDF. “Yet in this ruling the Obama Board has twisted the law to deny workers their vote to decertify the union solely because they were previously denied a secret ballot vote over unionization.”

Silvia Lopez

Lopez spearheaded decertification of the United Farm Workers at Gerawan Farming in Fresno, California. The family-owned Gerawan has been operating in California’s Central Valley for more than six decades. It employs up to 5,000 workers over the course of a year to pick such fruits as nectarines, peaches, and grapes.

The UFW won a representation election at Gerawan in 1990, although it wasn’t until 1992 that state labor authorities certified the results. There was one bargaining session between Gerawan management and the UFW, with no contract. Then the UFW vanished. Workers didn’t hear from the union for almost 20 years.

Silvia Lopez leading farm workers in protest against Gerawan Farming.

Silvia Lopez leading farm workers in protest against Gerawan Farming.

In October 2012, the UFW contacted Gerawan to negotiate a new contract. The contact was apparently spurred by changes in state labor laws. CNBC reported: “Unlike the early ’90s, the UFW is now able to take advantage of newer laws in California that force both sides to accept a contract through mandated arbitration by the California Agricultural Labor Relations Board [ALRB].”

At that point, Lopez, a single mother, had worked at Gerawan for 15 years. Her parents and daughters had worked there as well. She was shocked when she was told that she had been working at a unionized company.

Also shocking: the three percent union dues that she and the other workers would be paying the union that had ignored them for two decades. Taking the dues into account, the workers would be making less money than before the union stepped back into the picture.

Gerawan, it should be noted, pays wages that are estimated to be between 21 and 77 percent higher than the industry standard. In October 2013, Lopez gathered and turned in between 2,700 and 2,800 signatures from coworkers in a petition to decertify the union. The state’s Agricultural Labor Relations Board refused the signatures, questioning their legitimacy, so Lopez collected a new petition with 3,000 signatures. The board balked, but Governor Jerry Brown (D), who created the ALRB during his first stint as governor in the 1970s, pressured the board into allowing a vote.

The election was held on November 5, 2013 and, for almost two years, the ballots were locked up at the ALRB’s regional headquarters in Visalia. The stated reason was that the board needed to investigate accusations of unfair labor practices, specifically, violations of the rules for conducting unionization related elections. (For a time, the board claimed to have run out of money to conduct the investigation.) Meanwhile, the UFW attempted to force a contract on the company and the workers through the states’ mandatory mediation and conciliation (arbitration) process.

Jeffrey Scott Shapiro reported in the Washington Times:

Gerawan Farming’s laborers have accused the Agricultural Labor Relations Board of not honoring the true intent of the California Labor Relations Act, the 1975 law enacted to guarantee collective bargaining rights and worker freedom of association. . . .

The conflict has raised tensions in California’s San Joaquin Valley, pitting union activists against the very workers they purport to champion. . . .

[T]he mandatory mediation and conciliation practice . . . has been used occasionally when both sides of a dispute fail to come to an agreement. “When the workers found out they were going to have a contract forced on them that would make them pay dues, they went to Modesto to participate in the MMC [mandatory mediation and conciliation] hearing but were barred at the door,” said Anthony Raimondo, a California lawyer representing Ms. Lopez.

According to Shapiro in the Times, lawmakers took note of Lopez’s activism and of the fact that the workers were shut out of the hearing on their own contract.

State Assemblyman Jim Patterson, a Republican, once proposed a bill that would have guaranteed worker witnesses the right to attend Agricultural Labor Relations Board hearings. . . . California’s 5th District Court of Appeal has since declared mandatory mediation and conciliation unconstitutional, and the matter will undergo judicial review by the state Supreme Court. . . .

Mr. Raimondo expressed concerns about reported close ties between the state board and the union. “I don’t think the ALRB process is a fair one because the agency depends on this union for its survival,” he said. “The UFW is essentially the only union that uses this law. The vitality of the union is linked directly to the budget for the agency. We have numbers that show since these disputes with Gerawan started, the ALRB budget and staff have more than doubled.”

The refusal to count the votes was so outrageous that Governor Jerry Brown (D-California) seemed to attempt to disassociate himself from it. Last June, Brown fired the Agricultural Labor Relations Board general counsel, Sylvia Torres Guillen, who had been one of the key officials blocking the counting of the votes and trying to destroy the ballots.

A few hours later, at a gala at Sacramento’s Leland Stanford Mansion attended by Brown, hundreds of Gerawan workers protested and attempted to meet with the Governor. The workers chanted, “Count our votes!” The party for the well heeled and well connected was to celebrate the 40th anniversary of the state law that set up the ALRB. As noted by Matt Patterson of the Center for Worker Freedom:

On that hot June day the workers loaded buses (after working the fields since early that morning) and made the three hour trek to Sacramento to implore Brown to help them.

Brown, to his credit, graciously sent a representative out to meet the workers as both the protest and the party began at 5:00 pm. The representative accepted 800 petitions on behalf of the Governor, sworn statements from Gerawan workers testifying that they did not want the UFW to represent them.

Then Silvia Lopez, single mother and leader of the anti union movement, was invited inside to meet Brown himself. The workers cheered as Ms. Lopez was led through the gates—it was the first time that Brown had acknowledged them and their struggle publically. Inside, however, as the video clearly shows, someone attempted to prevent Ms. Lopez from meeting Brown, even going as far as to push her away from the Governor. That someone was Dolores Huerta . . .

Huerta, 85, cofounded the UFW with Cesar Chavez and served as the organization’s vice president until 1999. An honor-ary chair of the Democratic Socialists of America, Huerta in 2006 openly praised Venezuela’s Marxist strongman Hugo Chavez. (Regarding Chavez’s policies, she asked, “So why can’t we do that here in the United States?”) She placed Hillary Clinton’s name in nomination at the 2008 Democratic National Convention and, in 2012, received the Medal of Freedom from President Obama.

The Sacramento Bee reported:

Footage shot inside the mansion shows Huerta moving to block Lopez as she attempts to meet the governor. The video was shot by Anthony Raimondo, a Fresno labor relations lawyer who is representing Lopez in the Gerawan case. A voice off camera asks Huerta, “Why are you doing that?” Huerta’s answer: “You know why.”

Regarding that confrontation, CFP’s Patterson commented: “Huerta helped create the union that demands 3 percent of Lopez’s pay, the union that is using its government enforcers at the ALRB to deny her First Amendment freedoms of speech and assembly. The union that has—quite literally—disenfranchised her. Huerta is, in other words, the face of Silvia Lopez’s oppressor.”

In September, though, Lopez and the Gerawan workers lost their case when an administrative judge set aside the decertification election. The judge declared that Lopez got a donation of $ 20,000 from the California Fresh Fruit Association (of which Gerawan is a member) to fund the anti-union fight, that people physically blocked workers while collecting some of the petition signatures, and that Lopez got time off from work to lead the decertification effort. Also, he ruled that Gerawan raised the workers’ pay to curry their favor. (Believe it or not, raising pay to make workers happy can be considered an “unfair” practice under labor law.)

By the way, Gerawan remains a top target of the unions. The Sacramento Bee reported in September that—

In the waning days of the recently concluded legislative session, the Brown administration, business and labor officials emerged from dozens of hours of private meetings and conference calls with a plan to resolve a festering dispute over pay for farm workers and other low wage laborers in California.

The solution, passed in a bill on the Legislature’s final day, reflected a multimillion dollar compromise: In exchange for back payments to thousands of employees for rest periods and other work hours, farmers would receive protection from lawsuits— and potentially far stiffer penalties— for past failure to pay.

The agreement went little noticed in the flurry of late session bills. But it marked an unusual achievement for an industry beset by labor discord. . . . To keep the United Farm Workers union from opposing the measure, the pact included exemptions effectively excluding Fresno County’s controversial Gerawan Farming operation and Fowler Packing Co., among other growers, from the bill’s protection from existing litigation. Those carve outs were necessary to maintain the support of labor, [Assemblyman Dan] Williams said. But they left a rift within the agriculture community. “The fact is, the people that were involved in this have various levels of exposure and concern as they’re looking at it,” said Barry Bedwell, president of the California Fresh Fruit Association. “But why shouldn’t we have a negotiation system that says, ‘Look, if this solution is a fair and good one, why shouldn’t it apply to everyone?’” Gerawan has been the subject of UFW animosity for a bruising case over employee representation.

Gerawan and Fowler weren’t the only businesses targeted for special treatment. According to the Bee, “The legislation also contained a custom tailored benefit for one telecommunications company, AT&T. The bill grants the company extra time to program payroll systems to comply with the law. The company, a major donor to [Governor] Brown’s political causes, recently acquired DirecTV, a company facing litigation over piece rate pay.”

Terry Bowman

Terry Bowman, who was a United Auto Workers member for 19 years, formed a national group called Union Conservatives and has traveled the country speaking in favor of Right to Work laws and other conservative positions. In 2014, he ran for Congress as a Republican, but was defeated by the Democratic candidate, Debbie Dingell. (Dingell, her husband, and her husband’s late father together have held the seat since the 1932 election.) In congressional testimony in 2012, Bowman described the origin of his activism:

In December 2009, my UAW local (local 898) published their newsletter entitled “Raw Facts.” In this issue, was a story which particularly enraged me entitled “Health Care Reform: What Would Jesus Do?” The article used incorrect theology to make the argument that Jesus was basically a socialist and would approve of the Patient Protection and Affordable Care Act [Obamacare]. I have some authority on this issue because I studied at Heritage College and Seminary, and I could easily tell that the author of this article incorrectly used Scripture in order to push a political agenda. It was finally at this moment where I stood up and said “ENOUGH! Somebody has to do something!” And of course, that “somebody” was me. I decided that the only way to fight back against the abusive actions that union officials engage in with my hard earned dues was to start organizing conservatives within the unions.

Neil Cavuto interviews Terry Bowman on Fox News

Neil Cavuto interviews Terry Bowman on Fox News

Since I started Union Conservatives, I have heard the stories of hundreds of union workers who are also tired and fed up with the political activities of their own unions. These American citizens rightly believe that the unions have become quasi political parties and socioeconomic groups pushing a radical, left wing ideology that many of their workers, including me, find offensive. Up to 40 percent of union workers vote Republican. That means over five million union workers in the United States alone feel harassed, ridiculed, and persecuted because of the political activities of their union bosses. . . .

Union officials use publications and magazines, websites and newsletters, and many other activities which they call “educational” to promote a political agenda. For example: the UAW financially maintains their “Black Lake Facility,” a retreat for where union members and staff go to be educated about things like “leadership development, union involvement, health and safety, political action, civil rights and many other topics.”

Although I have worked [as a UAW member] for over 15 years, I have never once been invited to go to Black Lake Resort. However, many UAW members get their wages paid to attend the one week seminars (wages paid by the local union), and the entire retreat is financially paid for with regular union dues—including food and lodging (all of which are right on the premises). Unfortunately, there seems to be a certain group of people who are invited time and time again (workers who are involved with far left union activity), and the rest of us are never afforded the opportunity to go. I have been told that these “training sessions” are full of political propaganda, and they constantly disparage the Republican Party.

Secondly, the UAW’s publications such as Solidarity, local union newsletters, and retiree publications are all promoted by the union officials as educational publications, yet they are full of political propaganda. You will find attached to this testimony just a small random selection of articles which are very biased and are not an accurate representation of the political opinions of their membership. “Forced Solidarity” is no solidarity at all. Even prisoners in a chain gang have solidarity. Forced solidarity is nothing more than being a prisoner in chains. Only through having a complete volunteer union is there real and true solidarity.

In his testimony, Bowman cited a comment by AFL CIO President Richard Trumka: “I got into the labor movement not because I wanted to negotiate wages. I got into the labor movement because I saw it as a vehicle to do massive social change to include the lots of people.”

Journalist/blogger Jay Mcnally wrote:

Now on a mission, Bowman decided to start organizing conservative union members across the country. He realized that due to the fear of harassment and persecution, most conservatives in the unions do not speak up and make their voices heard. “It’s really quite sad,” Bowman explains, “that organizations that claim solidarity actually marginalize a large part of their membership and perpetuate division and hostility to a growing group of members who embrace truth and reality.”

In a Wall Street Journal oped written with Vincent Vernuccio, Bowman noted that “the UAW spends millions of dues dollars on a political agenda involving divisive social issues, such as ObamaCare, radical environmentalism and gun control. Many workers no longer want to fund what they believe to be contrary to their values and beliefs.”

Bowman was instrumental in the attempt to defeat Prop 2 in Michigan—a measure that would have given unions effective control over state government—and in the passage of Right to Work in that state. [See Labor Watch December 2012.] At the time, he said, “All across Michigan in every union, workers are frustrated over a lack of on the job representation, being denied their First Amendment right of freedom of association, and unions taking their money and spending it on a political agenda with which 40 percent or more of members disagree.”

After Right to Work passed in his state, Bowman wrote, “Any future rise in union membership will not come from outdated compulsory activities. It can only come if officials rethink what unionism is, and what it is not. The best ideas are coming from outside agencies that see an unlimited potential for positive influence—if those unions are willing to break the antiquated mold and embrace free market principles instead of special interests.”

James Perialas

One of the heroes on our list is actually the president of a union. A teacher in the public schools of Roscommon, Michigan, James Perialas heads the Roscommon Teachers Association, which is independent of the big national and state teachers’ unions.

In an interview, Perialas described himself as “a high school social studies, government, and economics teacher from northern Michigan.” He said that, “When I first started, 24 years ago, I found out that we were compelled to join the union, so there was no choice. We gave our name and address and filled out these cards and we had our dues directed right out of our paychecks. And, at that time a very naïve teacher, I didn’t question it.”

James Perialas, President of the Roscommon Teachers Association, opposes the cost ineffectiveness and inefficiency of the Michigan Education Association

James Perialas, President of the Roscommon Teachers Association

Eventually, “Our dues were approaching $1,000 per person. For anybody, $1,000 is significant. For teachers, that’s a vacation, that’s a good portion of a family’s income. To pay that and feel like you’re not getting anything in return wasn’t acceptable to us.” He pointed out that union officials were overpaid, such as one local union representative, a UniServ (unified services) director in charge of 13 schools, who made $139,000 a year. “The only way to get out from under the situation was to decertify the union.”

In 2012, led by Perialas, teachers in the Roscommon Area Public Schools voted 42 to 22 to decertify the Michigan Education Association, an affiliate of the National Education Association. “I am excited that my colleagues have shown the courage to stand up to MEA/NEA and its bureaucratic machine,” Perialas in response to the vote. “We are not anti-union, we are anti-MEA. There were many services that were provided by the MEA that we could do ourselves, at half the cost.”

In a 2013 op-ed, he described what happened after they replaced the MEA:

Forming a “local only” union, away from the MEA/NEA, allowed Roscommon teachers to immediately cut our annual union dues from just under $1,000 per member to $600. With those dues, we purchase liability and litigation insurance privately and have hired our own attorney to replace the UniServ (grievance advice) functions of the MEA. Our union negotiates our contract with the district, which we have been doing on our own for years.

Why did we do this? Because the MEA is a bureaucratic behemoth with poor customer service. The union paid its president over $280,000 in 2010 and $270,000 last year. In 2011-2012, while the National Education Association and American Federation of Teachers were shedding members, both unions gave their national presidents raises: AFT President Randi Weingarten had her salary increase to $407,323 from $342,552, while NEA President Dennis Van Roekel’s salary jumped to $362,644 from $298,387.

But education employees don’t have to put up with it. Competition drives innovation and change. Moving to a local union has allowed Roscommon to cut our dues nearly in half while banking over $25,000 this year alone. Some of that money will be kept in a contingency fund and some will go to provide local scholarships for our graduating seniors.

The most attractive characteristic of the local only union option is customer loyalty. We provide a value proposition for our members. I would guess that our local will lose a small percentage of our members as a result of the right-to-work law, but nowhere near what the MEA will lose in the various locals statewide. Teachers have a difficult choice going forward. Some will choose to simply walk away from the union. Others will choose to continue to deal the best they can with the current system. But all should know they have the option of taking control of their own union by forming a local-only bargaining unit.

