[Senate Hearing 117-197]
[From the U.S. Government Publishing Office]
S. Hrg. 117-197
THE RIGHT TO ORGANIZE:
EMPOWERING AMERICAN WORKERS
IN A 21ST CENTURY ECONOMY
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED SEVENTEENTH CONGRESS
FIRST SESSION
ON
EXAMINING AMERICAN WORKERS IN A 21ST CENTURY ECONOMY, FOCUSING ON THE
RIGHT TO ORGANIZE, AFTER RECEIVING TESTIMONY FROM MARK GASTON PEARCE,
GEORGETOWN LAW CENTER WORKERS' RIGHTS INSTITUTE, AND HEIDI SHIERHOLZ,
ECONOMIC POLICY INSTITUTE, BOTH OF SILVER SPRING, MARYLAND; JYOTI
SAROLIA, ELLIS HOSPITALITY, TEMECULA, CALIFORNIA, ON BEHALF OF THE
INTERNATIONAL FRANCHISE ASSOCIATION; AND GRACIE HELDMAN, PANDORA, OHIO.
__________
JULY 22, 2021
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
46-777 PDF WASHINGTON : 2023
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
PATTY MURRAY, Washington, Chair
BERNIE SANDERS (I), Vermont RICHARD BURR, North Carolina,
ROBERT P. CASEY, JR., Pennsylvania Ranking Member
TAMMY BALDWIN, Wisconsin RAND PAUL, M.D., Kentucky
CHRISTOPHER S. MURPHY, Connecticut SUSAN M. COLLINS, Maine
TIM KAINE, Virginia BILL CASSIDY, M.D., Louisiana
MAGGIE HASSAN, New Hampshire LISA MURKOWSKI, Alaska
TINA SMITH, Minnesota MIKE BRAUN, Indiana
JACKY ROSEN, Nevada ROGER MARSHALL, M.D., Kansas
BEN RAY LUJAN, New Mexico TIM SCOTT, South Carolina
JOHN HICKENLOOPER, Colorado MITT ROMNEY, Utah
TOMMY TUBERVILLE, Alabama
JERRY MORAN, Kansas
Evan T. Schatz, Staff Director
David P. Cleary, Republican Staff Director
John Righter, Deputy Staff Director
C O N T E N T S
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STATEMENTS
THURSDAY, JULY 22, 2021
Page
Committee Members
Murray, Hon. Patty, Chair, Committee on Health, Education, Labor,
and Pensions, Opening statement................................ 1
Braun, Hon. Mike, a U.S. Senator from the State of Indiana,
Opening statement.............................................. 3
Witnesses
Pearce, Gaston, Mark, Executive Director of the Workers Rights
Institute, Georgetown University Law Center, Silver Spring, MD. 7
Prepared statement........................................... 8
Shierholz, Heidi, Ph.D., Senior Economist and Director of Policy,
Economic Policy Institute, Silver Spring, MD................... 17
Prepared statement........................................... 18
Heldman, Gracie, worker, Pandora, OH............................. 23
Prepared statement........................................... 25
Sarolia, Jyoti, Principal and Managing Partner, Ellis
Hospitality, Temecula, CA...................................... 27
Prepared statement........................................... 29
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.
Tuberville, Hon. Tommy:
Entrepreneur Magazine Series On Negative Impacts of PRO Act.. 62
State Policy Network Pro Act Letter.......................... 63
National Association of Wholesaler-Distributors Letter....... 66
Braun, Hon. Mike:
Coalition For A Democratic Workforce......................... 68
APP-Based Work Alliance...................................... 73
National Association of Manufacturers........................ 75
National Ready Mixed Concrete Association, National Stone,
Sand & Gravel Association, Portland Cement Association..... 75
Pro Act Joint Trades Letter.................................. 77
QUESTIONS AND ANSWERS
Response by Heidi, Shierholz to questions of:
Senator Lujan................................................ 68
Senator Casey................................................ 68
Response by Gracie, Heldman to questions of:
Senator Lujan................................................ 69
Response by Mark, Pearce to questions of:
Senator Lujan................................................ 69
Senator Burr................................................. 71
Senator Tim Scott............................................ 72
Response by Jyoti, Sarolia to questions of:
Senator Tim Scott............................................ 72
THE RIGHT TO ORGANIZE:
EMPOWERING AMERICAN WORKERS
IN A 21ST CENTURY ECONOMY
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Thursday, July 22, 2021
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The Committee met, pursuant to notice, at 10 a.m., in room
430, Dirksen Senate Office Building, Hon. Patty Murray, Chair
of the Committee, presiding.
Present: Senators Murray [presiding], Casey, Baldwin,
Kaine, Hassan, Smith, Rosen, Lujan, Hickenlooper, Cassidy,
Murkowski, Braun, Marshall, Tuberville, and Moran.
OPENING STATEMENT OF SENATOR MURRAY
The Chair. Good morning. The Senate Health, Education,
Labor, and Pensions Committee will please come to order. Today
we are holding a hearing on empowering workers and the right to
organize and collectively bargain. Ranking Member Burr is not
here at this time. Senator Braun will be taking his place.
Welcome to our Committee this morning. We will each have an
opening statement and then we will introduce the witnesses.
After the witnesses give their testimony, Senators will each
have 5 minutes for a round of questions.
While we were unable again to have this hearing fully open
to the public or media for in-person attendance, live video, as
always, is available on our Committee website at
help.senate.gov. If anyone is in need of accommodations,
including closed captioning, please reach out to the Committee
or the Office of Congressional Accessibility Services.
Today's hearing is long overdue. We have been through 4
years of attacks on workers' rights from the previous
Administration. It has now been 12 years since the minimum wage
was raised and it has been over 70 years since the National
Labor Relations Act, the cornerstone of our Nation's labor
laws, was significantly updated. 70 years ago there was no
Internet. Approximately one-third of women participated in the
labor force.
Racial segregation was allowed under the law, and the
average retirement age and average life expectancy were both
around 68 years. While our ways of working and our workforce
may have changed, the need for workers to be able to join
together and have a voice in their wages and working conditions
without fear remains as important as ever. Our labor laws are
overdue for an update, and the COVID-19 pandemic has only made
this need more clear and more urgent. This crisis has changed a
lot over the last year and a half, but it has also shown us how
much it needs to be changed. This past year, we witnessed the
most unequal economic crisis in modern history unfold as women,
workers of color, workers with disabilities, and workers with
low incomes disproportionately lost jobs, wages, and more.
We witnessed how important it is workers have paid family
sick and medical leave, a livable wage, and quality, affordable
childcare and health coverage. We witnessed growing inequality
as millions of people lost jobs last year, and while the top 1
percent gained about $10 trillion in wealth. An increasing
wealth inequality wasn't a pandemic-only phenomenon. It has
been happening for decades. And all of this gave us an
important reminder of the difference unions and the right to
organize and collectively bargain make in countering this kind
of extreme inequality.
Here is what unions mean. Unions mean higher wages. In
2020, non-union workers were paid about $0.84 per $1.00
compared to union workers. Unions mean better benefits. For
example, union workers are more likely to have paid sick days.
And while only around two-thirds of nonunion workers can get a
retirement plan, health care plan, and prescription drug
coverage through their employer, over 9 in 10 union workers had
these benefits, and union workers were almost twice as likely
to have the option of an employer sponsored dental plan. Unions
also means safer workplaces. Unions work hard to educate
members about their rights to a safe workplace, and as a
result, unionized workplaces are much more likely to be held
accountable for health and safety violations.
Perhaps one of the most important aspects of union
representation is knowing you have other workers in your corner
to help make sure you are treated with respect and dignity in
the workplace, knowing you have got backup to make sure you
will not only be paid fairly, but treated fairly. In short,
unions mean workers who are the ones truly making our economy
run have better wages and benefits that help them support their
families and live their lives. That is why I am proud
Washington State has the fifth highest rate of union membership
in the Nation. But unfortunately for workers across the
country, barriers to workers seeking to form or join a union
have been mounting in recent years.
We have seen employers try and at times succeed at
misclassifying workers to deny them their rights, preventing
workers from organizing and collectively bargaining through
complicated contracts and subcontracts, and undermining union
elections in too many ways to count. Meanwhile, efforts at the
National Labor Relations Board to educate workers about their
rights and enforce worker protections have dwindled,
particularly as Republicans have worked to skew the Board
against workers in recent years.
I am really hopeful that the new NLRB nominees that have
come before our Committee recently will help start to fix this
because the results of this campaign against workers' rights
have been deeply damaging, especially in light of this
pandemic. Right now, only one in eight essential workers is
represented under a collective bargaining agreement, and some
of the highest risk industries during this pandemic, health
care, food, agriculture, have the lowest unionization rates.
Stronger organizing and collective bargaining rights could
have helped change the trajectory of this pandemic and saved
lives by making sure that workplace safety was a priority, more
workers had paid sick days, and more workers had the wages and
benefits that they needed to stay economically secure, like
quality, affordable health care and a reliable retirement plan.
In short, the pandemic made it clear than ever, we have got to
make it easier for workers to exercise their right, their right
to collectively bargain, and for unions to fight for the people
they represent. Doing so will help us build our economy back
stronger in a way that works for families and communities, not
just those at the top. And it will help us build back fairer.
As data show, union memberships reflects the racial,
ethnic, gender, and age diversity of America's workforce.
Almost half of workers represented by a union are women, and
nearly 4 in 10 union members are workers of color. When it
comes to addressing racial inequities, data show Black union
workers earn on average 16 percent more than their nonunionized
counterparts. When it comes to the gender pay gap, women who
are not represented by a union are paid $0.78 on the dollar
compared to men. But women who are represented by unions are
paid $0.94 on the dollar.
When it comes to creating more inclusive workplaces for
people with disabilities, union covered workers in general are
more likely than nonunion employees to request accommodations
regardless of disability status. So as we work to rebuild our
economy in the aftermath of this pandemic, our work has to
include steps to finally update our labor laws in order to
protect and empower workers. Because we know our economy is
stronger when working families are stronger, and our working
families are stronger when unions are stronger.
That is why I introduced the Pro Act earlier this year, and
I am pushing it hard to get across the finish line. But we
can't stop there. We need to raise the minimum wage, provide a
comprehensive paid leave program, and more. It is also why I
supported the unionization vote of Amazon workers in Alabama,
and I support the continued fight for unionization of Amazon
workers in Washington State and workers across our Country. And
it is why we are having this hearing today.
I look forward to hearing from our witnesses today, thank
you all for being here, about how we finally bring the NLRA
into the 21st century, and how we can ensure every worker is
able to form a union--form or join a union so they can bargain
for better wages and benefits and safer workplaces in which
they are treated with respect. With that, I will turn it over
to Senator Braun for his statement.
OPENING STATEMENT OF SENATOR BRAUN
Senator Braun. Thank you, Madam Chair. When I was asked to
fill in for a Ranking Member Burr, it is an honor to do it.
Anyone in the U.S. Senate, I think I am most recently off the
pavement of actually living through these issues we are going
to talk about here today. I come from Main Street. I chose not
to go to Wall Street to move back to my hometown. My wife did
the same thing and has had a small business in our downtown for
43 years this September. When I ask her what she pays in terms
of wages to her own employees, and they are like family, they
have been there for a long time, way above what the average
wage rate would be across most states, even in a low cost of
living State like Indiana. And my discussion is going to center
around one premise.
I had a company that had 15 employees for 17 years. I know
every aspect about what it takes to be successful in an
enterprise, and it starts with treating your employees like
family. And if you are going to grow into an enterprise like
what I just left two and a half years ago, it is because you
have done all those things. And if you do it right, you don't
need a union. And I am for unions because you need them in
places where you are up against a monolith of big business. But
the premise today is going to be that whatever we do for
workers' rights, which I believe in 100 percent, to be able to
have them organize and express those, don't kill the golden
goose that has made jobs for union workers possible is a small
business.
Remember, every company in this country, from General
Motors to Amazon started probably with an employee or two and
did it in a hardscrabble way like I did for 17 years, where my
paycheck was generally lower, way under what it would have been
for running a business or an enterprise simply because of the
fact that you deal with the economics at hand. And when you
think about what it takes to get an enterprise large enough to
have a union there representing employees, it is a perilous
pathway. Most don't make it. And you need to measure, if we
want the Pro Act to be considered, is it going to take out what
allows unions to form in the first place or what allows a
little business to become a big one.
My contention is, and from what I am hearing across the
country in terms of small businesses, they think that this puts
them in peril. And if you don't have small businesses that are
healthy, you are not going to have big businesses and you are
not going to have employment bases that are large enough to
need unions in the first place. So I am worried that this is a
one-size fits all like many things we do here in DC, and that
for the reasons I am going to mention here now, it is going to
be detrimental to small businesses.
Small businesses, most of them, don't get a return on
investment. They live out of that business for their wage, for
their livelihood. And if anything we do here, if it puts that
in peril, it is a misguided effort from the top down and my
opinion is not needed. Ms. Sarolia, who has an enterprise in
California, a place that largely roles like the Federal
Government in thinking you can do things from the top down--it
is why many businesses are leaving the state. It is why many of
us who consider doing business there do it with a second
thought. We got there 10 years ago in my little business that
now has become a big business and that where we pay the highest
starting wage in my hometown, in the lowest unemployment
county, you don't feel welcomed in places like that tell you
how you need to operate your business and many times do it in a
way that is going to chase you away from the very thing you are
wanting to promote.
I said earlier I support the freedom to unionize. I think
there is a place for it. You got big business. I have been one
of the most outspoken here as a Senator that is a different
type of entity than a Main Street enterprise. You may need to
use dynamics differently to deal with them. But I want to list
a few of the things we got. We have got 27 right to work
states. And this pretty well says that it is going to get rid
of that if it can. To me, you are taking--you are getting rid
of the choice of whether you want to join a union or not.
