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How California skims federal Medicaid payments to fund a powerful union

CONNECTED: Democratic presidential candidate Hillary Clinton and Service Employees International Union (SEIU) president Mary Kay Henry (left). The politically powerful union has worked a deal with several states, including California, to skim dues from Medicaid-paid workers. (AP Photo / Carlos Osorio)

By Sam Han and Will Swaim

Home caregivers serving Medicaid patients in California are being shortchanged and, chances are they don’t even know it.

Medicaid pays for elderly and disabled individuals who need support with activities of daily living to receive support at home from a caregiver. But California and 10 other states deduct union dues from caregivers’ Medicaid payments, in many cases without the knowledge or approval of patients and their caregivers. Given the fact that many caregivers work in their own homes caring for loved ones and relatives, unions typically have little role to play in exchange for the dues they collect.

In this way, unions skim an estimated $200 million each year in dues from Medicaid payments before those checks ever reach the patients they were intended to help. In short, dues skimming takes funds meant to provide care for our country’s most vulnerable people — the elderly, sick, poor, and disabled — and sends it to a politically favored special interest group that provides no services to the needy.

Federal reports filed by SEIU 2015, one of the two unions representing Medicaid caregivers in California, indicate that nearly 60 percent of the funds it collects in dues are spent on political work and other activity unrelated to representing caregivers.

Some caregivers — often parents looking after their disabled children or family members taking care of other relatives — have challenged the legality of forcing in-home providers to pay union dues just so they can care for a loved one. Illinois caregiver Pam Harris took her case all the way to the U.S. Supreme Court. Ruling in Harris’ favor, the Court called dues skimming a “scheme” and said unions couldn’t force caregivers to pay dues.

Unfortunately, unions have found ways to get around the decision and keep home caregivers paying dues. Often, they impose onerous hoops caregivers must jump through to resign, or they enact confusing and arbitrary rules intended to keep the dues money flowing. For instance, Oregon caregivers who belong to SEIU 503 may leave the union only during a 15-day annual period that varies by member. California caregivers are subjected to a half-hour-long union membership pitch before they’re allowed to work. Caregivers in Minnesota have alleged the union forged signatures on membership cards.

This piecemeal approach isn’t working for caregivers, and it’s time for Washington to finally put a stop to dues skimming so caregivers can focus on serving their patients, not overcoming hurdles to get out of the union. The U.S. Department of Health and Human Services could fix the issue by clarifying administrative rules to prevent states from diverting Medicaid dollars to unions. Congress could also act to stop this abuse.

Getting states out of the union dues collecting business would help protect the integrity of Medicaid for current and future patients while also upholding the rights of caregivers who don’t want to join a union. Most importantly, it would ensure the funds are spent on providing services to the needy, as originally intended. At the same time, nothing would prevent caregivers who desire to remain union members from paying union dues on their own.

California has an estimated 300,000 or more in-home caregivers serving Medicaid clients. Many, if not most, of these people are unaware they belong to a union and are having hundreds of dollars per year skimmed off their Medicaid payments for union dues, but that doesn’t make dues skimming right.

Medicaid patients are among the most vulnerable around us. Let’s not allow them to continue to be victimized by unions.

Samuel Han is the California Director of the national Freedom Foundation. Will Swaim is president of the California Policy Center. Both organizations work to advance free-market and limited-government principles. This commentary appeared first in the Orange County Register.

Teacher Union Political Spending: Liberal as Ever

AFT continues to use teachers as ATM machines to fund their pet leftist causes.

The latest American Federation of Teachers annual financial disclosure has been released (H/T RiShawn Biddle). This year’s LM-2 is filled with goodies that are sure to warm the cockles of leftist teacher union members, but apolitical educators, centrists and certainly those on the right just may have a different opinion.

Despite all the legitimate bad press the Clinton foundations have received the last few years, AFT still continues to pour more money into their pay-for-play operations. In 2015-2016 the union gave $250,000 to the Bill, Hillary & Chelsea Clinton Foundation, and the same amount to the Clinton Global Initiative. This brings the total given by AFT to the Clintons over the past four years to $2.2 million. Maybe the union figures they need to assure that the Clintons won’t go wanting should the money from foreign special interests to secure weapons deals dry up. In any event, the gifts will ensure that AFT president Randi Weingarten will have HRC on speed-dial.

And of course the Clintons aren’t the only leftists to receive loot from the teachers union. The Center for Popular Democracy, a progressive pro-labor and anti-charter school outfit, received $373,000. Additionally, the union gave $25,000 each to Al Sharpton’s National Action Network and the radical Hispanic activist group, La Raza. Here is a chart with a small, but representative sampling of AFT’s donations:

aft-pays-to-play

Clearly there are no gifts to any group that is remotely conservative. Nope. Even though the teachers themselves are anything but a leftist monolith, practically none of the union’s money flows in a rightward direction. In fact, in all elections since 1989, AFT has given $76,446,797 to Democrats and liberals and just $363,000 to Republicans and conservatives. In other words, less than one half of one percent of the union’s political spending goes to the right. (And in those cases it’s usually supporting the more left-leaning of two Republicans running against each other.) The National Education Association isn’t a whole lot better; about 3 percent of its political largess goes rightward. But according to Mike Antonucci, an NEA internal survey in 2005 (consistent with previous results), showed that its members “are slightly more conservative (50%) than liberal (43%) in political philosophy.” No reason to think AFT is any different. And Mary Kay Henry, president of the SEIU, which serves both public and private employees, acknowledged in January that “64 percent of our public members identify as conservative….”  (Like the AFT, about one-half of one percent of SEIU political donations go to Republicans/conservatives.)

So how do the government unions, whose leaders run to the left of the average worker, get away with spending dues dollars on candidates and causes that so many of its members revile? The answer very simply is because its members let them. But teachers and other government workers don’t have to put up with this. Typically about one-third of all teachers’ union dues are spent on politics, but legally the rank-and-file does not have to subsidize the union’s agenda. A teacher can withhold the political portion of their dues by resigning from the union and becoming an agency fee payer. In this scenario, the teacher is still forced to pay about two-thirds of full dues because the union claims it’s forced to represent you in collective bargaining. This is a half-truth; they do have to represent you. But they insist on that set-up because, as the exclusive bargaining agent, they then get to collect dues from every single worker.

A teacher who resigns from the union cannot vote on their contract and loses their union-supplied liability insurance. The latter is essential for a teacher, but that and other benefits are available through joining a professional organization like the Association of American Educators, a non-union alternative.

Sadly, very few teachers have taken advantage of the agency fee payer option. In the Golden State, the California Teachers Association, an NEA affiliate, claims that 35 percent of its 300,000 or so members are Republicans. But only about 10 percent of its members withhold the political share of their dues. That means there are 75,000 Republican union members who are paying for causes and candidates they are opposed to. The national numbers are even worse. Only 88,000 of NEA’s 3 million members (2.9 percent) withhold the political portion.

If enough teachers withheld the political portion of their dues, the unions might sit up and take note. Millions of dollars less to spend on their pet candidates and causes might shake up union leaders – all of whom have become all-too-comfy with their all-too-compliant members – and force them to be more responsive to those they insist on representing. With the failure of the Friedrichs case due to Justice Scalia’s untimely death, the unions still have a captive flock throughout much of the country. But teachers who don’t like being forced to pay for their union’s political agenda need to stand up and just say no. If you do, you will sleep better at night and be a few hundred dollars a year richer. By maintaining the status quo, consider yourself a willing ATM for the biggest political bullies in the country.

For those of you who are sick and tired of subsidizing union politicking, you can get help here.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Unions Foiled in Plot to Evade Open Government Law

It’s rare to see a California local government rescind a vote. But on October 4, 2016, the San Joaquin County Board of Supervisors voted 5-0 to rescind a controversial and probably illegal vote taken three weeks earlier to satisfy the political demands of construction unions.

Rescind Project Labor Agreement Vote - San Joaquin County Board of Supervisors - October 4, 2016

Rescind Project Labor Agreement Vote – San Joaquin County Board of Supervisors – October 4, 2016

On September 13, the board had voted 3-2 to direct staff to negotiate a Project Labor Agreement (PLA) with construction trade unions for a $41 million county hospital expansion. Organizations that defend fair and open bid competition for public contracts were caught by surprise. There was nothing on the September 13, 2016 meeting agenda to indicate board discussion – let alone action – concerning a government-mandated Project Labor Agreement.

But some people seemed to know a vote would happen. Union officials and activists attended the September 13 meeting and called on the Board of Supervisors to negotiate a Project Labor Agreement. At least one Supervisor was ready to make a motion for it even though the proposal was introduced to the board via public comment.

In addition to undermining the public interest, the vote appeared to be illegal. Under the California Ralph M. Brown Act, an elected governing board cannot vote on items without notifying the public in advance that such items will be considered for action. This is a basic principle of open and transparent government.

But having a law and actually enforcing it are sometimes two different things. Frequently the public encounters insurmountable challenges in making California local governments accountable for violating what’s commonly called “the Brown Act.” In this case, opponents of government-mandated Project Labor Agreements needed persistence and determination to confirm the illegal action and get it rectified.

A video record of the meeting posted on the county website after the meeting strangely cut off before the vote, thereby depriving the public of a source to prove what had happened. A reporter who covered the September 13 Board of Supervisors meeting for the local newspaper insisted that the board had not taken a vote to negotiate a Project Labor Agreement. Members of the public trying to obtain draft meeting minutes were frustrated by what seemed to be bureaucratic delays.

Yet there was one reliable witness at the meeting who was paying close attention to the proceedings. This witness was sure that a 3-2 vote had been taken specifically to authorize staff to negotiate a union Project Labor Agreement to include as a bid specification for the San Joaquin General Hospital Phase 2 Acute Care Patient Wing Expansion Project.

Eventually, the county was able to restore the video to completeness and provide the order of the board. It was indeed a vote directing staff to negotiate a Project Labor Agreement with unions, with the agreement to come back for ratification at the September 27 board meeting. (Allowing only two weeks for “negotiations” of a major labor relations contract suggests that union officials and some county supervisors were going to pressure staff to hastily sign off on a standard boilerplate agreement that unions typically introduce at the start of negotiations.)

The plot was now proven. A coalition of organizations banded together and hired a law firm to send a letter to the Board of Supervisors demanding that the vote be nullified. Meanwhile, the Board of Supervisors cancelled its September 27 meeting for unknown reasons. Then the Board of Supervisors scheduled an agenda item at the October 4 meeting to rescind the original September 13 vote.

San Joaquin County Administration Building Evacuation - October 4, 2016

Evacuating the San Joaquin County Administration Building on a beautiful fall day.

But supporters of fair and open bid competition on taxpayer-funded contracts even struggled at the October 4 board meeting to get that 5-0 vote to correct the apparently illegal action. Hundreds of Service Employees International Union (SEIU) activists repeatedly disrupted and delayed the meeting to express displeasure with their own contract negotiations. When a representative of the Coalition for Fair Employment in Construction was speaking during public comment to urge the board to rescind their Project Labor Agreement vote, someone set off the fire alarm, resulting in the evacuation of the building.

In the past 20 years, the militant union activism and underhanded political tricks formerly concentrated in a few urban centers of California have rippled out 75 miles to places such as San Joaquin County. While many fiscal conservatives are fleeing the state or dying, those who choose to remain in California must monitor their local government agendas and make elected officials accountable when they violate the law for a special interest group.

Sources

September 26, 2016 Letter to San Joaquin County Board of Supervisors – Brown Act Violation – Project Labor Agreement Vote

October 4, 2016 San Joaquin County Board of Supervisors Meeting Agenda Item – Rescind Vote to Negotiate Project Labor Agreement

Union Creates Bedlam at San Joaquin Supervisors Meeting – Stockton Record – October 4, 2016


Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.

Freedom Foundation Serves Notice in California with Union Opt-Out Ads

The Freedom Foundation – which last year expanded into Oregon after spending a quarter century fighting for free markets and limited, accountable government in neighboring Washington – will take its first formal plunge into California this week by unveiling a series of TV ads targeting unionized caregivers.

Much like ads that have run successfully in Washington and Oregon, the California ads will deliver to home-based care providers a message their union doesn’t want them to hear: “You have a choice.”

Prior to 2014, home-based health providers being compensated for by Medi-Cal for providing care for a client or loved one were required to pay either dues or fees to a labor union.

But in Harris v. Quinn, the U.S. Supreme Court established that these state-paid home care aides and other “partial-public” employees could decide for themselves whether to associate with a union.

Faced with the prospect of massive defections – and the corresponding loss of billions in dependable revenue – the unions answered Harris by first ignoring the ruling, then fighting to keep the workers unaware of their newly affirmed legal rights.

And for those who heard about their rights and tried to exercise them, the unions dreamed up ways to make the opting-out process more trouble than it was worth.

The Freedom Foundation works in all three areas. Its lawyers have filed countless suits in the past two years aimed at making the unions live up to their legal responsibilities under Harris. Equally important, the organization has created a one-of-a-kind canvassing program that has hired dozens of workers to fan out all over the Pacific Northwest and visit thousands of home care providers with information their union is trying to keep from them.

The new California ads lay the groundwork for a similar push in this state by introducing viewers to providers in neighboring states who opted out with the Freedom Foundation’s help.

“As our name implies, we’re committed to freedom,” said Freedom Foundation CEO Tom McCabe. “If someone wants to be a union member and support its political agenda with their hard-earned dollars, that’s their privilege. But we also believe people have the right to decide for themselves they want to keep every dollar Medicare has allocated for their effort and for the care of their loved ones.”

The ads will run on cable TV stations in the Orange County market starting on Sept. 12.

“This is our largest ad buy – really, our largest marketing effort of any kind – ever,” McCabe said. “We’re in California for good now, and we want to bring the same information to forcibly unionized workers in this state that we did to the thousands of caregivers who’ve opted out in the past two years in Washington and Oregon.

