(Incomplete) Reflections on the Sanders and Warren Labor Plans

Bernie Sanders ("The Workplace Democracy Plan") and Elizabeth Warren ("Empowering American Workers and Raising Wages") have now both released labor plans as part of their presidential election campaigns. If enacted, each ambitious plan would bring the deepest and most far-ranging reforms to labor law since…well, ever. Both plans include provisions for union certification based on card checks followed by first contract arbitration when needed, reducing employer interference in union drives, banning permanent strike replacements and right-to-work laws, and extending protections for unionization to public sector workers, independent contractors, graduate students, and others who have been excluded. These are all sorely needed reforms, and it's great to see labor law getting serious attention.

Both plans also call for sector bargaining in which wages and other basic employment standards would be established at an industry level, as is often the case in Europe. But European countries are small, have weaker links between being a union member and having union representation (a link that is at the heart of the U.S. system), and have stronger employer associations, traditions of social dialog, and other supporting institutions. Technically, sector bargaining isn’t prohibited under existing U.S. labor law (and has occurred, as in the steel industry in the 1950s), but it requires everyone to be unionized and employers to agree to it. So to make this a reality, policy change is necessary. It’s very difficult to see how this would be imported to the United States on a large scale. Philosophically, will workers see this as a step towards workplace democracy when unions they haven’t supported are speaking for them? Practically, how will sectors be determined along with representatives of labor and business in each? Legally, how will sector bargaining and agreements be enforced? I’m all for learning from international experience and importing good ideas, but I think this is a stretch in this particular case. In fact, Germany represents a classic case of strong sector bargaining, but it recently established a minimum wage because of the decline of sector bargaining. So while I understand the rationale for raising wages and standards on a broad rather than piecemeal basis, and for taking wages out of competition, I'm skeptical that sector bargaining can be a U.S. reality even if there was the political will. Maybe I'm not alone--while Sanders plan actually calls for “a sectoral collective bargaining system with wage boards”—so in other words, wage boards which are more akin to reforming minimum wages than actual sector bargaining.

Both plans also seem to have an underlying mindset that workers are ripe for unionization, but are prevented from doing so either because they are excluded from protections (e.g., gig workers) or the election process favors employers (e.g., greater access to employers, minimal penalties for firing union supporters). This is undoubtedly true. Research consistently shows that many nonunion workers want a union—maybe as high as 50 percent. But only partly true: this same research also shows that others want more voice in other forms. As such, both plans seem to miss opportunities to promote localized, participatory forms of worker voice. Specific possibilities here include mandatory safety and health committees and works councils. As workers experience voice directly in their own workplace, they can see its benefits, and push for stronger forms of involvement and representation. This might even lead to majority support for a traditional union with full-fledged bargaining rights. In this way, others have labeled this “training wheels voice.” I would add training wheels voice to the Sanders and Warren plans.

Stepping away from the areas connected to labor relations and collective bargaining, the Warren plan goes much further than the Sanders plan. For example, the Warren plan would prohibit non-compete clauses and “no-poach” agreements which limit worker mobility and thereby suppress wages and benefits, and would also ban forced arbitration agreements. The Warren plan also addresses worker scheduling, discrimination, and labor policy enforcement issues, and also provides for worker representative on corporate boards of directors. There are sound bases for all of these proposals. But one area where the Sanders plan goes beyond the Warren plan is in ending at-will employment by prohibiting workers from being fired when there isn’t just cause.

Ten years ago in our book Invisible Hands, Invisible Objectives: Bringing Workplace Law and Public Policy Into Focus, Steve Befort and I advocated for an “American Good Cause Termination Act” in which employees can only be fired if there is “good cause” for such an action. A just cause standard is nearly universal in U.S. union contracts and CEO contracts (and has also been in effect in Montana since 1987). Decades worth of decisions by labor arbitrators applying this standard have created a reasonably coherent framework for determining if an employer has good cause to discharge an employee. This proposed universal good cause standard does not prevent employers from terminating employees because of substandard performance or changes in the direction of the business. To balance employer and employee interests, we propose that a U.S. good cause standard be remedied by a maximum of one year’s back pay, except in cases of unlawful discrimination in which case double or treble damage awards would be allowed. It is difficult to argue that U.S. employers would be at a competitive disadvantage in the global economy because the United States virtually stands alone in failing to a provide general statutory protection against unjust terminations.