Unions, which I think should have the freedom to organize, got
to make their case though. You are going to end up in a place
like Illinois where there is not a right to work law. Think
about this, their union membership has only gone up 1 percent
since we put in right to work laws across the country. Union
membership in Indiana has gone up 24 percent in a right to work
state.
Violating the rights of workers across America to prop up
an outdated system that benefits Washington elites is not the
answer. A union power grab--I am not going to say that. I think
that is kind of a hot phrase. I try to avoid them here. But if
we are trying to grow anything for the sake of growing it,
there is not merits to the case. It is misguided. The Pro Act
will force employers to provide unions with work shift
information and employees' personal contact information during
organizing elections. Independent contractors such as gig
workers will be made employees under the Pro Act, limiting
these workers' ability to pick jobs and schedules that work for
them and their families.
The Pro Act will put the burden of proof on employers to
prove that they didn't interfere in a union election rather
than the party claiming that they did. The Pro Act will change
the very definition of an employer by codifying the 2015
standard expanding joint employer status. This means that many
small businesses would be considered joint employers.
Litigation against franchise businesses nearly doubled due to
this in 2015, and that is another issue to contend with. Many
of the reasons folks don't go into a place like California is
because the trial lawyers in many cases run the administrative
dynamic there, chasing businesses away, losing jobs.
For all of these reasons and many more, it is no surprise
that American organizations across the country are strongly
opposed to the Pro Act. Right here, a folder of over 280
organizations that represent small business have written
accordingly. I ask unanimous consent to submit the eight
letters here representing more than 280 groups opposing the Pro
Act.
The Chair. Without objection.
[The information referred to can be found on page 68]
Senator Braun. Though, Government was much of the problem
for small businesses last year, I acknowledge that without it,
with what we--without what we did here through the PPP--in the
moment of crisis, there is a need for it. That doesn't mean you
take what we did, and you broaden in a way that has already
made a small business one of the most difficult things to grow
into a large one. And if the Pro Act does anything to make it
harder to start and grow a small business, everything that you
are trying to do through the Pro Act becomes immaterial, and it
is actually working against what you are really concerned with.
The Chair. Thank you. We will now introduce today's
witnesses. Our first witness has decades of experience in labor
law protecting workers' rights. Mark Pearce is a former Board
member and Chairman of the National Labor Relations Board. He
was first appointed to the NLRB by President Barack Obama in
2010, served two terms on the Board concluding in August 2018.
He is now a Visiting Professor and the Executive Director of
the Workers' Rights Institute at Georgetown University Law
Center.
Before that, he was a Senior Scholar and Lecturer at
Cornell University's School of Industrial Labor Relations. Mr.
Pearce, thank you for joining us. I look forward to your
testimony. Next, I will introduce Dr. Heidi Schierholz, an
economist with deep understanding of how workers' rights
strengthen our economy as a whole. Dr. Schierholz is the Senior
Economist and Director of Policy at the Economic Policy
Institute, a nonprofit think tank focused on the needs of
workers. She served as Chief Economist for the Department of
Labor under President Obama, where she helped develop and
execute initiatives to boost workers' rights, wages and
benefits, protected workers' savings, and increased workplace
safety.
Dr. Schierholz, we are pleased to have you with us today
and look forward to hearing from you shortly. Our next witness
is someone who knows firsthand some of the barriers workers are
up against when they fight to exercise their rights. Gracie
Heldman joins us from Pandora, Ohio. She works for the
Heartside Food Solutions. It is an industrial bakery with over
1,000 employees, which provides goods for familiar names like
Nabisco, General Mills, and Kellogg.
Mrs. Heldman has worked at the bakery for over 33 years in
the packing department, and she has spent 20 of those years so
far fighting to form a union. Mrs. Heldman, thank you so much
for joining us. I look forward to hearing from you about your
experience. And now I will turn it over to Senator Braun to
introduce our final witness, Jyoti Sarolia.
Senator Braun. Thank you, Madam Chair. Jyoti Sarolia is a
principal in Ellis Hospitality, which is now a third generation
hotel company based in California. Their portfolio currently
has seven hotel properties throughout California, a definition
of a small business that has made it to the next level. The
company was built and named to honor New York City's Ellis
Island, where her family members had entered during the early
years to pursue the American dream. Ms. Sarolia has grown up in
the hospitality industry and even lived in a hotel owned by her
extended family until the age of eleven.
She started learning about hotel operations, everything
from housekeeping to the front desk. She has served as an
Asian-American Hotel Owners Association Ambassador to the South
Pacific region since 2015 and has been part of a franchise
organization there since 2017. Since 2009, she has been
involved in the Choice Hotels Owners Council.
She lives in Temecula, California, I will say that is close
enough, and attended San Francisco State University. True
example, someone that moves to this country, a country based
upon immigrants and entrepreneurs. And look forward to hearing
your thoughts on the Pro Act today.
The Chair. Thank you. Ms. Sarolia, thank you for joining us
today to share your experience. With that, we will hear our
witness testimony.
Mr. Pearce, we will begin with you.
STATEMENT OF MARK GASTON PEARCE, EXECUTIVE DIRECTOR OF THE
WORKERS' RIGHTS INSTITUTE, GEORGETOWN UNIVERSITY LAW CENTER,
SILVER SPRING, MD
Mr. Pearce. Chair Murray, Senator Braun, and Members of the
Committee, and my fellow panel of witnesses, thank you for the
opportunity to testify today on the right to organize on
empowering U.S. workers in the 21st century. As the
introduction indicates, I was a Former Chairman of the National
Labor Relations Board, and I have had close to 23 years of
service with that agency and more time practicing before that
agency while in private practice.
Congress passed the National Labor Relations Act, also
known as the Wagner Act, in 1935, out of recognition for
workers' rights, fundamental rights. Despite its flaws, the
NLRA was the first law to provide these protections. Among its
fundamental purpose was to encourage collective bargaining,
protect workers' rights to organize, and provide workplace
democracy, so as to preserve worker integrity and balance and
the relationship between labor and management. In that respect,
the NLRA has lost its way. Because of lack of reform and years
of manipulative interpretation, the Act has increasingly become
ineffective in the 21st century. Workers are being classified
outside of the Act's protection.
Concerted activity for mutual aid or protection is being
restricted and reinterpreted. And through the reversal of
decades of precedent, union access to employees and members has
been all but extinguished. Policy isolation at the NLRB has
created a confusing atmosphere where workers and businesses
remain uncertain about their rights and obligations. Rules
relating to conduct of union elections are subject to radical
change with the change of administrations. Meanwhile, even when
a union succeeds in becoming a bargaining representative,
employers' unfair labor practices that aim to undermine
employees' chosen bargaining representative can have a
corrosive effect that linger for years.
Studies have shown that within 1 year after an election,
less than 50 percent of newly organized units have obtained
their first collective bargaining agreement. There are also
procedural obstacles that are in the way of worker rights.
Workers are subjected to--are expected to know their rights,
yet employers cannot be mandated to post notices advising
employees of these rights because this agency is a reactive not
a proactive agency.
Workers file charges with the NLRB and often are left to
wait for a significant period of time. By that--by the time,
justice is reached, or a board order is enforced, years have
gone by. By then, workers have lost homes, lost the respect of
their family, and most of all, they have lost faith in a system
that was designed to help them. The accent, inadequate remedies
for unlawful conduct not only failed to deter or fully remedy
violations, but in fact incentivize unlawful practices. The
National Labor Relations Act provides only limited remedies to
violations, the ancillary limits, remedies to a cease and
desist order or a notice posting. And where somebody is
terminated, they get back pay and reinstatement, yet other
worker protection agencies provide for compensation, such as
punitive damages and compensatory damages.
Title VII provides that--and the FLRA provides that. Unfair
labor practices against undocumented workers go unreported
entirely. The Supreme Court held that undocumented workers are
employees within the scope of Section 2-3 of the Act. We can
celebrate that. But they also in Hoffman Plastics, state that
undocumented workers can't receive the remedy. They can't get
the back pay that they lost, and in fact, they will lose their
position. They are not entitled to be reinstated. And in all
likelihood, if they used the process of the Act, they will get
deported. I will wrap up by saying this, because, of course, I
have plenty more to say.
Workers continue to need the protection of the labor laws.
The pandemic underscored that need. Workers' rights and
protections are meaningless if the laws are not responsive to
workers and business models of the 21st century. This statute
had its 86th birthday on July 5th. Let's celebrate by blowing
out the candles, cutting the cake, and retooling this needed
vital piece of legislation for modern times.
Thank you very much for giving me the opportunity to
testify before this Committee today. I look forward to your
questions.
[The prepared statement of Mr. Pearce follows:]
prepared statement of mark gaston pearce
Thank you for this opportunity to testify before you today
regarding ``The Right to Organize: Empowering American Workers in a
21st Century Economy.'' This is a special privilege for me because I
have spent half of my forty-year career working with the National Labor
Relations Board (NLRB or ``the Board''), first as a lawyer, then
ultimately as Board Member and Chairman. The NLRB is the agency charged
with enforcing the foremost labor law in the country, the National
Labor Relations Act (NLRA or ``the Act''). The NLRB has, however, been
hampered in effectively enforcing the NLRA because of the inadequacy of
its remedies.
My first legal position after law school was the NLRB's Buffalo,
New York Regional Office. For the better part of 15 years I conducted
representation elections for workers as an NLRB agent. I was a Hearing
Officer who heard evidence and made determinations about objectionable
conduct affecting an election, and, as a Field Attorney and District
Trial Specialist, I investigated and prosecuted violations of the NLRA.
I was privileged to represent workers and unions at two private law
firms in Buffalo. One of the firms, co-founded by me, was counsel to
numerous local unions and several national unions in a variety of
industries. In April 2010 I was honored to be appointed by then-
President Barack Obama to the NLRB as Board Member, and later
designated Chairman. I served in these positions for over 8 years. As I
will fully discuss in my testimony, my experience has made me certain
that our current system is not working and that all workers need
greater rights to organize and have a voice in wages and working
conditions.
The NLRA has as Among its Fundamental Purposes the Encouragement of
Collective Bargaining and the Protection of the Worker's Right to
Organize
Congress passed the NLRA, also known as the Wagner Act, in 1935 out
of recognition that workers' rights were fundamental rights. Despite
its many flaws, the NLRA was the first law to provide these protections
even if not for all workers.
Section 1 of the NLRA declares that it shall be the policy of the
United States to encourage ``the practice and procedure of collective
bargaining'' and to protect ``the exercise by workers of full freedom
of association, self-organization, and designation of representatives
of their own choosing, for the purpose of negotiating the terms and
conditions of their employment or other mutual aid or protection.'' \1\
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\1\ 29 U.S.C. Sec. 151.
The NLRA was Established in 1935 to Achieve Workplace Democracy
Historic employer practices of union-busting and refusals to
bargain collectively agitated workers, leading to strikes and increased
industrial unrest and burdening commerce in the process. The drafters
of the Wagner Act believed that improved industrial democracy, achieved
by codifying the rights to bargain collectively and organize for mutual
aid or protection, would ``eliminate the causes of certain substantial
obstructions to the free flow of commerce.'' \2\
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\2\ 29 U.S.C. Sec. 151.
By encouraging accessible democratic processes in the workplace,
the Wagner Act gave employees the power to influence the terms and
conditions of their employment and addressed the inherent inequity in
bargaining power between a sophisticated employer and an employee
acting alone. The drafters intended for more democracy in the workplace
to lead to less wage depression and increased wage-earner purchasing
power, thereby eliminating (or at least softening) the underlying
economic conditions that drove workers to strike and to violence in the
pre-Wagner era. \3\
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\3\ 29 U.S.C. Sec. 151. See also Kenneth G. Dau-Schmidt, et al.,
Labor Law in the Contemporary Workforce 40, 47 (3rd ed. 2019).
The non-economic impact of industrial democracy mattered, too; the
creation of private law through worker-led collective bargaining showed
good faith government support of a central tenant of the labor
movement--dignity at work. \4\ Industrial democracy is the means
through which industrial peace may be achieved. Correspondingly, cases
from different eras demonstrated that courts were using various
manifestations of industrial democracy to improve the experiences of
employees. The Supreme Court when it upheld the establishment of the
NLRA in NLRB v. Jones and Laughlin Steel Corp., \5\ drew heavily from
the Commerce Clause to uphold the constitutionality of the NLRA while
also acknowledging the plight of workers and Congress' intent to use
industrial democracy to protect employees. The Court stated:
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\4\ Dau-Schmidt, et al., at 48.
\5\ NLRB v. Laughlin Steel Corp., 301 U.S. 1 (1937).
`` . . . the statute goes no further than to safeguard the
right of employees to self-organization and to select
representatives of their own choosing for collective bargaining
or other mutual protection without restraint or coercion by
their employer. That is a fundamental right.'' \6\
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\6\ Id. at 33.
The Court's protection of collective bargaining was a key signal
that it endorsed industrial workplace democracy as a means of workers,
who in this case, were being discriminated against by an employer that
disapproved of union association. \7\ Decades later, the Supreme Court
would recognize that under the NLRA, even employees with no union and
no spokespersons still had voice through the exercise of the right to
walk out of their workplace rather than be subjected to the bitterly
cold conditions of an unheated Baltimore factory in 1962. \8\ Still
later, in 1984 the Court recognized an individual's worker's right to
complain and assert the authority of the negotiated collective
bargaining agreement, the law of the workplace, \9\ as justification
for a refusal to drive an unsafe truck. See, NLRB v. City Disposal
Systems, Inc. \10\ Through collective-bargaining, workers had a voice
and formed into unions. These unions built the middle class and in so
doing raised standards for all workers.