“We believe in the collective bargaining process. However, we’re anti big union,” Perialas recently told the Daily Signal. “The big bureaucratic unions, whether it be in education, the auto industry, or any industry, they’ve become so large that they’re not responsive to the very people, the income stream [they represent]. We left and we now very happily have the Michigan Education Association in the rearview.

“We are now three years into being our own local only union . . . We have an executive board and negotiating team that we pay a very modest stipend, and we hired an attorney that represents us [providing] our day to day legal advice. We hand out local scholarships. And beyond that, we proudly don’t do much else.”

…and others

Mari Gusman, a healthcare aide from Wisconsin, felt that her union was more interested in raising dues rates than representing employees. As she tells it, “The small raises that the union negotiated for us were paired with an increase in monthly dues, so that we felt like we weren’t getting a raise at all. When we complained to the union, their response was almost always the same: ‘It’s better than nothing.’”

But that was only the beginning. After Gusman gathered signatures from her colleagues to remove the ineffective union from her workplace, the threats and intimidation started:

The union misled me into thinking that I needed to send the signed petitions to them in order for our election to go forward. This was a lie: The signatures were supposed to remain private, and be sent directly to the regional office of the National Labor Relations Board.

All of a sudden, my coworkers who had signed on to remove the union received “house calls” from union organizers sent from Madison. The union also publicly insulted me in a letter sent to all of my coworkers. We were repeatedly bullied and harassed, and when the time came to vote on removal, the union’s bullying paid off.

One union member who thinks it should be easier to decertify is Los Angeles Times press operator Lee Carey’s union failed to keep promises that it made during the organizing campaign, taking dues money after negotiating a contract that was worse than their previous working arrangement.

“I’ve been [at the Times] since 1981,” he said in an interview. “Newspapers were booming back in the eighties when I first started, and then the Internet just got stronger and stronger, so the revenue stream just dried up. There used to be about a thousand pressmen when I first started now we’re down to about 75 . . . We gotta do a whole lot more with a lot less and so there was a rebellion of sorts and that opened the door for the union.” He added:

They promised to improve our benefits, pay, working conditions and staffing levels. Enough people believed these promises, and the union won an election in 2007 by just six votes.

After months of contract negotiations, it became clear the union wasn’t going to be able to deliver on its many promises. One morning in December 2008, I remember sitting in a hotel in Commerce; the union international had sent their best to try to sell us a contract that wasn’t as promised. Most pressmen were there to not ratify the proposed contract, since it represented less than what we had been earning. . . .

Out of fear and misinformation from union officials, my coworkers ratified a contract that resulted in a reduction in pay and benefits. The “less than what we had” contract required us to pay $60 a month in dues to the union responsible for these cuts. . . .

It’s kind of an uphill battle to get them out, go through the petition process . . . You have to take personal attacks from the union. There are good unions out there, they represent their employees well but this is what happens when you get a union such as this one that’s non-performing. . . . It’s really hard to get rid of them. I think it would be easier if they were made to recertify automatically, where they have to prove themselves again and earn it. Instead, they’re putting the onus on the worker.

Making an exit

The Manhattan Institute’s Diana Furchtgott Roth, a frequent contributor to Labor Watch, wrote recently of efforts to shore up the unions:

The Obama appointed National Labor Relations Board is doing all that it can to reverse the decline in union membership from 20% of wage and salary workers in 1983 to 11% in 2014.

The NLRB has instituted “ambush elections” that require elections to be held about two weeks after the petition for union representation, rather than after five or six weeks, as was the case previously. The shorter time period prevents employers from scheduling meetings to tell workers about the potential disadvantages of union representation. Still, these speedy elections can only be used to certify unions, not to decertify them. If workers want to decertify their unions, they sometimes have to wait as long as two years.

The NLRB has allowed the use of “micro unions,” small groups of workers within a company who want to be represented by a union even though a larger majority does not choose representation. Examples are shoe salesmen at Bergdorf Goodman’s, or cosmetics workers at Macy’s. But the NLRB does not allow small groups of workers in unionized firms such as General Motors or Ford to choose to eschew union membership. The process only works one way.

If the NLRB made it as easy to leave a union as it does to join, one could believe they were working on behalf of workers. The plight of workers trapped in a union is one that the agency and the White House choose not to address. Unions are like Roach Motel ads: You can check in, but you can’t check out.

Former House Speaker Newt Gingrich (R-Georgia) and Richard Berman, executive director of the Center for Union Facts, recently wrote of the need for reform in labor laws:

The old labor laws often serve to protect the status of entrenched unions, at the expense of employees’ rights. The old rules make it extraordinarily difficult for employees to free themselves of unions that have become quasi political parties.

When hundreds of millions of union member dues dollars are spent supporting radical left-wing organizations that do not enhance wages or working conditions, something is broken. As employees find less reason to have a union represent them, unions have struggled to maintain their membership with increasingly deceptive practices. They often pressure a majority of employees to sign authorization “cards” that can legally be used to force employers to recognize the union without holding an election. . . .

Many existing unions represent thousands of employees, not a single one of whom voted for them. In fact, an analysis of government data suggests that less than 10% of unionized employees today voted for the union that collects their dues.

Amazingly, in the private sector the figure is less than seven percent. That’s right: Fewer than seven out of 100 non governmental union members have ever actually voted to be members of their unions.

That happens because, once a union is voted in, it can hang on for year after year, decade after decade without ever facing another vote. It’s a variation on that old joke about “voting” in Communist countries: “One man, one vote, once.”

As noted in 2012 by James Sherk of the Heritage Foundation:

Very few union members chose their union to represent them. Most accepted union representation as a condition of employment, but did not separately choose either general representation or the specific union that represents them. This happens because the National Labor Relations Act (NLRA) does not require private sector unions to stand for re-election. . . .

A unionized workforce remains unionized until the employer goes bankrupt, or the workers decertify it (a prohibitively difficult undertaking). New employees are represented by the union for which previous employees voted. The overwhelming majority of workers in both the private sector and in government inherited collective representation in this manner. . . .

[Regarding public sector workers:] In some states, the unionizing votes took place so long ago that the government has no records of the election. South Dakota passed legislation requiring government employers to meet and negotiate with union representatives in 1970. The state Department of Labor no longer has the records showing when those elections took place.

Once upon a time, activists fought hard for the right of workers to join unions.

Today, the fight is over protecting workers from bad unions—ensuring that they can decline to join or pay dues to a union (through Right to Work laws) or, through the decertification process, ensuring that they can get rid of a union that isn’t serving their interests.

In the field of labor law, it’s the battle of the 21st Century.

About the Author: Dr. Steven J. Allen (JD, PhD) is editor of Labor Watch. This article originally appeared in the January 2016 issue of “Labor Watch” and appears here with permission.

The NLRB Targets the American Dream

Summary: The National Labor Relations Board is poised to scrap the long-held legal definition of a joint employer, which has allowed business sectors—including the franchise industry—not only to thrive in recent decades but also to bounce back more quickly from the Great Recession than other segments of the economy. Given the employee turnover in many franchises, unions see aggressive action by the NLRB as a chance to expand membership rolls and generate revenues from dues that will support unions’ activist political agendas. But an array of business groups warn that changing the meaning of joint employer could bankrupt many small businesses and imperil the creation of the very jobs that represent an entry point for millions of the country’s workers.

If you’ve taken your car to Jiffy Lube, stayed at a Choice Hotel, or ordered a pizza from Papa John’s, you’ve most likely patronized a business built on the franchise model. From KFC, Wendy’s, Arby’s, and Dairy Queen, to Planet Fitness, Ace Hardware, Supercuts, RE/MAX, and H&R Block, franchises are at the heart of small business in America.

Despite the strong national brand identification associated with these names, they are actually part of the small business mosaic of America. Franchisees are independent business people, running their own shops under the marquee of a brand customers that know and trust, often actually located on Main Streets across the country.

Franchises give small businesses, many of them family businesses—literally “mom-and-pop operations”—the opportunity to take advantage of national brand-name recognition and advertising, supply networks, business expertise, and other advantages that would otherwise be available only to the big guys. Many franchise operators are the first in their families to run businesses, and many are immigrants or members of minority groups.

20150416-UW_AgnewFor millions of Americans, franchise businesses are a path to success. Why is the National
Labor Relations Board putting a roadblock in front of small-business entrepreneurs?

There’s a world of difference between a local franchise business and a multinational corporation. The point seems so obvious it should hardly need to be made.

Yet a series of developments in federal labor law is lumping these two classes of businesses together in a way that could imperil some of the 8.9 million jobs the franchise industry provides in this country. In addition, the new rules could lump subcontractors in with the companies that hire them to perform such services as waste disposal and recycling, office cleaning, clothes cleaning, security, parking services, and photocopying.

What’s a “joint employer”?

The definition of “joint employer” is at the heart of separate-but-related rulings that have been issued, or are expected to be issued, regarding union-backed actions against the world’s largest restaurant chain (McDonald’s USA) and a Houston-based waste disposal company (Browning-Ferris). In the McDonald’s case, a majority of the five-member National Labor Relations Board is poised to comingle independently owned franchises with their corporate brands, linking them together as joint employers. In the Browning-Ferris case, the NLRB would apply that idea to subcontractors, linking them to the businesses that hire them.

Franchise owners say the NLRB’s action ignores the fact that the corporate brands have almost no influence or oversight on the locally owned franchise businesses’ day-today operations. They contend that initiatives by the NLRB and its General Counsel fly in the face of decades of laws, regulations, and court rulings on the definition of joint employer.

If those novel actions are upheld, it would be a great victory for unions, because it would make it easier for them to recruit millions of new members, to rake in badly needed fees and dues revenue to support their political agendas, and to facilitate organizing activities nationwide. Additionally, if the meaning of joint employer is changed, local franchise businesses could be treated as guilty-by association, as unions disrupt local businesses across the country in retribution for actions at a single, unrelated, independently operated franchise. This would also slow the growth of the franchise sector, possibly shutter existing locally owned franchisees, and eliminate many jobs.

Common law (the basic law we inherit from centuries of custom and precedent), statutory law, and regulations and legal rulings over the last-half century have clearly established who is an employer and when a so-called joint employer relationship exists. With regard to franchised businesses, the locally owned franchise business, not the corporate franchise brand, is deemed the employer.

In 1968, the NLRB issued a decision in a case involving the Southland Corporation, the parent company for 7-Eleven. In that case, the NLRB carefully considered whether the franchisee’s use of the trade name or operational system made the franchisor (the big national or international company) the joint employer. It held that a franchisor could be considered a joint employer only if it controlled labor relations and employment decisions by the franchisee. Because such decisions belong to the franchisee in the franchise model, franchisors were ruled to not be joint employers.

Over the past three decades, a number of subsequent cases related specifically to the franchise model have upheld this understanding.

The current standard was articulated in two cases from 1984, TLI, Inc. and Laerco Transportation. In a recent analysis on the website of Inside Counsel magazine, labor lawyer Marilyn A. Pearson explained that, in those two cases, the NLRB held that legally separate entities are joint employers only when they actually share the ability to control or co-determine the essential terms and conditions of employment (such as hiring, firing, discipline, supervision, and direction of employees). In order to qualify as a joint employer, the brand company’s control over these employment matters must be direct and immediate.

Most recently, the California Supreme Court declined to hold Domino’s Pizza LLC, the national company, liable in a sexual harassment case involving the employees of a Domino’s franchisee. The court ruled: A franchisor, which can have thousands of stores located far apart, imposes comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way. To this extent, the franchisor controls the enterprise. However, the franchisee retains autonomy as a manager and employer. It is the franchisee who implements the operational standards on a day-to-day basis, hires and fires store employees, and regulates workplace behavior. Analysis of the franchise relationship for vicarious liability purposes must accommodate these contemporary realities.

These cases illustrate why the franchise industry, the National Restaurant Association, the National Retail Federation, the U.S. Chamber of Commerce, and a whole host of other employer groups are alarmed and dismayed by the NLRB’s recent steps to jettison the old definition.

Changing the definition

On December 19, the NLRB’s Office of the General Counsel, headed by Richard Griffin (former general counsel of the International Union of Operating Engineers), filed complaints that accused McDonald’s USA and some of its franchisees of labor violations. These formal charges had been expected since July 29, when Griffin announced his intent to name McDonald’s USA as a joint employer with the individual franchisees. The claims allege McDonald’s workers at locations across the country were fired or intimidated for participating in union organizing or in a well-funded national protest movement led by the Service Employees International Union (SEIU).

As noted by the International Franchise Association (IFA), a major trade group representing over 1,300 franchise companies and more than 780,000 locally owned establishments from various industry sectors, changing the “joint employer” definition could do great harm. The change could saddle tens of thousands, even hundreds of thousands of small businesses with uncertainty, threats of litigation, and additional costs that could make it harder for these businesses to succeed, and harder for many of the country’s most economically vulnerable people to enter and stay in the job market.

Referring to the December complaints, Robert Cresanti of the IFA said, “This isthe nightmare before Christmas for local franchise businesses. The [NLRB] has effectively legislated a change to the definition of who an employer is, which will impact hundreds of thousands of businesses.”

Michael J. Lotito, co-chair of the Workplace Policy Institute created by the law firm Littler Mendelson, told reporters: “What the [NLRB’s] general counsel seems to be suggesting is that when a franchisor provides a tool, when the franchisor provides a resource that might help the franchisee better undertake their business and become more successful as a small business owner, that that somehow equates to joint employment.” In fact, “[t]he NLRB’s decision in 1968 made very clear that the issue is notwhether or not you provide tools or support but the issue is whether or not the individual franchisor is making the decisions for their franchisees. So the general counsel is trying to upend decades of settled law that have been the foundation of the franchisor/franchisee relationship and finding suddenly that now, there’s a joint employment where none existed.”

Nowhere in the 13 complaints, which collectively span over 150 pages, does the NLRB’s Richard Griffin elaborate on what is meant by “degree of control,” according to Lotito. The 78 separate charges in these complaints involve allegations of discriminatory discipline, reductions in hours, discharges, and other “coercive conduct” directed at employees in response to union organizing activity.

These allegations are location-specific but Griffin, by declaring the corporate brand — McDonald’s — a joint employer, appears to have asserted that McDonald’s had a say in the alleged illegal or unfair practices at these sites. Yet, according to Lotito, Griffin failed to provide to the public any of the rationale that led to his decision.

Subcontractors, too

To make matters worse for employers, the NLRB is poised to rule in a similar manner in the Browning-Ferris case. In that dispute, a union is seeking to engage in wage-and-benefit negotiations with subcontracted employees at a recycling facility in Milpitas, California. The board invited amicus curiae (friend of the court) briefs, which allow people and organizations who are not direct parties to a case to provide their analysis of the issues. General Counsel Griffin filed such a brief and urged the NLRB to abandon its current analysis of joint employment to be replaced with a more expansive “economic realities” approach.

Browning-Ferris, paired with the McDonald’s case, would have a significant and likely very harmful effect for the franchise business model. It could also throw into chaos many other types of business arrangements. Should the NLRB formally adopt a more sweeping definition of joint employer, it could affect every business that subcontracts or outsources any function, which nearly all businesses do. “Browning-Ferris is incredibly pernicious,” said IFA’s Cresanti.

Griffin’s amicus brief in that case deals with whether a supplier could be considered a joint employer based solely on the volume of business a particular company does with those suppliers. This would have implications for practically any job that involves any form of subcontracting and vending arrangement. David French of the National Retail Federation noted that a retailer often operates a retail store within another retail store—a cosmetic counter inside a department store, for example. A decision in the Browning-Ferris case to throw out the longheld definition of joint employer could raise questions about whether the department store has a joint employer relationship with the actual owner of the make-up counter.

