Labor

NLRB Ambush Election HearingOn three separate panels, I testified last week against the flaws inherent in the National Labor Relations Board’s (NLRB) latest proposed rule.

The NLRB benignly purports to re-examine “Representation Case Procedures.” The rulemaking is commonly known as the ambush elections rule, as a result of a key component that could require elections in as few as ten days.

FIRST PANEL

On the first panel, I addressed the election date at the heart of the proposal. Approvingly quoting a letter from eighteen United States Senators who commented against the proposed rule, I noted that, “then-Senator John F. Kennedy stated that it was essential to allow ‘at least a 30-day interval between the request for an election and the hold of an election’ in order to ‘safeguard against rushing employees into an election where they are unfamiliar with the issues.’”

The crux of then-Senator Kennedy’s statement is a focus on safeguarding employees and on ensuring that effectively educating employees remains the Board’s focus.

ANALOGY TO STUDENTS’ STUDIES

Pointing out that the median times for elections are on the order of 40 days and that the proposal could call for elections in as few as ten days, I asked, “Would your students benefit from a 75-percent reduction in study time?”

I pointed out that workers, who already have a job and many of whom have families and hobbies, are challenged with essentially learning a crash course in labor law and labor economics—two arcane and intricate areas normally pursued by highly trained specialists with advanced degrees.

An absolute minimum of 30 days and really a routine minimum of sixty days are appropriate to learn such material.

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Post image for CEI’s WorkplaceChoice.org Scores Paycheck Fairness Act

The Competitive Enterprise Institute scored Wednesday’s vote in the U.S. Senate on the passage of S. 3772, The Paycheck Fairness Act, a bill that would fundamentally change the Equal Pay Act of 1963, which prohibits employers from paying women less than men for performing the same work in the same workplace.

The score will be incorporated into CEI’s Congressional Labor Scorecard that can be seen in full on CEI’s labor policy website, WorkplaceChoice.org.

CEI opposes numerous provisions of the proposed bill:

  • Sections 3(a) and (b) proposes to sharply curtail employers’ defense to discrimination claims based on “any factor other than sex,” and their ability to discipline employees.
  • Section 3(c) would expose employers for the first time to compensatory and punitive damages for unintentional sex discrimination and promote class action lawsuits. It would also broaden a “loser-pays-all” attorney’s fees provision against the defendant employer, though the same does not and would not apply to an unsuccessful employee plaintiff.
  • Section (4) would mandate that the EEOC and the Office of Federal Contract Compliance Programs “provide training to Commission employees and affected individuals and entities on matters involving discrimination in the payment of wages.” A plain reading could afford plaintiffs and their attorneys training in how to sue employers.
  • Sections (6) and (7) would require the Secretary of Labor to tell employers, unions, and the general public how to eliminate pay disparities between men and women, rewarding compliant ones. The Secretary would conduct studies, publish materials, convene a national summit, and become involved in state and community education on the topic.
  • Section (8) and (9) would require new federal regulations “for the collection of pay information data from employers as described by the sex, race, and national origin of employees.” Data would be mined in the Current Employment Statistics survey and re-instated Equal Opportunity Survey, taking limits off the Office of Federal Contract Compliance Programs in use of the data for enforcing against employers. Public availability of the data appears to be aimed at helping the plaintiffs’ trial bar sue employers.

This bill would make America more litigious and saddle virtually all the nation’s businesses with more red tape and costs, even though gender-based employment discrimination is already illegal. The same legislation received a vote last Congress—during an election year—and there was scant reason to believe Senators would change their position. As expected, this political stunt was voted down.

For the 113th Congress’ Senate vote 103 on cloture on the motion to proceed to the Paycheck Fairness Act, S. 2199, the vote was 53 Yeas to 44 Nays, with three Senators (Coburn, Cornyn, and Cruz) not voting. Sixty votes were needed for cloture to proceed to the bill, and thus the bill will not be discussed on the Senate floor.

Only Senator King, an Independent of Maine who caucuses with the Democrats, split with his caucus on this vote. All Republicans opposed cloture, and all Democrats supported cloture, with the lone exception of Majority Leader Harry Reid who opposed cloture for the procedural reason that he is thereby afforded the opportunity to resurrect the cloture motion.

“In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses.” So began a 3-to-0 ruling Wednesday by the Sixth Circuit Court of Appeals in EEOC v. Kaplan Higher Education Corp. (Apr. 9, 2014). CEI joined the Pacific Legal Foundation’s amicus brief in support of the employer sued by the EEOC, the federal civil-rights agency. (EEOC stands for Equal Employment Opportunity Commission.) As former assistant attorney general Roger Clegg (now at the Center for Equal Opportunity) notes,

The Obama Administration sued Kaplan for running credit checks on employee applicants – similar, by the way, to the ones the EEOC itself uses. Kaplan had learned that some of its employees had misappropriated student payments and, to provide safeguards against this behavior, it began screening its applicants for major red flags in their credit history. The EEOC sued Kaplan, arguing that it cannot use credit checks, because use of credit checks has a disparate impact on black applicants.