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\7\ Id. at 22.
\8\ NLRB v. Washington Aluminum, 370 U.S. 9, 17 (1962).
\9\ www.jwj.org/collective-bargaining-101.
\10\ 465 U.S. 822 (1984).
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The NLRA has not Been Meaningfully Amended Since 1947 and is in Dire
Need of Reform
Core provisions of the NLRA have been eroded by overly narrow NLRB
and court interpretations which frustrate the congressional intent
behind the creation of the NLRA. The right to engage in protected
concerted activity has withered away over decades of judicial attack
and the policies of labor hostile NLRB majorities. From 1980 until its
recent 2018 temporary spike, \11\ the worker's statutory right to
strike over working conditions and for mutual aid and protection has
been curtailed almost to the point of ineffectiveness by policies that
allow employers to permanently replace economic strikers without a
showing of exigency. Recent interpretations of the NLRA law by NLRB
majority of the previous administration has resulted in a findings that
has substantially narrowed the rights of workers to engage in protected
concerted activity. In the 2019 case, Alstate Maintenance, \12\ an NLRB
comprised of a majority of Trump appointees held that employer lawfully
terminated a sky cap who engaged in a group work stoppage in protest of
an employer's failure to address the airport tipping practice of a team
of athletes. The Trump NLRB found that the activity was not protected
concerted activity, but rather conduct stemming from unprotected
``gripes.''
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\11\ https://www.marketwatch.com/story/strikes-are-up-but-union-
membership-is-down-and-that-could-be-a-good-sign-for-the-economy-2020-
02-13.
\12\ Alstate Maintenance 367 NLRB No. 68 (2019).
In addition, there needs to be a statutory definition of ``joint
employer'' and ``employee.'' All too often the public is without
consistent guidance as it is presented with oscillating policy on these
subjects, depending on what administration is in the White House.
Without clear statutory language, workers will continue to suffer from
the see-sawing of labor law.
The Trump NLRB turned to rulemaking as a substitute for
adjudication in its effort to modify the Obama Board's joint-employer
standard in Browning-Ferris Industries. \13\ While Browning-Ferris was
pending before the U.S. Court of Appeals for the District of Columbia
Circuit, the Board attempted to reverse the case through adjudication
in Hy-Brand Industrial Contractors, Ltd. \14\ That effort was derailed
following a determination that participating Member William Emanuel had
a conflict of interest. \15\ As a result, Browning-Ferris was
reinstated as the prevailing statement on the joint-employer standard.
Undeterred, in September 2018, the NLRB issued a notice of proposed
rulemaking (NPRM) that recommended codifying the approach taken in Hy-
Brand. In December 2018, while the NLRB was reviewing public comments
on its proposed rule, the D.C. Circuit substantially enforced the
Browning-Ferris approach and emphasized that the common law ``permits
consideration of those forms of indirect control that play a relevant
part in determining the essential terms and conditions of employment.''
\16\
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\13\ 362 NLRB 1599 (2015).
\14\ 365 NLRB No. 156 (Dec. 14, 2017).
\15\ See https://www.nlrb.gov/news-outreach/news-story/board-
vacates-hy-brand-decision.
\16\ Browning-Ferris Industries of California, Inc. v. NLRB, 911
F.3d 1195 (D.C. Cir. 2018).
The final rule, which the Board issued in February 2020, \17\
failed to resolve key questions about how to determine if two entities
are joint employers, revealing the limitations of rulemaking as a means
of defining standards rooted in the common law. Browning Ferris is
still in litigation, as the Republican majority has refused to apply
its remedy to the parties. \18\
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\17\ See https://www.govinfo.gov/content/pkg/FR-2020-02-26/pdf/
2020-03373.pdf.
\18\ 369 NLRB No. 139 (July 2020): The Board found that
retroactively applying any clarified version of the new joint-employer
would be ``manifestly unjust.'' The Board elaborated that Browning-
Ferris changed old, reasonably clear law in a way that substantially
affected reasonable expectations under the Act. So, the Board concludes
that the new standard should not have been applied to Browning-Ferris.
The old standard was applied, and it does not seem that the new
standard was clarified in any meaningful way. 370 NLRB No. 86 (Feb.
2021): The Board denied the Charging Party's Motion for Reconsideration
of the above decision since there was not (a) any material error or (b)
extraordinary circumstances warranting reconsideration. May 2021: Court
Petitioner filed to have the order reviewed.
The Trump Board continued its trend of using rulemaking as a way to
entrench its position on contentious policy questions in its NPRM on
students' status as employees under the Act. Under the proposed rule,
students who perform services at a private college or university
related to their studies will be held to be primarily students with a
primarily educational, not economic, relationship with their
university, and therefore not ``employees'' within the meaning of
Section 2(3). \19\ This rule was intended to overrule the Board's
decision in Trustees of Columbia University, \20\ and reinstate the
rule of Brown University \21\ on a more permanent basis. The Trump
Board, without the direction of the Supreme Court or an analogous
doctrinal argument about the need for statutory consistency, sought to
usurp the role of Congress and use rulemaking to modify the statutory
scheme of the NLRA by excluding students from employee status. Similar
to the tack in the joint employer rule, the goal of this proposed rule
was clearly to change a standard that the Board was unable to achieve
through adjudication. After the change of administrations, the Board on
March 9, 2021, abandoned this rulemaking effort. \22\
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\19\ 29 U.S.C. 152(3).
\20\ 364 NLRB No. 90 (2016).
\21\ 342 NLRB 483 (2004).
\22\ Federal Register: Jurisdiction-Nonemployee Status of
University and College Students Working in Connection With Their
Studies.
However, the Trump NLRB's overly narrow interpretation of the term
``employee'' generally as decided in SuperShuttle, \23\ continues to
wrongfully deprive workers of their rights by allowing employers to
more easily misclassify them as independent contractors, who are
excluded from the NLRA's protections.
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\23\ 367 NLRB No. 75 (2019).
Other decisions during the Trump NLRB amounted to an all-out
assault on access to the workers. As articulated in a 2020 presentation
before the American Bar Association, \24\ the Trump Board majority, in
a tack designed to undercut the rights of workers--organized or not yet
organized--to communicate with union staff and with the public,
launched a breathtaking attack on access rights under Section 7, even
as it has initiated the rulemaking process in regard to access
questions. \25\ In each of the cases, the majority has overturned clear
precedent decided as recently as 10 years and as established as forty.
The majority justified its decisions in these cases by refusing to
address the union animus on which the ALJ premised their decision
(Kroger), \26\ misrepresenting the undisputed facts of the case (UPMC),
\27\ or ignoring clear, on-point authority from the D.C. Circuit (Tobin
Center). \28\ Moreover, these decisions represent a departure from the
tradition of giving notice to the public when it is considering
reversing significant precedents, as it does in each of these cases.
The end results of stripping workers of Section 7 access rights seem to
justify that majority's means.
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\24\ 24 Get Off My Lawn! The Changing Nature of Employer's Property
Rights Under Tobin Center, UPMC Presbyterian Shadyside, and Kroger
Limited Partnership A union perspective, by Pamela Chandran; ABA
Committee on Development of the Law Under the National Labor Relations
Act 2020 Midwinter Meeting San Juan, Puerto Rico March 1-4, 2020.
\25\ The Board announced its intention to address access in its
rulemaking priorities in May 2019. National Labor Relations Board,
Semiannual regulatory agenda, 84 Fed. Reg. 29776 (June 24, 2019). The
Notice of Proposed Rulemaking, however, has not been released.
\26\ Kroger Limited Partnership and UFCW Local 400, 368 NLRB No.
64 (2019).
\27\ UPMC Presbyterian Shadyside (UPMC), 368 NLRB No. 2 (2019).
\28\ Bexar County Performing Arts Center Foundation d/b/a Tobin
Center for the Performing Arts (Tobin Center), 368 NLRB No. 46, slip
op. at 24 (2019).
With an agency designed to be reactive rather than proactive, many
workers simply don't know their rights. Efforts by the NLRB to require
that an employer post a notice of employee rights in the same way other
labor laws require was struck down by the courts because the statute
would have to be amended for such a mandate to take effect. Regional
offices of the NLRB are often placed in facilities where immigrate and
other low wage workers cannot access because they either require
identification to enter, are invisible to the public due to lack of
signage \29\ or because of the closure of resident offices, are too
distant from the worker's locale. In addition, longstanding budgetary
freezes and the NLRB's mismanagement under the Trump Administration
have left the Board's Regional Offices understaffed and under resourced
for their critical mission.
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\29\ Even the national headquarters of the NLRB was required to be
relocated to a privately owned building in Washington, DC where
external agency signage is prohibited.
Moreover, as has been recently demonstrated by the actions of the
prior General Counsel, Peter Robb, the NLRB is susceptible to
diminished effectiveness by a labor hostile administrator. A new report
\30\ by the nonpartisan US Government Accountability Office (GAO) found
that Robb was dismantling the agency from the inside. He reduced staff
size, destroyed employee morale, and failed to spend the money
appropriated by Congress. This all occurred while Robb was pursuing
what many in labor described as an anti-worker, pro-corporate agenda.
\31\ The NLRB's staffing fell 26 percent between fiscal year 2010 and
fiscal year 2019, from 1,733 to 1,281. The personnel losses were
disproportionately in the NLRB's field offices, where unfair labor
practice charges are investigated, and union representation elections
are held. The staffing problem was greatly exacerbated during Robb's
time in office. For the 8 years preceding Robb, the agency filled 95
percent of vacancies in the headquarters and 73 percent in the field
offices. But under Robb, staffing in the field dropped by 144 people,
and only 13 people--a mere 9 percent--were hired to fill these
vacancies.
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\30\ GAO-21-242, NATIONAL LABOR RELATIONS BOARD: Meaningful
Performance Measures Could Help Improve Case Quality, Organizational
Excellence, and Resource Management.
\31\ Unprecedented: The Trump NLRB's attack on workers' rights.
Economic Policy Institute (epi.org).
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There is a Need for Stable and Consistent Union Election Reform
In 2014, the Obama-era Board significantly revised the existing
representation-case procedures to ``remove unnecessary barriers to the
fair and expeditious resolution of representation questions . . .
streamline Board procedures, increase transparency and uniformity
across regions, eliminate or reduce unnecessary litigation,
duplication, and delay, and update the Board's rules on documents and
communications in light of modern communications technology.''
Opponents of the rule contended that the Board's primary objective
was to speed up the union election process and delay employer
challenges. Although business groups raised facial challenges to the
rule in two court proceedings, the rule was upheld by both the U.S.
Court of Appeals for the Fifth Circuit and the U.S. District Court for
the District of Columbia Circuit. \32\
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\32\ Associated Builders & Contractors of Texas, Inc. v. NLRB, 826
F.3d 215 (5th Cir. 2016); Chamber of Commerce of the United States v.
NLRB, 118 F. Supp. 3d 171 (D.D.C. 2015).
Despite these favorable court decisions, a newly configured Trump
Board issued a request for information (RFI) seeking public input on
how the 2017 rule was operating as one of its first orders of business.
The RFI prompted thousands of statements from unions and employers
alike, including praise from NLRB Regional Directors experienced in its
implementation and operation. \33\ Nevertheless, in 2019, the
Republican-majority Board, while explicitly disclaiming any reliance on
the RFI or the information the Board gathered during that extensive
process, rolled back substantial portions of the 2014 rule without
notice and comment or empirical data to support its modifications. \34\
The final rule was found, in pertinent part, to have violated the
Administrative Procedure Act and made ``radical changes'' to the
election procedures without opportunity for notice and comment.
Substantial portions of the rule were struck by Judge Ketanji Brown
Jackson in litigation before the U.S. District Court for the District
of Columbia. \35\ It is noteworthy that the several 2019 modifications
to the 2014 rule deemed procedurali by the court were retained and will
be subject to change at any time by any succeeding Board without notice
and comment. This does little to provide the public with policy
stability.
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\33\ See Representation-Case Procedures, 82 Fed. Reg. 58783 (Dec.
14, 2017).
\34\ Representation-Case Procedures, 84 Fed. Reg. 69524, 69558
(Dec. 18, 2019) (Member McFerran, dissenting).
\35\ See AFL-CIO v. NLRB, Civ. No. 20-cv-0675 (KBJ), 2020 WL
3041384 (D.D.C. June 7, 2020).
The Need to Strengthen Protections During the Bargaining Process
Employer unfair labor practices that aim to undermine employees'
chosen bargaining representative can have corrosive effects in the
workplace that linger for years. As Kate Bronfenbrenner's research has
shown, within 1 year after an election, only 48 percent of newly
organized units have obtained first collective bargaining agreements.
By 2 years, that number rises to 63 percent, and by 3 years to 70
percent. Even after 3 years, only 75 percent of units have reached a
first contract. \36\ During my time at the NLRB, I frequently
encountered stories that demonstrated an urgent need for better
protection for workers during their first-contract negotiations. One
representative example is a case called Somerset Valley Rehab Center
and Nursing home \37\--the employer would not bargain and deprived
employees of a collective bargaining agreement for 7 years after the
union was certified as the representative of the employees. It took
many legal proceedings and enforcement by the Third Circuit.
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\36\ See Kate Bronfenbrenner, No Holds Barred: The Intensification
of Employer Opposition to Organizing, Economic Policy Institute
Briefing Paper #235 (May 20, 2009), available at https://www.epi.org/
files/page/-/pdf/bp235.pdf.