If, as expected, the NLRB formally adopts the new, more sweeping definition in Browning-Ferris, it would establish a new legal definition that would be applied by administrative law judges who hear related cases, such as the McDonald’s complaints.

Going after the little guy

It may be tempting for media outlets and commentators to frame this as a struggle between exploited workers and greedy corporations. After all, why should McDonald’s and other companies that make wide use of franchises and contract employers enjoy insulation from liability? But the real victim would be the franchisee—the little guy—not the big corporation.

In the franchise model, the national or regional corporate franchisor provides the hotelier, restaurateur, or other business operator with a brand, a logo, a product, or service standards, marketing, and tools such as a hotel reservation system. In exchange, the franchisor is paid a royalty, and the franchisee has the power to run the business the way he or she likes. The corporation does not micromanage the franchisee’s decisions about who will be the shift supervisor, who needs to cover for a sick employee, or when the floors get mopped.

“I have always been an entrepreneur at heart, but didn’t realize I could own a franchise with a growing brand that allowed me to capitalize on my passion for keeping things clean and organized until I found OpenWorks,” said Amina Redd, a franchisee who provides commercial cleaning and facilities services in the Phoenix area. “After more than 15 years as a franchisee, I am convinced that my passion for what I do and treating each customer and employee with the respect and personal attention they deserve has been the key catalyst for my success.”

Franchises make up a large and vibrant part of the U.S. economy, with nearly 800,000 franchise locations directly employing 8.9 million people across the country, according to the International Franchise Association. The franchise sector is playing an outsized role in an economic recovery that has been stubbornly slow and tentative. The industry is expected to create nearly a quarter-million new jobs in 2015 alone.

The number of new franchises could increase in the years to come as well. According to Matthew Haller of IFA, it has become common for younger people in middle management positions in large, nonfranchise companies to become frustrated by the lack of opportunities to move up the corporate ladder. Rather than wait for years for senior managers to retire, they decide they have the skills and experience in business decision making and staff management to run their own shops. So they grab hold of the opportunity to own a franchise business.

Stephen Duprey is an attorney in Concord, New Hampshire. A little more than 25 years ago, he was investing in and developing real estate and became intrigued by the hospitality industry. It occurred to him that the country was on the cusp of shifting from independently owned and operated hotels to the franchise model. The arrangement held a lot of appeal for would-be entrepreneurs and aspiring small business owners like Duprey, and he became a Choice Hotels franchisee. Today, he also operates two Marriott hotels.

The decision to become a franchisee involves a lot of personal fortitude and risk. Duprey and millions of others like him have put up their own capital, often their life savings, and years of “sweat equity” to get their foot in the door of running their own businesses. The franchise model is an ideal way for a would-be entrepreneur to reduce the risk to some degree while he or she learns how to run an independent business.

As a franchisee, Duprey does not personally pay for, say, an ad that Choice Hotels runs during the Super Bowl. His business gets the benefit of advertising that it would be impossible for him to buy as the owner/operator of an individual small business. At the same time, the entire Choice Hotels organization benefits from the high quality of the accommodations and service he provides his guests. It’s a mutually beneficial relationship. “The power of many always beats the power of one when it comes to marketing,” he said.

Typically, royalty costs in the franchise industry are three to five percent. Labor accounts for the vast majority of the franchisees’ costs and for most of the money spent on day-to-day management. Real estate and marketing account for the rest. These expenses must be paid before the local franchise can see a profit. In the restaurant sector, for example, profit margins are in the four to eight percent range, depending on the local market and other factors—a respectable profit, but achievable only with attentiveness to containing costs. The stewardship of resources is almost entirely in the hands of the franchisee.

It is the owner-franchisee who hires and fires, establishes wages, and sets the schedule.Locally owned franchise businesses often provide an entry into the workforce for many people. In fact, many franchise owners pride themselves on providing guidance to first-time workers on basic life skills such as punctuality, teamwork, and professionalism. Workers at franchise establishments, like all workers, are protected by numerous, multilayered laws and regulations governing the health and safety of workers. Franchise agreements explicitly state that franchise owners must follow all of these local, state and federal laws. Franchise owners must abide by minimum wage and overtime laws; provide paid sick leave and breaks; establish training to prevent and remedy harassment; and follow anti-discrimination laws governing age, race, gender, disability, and other classifications. They must also abide by building codes, zoning laws, and other local ordinances. Employees in franchise operations, as in other workplaces, are given ample opportunity to understand their rights, and they are instructed how to make sure their employers honor these rights. As any franchise employee can tell you, the “artwork” in the break room often consists of posters, bulletins, and publications, provided by the government, on how to sue your employer for violating workplace laws and on how to do so without cost or fear of retribution.

SEIU’s involvement—no surprise

What is the impetus for the federal government’s sudden reversal of policy on the definition of employer? It is part of a broader trend of organized labor flexing its muscles, with the support and encouragement of the Obama administration. You might say the unions have a symbiotic (mutually beneficial) relationship with the Obama administration, analogous to the relationship between franchisors and franchisees. With only two years left in the Obama administration, labor unions need to move quickly to capitalize on that relationship, and on the opportunity to increase their membership rolls and replenish their coffers.

There is a perception in some quarters that the protests against the quick service (“fast food”) industry over the past two years have been spontaneous. In this view, the protests came about because workers suddenly got fed up with being exploited, just as the Occupy Wall Street protests were supposedly spontaneous and up-from-the-grassroots. In fact, it’s the SEIU—often referred to as “Obama’s favorite union”—that has been behind the fast-food protests. The SEIU’s strategy has been to organize the protests systematically and methodically, and sometimes covertly. Skeptics point out that the unions themselves, not the workers, have the most to gain by taking on the quick-service restaurant industry.

SEIU membership has slipped by three percent since 2011, even though the labor force has grown by two percent over the same time. As Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor and now a senior fellow at the Manhattan Institute, noted in last month’s Labor Watch, the turnover at McDonald’s is some 157 percent annually. Most workers leave after three or four months.

When such a workplace is unionized, the union receives initiation fees, generally around $50 to $100 each, for each new worker. Because the typical worker is gone quickly, the union spends very little on services for that worker. In addition to initiation fees, unions collect dues amounting to two percent of paychecks. Furchtgott-Roth estimates that unions stand to gain about $155 million each year from unionizing half of McDonald’s workforce, $45 million of that from initiation fees alone.

As SEIU and other unions have lost members, they have begun to organize in new ways. They have set up so-called “worker centers”—sometimes called union-front organizations, or UFOs—to accomplish their goals. [See Labor Watch September 2013.]

Supposedly, worker centers are nonprofit organizations that offer a variety of services to their members, including education, training, employment services, and legal advice. According to Robert J. Grossman, a lawyer and Marist College professor, the number of worker centers across the country has risen from five in 1992 to at least 215 today.

These organizations have a tax-exempt status known as 501(c)(3), the status accorded to charities, churches, foundations, and other “public interest” institutions. But rather than serve the public, worker centers have a decidedly more narrow, self-interested purpose, namely, to support union organizing, which raises questions about the legality of worker centers’ tax status and their receipt of tax-deductible donations. No wonder these front groups have drawn scrutiny from business groups, tax and employment lawyers, and some members of Congress.

Last summer, the New York Times reported on what it said was the largest gathering of quick-service (“fast food”) workers calling for wage increases and various workplace regulations. The event was largely underwritten by the SEIU, which spent more than $15 million on the campaign.

Marching under the banners of Fast Food Forward, Fight for Fifteen, and other “charities,” workers in some 190 cities walked off the job in early December demanding wage increases and other concessions. The organizations were often described as independent, grassroots groups, but in fact the effort was put together by the SEIU. Some of the workers protesting, it was credibly alleged, were not even actual employees but stand-ins paid to represent workers.

Wages & hours

Another aspect of the Labor Department’s attack on small businesses, franchises in particular, comes from the department’s Wage and Hour Division, under the stewardship of David Weil.

Back when he was a Boston University economics professor, Weil wrote a book called The Fissured Workplace that has become the foundation for many of the attacks on the franchise industry and the quick-serve industry. The book is based on data he gathered for a study of the franchise model that focused on the quick-service restaurant and hotel industries. (The study was commissioned by the Labor Department and paid for by taxpayers.) Weil claimed in the book that businesses run by franchisees had more wage-and-hour infractions than those operated directly by corporations, in part because they are subject to additional costs from franchise fees, which they try to make up for by keeping wages as low as possible. This, according to Weil, allows them to enjoy larger profit margins.

Weil was confirmed to his Labor Department position only after then-Senate Majority Leader Harry Reid (D-Nev.) amended Senate rules and made it much more difficult for Republicans to block President Obama’s nominations. Not a single Republican voted for him. AFL-CIO President Richard Trumka tweeted that the 51-42 vote for Weil “is an important step toward putting a real cop on the beat to enforce our wage & hour laws.” In a profile published by the Boston Globe in June, Weil claimed he is not against franchises and subcontractors, and he acknowledged that many of these small business owners operate ethically and within the law. He said he wants to make sure that good businesses are not undercut by the bad ones. He added, “Parent companies specify a lot of what happens on the ground—down to the details of how a jelly doughnut is made or where a sign is hung, so why can’t they be held accountable for how their workers are treated? Can you really have it both ways, and specify things at a fine level in one respect, but in regards to compliance with workplace laws, say, ‘Well, they’re not our employees?’”

The answer is yes, franchisors can and should have it both ways. Franchisee Stephen Duprey has noted that this is the essence of what makes the franchise model successful. Even though Choice Hotels provides the tools he needs to run his enterprise, he said the decisions about how to recruit, hire, train, retain, and promote people, along with what to pay them, are his alone. “Not in my 26 years have they been involved in any work place decisions,” he said. “If that were true, I’d be working for them and not running my own business. I’d be an employee.”

The prospect of not being able to control a key expense such as wages is very unsettling to Duprey and other small business owners. He noted that hotel rooms in New York City can average $300-400 a night, in contrast to New Hampshire where rates can average in the $70-a-night range. Dictating corporate standards on wages and other workplace conditions that ignore these market realities would be counter to good business planning and could easily bankrupt him.

Duprey said he believes that it would make little sense to enter into a 10- or 25-year contract with a franchisor, which is typical in the industry, if the franchisee lacked control over the business, or if the franchisee faced unsustainable labor costs and the threat of legal action stemming from illegal or unfair practices of a franchisee in another state.

“My concern is not that I will be charged with any labor violations, but that my franchisor, in response to the NLRB’s changing long-standing joint employer standards, will take measures to protect itself that will end up reducing my autonomy as a franchise owner,” said Clint Ehlers, a FASTSIGNS franchisee in Pennsylvania. “If franchise owners have less independence and control, they can also expect lower profits. If profits are lower, there will be less demand from entrepreneurs to start franchised businesses. If fewer new locations open, the brand does not realize its growth potential. And that hurts each individual franchise owner in the franchise system.”

Bracing for a long battle

In her keynote speech at the union’s convention last summer, SEIU President Mary Kay Henry said that the CEO of McDonald’s and the CEO of Yum Brands (which owns KFC, Taco Bell and Pizza Hut) are each paid more than $10 million a year, and “A selfish few at the top are using their power to hold down wages, no matter how much that hurts families and communities across the nation.”

But it’s not the CEOs of big companies who would pay the price if the franchise model is weakened. The result would be fewer jobs for the people who need them, and economic losses in communities around the country.

Who would benefit from hurting the franchise model? Not workers, but unions. It’s a lot easier to unionize, and a lot easier to negotiate, if unions are dealing with a single corporate entity, instead of thousands of individual small businesses.

“Labor unions are not bad things. They have done good things for workers over the years,” Duprey said. “But in this situation, they are trying to make us all one employer—or to make me an employee—and this is not a good thing.”

What’s coming

The NLRB announced it has scheduled consolidated hearings on the McDonald’s case in three regional locations in the Northeast, Midwest, and West to address violations that, it asserts, require remedial relief as soon as possible. Absent the highly unlikely case of a settlement, the initial litigation will commence on March 30, 2015, and will involve allegations of unlawful actions committed against employees at McDonald’s restaurants in the jurisdiction of six Regional Offices of the NLRB. That hearing process could be lengthy and any administrative ruling will be open to appeals to the NLRB and the courts, ultimately even the U.S. Supreme Court. The entire process could take years.

In the meantime, businesses will be left hanging. Business decisions require a certain degree of certainty, and the mere chance that the SEIU and NLRB will win this fight is enough to burden franchise businesses.

Business groups have already begun to explore bipartisan legislative action to address the issue in the short run, possibly with stipulations on spending bills to block implementation of the policy. As the NLRB’s allegations make their way through the hearing and judicial process, Matthew Haller of the International Franchise Association assured, “We will fight these decisions by all means available to us. What’s at risk, across the country, are small businesses that often represent the life savings and the life’s work of their owners.”

David Agnew is the pseudonym of a writer/analyst in Washington, D.C. This article originally appeared in “Labor Watch,” a project of the Capitol Research Center, and is republished here with permission.

*   *   *

The NLRB Targets the American Dream

Summary: The National Labor Relations Board is poised to scrap the long-held legal definition of a joint employer, which has allowed business sectors—including the franchise industry—not only to thrive in recent decades but also to bounce back more quickly from the Great Recession than other segments of the economy. Given the employee turnover in many franchises, unions see aggressive action by the NLRB as a chance to expand membership rolls and generate revenues from dues that will support unions’ activist political agendas. But an array of business groups warn that changing the meaning of joint employer could bankrupt many small businesses and imperil the creation of the very jobs that represent an entry point for millions of the country’s workers.

If you’ve taken your car to Jiffy Lube, stayed at a Choice Hotel, or ordered a pizza from Papa John’s, you’ve most likely patronized a business built on the franchise model. From KFC, Wendy’s, Arby’s, and Dairy Queen, to Planet Fitness, Ace Hardware, Supercuts, RE/MAX, and H&R Block, franchises are at the heart of small business in America.

Despite the strong national brand identification associated with these names, they are actually part of the small business mosaic of America. Franchisees are independent business people, running their own shops under the marquee of a brand customers that know and trust, often actually located on Main Streets across the country.

Franchises give small businesses, many of them family businesses—literally “mom-and-pop operations”—the opportunity to take advantage of national brand-name recognition and advertising, supply networks, business expertise, and other advantages that would otherwise be available only to the big guys. Many franchise operators are the first in their families to run businesses, and many are immigrants or members of minority groups.

20150416-UW_AgnewFor millions of Americans, franchise businesses are a path to success. Why is the National
Labor Relations Board putting a roadblock in front of small-business entrepreneurs?

There’s a world of difference between a local franchise business and a multinational corporation. The point seems so obvious it should hardly need to be made.

Yet a series of developments in federal labor law is lumping these two classes of businesses together in a way that could imperil some of the 8.9 million jobs the franchise industry provides in this country. In addition, the new rules could lump subcontractors in with the companies that hire them to perform such services as waste disposal and recycling, office cleaning, clothes cleaning, security, parking services, and photocopying.

What’s a “joint employer”?

The definition of “joint employer” is at the heart of separate-but-related rulings that have been issued, or are expected to be issued, regarding union-backed actions against the world’s largest restaurant chain (McDonald’s USA) and a Houston-based waste disposal company (Browning-Ferris). In the McDonald’s case, a majority of the five-member National Labor Relations Board is poised to comingle independently owned franchises with their corporate brands, linking them together as joint employers. In the Browning-Ferris case, the NLRB would apply that idea to subcontractors, linking them to the businesses that hire them.

Franchise owners say the NLRB’s action ignores the fact that the corporate brands have almost no influence or oversight on the locally owned franchise businesses’ day-today operations. They contend that initiatives by the NLRB and its General Counsel fly in the face of decades of laws, regulations, and court rulings on the definition of joint employer.