He concluded, “Our message to the workers and the unions that deceive them is that we’re here, we’re staying and we mean business.”

The Freedom Foundation is a member-supported, Northwest-based think and action tank promoting individual liberty, free enterprise and limited, accountable government.

CTA’s New Gambit to Cheat Taxpayers Annually

A bill, near passage, would require you and me to pay for union indoctrination sessions in California. 

California is a fabulous place. Fantastic weather, fertile fields, glorious mountains and a thousand mile coastline have long beckoned many to the Golden State.

And then there is the state legislature.

This law-making body is very far from fabulous. Its main activities in our one-party state are taxing, spending and regulating our business community, workers and economy to death. Additionally, many of its members are in the pocket of the California Teachers Association, which is by far the biggest political spender in the state, unleashing $290 million on candidates and causes between 2000 and 2013.

The latest legislative sop to the unions is AB 2835, a CTA-co-sponsored bill that, if it passes, will force local governments, including school districts, to provide 30-minute in-person orientations, paid for by the taxpayer, to each and every new public employee during work hours within the first two months of their being hired. But as pointed out by several government officials in a piece that ran in the East Bay Times recently, cities, counties and special districts already do that, spending “the better part of a full day educating new employees on the benefits available to them, policies on harassment and violence, and how to respond to possibly harmful workplace situations. Our employees begin their public service with the knowledge they need to serve their communities.”

However, AB 2835 goes way beyond that, requiring local governments to set aside half of an hour – within the first hour of any orientation it provides – for each union representing public employees to speak, with almost no restrictions, to new employees. “It won’t matter if local governments are using an online or video orientation to maximize tax dollars and avoid unnecessary travel expenses. It won’t matter if a police officer or firefighter should be on-call to respond to emergencies instead of meeting with his or her union representative. Every employee. In-person. Thirty minutes during the first hour of an orientation. Every time.”

This requirement would place an enormous administrative burden on government, and it won’t come cheap. The California State Department of Finance has estimated that the mandate would cost taxpayers “more than $70 million annually for local governments and more than $280 million annually for school districts.”

AB 2835 would especially pose logistical problems for schools because the 30 minute orientation sessions would be held during the work day. Colleges, which have numerous collective bargaining units, would be especially affected.  As the Association of California Community College Administrators points out, allowing each collective bargaining unit 30 minutes to make a presentation, “will result in a significant length of time, which will require colleges to hire additional staff to cover classes and other critical campus safety services during the orientations.”

Not surprisingly, the bill is backed by a gaggle of labor organizations. In addition to CTA, the California Faculty Association, California Nurses Association and SEIU are behind it. The opposition includes the California School Boards Association, the League of California Cities and the Association of California School Administrators.

Just as onerous as the cost and disruptiveness will be the quality of the orientation session. This is going to be a hard sales pitch, plain and simple. Or, in less polite terms, indoctrination. I guarantee that the results of a study released in April by the Heritage Foundation – which found that between 1957 and 2011, mandatory collective bargaining costs a family of four between $2,300 and $3,000 a year – will not be a topic of discussion.

Also missing from the pitch will be a recent study by Cornell researcher Michael Lovenheim. He found that “laws requiring school districts to engage in collective bargaining with teachers unions lead students to be less successful in the labor market in adulthood. Students who spent all 12 years of grade school in a state with a duty-to-bargain law earned an average of $795 less per year and worked half an hour less per week as adults than students who were not exposed to collective-bargaining laws.”

Will the orientation stress that collective bargaining creates significant potential for polarization between employees and managers? Or that it decreases flexibility and requires longer time needed for decision making? Or that it protects the status quo, thereby inhibiting innovation and change? Or that it restricts management’s ability to deal directly with individual employees? Nah.

AB 2835 was birthed when CTA leaders were frightened that the Friedrichs decision was going to go against them and decided they needed to deliver a sales pitch to teachers who would no longer be forced to pay money to the union as a condition of employment. But with Antonin Scalia’s death and the Supreme Court’s subsequent refusal to rehear the case, this bill is irrelevant; CTA and the smaller California Federation of Teachers still have a captive audience. Just about every public school teacher in the state will continue to be forced to pay a union if they want a job in a public school. But if CTA and other unions still insist on trying to convince prospective members of their value, they should do it after hours and not ding the taxpayer in the process.

The bill sailed through the California State Assembly and now rests in the State Senate where it must be voted on by August 31sttomorrow, for it to become law. So, if you live in the Beholden State, please contact your state senator immediately and keep your fingers crossed. And should the bill become law, prepare for even more money to be transferred from your wallet to the unions’ already healthy coffers.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

The Myth of the Underpaid Teacher Lives On

 Yet another “study” showing how poorly teachers are paid has surfaced.

Well, it’s a new school year and there is much tumult in the world of public education. Common Core battles, testing opt-outs, and litigation about school choice and teacher work rules dot the landscape. But with all the uncertainty, it’s comforting to know that there is one thing we can count on in late summer: a new bogus study showing that public school teachers are woefully underpaid.

This year’s entry doesn’t disappoint. “The teacher pay gap is wider than ever,” subtitled “Teachers’ pay continues to fall further behind pay of comparable workers” is a 29-page report released by the Economic Policy Institute, whose mission is “to inform and empower individuals to seek solutions that ensure broadly shared prosperity and opportunity.” If this were an honest statement, the word “opportunity” would be followed by “as long as the solutions are in sync with the union party line.” You see, EPI is nothing more than a union front group whose board includes a rogue’s gallery of Big Labor honchos: AFL-CIO’s Richard Trumka, SEIU’s Mary Kay Henry, American Federation of Teachers’ Randi Weingarten, National Education Association’s Lily Eskelsen-García, et al.

And not only do the teachers unions have strong board representation, they donate heavily to EPI. According to the latest labor department reports, 2015 saw NEA present a $250,000 gift to EPI, only to be outdone by the smaller AFT, which kicked in $300,000 to the organization.

The study itself is just what you would expect: loads of numbers that are supposed to make people think that teachers are essentially little more than impoverished serfs, valiantly slaving away for pennies. Among the report’s claims:

  • Teachers’ weekly wages are 23 percent lower than those of other college graduates.
  • For public-sector teachers, the relative wage gap (regression adjusted for education, experience, and other factors) has grown substantially since the mid-1990s: It was ‑8 percent in 1994 and grew to a record ‑17.0 percent in 2015.
  • Regardless of experience, teacher wage gap expanded for female teachers.

Needless to say, the unions solemnly wrote about the report as if it were “news,” with NEA blogger Tim Walker suggesting that all teachers get a raise. And as day follows night, the media jumped on board. The relentless and reliably-unreliable Washington Post education blogger Valerie Strauss dutifully posted the whole report with the title, “Think teachers aren’t paid enough? It’s worse than you think.The Fiscal Times sounded alarm bells with “Teacher Pay Hits Record—but Not a Good One.”

But like most similar studies, EPI’s doesn’t do an apples-to-apples comparison. It omits a few things like the simple fact that teachers work 6-7 hour days and 180 days a year, whereas the study’s “comparable workers” put in an 8-9 hour a day and work 240-250 days a year. (Yes, yes, I know teachers take work home, but so do many other professionals who don’t get summers off.) Also, unlike private-sector workers, most teachers have extensive health benefits for which they typically pay very little, if anything. Furthermore, as University of Missouri professor Michael Podgursky points out, the pension benefits for teachers, which they only pay a tiny portion of – the taxpayer getting hosed for the rest – add greatly to a teacher’s total compensation. (The EPI report actually alludes to this, but buries it on page 14; more on this in a bit.)

Perhaps the most honest and well-researched study done on teacher pay, including the time-on-the-job and benefits factors, was done in 2011 by Andrew Biggs, a resident scholar at the American Enterprise Institute, and Jason Richwine, a senior policy analyst at the Heritage Foundation. In their report, they destroy the teacher union-perpetuated myth of the under-compensated teacher. Their study, in fact, found that teachers are actually paid more than private-sector workers.

They make the case that workers who switch from non-teaching jobs to teaching jobs “receive a wage increase of roughly 9 percent, while teachers who change to non-teaching jobs see their wages decrease by approximately 3 percent.” Additionally, when retiree health coverage for teachers is included, “it is worth roughly an additional 10 percent of wages, whereas private-sector employees often do not receive this benefit at all.”

Biggs and Richwine conclude that after taking everything into account, “teachers actually receive salary and benefits that are 52 percent greater than fair market levels, equivalent to more than $120 billion overcharged to taxpayers each year.”

Back to the EPI study. On page 14 of the report, it acknowledges,

Our analysis of relative teacher pay thus far has focused entirely on the wages of teachers compared to other workers. Yet benefits such as pensions and health insurance are an increasingly important component of the total compensation package. Teachers do enjoy more attractive benefit packages than other professionals; thus, our measure of relative teacher wages overstates the teacher disadvantage in total compensation. The different natures of wages and benefits should be kept in mind, as it is only wages that may be spent or saved. Thus, the growing wage penalty is always of importance.

So in essence, the authors of the study come clean in this paragraph and admit that their stress on wages alone overstates the real disparity in pay. The “spent or saved” comment is especially ridiculous. Pension earnings are indeed “saved” for the future. Whatever. It’s obvious that this report is meant to tug at the heartstrings, build righteous indignation and provide local teachers unions with ammo for collective bargaining battles with school boards.

For an honest assessment of teacher pay, stick with the Biggs-Richwine study. But if one is looking for skewed and incomplete data as fodder for a splashy headline or an emotional plea, the dishonest and self-serving union-sponsored EPI report fills the bill beautifully.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

The Unions’ Favorite California State Senator

Money in politics has been a recurrent theme in this election cycle. Campaign finance reform advocates, mainstream media and certain candidates have repeatedly driven home the idea that corporations and rich conservatives are biasing the political process by making big-money donations, often without disclosure. Much of the narrative – advanced by authors such as New Yorker writer Jane Mayer and politicians like Nevada Sen. Harry Reid – has focused on the Koch Brothers, who are blamed for everything from financial deregulation to global warming.

This narrative misses a couple of key points. First, following the Supreme Court’s 2010 Citizens United decision, liberals predicted a wave of unleashed corporate spending would transform the political landscape. But after spending a combined $6 billion in 2012, Republicans and Democrats produced a federal government that looked remarkably like the one that prevailed before the election. In this cycle, spending by the Koch Brothers and other right-of-center billionaires was not enough to prevent a Donald Trump nomination or the rise of Bernie Sanders, the U.S. senator from a tiny state who occupies the extreme left fringe of the political spectrum.

Second, the Koch Brothers and their allies are not the only major donors trying to influence the process. Such left-of-center billionaires as George Soros, Tom Steyer and Mike Bloomberg also have a large impact. And government union donations are a far bigger factor in certain campaigns in California, as research by California Policy Center and the Freedom Foundation reveals.

If money doesn’t always win elections, it can indeed shape the agendas of the winners. One of the best examples of money that makes a difference is the case of Connie Leyva.

Leyva: Look for the union labelLeyva: Look for the union label

Since 2014, Leyva has represented California’s 20th Senate District, a bow-tied shaped district covering parts of San Bernardino County and northern Los Angeles County. According to Secretary of State data, her campaign committee received 324 contributions totaling almost $746,000. Of this total, we estimate that 79 percent came from unions and union-related committees.

(Our review found possible duplicates among Leyva’s contribution records. Our reporting assumes that each record shown on the Secretary of State’s site is correct and non-duplicated.)

In 2014, California limited contributions to Senate and Assembly candidates to $4100, but also provided a higher limit of $8200 for “small contributor committees.” These committees bundle large numbers of small, individual contributions and then dole them out to various candidates. Connie Leyva received the maximum $8200 contribution from 35 such committees, of which 34 were union-sponsored.

Of the 53 entities contributing the general $4100 maximum, 40 were union-related.

Leyva’s union donors included a broad spectrum of public and private labor organizations. In many cases, several locals and affiliates of a single union donated to her campaign – magnifying their support and influence. Among the unions with multiple contributors were the International Brotherhood of Electrical Workers (IBEW), the Service Employees International Union (SEIU) and the United Food and Commercial Workers (UFCW). Contributions from UFCW locals, PACs and other related entities totaled $83,900, 11% of Leyva’s 2014 campaign receipts. This is especially notable given the fact that Leyva was a UFCW union representative and president of a UFCW local before her election to the state Senate.

Although impressive, Leyva’s 79% union contribution proportion actually understates the degree to which labor interests underwrote her campaign. For example, Leyva received just over $25,000 in contributions from individuals, most of whom reported their employers. $7950 of these individual contributions came from employees of UFCW, the AFL-CIO and other labor organizations.

Leyva also received contributions from other candidate committees, including those for Anthony Rendon, Kevin De Leon and Roger Hernandez. All of these candidates received significant union support, so their ability to contribute surplus funds to the Leyva campaign is attributable in no small measure to organized labor.

Finally, Leyva benefited from a union-backed Independent Expenditure Committee. Committees of this type can campaign for or against a candidate, but must operate independently from that candidate’s campaign committee. There is no limit on the size of contributions to Independent Expenditure Committees, which makes them quite popular with large donors.

In the 2014 cycle, the Committee for Working Families spent $290,000 on behalf of Connie Leyva. This committee is sponsored by the California Labor Federation, AFL-CIO. A review of the Committee’s contributions shows that almost all of its money came from union sources (although it did receive a donation from Sean Parker, a billionaire who leans left).

The same committee also spent $44,000 on mailers opposing Democratic rival Alfonso Sanchez in May 2014. Although relatively small, this expenditure may have been especially decisive because Leyva defeated Sanchez by only 1148 votes in the primary to take the second spot on the November ballot. In the general election, Leyva defeated Republican Matthew Munson by a wide margin.

Leyva’s funding far exceeded that of her rivals. Sanchez’s committee received $44,000 in contributions – about 6% of Leyva’s total. That said, Sanchez did benefit from independent expenditures by JOBSPAC, a committee primarily funded by corporate contributions. JOBSPAC spent $269,000 for Sanchez and $66,000 to oppose Leyva.