The benefits of an American Good Cause Termination Act would be widespread. Social justice (equity) is served by outlawing both bad and irrelevant reasons for dismissing employees. Other employment policies would also be enhanced as workers would have greater protections for exercising their rights, such as by filing a valid workers’ compensation claim or taking a family or medical leave. Also, employee voice would be facilitated because employee free speech, autonomy, and unionization would be protected as terminations in retaliation for pursuing these activities would not possess good cause unless they interfered with job performance. Efficiency could even be promoted by reducing the regulatory burdens of the current system--including multiple forums and an expensive litigious approach--with a streamlined system that is quicker and cheaper. So this is an omission from the Warren plan that could help support the broader objectives of that plan, and I think it merits serious consideration.

Among many other things that Steve and I proposed (some of which overlap with the Sanders and/or Warren plans), I will highlight just one that is missing from both which could be the easiest of all to implement: mandatory disclosure of employment terms and conditions. Workers simultaneously over-estimate the extent to which they can only be fired for a good reason and under-appreciate the availability of other benefits (e.g., family leave) or protections (e.g., NLRA protections of collective voice). The employment relationship would work better if employees better understood their actual terms and conditions of employment. As Richard Edwards noted many years ago, lenders are required to disclose accurate interest rates for loans and manufacturers must reveal the ingredients of food products. Given the importance of employment to individuals, disclosure of employment terms also should be required. This should include wage and benefit information, leave policies, dismissal policies, and descriptions of their rights under the law. At-will employees, for example, should be told that they can be dismissed for any reason. Subject to relevant laws, employers would still be free to unilaterally determine and change these policies, but those changes should be transparent to employees.

This proposal for mandatory disclosure of the terms and conditions of employment has international precedents. China requires written contracts for employees that specify wages and benefits, the length of the working day, vacation policies, disciplinary policies, and methods for changing, renewing, or terminating the contract. Closer to our proposal are European Union requirements that employers must provide written notices to employees detailing key elements, including wage payments, leave policies, and the expected duration of employment for temporary employees. These requirements date back to 1991, and were just renewed in 2019. Who can be opposed to greater accuracy and transparency?

In closing, as someone who advocated for broad-scale policy reform 10 years ago, it’s great to see such comprehensive plans being proposed and debated. Of course the path to actual enactment is a lengthy and uncertain one. But ideas are important for highlighting the deficiencies and imbalances in the current system, and for starting to shape new norms and expectations that can one day lead to substantive reform and ultimately, employment with a human face.

Confronting the Myth that Workers Know What They are Signing Up For

Sinclair Broadcasting Group has recently been forcing news anchors at its stations across the country to broadcast statements that echo President Trump’s attacks on the news media as propagating “fake news.” These anchors have then been criticized for following along rather than quitting. But they signed employment contracts in which they can be assessed sizable monetary penalties for quitting, and they also signed non-compete agreements preventing them from working at another TV or radio station for six months. Coincidentally, last week, Professor Evan Starr visited my department to present his research on non-compete agreements in the U.S. labor force. Among many important findings are these: the use of non-competes and their effects on outcomes are unrelated to the extent to which non-compete agreements are legally enforceable in each worker’s state. Moreover, a third of non-compete agreements are forced on workers after they have already accepted the job, and less than 20 percent consulting family, friends, or a lawyer before signing it. What emerges from this, among other things, is a picture of workers who don’t really understand the legal parameters under which they are agreeing to work.