If those novel actions are upheld, it would be a great victory for unions, because it would make it easier for them to recruit millions of new members, to rake in badly needed fees and dues revenue to support their political agendas, and to facilitate organizing activities nationwide. Additionally, if the meaning of joint employer is changed, local franchise businesses could be treated as guilty-by association, as unions disrupt local businesses across the country in retribution for actions at a single, unrelated, independently operated franchise. This would also slow the growth of the franchise sector, possibly shutter existing locally owned franchisees, and eliminate many jobs.

Common law (the basic law we inherit from centuries of custom and precedent), statutory law, and regulations and legal rulings over the last-half century have clearly established who is an employer and when a so-called joint employer relationship exists. With regard to franchised businesses, the locally owned franchise business, not the corporate franchise brand, is deemed the employer.

In 1968, the NLRB issued a decision in a case involving the Southland Corporation, the parent company for 7-Eleven. In that case, the NLRB carefully considered whether the franchisee’s use of the trade name or operational system made the franchisor (the big national or international company) the joint employer. It held that a franchisor could be considered a joint employer only if it controlled labor relations and employment decisions by the franchisee. Because such decisions belong to the franchisee in the franchise model, franchisors were ruled to not be joint employers.

Over the past three decades, a number of subsequent cases related specifically to the franchise model have upheld this understanding.

The current standard was articulated in two cases from 1984, TLI, Inc. and Laerco Transportation. In a recent analysis on the website of Inside Counsel magazine, labor lawyer Marilyn A. Pearson explained that, in those two cases, the NLRB held that legally separate entities are joint employers only when they actually share the ability to control or co-determine the essential terms and conditions of employment (such as hiring, firing, discipline, supervision, and direction of employees). In order to qualify as a joint employer, the brand company’s control over these employment matters must be direct and immediate.

Most recently, the California Supreme Court declined to hold Domino’s Pizza LLC, the national company, liable in a sexual harassment case involving the employees of a Domino’s franchisee. The court ruled: A franchisor, which can have thousands of stores located far apart, imposes comprehensive and meticulous standards for marketing its trademarked brand and operating its franchises in a uniform way. To this extent, the franchisor controls the enterprise. However, the franchisee retains autonomy as a manager and employer. It is the franchisee who implements the operational standards on a day-to-day basis, hires and fires store employees, and regulates workplace behavior. Analysis of the franchise relationship for vicarious liability purposes must accommodate these contemporary realities.

These cases illustrate why the franchise industry, the National Restaurant Association, the National Retail Federation, the U.S. Chamber of Commerce, and a whole host of other employer groups are alarmed and dismayed by the NLRB’s recent steps to jettison the old definition.

Changing the definition

On December 19, the NLRB’s Office of the General Counsel, headed by Richard Griffin (former general counsel of the International Union of Operating Engineers), filed complaints that accused McDonald’s USA and some of its franchisees of labor violations. These formal charges had been expected since July 29, when Griffin announced his intent to name McDonald’s USA as a joint employer with the individual franchisees. The claims allege McDonald’s workers at locations across the country were fired or intimidated for participating in union organizing or in a well-funded national protest movement led by the Service Employees International Union (SEIU).

As noted by the International Franchise Association (IFA), a major trade group representing over 1,300 franchise companies and more than 780,000 locally owned establishments from various industry sectors, changing the “joint employer” definition could do great harm. The change could saddle tens of thousands, even hundreds of thousands of small businesses with uncertainty, threats of litigation, and additional costs that could make it harder for these businesses to succeed, and harder for many of the country’s most economically vulnerable people to enter and stay in the job market.

Referring to the December complaints, Robert Cresanti of the IFA said, “This isthe nightmare before Christmas for local franchise businesses. The [NLRB] has effectively legislated a change to the definition of who an employer is, which will impact hundreds of thousands of businesses.”

Michael J. Lotito, co-chair of the Workplace Policy Institute created by the law firm Littler Mendelson, told reporters: “What the [NLRB’s] general counsel seems to be suggesting is that when a franchisor provides a tool, when the franchisor provides a resource that might help the franchisee better undertake their business and become more successful as a small business owner, that that somehow equates to joint employment.” In fact, “[t]he NLRB’s decision in 1968 made very clear that the issue is notwhether or not you provide tools or support but the issue is whether or not the individual franchisor is making the decisions for their franchisees. So the general counsel is trying to upend decades of settled law that have been the foundation of the franchisor/franchisee relationship and finding suddenly that now, there’s a joint employment where none existed.”

Nowhere in the 13 complaints, which collectively span over 150 pages, does the NLRB’s Richard Griffin elaborate on what is meant by “degree of control,” according to Lotito. The 78 separate charges in these complaints involve allegations of discriminatory discipline, reductions in hours, discharges, and other “coercive conduct” directed at employees in response to union organizing activity.

These allegations are location-specific but Griffin, by declaring the corporate brand — McDonald’s — a joint employer, appears to have asserted that McDonald’s had a say in the alleged illegal or unfair practices at these sites. Yet, according to Lotito, Griffin failed to provide to the public any of the rationale that led to his decision.

Subcontractors, too

To make matters worse for employers, the NLRB is poised to rule in a similar manner in the Browning-Ferris case. In that dispute, a union is seeking to engage in wage-and-benefit negotiations with subcontracted employees at a recycling facility in Milpitas, California. The board invited amicus curiae (friend of the court) briefs, which allow people and organizations who are not direct parties to a case to provide their analysis of the issues. General Counsel Griffin filed such a brief and urged the NLRB to abandon its current analysis of joint employment to be replaced with a more expansive “economic realities” approach.

Browning-Ferris, paired with the McDonald’s case, would have a significant and likely very harmful effect for the franchise business model. It could also throw into chaos many other types of business arrangements. Should the NLRB formally adopt a more sweeping definition of joint employer, it could affect every business that subcontracts or outsources any function, which nearly all businesses do. “Browning-Ferris is incredibly pernicious,” said IFA’s Cresanti.

Griffin’s amicus brief in that case deals with whether a supplier could be considered a joint employer based solely on the volume of business a particular company does with those suppliers. This would have implications for practically any job that involves any form of subcontracting and vending arrangement. David French of the National Retail Federation noted that a retailer often operates a retail store within another retail store—a cosmetic counter inside a department store, for example. A decision in the Browning-Ferris case to throw out the longheld definition of joint employer could raise questions about whether the department store has a joint employer relationship with the actual owner of the make-up counter.

If, as expected, the NLRB formally adopts the new, more sweeping definition in Browning-Ferris, it would establish a new legal definition that would be applied by administrative law judges who hear related cases, such as the McDonald’s complaints.

Going after the little guy

It may be tempting for media outlets and commentators to frame this as a struggle between exploited workers and greedy corporations. After all, why should McDonald’s and other companies that make wide use of franchises and contract employers enjoy insulation from liability? But the real victim would be the franchisee—the little guy—not the big corporation.

In the franchise model, the national or regional corporate franchisor provides the hotelier, restaurateur, or other business operator with a brand, a logo, a product, or service standards, marketing, and tools such as a hotel reservation system. In exchange, the franchisor is paid a royalty, and the franchisee has the power to run the business the way he or she likes. The corporation does not micromanage the franchisee’s decisions about who will be the shift supervisor, who needs to cover for a sick employee, or when the floors get mopped.

“I have always been an entrepreneur at heart, but didn’t realize I could own a franchise with a growing brand that allowed me to capitalize on my passion for keeping things clean and organized until I found OpenWorks,” said Amina Redd, a franchisee who provides commercial cleaning and facilities services in the Phoenix area. “After more than 15 years as a franchisee, I am convinced that my passion for what I do and treating each customer and employee with the respect and personal attention they deserve has been the key catalyst for my success.”

Franchises make up a large and vibrant part of the U.S. economy, with nearly 800,000 franchise locations directly employing 8.9 million people across the country, according to the International Franchise Association. The franchise sector is playing an outsized role in an economic recovery that has been stubbornly slow and tentative. The industry is expected to create nearly a quarter-million new jobs in 2015 alone.

The number of new franchises could increase in the years to come as well. According to Matthew Haller of IFA, it has become common for younger people in middle management positions in large, nonfranchise companies to become frustrated by the lack of opportunities to move up the corporate ladder. Rather than wait for years for senior managers to retire, they decide they have the skills and experience in business decision making and staff management to run their own shops. So they grab hold of the opportunity to own a franchise business.

Stephen Duprey is an attorney in Concord, New Hampshire. A little more than 25 years ago, he was investing in and developing real estate and became intrigued by the hospitality industry. It occurred to him that the country was on the cusp of shifting from independently owned and operated hotels to the franchise model. The arrangement held a lot of appeal for would-be entrepreneurs and aspiring small business owners like Duprey, and he became a Choice Hotels franchisee. Today, he also operates two Marriott hotels.

The decision to become a franchisee involves a lot of personal fortitude and risk. Duprey and millions of others like him have put up their own capital, often their life savings, and years of “sweat equity” to get their foot in the door of running their own businesses. The franchise model is an ideal way for a would-be entrepreneur to reduce the risk to some degree while he or she learns how to run an independent business.

As a franchisee, Duprey does not personally pay for, say, an ad that Choice Hotels runs during the Super Bowl. His business gets the benefit of advertising that it would be impossible for him to buy as the owner/operator of an individual small business. At the same time, the entire Choice Hotels organization benefits from the high quality of the accommodations and service he provides his guests. It’s a mutually beneficial relationship. “The power of many always beats the power of one when it comes to marketing,” he said.

Typically, royalty costs in the franchise industry are three to five percent. Labor accounts for the vast majority of the franchisees’ costs and for most of the money spent on day-to-day management. Real estate and marketing account for the rest. These expenses must be paid before the local franchise can see a profit. In the restaurant sector, for example, profit margins are in the four to eight percent range, depending on the local market and other factors—a respectable profit, but achievable only with attentiveness to containing costs. The stewardship of resources is almost entirely in the hands of the franchisee.

It is the owner-franchisee who hires and fires, establishes wages, and sets the schedule.Locally owned franchise businesses often provide an entry into the workforce for many people. In fact, many franchise owners pride themselves on providing guidance to first-time workers on basic life skills such as punctuality, teamwork, and professionalism. Workers at franchise establishments, like all workers, are protected by numerous, multilayered laws and regulations governing the health and safety of workers. Franchise agreements explicitly state that franchise owners must follow all of these local, state and federal laws. Franchise owners must abide by minimum wage and overtime laws; provide paid sick leave and breaks; establish training to prevent and remedy harassment; and follow anti-discrimination laws governing age, race, gender, disability, and other classifications. They must also abide by building codes, zoning laws, and other local ordinances. Employees in franchise operations, as in other workplaces, are given ample opportunity to understand their rights, and they are instructed how to make sure their employers honor these rights. As any franchise employee can tell you, the “artwork” in the break room often consists of posters, bulletins, and publications, provided by the government, on how to sue your employer for violating workplace laws and on how to do so without cost or fear of retribution.

SEIU’s involvement—no surprise

What is the impetus for the federal government’s sudden reversal of policy on the definition of employer? It is part of a broader trend of organized labor flexing its muscles, with the support and encouragement of the Obama administration. You might say the unions have a symbiotic (mutually beneficial) relationship with the Obama administration, analogous to the relationship between franchisors and franchisees. With only two years left in the Obama administration, labor unions need to move quickly to capitalize on that relationship, and on the opportunity to increase their membership rolls and replenish their coffers.

There is a perception in some quarters that the protests against the quick service (“fast food”) industry over the past two years have been spontaneous. In this view, the protests came about because workers suddenly got fed up with being exploited, just as the Occupy Wall Street protests were supposedly spontaneous and up-from-the-grassroots. In fact, it’s the SEIU—often referred to as “Obama’s favorite union”—that has been behind the fast-food protests. The SEIU’s strategy has been to organize the protests systematically and methodically, and sometimes covertly. Skeptics point out that the unions themselves, not the workers, have the most to gain by taking on the quick-service restaurant industry.

SEIU membership has slipped by three percent since 2011, even though the labor force has grown by two percent over the same time. As Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor and now a senior fellow at the Manhattan Institute, noted in last month’s Labor Watch, the turnover at McDonald’s is some 157 percent annually. Most workers leave after three or four months.

When such a workplace is unionized, the union receives initiation fees, generally around $50 to $100 each, for each new worker. Because the typical worker is gone quickly, the union spends very little on services for that worker. In addition to initiation fees, unions collect dues amounting to two percent of paychecks. Furchtgott-Roth estimates that unions stand to gain about $155 million each year from unionizing half of McDonald’s workforce, $45 million of that from initiation fees alone.

As SEIU and other unions have lost members, they have begun to organize in new ways. They have set up so-called “worker centers”—sometimes called union-front organizations, or UFOs—to accomplish their goals. [See Labor Watch September 2013.]

Supposedly, worker centers are nonprofit organizations that offer a variety of services to their members, including education, training, employment services, and legal advice. According to Robert J. Grossman, a lawyer and Marist College professor, the number of worker centers across the country has risen from five in 1992 to at least 215 today.

These organizations have a tax-exempt status known as 501(c)(3), the status accorded to charities, churches, foundations, and other “public interest” institutions. But rather than serve the public, worker centers have a decidedly more narrow, self-interested purpose, namely, to support union organizing, which raises questions about the legality of worker centers’ tax status and their receipt of tax-deductible donations. No wonder these front groups have drawn scrutiny from business groups, tax and employment lawyers, and some members of Congress.

Last summer, the New York Times reported on what it said was the largest gathering of quick-service (“fast food”) workers calling for wage increases and various workplace regulations. The event was largely underwritten by the SEIU, which spent more than $15 million on the campaign.

Marching under the banners of Fast Food Forward, Fight for Fifteen, and other “charities,” workers in some 190 cities walked off the job in early December demanding wage increases and other concessions. The organizations were often described as independent, grassroots groups, but in fact the effort was put together by the SEIU. Some of the workers protesting, it was credibly alleged, were not even actual employees but stand-ins paid to represent workers.

Wages & hours

Another aspect of the Labor Department’s attack on small businesses, franchises in particular, comes from the department’s Wage and Hour Division, under the stewardship of David Weil.

Back when he was a Boston University economics professor, Weil wrote a book called The Fissured Workplace that has become the foundation for many of the attacks on the franchise industry and the quick-serve industry. The book is based on data he gathered for a study of the franchise model that focused on the quick-service restaurant and hotel industries. (The study was commissioned by the Labor Department and paid for by taxpayers.) Weil claimed in the book that businesses run by franchisees had more wage-and-hour infractions than those operated directly by corporations, in part because they are subject to additional costs from franchise fees, which they try to make up for by keeping wages as low as possible. This, according to Weil, allows them to enjoy larger profit margins.

Weil was confirmed to his Labor Department position only after then-Senate Majority Leader Harry Reid (D-Nev.) amended Senate rules and made it much more difficult for Republicans to block President Obama’s nominations. Not a single Republican voted for him. AFL-CIO President Richard Trumka tweeted that the 51-42 vote for Weil “is an important step toward putting a real cop on the beat to enforce our wage & hour laws.” In a profile published by the Boston Globe in June, Weil claimed he is not against franchises and subcontractors, and he acknowledged that many of these small business owners operate ethically and within the law. He said he wants to make sure that good businesses are not undercut by the bad ones. He added, “Parent companies specify a lot of what happens on the ground—down to the details of how a jelly doughnut is made or where a sign is hung, so why can’t they be held accountable for how their workers are treated? Can you really have it both ways, and specify things at a fine level in one respect, but in regards to compliance with workplace laws, say, ‘Well, they’re not our employees?’”

The answer is yes, franchisors can and should have it both ways. Franchisee Stephen Duprey has noted that this is the essence of what makes the franchise model successful. Even though Choice Hotels provides the tools he needs to run his enterprise, he said the decisions about how to recruit, hire, train, retain, and promote people, along with what to pay them, are his alone. “Not in my 26 years have they been involved in any work place decisions,” he said. “If that were true, I’d be working for them and not running my own business. I’d be an employee.”