Munson, the Republican, collected only $260 for his committee and did not receive any support from Independent Expenditures Committees.

What the Unions Got for Their Money

In the state legislature, Senator Leyva has returned the investment unions made in her election.

The California Labor Federation issues an annual legislative scorecard, rating State Senators and Assembly-members on their union-related votes. In 2015, Leyva received a perfect 100% — taking the union-endorsed position on all 25 votes the Federation considered. Nine of these bills were vetoed by Governor Jerry Brown, a Democrat.

For example, Leyva voted for AB 787, which would have banned for-profit companies from running charter schools. As Brown noted in his veto message, the bill contained ambiguous language which could have been interpreted to prevent charters operated by not-for-profits from buying goods and services from for-profit companies. Handicapping charter schools and thereby restricting school choice is an ongoing priority for education unions that contributed to Leyva’s campaign.

Brown also vetoed Leyva-supported AB 251, which would have compelled more developers to pay high state-mandated prevailing wages on infrastructure projects. Brown expressed concern that the measure was “too restrictive and may have unintended consequences.” While the bill would have benefited trade unions, it would have further increased the high cost of real estate in California.

Leyva was one of 11 state senators to receive the Labor Federation’s perfect legislative score, so her record could be seen as unremarkable. But Leyva isn’t only voting for widely-supported pro-union legislation; she is also writing and advocating new, more radical measures.

Recently, she sponsored SB 1015 which would compel disabled and elderly individuals to pay time and a half to their caregivers when they work more than 45 hours per week. This overtime pay requirement has been in place since 2014, but would end on December 31, 2016 in the absence of Leyva’s legislation. When combined with the escalation of the minimum wage to $15 per hour between now and 2022, the time-and-a-half pay requirement will become onerous for many patients who live on fixed incomes. Finally, and without disparaging the important work that caregivers provide, their long hours can be a deceptive, since the people in their charge are often sleeping or watching TV and thus not requiring active support.

Earlier in 2016, Leyva introduced SB 1167, the Worker Heat Safety Act which would require Cal/OSHA to develop new regulations to limit high workplace temperatures. However, employers are already required to safeguard employees against hazardous workplace conditions including excessive heat. Economist John Husing told the Riverside Press-Enterprise that Leyva’s bill could hurt the inland empire’s warehousing industry, which employs over 33,000 workers. “My fear is, this is organized labor going after a sector where it has not had much success in organizing,” Husing said. “They are going the legislative route.”

Conclusion

In the Inland Empire, organized labor pushed aside a business-friendly Democrat and elevated a union executive to the state legislature. They did this by injecting over $850,000 into the campaign, dwarfing spending by rival candidates. The incumbent has repaid her labor paymasters by doing what she was undoubtedly already inclined to do – maintaining a perfect pro-labor voting record and pushing the envelope in the unions’ direction with new legislative proposals.

While readers may differ about the wisdom of the legislation Leyva sponsored and supported, it is hard to debate that union money was essential to advancing her candidacy and agenda. A defense of union behavior is this regard requires one to either reject the notion that “money in politics” is necessarily bad or to argue that big campaign donations are only acceptable when they support a progressive agenda.

If those who wish to defend union support for Leyva and other Assembly and Senate Democrats adopt the latter view, they should not couch their opinions as a call for institutional improvement. Instead, they are advancing a highly partisan belief that “money in politics” is bad only when deployed by people they don’t like.

Will Swaim is vice president of communications for the California Policy Center, former vice president of journalism for the Franklin Center, and founding editor and publisher of OC (Orange County) Weekly.

ABOUT THE CALIFORNIA POLICY CENTER
The California Policy Center is a non-partisan public policy think tank providing information that elevates the public dialogue on vital issues facing Californians, with the goal of helping to foster constructive progress towards more equitable and sustainable management of California’s public institutions. Learn more at CaliforniaPolicyCenter.org.

The DivIdes of March

My latest battle against a teacher union leader….

Last month, Rebecca Friedrichs, lead plaintiff in a lawsuit against the California Teachers Association that was recently heard by the U.S. Supreme Court, and I were invited to talk about her case on Inside OC, a public affairs TV show in Orange County. Rebecca was given the first half of the show solo and the second half would see me debating her case against an unspecified union representative. I agreed to participate and was stunned a few days later when the show’s host, Rick Reiff, told me in an email that my sparring partner would be none other than CTA President Eric Heins.

After years of debunking teacher union spin, it’s always a pleasure to go face to face with these folks and expose their distortions. My first opportunity in this realm came in New York City in March, 2010 when Terry Moe, Stanford professor and expert-on-all-things-teachers-union, captained a debate team which included former Secretary of Education Rod Paige and me. Our opponents were Randi Weingarten, president of the American Federation of Teachers, a school superintendent from Southern California and a teacher from Massachusetts. In the town where the modern teacher union movement was hatched, we won the debate handily; in fact we clobbered them. In a review of the debate, University of Arkansas professor and esteemed education reformer Jay Greene referred to it as a smackdown.

Three years later in March, 2013, I shared a stage in Mountain View with Moe again, former California State Senator Gloria Romero, who regularly battled the teachers unions during her time in Sacramento, and Heins’ predecessor at CTA, Dean Vogel. Though not a debate, the event sponsored by the Conservative Forum of Silicon Valley, saw sparks fly at various points as the three of us refused to let Vogel get away with any of the usual union bromides.

Now, three Marches later, I am going face-to-face with yet another union leader. The always articulate Rebecca kicked things off, talking for 15 minutes about the lawsuit – the tragedy of Justice Scalia’s death, her hope that the case will be reargued, the problems she had trying to make her dissident voice heard as a union member, the immorality of teachers unions protecting bad teachers and the fallacy of the free-rider argument.

Then Heins, who had a dislocated shoulder and had flown in from Burlingame to be a participant, got five minutes which he used to note what he claims to be the positive aspects of teachers unions – how teachers like Rebecca benefit from collective bargaining, that teachers unions benefit kids, etc.

At about 20 minutes in, I appear and do my best to refute Heins. I asked him why, if the union is so beneficial to teachers, they must be forced to pay dues. He claimed that it is because the union must represent all teachers. I had to remind him that exclusive representation is something demanded by – not foisted on – the unions.

When Heins again glorified the value of collective bargaining, I was tempted to rebut him, but refrained, and emphasized that the case is not at all about collective bargaining but rather about teachers’ freedom of choice. Heins then brought up the old “labor peace” argument, which to me is akin to Al Capone negotiating with Elliot Ness, with the Mafia Don explaining that, “You want peace? Let us partner with you.” Bad argument, because it makes the unions sound like extortionists, but then again….

The subject of tenure came up, and of course Heins immediately used the softer sounding phrase “due process,” though he did let its accurate name “permanent status” slip in once. He then extolled the virtue of the three man panel that considers and decides the fate of teachers accused of wrong-doing. But I countered that the panel is made up of two teacher-union members and an administrative law judge – all hand-picked by the union. Hardly a fair process.

At the end of the segment, Heins just had to dredge up the Koch brothers, signaling that the discussion has jumped the rails. The program came to an end at that point and there was only time for me to respond with an eye-roll. Fortunately, however, we were able to continue our discussion for another nine minutes, which is available on YouTube. We picked up on Heins’ Koch-bashing and I pointed out that the biggest political spender in California is not the Kochs or some large corporation, but rather CTA, whose political gifts are about double the second largest spender, also a union – the California State Council of Service Employees, a branch of SEIU.

Heins then veered into how democratically union decisions are made and that they respect minority views. I asked him if the union respected a Republican minority view and he assured me it did. I mentioned that his predecessor claimed that CTA membership was about 65 percent Democrat and 35 percent Republican. I asked Heins what proportion of their political giving goes to Republicans. He insisted that all their spending “is based on education policy” and that they support some Republicans. This is mostly a crock, but I did not bring up the following to refute him as we got side-tracked. What I wished I had said, was that about 97 percent of CTA political spending goes to Democrats, with the remaining crumbs going to the GOP. More importantly, I did not bring up where so much CTA spending goes. Despite Heins’ insistence that it based on education policy, it is not. For example, CTA has spent millions on initiatives to get drug discounts for Californians, to regulate electric service providers, to raise the corporate tax rate in the Golden State, etc. (The last one is especially hypocritical as CTA doesn’t pay one red cent in taxes.) The union also spent well over $1 million of teacher union dues fighting for same sex marriage.

I suggested that the union regularly buys politicians at which point Heins smiled and said that my comment was “cynical spin.” Hardly. We then discussed seniority which Heins thought was quite fair, while I, along with many other reformers, think it is an abominable way to make staffing decisions.

At the end of the session, Reiff said, “We needed an hour!” and he was right. There was way too much ground to cover in such a brief time. The following day I sent a message to Heins telling him I would be willing to do an hour with him anytime, anywhere. I have yet to hear back.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Demand Rising for Union Transparency and Choice

The Devil at Our Doorstep and blogs such as Rank and File Union Membership Post Victories, SEIU Watch and Michigan Kickoff are committed to publicizing the stories of employees across the nation that have been impacted by, or are taking steps to fight back against, Big Labor’s control tactics of forced unionism and forced dues. Much of these “membership” dues are utilized for political purposes instead of for the benefit of the membership. But people are fighting back. “Mariam the Mighty,” an immigrant from Egypt, now works for the State of California’s Department of Motor vehicles (DMV). As a member of a state agency, she is required to have membership in the Service Employees International Union (SEIU). Mariam has expressed her concern that unions were the primary downfall of her home country and she did not want to see the same thing happen in the United States of America! Subsequently, she started a movement against the union, Occupy SEIU, and is committed to having the SEIU Exposed.

Mariam’s latest movement is titled “Transparency and Choice,” and it is an effort to require California’s public employee unions to post an itemized version of its budget and financials online, making it accessible to the membership. Additionally, the proposal would require public unions to hold an election every two years to determine if the current labor union should continue to represent the membership or allow workers to select another public employee union to takes its place if they wanted to remain unionized. It is apparent that public employees in California are fed up with the union monopoly and Want Change Now. California Assemblywoman Shannon Grove is Supporting Mariam and her Coalition in achieving their objectives and in limiting the political power that unions have in the state of California. Mariam’s coalition hopes to obtain 1 Million signatures by March 31, 2016 by having members go to www.TransparencyAndChoice.com and sign the petition.

20160308-UW-Bego

Once again union members are intent on the Big Labor Racket Being Exposed. They realize Big Labor is not in business for the membership, but rather to Collect Money for its Political Interests. I sincerely hope that all who read this blog will help Mariam and her coalition achieve their objectives by spreading the word on their efforts, and getting the media to bring public attention to their cause. After all, this is just the beginning of California moving towards becoming a “Right to Work” state, which the majority of states now have implemented into law. For more information, read Big Labor’s Rollercoaster of Emotions and Public Unions on the Precipice, chronicling public unions’ desperate attempts to maintain forced unionism and dues to keep the Democratic Party in place and avoid the demise of public sector unions.

Read:  Shannon Grove Pushes Plan to Make Unions More Accountable to its Members

It is imperative that we bring attention to causes like those of Mariam. Together we can eliminate the SEIU’s Persuasion of Power and bring forth “Right to Work” to protect employees across the country.

About the Author: 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.

$15 Minimum Wage for California: Maybe Okay for the Coast, but a Disaster for the Central Valley

The November 2016 ballot is likely to contain an initiative that would raise the statewide minimum wage to $15 by 2021. At the beginning of this year, the state’s minimum wage rose from $9 to $10. If Measure 15-0032 passes, it will rise an additional dollar each year between 2017 and 2021; after that, it would be adjusted annually for inflation.

The initiative, promoted by the Service Employees International Union (SEIU), is part of a campaign around the country to elevate pay for low income workers and combat income inequality. While this issue has been traditionally popular on the left, some conservatives have also jumped on the bandwagon.

The traditional conservative/libertarian attack on minimum wage laws – that they destroy jobs – has also come under pressure. San Francisco and many Bay Area cities have implemented higher minimum wages, yet the region’s unemployment rate is well below national and statewide levels. Seattle is in the process of raising its minimum wage to $15, and yet its unemployment rate also remains low, although there is some concern that restaurant jobs are drying up in that city.

Free market advocates may have to admit that higher minimum wages won’t crater every economy at all times.  In high cost areas like San Francisco, the economy can withstand generous minimum wages especially during a boom. But aggressive minimum wage increases may have different effects when applied elsewhere.

Table 1, extracted from Bureau of Labor Statistics data, shows just how much hourly wages vary widely across California. For each metropolitan area, the table shows the 10th percentile, 25th percentile and median wage. The median wage is that paid to the worker whose compensation is higher than 50% of other workers in the area.  Likewise, the 25th percentile wage is earned by the worker who is paid more than 25% of area workers.

Area10th Percentile25th PercentileMedian
Visalia-Porterville8.669.3813.60
El Centro8.619.2413.79
Madera-Chowchilla8.729.7214.98
Fresno8.769.7515.02
Merced8.739.9315.02
Salinas8.8710.1115.28
Chico8.9210.5015.70
Bakersfield-Delano8.749.6615.85
Modesto8.8910.6815.97
Redding9.0010.9516.28
Riverside-San Bernardino-Ontario8.9510.7216.36
Yuba City8.9410.7816.38
Stockton8.9410.8716.84
San Luis Obispo-Paso Robles9.0311.0216.94
Napa9.4611.9117.66
Santa Cruz-Watsonville9.1211.4517.81
Santa Barbara-Santa Maria-Goleta9.0111.1517.86
Oxnard-Thousand Oaks-Ventura9.1411.4117.95
Hanford-Corcoran8.8310.7318.07
Los Angeles-Long Beach-Glendale9.0611.4218.32
Vallejo-Fairfield9.0811.4818.58
Santa Rosa-Petaluma9.4212.3318.65
Santa Ana-Anaheim-Irvine9.1611.5818.65
San Diego-Carlsbad-San Marcos9.2111.7818.77
Sacramento--Arden-Arcade--Roseville9.1812.1619.60
Oakland-Fremont-Hayward9.5313.5922.44
San Francisco-San Mateo-Redwood City10.8014.8025.27
San Jose-Sunnyvale-Santa Clara10.4315.0927.61

The table shows 2014 medians ranging from a high of $27.61 in San Jose and neighboring Silicon Valley cities to just $13.60 in Visalia-Porterville in the Central Valley. In fact, there are three Central Valley metropolitan areas with median wages below $15. The implication is that if the new minimum wage was imposed immediately, more than half the workers in these areas would have to receive a raise or lose their jobs. In relatively weak economies like those in the Central Valley, the latter option seems more likely.  This is especially the case in El Centro, where unemployment remains around 20%.