The economists in the audience had a hard time accepting this picture. Economists are trained to think that rational agents make informed choices based on good information. But there is a lot of evidence that workers don’t have great information about their own employment conditions. Two years after the Family and Medical Leave Act (FMLA) was enacted, not even 50% of nonunion hourly workers had heard of it and barely one-third thought they were eligible (Budd and Brey, “Unions and Family Leave: Early Experience under the Family and Medical Leave Act,” Labor Studies Journal, 2003). In Britain, I’ve found that it’s common for two-thirds of workers to not know that some types of employer-provided family-friendly policies are available to them (Budd and Mumford, “Family-Friendly Work Practices in Britain: Availability and Perceived Accessibility,” Human Resource Management, 2006). In a survey of U.S. companies emphasizing “shared capitalism,” 20-25% of employees’ responses to questions about whether they were covered by profit-sharing, gainsharing, or individual incentive plans didn’t match what their employer reported (Budd, “Does Employee Ignorance Undermine Shared Capitalism?” in Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-Based Stock Options, 2010).

You can try out your own knowledge. Consider the following scenario: 

An employee (in the United States) is accused of dishonesty. The supervisor knows that this employee is not dishonest but fires him anyway because she dislikes the employee personally. The employee’s job performance has been satisfactory.

Is this termination legal or illegal? Did you say "illegal"? If you did, you're not alone, but you're WRONG. Except for a minority of workers (those covered by a union contract with unjust dismissal protections or similar civil service protections, or those working in Montana where this is an unjust dismissal law), this termination would be legal because of employment-at-will. But Pauline Kim found that over 90% people think this is illegal (“Bargaining with Imperfect Information: A Study of Worker Perceptions of Legal Protection in an At-Will World,” Cornell Law Review, 1997). Other research also finds high rates of employee ignorance about workplace law violations and how to remedy them (e.g., Alexander and Prasad, “Bottom-Up Workplace Law Enforcement: An Empirical Analysis,” Indiana Law Journal, 2014).

Why is this lack of understanding such a problem? Because our laissez-faire labor market is premised on fully informed workers making wise choices such that the employment relationship is an equal one among consenting parties. When workers lack a true understanding of what they are signing up for, then the employment relationship looks more like an unequal one in which workers are disadvantaged, if not exploited. Steve Befort and I have therefore argued that U.S. employers should be required to provide a written statement to all employees disclosing all terms and conditions of employment, including being subject to employment-at-will (Befort and Budd, Invisible Hands, Invisible Objectives: Bringing Workplace Law and Public Policy Into Focus, 2009). By itself, this might not change the actual terms and conditions of employment, but it would at least paint a truer picture of what workers are signing up for. 

It must also be said that another pictures emerges from the Sinclair Broadcasting mandate and from research on non-compete agreements--namely, workers lacking options which would allow them to refuse to sign these contracts. Fighting the myth that workers know what they are signing up for and creating ways to facilitate a better understanding of the true nature of the employment relationship probably won’t solve this imbalance, but it’s a good place to start.

From Google to Top Dog hot dogs via Charlottesville: What About Employee Free Speech?

It’s been an “interesting” week. First, a Googler was fired for his infamous memo on the alleged biological roots of gender inequality. And now Top Dog, a California hot dog chain, has fired a cook because he was identified on social media as a participant in the white supremacist demonstration in Charlottesville. These firings are probably legal in the United States because of employment-at-will, but should they be?

Most workers in the United States are at-will employees. As explained by a Tennessee court way back in 1884, this means that employers “may dismiss their employees at will, be they many or few, for good cause, for no cause or even for cause morally wrong, without being thereby guilty of legal wrong.” Employment-at-will is not unlimited. Workers covered by union contracts or similar civil service rules are likely shielded from the vagaries of at-will employment by policies that require a just or good cause for being disciplined or terminated. And there are legal exceptions, such as nondiscrimination protections (you can’t be fired because of your gender or race, for example), and some very specific judicial exceptions. But these exceptions are much narrower than most people believe. Most workers can’t be fired for a reason that violates a specific nondiscrimination law, but otherwise employers generally do not need a good reason to fire someone. So even if the cook has been misidentified, he can still be fired because Top Dog doesn’t need a good reason for firing someone.

But what about the First Amendment protection of freedom of speech and expression? Doesn’t this protect the Google engineer and the hot dog cook? No. The First Amendment protects freedom of expression by restricting governmental limitations on freedom of speech; it does not prohibit private organizations like Google and Top Dog from limiting speech and expression. Contrary to popular beliefs, U.S. workers generally do not enjoy the right to free speech and expression. So the firings of the Google engineer and the hot dog cook were likely legal.