The prospect of not being able to control a key expense such as wages is very unsettling to Duprey and other small business owners. He noted that hotel rooms in New York City can average $300-400 a night, in contrast to New Hampshire where rates can average in the $70-a-night range. Dictating corporate standards on wages and other workplace conditions that ignore these market realities would be counter to good business planning and could easily bankrupt him.

Duprey said he believes that it would make little sense to enter into a 10- or 25-year contract with a franchisor, which is typical in the industry, if the franchisee lacked control over the business, or if the franchisee faced unsustainable labor costs and the threat of legal action stemming from illegal or unfair practices of a franchisee in another state.

“My concern is not that I will be charged with any labor violations, but that my franchisor, in response to the NLRB’s changing long-standing joint employer standards, will take measures to protect itself that will end up reducing my autonomy as a franchise owner,” said Clint Ehlers, a FASTSIGNS franchisee in Pennsylvania. “If franchise owners have less independence and control, they can also expect lower profits. If profits are lower, there will be less demand from entrepreneurs to start franchised businesses. If fewer new locations open, the brand does not realize its growth potential. And that hurts each individual franchise owner in the franchise system.”

Bracing for a long battle

In her keynote speech at the union’s convention last summer, SEIU President Mary Kay Henry said that the CEO of McDonald’s and the CEO of Yum Brands (which owns KFC, Taco Bell and Pizza Hut) are each paid more than $10 million a year, and “A selfish few at the top are using their power to hold down wages, no matter how much that hurts families and communities across the nation.”

But it’s not the CEOs of big companies who would pay the price if the franchise model is weakened. The result would be fewer jobs for the people who need them, and economic losses in communities around the country.

Who would benefit from hurting the franchise model? Not workers, but unions. It’s a lot easier to unionize, and a lot easier to negotiate, if unions are dealing with a single corporate entity, instead of thousands of individual small businesses.

“Labor unions are not bad things. They have done good things for workers over the years,” Duprey said. “But in this situation, they are trying to make us all one employer—or to make me an employee—and this is not a good thing.”

What’s coming

The NLRB announced it has scheduled consolidated hearings on the McDonald’s case in three regional locations in the Northeast, Midwest, and West to address violations that, it asserts, require remedial relief as soon as possible. Absent the highly unlikely case of a settlement, the initial litigation will commence on March 30, 2015, and will involve allegations of unlawful actions committed against employees at McDonald’s restaurants in the jurisdiction of six Regional Offices of the NLRB. That hearing process could be lengthy and any administrative ruling will be open to appeals to the NLRB and the courts, ultimately even the U.S. Supreme Court. The entire process could take years.

In the meantime, businesses will be left hanging. Business decisions require a certain degree of certainty, and the mere chance that the SEIU and NLRB will win this fight is enough to burden franchise businesses.

Business groups have already begun to explore bipartisan legislative action to address the issue in the short run, possibly with stipulations on spending bills to block implementation of the policy. As the NLRB’s allegations make their way through the hearing and judicial process, Matthew Haller of the International Franchise Association assured, “We will fight these decisions by all means available to us. What’s at risk, across the country, are small businesses that often represent the life savings and the life’s work of their owners.”

David Agnew is the pseudonym of a writer/analyst in Washington, D.C. This article originally appeared in “Labor Watch,” a project of the Capitol Research Center, and is republished here with permission.

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Beware Ambush Elections

The U.S. Senate HELP Committee recently contacted me about my experience with labor elections and my insight about how this ruling would harm businesses and employees across the country. This week, the points expressed in my original blog and documented in The Devil at Our Doorstep will be debated and voted upon, as reported in recent headlines “Republican-Controlled Congress to Vote to Repeal NLRB Rule.” Additionally, in a show of support the US Chamber Asks Judge To Nix NLRB’s Election Rule. Hopefully, Senate Democrats will stand behind movement, recognize the injustice, and provide enough votes to override an expected Presidential veto.

Employees and employers across the country need to be wary of the forced union ambush being promulgated by President Obama and his big labor “Gasping Dinosaurs” and the radicals the President has appointed at the National Labor Relations Board (NLRB). The President is utilizing Rule by Fiat to fundamentally transform America as he promised when he was first elected, while also paying back his political supporters.

NLRB Flexes Muscles” was definitely the theme this past week as the NLRB published its final rule making on “ambush elections,” and effectively reduced election periods from 41 to 21 days or potentially less (see Ambush,NLRB boosts unions’ organizing leverage, Elections, NLRB Issues its Ambush Election Rule, NLRB Representation Case Procedures Fact Sheet, Quickie Gifts to Big Labor, and NAM CEO Speaks Out ON NLRB Ruling). Even more damaging to both employees’ and employers’ rights and privacy is the fact that, in its rule making, the NLRB stated that employers must provide the names, e-mail addresses, home addresses and phone numbers of its employees to facilitate the “Quickie Elections.“ As described in The Devil at Our Doorstep, the current 41 day pre-election period is necessary, as employees are often coerced, intimidated and lied to by the organizers representing the labor unions. Often they are misled to believe that once they sign a union election card they must vote for the union when they go to the polls! While absolutely false, such conduct has been well established by the NLRB to be completely acceptable.

Unless the employer’s management team is well-versed on labor law and well-prepared to contradict these misrepresentations, their employees would never know the truth. The Quickie Elections rule making makes it virtually impossible for an employer to have the opportunity to refute the union’s misinformation and propaganda, particularly if the employer has not been faced with such organizing efforts in the past. In my own experience, if I would not have had the opportunity to meet and speak with our employees on several occasions — which would not be possible under the new ruling — they would have gone to the polls believing they had to vote for the union, despite the fact they had been intimidated into signing election cards.

As if that wasn’t enough, the NLRB boosts unions’ organizing leverage by allowing employees and union organizers access to employers e-mail systems so they can coerce, misinform, intimidate and misrepresent the truth about what is transpiring, and ignore big labor’s true goal, that It’s All About the Dues Money. In effect, what is happening is a rapid move towards “Card Check,” effectively allowing a union to force unionize an employer’s workforce behind the scenes virtually overnight.

These Quickie Gifts to Big Labor by the NLRB are A Death Penalty for Employees and Employers! They provide labor organizers great leverage to force employers to sign a Neutrality Agreement. This agreement is big labor’s current means of eliminating the secret ballot election by utilizing Death by a Thousand Cuts corporate campaigns to intimidate employers into signing it and achieving Card Check.

These actions are nothing more than political pay back by this Administration to the big labor bosses at the expense of the American people and the American economy.

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David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

Big Labor's Conundrum

Over the past four decades, Big Labor has continued to see its membership shrink drastically as its leaders use the same failed tactics involving forced unionism. The argument that most workers are better off without unions today is supported by the fact that unions now represent approximately 11.3% of the total workforce and 6.6% of the private workforce, a steep fall from their heyday in 1945 when they represented about 35.5% of the workforce. Yet Big Labor has refused to change. Isn’t the definition of insanity, “continuing to do the same thing, but expecting different results?” The inability of Big Labor to generate new organizing strategies or to bring additional value to employees has put unions “between a rock and a hard place,” as succinctly described by pro-labor pundit Jack Rasmus, author of a 4-part essay on the Decline of Labor Unions. Mr. Rasmus’ work is worth reading, both to call attention to labor’s intransigence to make itself relevant to today’s workforce, and to read between the lines for potential strategy changes, if and when labor ever gets its act together.

A sample quote from part one of his essay:
“Had any other movement and its organizations produced so little, for so long, at such a growing financial and other cost to its membership, it would have undertaken a fundamental revision of its basic strategic approach long before now. However, union labor’s efforts to address its failing strategies over the last four decades have been token and tentative at best. Not much has been done to confront, or otherwise challenge and change, labor’s obviously failed strategies of the past four decades—neither at the ‘top’ among its national leadership nor at the ‘local level’ of local union membership. That fundamental strategic discussion is now long overdue.”

Despite its obvious failures, big labor continues, at great cost to its membership and reputation, to engage in ruthless tactics and pursue its own political agenda. It has maintained this course, despite the fact that people are moving away from forced-unionism areas and that membership is declining even in politically favorable locations (see Latest Census Data Show Families Continue to Flee Forced-Unionism States and Even in Liberal Minnesota, Labor Unions Are Losing Members. Big labor continues utilizing its political ties with the current Administration to focus on achieving Card Check, specifically thru rules and regulations recently implemented by President Obama’s National Labor Relations Board, the government agency charged with fairly administering the nation’s labor policy. The following articles outlining new rules and regulations recently handed down by the NLRB at the President’s direction accurately portray the reluctance of the unions to change their business model or otherwise reinvent themselves to serve modern America (see Reinventing America’s Unions for the 21st Century).

  • UNIONS: Focus now is on new laws, not new members
  • The NLRB’s New Election Rules: Quickie Elections and ‘The Mount Everest of Regulations’ to Trap…
  • Federal agencies spend millions on union business 
  • NLRB Opens Door for SEIU at McDonalds
  • NLRB General Counsel Announcement on Joint Employer Status for Franchisors Could Have Significant Implications
  • NLRB ratifies actions taken by unconstitutional labor board

Confounding big labor’s position is the fact that it must go along with the President’s goals of increasing the minimum wage and providing amnesty for undocumented aliens, in an effort to attract a larger base for the President and the Democratic Party in exchange for the pro-labor rules and regulations recently propagated by the Rogue NLRB. These political initiatives are, in fact, not in the best interest of the labor movement. Nevertheless, Big Labor continues to support them due to their need for political backing from the Democratic Party.

First, significantly increasing or doubling the minimum wage — as being pushed by the SEIU — would have devastating consequences on those least able to handle them. As succinctly portrayed by Phil Wilson from the Labor Relations Institute in a recent article:

“If you double the labor costs in these businesses you force these small companies to come up with new ways to operate their business that account for the increased expense. They will hire fewer people and try to make jobs as efficient as they possibly can. They will replace labor with technology everywhere they can (you see this in many restaurants and convenience stores today – you’ll be ordering off an iPad everywhere you go). They will raise prices or reduce selection to just the most profitable items. Remember, we are not talking about a minor adjustment in the minimum wage – this is a massive shift in labor costs that companies will be forced to deal with. For every lucky person who keeps their minimum wage job and rejoices in their doubled income there will be several who cannot find any work, period. You will significantly increase the class of people who are unemployable, along with all the other problems that creates. Be careful what you wish for. Also, these small units would divert attention away from the other bargaining units the unions already represent. If officials take the eye off the ball on these bigger, more stable units they risk losing those units to decertification, further reducing cash flow and profitability of the union. Be careful what you wish for.”

One more comment on the minimum wage increase. It is basically the same fundamental tactic the United Autoworkers and other unions utilized to increase wages in the American auto industry. The American auto industry and Detroit today are a foreshadowing of the affect significantly raising the minimum wage would have on the entire American economy.

Big labor also has been supportive of the President’s executive order, granting amnesty to up to 5.5 million undocumented workers, thereby giving them the ability to legally enter the workforce (see Unions launch recruiting push for immigrants protected by Obama actions). On the surface, this may seem to be a great opportunity for new union members as the big labor bosses would utilize information from the Administration and union foot soldiers to identify these people, help them assimilate into legal jobs, and then use pressure to help them force unionize the employers. However, many of these people will be utilized by companies as independent contractors (see Open Borders Costing American Jobs and Depressing Wages). Big labor will in effect spend a lot of time and money in an effort to force unionize these people at the risk of taking its eye off the ball and disenfranchising and losing a large part of its current membership.

Unfortunately, the big labor Gasping Dinosaurs seem incapable of changing and embracing the need for change. Instead they continue to expose the fact that It’s All About the Dues Money, by utilizing member’s dues as political donations to elect politicians thus expecting political favors in a desperate attempt to protect their lifestyles and reverse the decline of union membership (see Big Labor’s Top 100 and If This Is True, The Amount Of Money The UAW Uses On Politics Is Shocking). Combined with the President’s amnesty and minimum wage agendas reversing union decline is truly a conundrum for the big labor bosses who seem incapable of working legally and professionally within the parameters of the free market system to be successful (see The 2014 Union Corruption Report: A Year In Review). Instead of polishing its approach and providing a quality product people would embrace, Big Labor continues to utilize unsavory political favors and bully tactics in a futile attempt to rebuild its membership at the expense of its current membership. It is Time for Republicans to Go On the Offensive with its majority in both Houses. They need to come to the aid of Americans, defund the Rogue NLRB and stop the Death by a Thousand Cuts being perpetrated on American employees and employers. There is no doubt that Unions Face Challenges in 2015. It is time to add to big labor’s conundrum!

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David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

Big Labor and Allies Escalate Tactics as Mid-term Elections Approach

Activity by the National Labor Relations Board (NLRB), Department of Labor (DOL) and Occupational Safety and Health Administration (OSHA), as well as several of the largest labor unions, over the past two weeks evidences the Obama Administration’s growing anxiety as the mid-term election approaches. The Administration, facing loss of the Senate and ultimate control in both houses, continues to direct its agencies to pass union-friendly regulations and to impose its interpretation of current law to favor accelerated forced unionism. The Administration and Democratic Party represent a typical symbiotic relationship where they are co-dependent upon each other for future survival. The Administration needs union contributions and union foot soldiers to have any chance of maintaining a senate majority and making gains in the house during the 2014 mid-term elections (see Union Money in Elections). Conversely, Big Labor is finally recognizing and admitting that their declining membership is a major problem and they need the Administration’s help (see AFL-CIO admits declining membership a major problem).

In order to get the ball rolling, several pro-labor steps have been taken by OSHA, the NLRB and the Department of Labor (DOL). First, OSHA has reaffirmed its position that union officials may accompany OSHA inspectors on safety inspections in non-union facilities. This issue was reported in a previous blog, OSHA Opens New Door For Big Labor, and was more recently presented by the CEO of PJS on the Greta Van Susteren Show this past week, in CEO: How union organizers are targeting my non-union company. The union involved – the SEIU – used such tactics as part of its ongoing Corporate Campaigns to force a cleaning company in Houston to sign a Neutrality Agreement and achieve forced unionization through Card Check, as described in SEIU Uses Federal Inspections to Target Houston Small Business. As if that wasn’t bad enough, the SEIU is buying votes in polls and gaining naive media attention, from media groups like the Los Angeles Times, to support its attack on fast food companies as chronicled in Beware SEIU, Especially Bearing “Polls”.

Not to be outdone, the General Counsel of the National Labor Relations Board is looking to limit the ability of business owners to relocate their businesses without approval of the union (see NLRB will limit ability of unionized business to relocate). This move is an obvious attempt to preserve union membership heading into the midterms while taking away the fundamental right of a free market society. On a bright note, House, Senate Leaders Introduce Legislative Response to NLRB Ambush Election Rule, which was approved by the House Education and Workforce Committee this past week

In a surprising move, the NLRB complains Walmart Black Friday protesters broke rules, went too far and must Cease and Desist! This decision was made by a local NLRB Region and is not expected to survive the pro-labor board in Washington D.C. Finally, the DOL, under the Administration’s direction, limited the reporting responsibilities of unions during the President’s first term. Labor unions, particularly the United Food and Commercial Workers continue to take full advantage of it by funding OUR Walmart, a “Worker Center” operation utilized to advance its Corporate Campaigns against Wal-Mart in an attempt to force Card Check and force unionize Wal-Mart’s workforce.

The UAW appears to be attempting to force Volkswagen into Card Check. This past week, an anti-union group said Volkswagen may ignore the election results and bring in the union, basically agreeing to Card Check. Additionally,Unable To Sell Unionization On Its Merits, The UAW Turns To Race, Rappers And An Actor For Aid, and the UAW Bosses Turn To Bovine Excrement Manufacturing. Despite the fact these tactics continue not to work for the UAW, the union has decided to continue to press the issue and to replace outgoing President Bob King with UAW Secretary Treasurer Dennis Williams who supports King’s tactics. Once again The United Auto Workers Promote Failure. Isn’t the definition of “insanity” to repeat the same things over and over again, with the same failed results?