\37\ 1621 Route 22 West Operating Co., LLC d/b/a Somerset Valley
Rehabilitation and Nursing Center v. NLRB, 3d Cir. No. 12-1031, March
14, 2018.
I welcome the PRO Act's proposal to strengthen protections for
employees when they are in the vulnerable position of negotiating a
first contract.
Procedural Obstacles to Relief
During my tenure with the NLRB's regional office as well has my
period of private practice, I spent a significant amount of my time
advising the public and clients who had been subjected to unfair labor
practices. I would advise workers of their rights under the NLRA and
the consequences of their employers' conduct. In every instance, I
encouraged workers to rely on the Act's protections despite employer
intimidation, misrepresentation, and abuse. All too often, because of a
protracted process and virtually toothless respondent sanctions for
unfair labor practices, victimized workers seeking and awaiting justice
would pay the heavy price of retaliation and job loss. Workers might be
blackballed and forced to go through extended periods without income.
They would lose the support of their friends. Their families would
suffer and become dysfunctional. Ultimately, these victimized workers
lose hope.
After I became a Board Member, I observed how cases would be tied
up for years on appeal, how vacancies on the Board would cause case
processes to grind to a halt, and how efforts to provide the public
with relief during periods of loss of quorum and political gridlock
were curtailed and often reversed as a result of judicial intervention.
As I expressed previously, when workers file charges with the NLRB,
they are often left to wait for a significant period of time. Proving
that an employer has unlawfully terminated an employee or otherwise
significantly interfered with that employee's rights under the NLRA can
be a very lengthy process. Ordinarily, such charges must be
investigated by an NLRB regional office, after which there is a hearing
before an administrative law judge. After the administrative law judge
renders a decision, employers typically file appeals and await
decisions by the NLRB, after which they often refuse to comply with the
Board's orders and appeal those orders to the Federal Courts of
Appeals. By the time the Board's order is enforced, several years may
have elapsed, and a fired worker has frequently found a new job. For
this reason, although 1,270 employees were offered reinstatement in
fiscal year 2018, only 434 accepted such offers. \38\
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\38\ See https://www.nlrb.gov/news-outreach/graphs-data/remedies/
reinstatement-offers (last accessed 4/30/19).
Even though Section 10(j) of the NLRA permits the Board to seek an
injunction in Federal district court when an employer fires workers for
organizing a union or engaging in protected concerted activity, the
Board only uses this authority sparingly. \39\ In fiscal year 2018, the
Board only authorized 22 injunctions, despite employers' frequent
interference with employees' right to organize unions. \40\ By
contrast, during my years as Chairman, the Board authorized an average
of 43 injunctions per year. In addition, the NLRA requires the Board to
seek an injunction whenever a union engages in unlawful picketing or
strike activity. \41\
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\39\ 29 U.S.C. Sec. 160(j).
\40\ See https://www.nlrb.gov/sites/default/files/attachments/
basic-page/node1674/nlrbpar2018508.pdf (last accessed 4/30/19).
\41\ See 29 U.S.C. Sec. 160(l).
Sadly, what I have just described often represents the best-case
scenario for a worker who must go through the full process of
litigating an unfair labor practice charge. In recent years, procedural
infirmities at the NLRB itself have all too frequently compromised its
ability to act, further prolonging the delay workers must endure before
finally enjoying the remedies they are due. Political gridlock has
often prevented the NLRB from operating with the full five-member
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complement contemplated by the statute.
I commend the PRO Act for attempting to create greater parity and
predictability by making injunctive relief in the event of employer
unfair labor practices mandatory in a greater number of cases.
Similarly, I am encouraged by the PRO Act's provisions to address
the Supreme Court's decision in Epic Systems Corp. v. Lewis. \42\
During my time as Chairman, the NLRB issued D. R. Horton, Inc. \43\ and
Murphy Oil USA, Inc. \44\ In these cases, the Board found that an
employer violates Section 8(a)(1) when it requires employees, as a
condition of employment, to waive their rights to pursue class or
collective actions involving employment claims. \45\
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\42\ 138 S. Ct. 1612, 584 U.S.--(2018).
\43\ 357 NLRB 2277 (2012).
\44\ 361 NLRB 774 (2014).
\45\ 45 29 U.S.C. Sec. 158(a)(1).
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The many cases involving mandatory arbitration agreements that
followed in the wake of D. R. Horton and Murphy Oil stood as a
testament to the prevalence of employers' efforts to preemptively
stifle concerted activity. And though the Seventh and Ninth Circuit
Courts of Appeals agreed with the NLRB's view that arbitration
agreements that require employees to forego their Section 7 rights are
invalid under the Federal Arbitration Act's saving clause, \46\ the
Supreme Court read the Federal Arbitration Act differently. As
dissenting Justice Ruth Bader Ginsburg recognized, the ``inevitable
result of [the majority's] decision will be the underenforcement of
Federal and state statutes designed to advance the well-being of
vulnerable workers.'' By restoring employees' rights to pursue their
employment claims on a class or collective basis, the PRO Act would
empower workers to join together to protect themselves and each other
and to seek vindication when they have been wronged at work.
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\46\ See Ernst & Young LLP v. Morris, 834 F.3d 975 (9th Cir.
2016); Lewis v. Epic Systems Corp., 823 F.3d 1147 (7th Cir. 2016).
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Inadequate Remedies for Violations
As was stated in the testimony of Devki K. Virk before the House of
Representatives Committee on Education and Labor, Subcommittee on
Health, Employment, Labor and Pensions, \47\ the Act's inadequate
remedies for unlawful conduct not only fail to deter or fully remedy
violations, but in fact incentivize unlawful practices. The NLRA
provides only limited remedies for violations. Section 10(c) of the
NLRA limits the remedies to a cease-and desist order and, in the event
of an unlawful firing, reinstatement with back pay, along with a
required notice posting. By comparison, victims of race-or sex-based
discrimination are eligible for compensatory and, in some cases,
punitive damages under Title VII of the Civil Rights Act. Claimants
owed unpaid wages or overtime can recover liquidated damages in
addition to their lost wages under the Fair Labor Standards Act.
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\47\ Devki K. Virk, Bredhoff & Kaiser, P.L.L.C., Testimony before
the Committee on Education and Labor, Subcommittee on Health,
Employment, Labor and Pensions, U.S. House Of Representatives, March
26, 2019.
Consistent with Devki Virk's observations, I have found that the
lack of effective remedies under the NLRA is of obvious importance for
individual workers who are fired for organizing a union or engaging in
other protected activity under Section 7 of the NLRA. Because employers
often calculate that noncompliance is less costly, the Board's limited
remedies stand in the way of its ability to fulfill its statutory
mission to ``encourage the practice and procedure of collective
bargaining'' and ``protect the exercise by workers of full freedom of
association, self-organization, and designation of representatives of
their own choosing.'' \48\
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\48\ 29 U.S.C. Sec. 151.
I recall a particular example of a respondent's flagrant pattern of
flouting the NLRA in light of the NLRB's inadequate remedies was the
2014 case Pacific Beach Hotel. \49\ In that case, the Respondents had
engaged in egregious unfair labor practices over the span of 10 years.
The Board found that the Respondents had violated multiple provisions
of the Act and engaged in objectionable conduct that interfered with
elections on two occasions. In addition, the Respondents were subject
to two Section 10(j) injunctions and had been found to be in contempt
of court for violating a Federal district court's injunction.
Nevertheless, in 2014 the Board in faced Respondents which still had
not complied with the remedial obligations imposed on them after the
Board's prior decisions.
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\49\ HTH Corp., Pacific Beach Corp., and KOA Mgmt., LLC, a single
employer, d/b/a Pacific Beach Hotel, 361 NLRB 709 (2014).
Rather, the Respondents continued to engage in unlawful activity,
some of which repeatedly targeted the same employees for their
protected activity and detrimentally affected collective bargaining.
For example, after the Board held that the Respondents unlawfully
imposed unilateral increases to housekeepers' workloads in 2007, the
Respondents briefly restored the lower workloads only to unilaterally
raise them again. Similarly, the Respondents unlawfully disciplined,
suspended, and then discharged an employee a second time for his
protected activity, after he was reinstated pursuant to a Federal
district court order of interim injunctive relief. Respondents
continued making unilateral changes to work rules, taking adverse
actions against employees for supporting the Union, placing employees
under surveillance, undermining the Union, threatening, and
intimidating Union agents, and in many other manners interfering with
employee rights under the Act--all contrary to the Board's prior
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orders.
Faced with a flagrant violator of the Act of such magnitude, the
Board, cognizant of its inability to impose punitive remedies, tried to
do its best with the authority it had. Among other remedies specific to
these violations, the Board ordered the Respondents to cease and desist
from engaging in the recidivist behavior described previously and
ordered reinstatement with back pay to the affected employees. It also
ordered a 3-year notice-posting period and required mailing of the
notice, the Decision and Order, and an additional Explanation of Rights
to current and former employees and supervisors, as well as provision
of the material to new employees and supervisors for a period of 3
years. These notices had to also be published in local media of general
circulation. Because its past orders were not self-enforcing and
required the General Counsel and the Charging Party to incur additional
litigation costs by seeking Federal court enforcement, the Board
majority also ordered that the multiple years of litigation costs be
awarded to the General Counsel and Union, as well as certain other
costs incurred by the Union as a direct result of the Respondents'
unfair labor practices. It should be noted that the remedy of
litigation costs was, however, struck down by the Court of Appeals for
the District of Columbia Circuit because the Board lacked the statutory
authority to impose such sanctions. \50\ Given the Act's significant
remedial limitations, employers are commonly willing to flout the law
by intimidating, coercing, and firing workers because they engage in
protected concerted activity or attempt to organize a union. As the
Board's experience in Pacific Beach Hotel shows, when employers
discover that the cost of noncompliance is so low, they sometimes
violate the law frequently over the course of many years.
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\50\ HTH Corp. v. NLRB, 823 F.3d 668, 678-81 (D.C. Cir. 2016).
It isn't difficult to understand why. Without a credible deterrent,
employers weighing the consequences of violating the law face a choice
that all but incentivizes such serious interferences with employees'
rights. As Devki Virk explained, one-third of employers fire workers
during organizing campaigns, \51\ and 15 to 20 percent of union
organizers or activists may be fired as a result of their activities in
union campaigns. And although the NLRB obtained 1,270 reinstatement
orders for workers who were illegal fired for exercising their rights
in fiscal year 2018 and collected $54 million in back pay for workers,
\52\ even when the Board is able to timely intervene and order
reinstatement and backpay, it is not always enough to prevent employer
lawbreaking.
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\51\ Josh Bivens et al., ``How today's unions help working
people.''
\52\ National Labor Relations Board, NLRB Performance Reports-
Monetary Remedies/Reinstatement Offers, accessed February 2019.
During my time as Chairman, the NLRB modified its approach to
calculating backpay in an effort to better fulfill the agency's dual
remedial mandate to ensure that discriminatees are actually made whole
and to deter future unlawful conduct. In King Soopers, Inc., \53\ the
Board modified its standard make-whole remedy to require respondents to
fully compensate discriminatees for their search-for-work expenses and
expenses they incurred because they were victims of unlawful conduct.
Previously, the Board had treated search-for-work and interim
employment expenses as an offset that would reduce the amount of
interim earnings deducted from gross backpay, an approach which I and
the other members who joined the majority in King Soopers argued
unfairly prevented discriminatees from being made whole and amounted to
a subsidy of employers' violations of the law.
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\53\ 364 NLRB No. 93 (2016), enf'd in relevant part, 859 F.3d 23
(D.C. Cir. 2017).
While King Soopers marked a significant improvement that has helped
the Board come closer to making employees who suffer unlawful
termination whole, even the prospect of paying a full back pay award is
often not a sufficient deterrent for employers. The PRO Act comes even
closer to accomplishing a full make-whole remedy by providing that
backpay is not to be reduced by interim earnings. And by including
provisions for front pay, consequential damages, and liquidated
damages, the PRO Act would help the Board more effectively deter
violations by making compliance with the law a more rational decision
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for employers.
I see a particular need for the enhanced remedies the PRO Act would
provide when employers violate Section 8(a)(4) of the Act, which makes
it an unfair labor practice to discharge or discriminate against
employees because they have ``filed charges or given testimony'' in a
Board proceeding. \54\
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\54\ 29 U.S.C. Sec. 158(a)(4).
Without the assurance that they will be fully protected when they
file charges and participate in Board hearings, employees will continue
to be fearful about coming forward to tell their stories or testify on
behalf of their unions or fellow employees. Unchecked retaliation
against employees seeking enforcement of the NLRA, threatens the
viability of the whole remedial scheme the Act contemplates.
Unfair Labor Practices Against Undocumented Workers
In Sure-Tan, Inc. v. NLRB, \55\ the Supreme Court held that
undocumented workers are ``employees'' within the scope of Section 2(3)
of the Act. \56\
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\55\ 467 U.S. 883, 892 (1984).
\56\ 29 U.S.C. Sec. 152(3).
However, the Supreme Court in Hoffman Plastic Compounds, Inc. v.
NLRB, \57\ also made it clear that Board lacked ``remedial discretion''
to award backpay to an undocumented worker who, in contravention of the
Immigration Reform and Control Act (IRCA), had presented invalid work-
authorization documents to obtain employment. While a respondent may be
found liable for such unlawful conduct, victimized undocumented
employees are prohibited from receiving the make whole remedies of back
pay and/or reinstatement, which are commonly ordered as a remedy for
such violations of the law. Consequently, because of the limitations in
the statute, violators are merely obliged to post a notice committing
to cease and desist from such conduct. This is tantamount to a slap on
the wrist of flagrant violators of the law. I joined former NLRB
Chairman Wilma Liebman in articulating the inadequacy of this remedy in
Mezonos Maven Bakery, Inc., \58\ a post-Hoffman Plastics Board
decision. Among the concerns former Chairman Liebman and I expressed
are the following:
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\57\ 535 U.S. 137 (2002).