Anyway, putting aside the inherent dubiousness of the whole lawsuit, there were also severe methodological problems with the Obama Administration’s evidence, which relied on “race raters” to determine, by scrutinizing driver’s license photos, the race of the applicants. So the trial judge threw out the case. Today, I’m happy to report, the court of appeals affirmed that decision – and in no uncertain terms, I might add, much I’m sure to the Obama administration’s chagrin.

At the Washington Post, UCLA Law Professor Eugene Volokh provides these excerpts from the court’s ruling:

The EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations.” Because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. The defendants (collectively, “Kaplan”) have the same concern; and thus Kaplan runs credit checks on applicants for positions that provide access to students’ financial-loan information, among other positions. For that practice, the EEOC sued Kaplan. Specifically, the EEOC alleges that Kaplan’s use of credit checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII of the federal Civil Rights Act. See 42 U.S.C. § 2000e-2(a)(1), (a)(2), (k). Proof of disparate impact is usually statistical proof in the form of expert testimony; and here the EEOC relied solely on statistical data compiled by Kevin Murphy, who holds a doctorate in industrial and organizational psychology. For two reasons, however, the district court excluded Murphy’s testimony on grounds that it was unreliable. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court therefore granted summary judgment to Kaplan. The EEOC now argues that the district court “erred” — a telling, oft-repeated, and mistaken choice of word here — when it excluded Murphy’s testimony. We reject the EEOC’s arguments and affirm.

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The EEOC brought this case on the basis of a homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself. The district court did not abuse its discretion in excluding Murphy’s testimony.

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Earlier, we wrote about a Wisconsin town whose ordinance holds parents liable for bullying by their children, including certain speech. We and law professor Eugene Volokh noted that this raised serious First Amendment issues. Now, a New Jersey judge has done the same thing by judicial construction, by allowing New Jersey school districts to drag students and their parents into lawsuits brought against school districts by alleged victims of bullying or discriminatory harassment. (New Jersey’s anti-bullying law is so broad that it violates the First Amendment by banning non-violent speech, notes the civil-liberties group Foundation for Individual Rights in Education.)

On March 12, a New Jersey Superior Court Judge ruled in V.B. v. Flemington-Raritan Regional School District that that school district, and the Hunterdon Central Regional High School, “could name 13 students and their parents as third-party defendants in a bullying suit,” dragging them into a lawsuit against the school districts, and potentially forcing them to share the massive cost of paying any damages awarded by a judge or jury against the school district. Judge Yolanda Ciccone allowed the parents to be sued based on conduct and offensive comments both in school (where teachers and schools officials, not parents, were in charge) and outside of school. She based this ruling partly on speech that is protected by the First Amendment outside the schoolhouse, such as unkind remarks on Facebook, writing that “Plaintiff’s complaint includes several allegations of that acts of bullying and harassment took place on Facebook, and that plaintiff had to contact Facebook directly to have to [sic] offending statements removed.”

Never mind that federal judges have ruled that the First Amendment applies with added force to students’ speech outside of school, meaning that vulgar speech that is banned in school may be protected speech when it occurs away from school, as cases like Klein v. Smith (1986) illustrate. Similarly, the federal appeals court in New Jersey has issued two First Amendment rulings in favor of students disciplined for creating fake web profiles lampooning their principals, holding that the speech was protected outside of school even if it would be unprotected in school, in Layshock v. Hermitage School District (2010) and J.S. v. Blue Mountain School District (2011).

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In my previous post, I described the “California rule,” which puts state governments in a legal straitjacket when trying to reform underfunded public pensions. Specifically, it places pensions in a privileged position relative to other types of compensation, like salary or health insurance benefits, by making them more difficult to change. This post highlights a real-world example of the California rule’s dangers.

The place is Pacific Grove, California, a town of 15,000 residents on the Monterey Peninsula’s northern tip, with an annual budget of $11 to $12 million. In 2008, John Moore, a Pacific Grove resident and retired attorney, learned that the City of Pacific Grove had issued $19 million of pension bonds two years earlier, while at the same time it gave the police union a 30% raise.

After making several requests under California’s Public Records Act, Moore uncovered a tale of self-dealing by Pacific Grove and union officials to rip off California taxpayers. The result of Moore’s investigation, “The Fall of Pacific Grove,” was published in The Pine Cone, a Monterey County paper; it’s now available online thanks to the California Public Policy Center.

In 2002, the Pacific Grove city council adopted a 50 percent pension increase for public safety workers, after being told by the city manager that the increased benefit would cost around $51,500 per year. However, the city manager withheld from the council an actuary report that estimated the benefit at over $800, 000 per year. The hidden actuary report was not discovered until 2009. The results have been predictable and dire. Pacific Grove’s pension deficit has ballooned to $45 million, plus $20 million in pension bonds, and is growing at 7.5 percent a year, according to Moore.