Finally, the question must be asked, is the unionization of college sports spreading? The answer appears to be both yes and no. Recent reports indicate that the University of Notre Dame could be next (see Notre Dame could be next front in union battle). However, it appears any progress on this movement will take a long time as Northwestern University has filed an appeal on the decision made by the NLRB administrative law judge finding college athletes to be “employees” (see Northwestern University Appeals NLRB Ruling on Athletes as Employees). Contrary to the judge’s finding, an Ohio bill says college athletes aren’t employees.

Unions and the Democratic Party desperately need money as mid-term elections approach as discussed in It’s All About the Dues Money! Desperation is setting in despite the fact the Administration has aligned the federal labor agencies in big labor’s favor. The American people are beginning to wake up, and businessmen across the country are standing up to big labor’s Death by a Thousand Cuts Corporate Campaigns and saying “no” as chronicled by the PJS CEO and this Hilarious Car Dealership Outwitting Labor Union Tactics — And This Video May Just Be the Victory Lap where a Wichita auto dealership beat a union at its own tactics.

Desperation is setting in and it is only going to get uglier as the mid-term elections approach.

David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

NLRB Unleashes Flurry of New Rulemaking Initiatives

After a period of relative quiet, a recent flurry of rulemaking initiatives by the the National Labor Relations Board evidences the current Administration’s intent on satisfying big labor leading up to the crucial 2014 mid-term elections.

Ambush Election Rules

The NLRB originally adopted this rule in 2011,  but the D.C. Circuit Court rejected the rule on procedural grounds, finding that the NLRB had improperly issued the rule because they did not have a quorum. Member Brian Hayes was active in office, but did not vote on passage of the rule. Initially, the NLRB appealed the Circuit Court’s decision.  In December 2013, however, the Board requested that the court dismiss the appeal. It was generally presumed by those following the NLRB that the reason for doing this was to clear the slate and “start over.” It appears that’s what is being done. On February 6, 2014, the NLRB issued a Notice of Proposed Rulemaking reissuing their proposed “Ambush Election” rules in substantially the same form as the 2011 proposal.

Among other things, the rulemaking: (i) narrows the scope of pre-election hearings (won’t consider campaign irregularities, eligibility to vote, etc.), (ii) shortens the timeframe prior to election, and (iii) gives the Board discretion over whether to hear post-election disputes (whether they would be heard at all).

The underlying goal of this rule is to achieve Card Check under the guise of an election process. In effect, big labor would indoctrinate employees through misinformation, propaganda and intimidation months ahead of petitioning for an election. Employers, under the new rule, would theoretically then have as little as 10 days to reverse the indoctrination, which based on my experience is almost impossible. This is just another step towards Card Check through Regulation vs. Legislation! Please read Obama’s NLRB deals big labor a winning hand: part 1 and National Labor Relations Board Pauses from Election Rules Amendments.

Revision of Arbitration Rules

The board is considering a proposal of radical NLRB General Counsel Richard Griffin to change the way the Board considers the decisions of arbitrators in labor matters under the NLRA. In essence, in a situation in which an employer and a union or employee had agreed to utilize an arbitrator to resolve disputes, the NLRB would be empowered to disregard the arbitrator’s decision if it disagreed with it. This would permit labor unions to have “two bites of the apple” (as used by former NLRB Board Member Ronald Meisburg), to challenge employer action. Part of the Employee Free Choice Act (see EFCA Through the Backdoor) a.k.a. Card Check this rulemaking would basically tilt the collective bargaining negotiations process heavily in favor of big labor. It is a part of the process to enact Card Check through Regulation vs. Legislation. As the President said he has a pen and a phone and he will act on his own. Obviously, he is also delegating this authority to his appointees like Richard Griffin. Please read NLRB Invites Input On Arbitration Award Deferral Standard.

Micro-Unions

Richard Griffin and his radical pro-union teammates are also intent on establishing “Micro-Unions.” Griffin recently commented that NLRB guidance on micro-unions is forthcoming. The concept of “micro-unions” is an NLRB creation, stemming from its decision in the Specialty Healthcare case. It is nothing more than a ploy to allow unions to establish a foothold in a business with a small segment of employees then turn it into full-scale unionization of all employees within the company (see NLRB General Counsel: Guidance on Micro-Unions is Coming). This particular rule shows just how desperate the big labors interests really are to rebuild dwindling membership.

Basically this all boils down to two things, money and political power. Both the President and the labor bosses need big labor to rebuild its membership so they can maintain political power. It has little or nothing to do with helping employees or the citizens of this great country the United States of America.

David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

Public Union Foes and Defenders

The basic premise behind public employee financed campaigns is that the election is now while the bills may be deferred for years, particularly if they take the form of pension promises. Eventually, however, the bills do come due. This is why Governor Mitch Daniels (R-Indiana) said he decided on his first day of office in 2005 322 to end public employee collective bargaining rights and to stop collecting union dues. Without the state collecting dues, only 10% of union members chose to stay enrolled by paying their own dues.

Governor Chris Christie (R-New Jersey) stood before 200 of his state’s mayors in 2010 and declared that the era of “Alice-in-Wonderland” budgeting is over: “Money does not grow on trees. . . . For New Jersey and any number of other states and municipalities, it’s useless to pretend. . . . We have no room left to borrow. We have no room left to tax.” Chris Christie went on to say that his treasurer had presented him with  possible budget deletions or freezes to balance the budget and that he had adopted . Almost all observers thought that this was the end of the Governor’s career. Instead it made him a national figure and even won approval from New Jersey voters.

Governor Scott Walker (R-Wisconsin) was elected in 2010 and immediately moved to restrict collective bargaining for benefits (excluding police and fire) and also to stop collecting union dues. This led to a firestorm of protest and a recall election, which the Governor won. Governor John Kasich (R-Ohio), also elected in 2010, restricted public employee collective bargaining, including police and fire, but his actions were overturned by voters in a 2011 referendum.

In retrospect, Kasich’s chief error was in not moving to end automatic state collection of all union dues. Scott Walker’s experience in Wisconsin in this regard is highly instructive. Walker’s position was that the state would continue collecting all dues until the end of the contract. After that, dues would only be collected with the consent of the public worker. What actually happened was that two-thirds of workers enrolled in AFSCME, the state’s largest public union apart from the teachers’ NEA, refused to give their consent. As in Indiana, the political power of the union took a major hit. As Jim Geraghty commented in the National Review: “Apply this across the country . . . and you’re talking about . . . a game-changer in so many states.”

Ironically, a federal court ruled in 1966 that a union did not have the right to use member dues for political purposes if a member objects. But few union members know about the right to opt out or, if they do, may feel intimidated in pursuing what are called their “Beck rights.” Moreover the unions make it very difficult by stalling on Beck rights requests, smothering them in endless red tape, and refusing to calculate what portion of the dues apply. If, however, the public employer refuses to collect full dues for the union automatically and instead asks the member whether dues should be used for political purposes, it is much easier for the worker to express a preference.

As we have noted, the rules governing state and local public unions differ from those governing federal workers. The former can usually engage in collective bargaining and go on strike; the latter seem to serve little purpose other than to collect dues and put a share of it at the disposal of the Democratic Party. Despite these differences, federal wages and benefits have also risen, so that taken together they now exceed what can be earned in the private sector for the same job. This is a remarkable reversal: fifty years ago, it was generally understood that federal workers would earn less in exchange for more days off, slightly better benefits, and almost total job security.

Studies purporting to compare federal with private work levels do not agree with one another, but the Congressional Budget Office has found that, comparing employees of comparable educational level, federal wages are higher at lower pay scales, similar at middle, and somewhat lower at the high end, with benefits much higher across the board. Taken together, the federal employee advantage is 16%. In addition, federal employees work three hours less per week on average and one month less per year. An earlier Labor Department study found that state and local workers make 46% more, so federal workers were not doing as well. Other studies, however, suggest all categories of government pay are more like twice as high as private, when the net present value of soaring retirement awards, often equal to final year pay, is taken into account.

The number of very highly paid federal employees has also increased, even during the years following the Crash of 2008. For example, in early 2008, the Labor Department had only one employee earning $170,000 or more. Eighteen months later, there were 1,690 such employees. Over the same period, all federal employees making more than $100,000 rose from 14% to 19%. One federal employee, working in a government green energy lab in Colorado, was reported in 2012 to be making just under $1 million, with two deputies making over $500,000 each, and nine others making over $350,000. The number of all jobs during the economic recession of 2008–2009 also rose in the federal government, unlike in the private sector, where over eight million disappeared. It is not at all surprising that by the end of 2010, seven of the ten richest counties in the US surrounded Washington, DC.

Having come into office on a wave of union support and money, the Obama administration literally opened its doors to union leaders. Andy Stern, the head of the powerful SEIU, visited the White House more often than any other political figure during the first six months. What he seemed to want most was “Card Check” legislation that would end the secret ballot in union organizing. President Obama and Democratic leaders strongly endorsed the bill, but it must have lacked some Democratic votes in the Senate, because it was never put forward for a vote, despite overwhelming Democratic majorities in Congress.

President Obama found other ways to reward labor. During his first weeks in office, he signed executive order 13502, which made union membership a requirement of anyone working on federal construction projects. He also opposed Senator Jim DeMint’s (R-South Carolina) National Right to Work bill, which would have ended compulsory union membership as a job condition in all states (23 states have their own versions of this law).

The President backed a decision by the Democrat controlled National Labor Relations Board (NLRB) intended to block Boeing’s plan to move 787 Dreamliner plane construction from unionized Washington to union-free South Carolina. He backed another highly controversial decision to force companies to turn over their employees’ private email addresses and telephone numbers without employee consent to union organizers. He also tried unsuccessfully to force companies doing business with the government to reveal all political activity or donations, a rule that would not have applied to unions. By early 2012, he had granted waivers from his Obamacare legislation to unions representing 543,812 employees (also to administration friendly companies with 69,813 employees).

Meanwhile the president kept subsidies flowing to the Post Office which, despite massive losses, reliably collects union dues from workers, which are then made available to Democratic campaigns ($3.6 million in the 2010 election cycle). Other countries have successfully privatized their mail delivery. The obstacle to doing this in the US is that postal workers, like other government employees, are deemed to be, for the most part, reliable Democratic voters, and their union is regarded as an indispensable political cash cow.

Crony-Capitalism-in-America

About the Author: Hunter Lewis is co-founder of AgainstCronyCapitalism.org. He is co-founder and former CEO of global investment firm Cambridge Associates, LLC and author of 8 books on moral philosophy, psychology, and economics, including the widely acclaimed Are the Rich Necessary? (“Highly provocative and highly pleasurable.”—New York Times) He has contributed to the New York Times, the Times of London, the Washing­ton Post, and the Atlantic Monthly, as well as numerous websites such as Forbes.com and RealClearMarkets.com. This post is an excerpt from Chapter 20 of his most recent book, Crony Capitalism in America: 2008–2012.

Michigan: One Year Later

Teachers union is desperate to hold onto every last unwilling member.

A year after Michigan became the country’s 24th right-to-work state, teachers are finding that their union resembles a Roach Motel – it’s real easy to get in, but getting out can be a mother. Just ask Miriam Chanski, a 24 year-old Kindergarten teacher who was misinformed, disinformed, and ignored when she tried to resign from the Michigan Education Association. As a result of the union’s chicanery, the Mackinac Center Legal Foundation has taken up her case.

The inconvenient truth for the unions is that when teachers actually have a choice whether or not to join, many don’t, which is a big problem for the unions. In a moment of candor, former National Education Association general counsel Bob Chanin admitted as much in a U.S. District Court oral argument in 1978,

… it is well-recognized that if you take away the mechanism of payroll deduction, you won’t collect a penny from these people, and it has nothing to do with voluntary or involuntary. I think it has to do with the nature of the beast, and the beasts who are our teachers . . . simply don’t come up with the money regardless of the purpose. (Emphasis added.)

This is a nicer way of saying, “If you don’t hand over your money willingly, we will take it from you anyway.” While those in the law enforcement community would call this “robbery,” the unions politely call it “payroll deduction.”

Unfortunately, there are teachers who can be counted on to faithfully spout the union party line and Chanski’s suit has brought them out of the woodwork. As reported in a Detroit News editorial last week, some teachers are displeased with their colleagues who are trying to part ways with the union.

  • … Upon leaving the union, is she (Chanski) also willing to give up the salary that united teachers achieved over three or four decades of bargaining and negotiating?
  • When she (Chanski) decided to exercise her rights not to be in the union, did she also give up the pay/benefits/working conditions the union fought and bargained for her and other members?
  • Freeloading services is un-American.

Ah, the F-Bomb has been dropped! “Freeloader” is an epithet hurled at independent teachers who would like to disengage from their union. But even with a right-to-work statute in place, public sector workers under a union contract still can’t represent themselves according to Michigan law. This is known as exclusive or monopoly representation, which means that any worker who leaves a union is still tethered to the contract negotiated by that union. So these so-called freeloaders or free riders don’t have a choice. As such, they are really “forced riders.”

While not forcing teachers to join the union is a step in the right direction, why should they still be subjected to a collective bargaining agreement that they want nothing to do with? As the editorial goes on to explain,

The National Labor Relations Board specifies that members-only bargaining is acceptable in the private sector, but states set public sector rules. Yet members-only agreements, which allow for a union to bargain on behalf of only dues-paying employees, are rare since unions prefer to represent all workers.

Writing about monopoly bargaining in Michigan, teacher union watchdog Mike Antonucci explains,

Leaving aside the question of those who may not benefit from a contract they are forced to pay for – math and science teachers, low-seniority teachers, high-performing teachers, teachers who might want a different insurance provider – unions are required by law to represent everyone in a bargaining unit, regardless of membership status, because they insist on it. The very first thing any new union wants is exclusivity. No other unions are allowed to negotiate on behalf of people in the bargaining unit. Unit members cannot hire their own agent, nor can they represent themselves. Making people pay for services they neither asked for nor want is a “privilege” we reserve for government, not for private organizations. Unions are freeloading on those additional dues.…The “freeload” crack is especially ironic coming from MEA (Michigan Education Association), which ran an $11 million budget deficit in 2010-11 and is a cumulative $113 million in the red. In other words, the union has spent millions of dollars in dues it hasn’t collected yet, some of which will be paid by people who might not even be members yet. Who is freeloading?

But there may be help on the way, as there is a talk of legislation in Michigan that would eliminate monopoly representation for all public-sector workers. This isn’t going over well with American Federation of Teachers-Michigan president David Hecker. He wants to keep the exclusivity clauses because he says “the union cares about all workers.”

All of them? Even the ones who are desperately trying to escape? Mr. Hecker is engaging in 1984-style union Newspeak at its finest. Yes, George Orwell’s spirit is alive and well.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.

Union Power, Not Worker Welfare, Motivates Attack on Nonunion Employer

After battling the SEIU’s Corporate Campaign against my company, and ultimately winning, I firmly believed that I had experienced corruption at its worst. Sadly, I was mistaken.

It all began in January 2012 when my company was awarded a housekeeping contract in Kokomo, Indiana, a city that benefited from a major portion of the President’s 2009 Stimulus Package and Auto Bailout. It was an unprecedented award, as we were the first non-union cleaning contractor to be awarded the facility. Our staff replaced approximately 30 United Auto Workers (UAW) members, who did not lose their jobs, but rather were absorbed into the plant operations. The most striking part of the transition was how successful we were. Plant management was ecstatic with the cleanliness, efficiency and safety of our company and employees. Our employees were happy and the employees at the plant were happy with a cleaner facility. This pleasant relationship continued for over 6 months, until the UAW International raised its ugly head.

Apparently, it did not sit well with the powers-to-be at UAW International that a non-union contractor could be successful at a “union” facility. They sent a corporate organizer espousing the belief that the employees, who to that point had not requested union representation, needed union “protection” and deserved better wages and work rules. The sudden appearance of the UAW International had nothing to do with the employees, but had everything to do with their fear that if we were successful in this plant, that we could begin picking up more “union” plants across the country, thus threatening their future membership dues and way of existence.