\58\ 357 NLRB No. 47 (2011).
1. Precluding backpay undermines enforcement of the Act.
Although the primary purpose of a backpay award is to make
employee victims of unfair labor practice whole, the backpay
remedy also serves a deterrent function by discouraging
---------------------------------------------------------------------------
employers from violating the Act.
2. Precluding backpay chills the exercise of Section 7 rights.
Provided it is severe enough, one labor law violation can be
all it takes. The coercive message--that if you assert your
rights, you will be discharged (and, perhaps, detained, and
deported)--will have been sent, and it will not be forgotten.
3. Precluding backpay fragments the workforce and upsets the
balance of power between employers and employees. Protecting
collective action is the bedrock policy on which the Act rests,
as was recognized by the Supreme Court when it upheld the Act's
constitutionality. \59\
---------------------------------------------------------------------------
\59\ See NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 33
(1937) (``Long ago we stated the reason for labor organizations. We
said that they were organized out of the necessities of the situation;
that a single employee was helpless in dealing with an employer; that
he was dependent ordinarily on his daily wage for the maintenance of
himself and family; that if the employer refused to pay him the wages
that he thought fair, he was nevertheless unable to leave the employ
and resist arbitrary and unfair treatment; that union was essential to
give laborers opportunity to deal on an equality with their
employer.'') (citing American Steel Foundries v. Tri-City Central
Trades Council, 257 U.S. 184, 209 (1921)).
4. Precluding backpay removes a vital check on workplace
abuses. The very employers most likely to be emboldened by a
backpay-free prospect to retaliate against undocumented workers
for concertedly protesting their terms and conditions of
employment are the ones most likely to impose the worst terms
---------------------------------------------------------------------------
and conditions.
Both former Chairman Liebman and I recognized that an award of
backpay to undocumented workers is beyond the scope of the Board's
authority under the Court's decision in Hoffman. We nevertheless
remained convinced that an order relieving the employer of economic
responsibility for its unlawful conduct can serve only to frustrate the
policies of both the Act and our Nation's immigration laws. Although
untested, we suggested in Mezonos that a remedy requiring payment by
the employer of backpay equivalent to what it would have owed to an
undocumented worker would not only be consistent with Hoffman but would
advance Federal labor and immigration policy objectives. Such backpay
could be paid, for example, into a fund to make whole victimized
workers whose backpay the Board had been unable to collect. The novelty
of such a remedy would likely cause it to be tied up in court
challenges, thereby delaying justice for an untold period. However, the
PRO Act would bring forth a clear and expedient resolution to the
consequential inequities presented by the current state of the law.
Thank you very much for giving me the opportunity to testify before
the Committee today. I applaud you for thinking carefully about how
best to ensure that working people in this country can enjoy full
freedom of association.
______
The Chair. Thank you, Mr. Pearce.
Dr Shierholz.
STATEMENT OF HEIDI SHIERHOLZ, PH.D., SENIOR ECONOMIST AND
DIRECTOR OF POLICY, ECONOMIC POLICY INSTITUTE, SILVER SPRING,
MD
Ms. Shierholz. Chair Murray, Senator Braun, and other
Members of the Committee, thank you for the opportunity to
testify today on this urgent matter and I am really going to
dig in on the economics of this. And I will start by saying
that the share of workers covered by a collective bargaining
agreement declined from 27 percent to 12.1 percent between 1979
and 2020. This decline was not because your workers don't want
to be in unions.
In the four decades from the late 1970's to the late
2010's, the share of nonunion workers who said they would vote
to unionize if they were given the opportunity rose from one-
third to nearly one-half. The fact that workers want to be in
unions is no surprise when workers are able to form a union and
collectively bargain their wages, benefits, and working
conditions all get better. So on average, a worker covered by a
union contract earns 10.2 percent more than a similar worker
who is not in a union.
Union workers are more likely to have employer provided
health insurance, employer sponsored retirement plans, paid
vacation and sick leave, more predictable schedules, and safer
workplaces. Further, the right to a union is directly relevant
to our urgent national conversation around racial equity. Black
workers are more likely than white workers to be in unions, and
Black workers who are in unions get a bigger boost from being
in the union than white workers do. Those two facts together
mean that unions help narrow the Black, White wage gap. And
research shows that this phenomenon is not new. By 1950, Black
workers were more likely to be in unions and had a larger union
premium than white workers.
This means that the net effect of the mid-20th century
spread of unionization was that the institution of collective
bargaining was one of the most important institutions in our
Country for advancing racial, economic, economic justice. And
conversely, the decline of unionization has played a
significant role in the expansion of the Black, white wage gap
over the last four decades. I also want to highlight the fact
that nonunion workers benefit from the presence of unions when
union density is high. Unions essentially set standards that
nonunion workers must meet in order to attract and retain the
workers that they need.
This combination of the direct effect of unions on union
members and the spillover effect to nonunion workers means that
unions are crucial for decent wage growth for working people.
Research shows that unionization accounts for a third of the
growth in inequality between typical workers and workers at the
high end of the wage distribution in recent decades. The
pandemic also taught us crucial lessons about the importance of
unions. While the number of workers represented by a union
declined in 2020, as the economy shed millions of jobs, the
unionization rate rose because union workers saw less job loss
than nonunion workers.
This was due in large part to the fact that unionized
workers had a voice in how their employers navigated the
pandemic. They used this voice for things like negotiating
terms of furloughs or work sharing arrangements to save jobs.
The importance of unions has been especially clear for
frontline workers during the crisis. Unionized workers who
provide essential services were able to do things like secure
enhanced safety measures, additional premium pay, paid sick
time. But like non-essential workers, most essential workers
are not unionized.
During the pandemic, many nonunionized, essential workers
were forced to work without personal protective equipment or
access to paid sick leave or premium pay. The decline of
unionization in recent decades has not been, as some would like
us to believe, the natural result of a modern economy. It has
been the result of fierce corporate opposition that has
suppressed workers' freedom to organize. Aggressive anti-union
campaigns were once confined to the most anti-union employers,
but now they are the norm.
As a National Labor Relations Act makes--and though the
National Labor Relations Act makes it illegal for employers to
intimidate, coerce, or fire workers in retaliation for
organizing, the penalties are so weak that they don't provide
an actual economic disincentive for illegal union busting. And
as a result, it is rampant. Employers are charged with illegal
conduct in over 40 percent of union elections.
Despite these relentless attacks on unions and collective
bargaining, an update to labor law to rebalance the system has
not happened. The huge gap between the share of unions--the
share of workers who want a union and the share of workers who
are in a union makes it clear that our system of labor law is
not working. Policy changes like the Protecting the Right to
Organize Act are crucial for rebuilding an economy that
guarantees all workers the right to come together and have a
voice in their workplace. Thank you and I look forward to
questions.
[The prepared statement of Ms. Shierholz follows:]
prepared statement of heidi shierholz
Chair Murray, Ranking Member Burr, and Members of the Committee,
thank you for the opportunity to testify today on the right to organize
and on empowering U.S. workers in a 21st century economy. My name is
Heidi Shierholz and I am a senior economist and the director of policy
at the Economic Policy Institute (EPI) in Washington, DC. EPI is a
nonprofit, nonpartisan think tank created in 1986 to include the needs
of low-and middle-wage workers in economic policy discussions. EPI
conducts research and analysis on the economic status of working
America, proposes public policies that protect and improve the economic
conditions of low-and middle-wage workers, and assesses policies with
respect to how well they further those goals. I previously served as
Chief Economist at the U.S. Department of Labor during the Obama
administration.
Today I will discuss the importance of unions to working people, to
racial equity, and to reducing economic inequality. I will also discuss
how the decline in unionization in recent decades is the direct result
of relentless attacks on unions. Finally, I will discuss the economic
impacts of the coronavirus pandemic, how unions played a vital role in
protecting workers during the pandemic, and why promoting unionization
and the right to collectively bargain through labor law reform is
essential for an equitable recovery.
The Benefits of Unions to Union Workers
The share of workers covered by a collective bargaining agreement
dropped from 27.0 percent to 12.1 percent between 1979 and 2020,
meaning the union coverage rate is now less than half where it was four
decades ago. \1\ Importantly, this decline was not because workers are
now less interested in being in a union. In the four decades between
the late 1970's and the late 2010's, the share of non-union workers who
said they would vote to unionize if given the opportunity rose from
one-third to nearly one-half. \2\
---------------------------------------------------------------------------
\1\ Economic Policy Institute, ``Union Coverage,'' The State of
Working America Data, last updated February 2021.
\2\ Thomas A. Kochan et al., ``Worker Voice in America: Is There a
Gap Between What Workers Expect and What They Experience?'' ILR Review
72, no. 1 (January 2019): Figure 3, https://doi.org/10.1177/
0019793918806250.
It's no surprise workers want unions. When workers are able to come
together, form a union, and collectively bargain, their wages,
benefits, and working conditions improve. \3\ On average, a worker
covered by a union contract earns 10.2 percent more in wages than a
peer with similar education, occupation, and experience in a
nonunionized workplace in the same sector. \4\ Unions also provide
workers with better benefits. For example, unions workers are far more
likely to be covered by employer-provided health insurance: More than
nine in 10 workers covered by a union contract (95 percent) have access
to employer-sponsored health benefits, compared with just 68 percent of
nonunion workers. Further, union employers contribute more to their
employee's health care benefits. \5\ Union workers also have greater
access to paid sick days: More than nine in 10 workers--93 percent--
covered by a union contract have access to paid sick days, compared
with 75 percent of nonunion workers. \6\ Union workers are also more
likely to have paid vacation and holidays, more input into the number
of hours they work, and more predictable schedules. Further, union
employers are more likely to offer retirement plans and to contribute
more toward those plans than comparable nonunion employers. \7\
---------------------------------------------------------------------------
\3\ Bivens et al., How Today's Unions Help Working People: Giving
Workers the Power to Improve Their Jobs and Unrig the Economy, Economic
Policy Institute, August 2017.
\4\ Economic Policy Institute, Unions Help Reduce Disparities and
Strengthen Our Democracy (fact sheet), April 23, 2021.
\5\ Economic Policy Institute, Unions Help Reduce Disparities and
Strengthen Our Democracy (fact sheet), April 23, 2021.
\6\ Economic Policy Institute, Unions Help Reduce Disparities and
Strengthen Our Democracy (fact sheet), April 23, 2021.
\7\ Economic Policy Institute, Unions Help Reduce Disparities and
Strengthen Our Democracy (fact sheet), April 23, 2021.
Unions also improve the health and safety practices of workplaces
through their collective bargaining agreements by providing health
insurance and requiring safety equipment. \8\ Further, unions empower
and allow workers to freely report unsafe working conditions without
retaliation, which can lead to a reduction in work hazards. \9\
Research has found that so-called ``right-to-work'' legislation, which
weaken unions, has been associated with a roughly 14 percent increase
in the rate of occupational fatalities. \10\
---------------------------------------------------------------------------
\8\ Michael Zoorob, ``Does `Right to Work' Imperil the Right to
Health? The Effect of Labour Unions on Workplace Fatalities,''
Occupational and Environmental Medicine, 75, (June 2018): 736-738,
https://dx.doi.org/10.1136/oemed-2017-104747.
\9\ Benjamin C. Amick et al., ``Protecting Construction Worker
Health and Safety in Ontario, Canada: Identifying a Union Safety
Effect,'' Journal of Occupational and Environmental Medicine, 57, no.
12 (December 2015): 1337-1342, https://doi.org/10.1097/
JOM.0000000000000562.
\10\ Michael Zoorob, ``Does `Right to Work' Imperil the Right to
Health? The Effect of Labour Unions on Workplace Fatalities,''
Occupational and Environmental Medicine, 75, (June 2018): 736-738,
https://dx.doi.org/10.1136/oemed-2017-104747.
---------------------------------------------------------------------------
The Importance of Unions to Racial Equity
The right to a union and collective bargaining is also directly
relevant to our urgent national conversation around racial inequality
in its various forms, including economic disparities by race. Unions
and collective bargaining help shrink the Black--white wage gap, due to
the fact that Black workers are more likely than white workers to be
represented by a union and that Black workers who are in unions get a
larger boost to wages from being in a union than white workers do (i.e.
the ``union wage premium'' is larger for Black workers than for white
workers). Further, research shows that this phenomenon isn't new.
Starting in the mid-1940's, Black workers began to be more likely to be
in unions and to have a larger union premium than white workers. \11\
While significant segments of organized labor--like nearly all
institutions in U.S. society--exhibited racial bias well past the mid-
1940's, the net effect of the mid-20th century spread of unionization
made the institution of collective bargaining one of the most important
institutions in the country for advancing racial economic justice.
Consequently, one of the most devastating casualties of the erosion of
collective bargaining in recent decades has been the weakening of this
force for racial equity. The decline of unionization has played a
significant role in the expansion of the Black--white wage gap over the
last four decades. An increase in unionization could help halt and
reverse those trends. \12\
---------------------------------------------------------------------------
\11\ Henry S. Farber, ``Unions and Inequality over the Twentieth
Century: New Evidence from Survey Data,'' Quarterly Journal of
Economics, 136, no. 3 (August 2021): 1325-1385, https://doi.org/
10.1093/qje/qjab012.
\12\ Valerie Wilson and William M. Rodgers III, Black-White Wage
Gaps Expand with Rising Wage Inequality, Economic Policy Institute,
September 20, 2016.