But should they be? In our book Invisible Hands, Invisible Objectives: Bringing Workplace Law and Public Policy Into Focus, Steve Befort and I advocate for broad freedom of speech protections for employees. The effectiveness of the political process as well as respect for human dignity require that employees be able to exchange ideas, complain, attend meetings and demonstrations, and blog or tweet about issues of either public or private concern. With that said, a difficulty with any free speech protection is how to accommodate views that are unpleasant and contrary to our own. These difficulties will never disappear, but currently they are solved in the work arena by giving employers all the power. I think it would be better to have some protections. 

And yet, the events of the past week dramatically highlight that these protections should not be unlimited. Rather, there should be statutory protections for employee free speech in which private and public employers are not allowed to violate an employee's freedom of expression either in or out of the workplace absent a legitimate business justification for a specific limitation. If a worker who has been disciplined or discharged can make a case that this stemmed from expressive activity (which isn’t in doubt for the two workers here), then the employer must demonstrate a "substantial and legitimate business reason" for the action to be legally acceptable.

What would this mean for the Google engineer and the hot dog cook? Would their reprehensible actions be protected? Probably not. Behavior that harms the employer’s reputation as well as behavior that causes other employees to be unable to work with him or her are generally seen as giving the employer a legitimate business reason to discipline or fire a worker even when that worker is protected by a just cause contractual provision (as in the United States) or wrongful discharge statute (as in Canada). So firing the Googler and the cook would likely be legal. We do not have to concede all employee rights to freedom of expression in order to denounce the behaviors of the past week. 

Admittedly, there might be other circumstances which might make us uncomfortable. Would firing a worker who attended a Black Lives Matter rally be acceptable because racist co-workers refused to work with this individual? Or would it be illegal to fire someone charged with sexual assault outside of the workplace if that worker doesn't work with anyone else (see the Ontario case of Merritt v. Tigercat Industries)? There are no easy answers here, or in many other areas of legal standards. But I submit that some standards are better than none. 

So the Google engineer, the hot dog cook, and many other U.S. workers should have greater speech and expression protections than is currently the case. But these protections shouldn’t be unlimited. Granted, this isn’t as efficient as giving employers unilateral authority.  As with many other aspects of the employment relationship, we need to find a balance between complex, competing interests. 

Regulating Work: The Importance of the Geography of the Value Chain

Last week I was lucky to spend two days in beautiful Tuscany at an excellent ESRC-sponsored seminar on employment regulation hosted by faculty from Newcastle (England), Strathclyde (Scotland), and Monash (Australia) universities. As the stimulating presentations unfolded, a pattern emerged: in cases where the geography of employment regulation matched the geography of the value chain, regulation was effective; otherwise it was not.

As Nigel Haworth described, in the New Zealand fishing industry, the state is a robust actor in regulating working conditions on fishing vessels because particularly valuable species of fish are only found in New Zealand waters. So demand for those fish can only be filled by work that takes place there. In contrast, New Zealand recently weakened labor laws for workers in the movie industry because Warner Bros could have filmed “The Hobbit” somewhere else. Regional approaches to governing Italian workplaces match the vibrant pockets of Italian industrial districts (Luigi Burroni), whereas unions in Sierra Leone struggle to represent the large numbers of informal sector workers (John Stirling). And local and national attempts to create safer garment workplaces in Bangladesh and elsewhere have failed because of the ease of shifting production to new locations. So in this case, international standards are needed (Janice Bellace). 

 

Of course I’m not the first to think of these linkages.  In 1909, John R. Commons, the father of American industrial relations, published a once-famous article, “American Shoemakers, 1648-1895: A Sketch of Industrial Evolution.” Commons illustrated how workers’ efforts to improve their working conditions matched the evolution of the shoemaking production process and the nature of the “competitive menace.” When shoemakers were skilled craftsmen largely working as individuals, they formed guilds to prevent unskilled, substandard shoemakers from undermining their standards. When shoemaking became more of a job, workers formed unions, first on a local basis. And as the competitive menace expanded with the extension of the production and distributions systems, local unions joined to become national in scope, and they lobbied for protections in international markets.