Consistent with their SEIU brethren, and in line with the direction of the NLRB since President Obama’s recess appointments in attempt to create Card Check through Regulation vs. Legislation, the UAW immediately contacted us about signing a Neutrality Agreement, which they instead labeled as a “Partnership Agreement.” This blatant misrepresentation would be the first and least onerous of the many that would be spewed by the desperate Gasping Dinosaurs to secure the unionization of our employees. We responded to the UAW just as it did when the SEIU requested we sign a Neutrality Agreement in 2007, we were still not interested in signing away our employees’ rights to a secret ballot election (for more details, read The Devil at Our Doorstep). Despite several contacts by the UAW organizer requesting that we sign the “Partnership Agreement,” we respectfully declined. Giving credit where credit is due, the UAW did not threaten us with a Corporate Campaign, in fact things became suspiciously quiet going into Thanksgiving last year.

Unfortunately, the silence did not last long. The day after Thanksgiving we received notice that the UAW had petitioned for an election to determine union representation for our employees. Immediately we responded, as we had the past, that we expected both sides to conduct themselves with integrity and within the guidelines of the law and NLRA regulations. We also wanted the election to be held as close to the 42-day mandated period as possible, despite knowing the coming holidays would complicate the process. The UAW agreed to an election date of January 8, 2013. This agreement would be the UAW’s last act of civility and integrity during the process.

The day before the election, January 7, 2013, it was clear that the employees were likely to vote against UAW representation, in a close election. Subsequently, the UAW International took it upon itself to ensure a victory. The UAW International contacted the customer’s corporate executives in Detroit and secured an agreement that if the employees would vote for union recognition, the customer would pay us increased costs, including a wage increase of $5.00 per hour, associated FICA, FUTA, SUTA taxes and insurance, plus any applicable overhead and margin increases. This meeting took place without our knowledge nor the involvement of local plant management, who was responsible for budgets and profitability. That same evening the UAW met with our employees at a local Pizza Hut and disclosed the deal. They told our employees all they had to do was vote in the UAW in order to receive the raise in pay.

The next day our employees, coerced by the union “incentive,” voted in the UAW as its representative. Interestingly enough, our local management at the plant received a phone call approximately 1 hour before the secret ballot election closed and was told that an agreement had been reached and that we would be reimbursed for the increased costs in labor and wages for the facility. I personally received a call a few days later from the customer, verifying the call we received on election day. The most astounding part of the call was that the customer provided us with the exact dollar amount, per hour, it would be reimbursing us, which corresponded almost perfectly with the cost of the wage increase, associated taxes and benefits that the UAW promised employees the night before the election. I sincerely believe that both the UAW and the customer believed that because we would be receiving more revenue, including profit margins, that we would accept the money, negotiate a contract, pay employees more and everyone would be happy. They never considered that we would take the moral high ground and refuse the money.

We immediately filed charges and Unfair Labor Practices (ULP) with the National Labor Relations Board (aka the Rogue NLRB), knowing it would be an uphill battle considering President Obama’s payback to big labor, in the form of unconstitutional recess appointments to the NLRB. The Regional NLRB, to its credit, determined that hearings should be held based on the claims and evidence. Despite significant testimony from employees and the customer’s plant management, as well as other information that clearly implicated the UAW in corruption and coercion, the NLRB found in favor of the UAW.

The decision came as no surprise, based on the NLRB’s “pro-labor” stance under the current Administration. Undaunted, we appealed the decision, which moved the process to Washington D.C. for review. This review would come from the same board that had already been ruled unconstitutional by the United States D.C. Circuit Court, and who believes it can circumvent the Constitution by changing regulations, reversing decisions and making decisions that enable big labor to wage war on employers in attempt to achieve Card Check and force unionization on employees. The NLRB responded as expected, finding in favor of the UAW.

Immediately, the UAW requested to begin contract negotiations, which we declined. Since the D.C. Circuit Court’s decision had been appealed to the U.S. Supreme Court, after finding the recess appointed board members unconstitutional and placing their subsequent decisions and regulation changes on hold, it seemed logical that discussions would be fruitless until the Supreme Court reached a decision. The UAW quickly returned to its intimidation tactics. They contacted our customer and threatened a strike at the facility unless we began negotiations. The customer, so intimidated by these tactics, canceled our contract, not for poor quality or service and not for refusing to negotiate with the UAW, but for convenience. The corporate office then awarded the contract to a “union” contractor, against the wishes of the local plant management who was instructed to remain neutral and quiet. The whole scenario begs the question, if the customer wanted to pay higher wages, why didn’t they talk to us about it in the very beginning? By offering to build in higher wages for our employees, they could have protected them from the shackles of big labor and required union dues. We would have been more than happy to negotiate with the customer directly for improved wages for our employees.

This same scenario is currently being played out in Chattanooga, Tennessee, where the UAW is attempting to Force Unionize Volkswagen Employees through use of a Neutrality Agreement and Card Check. In this case, the union claims they have enough votes to win an election, but instead of holding a secret ballot election, which they say takes time and effort, the facility should utilize Card Check. Based on personal experience and as chronicled in The Devil at Our Doorstep, the truth that was discovered upon talking to my employees throughout these scenarios, was that they were intimidated and lied to about the cards they were signing. This is most likely what is occurring at the Volkswagen Plant, the UAW is merely attempting to achieve Card Check through the back door, and the economic impact of these events could be devastating.

Once again Big Labor’s Gasping Dinosaurs are demonstrating their desperation as they continue to utilize intimidation and coercion to force unionize employees with their “ends justify the means” quest to avoid extinction.

David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

Putting “Teeth” in Right-to-Work

Having been involved in discussion regarding Right-To-Work legislation in Indiana and Michigan, I can attest to the tireless efforts of grassroots movements – by local businesses in Indiana and concerned United Auto Worker employees in Michigan – to achieve the goal of protecting worker freedoms. Statistical data shows that the implementation of a Right-To-Work law is positive, as such states see statistical growth in both population and jobs. Right-To-Work laws are important guarantees of the freedom of choice and the assurance of a lack of intimidation in the organizing process, but there is growing evidence that workers and management in RTW states are still subjected to union intimidation.

A recent article by Diana Furchtgott-Roth of The Manhattan Institute, suggests not.  Ms. Furchtgott-Roth points out that RTW states not only have the highest employment growth over the last 4-5 years, but they also have the highest growth rate for union membership! The statistics she presented were absolutely astonishing, but few people have picked up on the significance and logic behind the union growth in these states. The truly frightening part is the number of cases recorded, since Card Check is virtually unregulated and therefore untraceable.

“Why Union Growth: According to data from the National Labor Relations Board (NLRB), in 38% of all union recognitions in 2009, the latest year for which data is available, unions bypassed secret ballot elections and instead used card checks to unionize employees. Specifically, the NLRB reports that unions won 794 single-union representation elections. During that period, the NLRB recorded 485 notices of card check union recognition.”

Unfortunately, Big Labor’s “Gasping Dinosaurs” are a resourceful lot. Their political contributions have bought them the support of President Obama and his Administration, who has, in turn, appointed a Rogue NLRB. The NLRB is currently lead by heavily pro-union favored board members, many of whom were unconstitutionally appointed by the President (see Appeals Court Nixed Obama’s Recess Appointments). The result of this support is that Big Labor bosses see RTW states as a shining new opportunity to rebuild its declining membership. Unions understand that with the support of the indebted President and pro-labor support from the NLRB, they can achieve membership without an election through Card Check by utilizing their insidious campaigns of “Death by a Thousand Cuts.”

Once they have infiltrated the masses, Big Labor can then use the same type tactics against the newly forced unionized employees to ensure that they don’t exercise their right not to pay dues (or in some cases, belong to the union) under RTW laws. This can be accomplished by making sure that the uneducated are not advised of these rights, or by the specific targeting of persons who choose not to pay dues.  This can be accomplished because, unions are legally allowed to broadcast a list of those individuals who choose not to pay dues (see Worker’s Allege Improper Collection of Union Dues).

This raises concern, as it is unclear how the “dues-paying” union membership will choose to use this list. Membership who view non-payers as “freeloaders,” may be inclined to use unlawful force, threats, and/or intimidation in an attempt to alter a non-member’s decision. Unfortunately, most members ultimately cave, as employees subject to such intimidation have few options.  While this type of activity is unlawful, the sole oversight of these actions belongs with the National Labor Relations Board, a partisan governmental “agency” whose devotion to labor unions is well-documented and unquestioned. The process is timely, difficult to understand, and expensive – as it generally includes the involvement of an attorney to represent ones interest. With little oversight, Big Labor can continue to grow its membership in RTW states through a combination of employee and employer intimidation, with no government regulation to hinder its actions.

Although RTW has been a Godsend for many states, employees and employers, RTW laws need more “teeth” in order to truly protect employees and employers from ruthless forced unionization tactics. The following changes would eliminate the “behind the scenes” intimidation and allow for fair representation in union elections. Additionally, these changes would impose collective bargaining restrictions that would allow members to make decisions free of coercion as to whether they wished to remain part of the bargaining unit.

1. Reinstate Secret Ballot Elections:  Uphold the long standing belief in allowing people to vote their conscience through a “Secret Ballot Election” by inserting language that requires all union representation be achieved by secret ballot conducted under the auspices of the National Labor Relations Board (NLRB). Currently Indiana State Senator Jim Banks has introduced such an Amendment to the Indiana state constitution and Virginia has already passed such a law (see New Employee Privacy and Union Voting Rights Laws in Virginia Go Into Effect July 2013).

2. Eliminate Check Off Clauses:  Such clauses in collective bargaining agreements require unionized employers and government entities to deduct union dues from member paychecks and forward them to the union. These clauses are utilized by Big Labor through intimidation to force employees to remain part of the bargaining unit in RTW states. Unions should be required to be their own accountants and collect dues directly from the employees without third party involvement. In essence members would then have the ability to decide, just like in the free market, if the services/products they are receiving are worth paying for directly. This is no different than a person paying when satisfied for legal, real estate, investing, or other services/ products. It only makes sense, but is often a non-starter for Big Labor in contract negotiations (see Teachers Silenced by Teachers Union).

3. Eliminate Monopoly Representation and Outlaw Neutrality Agreements:  In The Devil at Our Doorstep, I presented the following as the first two points in my “Ten-Point Plan to Battle Big Labor.”

a) Replace the current union monopoly representation with a secret ballot election every three years, so unions have to justify their actions to the employees. Unions must obtain written consent from every dues paying member before using money on anything other than collective bargaining activities.

b) Institute a new regulation that outlaws neutrality-type agreements, which allow card check in lieu of secret ballot elections.

4. Rewrite State Extortion and Blackmail Laws:  James Sherk of The Heritage Foundation accurately proposed that we should modify state extortion and blackmail laws to include unions, which are currently not implicated under labor law. This would prohibit pressure campaigns which are designed to force an employer to surrender, rather than trying to persuade the employees to unionize.

Leveling the Playing Field through these changes and passing a National Right-To-Work Law are necessary steps to improve the economy and continue to create jobs absent the threat of Big Labor intimidation! It is imperative for this great country and the freedom of its citizens that new “teeth” are introduced to support and assure the success of the recently passed Right-To-Work laws.

David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

Will the Labor Department Disarm Employers vs. Unions?

Summary: At the behest of unions desperate for new members, the U.S. Labor Department plans to make a major regulatory shift. The change has no basis in existing law or precedent, and it will harm labor-management relations while costing billions of dollars. 

A shocking change in American labor relations is brewing at the U.S. Department of Labor, which is expected sometime soon to alter a major regulation. The change involves a new interpretation of the “advice exemption” of the Labor Management Reporting and Disclosure Act. Specifically, businesses would have to disclose the names of, and fees paid to, attorneys and consultants who advise them on union-organizing activities. In turn, attorneys and consultants providing such advice would be required to disclose their client lists and the fees they receive.

In making this change, the administration would sweep away over a half-century of precedent and contravene both the clear intent of Congress and the law’s express language. This new regulation would violate the attorney-client relationship, effectively strip employers of First Amendment rights, compromise companies’ ability to seek advice in complying with federal labor law, and deny workers the information they need and to which they are legally entitled before they vote on whether to join a union. The change has been accurately called a “gag rule.”

The economic fall-out of the proposed change, termed the Persuader Rule, would also be dramatic. My estimates of the costs are detailed below, but in short, they could be many billions of dollars—perhaps $3.2 to $4 billion for businesses to familiarize themselves with the new rule, and then annual expenditures in the range of $4.3 to $6.5 billion. This rule could cost the economy $60 billion over ten years. This potential cost would be tens of thousands of times greater than the administration’s $826,000 cost estimate, which was low-balled in order to escape the mandatory cost/benefit review that any new rule costing $100 million or more must undergo.

The existing rule’s clear meaning

The Persuader Rule stems from the Labor-Management Reporting and Disclosure Act of 1959, known as the LMRDA or Landrum-Griffin Act. That legislation required secret elections for union officers, made it more difficult for union officials to line their own pockets with members’ money, and barred convicted felons and members of the Communist Party, an extremist group then controlled by the Soviet Union, from holding union office.

The act passed as a result of the so-called McClellan hearings, in which Sen. John McClellan (D-Ark.) and his top aide, Robert F. Kennedy, investigated Jimmy Hoffa of the Teamsters Union and other corrupt union bosses. Although primarily aimed at corruption in organized labor, the legislation also affected businesses. The act’s stated object was to create reporting requirements for unions, employers, and consultants, in order to make the unionization process more transparent.

The Persuader Rule was included in the legislation largely because the McClellan investigation exposed the unethical activities of a consulting firm headed by a Nathan Shifferman from Chicago. Shifferman employed about 35 consultants who often concealed their true identity. They would go to a town where union organizing was occurring and, posing as workers, they would form anti-union employee committees. Under that pretense, they would argue against the union and spy on union meetings and other activities, then report back to Shifferman. They had direct contact with employees, and these middlemen, as they were called, concealed their true identity from the workers. (The unions have their own version of this practice, called “salts”—workers paid by the unions to infiltrate workplaces and unionize them.)

The LMRDA section on persuaders was designed to force employers to operate in an open manner, to require consultants to reveal themselves and their agents, and to expose fees paid to consultants, so employees would know the source of their information. Some of these consultants may have been attorneys, but they never acted as attorneys to advise employers; so attorney-client confidentiality was never at issue.

The Persuader Rule required businesses to report the names of hired consultants who make presentations directly to firms’ employees. In the more than half a century since the passage of the legislation, firms have never been required to report the names of people who gave them advice but did not interact directly with employees.

Section 203(b) of the act states that consultants who are directly engaged in persuading employees not to join unions must report this information to the Labor Department. The same section of the act exempts from the reporting requirement those who provide advice to firms without any contact with employees. Section 203(c) states, “Nothing in this section shall be construed to require any employer or other person to file a report covering the services of such person by reason of his giving or agreeing to give advice to such employer. . . . ” That language was a clarification provided by an amendment that Sen. Barry Goldwater (R-Ariz.) offered.

Senator John F. Kennedy (D-Mass.) questioned the need for the Goldwater amendment but went along with it. “There is no doubt in my mind that the bill which was originally drafted by lawyers adequately protected them,” he said. “Therefore, I do not feel that the amendment offered by the Senator from Arizona is wholly necessary. But in order that there may be no question about it I will accept the amendment.”

The Senate Committee on Labor and Public Welfare reported on the act:

The committee did not intend to have the reporting requirements of the bill apply to attorneys and labor relations consultants who perform an important and useful function in contemporary labor relations and do not engage in activities of the types listed in [the relevant section].

Since 1962, except for a brief period in 2001 (under a last-minute Clinton administration rule that was quickly dropped by the Bush administration), the interpretation of the section has been consistent: Firms do not have to report their advisors’ names if these individuals have no contact with employees.