---------------------------------------------------------------------------
Unions and Economic Inequality
While union workers receive higher wages than nonunion workers,
nonunion workers also benefit from the presence of unions. When union
density is high, nonunion workers benefit, because unions effectively
set broader standards--including higher wages--that nonunion employers
must meet in order to attract and retain the workers they need (and to
avoid facing a union organizing drive themselves). The combination of
the direct effect of unions on union members and this ``spillover''
effect to nonunion workers means unions are crucial in raising wages
for working people and reducing income inequality. \13\
---------------------------------------------------------------------------
\13\ Jake Rosenfeld, Patrick Denice, and Jennifer Laird, Union
Decline Lowers Wages of Nonunion Workers, Economic Policy Institute,
August 2016.
Unsurprisingly, then, after decades of decline in the share of
workers represented by a union, the U.S. economy in 2019 had the
highest inequality ever in U.S. history, according to Census Bureau
data. \14\ Chief executive officer (CEO) compensation grew 1,167
percent between 1978 and 2019, while typical worker compensation had
risen only 13.7 percent during that time. \15\ From 1979 to 2019, the
wages of the top 1 percent grew nearly 160.3 percent, whereas the wages
of the bottom 90 percent combined grew just 26.0 percent, less than
one-sixth as fast. \16\
---------------------------------------------------------------------------
\14\ United States Census Bureau, ``American Community Survey
Provides New State and Local Income, Poverty and Health Insurance
Statistics'' (press release), September 26, 2019.
\15\ Lawrence Mishel and Jori Kandra, CEO Compensation Surged 14
percent in 2019 to $21.3 Million, Economic Policy Institute, August
2020.
\16\ Lawrence Mishel and Jori Kandra, ``Wages for the Top 1
percent Skyrocketed 160 percent since 1979 while the Share of Wages for
the Bottom 90 percent Shrunk,'' Working Economics (Economic Policy
Institute blog), December 2020.
Recent research examining the direct effect on wages of union
workers and the spillover effect on wages of nonunion workers has
demonstrated that the median worker's wages would have been higher, and
inequality between middle-and high-wage workers much lower, had there
not been an erosion of collective bargaining. For instance, the
``typical'' or median worker economy-wide would have earned $1.56 more
per hour in 2017 had unionization not declined since 1979. This
translates to an equivalent gain of $3,250 for a full-time, full-year
worker. \17\ Figure A provides an instructive raw comparison, showing
that as union membership has eroded, the share of total income in the
economy that gets funneled to the rich has risen accordingly. More
rigorous research shows that de-unionization accounts for one-third of
the growth in inequality between typical workers and workers at the
high end of the wage distribution in recent decades. \18\
---------------------------------------------------------------------------
\17\ Lawrence Mishel, The Enormous Impact of Eroded Collective
Bargaining on Wages, Economic Policy Institute, April 2021.
\18\ Lawrence Mishel, The Enormous Impact of Eroded Collective
Bargaining on Wages, Economic Policy Institute, April 2021.
---------------------------------------------------------------------------
FIGURE A
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
.epsUnions and the Pandemic
The U.S. entered the COVID-19 pandemic with an economy
characterized by extreme economic and racial inequality, historically
low rates of union density, and weak worker protections, but low
unemployment. In February 2020, the unemployment rate was at a 50-year
low of 3.5 percent. In March and April 2020, the labor market shed an
unprecedented 22 million jobs, losses the likes of which we hadn't
experienced in modern history. Low-wage workers experienced vastly
greater job loss due to the fact that low-wage jobs are concentrated in
sectors that got hit particularly hard because they involve more social
contact (such as restaurants and bars, hotels, personal services,
events, and brick-and-mortar retail). Further, due to differences in
labor market outcomes caused by occupational segregation,
discrimination, and other disparities rooted in systemic racism and
sexism, people of color--and particularly women of color--experienced
much greater job loss. While white non-Hispanic workers saw a peak
unemployment rate of 12.8 percent, Black non-Hispanic workers saw a
peak unemployment rate of 16.7 percent, Latino workers saw an
unemployment rate of 18.5 percent, and AAPI workers saw an unemployment
rate of 15.0 percent. \19\, \20\
---------------------------------------------------------------------------
\19\ Celine McNicholas et al., Why Unions Are Good for Workers--
Especially in a Crisis Like COVID-19: 12 Policies That Would Boost
Worker Rights, Safety, and Wages, Economic Policy Institute, August
2020.
\20\ While jobs are now returning rapidly--on average, the labor
market added more than 600,000 jobs in each of the last 5 months--an
enormous gap in the labor market remains. We still have 6.8 million
fewer jobs than we did before the COVID-19 recession began. And
furthermore, that 6.8 million is not the total gap in the labor market.
Before the recession, we were adding about 200,000 jobs per month. At
that pace, we would have added 3.2 million jobs since the recession
began, which means the total gap in the labor market right now is as
many as 10 million jobs (6.8 + 3.2 = 10 million jobs). Further, the
recovery remains highly inequitable. The June jobs report shows the
overall unemployment rate is 5.9 percent. However, while the
unemployment rate is 5.2 percent for white workers, the Black
unemployment rate is 9.2 percent and the Hispanic and Asian
unemployment rates are 7.4 percent and 5.8 percent, respectively.
The Bureau of Labor Statistics' most recent data on unionization
shows that while the number of workers represented by a union declined
in 2020, the unionization rate rose because union workers saw less job
loss that nonunion workers. This increase in the unionization rate was
due in part to the fact that unionized workers have had a voice in how
their employers have navigated the pandemic, and have used this voice
for such things as negotiating for terms of furloughs or work-share
arrangements to save jobs. \21\ This engagement likely played a role in
limiting overall job loss among unionized workers. \22\
---------------------------------------------------------------------------
\21\ Celine McNicholas et al., Why Unions Are Good for Workers--
Especially in a Crisis Like COVID-19: 12 Policies That Would Boost
Worker Rights, Safety, and Wages, Economic Policy Institute, August
2020.
\22\ Celine McNicholas, Heidi Shierholz, and Margaret Poydock,
Union Workers Had More Job Security during the Pandemic, but
Unionization Remains Historically Low, Economic Policy Institute,
January 2021. Another reason unionization rates increased in 2020 was a
``pandemic composition effect.'' In particular, industries with lower
unionization rates, like leisure and hospitality, have tended to
experience the most job loss during the pandemic, while sectors with
higher unionization rates, like the public sector, have tended to see
less job loss. A simple decomposition of the increase in the overall
unionization rate in 2020 shows that roughly half (46.5 percent) of the
increase was the result of a pandemic composition effect, while roughly
half (53.5 percent) was due to union workers seeing less job loss than
nonunion workers in the same industry.
The importance of unions in giving workers a collective voice in
the workplace has been especially salient for frontline workers
throughout the pandemic. During the crisis, unionized workers who
provide essential services have been able to secure enhanced safety
measures, additional premium pay, and paid sick time. \23\ But most
essential workers, like nonessential workers, are not unionized. For
example, just 10 percent of essential workers in health care are
unionized and just 8 percent of essential workers in food and
agriculture are unionized. \24\
---------------------------------------------------------------------------
\23\ Celine McNicholas et al., Why Unions Are Good for Workers--
Especially in a Crisis Like COVID-19: 12 Policies That Would Boost
Worker Rights, Safety, and Wages, Economic Policy Institute, August
2020.
\24\ Celine McNicholas and Margaret Poydock, ``Who Are Essential
Workers: A Comprehensive Look at Their Wages, Demographics, and
Unionization Rates'' Working Economics (Economic Policy Institute
blog), May 29, 2020.
During the pandemic, many nonunionized essential workers were
forced to work without personal protective equipment or access to paid
leave or premium pay. Further, when nonunion workers have advocated for
health and safety protections or wage increases, they were often
retaliated against or even fired. The lack of these basic protections
led to thousands of essential workers becoming infected with the
coronavirus. \25\
---------------------------------------------------------------------------
\25\ Celine McNicholas et al., Why Unions Are Good for Workers--
Especially in a Crisis Like COVID-19: 12 Policies That Would Boost
Worker Rights, Safety, and Wages, Economic Policy Institute, August
2020.
---------------------------------------------------------------------------
The Decline in Unionization is the Direct Result of Relentless Attacks
on Unions
As mentioned above, the decline in collective bargaining in recent
decades has not happened because workers don't want unions--a far
higher share of nonunionized workers report wanting to be in a union
today than did four decades ago. The decline in unionization has been
the result of fierce corporate opposition that has suppressed workers'
freedom to form unions and bargain collectively. Intense and aggressive
anti-union campaigns--once confined to the most anti-union employers--
have become widespread; it is now typical, when workers seek to
organize, for their employers to hire union avoidance consultants to
orchestrate fierce anti-union campaigns.
Though the National Labor Relations Act (NLRA) makes it illegal for
employers to intimidate, coerce, or fire workers in retaliation for
participating in union-organizing campaigns, the penalties are
insufficient to provide a serious economic disincentive for such
behavior (there are no punitive damages or criminal charges under the
NLRA; penalties may consist of being required to post a notice or
reinstate illegally fired workers). \26\ This means that employers can
engage in illegal tactics with almost no financial concern; for
example, employers often threaten to close the worksite, cut union
activists' hours or pay, or report workers to immigration enforcement
authorities if employees unionize. One out of five union election
campaigns involves a charge that a workers was illegally fired for
union activity. \27\
---------------------------------------------------------------------------
\26\ Celine McNicholas et al., ``Civil Monetary Penalties for
Labor Violations Are Woefully Insufficient to Protect Workers,''
Working Economics (Economic Policy Institute blog), July 15, 2021.
\27\ Celine McNicholas et al., Unlawful: U.S. Employers Are
Charged with Violating Federal Law in 41.5 percent of All Union
Election Campaigns, Economic Policy Institute, December 2019.
In the face of these attacks on collective bargaining, policymakers
have egregiously failed to update labor laws to rebalance the system.
In fact, in many cases policy is moving backward; 27 states have passed
so-called right-to-work laws, \28\ which are intended to undermine
union finances by making it illegal for unions to require nonunion
members of a collective bargaining unit (who don't pay union dues) to
pay ``fair share fees''--fees that cover only the basic costs of
representing employees in the workplace. And the Supreme Court decision
in Janus v. AFSCME--a case financed by a small group of foundations
with ties to the largest and most powerful corporate lobbies--made
``right-to-work'' the law of the land for all public-sector unions.
\29\
---------------------------------------------------------------------------
\28\ National Conference for State Legislatures, Right-To-Work
Resources (fact sheet).
\29\ Celine McNicholas, Zane Mokhiber, and Marni von Wilpert,
Janus and Fair Share Fees: The Organizations Financing the Attack on
Unions' Ability to Represent Workers, Economic Policy Institute,
February 2018.
---------------------------------------------------------------------------
Conclusion: The U.S. Needs the PRO Act
In the expansion following the Great Recession, the unemployment
rate ultimately got down to 3.5 percent. However, given the tight labor
market, wage growth for working people was surprisingly slow and
uneven, racial wage gaps worsened, and the highest earners continued to
see more than their fair share of economic gains. The years after the
Great Recession marked a completely different story from the experience
following the Great Depression, and there is no mystery to that
phenomenon--Federal labor law policy following the Great Depression
enabled workers to organize unions, while Federal lawmakers failed to
pass labor law reform following the Great Recession. We can't make that
same mistake now.
This is a critical moment and the policy decisions made will have
longstanding impacts on our economy. We know that unions are essential
to a fair and equal economy. It is crucial that policymakers prioritize
labor law reforms that restore workers' rights to organize and bargain
collectively. The Protecting the Right to Organize (PRO) Act addresses
many of the major shortcomings with our current law. Passing the PRO
Act would help restore workers' ability to organize with their co-
workers and negotiate for better pay, benefits, and fairness on the
job, and it would reduce racial disparities and help halt and reverse
skyrocketing inequality. \30\
---------------------------------------------------------------------------
\30\ The decline of unionization over the last four decades has
played a significant role in the expansion of the Black--white wage
gap. See Valerie Wilson and William M, Rodgers III, Black-White Wage
Gaps Expand with Rising Wage Inequality, Economic Policy Institute,
September 2016.
The large gap between the share of workers who want a union and the
share of workers who are in a union underscores that our system of
labor laws is not working. Fundamental reform is required to rebuild an
economy that guarantees all workers the right to come together and have
a voice in their workplace and no longer leaves most workers behind.
Meaningful policy changes like the PRO Act are crucial for restoring a
---------------------------------------------------------------------------
fair balance of power between workers and employers.
Thank you and I look forward to your questions.
______
The Chair. Thank you very much.
Mrs. Heldman. Can you turn on your mic?
STATEMENT OF GRACIE HELDMAN, WORKER, PANDORA, OH
Ms. Heldman. Thank you, Madam Chair. My name is Gracie
Heldman and I live in Pandora, Ohio. I would like to thank the
Committee for inviting me here today to tell my story. This is
a story about a company that has broken the law for 20 years to
stop its workforce from joining a union.
I am a long time employee of Heartside Solutions in McComb,
Ohio. The company has huge bakeries all across the country.
They make cookies, crackers, bars, and other baked goods for
companies like Kellogg, Nabisco, and General Mills. There are
over 1,000 of us in the McComb plant that runs 24 hours, 7 days
a week. I have been working at Heartside for over 33 years, and
I can tell you working in a huge industrial bakery is hard
work. The hours are long, and the pain can be really bad,
especially in your wrist, shoulders, back.
The company does not take health and safety seriously, so
it is not really surprising the McComb bakery has been cited by
OSHA many times and this is one of the worst offenders in Ohio.