Putting all of this together, we can think of the geography of the value chain as ranging from atomistic to global:

And then we must note that effective regulation typically occurs when the geography of the value chain is in the middle range (local and national systems)--this is the “sweet spot” of effective regulation and governance. For value chains that are more atomistic or more global, it is often difficult to establish and enforce labor standards and to give workers effective voice. 

If this analysis is right, it should be particularly alarming because trends in work point toward both ends of the geography of the value chain as increasingly important, not the middle. The effects of globalization on manufacturing over the past few decades is a well-known story, but services, too, are increasingly becoming globalized—for example, through outsourcing to lower cost areas, such as has happened with legal research and Catholic prayer fulfillment. At the opposite end of the spectrum, in addition to the millions in developing countries who work in informal sectors, there are many atomistic areas on the rise in developed countries, such as the self-employed, independent contractors, and household-based workers such as home health aides.

These are not new issues (see Commons), and they are not easy issues. But they are issues of critical importance. The geography of the value chain is dynamic in today’s organizations and economies. The regulation of work cannot continue to only hit the sweet spot of subnational and national value chains. We need to continue to figure out how to design strategies for governing work—whether privately crafted through unions and other institutions, or publicly crafted through government regulation—that match the dynamism of the geography of the value chain across its full spectrum. Only then will work really work for all. 

Right-to-Request--Let's Give Dialogue a Try

An initiative was launched this week to include a ballot measure for San Francisco voters that would give caregivers and parents a right to request a flexible work schedule from their employers ("Family friendly SF? New measure would pioneer flexible work rules"). Employers would only be allowed to deny such requests if they posed an "undue hardship" for the company such as an increase in costs or a "detrimental effect on the ability to meet customer or client demands." According to the San Francisco Appeal, "the San Francisco Chamber of Commerce is already voicing opposition to the proposal because of its potential impact to the city's business community." But this type of flexible approach can provide a good model for balancing the needs and interests of employers and employees.

Indeed, Steve Befort and I called for U.S. policymakers to experiment with right-to-request policies in our book Invisible Hands, Invisible Objectives: Bringing Workplace Law and Public Policy Into Focus that was published by Stanford University Press. As with many areas of employment and labor law, the U.S. lags behinds. In the Netherlands, after one year of working for an employer, a worker can request in writing an increase or decrease in their work hours by specifying the desired number of weekly hours and distribution of hours across the days of the week. Such requests can only be made every two years. The employer is required to consult with the employee and to grant the requested number of hours unless there are "serious business reasons" such as being unable to recruit another employee to fill the needed hours. Germany has a similar law that grants workers the right to request specific work schedules. Even though these laws are frequently associated with enhancing workers' work-family balance, workers do not have to provide a reason for their request because workers are seen as autonomous individuals with rights to individual self-determination.

The United Kingdom also has a right to request law and though it only applies to parents of young or disabled children, employers must meet with the employee to discuss their request and can only deny it on "clear business grounds." The British statute is particularly intriguing because it establishes a mandatory voice mechanism in the form of an interactive dialogue between employees and employers but does not impose any enforceable substantive standard relative to the outcome of those dialogues. Unlike the Dutch and German statutes, the U.K. version does not authorize any substantive judicial review of the employer's business judgment. Nonetheless, the British approach has achieved resounding success. During the first year of the statute's operation, 75 percent of all employees submitting requests received full voluntary approval from their employer, and most employers reported no significant compliance issues.

U.S. policymakers should adopt something similar to these European right-to-request policies. These policies facilitate employee voice by requiring employers to consult with individual employees, but also allow employers to reject onerous requests. Such policies therefore do not create a burdensome set of unwavering standards or rigid entitlements; rather, they create a participatory framework where employees and their employers can work out mutually-agreeable arrangements. In short, these statutes represent a flexible regulatory response to a work environment characterized by an increasing demand for flexibility by employers and employees.