To be fair to the authors of the proposed ballot measure, their plan is to phase in the minimum wage increase, rather than implement in one fell swoop. If the initiative passes, the minimum would reach $15 in 2021 – seven years later than the latest available BLS figures shown in Table 1. Over the last year, average wages rose by about 2.5%. If this trend continues the cumulative increase between 2014 and 2021, would be 19%. Table 2 bumps up the 2014 wages by 19% to give an impression of what wage levels might look like in the absence of a minimum wage hike.

Area10th Percentile25th PercentileMedian
Visalia-Porterville10.3811.5717.83
El Centro10.4211.6017.87
Madera-Chowchilla10.3911.8217.87
Fresno10.5612.0318.18
Merced10.6112.5018.68
Salinas10.4011.5018.86
Chico10.5812.7119.00
Bakersfield-Delano10.7113.0319.37
Modesto10.6512.7619.47
Redding10.6412.8319.49
Riverside-San Bernardino-Ontario10.6412.9420.04
Yuba City10.7513.1120.16
Stockton11.2614.1721.02
San Luis Obispo-Paso Robles10.8513.6321.19
Napa10.7213.2721.25
Santa Cruz-Watsonville10.8813.5821.36
Santa Barbara-Santa Maria-Goleta10.5112.7721.50
Oxnard-Thousand Oaks-Ventura10.7813.5921.80
Hanford-Corcoran10.8113.6622.11
Los Angeles-Long Beach-Glendale11.2114.6722.19
Vallejo-Fairfield10.9013.7822.19
Santa Rosa-Petaluma10.9614.0222.34
Santa Ana-Anaheim-Irvine10.9214.4723.32
San Diego-Carlsbad-San Marcos11.3416.1726.70
Sacramento--Arden-Arcade--Roseville12.8517.6130.07
Oakland-Fremont-Hayward12.4117.9632.86
San Francisco-San Mateo-Redwood City0.000.000.00
San Jose-Sunnyvale-Santa Clara0.000.000.00

With the 19% increase, all metropolitan areas have medians above $15. But in most areas, at least 25% of workers would still be making below $15 per hour, and, in all areas at least 10% would be below the proposed minimum. Because BLS, just gives us three points on the distribution curve, we can’t precisely project the impact on different areas, but it stands to reason that Visalia-Porterville with a projected median wage of $16.18 would be much more severely impacted than San Jose-Sunnyvale-Santa Clara at $32.86.

The fact that higher minimum wages don’t seem to cause unemployment spikes in affluent coastal redoubts, doesn’t prove that they are an appropriate solution statewide. More likely, the opposite is true. The $15 minimum wage could destroy tens of thousands of jobs in the Central Valley, worsening income inequality – just the opposite of what the SEIU and its progressive allies hope to achieve.

A Union Bank with a Goal: Victory for the Left

Summary: Amalgamated Bank is America’s only union-owned bank. The latest chapter of its tumultuous history finds it specializing in political work that few financial institutions would dare risk. Funded by monies that unions compel their members to provide, the bank seems less devoted to maximizing returns for customers than to assisting left-wing candidates and causes in their quest for power.

Self -styled “Progressives” have largely avoided the complicated world of banking and finance. When they focus on the banking industry, it’s usually when they have a grievance, such as when they see the banking industry as exerting undue influence on politics and society.

Amalgamated Bank is the exception. It’s a bank they like.

Keith Mestrich, former Chief Financial Office of the Service Employees International Union, heads the SEIU-controlled Amalgamated Bank, which backs various causes of the Left.

Keith Mestrich, former Chief Financial Office of the Service Employees International Union,
heads the SEIU-controlled Amalgamated Bank, which backs various causes of the Left.

A union owned institution with extensive ties to the Democratic establishment, it is embraced by the Left. Increasingly, it is a player in the financial field, run by and patronized by the labor movement and its allies. With its blend of specialized political financing and ideological bent, Amalgamated has attracted high-profile accounts—the Democratic National Committee, a pro-Hillary Clinton superPac, and a hundred others of like mind.

For an example of the way the bank has brought political titans and their union patrons together under its expanding umbrella, consider this story: On September 27, Keith Mestrich, president and CEO of Amalgamated Bank, stood beside Randi Weingarten, president of the American Federation of Teachers, at a glitzy Clinton Global Initiative event and together pledged to invest $100 million in early childhood education. Left unspoken: the same union had endorsed Hillary Clinton’s campaign only weeks before, supposedly because of the very same issue.

Nor was the American Federation of Teachers a stranger to its partner in this Progressive investment; the union also happens to be a major client of the bank.

The bank has positioned itself as an innovator in the nascent niche of political investment banking, offering cash infusions on short notice to political action committees and campaigns and providing round-the-clock service to political groups that operate far outside traditional banking hours. For unions in the corporate world the bank has also become an unconventional vehicle for change. As the home of billions of dollars in union pension funds—strategically invested across a broad portfolio of companies—Amalgamated essentially gives the labor movement a seat at the corporate governance table and thus an influential voice in how big businesses operate.

Since its founding in 1923 by a New York City garment workers’ union, Amalgamated’s evolution has mirrored that of the labor movement as a whole. Just as well-connected national unions have overshadowed local ones, so too has the bank’s target market shifted to Washington power players.

Ten years ago, an Associated Press Financial Wire reporter said of the bank: “The 80- year- old company caters to everyone from New York City firefighters to carpenters to teachers.” But as Amalgamated approaches its centenary, its list of top clients includes Democratic candidates, political advocacy groups, and the national labor empires that have come to play a prominent, if not outsized, role in shaping the Left’s agenda. The bank has openly embraced labor friendly policies of left-leaning groups as it serves their financial needs, creating a unique relationship between the unlikely allies of banks and unions.

America’s union bank
Amalgamated declined to comment for this story beyond a statement affirming that it follows Federal Election Commission guidelines for campaign lending. Husbanding assets of $3.8 billion at the end of the third quarter of 2015, the bank reported liabilities of $3.5 billion. Its headquarters is in New York City, and it has 17 branches in three states (New York, New Jersey, and California) and the District of Columbia.

Amalgamated prides itself on being “America’s Labor Bank” at a time when the labor movement is an ever more polarizing political force. In recent years the country’s romantic history with unions has given way to falling private sector membership and growing support for Right to Work policies that free workers from being compelled to join and contribute to unions. Wisconsin Gov. Scott Walker (R) built his national profile by reforming government worker unions in his home state, and GOP presidential hopefuls from Carly Fiorina to Sen. Rand Paul (Ky.) have spoken out against compulsory collec-tive bargaining on the campaign trail. Many politicians argue that unions have lost their usefulness to the workforce as union officials position themselves more as political players and less as workers’ advocates.

Across the aisle, Democratic candidates are scrambling to lock up coveted union endorsements ahead of the 2016 primary season. Neither the powerful AFL-CIO nor the Service Employees International Union (SEIU) has selected a candidate to support, and both are using the device of delayed endorsement to encourage the frontrunners to prove their friendliness to the labor movement.

Such endorsements are just one way unions wield outsized power over politicians. While Sen. Bernie Sanders is widely seen as the Democrat with the more labor-friendly platform, Hillary Clinton is much more likely to win the nomination, regardless of whether unions fall in line behind her. This situation puts the labor movement in a difficult position when it comes to picking a 2016 candidate. Endorsements from the biggest unions, like SEIU, are highly sought commodities in Democratic primaries. [As this article was being prepared for publication, SEIU finally announced its support for Clinton.]

Keith Mestrich, Amalgamated’s president and CEO, was a top SEIU official before joining the bank in 2012 as the director of its Washington office. Mestrich soon began cultivating Amalgamated’s connections to the Democratic Party, reflecting the labor movement’s broader push to ingratiate itself with the political Left.

Mestrich has said he traces the “renaissance” of his bank, which struggled just a few years ago to recover from economic downturn, to the Democratic National Committee’s 2012 decision to shift its assets from Bank of America to Amalgamated. Over the course of the following year, deposits from the Washington area rose by 70 percent as more than 100 new Democrat-linked groups started banking at Amalgamated, according to a 2013 profile by the Washington Post. Debbie Wasserman Schultz, head of the Democratic National Committee, touted the move to Amalgamated by praising the bank’s “legacy” of supporting the middle class.

In 2014, Amalgamated attracted the business of Ready for Hillary, a political action committee created to build a broad bench of support for Clinton ahead of her official campaign launch. Adam Parkhomenko, executive director of Ready for Hillary, explained the PAC’s move to Amalgamated last fall: “It is important for us that our bank share the Progressive values of this effort.”

Indeed, many on the left have praised the bank for its commitment to a set of ideals in the way it conducts business, which is unusual in the financial services industry. Like Ready for Hillary, political campaigns and organizations have embraced Amalgamated because it shares their ideological positions and allows them to disconnect their financial decisions from the larger banks they often criticize.

But others fault the bank for allowing politics to seep into its investment practices. Right To Work supporters frequently point to unions’ political spending, which is ubiquitous and concentrated heavily in Democratic circles, when they argue that mandatory union dues unfairly force members to fund candidates and causes with which they do not agree. The concern extends to the lending and investment practices of Amalgamated, which almost exclusively benefit Democrats.

“Amalgamated is a perfect embodiment of the slush fund that organized labor has become,” said Matt Patterson, executive director of Center for Worker Freedom, an arm of Americans for Tax Reform. “Unions take dues from members (by force in non-Right To Work states) and funnel it directly to liberal groups and Democrat politicians.”

Unions’ growing emphasis on political spending has left many right-leaning members feeling disenfranchised. A bill introduced in both chambers of Congress in July would have given individual members more power over the political spending of their unions, but the legislation continues to languish on Capitol Hill.

Union watchdog organizations worry that mandatory member dues allow labor groups to make financial decisions that the members themselves might not support—including where the unions park their pension funds. In the case of Amalgamated, those pension funds are often used as tools to force “social” and “environmental” agendas on private businesses. Other arms of the bank nurture Democratic causes, creating tensions for Republican members who were compelled to pay dues that were then poured into Amalgamated.

“The Amalgamated Bank is a classic example of the left wing shadow infrastructure that labor unions create using mandatory member dues,” said Rick Berman, executive director of the Center for Union Facts, which is critical of the labor movement. “Exit polls show that 40 percent of union households vote Republican, but the cozy relationship between the Amalgamated Bank and Democratic Party ensures that conservative leaning union members will never be meaningfully represented—and will always fund politicians they don’t support.”

For Republican union members, the conflict extends far beyond Amalgamated Bank. Unions give overwhelmingly to Democratic candidates. In the last election cycle, 89 percent of the labor movement’s spending went to Democrats, and only 11 percent to Republicans. In 2008, unions spent 92 percent of the more than $75 million they put in politics on Democrats, according to the Center for Responsive Politics.

But Amalgamated’s openly partisan leaning injects Progressive politics into an area that is usually kept unbiased: workers’ retirement savings.

Ivan Osorio, editorial director at the Competitive Enterprise Institute (and a former editor of Labor Watch), said the union controlled bank’s lending in electoral politics is far less transparent than the typical political activity of unions. “One major difference is that union political donations are done directly. That’s very clear. They collect so much money in dues, they give so much money to candidates. . . . It’s pretty straightforward,” he said. “With a bank, it’s supposed to be run like a business, so it’s not a direct donation. Whether that kind of campaign lending constitutes undue risk, that’s for the bank to decide.

”Campaign lending can be a complicated process because campaigns and PACs often have little credit or collateral, yet they are forced by the nature of elections to move enormous sums of money on short timelines—for example, to buy expensive TV ads. Revenue is sporadic, with donations coming in spurts as largely unpredictable events unfold on the campaign trail.

Bob Biersack, senior fellow at the Center for Responsive Politics, said campaigns typically borrow against “physical assets” like computer systems, or against less conventional assets like donor lists, which he said campaigns can sell or rent out to other organizations in order to drum up income.

Amalgamated has worked to make itself a resource in political finance, a growing industry, for Democratic groups that need increasingly flexible options. For example, when Ready for Hillary needed a seven figure loan last fall, the bank “was willing to underwrite the loan against the flow of future contributions,” according to a recent New York Times report.

In 2012, the Democratic National Committee borrowed $8 million from Amalgamated in a move that some said plunged the DNC in debt to the SEIU. The relationship raised eyebrows because of the way it further entwined the finances of the union and the bank. “There’s an ideological dimension to Amalgamated and that’s what makes it different from most banks,” Osorio noted.”

Biersack said the bank’s campaign lending is not the same as a donation and does ultimately benefit union pension holders, just as any other loan would. “The bank (and its pension fund investors) earns money because it charges interest on loans and fees for other kinds of services. They aren’t giving anything to campaigns without getting paid,” Biersack said. “The bank isn’t giving anything to anyone—it’s earning a return on its business activities. Contributions are gifts with nothing coming in return and lobbying efforts are spending money hoping to get a policy outcome.”