It was one of the main reasons so many of us have been wanting
to join the bakers' union since the late 90's. We have been
overworked. We have been injured on the job, disrespected by
supervisors, and forced to work in bad conditions. We wanted a
union to protect us while we were at work, to give us a say
about the conditions we had to work under, and to help us get
respect from our bosses. In the early 2000's, there was a lot
of support for the union.
Most of us were fed up with the way we were being treated.
In 2002, over 65 percent of us signed BCTGM union cards so that
we could have an election to vote on the union. That seems
simple enough. But instead of having the election soon after we
filed a petition, the company was able to stall and delay the
election for over 2 months. This gave the company plenty of
time to run an anti-union campaign and scare the workers, which
is what they did. First off, the company hired union busters
that walked the floor of the bakery, spied on us, held
mandatory anti-union meetings. They told us the plant would
close, that we would lose our wages and benefits, and that we
would be forced to go on strike.
If we didn't go to these meetings, we would be fired. Then
the company actually fired seven people that supported the
union. They really scared people. Many of these people, they
wanted to join the union, had signed union cards, were too
scared to support it. When we finally had a union election
after the company's months of delays, many of these unions for
us voted no and we lost the election. They were scared and felt
the law did not protect them. The law was just not on our side.
If the Pro Act had been in place, we would have had the
election earlier, the company would not have been able to hire
union busters and lie about the union, and the company would
have suffered major penalties for firing union supporters.
We would have won the first election almost 20 years ago.
After the election of 2002, the union filed charges with the
NLRB. Seems to me this was an open and shut case, but the case
took more than 8 years to be decided. The Federal Court of
Appeals finally found the company guilty, but only brought back
two of the workers. For firing workers, breaking Federal labor
law and dragging the NLRB case through the courts. For 8 years,
the company only received a slap on the wrist, and we still
didn't have the protection of a union. The Federal Court of
Appeals did order a rerun election.
Once again, the company stalled and delayed the day of the
election. The company ran a very vicious campaign. Hispanic
workers like me were targeted. Many were told they would be
deported if they supported the union. We finally had a rerun
election in 2010, but the company had scared the workers so bad
they voted against the union. Again, the union filed charges
against the company, but it didn't make any difference. This
was a really tough time for many of us that had been supporting
for so long the union. I had coworkers that I was close to,
they committed suicide.
Many others got severely depressed. From a personal
standpoint, things went from bad to worse. A couple of years
ago, a coworker found bedbugs in some of the cases and of
course, they blamed us workers for this. The supervisor made a
whole line of women march into their first aid room where we
were told to strip so a nurse could examine us for bedbugs. If
we refused, we would be punished, sent home without pay, and
possibly fired. So we stayed in line and stripped so we could
be searched. It was humiliating. The next day, rumors swirled
about women and their granny pants going around the plant. It
could only have come from supervisors. This was such a
degrading experience that I will never forget.
Last year, we had our third attempt in 20 years to join
that union. We had more than 60 percent of 1,200 workers sign
union cards, just like the previous election. The company hired
union busters, spent 3 months trying to put fear into the
workforce. This time, they really focused on the Hispanic or
Hispanic workers again. Many were threatened with deportation
if they supported the union and voted yes. Even at the height
of the pandemic, the company forced us to attend mandatory
meetings. They set up a big tent outside the plant to make it
look like we would be safe. They squeezed more than 150 of us
inside a tent, sitting side by side, less than two feet apart,
even though people were scared.
I really thought we had a shot to win this election. We got
closer than ever before in this election, but it was not enough
to overcome the company's vicious anti-union campaign. For over
20 years, we have fought to join the BCTGM. For over 20 years,
I have seen the law look the other way. Nothing protected our
rights to join a union. And the worst part of it all is the
company knew that. They knew they could do whatever they wanted
and at worst they would get a slap on the wrist.
I am just one worker who wants to join a union, but there
are millions out there in America. They would love to join a
union so they can have dignity, justice, and respect, and not
have their rights stolen.
[The prepared statement of Ms. Heldman follows:]
prepared statement of gracie heldman
Thank you, Madam Chair. My name is Gracie Heldman and I live in
Pandora, Ohio.
I would like to thank the Committee for inviting me here today to
tell my story. This is a story about a company that has broken the law
for 20 years to stop its workforce from joining a union.
I am a long-time employee at Hearthside Food Solutions in McComb,
Ohio. The company has huge bakeries all across the country that make
cookies, crackers, bars and other baked goods for companies like
Kellogg, Nabisco and General Mills.
There are over one-thousand of us in the McComb plant that runs 24
hours, 7 days a week.
I have been working at Hearthside for over 33 years, and I can tell
you working in a huge industrial bakery is hard work. The hours are
long and the pain can be really bad, especially in your wrists,
shoulders and back.
The Company doesn't take health & safety seriously so it's not
really surprising the McComb bakery has been cited by OSHA many times
and is one of the worst offenders in Ohio.
That was one of the main reasons so many of us have wanted to join
the Bakery Workers Union since the late 90's. We have been overworked,
we've been injured on the job, disrespected by supervisors, and forced
to work in bad conditions. We wanted a union to help protect us while
we were at work, to give us a say about the conditions we have to work
under, and to help us get just a little bit of respect from our bosses.
In the early 2000's there was a lot of support for the union. Most
of us were completely fed up by the way we were being treated. In 2002,
over 65 percent of us signed BCTGM union cards so that we could have an
election to vote on the union.
That seems simple enough but instead of having the election soon
after we filed the petition, the company was able to stall and delay
the date of the election for over 2 months. This gave the company
plenty of time to run an anti-union campaign and scare the workers.
Which is what they did.
First off, the company hired union busters that walked the floor of
the bakery, spied on us, and held mandatory anti-union meetings. They
told us the plant could close, that we'd lose our wages and benefits,
and that we'd be forced to go on strike.
If we didn't go to these meetings we'd be fired.
Then the company actually fired seven people that supported the
union. That really scared people. Many of those people that wanted to
join the union, and had signed union cards, were now too scared to
support it.
When we finally had the union election, after the company's months
of delays, many of these union supporters voted NO and we lost the
election. They were scared and felt unprotected by the law.
The law was just not on our side.
If the Pro Act had been in place, we would have had the election
earlier. The company would not have been able to hire union busters and
lie about the union. And the company would have suffered a major
penalty for firing union supporters.
We would have won that first election almost 20 years ago!
After that election in 2002, the Union filed charges with the NLRB.
It seemed to me this was an open and shut case. But the case took more
than 8 years to be decided.
The Federal Court of Appeals finally found the company guilty, but
only brought back two of the seven workers!
For firing workers, breaking Federal labor law, and dragging the
NLRB case through the courts for 8 years, the Company only received a
slap on the wrist. And we still didn't have the protection of a union.
The Federal Court of Appeals did order a re-run election.
Once again, the company stalled and delayed the date of the
election. Then the company ran a vicious anti-union campaign. Just like
the first campaign, we were forced to attend mandatory meetings where
we heard the lies all over again.
Hispanic workers like me were targeted. Many were told they'd be
deported if they supported the union.
We finally had a re-run election in 2010, but the company had
scared the workers so bad they voted against the union. Again, the
Union filed charges against the company but it didn't make any
difference.
This was a really tough time for many of us that had been
supporting the union for so long.
I had co-workers that I was close with who committed suicide.
Many others got severely depressed.
But leaving wasn't really an option for a lot of folks. We needed
to work to put food on the table and there's not a lot of jobs in and
around McComb.
From a personal standpoint, things went from bad to worse.
A couple of years ago the company found bed bugs in some of the
flour and other products. Of course, they blamed us workers for this.
The supervisors made a whole line of women march into their offices
where we were told to strip so a nurse could examine us for bed bugs.
If we refused, we would be punished, sent home without pay and
possibly fired. So, we stayed in line and were strip searched. It was
humiliating.
The next day rumors about women in their ``granny panties'' were
going around the plant. It could only have come from the supervisors.
This was such a degrading experience that I will never forget.
Last year we had our third attempt in 20 years to join the BCTGM.
We had more than 60 percent of 1,200 workers sign union cards.
Conditions at the plant kept getting worse. And everyone's stress
levels were high because of the threat of Covid-19. More than thirty
workers contracted the corona virus during the spring and summer of
2020, so we were all worried.
Just like the previous elections, the company hired union busters
who spent 3 months trying to put fear into the workforce.
This time, they really focused on my Hispanic co-workers. Again,
many were threatened with deportation if the union was voted in.
Even at the height of the pandemic the company forced us to attend
mandatory meetings. They set up a big tent outside the plant to make it
look like we would be safe. Then they squeezed more than 150 of us
inside the tent seating us side by side less than 2 feet apart.
Once again, they threatened loss of wages and benefits if we voted
for the union.
Even though people were scared I really thought we had a shot to
win this election. But the company had scared the workers so bad that
we were never really given a fair chance to make a decision about
joining the BCTGM.
We got closer than ever before in this election but it was not
enough against the company's actions.
For over 20 years we have fought to join the BCTGM. For over 20
years I have seen the law look the other way. Nothing protected our
right to join a union. And the worst part of it all, is that the
company knew that. They knew they could do whatever they wanted and at
worst, they'd get a slap on the wrist.
I'm just one worker who wants to join a union. But there are
millions more like me. We just want a fair chance.
Thank you.
______
The Chair. Thank you. Thank you, Mrs. Heldman, I appreciate
that.
Ms. Sarolia.
STATEMENT OF JYOTI SAROLIA, PRINCIPAL AND MANAGING PARTNER,
ELLIS HOSPITALITY, TEMECULA, CA
Ms. Sarolia. Good morning, Chair Murray, Senator Braun
sitting in for Ranking Member Burr and distinguished Members of
the Committee. What an honor and privilege it is here to sit
here with you, and I thank you in advance for your time and
your ability to listen to my story today. My name is Jyoti
Sarolia. I am from Temecula, California, and I am the principal
at Ellis' Hospitality that owned and operate seven hotels.
Thank you very much for the invitation to appear before this
Committee today. I am honored to share my story of small
business ownership and discuss the views of local business
owners everywhere as it relates to empowering American workers.
I will focus my comments on Protecting the Right to
Organize Act or Pro Act. This is an issue of great importance
to the 730,000 franchise business owners like me who employ
nearly 8 million workers in a range of industries, and I appear
before you today on their behalf as well. With both respect and
candor, let me say this, the Pro Act is the most anti-small
business bill in the history of Congress. With the stroke of a
pen upon enactment, the Pro Act's joint employer and
independent contractor provisions alone would steal the
American dream of business ownership from countless
entrepreneurs.
But indirectly I am also here to testify on behalf of all
the bakers, physical therapists, realtors, freelancers, truck
drivers, doctors, caterers, drivers, insurance agents,
salespeople, commercial fishermen, stylists and many more who
contribute so much to the economy and whose livelihood the Pro
Act could upend. And not because of unionization, but because
the Pro Act could practically demote any of these professionals
from entrepreneur to employee. They don't want that, and I
don't want that.
As a franchise business owner, I have worked so hard to
provide for my employees. My passion is making a difference in
our team members' lives and growing more team members in the
future so they can become upwardly mobile so that someday they
can own their own hotel or franchise business if they want. And
because, with due respect to great businesses like Starbucks
and Chipotle, no matter how hard an employee works, you can't
own a Starbucks and you can't own a Chipotle. But in
franchising, you can own your own business. It doesn't matter
if you are a man or a woman, what color is your skin, who you
love, or where you came from.
That is why it is a business strategy that every Member of
the Senate should support. But instead, the Pro Act seeks to
streamroll businesses run by women entrepreneurs, entrepreneurs
of color, and others that operate and grow using the franchise
method. And instead, the Pro Act seeks, through its joint
employer and independent contractor provisions to transform
franchise systems from a network of small businesses into one
big business. Why would 47 Senators seek to consolidate so much
corporate power at the expense of small businesses and owners
like me? Put simply, this legislation could end the franchise
business model, the business format that has perhaps provided
the most accessible path to business ownership for
entrepreneurs of all backgrounds. Why should 47 Senators seek
to enhance organized labor's political power at the expense of
women entrepreneurs and entrepreneurs of color like me?
From the franchising perspective, these issues are bigger
than the Pro Act today. The more important issue is that the
incredible value of franchising needs to be more fully
appreciated. My testimony today includes details on forthcoming
Oxford Economics research that reveals three takeaways. First,
franchises are locally owned and keep their resources in local
community, unlike a business run by a faraway headquarters.
Second, franchising offers a path to entrepreneurship to people
of diverse backgrounds who would not otherwise own a business.
Big corporations don't offer entrepreneurship.
Last, franchise jobs are good jobs that offer comparable
pay and benefits to other Main Street business jobs. Madam
Chair, the pandemic has drawn a historic curveball at the
hospitality industry. There was no playbook for how hoteliers
or other franchise owners were supposed to navigate the world.
But due to hard work, support from our franchise brands, and
even some SBA assistance, we are still here today serving our
employees, customers, and communities. Small businesses are
just starting to recover, and now we are facing the Pro Act.
Women and immigrants and people of color have faced enough
barriers to business ownership over the years, haven't they?
The Pro Act raises these barriers for people like me again.
If you want to help build wealth for communities of color, if
you want to support women entrepreneurs, if you want to give
immigrants a shot at the American dream, and if you want to
support people like me, then let's table the Pro Act and let's
build better policies that will both promote workers' future
and protect the local franchise business owners in your state.
Thank you for the opportunity, and again your time, and
what an honor and privilege it is to share our story.