For decades unions have tried to have the Persuader Rule changed in order to make it harder for consultants to help businesses avoid unionization. The unions began to be frantic about the issue in the late 1970s.  In 1978, their rate of winning elections to represent workers fell to a then-low of 46 percent, just as their efforts to make it easier to unionize were defeated in the Democrat-controlled U.S. Senate. As they searched for a scapegoat, their eyes fell on the consultants—“union busters,” they called them.

It was easy to make that connection. U.S. News & World Report reported in 1979 that a survey of 800 union representation elections “found that outside consultants were involved in virtually every union defeat.” But one could just as easily blame the unions’ losses on the fact that the easiest-to-organize workplaces had already been organized; so their success rate was bound to fall eventually. Or one could blame employers for beginning to fight back against unions—a response of which the hiring of consultants was just a part.

Scapegoating, however, is part of the Left’s psychology. When the political process goes against them, they assume people have been tricked, or intimidated, or seduced by appeals to baser instincts. In the case of unionization, the presumption is that no one in his right mind would vote to reject a union; so rejection must result from someone’s evil deeds.

Admittedly, there was a time when businesses and governments used violence to deny people their right to organize, and strikes were broken using billy-clubs wielded by taxpayer-funded police or private police such as the Pinkertons. And so unions by the 1970s began to equate the techniques of consultants with those of the violent strikebreakers of decades past. The AFL-CIO president, George Meany, admitted the union busters’ style had changed: “they carry briefcases instead of clubs and brass knuckles. They leave no visible marks on the victims. But the job is the same.”  In 1979, Meany’s union called for a national campaign to identify consultants as lawbreakers “whose mission is to destroy existing unions and forestall the organization of new ones.”  In response to the perceived threat of the consultants, one of the unions’ key allies on Capitol Hill, Rep. Frank Thompson (D-N.J.), chairman of a subcommittee on labor, summoned consultants to testify in a series of hearings on “worker harassment.” (Thompson would later serve prison time for taking bribes in the Abscam scandal.)

Herbert Melnick, head of one labor consulting firm, Modern Management Methods, said at the time, “Unions have recently been losing an increasing number of elections. They would like to have it believed that this has occurred because of unfair tactics against them. Instead, we know that for a large part it is because enlightened companies, some with our assistance, are becoming increasingly sensitive and responsive to employees’ needs and aspirations.”

(What was the strategy most consultants advised their clients to use in order to forestall unionization? Mainly, it was to keep employees happy by involving them in important decisions, making them feel respected, sharing profits with them, providing competitive pay and benefits and employment security, selecting managers carefully, and promoting from within.)

Unions’ plans to change the Persuader Rule were short-circuited by the election of President Reagan, followed by the first President Bush. The so-called “advice exception” was affirmed in a 1989 memorandum by Assistant Secretary for Labor-Management Standards Mario A. Lauro Jr.  He wrote that “a usual indication that an employer-consultant agreement is exempt is the fact that the consultant has no direct contact with employees and limits his activity to providing to the employer or his supervisors advice or materials for use in persuading employees which the employer has the right to accept or reject.”

Now the Labor Department argues that regulations need to be changed so that all consultants are reported. The department claims that “the distinction between activities properly characterized as ‘advice’ and those that go beyond ‘advice’ has not been made clear,” especially when the employer sends his employees material that was written by an advisor. In such cases “it is fair,” the department argues, “to infer that reporting is required when a person engages in persuader activities, whether or not advice is also given.”

Apparently it doesn’t matter that the distinction was clear for 50 years; that the committee report for the bill made Congress’s intent clear; that the employer has the choice of whether to convey consultants’ prepared information to his employees or not; and that the cost of the new gag rule could be in the billions of dollars.

In 1959, the drafters of the Landrum-Griffin Act understandably worried that employees could be misled if they received materials from a third party without knowing the materials were paid for by the employer. Now, however, the Labor Department wants to regulate communications that are signed by the employer, with no doubt in anyone’s mind that the material represents the employer’s interest. It is hard to see how it’s anyone’s business whether someone helped the employer craft the words that the employer publicly embraces.

Unions losing ground

To understand the impetus behind the rule change, consider unions’ eroding position in America. Workers are voting with their feet, migrating from unionized states to right-to-work states, where employees do not have to pay dues to a union as a condition of working.  As a result of population shifts, in 2012 nine congressional seats moved to right-to-work states from forced-unionization states. Winners included Texas, Florida, Arizona, Georgia, and South Carolina, while the losers were New York, Ohio, Michigan, Illinois, and New Jersey.

Why do workers leave forced-unionization states? Because right-to-work states have created more jobs than forced unionization states. Over the past 25 years, the 22 right to work states (not including the newly right-to-work states Indiana and Michigan) created one and a half times as many jobs as the forced-unionization states. More recently, between 2011 and 2012, right-to-work states increased nonfarm payroll employment by 2.1 percent, compared to 1.5 percent in forced-unionization states.

Nor is that the end of the bad news for unions. Over the past decade, union membership has declined in both right-to-work states and in forced-unionization states, but while the membership decline has been 4 percent in right-to-work states, the decline in forced-unionization states has been even faster, at 10 percent.

With union membership down, unions are keen to swell their ranks, replenish their treasuries, fund staff salaries, and infuse new money into union-sponsored pension plans, many of which are dangerously underfunded.

Helping unions organize

Given this hemorrhage of membership, the unions were elated when they helped elect Barack Obama in 2008 (the SEIU alone bragged it spent $61 million on his election, and total union contributions were in the hundreds of millions). The union’s first effort to reverse their decline was a campaign to pass the Employee Free Choice Act, also known as “card check.” That legislation would have taken away workers’ right to a secret ballot in elections for union representation and imposed mandatory arbitration in contracts between unions and newly unionized firms.  It would have allowed workers to be organized into unions by checking a card that would be circulated and retained by the union—hence the term “card check”—rather than through a secret-ballot election, as required since the 1935 National Labor Relations Act.

Card check would have increased the role of intimidation in unionization. Organizers would know who signed and who refused, and they would know where refuseniks lived. This is precisely the sort of abuse that the secret ballot is supposed to prevent.

The card check gambit failed in Congress during President Obama’s first term. Afterwards, the administration sought to use regulatory authority to help unions. The change in the Persuader Rule, officially proposed in June 2011 and due to be finalized this spring, is a part of this effort.

The gag rule

One result of this gag rule would be to make it more difficult for employers to obtain advice when unions attempt to organize a workforce. The rule opens the way for union campaigns not only against individual companies, but also against the law firms that help them and the firms’ other clients. It discriminates in favor of big corporations, which can afford in-house lawyers and advisors, against small businesses who can only afford outside experts.

The timing of the gag rule puts companies in a difficult position because it reduces their ability to obtain advice on complex legal issues. When unions want to organize workplaces, firms are already limited in what measures they may take. Some measures known as “unfair labor practices” will result in financial penalties, and they can be tricky to define. Firms need expert advice on what constitutes an “unfair labor practice” so as to be able to comply with the law.

Companies will inevitably make errors and poor decisions if they face constraints on their ability to obtain advice, or if there is a shortage of lawyers available. Some law firms may leave the advisory business, and some may close or consolidate. Those that remain may well charge a premium for their services. (I don’t include this effect in my calculation of the cost of the gag rule, so the actual cost may be even higher than projected.)

For an indication of the magnitude of these hidden costs, consider what would happen if the Labor Department required documentation of any attorneys consulted for sex discrimination cases—and then released the names of all the attorneys’ other clients. This would lead to a reduction in the use of advisors in sex discrimination cases—and far more errors by businesses, including, perhaps, greater harm to the very employees sex discrimination laws were meant to protect.

This discouragement of the use of expert counsel in legally complex situations has effects that reach farther than those employers who seek advice on how to approach union organization. If a law firm or human resources consultant provides assistance that is construed as “persuasive” under the new rule, it will be required to disclose information concerning all labor-relations-related services it provides, including client names, transaction amounts, and general descriptions of the services provided.

In other words, if a lawyer performs a single persuasive action for a single firm, he or she will be obligated to disclose information about all client relationships, regardless of whether those other relationships included persuader services or even services that dealt with unionization issues. All labor relations advice-seekers would be revealed, and thus the use of such services would be discouraged.

The potential to appear as a named client of a law firm—and have details of that relationship reported because of a transaction that had nothing to do with one’s own business—makes engaging legal counsel on labor matters less attractive. As the American Bar Association noted in its comments on the proposed rule, these far-reaching reporting requirements “could very well discourage many employers from seeking the expert legal representation that they need,” which “might have the unintended consequence of increasing the number of employers who, without advice of counsel, would engage in unlawful activities.”

Confidentiality a necessity

Many legal firms do not want to publicize their list of clients, and many of these clients prefer to remain private. Legal and ethical rules prevent firms from revealing their clients without prior permission. There are many good and honest reasons why confidentiality between a lawyer and a client is preferred.  That’s why attorney-client privilege goes back to before the time of Queen Elizabeth. The government is chilling the free exercise of citizens’ rights when it seeks to invade the confidentiality of the attorney-client relationship.

Although the gag rule purports to help working Americans, it actually does the opposite. By discouraging employers from getting advice, it prevents workers from receiving an unbiased picture of the costs and benefits of joining a union, which is unfair to workers.

In addition, employers face new National Labor Relations Board (NLRB) rules this year. These rules need to be explained by legal professionals. One NLRB rule has reduced the time period for elections for union representation, resulting in so-called “quickie elections” for which employers have little time to prepare. Another NLRB rule will allow portions of companies to be represented by different unions, so that a department store’s shoe sellers could be represented by one union and its lingerie salesmen by another.

The National Labor Relations Board (NLRB), an independent agency that is not part of the Labor Department, is already working with the department to make sure firms fulfill the proposed reporting requirement, even though the gag rule is not yet final. Now, when a law firm represents a company before the NLRB, the NLRB sends the name of the firm over to the Labor Department and the Labor Department contacts the firm to ask pointedly if it should be filling out the reporting forms that are supposedly required. (The fact that a supposedly independent agency is working so closely with the politics-driven Department of Labor is troubling in itself.)

In the pro-union environment created by the NLRB under President Obama, businesses are in great need of competent advice on how to defend themselves—advice they would be denied under the new version of the Persuader Rule.

Shocking costs

The proposed rule change threatens not only businesses that face unionization but the entire U.S. economy, thanks to the rule’s steep price tag. If implemented as expected, it will drive some business offshore and discourage other businesses from locating here. No other industrialized country has such a requirement that applies to law firms.

I estimate the rule could cost our economy from $7.5 billion to $10.5 billion the first year of implementation, and between $4.3 billion and $6.5 billion per year thereafter. The total cost over a 10-year period could be in the neighborhood of $60 billion. This is an underestimate, because it does not include the indirect economic effects of raising the cost of doing business in the United States.  (The more businesses are unionized, the less flexibility there is in the labor market to respond to changing conditions. That’s one reason America’s fastest-growing states are right-to-work states, where employees do not have to join unions as a condition of employment.)

In sum, whether we consider the rule on grounds of fairness to employers and their advisors, or on economic grounds—where its costs are almost certain to be several orders of magnitude more burdensome than the administration’s disingenuous estimate—we find that it fails every test. Workers, employers, and all Americans deserve better.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow of the Manhattan Institute for Public Policy, headquartered in New York City. This article orginally appeared in “Labor Watch” published by the Capital Research Center and appears here with permission.

OSHA Opens New Door for Big Labor

Last week, OSHA joined the ranks of the National Labor Relations Board (NLRB), the Department of Labor (DOL), and the Equal Employment Opportunity Commission (EEOC) in furthering the Obama Administration’s push to implement “card check” as pay back for Big Labor’s political contributions and ground game support during the past two Presidential Elections (see past blog, Card Check through Regulation vs. Legislation).

OSHA’s latest published “Interpretation Letter,” permitting non-union employees to utilize union reps as their representatives during an OSHA inspection is absolutely frightening (see ALERT – L&E_OSHA Interpretation Letter Non-Union Employees Representative). Just as frightening, is that this interpretation has not been widely reported by the mainstream media.

Perhaps the silence is the result of the media’s view that the provisions contained in the “interpretation letter” amount to nothing more than harmless, common sense provisions designed to assist employees who feel exposed to potential unsafe working conditions. On the surface this would seem reasonable. However, this provision has been part of OSHA regulations for years. Never before has it been interpreted to allow non-union employees to utilize a third-party union to act as their representative.

So why now? Despite the Administration’s best attempts, Big Labor continues to lose hundreds of thousands of members as they have lost all relevance and no longer deliver a product of value.  This action by the Obama Administration through its Chief Safety Regulator opens a huge opportunity for unions to enter non-union facilities under the auspices of government approval, and to begin organizing the employees. The unions have become enabled with recent Rogue NLRB decisions allowing unionization of small groups of employees, or “micro-units” within a business.  These actions are nothing but blatant Administration attempts to provide Big Labor the opportunity to get its foot in the door of non-union facilities where they previously had no chance to organize the workforce.

During the SEIU’s Corporate Campaigns against my company (EMS), the SEIU actually utilized this tactic in order to defame and intimidate the company into signing a Neutrality Agreement thus eliminating the secret ballot election and imposing Card Check, as chronicled in The Devil at Our Doorstep. The SEIU was, ultimately, unsuccessful. However, had these two decisions been in place at the time, the SEIU might very well have been successful in organizing a small unit of employees within EMS’s workforce. The union would simply have to convince, by any means necessary, a couple of employees to join the union cause. They would then allege “safety violations” to OSHA, who would then likely appear for an inspection, generally encompassing not just the complained of activities, but any potential safety concern, no matter how large or small. This, of course, poses substantial risk, both financially and to the reputation of the targeted company.

The SEIU took these actions against EMS in Cincinnati and Indianapolis. If the SEIU would have been allowed to represent these misguided employees the outcome most likely would have been much different from what is related in the following excerpt from The Devil at Our Doorstep. The SEIU would have had even more access to our employees as their representative:

“When I believed the war could not become more bizarre, it did. Without warning, SEIU filed an OSHA complaint in Cincinnati against EMS. This government agency, the Occupational Safety and Health Administration, establishes and enforces protective standards designed to prevent work-related injury, illnesses, and death. 

The complaint charged that EMS employees were forced to carry human body parts out in bags at a Cincinnati university, that there were hazardous chemicals and dust in the bio lab, and that people were getting nosebleeds from the poor conditions. Then SEIU sent out handbills and letters alleging that EMS was being investigated for OSHA violations at the university. The word “investigated” had its obvious repercussions, a crafty move by the union. Predictably, when the truth was revealed, it became known that the lab in question was a regular biology lab anyone in college might use. There was no dust found and no hazardous materials of any kind. Animal parts from dissections existed, but no EMS employees touched or disposed of them. Human body parts were nonexistent, a figment of some SEIU organizer’s imagination.

The university’s own investigation confirmed these facts, and its independent report was forwarded to OSHA, who promptly dismissed the charges. Regardless, SEIU had used an inflammatory allegation to file trumped-up charges against EMS to defame our company and the university.”

By taking these actions, the union accomplished their first objective – get in the door and commence the pressure against the targeted company.  The stage is then set for the union to achieve Card Check by offering to have the charges withdrawn if the company would simply sign the Neutrality Agreement. As a practical matter, this would eliminate the secret ballot election. The union would no longer have concern about whether or not they would be voted in by the employees. Overnight the company would be unionized.

What makes the timing of the OSHA interpretation so questionable is the fact that the President’s recent recess appointees to the NLRB have been found unconstitutional and all of their decisions over the past year have been placed on hold until constitutional appointments can be made and the decisions revisited (see National Labor Relations Board or NBLR – National Big Labor Resuscitation and Tip of the Iceberg). These decisions were extremely pro-labor and designed to allow Big Labor to bypass Corporate Campaigns and achieve Card Check. Once again, it begs the question When Will the Mainstream Media Wake Up?

David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.