Voters are increasingly concerned with the level of influence public unions have over politics. A 2011 poll by Fox News found 68 percent of registered voters worried that public unions had too much sway over which candidates win elections. Other polls have found that people are nearly as concerned with labor’s political spending as they are with the perception of corruption among unions. This problem would likely be seen as worse in a situation where the functions of a bank—already an institution that inspires skepticism in many Americans—became entangled with the political ambitions of a union.

The pivot to politics
Amalgamated’s pivot to politics came as the bank emerged from a financial crisis that had threatened the future of the organization. In 2011, Amalgamated was drowning in losses from real estate deals and staring down punishment from the Federal Deposit Insurance Corporation (FDIC) as its cash flow evaporated.

According to an enforcement action filed by the FDIC that year, Amalgamated was under scrutiny for allegedly allowing delinquent loans to sit uncollected on its books, even though some were unlikely ever to be repaid. In some cases, the bank reportedly issued new loans to pay off delinquent ones and thus avoided or delayed listing the unpaid loans as losses.

The union-owned bank was rescued in the spring of 2012 when a pair of left-leaning billionaires infused Amalgamated with $100 million, each nabbing a fifth of the bank’s common stock. One of the men, Wilbur Ross of WL Ross & Co., had a history of swooping into failing firms and turning a profit, a practice that earned him nicknames like “vulture investor” and “the king of bankruptcy.”

The other man, Ron Burkle of the Yucaipa Companies, is perhaps best known for his hard-partying tendencies and ties to former President Bill Clinton, a longtime friend. Bill Clinton reportedly earned $15 million as an adviser to Burkle’s business since entering into an agreement with the Democratic donor in 2002. The arrangement sparked controversy during Hillary Clinton’s first presidential bid because of stories about Burkle’s wild lifestyle and his company’s occasion-ally questionable business deals.

As recently as 2007, former President Clinton was raking in millions from his ill-defined “partnership” with Yucaipa, according to tax returns released earlier this year by his wife’s campaign. The two men have since parted ways amid a public feud over payments, but the Amalgamated Bank’s board still includes an executive from Yucaipa and another from WL Ross & Co.

Explaining the bank’s rescue, Noel Beasley, Amalgamated’s chairman, told Bloomberg Business in 2013, “Frankly, there weren’t a lot of other people standing in line around the bank willing to put that kind of money into it.” Beasley is also president of the politically active union Workers United, which now owns a majority stake in the bank and has eight high-ranking officials on Amalgamated’s 15-member board.

In 2012, Ed Grebow was the bank’s CEO. He said Ross and Burkle’s infusions of cash were needed because “Regulators were threatening significant sanctions and possibly closing.”

At a time when Occupy Wall Street was ripping into the financial industry for its perceived corruption and risky practices, Amalgamated hung a banner proclaiming support for the movement outside its branch near New York’s Zucotti Park, where the movement was camped out in the fall of 2011. The bank ultimately provided a home for Occupy’s finances. Occupy selected Amalgamated as the destination for its donations even after the bank reportedly made investments in subprime mortgages.

As it has pulled out of the financial hole it dug for itself in 2011, Amalgamated has also grown its relationships with a variety of other left-leaning causes, from Organizing for Action (a 501(c) (4) political group that began life as the 2012 Obama for President campaign) to the Democratic Governors Association. Its client list now includes the Employment Justice Center, Progressive Majority, and Demos—all organizations allied with the Left.

Amalgamated’s massive investment losses had come on the heels of a bitter battle over control of the bank between Unite Here—which was the remainder of a failed 2004 merger of the UNITE and HERE unions—and Workers United, which was spun off from Unite Here in 2009 and subsequently affiliated with the SEIU. By stepping into the break- up of Unite Here and subsidizing the newly formed Workers United, SEIU was able to gain control of Amalgamated in a 2010 settlement. That was a major accomplishment for SEIU, because the powerful union had borrowed millions from Amalgamated. Critics questioned SEIU’s involvement in the dispute, noting that the union’s resulting victory in securing control of the bank essentially gave it ownership of one of its largest creditors.

“Part of the political nature of the bank extends to how it’s controlled, the way it changed hands,” Osorio said of the UNITE HERE battle that ultimately determined Amalgamated’s fate. “How its current control came to be determined was itself political in nature.” Similarly, when the Democratic National Committee borrowed $8 million from Amalgamated in 2012, the move caused some observers to object that the DNC had put itself in debt to the SEIU.

Minimum wage fights
Amalgamated has chimed in on a particularly hot button political issue by tweaking its own internal policies. As the fight for a $15 federal minimum wage rages, the bank has hiked the rates it pays its hourly employees. Progressives praised Amalgamated for taking the lead on an issue for which unions have advocated.

The New York City metropolitan transit system tore down more than 1,200 paid advertisements Amalgamated had installed in subway cars and stations in September. The controversial ads called on the government to raise the minimum wage to $15 an hour and were approved by a transit official in error, according to a report by Crain’s New York Business.

The episode highlights the tensions that can arise when a financial institution dabbles in political activism. While Amalgamated protested the decision on the grounds of free speech rights, the Metropolitan Transportation Authority said the postings violated its policy against “ads of a political nature.”

Amalgamated’s political involvement extends beyond just providing specialized financial services to actively pressing corporations to adopt policies that unions support. The bank appears to invest unions’ pensions through a company called LongView Funds, which it then uses to pressure or sue corporations that mismanage assets or, in some cases, act counter to Amalgamated’s political vision.

Through a series of shareholder resolutions and lawsuits, the bank has pressured select companies that have otherwise resisted the Progressive measures unions typically demand. For example, Amalgamated has pushed corporations, including Massey Energy and Union Pacific, to end the practice of “golden parachute” severance packages for executives. In 2008, the bank promoted a resolution that required Urban Outfitters to adopt a labor code that incorporated international human rights standards. Two years earlier, it urged Citigroup to tie executive compensation to performance, and it has since made the same demand to Valero, Avon, and Walgreens, among others.

In 2011, Amalgamated brought a suit against News Corp, the media conglomerate that owns Fox News and the Wall Street Journal, charging “nepotism,” among other things, after the company acquired a firm owned by Chairman Rupert Murdoch’s daughter. The resulting settlement reportedly forced News Corp to disclose its political contributions and set up an anonymous tip line for company whistleblowers.

Last year alone, Amalgamated aided the Left’s gun control agenda by pushing the boards of three different gun or ammunition companies—Sturm Ruger & Co., Olin Corporation, and Smith & Wesson—to disclose all their political spending.

In every case mentioned, Amalgamated used shares held by LongView to either vote on shareholder resolutions or bring a derivative lawsuit. LongView Funds publicly maintains a position that corporate executives should not earn generous salaries unless the companies they manage are thriving. “We oppose pay practices that excessively reward executives who have not performed well,” the fund wrote in an annual financial report. “As such, we urge companies to avoid practices that risk paying significant corporate assets as windfalls to executives, regardless of how well or poorly the executives have done.”

Osorio said Amalgamated’s boardroom activism separates it from most other banks. “It’s driven by a political agenda in a way that banks generally aren’t,” Osorio said. “If there is a pattern of shareholder resolutions that seek to advance some sort of political agenda, clearly” the bank is basing its decisions not on what will maximize the performance for investors, including union members and their pensions, but on other considerations. “With pension fund investments, the goal should be to increase returns,” Osorio noted.

Dr. Steven Allen, editor of Labor Watch, said the bank’s efforts to shape corporate policy go to the heart of why the labor movement embraces an institution like Amalgamated in the first place. “Why does a union have a bank?” he asked. “So it can either provide people with loans that maybe you and I consider questionable—but they can at least legally justify it—or they can use the bank’s power to pressure companies to go along with unionization.”

Amalgamated is understandably critical of other banks when they operate as honeypots for their own senior executives. But when Amalgamated takes the hard -earned money provided by working families in unions and then turns the cash into a honeypot for labor bosses’ preferred political allies, apparently that’s just fine.

About the Author: Sarah Westwood is an investigative reporter for the Washington Examiner, from which this article was adapted. This article originally appeared in the July 2015 issue of “Labor Watch” and appears here with permission.

Dear California Teacher

An email sent to educators just 10 years ago opened a lot of eyes – including mine – about the true nature of the teachers unions.

In 2005, after having taught for 24 years, I was becoming quite agitated. All along I had been subsidizing the teachers unions’ political agenda and thought I had no choice in doing so. I then learned that I could opt out of the political portion of union dues, but the process to do so was designed to discourage such actions. Shortly thereafter I read about Prop. 75, a California ballot initiative, which would have done just what I wanted: make the payment of the political portion of union dues voluntary. Teachers and other public employees would have to give the union permission before it deducted several hundred dollars a year from each paycheck to fund its pet political causes. The unions’ largess, supporting many causes which had nothing to do with teaching or education, went almost entirely in a leftward direction – implementing a single-payer health-care system in California, limiting restraints on the government’s power of eminent domain, etc.

In June, 2005, political consultant Steve Frank recruited me to become part of the Prop. 75 campaign. The so-called “Paycheck Protection” initiative was very popular at that time with both teachers and the general public. But over the summer, deeply threatened that their easy access to workers’ money would be cut off, the unions went into overdrive and spent a huge amount of cash, much of it on misleading ads. The California Teachers Association told teachers that if the prop passed, their pensions would be threatened. The police union told their members that if it was successful, the public would learn where the cops lived. Both allegations were big lies, but they were effective in swaying public opinion.

In October, several weeks before the election, Fontana teacher Lillian Perry and I signed off on an email sent to 90,000 teachers by the Prop. 75 campaign. It began,

Dear California Teacher:

We are also California teachers and are writing to you because we’re concerned about what the leaders of our union, the California Teachers Association (CTA), are doing to our union and with our hard earned dollars that we send to them in Sacramento every month.

Here’s the bottom line: Our current leadership is on the verge of bankrupting the CTA to fund a political agenda that many of us do not support.

Every year, union leaders in Sacramento take more than $100 million dollars from California teachers’ paychecks. This is approximately $300 per teacher per year. Much of this is used to fund a political agenda over which individual teachers have little control. Even worse, this is taken from our paychecks without our permission.

Earlier this year, the CTA leadership decided it still didn’t have enough money to spend on politics, so the (they) decided to take an additional $60 each year from our paychecks for the next three years. This forced assessment gave the union leaders an additional $50 million or more of our money for their political agenda.

Then, the spit really hit the fan. To say that CTA was unhappy would be the understatement of the century. The email made news all over the state, and if nothing else, got everyone talking about the prop. The Daily Kos smeared those of us who had stepped forward. CTA boss Barbara Kerr was indignant, saying, “It’s insulting that it was sent to them at their schools.” The union tried to push the matter – even at one point threatening Perry and me with imprisonment for sending our missive to teachers at work which it claimed was illegal. (The bullying didn’t work; we sent two more emails which CTA couldn’t stop because it didn’t have a legal leg to stand on.)

We did get some sympathetic press, though. Deroy Murdock, a media fellow with the Hoover Institution, wrote “The Union of the Snake” for National Review, in which he detailed the ugly bullying tactics used by the union to combat the initiative. As is oh-so-typical, the unions rarely argued the merits of the prop; they simply threatened us, cursed at us and shouted us down. As Murdock reports, when a National Right to Work Foundation lawyer and several of the prop’s advocates held a press conference in Sacramento, some of SEIU’s finest showed up and yelled “Shame on you!!” over and over and over again as the proponents tried to make their case. Murdock also related the tale of Sandra Crandall – a Teacher-of-the-Year – who then was in her 36th year as a Kindergarten teacher in Fountain Valley. In September, Crandall told the Los Angeles Times, “This is a freedom-of-choice issue. The issue is so simple, my Kindergarten children understand it. Ask permission. Ask permission on how to use my hard-earned money.”

Crandall’s simple, fair-minded statement engendered a less-than-charming response from “Four Pro-Union teachers who think you and the governor and the Republican party (sic) stink.” A few highlights:

You are a disgrace in supporting such a measure … You not only deserve to be shunned by your colleagues, you deserve to be bitch slapped in public by all the teachers you work with for demonstrating such a high level of right wing drivel and stupidity. Do us all a favor, shut your mouth and stop providing ammunition to the enemy.

Ah yes, nothing like tolerance and civil discourse!

As Election Day neared, I was mildly optimistic that we’d win. Especially so, after I, along with Lillian Perry, former Mayor Richard Riordan and Deputy Sheriff Lon Jacobs, appeared before the Los Angeles Times editorial board to pitch the initiative. We apparently convinced them of its merits, because on October 16th, much to my delight, the Times officially endorsed Prop. 75.

In the end though, we couldn’t beat the powerful union machine. Fueled by CTA’s $12 million ad buys (paid for, of course, with dues money teachers were forced to fork over), the anti-75 forces outspent us almost 10 to 1 – $54.1 million to $5.8 million and the measure lost by 53.5 to 46.5 percent. Not surprisingly all the big money came from the unions, including a $3.3 million donation from the California Democratic Party – a bought-and-paid-for wing of CTA.

Needless to say, I was furious with the outcome. But it motivated me in 2006 to co-found the California Teachers Empowerment Network, whose mission is to give teachers unbiased information, and combat union spin and outright lies. In 2010, I worked on a similar prop – The Citizens Power Initiative – which unfortunately never made it onto the ballot. And in 2012 I stumped for Prop. 32, yet another initiative promoting worker freedom. It too failed at the polls.

Now – exactly ten years after the rise and fall of Prop. 75 – there are two lawsuits which could accomplish even more than what the failed initiative had tried to achieve. The Friedrichs v CTA case, due to be heard by SCOTUS in 2016, would make paying any dues to a union optional for all public employees nationwide. If Bain v. CTA flies, teachers will be able to opt out of the political portion of their dues without being forced to resign from the union.

Both cases promote teacher freedom and choice at the expense of union bullying and hegemony. It’s about time teachers and other public employees had both.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Planned Persecution

NEA claims to be for religious freedom, but Catholics and other right-to-lifers need not apply.