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These days, local governments announcing bankruptcy seems like routine in California. Since the onset of the 2008 financial crisis, many state and local governments have seen their pension funds take huge losses. Yet, many of the underlying problems that have made pension shortfalls difficult to address go back many years — more than half a century, in fact.

One major reason public pensions have been so difficult to reform is their having a special legal status above other kinds of employee compensation. A new Federalist Society paper by Emory University law professor (and CEI alumnus) Alexander Volokh explains how this strange situation came to be and offers some ideas for reform.

One of the most important developments in public pension policy occurred in 1955. That’s when the California Supreme Court created what became known as the “California rule” regarding the legal status of public pensions. The case, Allen v. City of Long Beach, concerned a challenge to a 1951 city charter amendment that increased the employee pension contribution and changed the formula for determining payouts.

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broken-piggy-bankIn my previous post, I looked at some basic principles that should guide state policy makers when tackling pension reform. Now, we turn to the politics. And in that regard, Rhode Island’s 2011 pension reform offers a useful example for other states to consider.

In his Brookings study, “Pension Politics: Public Employee Retirement System Reform in Four States,” Drew University political science professor Patrick McGuinn looks at recent reform efforts in four states’ experience in implementing pension reform.

Two of these states—Utah and Rhode Island—enacted significant structural changes to their pension systems while the two others—New Jersey and Illinois—enacted more limited changes that were less innovative.

Drawing lessons from those four states, he then outlines some basic principles for how to implement reform, citing examples.

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Few people would raise their hands when asked that question. But actually putting a state’s financing on sound footing is difficult in practice. That makes Rhode ‘s Island’s pension reform not only unique, but also a good example for other states to consider.  Rhode Island got not only the policy, but also the politics right, according to Drew University political science professor Patrick McGuinn in a new Brookings Institution study.

In other words, how pension reform is accomplished is as important as what the reforms entail. In his study, McGuinn offers some sound principles on the politics — the “how” — of pension reform. Another new study, commissioned by the Society of Actuaries (SOA), offers some basic principles on the policy — the “what”.

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Thus describes an Illinois state Senator the challenge states face in reforming their public employee pension systems. Given that reality, it’s astounding reform would ever succeed. But succeed it has, in states with very large pension shortfalls that threaten to blow up their budgets.

Staring into the financial abyss, it seems, can help politicians overcome their strong temptation to offer generous benefits to their supporters — government employee unions in the case of pensions — and passing off the bill to future generations. Yet, government unions will defend their benefits even in states in extreme financial distress, as the recent Rhode Island pension settlement shows.

On February 14, Rhode Island officials reached an agreement to end six legal challenges to the state’s 2011 pension reform, the most far-reaching in the nation to date. The agreement scales back some of the savings in the 2011 reform bill, but  preserves most of them. Governor Lincoln Chafee and State Treasurer Gina Raimondo invested considerable effort and political capital in crafting and enacting the 2011 pension reform. So why did they agree to scale back any of it?

Because they had to. The state was forced into negotiating by a judge, ruling on a union legal challenge to the pension reform legislation. As Drew University political science professor Patrick McGuinn describes the decision in a new Brookings Institution study, “Pension Politics: Public Employee Retirement System Reform in Four States” (which points to Rhode Island’s reform as a model):

In December 2012, a Superior Court judge ordered the unions and the governor/treasurer’s office into mediation to resolve the dispute—an extremely unusual (and perhaps even unconstitutional) move.

In effect, the judge ordered the Chafee administration to negotiate with the unions to amend a law that had already been passed by the legislature and signed by the governor.

While legally dubious, the February 2014 agreement may be the least bad option in terms of achieving sound policy — which in the case of Rhode Island means preventing a budget meltdown. If a judge is willing to order the state government to renegotiate a law already on the books, who knows what might come next in court?

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“Boosting the federal minimum wage as President Barack Obama and congressional Democrats are proposing” would “cut employment by roughly 500,000 jobs, Congress’ nonpartisan budget analyst said Tuesday”; the Congressional Budget Office predicts that a minimum wage increase will result in “fewer jobs, especially for low-income workers; higher costs for business owners and higher prices for consumers. The study was unveiled as the Senate prepares for a March debate on a plan by Sen. Tom Harkin, D-Iowa, ramping up the minimum in three steps to $10.10 by 2016.” (Source: Associated Press).

Raising the minimum wage also drives up unemployment among young people and unskilled workers. This CBO report comes on the heels of an earlier CBO report that predicts a fall in employment of about 2 percent over the next decade due to work disincentives contained in the 2010 healthcare law. Obamacare has caused layoffs in the medical device industry, and will wipe out many jobs. It is also replacing full-time jobs with meager part-time jobs in community colleges, restaurants, and other sectors.

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