Labor Day 2015: Workers Getting Organized

On this Labor Day 2015, there are nascent signs that workers may be gaining a little ground.

These include: Companies like Walmart and T.J. Maxx increasing their minimum wage. Companies like Gap and Starbucks changing their job scheduling policies. And, companies like Google and Nestle improving their maternity leave benefits.

These changes are occurring for a number of reasons including:

  • Economics and the need for businesses to improve inefficient business practices that lead to lower employee productivity and higher turnover
  • Pressure from traditional unions
  • Pressure from other social and community organizing groups
  • Citizen, public and political involvement
  • New government rules and regulations

The question arises how to increase and sustain the benefits flowing to employees. As the foregoing reasons illustrate, this can be accomplished employing various methods.

From recent examples, however, it appears that one of the better ways to do so is by organizing through legal action. Consider the following evidence.

On September 1, in San Francisco, U.S. District Judge Edward Chen granted class action status to Uber drivers ruling that they could sue as a group to support the assertion that they are employees rather than independent contractors and thus eligible for certain forms of reimbursement from Uber. This means that nearly 160,000 California drivers can take part in the suit. (See our earlier blog on Uber for more information on Uber and the case.)

On August 27, the National Labor Relations Board (NLRB) ruled that companies that did business with or through temporary staffing agencies or franchisees might qualify as "joint employers" of the workers in those businesses with whom they contract. The NLRB's ruling is a narrow one and would obtain only "if workers provided by the subcontractors seek union representation."

Nonetheless, the current business model for those companies allows them to reduce labor costs significantly through this subcontracting. A change of this type could mean they might have to assume much broader employer responsibilities that they have been able to avoid through outsourcing.

On August 26, on the day before going to trial, Boeing settled a 401(k) plan class action suit on behalf of 190,000 Boeing employees and retirees, which accused Boeing of failing to uphold its fiduciary duties in the administration of its 401(k) plan for employees. The suit maintained that Boeing allowed excessive fees to go unchecked by choosing higher cost retail mutual funds over cheaper options and by improperly making plan decisions to benefit vendors receiving other Boeing business.

These legal cases are a sign of the times. Over the past quarter of a century or more, the playing field for workers has become an increasingly uneven one.

Where a business' rewards used to be relatively evenly distributed among executives/management, shareholders, and employees, in too many instances today, the third leg on that stool has become a much shorter stick. (See our earlier blog on CEO compensation.) As a result, workers (no matter what label they are given) with limited bargaining and negotiating power turn to the courts for solutions or answers.

Is there an alternative to the legal course of action? There just might be if the employees in the United States who are already "owners" in the companies for which they work got better organized.

The August 22 edition of The Economist in its Schumpeter column titled, "When Workers are Owners", states, "It is popular to lament the growing gap between capitalists and workers. In one respect, however, the gap is shrinking, the number of workers who own shares in the business that employs them. America leads the way: 32M Americans own stock in their companies through pensions and profit-sharing plans and share-ownership and share-option schemes."

It would seem that this employee ownership stake could be leveraged and turned into a group advantage as opposed to the opportunity of just voting one's individual ownership shares.

This could be accomplished through actions such as securing seats in a company on the board of directors for employee representatives, having an employee ombudsperson in an the organization, and uniting with other employee-owners to revise the rules and regulations that govern pensions, profit sharing and stock ownership plans to ensure greater benefits flow through to the employees.

The Schumpeter column correctly points out that employee stock ownership is not a panacea. It can result in employees holding too much of their pensions in company stock; lead to employees having too much stock in troubled companies and supporting incumbent bad management there; and, employees feeling entitled and not being as productive as they might be otherwise. The column also provides the counterpoints to each of those arguments.

For us, the overriding counterpoint is the current state of affairs with regard to the American economy writ large and the American worker writ small. The current pension plan approach currently benefits companies much more than employees.

There can be little argument about that. Compare and contrast what the American worker received under defined pension plans to those incredible shrinking 401(k) plans in place today. Enough said.

The current definition of what constitutes "joint employment" also clearly favors companies over employees. It states that "each company must be involved in the "hiring, firing, discipline, supervision and direction" of employees.

In an article titled, "Who's the Boss," The Economist reports that the the NRLB's general consul in its amicus curiae brief in the case "urges the Board to adopt a new standard that takes into account the totality of the circumstances, including how the putative joint employers structured their commercial dealing with each other." According to the article, the consul declared that this standard "undermines the ability of workers to bargain for better wages, hours and working conditions."

It is Labor Day 2015. The last remaining bastion for the union movement - the public sector - is under attack. Private sector union membership is a paltry 7%.

In general, that's bad news for workers. The good news is that workers are still finding ways to get organized and to make their voices heard.

When workers voices are heard America works. That's the news this Labor Day.

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