“The National Education Association believes that freedom of religion is a fundamental human right. The Association also believes that choice of religion is an intensely personal decision.” These high-minded words are from NEA Resolution I-33, which was passed at its recent convention. Nothing really new here; the NEA passed other similar resolutions this year, and in fact it does so every year. There is also nothing new about the union’s raving hypocrisy on the issue.

As we learned recently via several secretly recorded videos, Planned Parenthood (PP) not only performs an ungodly number of abortions every year, but is in the dead baby body parts sales biz too. One would think that the unions, which have donated millions to PP over the years, might have shown some reticence. But they have doubled down instead. Over at AFL-CIO, Boss Trumka asserted that calls to defund PP “based on doctored undercover recordings are politically motivated and wrong.” Actually, he’s wrong. The videos weren’t “doctored” at all; they were available in their entirety on the internet. SEIU president Mary Kay Henry stood her ground and affirmed in a tweet, “Extremists stoop to new low attacking women & access to preventive care.” (Henry has a familial stake in this in that SEIU VP Kirk Adams is married to PP president Cecile Richards.)

In another case of defending evil, spreading falsehoods and/or selling ignorance, American Federation of Teachers president Randi Weingarten tweeted “More than 50% of Planned Parenthood patients are enrolled in Medicaid. Defunding @PPFA would take their coverage away. #StandWithPP” Wrong again. Defunding PP won’t take anyone’s Medicaid coverage away.

But for sheer misdirection nothing beats United Federation of Teachers president Michael Mulgrew who back in 2012 announced a $125,000 gift to PP. “As a union with a large female membership, we know the importance of the kind of health care that Planned Parenthood provides, including breast cancer screening.” Well, actually, despite what many think, PP does not perform mammograms or even possess the necessary equipment to do so. Its clinics do provide referrals, but the Susan G. Komen Foundation and the American Cancer Society readily provide them as well.

It’s important to note that UFT’s $125,000 gift (and all union largess) is comprised of dues money the union collects from its teachers regardless of their religious/moral convictions. So what can a pro-life teacher do knowing that part of his/her union dues is going to fund PP, one of whose raisons-d’être is killing (and now selling body parts of) the unborn? In non-right-to-work states, these teachers have two options. They can become agency fee payers in which case they must still pay for things like collective bargaining but don’t have to support the unions’ progressive political agenda. Or a teacher can become a religious objector and pay absolutely no money to the union, but instead pay a full dues share to a charity agreed on by the teachers union and the school district. This is a difficult status to achieve because the union just can’t bear to have what it considers a freeloader in its midst. As such, a dissenting teacher must usually seek out legal assistance and go to great lengths to prove their religiosity.

Enter Linda Misja, a high school language teacher in western Pennsylvania. Ms. Misja, a devout Roman Catholic, and her union, the Pennsylvania State Education Association (PSEA), just can’t seem to agree on a mutually acceptable charity. According to Watchdog.org’s Evan Grossman, Misja initially requested that her money to go to People Concerned for the Unborn Child, a pro-life group which is opposed to artificial contraception, in-vitro fertilization and birth control. The union, which either has a dark sense of humor or is seriously delusional, came back with an offer to send her dues money to an abortion clinic.

Misja countered with an alternative: a charity arm of the National Rifle Association which works with public schools to teach gun safety. But the union nixed this idea also on the grounds that it was “too political.” As Misja and the union duke it out, $2,000 she earned as a teacher is sitting in an escrow account.

What all this points to is that the teachers unions – PSEA is but one example – put their far left agenda above all else. The high-minded assertion about religious liberty in NEA Resolution I-33 is a canard. If the union really believed in religious freedom, it would direct PSEA, an NEA affiliate, to honor Misja’s request to have her money donated to an entity that supports her Catholic beliefs. And just as ridiculous is PSEA’s claim that donating to the NRA is “too political.” Since 1989, NEA has spent $92,972,656 on candidates, PACs, etc. while the American Federation of Teachers spent $69,757,113 during the same 26 year period. (In 2014 alone, PSEA spent $2,711,333 on politics) But Ms. Misja is laughably being denied the option to donate to the NRA because it’s “too political.”

Tolerance is a buzzword the teachers unions use with great abandon. But when it only goes one way, it becomes dictatorial, which is a perfect word to describe many teacher union policies.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

The Friedrichs Free Rider Fraud

The Supreme Court’s decision to hear the Friedrichs case has the unions in a tizzy.

On June 30th, the Supreme Court decided to hear Friedrichs v. California Teachers Association et al, a case that could seriously change the way the public employee unions (PEUs) do business. If the plaintiffs are victorious, teachers, nurses, sanitation workers, etc. would be able to work without the financial burden of paying union dues. The responses to the Court’s decision from the teachers unions and their friends have ranged from silly to contradictory to blatantly dishonest.

In a rare event, leaders of the NEA, AFT, CTA, AFSCME and SEIU released a joint statement explaining that worker freedom would be a catastrophe for the Republic. Clutching their hankies, they told us that, “big corporations and the wealthy few are rewriting the rules in their favor, knocking American families and our entire economy off-balance.” And then, with an obvious attempt at eliciting a gasp, “…the Supreme Court has chosen to take a case that threatens the fundamental promise of America.” (Perhaps the labor bosses misunderstood the wording of the preamble to the Constitution, “In order to form a more perfect union….” No, this was not an attempt to organize workers.) While the U.S. is not without its problems, removing forced unionism will hardly dent the “fundamental promise of America.”

The California Federation of Teachers, which typically is at the forefront of any class warfare sorties, didn’t disappoint. The union claims on its website that the activity of union foes “has resulted in a sharp decline in median wages for working people and the decline of the middle class alongside the increasing concentration of income and wealth in the hands of the one per cent.” But wait a minute – the unions are the most potent political force in the country today and have been for a while. According to Open Secrets, between 1989-2014, the much maligned one-percenter Koch Brothers ranked 59th in political donations behind 18 different unions. The National Education Association was #4 at $53,594,488 and the American Federation of Teachers was 12th at $36,713,325, while the Kochs spent a measly $18,083,948 during that time period. Also, as Mike Antonucci reports, the two national teachers unions, NEA and AFT, spend more on politics than AT&T, Goldman Sachs, Wal-Mart, Microsoft, General Electric, Chevron, Pfizer, Morgan Stanley, Lockheed Martin, FedEx, Boeing, Merrill Lynch, Exxon Mobil, Lehman Brothers, and the Walt Disney Corporation, combined.”

So the question to the unions becomes, “With your extraordinary political clout and assertion that working people’s wages and membership in the middle class are declining, just what good have you done?”

Apparently very little. In fact, the National Institute for Labor Relations Research reports that when disposable personal income – personal income minus taxes – is adjusted for differences in living costs, the seven states with the lowest incomes per capita (Alaska, California, Hawaii, Maine, Oregon, Vermont, and West Virginia) are forced-union states. “Of the nine states with the highest cost of living-adjusted disposable incomes in 2011, Iowa, Kansas, Nebraska, North Dakota, South Dakota, Texas, Virginia and Wyoming all have Right to Work laws.” Overall, the cost of living-adjusted disposable income per capita for Right to Work states in 2011 “was more than $36,800, or roughly $2200 higher than the average for forced-unionism states.”

But the most galling and downright fraudulent union allegations about Friedrichs concern the “free rider” issue. If the case is successful, public employees will have a choice whether or not they have to pay dues to a union as a condition of employment. (There are 25 states where workers now have this choice, but in the other 25 they are forced to pay to play.) The unions claim that since they are forced to represent all workers, that those who don’t pay their “fair share” are “freeloaders” or “free riders.” The unions would have a point if someone was sticking a gun to their collective heads and said, “Like it or not, you must represent all workers.” But as I wrote recently, the forced representation claim is a big fat lie. Heritage Foundation senior policy analyst James Sherk explains,

The National Labor Relations Act (NLRA) allows unions that demonstrate majority support to negotiate as exclusive representatives. If they do so they must negotiate fairly on behalf of all employees, including those who do not pay dues. However unions may disavow (or not obtain) exclusive representative status and negotiate only for their members. Nothing in the National Labor Relations Act forces exclusive representation on unwilling unions. (Emphasis added.)

Mike Antonucci adds,

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.

If there are still any doubters, George Meany, the first president of the AFL-CIO, whose rein began in 1955 and continued for 24 years, told Congress,

When a union has exclusive recognition with a federal activity or agency, that union is required to represent all workers in that unit, whether or not those workers are members of the union. We do not contest this requirement. We support it for federal service, just as we support it in private industry labor-management relations.

While the NLRA applies only to private employee unions, the same types of rules invariably govern PEUs. Passed in 1976, California’s Rodda Act allows for exclusive representation and it’s up to each school district and its local union whether or not they want to roll that way. However, it is clearly in the best interest of the union to be the only representative for teachers because it then gets to collect dues from every teacher in the district. It’s also easier on school boards as they only have to deal with one bargaining entity. So it is really a corrupt bargain; there is no law foisting exclusivity on any teachers union in the state.

So exclusive representation is good for the unions and simplifies life for the school boards, but very bad for teachers who want nothing to do with organized labor. It is also important to keep in mind that the Friedrichs case is not an attempt to “bust unions.” This silly mantra is a diversionary tactic; the case in no way suggests a desire to do away with unions. So when organized labor besieges us with histrionics about “the promise of America,” the dying middle class, free riders etc., please remind them (with a nod to President Obama), “If you like your union, you can keep your union.” In this case, it’s the truth.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Split Roll and the Bottomless Hole

A union-led initiative wants to eliminate Prop. 13 benefits for businesses.

California’s Prop. 13, wildly popular on both sides of the political aisle, is under siege by unions. Using the Orwellian name “Make It Fair,” a coalition led by the California Teachers Association, California Federation of Teachers, SEIU and their friends has decided that they can milk businesses to the tune of $9 billion a year via a new ballot initiative.

As Dan Walters explains, “Proposition 13 limits property taxes on all forms of property to 1 percent of value, plus what’s needed to retire bonds and other debts, and limits increases in value to no more than 2 percent a year, except when properties change hands. Newly constructed homes and commercial buildings are placed on the tax roll at their initial values, but are protected by the limits thereafter.”

While it is true that there are a few loopholes which probably should be addressed on the commercial side of Prop. 13, the promoters of the so-called split roll initiative are using that as an excuse to essentially gut the tax protections for businesses. It is tantamount to owning a smooth-running automobile with an oil leak and being told you should ditch the car. To that end, Jon Coupal and Robert Lapsley joined together in 2014 to sponsor a reform bill that would have eliminated the loopholes. They explain,

AB 2371 was authored by the chair of the Assembly Revenue and Taxation Committee, Raul Bocanegra, and San Francisco-area Assemblyman Tom Ammiano and supported by a broad coalition of business and taxpayer organizations. Most importantly, we also had the support of the California Tax Reform Association (who is pursuing the split roll initiative) as it passed overwhelmingly off the Assembly floor.

But then a strange thing happened on the way to the Senate. The California Tax Reform Association suddenly flip-flopped and withdrew its support in the Senate, saying that AB 2371 was not real reform after all. Why? Because they realized that taking care of a potential problem would actually create a bigger problem for their political agenda to pass a split roll initiative next year. The California Tax Reform Association and other groups want to preserve the ‘loophole’ issue as one of their key messages in the 2016 campaign.

The unions would have us think that the state of California doesn’t receive its fair share of taxes. Of course nothing could be further from the truth, and most of us who pay them as residents and property owners in Taxifornia know it. As San Diego tax fighter Richard Rider informs us:

CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, and a heck of a lot higher than all the rest – including 7 states with zero state income tax – and 2 more that tax only dividends and interest income.

CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd.  Plus the 5th and 8th.

CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes). Two new 2015 bills seek a combined $10 billion++ CA state and local sales tax increase. At least one will likely pass.                          

CA has the nation’s 2nd highest gas tax at 63.8 cents/gallon (Jan., 2015). Add in the new 10-15 cent CA “cap and trade” cost and CA is easily #1. National average is 48.3 cents. Yet CA has the 6th worst highways.

CA in 2014 ranked 17th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 10th highest in the nation in 2009 (latest year available).

That the teachers unions are promoting another tax raise at this time is especially galling. Due at least in part to the union-orchestrated Prop. 30 in 2012, Governor Jerry Brown has just announced a revised budget which will see billions headed for schools over the next few years, including $3.1 billion for the current year and $2.7 billion for next year. K-12 education funding will increase $3,000 per pupil – a 45 percent boost – over 2011-12 levels.

But is it possible that the unions will be affected by their own proposition? As Mike Antonucci points out, it isn’t clear if they will be exempt from the provisions in the initiative. CTA’s building in Burlingame is assessed at $22 million and its 2014 tax liability was $265,000 or about the same 1.2 percent rate my wife and I pay for our home in Los Angeles. CTA’s and other unions’ tax bills could increase considerably if the prop flies. So it would hardly be a surprise if they tried to carve out an exemption for themselves. (Please keep in mind that that at the same time CTA is trying to stick it to tax-weary Californians, it brings in about $185 million a year in forced dues and pays not a penny in state and federal income tax.)

However, even if CTA and other public employee unions are not exempted, they may figure that they will still make out because that extra $9 billion will enable the state to hire busloads of new employees, all of whom will be forced to pay the unions if they want to work. In short, it will be an investment with a great ROI.

If successful, what are the ramifications of this initiative for California? The Orange County Register points to a March 2012 study from the Pepperdine University School of Public Policy’s Davenport Institute. It found that “adopting such a ‘split-roll’ property tax would result in a loss of nearly 400,000 jobs and $72 billion in economic activity in the first five years.”

Grim news for Californians. However, Texans are grinning ear-to-ear, baking cookies and ordering evermore welcome mats.

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 and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

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.

*   *   *

Beware the "Neutrality Agreement"

In previous articles, the connection between the SEIU and President Obama and their desire to turn America into a socialistic totalitarian dictatorship have been presented. President Obama’s actions since the 2014 Midterm Elections, as outlined below, support this position. The President is utilizing the SEIU’s “Persuasion of Power” by incorporating its corporate campaign strategy to fundamentally transform America, just as he promised within five days of taking the oath of office. In essence he is acting to force Americans and their representatives in Congress to sign a Neutrality Agreement and impose Card Check on America.

Card Check is a concept used by big labor to eliminate people’s choice when voting for union representation, and ultimately disenfranchises them from their employers, free choice and the free market. President Obama, trained by the SEIU (see Obama and the SEIU), is attempting to force Americans to agree to the same process with respect to government in order to achieve his agenda, to replace our free enterprise system with socialistic totalitarianism. Among his actions to accomplish this:

All of the above, and likely more behind the scenes, are designed to allow the President to establish a socialistic totalitarian regime potentially before the 2016 Presidential Election.

When is America going to wake up and realize that the President is controlled by the likes of the SEIU, the union labor bosses, and people like George Soros (see George Soros and Barack Hussein Obama). Obviously some have awakened, but are immediately censored as seen in 12-Year Old has Facebook Account Blocked after Criticizing Obama. The real question is When Will Congress and the Mainstream Media Wake Up and begin Identifying the Devil at Our Doorstep!

Maybe the following e-mail testimonial from a former in-house SEIU attorney to talk show host Chuck Wilder, whose show I was on, will wake up America to what I have been preaching all along:

Subject: A salute to David Bego for his courage

Chuck:
As former chief in-house legal counsel for what was then SEIU-Local 660, the largest local union west of the Mississippi representing some 25,000 Los Angeles County Employees, I salute David Bego for standing up for freedom against the SEIU.

Under the leadership of former “social worker” become socialist president of SEIU, Andy Stern, SEIU members were transformed from public servants to public enemies, grasping for salary, benefits, pensions and power over the taxpayers who pay them.

I just bought David’s book for my daughter for Christmas.

Good to see a modern David taking on the SEIU socialist Goliath.

For God & Country Forever; Surrender To Tyranny—Never!
Rees Lloyd

It is time to expose this President’s Divide and Conquer agenda, and The Taking of American Freedoms. It is time for Americans to stand up like Governor Scott Walker has with his recent passage of RTW (see Wisconsin Becomes 25th Right-to-Work State), and to punch the bullies in the nose to Restore America’s Prosperity before all is lost! Beware the Neutrality Agreement, America.

 

SEIU Motives and Tactics Remain the Same

Times have changed, but the SEIU’s motives, and the means and tactics used to accomplish these motives — as documented in The Devil at Our Doorstep — remain the same. The SEIU’s ultimate goal is to achieve its agenda of destroying America’s Free Enterprise system and replacing it with statism. As seen in recent actions across the country, it is apparent the SEIU is still intent on fundamentally changing America, as is its cohort in the White House, President Obama. The President continues to create a welfare state and to attempt to overwhelm the American economy. In his State of the Union Address, Obama’s Middle-Class Pitch made it very clear, his agenda is to continue to pit Americans against each other (see Overwhelming the System). Together, the President and the SEIU are intent on collapsing the American system. They fervently believe that their Cloward-Piven Strategy Is Working, and that such strategy is what is best for America and the rest of the world.

While the President continues to foment racial divide through federal investigations in Ferguson and New York the SEIU’s Insidious Tentacles are involved behind the scenes in fostering these unrests so Eric Holder and the President, with the assistance of Al Sharpton, can paint America as a racist country. The stories below found in Phil Wilson’s LRI Publication reveal tactics employed behind the scenes by the SEIU to facilitate the administration’s agenda of Divide and Conquer.

First, with respect to New York: Robert Murray, a top 32BJ SEIU organizer earning a six-figure salary, has been charged with two felony counts and three misdemeanors, including resisting arrest, inciting to riot, and obstruction of governmental administration, for his participation in the December 13 assault of two NYPD police officers on the Brooklyn Bridge.

 A week after the incident, Murray turned himself into the police. The union has reportedly put Murray on unpaid leave until the matter is settled. Elaine Kim, a spokesperson for the 32BJ SEIU, said “The union did not organize any official contingent to participate in the protests.”

 While that may be true, it is also true that the SEIU has a history of organizing protests without “officially” putting their name on it. Additionally, Mayor Bill de Blasio met with the group behind last month’s New York City protests. Guess where the meeting was held? 1199 SEIU headquarters.

Second, the SEIU has been involved in Ferguson: President Obama is utilizing the tried and true labor boss tactic of misdirection to take Americans’ “eyes off the ball” regarding his Amnesty Order and, instead, has been directing attention to the recent events in Ferguson and New York City, as witnessed in a recent interview on BET where he said Racism is “Deeply Rooted” in U.S. Society.

The eruption of violence following the Michael Brown decision in Missouri and the Eric Garner decision in New York were blamed by the media on “outside agitators,” people who descended on the scene to generate unrest, and publicity. But just who were these hoodlums? According to Bill O’Reilly, the SEIU was front and center in the escapade.

Knowing that the connections would be made sooner or later, SEIU is attempting to jump on the bandwagon calling for “racial justice” in relation to the two incidents. Not surprisingly, many of the “Black Lives Matter” protestors have also been actively protesting for the Fight for $15 movement, another protest project spearheaded by SEIU behind the scenes. Perhaps SEIU should be responsible to pay the bills for all of the property destroyed in the SEIU-fomented unrest and violence.

Third, the President’s home state is providing payback and funds for the SEIU to basically nullify the freedom provided to home health care workers not to pay union dues by the U.S. Supreme Court. After the Supreme Court’s Harris v. Quinn decision in October, the state of Illinois enacted a policy requiring home-based caregivers to attend “training sessions” led by SEIU. The state is using taxpayer money to pay the union as much as $2 million to conduct these meetings – most of which are spent with SEIU officials “telling caregivers they will lose all benefits, including health insurance and the Medicaid stipend that helps them care for their loved ones, should they opt out of paying union dues.” Illinois Policy Institute has responded by sending staff members to wait outside most of these meetings in order to inform caregivers that what SEIU is telling them is not the truth. SEIU, of course, complained to the state about Illinois Policy’s presence, creating some situations where staff members have been threatened with arrest.

Fourth, with respect to the President’s Amnesty program, as chronicled in DREAM Act, the Truth behind the Nightmare, the SEIU is being provided another payback in the form of potential future forced unionized workers as well as the opportunity to further create racial divide by giving them access to undocumented workers granted amnesty — The SEIU is taking advantage of President Obama’s recent executive order to give working visas to some 4 million immigrants. Their hope is that some of these people who have been too afraid to sign up in the past won’t be now.

There is no doubt the President and the SEIU are determined to fundamentally change the greatest country in the history of the world to impose their own view. America has provided more opportunity and increased the quality of life for more people, regardless of their background, than any country in history. Despite this, the President and the “same old” SEIU still believe they know best and are determined to destroy the American Free Enterprise system and impose statism upon this great country. Their true agenda is control of the American people.

*   *   *

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.

With 2014 Mid-Term Elections Close – Unions Intensify Efforts

Control of the U.S. Senate is at stake in the upcoming mid-term elections, which is imperative for the President and Big Labor to maintain their majority if there is any hope to achieve Big Labor’s goal of eliminating the secret ballot election and replacing it with the forced unionization method of Card Check. Even at a casual glance, however, the new tactics would cause even the most gullible to take pause and say, “Really?”

In recent weeks, Big Labor’s campaigns of intimidation and misinformation have risen to new heights. This is highlighted by the recent headline “Unions say they’ll get even with Scott Walker,” for passing popular laws restricting collective bargaining agreements and dues collection in Wisconsin (see Collective Bargaining is a Privilege, Not a Right). Such tactics are typical big labor strategy, as chronicled in The Devil at Our Doorstep, which clearly exposes the SEIU’s Death by a Thousand Cuts Corporate Campaign to use intimidation and misinformation to achieve its goals!

Unions accuse corporations of have an unfair advantage, stating that they have more money to spend on election candidates. The truth, however, is that Unions are Outspending Corporations on Campaign Ads Despite Court Ruling.

Once again, Big Labor is relying on the fact that a large percentage of the population that is naïve to their cause, and is therefore easily misled and too busy to investigate the facts. However, based on big labor’s latest tactic it appears the Gasping Dinosaurs may be carrying these assumptions a bit too far. Despite the fact Union Members are Not Happy with Their Leader’s Political Spending — and it has been well documented ( see IRS turns a blind eye to unions’ political expenditures) that approximately 90% of union donations go to democrats while they outspend corporate donors significantly — big labor is now attempting to humiliate (see The New Union Organizing Tool, Embarrassment) those who disagree with their agenda and their politics. An example can be seen with the Koch Brothers, whom Big Labor is attacking by discourage people from doing business with their companies. Believe it or not, a new AFL-CIO Ad Introduces the ‘Koch Sisters’ to Counter the Billionaire Brothers.

Perhaps most unbelievable is how Big Labor not just misuses its members’ dues for its own political agenda but believes it can continue to exploit its own power and its membership’s naiveté. The following e-mail was sent to members of the SEIU and was forwarded to me by one of its disgruntled members:

Would you throw away your umbrella in a rainstorm because you weren’t getting wet?
No, you wouldn’t. But that’s exactly what the Supreme Court did a year ago when they gutted the Voting Rights Act of 1965 (VRA), the most important and successful civil rights law ever enacted by the U.S. Congress.The right to vote is at stake. SIGN THE PETITION and tell Congress to restore strength to the Voting Rights Act!In some states, especially Southern ones, it used to be really, really hard for people of color to vote. The Voting Rights Act helped end that, banning racism at the polls and carrying forward the work Dr. Martin Luther King, Jr. and so many others to ensure communities of color have a voice in our political process.But in 2013, the Supreme Court — by a 5-4 vote — undid a VRA provision that cleared barriers to voting in areas where minority voters were heavily silenced at the polls.Within hours of the Supreme Court’s decision, several states in the South immediately announced that they would pursue new voter ID laws that were clearly designed to make it harder for African Americans and Latinos to vote. And one year later, 15 states have already enacted rules making it more difficult to vote.Voter discrimination based on race is not a thing of the past. It is a current reality that persists to this day. We need to stop Republicans in states around the country from enacting racist voter ID and voter suppression laws. Passing the Voting Rights Amendment Act now is the best way to do it.

Sign the petition: Tell Congress to stop the attacks on voting rights.

We’re joining with our allies for a petition delivery to Congress next week to urge the House and Senate to take swift action to correct this injustice.

There is no right more fundamental to our democracy than the right to vote. Tell Congress to restore the Voting Rights Act now.
 
The November elections are fast approaching, and vulnerable voters could lose their voice in this democracy if we don’t act now.
 
Thanks for fighting,
SEIU.org
 
As chronicled in Election 2010 and Fraudsters the Reason Blue States Remained Blue?, the real reason Big Labor wants to eliminate Voter Identification laws through restoration of the Voting Rights Act is for union members to more effectively intimidate undocumented workers and others who either don’t qualify, are of another political bent, or are disinterested, into registering to vote and then escorting them to the polls with the directive to vote for the big labor candidate of choice (see Big Labor’s Expense for Election Foot Soldiers, is Finally in the Media Spotlight). This brazen display of misinformation by the SEIU labor bosses leads one to ask the only question that makes sense: “Do they think we are idiots?”

*   *   *

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.

The Growing Rift Between Public and Private Sector Unions

New York Gov. Andrew Cuomo, a Democrat, is coasting to reelection with only partial support from organized labor. While many private unions remain in his corner, the state’s major government unions are either declining to support Cuomo’s bid for a second term or have endorsed a challenger. In this respect, Cuomo 2014 resembles New Jersey Gov. Chris Christie’s hugely successful reelection campaign last year. As Steve Malanga detailed here, Christie received enthusiastic support from building trades unions, whereas public sector unions never forgave him for his first term initiatives on pension and K-12 reform.

Any news about a private v. public split in the labor movement is encouraging, because influence peddling by government unions is far more troubling than when it’s done by private sector unions. Market forces keep corporations, and thus their unions, in check, but cities are monopolies and never go out of business. Government unionization thwarts the will of the voters, by forcing politicians to implement policy through the collective bargaining process instead of legislation. Taxpayers should not have to pay workers extra for administrative changes such as drug testing or a new teacher evaluation system.

But will the trend continue?  Many political coalitions don’t outlive their standard bearers. Bridgegate certainly seems to be testing Christie’s hold over his. And Cuomo is a uniquely talented politician, as attested by the polls, his warchest, his strong support on the left and right, and his ability to make the New York State legislature look effective or at least less dysfunctional.

Here are four factors to consider in considering the potential that other blue state politicians might split the labor movement, to the detriment of public sector unions.

First, recessions are helpful, because they stimulate more conflict between government unions and Democrats than private sector unions and Democrats. Most priorities of private labor—minimum wage, paid leave, making it easier to organize—can be pushed regardless of economic conditions. The arguments may change (“…now more than ever…”) but the goals and their chances at becoming reality probably do not.

As employers, governments must balance their budgets, and so, as policymakers, they simply can’t be as generous with teachers and police unions during recessions. An austerity budgeting regime puts unions on the defensive and sows distrust between them and Democrats. (“Is he doing this pension reform to shore up the retirement system, which is what he told us, or so that he can brag to the business community?”)

Second, the private/public distinction breaks down in the case of private unions that seek rents that effectively transform them into public employee unions. Project Labor Agreements and other union-friendly bidding restrictions on public construction projects make government workers out of employees of unionized construction firms. To regard 1199 SEIU, the most powerful union in New York State, as a private union like the steel or autoworkers would be to overlook the government’s outsized role in healthcare finance.

Third, the Cuomo model is more threatening to unions than the Christie model. Though statistically normal, Republican governorships in New York, Massachusetts, Connecticut and New Jersey are still hard not to interpret as aberrations, more the result of Democrats’ bungling than a political paradigm shift. The party remains weak. A blue state Democrat proving he can win and govern without unions provides a model for others to replicate whereas Republican success always seems sui generis.

Fourth, government unions have benefited from the weakness of private unions, which has made them more indispensable. Until private unions can do more for Democrats in the way of money and ground troops, politicians who care about being tagged as anti-worker will be wary of alienating AFSCME, NEA and  AFT.

About the Author:  Stephen Eide is a senior fellow at the Manhattan Institute’s Center for State and Local Leadership. Steve received his doctorate in political science in Boston College and previously was a Senior Research Associate at the Worcester Regional Research Bureau. His research focuses on public employee unions, retirement benefits, public finance, and urban policy.

Union Stand on Immigration Harms Union Membership

Editor’s Note:  As a businessman who plays by the rules and competes with companies who don’t, Dave Bego has first hand knowledge of how poorly managed immigration of unskilled workers harm the interests of the American worker. Regardless of your stand on immigration, you can’t expect to extend a de facto preference to unskilled immigrants, which is what America has done for the last few decades, and expect entry level workers to have any leverage with employers. So why are America’s unions promoting these policies? In an era of increasing automation, unskilled and semi-skilled jobs are disappearing. America has a shortage of skilled and highly educated workers, and it is those immigrants who should receive preference. But educated and highly skilled immigrants find good jobs and pay lots of taxes. They do not generate the need for new armies of multi-lingual public sector workers to care for them, from social welfare to public safety. They don’t generate the need for taxpayer subsidized low-income housing that is a windfall for politically connected developers. And they don’t vote for liberal candidates and causes that grow the state. The reasons private sector unions support large scale immigration of low skilled workers are political, and have little or nothing to do with the interests of their members. The reasons public sector unions support this are because it allows them to grow their government workforces, regardless of the ensuing social chaos, economic misery, and harm to the entry level American worker. Dave Bego may be outspoken on this issue, but he’s right. And he cares about hard working Americans far more than the unions he’s battled for years.

The most recent jobs report proclaimed that 288,000 new jobs were created and that unemployment dipped to 6.1%. The Obama Administration’s portrayal of the report as indicative of an economic recovery is more disingenuous rhetoric from a President and administration that was trained by the likes of the SEIU and Bill Ayres. Much like the misinformation spewed by big labor during Corporate Campaigns to force unionize employees, the intent is to bedazzle the naïve, uninformed and easily misled with propaganda designed to achieve its goals. The misleading jobs report cited by the Administration, as well as the President’s refusal to address the concern of our open borders, is reminiscent of Bill Ayer’s tactics except, instead of lobbing bombs, the President uses flowery and misleading rhetoric to achieve the destruction of the nation’s work force and economy! Conveniently, the jobs report failed to identify that the net 288,000 jobs consists of approximately 500,000 full-time jobs lost and replaced by 788,000 part-time jobs, realistically providing less take home pay for employees and failing to qualify them for the mandates of employer-provided health care insurance. Thank you Affordable Care Act (ACA)!

Despite the fact practically all other countries in the world have strict immigration penalties for illegal immigration, President Obama has failed to address the issue, magnifying the economic nightmare. Illegal immigration places a heavy burden on American taxpayers in the form of increased entitlement spending, public school funding, higher health care costs, loss of American jobs and lower wages for American workers. This is summed up succinctly in Ray Stevens video on Illegal Immigration – Come to the USA. Why would President Obama favor such a position and call for passage of the DREAM Act? Why would President Obama ask Congress for $3.7B to handle child migrants? The answer is simple, he is pandering for votes for the upcoming mid-term election and mollifying his big labor base who sees future union members, while further implementing his “Cloward and Piven” strategy of overwhelming the system and collapsing the economy (see Congressman: Yes, Barack Obama is Intentionally Destroying the United States). Americans, however, are waking up to the truth. 46% Believe Obama Administration Has Encouraged Young Illegal Immigrants To Come, and even Democrats are becoming skeptical (see Dem. Congressman: ‘Floored Me’ to See Obama Shoot Pool Rather than Visit Border). Unfortunately, it is not just children crossing the border, but also thousands of adults looking for both work in the Under Ground Economy and access to American entitlements.

The immediate impact of this open border policy combined with the ACA and a sluggish economy — as supported by the first quarter 2.9% negative GDP growth — is placed squarely on the backs of legitimate American workers. Despite the President’s claim to be supportive of American workers through his call for a national minimum wage of $10.10/hour, and his support of his SEIU labor buddies call for $15.00/hour wages for fast food employees in itsFast Food Forward campaign, the President’s initiatives are resulting in a spike in misclassification of workers across the country by companies illegally utilizing undocumented workers to fill positions to avoid health care costs and higher government imposed wages. Ironically, companies doing business legally with integrity and honesty are penalized and so are their employees, as they must reduce wages and number of employees or hours to remain competitive in the market place. The President subsequently blames the free market for the problem instead of his own actions! The question that must be explored is whether this is the result of unintended consequences or intentional destruction of the American economy?

My company has experienced the results of the President’s agenda in the form of lost jobs, as companies who use undocumented workers as misclassified independent contractors steal business from legitimate companies. These companies have a 20% or more cost advantage as they generally pay piece work wages. “Piece work” is a set rate per day or week, which requires a person to work as many hours as it takes to clean a certain area to obtain expected results. This often results in much less than minimum wage, no overtime pay and, since they are misclassified as independent contractors, there are no payroll taxes, social security or insurance costs (see Misclassification of Workers, Common Ground or Hot Bed of Greed). We have experienced two recent examples in the west and in the south where such companies bid significantly lower and, because of these cost advantages, “stole” the business through their illegal activity. Even worse is the fact that American employees end up being the real losers as this illegal activity, which is basically ignored and arguably condoned by this administration, artificially lowers wages for all Americans including the union members whom he claims to support!

It is painfully evident that this President cares little for the American worker or the future of America, as noted in The Devil at Our Doorstep. The rhetoric of the President and his big labor buddies that they are fighting for the American worker is disingenuous and despicable! If the President truly cared for the American worker he would use the military to seal the border immediately instead of ordering the Feds to Bring in Riot Squad Against Illegal Immigration Protesters. If he truly cared for the American worker he would require all illegal immigrants to register immediately (see The Senate Immigration Law Hurts All Americans). However, this will not happen if America does not wake up, because the real agenda is the destruction of this great country as we know it and implementation of Rule by Fiat! The answer to the question above is Be Afraid America, Be Very Afraid, as The Decline of American Exceptionalism is at hand and the O-Cloward-Piven Strategy Is Working!

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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.

Rank and File Union Membership Post Victories

On Monday, the U.S. Supreme Court (SCOTUS) issued its decision in the matter of Harris v. Quinn. In its decision not to exempt all public workers from paying union dues, it was nevertheless apparent that workers were handed a victory over unions (see Supreme Court Rules in Favor of Challengers to Union Fees, But Avoids Broad Ruling and Workers were Handed a Victory Over Unions). In a 5-4 ruling following political lines, the U.S. Supreme Court affirmed that just because home healthcare workers received Medicaid payments they were not employees of a government agency and subject to forced unionism or required to pay dues because of supposed union representation. The irony of this is that many of the home healthcare workers are independent contractors, not state workers, who have been forced to pay forced union dues because of the SEIU’s close political ties to former Illinois Governor Rod Blagojevich.  It could have been much worse for organized labor if SCOTUS had determined, as it should have, that no public employees should be forced to be part of the union or pay union affiliation/representation fees. Due to the narrow ruling, Big Labor was able to Dodge a Bullet with SCOTUS!

The decision of SCOTUS in Harris v. Quinn will ultimately cost the SEIU an estimated $50 Million in lost revenue. The SEIU recently took a similar hit when the Michigan legislature repealed a law similar to that in question in Harris v. Quinn (see SEIU Shows It Is Not About Employee Free Choice). The SEIU has been reaping large dues payments in states like California, as discussed in It’s All About the Dues Money. This decision will result in a significant drop in dues income, designed to line its pockets and support its political buddies. Make no mistake, this decision will have a profound affect on Big Labor’s ability to support its political allies with funds and foot soldiers in the November 2014 Election.

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Monday’s ruling is only the beginning of a conundrum facing Big Labor. Rank and file members across the country are fed up with Big Labor using their dues payments for political activities with which they disagree. Throughout the month of June, disgruntled SEIU and UAW members in California and Michigan have been on a mission to have “Non Germane Objector” (NGO) dues removed from the monthly dues being deducted from their paychecks. If successful, these reductions would decrease dues, and subsequently SEIU and UAW revenues by reportedly 35%. Brave members, such as Mariam Noujaim and Lisa Garcia, whose stories are chronicled in The Devil at Our Doorstep, and Brian Pannbecker, a cofounder of Union Conservatives, the organization responsible for the grass roots effort for Michigan become the 24th Right-To-Work State, have led the charge in these highly unionized states. Their efforts are further documented at www.occupyseiu.com and www.unionconservatives.com.

These bold actions, by responsible rank and file members of the SEIU and the UAW, as well as Harris and her band of home healthcare workers, will significantly affect the Big Labor Gasping Dinosaurs and their Symbiotic Relationship that Short Changes Americans! These brave hero’s victories will undoubtedly be evident as Administration and Big Labor Desperation Escalates prior to the 2014 Mid Term Elections.

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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.

Harris v. Quinn, an Important Limitation on Forced Unionization

On Monday, June 30, 2014 the United State Supreme Court issued its ruling in the important case of Harris v. Quinn.  While the case is limited in its ruling and scope, it is a critical one where the Court boxed in the ever expansionist reach of government employee unions. 

Background:

Mrs. Pamela Harris is the mother of a severely disabled son who needs constant care due to his disabilities.  A federal Medicaid program funds many state run programs that provides financial assistance by paying caregivers for these individuals who reside at home rather than in a more expensive nursing care facility.  Most often it is a family member who is providing this care and who is being paid to do so under this program.  The State of Illinois has such a program and by law declared these caregivers to be state employees but without any right to benefits, not subject to any control as to their time, place or methods of provision of care services (and provides that the caregiver is solely responsible to and is an at will employee of the customer (the disabled person)) and the State is immune from any liability to the disabled customer for any home caregivers negligence or intentional conduct.   

In 2003, first by executive order then legislation, the caregivers were forced to join a union, the SEIU, and pay dues, which the State withheld from their Medicaid payments.  Mrs. Harris and others challenged this forced unionization via this case.  She lost at the federal trial court and intermediate appeals court levels with those courts relying on a past U.S.S.C. court case Abood v. Detroit Bd. Of Ed. 431 U.S. 209 (1977).  The Supreme Court, noting the importance of the factual situation described above, ruled in Mrs. Harris favor. 

Limited Ruling:

The Court (Justice Alito) performed a detailed analysis of the reasoning behind the Abood case, which upheld the unionization of full time government employees (there teachers) who were directly the employees of the Board of Education.   Justice Alito and the rest of the majority found that full time direct state employees are vastly different factually to what I would call akin to in-home independent contractors and limited the extent of the Abood ruling to full time direct government employees.  Further to extend the finding in Abood upholding required union membership (or agency fee paying) to this situation was a reach to far.  The Court stated:

If we allowed Abood to be extended to those who are not full-fledged public employees, it would be hard to see just where to draw the line, and we therefore confine Abood’s reach to full-fledged state employees. 

Once the Court found the holding in Abood was not controlling in this situation, it then did an analysis of the facts of this situation under “generally applicable First Amendment standards.”  Relying on cases like Knox v. Service Employees 567 U.S. ___ , 132 S. Ct. 2277 (2012), the Court ruled that the justification of preventing “free riders” benefiting from union negotiations for its members applying to those not paying for union dues / expenses, did not apply in the context of the Harris facts (in-home workers as described above).   

Once again, the Court noted several significant differences between the regular full time government employee and the in-home caregivers the Illinois statute attempted to force unionization upon.   For example, one justification cited by the unions is “labor peace” in not having conflicting unions vying for membership in the same union shop locations.  The Court noted that in-home caregivers are not in one place but always in the customers’ homes (which are often the caregivers homes’ as well).  Space does not permit me to go through all of the Court’s reasoning here.  The Court ordered that union dues and agency fees can no longer be withheld from a home caregivers’ Medicaid payments if they object.

Implications from this Ruling:

1. The Court effectively blocked forced government unionization of recipients of funds under government programs like Medicaid where the person receiving the payments is not a true “government” worker where the state agency controls the time, method and means of employment.   This is especially true where the legislature declares the “employee” is not entitled to any typical government employee benefits like pension rights.  The Court was very specific about the limited nature of the “employment” between the State of Illinois and the home caregiver.  

2. The Harris decision is not banning forced union membership (or agency payments to a union by those who do not join the union) for traditional full time government workers such as public school teachers, CHP officers, Firefighters, etc.   This is not a “right to work” decision for all government employees. 

3. However, a close reading of the Harris majority’s analysis of the Abood decision notes the current majority’s concerns that the policy and practical implications of Abood’s approval of closed shop laws for government employees.  Thus the majority justices may be open to a challenge from a more traditional full time government employee. 

4. Elections matter – the Harris decision and the Burwell v. Hobby Lobby case (both critically important First Amendment cases decided on the same day) were five to four votes that included the swing vote of Justice Kennedy.  All of the four “liberal” justices voted in the dissent to uphold the forced unionization of the home caregivers in Harris (and to deny religious expression as argued in the Hobby Lobby case).  Thus the outcomes of the elections in the fall for control of the U.S. Senate and the White House in 2016 are critical as the make up of the Court could be the deciding factor on these important issues one way or another in the near future.

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About the Author:  Craig P. Alexander, Esq. is an attorney at law who practices in the area of insurance coverage, construction defect, business dispute and general civil litigation.  He is also a volunteer with the California Policy Center’s Transparent California Project.