[The prepared statement of Ms. Sarolia follows:]
prepared statement of jyoti sarolia
Good morning Chair Murray, Senator Braun, and distinguished Members
of the Committee. My name is Jyoti Sarolia, and I am a Principal at
Ellis Hospitality that owns and operates seven hotel properties in
California. Our small business is named after New York City's Ellis
Island, through which my family members entered America to pursue a
better life. Thank you very much for the invitation to appear before
this Committee to share my story of small business ownership and
discuss the views of local business owners everywhere as it relates to
empowering American workers in today's hearing. I will focus my
comments on the Protecting the Right to Organize Act, or ``PRO Act.''
This is an issue of great importance to franchise business owners like
me, and it is important that small business perspectives are heard by
our Nation's leaders.
I appear before you on behalf of the International Franchise
Association. IFA is the world's oldest and largest organization
representing franchising worldwide. Celebrating over 50 years of
excellence, education and advocacy, IFA works through its government
relations and public policy, media relations and educational programs
to protect, enhance and promote franchising. IFA members include
franchise companies in over 300 different business format categories,
individual franchisees, and companies that support the industry in
marketing, law and business development.
With both respect and candor, let me say this: the PRO Act is the
most anti-small business bill in the history of Congress. With the
stroke of a pen upon enactment, the PRO Act's joint employer and
independent contractor provisions alone would steal the American Dream
of business ownership from countless entrepreneurs.
There is a false notion that only businesses that have
representation cases before the National Labor Relations Board are
concerned about the PRO Act. This couldn't be further from the truth.
Put simply, businesses do not react in a vacuum. If the PRO Act becomes
law, franchise brands will react by offering fewer franchises, and as a
result, people like me will be collateral damage. Senators, you cannot
let this happen. Upending an entire business model and taking away
business opportunities to people like me, just to increase union power,
is unacceptable. There simply must be a better way to achieve the goals
of the legislation.
In my testimony, I will describe my small business story, share how
my business serves its employees and local communities, reveal how
hotels and other small businesses are recovering from the COVID-19
pandemic, and show why the PRO Act needlessly threatens every small
business during the economic recovery.
My Small Business Story
My granduncles came to this country to achieve the American Dream.
My grandfather, who was the eldest of the siblings, was not as educated
as his brothers and decided to continue farming and stay behind. His
two brothers, Dhayabhai and Santibhai, whom I call grandparents, along
with four other friends in the area, decided to come to America. They
had someone from their hometown who was already running a hotel in San
Francisco to host them when they arrived.
One can only imagine what life was like for my family, as they took
3 months to finally dock at Ellis Island. They were detained as their
health checks cleared and continued their journey via train to get to
San Francisco. They then met their host and saw the life they could
live while operating a hotel. From 1952 to 1957, both of my
grandparents worked various jobs until they were able to save enough
money to lease their first hotel, the Alder. Shortly after, their wives
immigrated to help with the business. This hotel still remains in my
extended family. Our hotel sign has also been displayed at the
Smithsonian for almost two years.
My parents then immigrated to the U.S. in 1967. In order for the
family to grow their business, they called upon other family members to
also join them in the business so they too could live their American
Dream. My parents got to work right away, cleaning rooms and doing
light maintenance.
Having lived in the Alder Hotel owned by my extended family in
downtown San Francisco until the age of 11, I learned first-hand many
of the responsibilities that were involved in running and operating a
successful hotel. I grew up learning the importance of hard work,
gaining skills in carpet laying and fixing household appliances, like
water heaters and toilets. I also later handled front-desk management,
housekeeping, and so many other responsibilities. My father took on the
responsibility of the more labor-intensive jobs, including home
renovating, painting, and supply management. Together, we all pitched
in to keep the business alive and our customers happy.
Today, hospitality still runs in my blood. I bought my first hotel
in 1996, and we now have seven properties and I oversee all aspects of
operations. My focus is to work with my leadership and provide
continued excellent service to our visitors and customers. Our mission
begins with our employees, ensuring they are our priority so we can
provide excellent service and care for our guests. This employee-first
mentality has proven to be the key to our success through the years,
and it remains my focus even now. Our mantra is, ``How can we better
serve you?'' This is the conversation that permeates our service
environment.
Community service is also a major priority of mine. Active
engagement with our local communities and business partners is
essential to advancing our journey together. With this in mind, I've
served on multiple boards, such as the Asian American Culture Society
of San Diego and the Choice Hotels Owners Council (CHOC). I also
proudly served as the first female Chair of the Franchise Advisory
Council in 2018.
As a franchise business owner, I have worked so hard to provide for
my family, employees, customers and stakeholders in my community. But
along the way, franchising has afforded me every opportunity to
succeed, no matter where I came from, my background, my gender, color
of my skin, or any other personal characteristic. It is a business
format every policymaker should support.
Background on the Franchise Business Format
Franchising is perhaps the most important business growth strategy
in American history. Today, there are more than 740,000 franchise
establishments, which support nearly 7.6 million jobs and $674.3
billion of economic output for the U.S. economy. \1\ ``Franchising is a
method of marketing goods and services'' that depends upon the
existence of the franchisor's control over a trademark, other
intellectual property or some other commercially desirable interest
sufficient to induce franchisees to participate in the franchisor's
system by distributing goods or services under the franchisor's name.
\2\
---------------------------------------------------------------------------
\1\ Franchiseeconomy.com (2021).
\2\ Joseph H. King, Jr., Limiting the Vicarious Liability of
Franchisors for the Torts of Their Franchisees, 62 Wash. & Lee L. Rev.
417, 420-21 (2005).
Franchising democratizes business ownership for people of all
backgrounds. There is a higher minority ownership rate among franchised
businesses than in nonfranchised businesses: 30.8 percent of franchises
were owned by minorities, compared to 18.8 percent of nonfranchised
businesses. Asians, Blacks, Hispanics, and ``other'' minorities had a
higher rate of ownership of franchises than nonfranchised businesses in
2012, while American Indians and Pacific Islanders had roughly the same
ownership rates among franchised and nonfranchised businesses. Asians
owned 11.8 percent of all franchises, compared to 6.3 percent of
nonfranchised businesses. Hispanics owned 10.4 percent of all
franchised businesses, compared to 7.2 percent of nonfranchised
businesses. Blacks owned 8.0 percent of all franchised businesses
compared to 4.7 percent of nonfranchised businesses. \3\
---------------------------------------------------------------------------
\3\ Franchised Business Ownership by Minority and Gender Groups.
IFA Foundation (2018).
Despite how it is often characterized, franchising is not an
industry. Franchising is a business growth model used within nearly
every industry. More than 230 different sectors that are represented in
franchising, and franchise brand companies offer a huge range of
services from lodging to fitness, home services to health care,
plumbing, pest control, security, and lawn care.
Furthermore, notwithstanding any popular misapprehensions,
franchising consists of far more than merely the ``fast food''
industry. As you can see in the graphic below, there are far more local
(50 percent of all franchised brands) and regional brands (34 percent
of all franchised brands) whose names you might not recognize than the
fast food giants that garner the most attention. In fact, 63 percent of
companies that franchise are not in the food services at all, and 83
percent are not in fast food. \4\
---------------------------------------------------------------------------
\4\ FRANdata research. (2021).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
.epsThere are two principal explanations given for the popularity
of franchising as a method of distribution. One is that it ``was
developed in response to the massive amounts of capital required to
establish and operate a national or international network of uniform
product or service vendors, as demanded by an increasingly mobile
consuming public.'' \5\ The other is that ``franchising is usually
undertaken in situations where the franchisee is physically removed
from the franchisor, and thus where monitoring of the performance and
behavior of the franchisee would be difficult.'' \6\ These two
motivations are consistent with a business model in which the licensing
and protection of the trademark rests with the franchisor and the
capital investment and direct management of day-to-day operations of
the retail outlets are the responsibility of the franchisee, which
owns, and receives the net profits from, its individually owned
franchise unit.
---------------------------------------------------------------------------
\5\ Kevin M. Shelley & Susan H. Morton, ``Control'' in Franchising
and the Common Law, 19 Fran. L. J. 119, 121 (1999-2000)
\6\ Paul H. Rubin, The Theory of the Firm and the Structure of the
Franchise Contract, 21 J. Law & Econ. 223, 226 (1978).
It is typical in franchising that a franchisor will license, among
other things, the use of its name, its products or services, and its
reputation to its franchisees. Consequently, it is commonplace for a
franchisor to impose standards on its franchisees, necessary under the
Federal Lanham (Trademark) Act to protect the consumer. Such standards
are essential for a franchisor that seeks to ensure socially desirable
and economically beneficial oversight of operations throughout its
network. These standards allow franchisors to maintain the uniformity
and quality of product and service offerings and, in doing so, to
protect their trade names, trademarks and service marks (collectively
the ``Marks''), the goodwill associated with those Marks, and most
importantly, the protection of the consumer. Because the essence of
franchising is the collective use by franchisees and franchisors of
Marks that represent the source and quality of their goods and services
to the consuming public, action taken to control the uniformity and
quality of product and service offerings under those Marks is not
merely an essential element of franchising, it is an explicit
requirement of Federal trademark law, which is discussed further in the
section below titled ``Franchising already `heavily regulated.'''
The State of the Small Business Economic Recovery
The COVID-19 pandemic battered small businesses in historic ways.
By August 2020, within the first 6 months of the COVID-19 outbreak, an
estimated 32,700 franchised businesses had closed; 21,834 businesses
were temporarily closed, while 10,875 businesses were permanently
closed.
While the pandemic affected nearly all small businesses, the SBA
noted industry and demographic differences in the impact of the
pandemic on business owners. Among demographic categories, there were
larger declines for Asian and Black business owners. The total number
of people who were self-employed and working declined by 20.2 percent
between April 2019 and April 2020. The Hispanic group experienced a
higher decline, at 26.0 percent. The highest declines were experienced
by the Asian and Black groups, with a decline of 37.1 percent for the
Asian group and 37.6 percent for the Black group. Meanwhile, leisure
and hospitality had the largest decrease in employment, at 48 percent,
and had the third largest small business share, at 61 percent. \7\
---------------------------------------------------------------------------
\7\ Daniel Wilmoth, The Effects of the COVID-19 Pandemic on Small
Businesses. U.S. Small Business Administration (2021).
Franchise business owners have been grateful to policymakers for
the Federal response. Congress provided $525 billion in emergency funds
extended through the Paycheck Protection Program and $194 billion
through the Economic Injury Disaster Loan program to help businesses in
---------------------------------------------------------------------------
need.
By the end of this year, franchising will have recovered to nearly
2019 levels in most metrics, including business growth and gross
domestic production. In 2021, 26,000 new franchise businesses will open
and 800,000 new jobs will be added by new franchise businesses. 8.3
million people will be employed by new franchise businesses by the end
of this year. \8\
---------------------------------------------------------------------------
\8\ Franchiseeconomy.com (2021).
The hotel industry has been uniquely negatively affected by COVID-
19. According to the American Hotel and Lodging Association's July 2021
analysis, the pandemic erased 10 years of hotel job growth. \9\ The
pandemic also devastated the hospitality industry workforce. For every
10 people directly employed on a hotel property, hotels support an
additional 26 jobs in the community, according to a study by Oxford
Economics. With hotels expected to end 2021 down nearly 500,000 jobs,
based on the pre-pandemic ratio, an additional 1.3 million hotel-
supported jobs are in jeopardy this year without additional support
from Congress. \10\
---------------------------------------------------------------------------
\9\ Economic Impact of the US Hotel Industry. Oxford Economics
(2021).
\10\ Ibid.
Leisure travel is starting to return, but the hotel industry's road
to recovery is long and uneven, with urban markets disproportionately
impacted. Projections have improved since January with the uptick in
leisure travel, but the industry remains well below pre-pandemic
levels. As of May of this year, twenty-one of the top 25 U.S. hotel
markets remaining in a depression or recession. Urban hotels were still
in a ``depression'' cycle while the overall U.S. hotel industry
remained in a ``recession.'' Urban markets, which rely heavily on
business from events and group meetings, continue to face a severe
financial crisis as they have been disproportionately impacted by the
pandemic. Urban hotels were down 52 percent in room revenue in May 2021
compared to May 2019. \11\
---------------------------------------------------------------------------
\11\ Ibid.
Despite all of these economic headwinds, and if Congress does no
harm, franchise businesses in all sectors will surely accelerate the
post-COVID economic recovery. While the number of unemployed
individuals peaked at nearly 30 million workers early in the pandemic,
such workforce dislocation forced many individuals to try
entrepreneurial ventures, including starting new franchise businesses,
which will likely result in the economic growth cited above. This
outsized growth should be expected because franchising has helped fuel
recovery following past economic downturns. After the financial crisis
from 2009-2012, employment in the franchise sector grew 7.4 percent,
versus 1.8 percent growth in total U.S. employment. \12\
---------------------------------------------------------------------------
\12\ FRANdata research (2021).
---------------------------------------------------------------------------
Now the biggest questions facing franchise small businesses like
mine during the economic recovery are legislative and regulatory risk.
There is no more significant and avoidable threat to small business job
creators than the PRO Act.
The Extremist PRO Act
The PRO Act is perhaps the most anti-small business bill ever
introduced in Congress. There must be a better way to advance worker
rights in an evenhanded way. Instead, on the backend of a global
pandemic that had a disproportionately negative impact on Main Street
businesses, business owners are facing this bill. It is incredibly
disheartening to small business owners that this legislation has
already passed the U.S. House of Representatives and is cosponsored by
47 U.S. senators.
The PRO Act puts the very existence of franchise businesses in
jeopardy. The PRO Act cobbles together more than 50 imbalanced
amendments to the National Labor Relations Act which are designed to
tip the scales against small businesses. Two provisions are
exponentially worse than the rest for franchising--an industry that
empowers new entrepreneurs to operate under a national brand, letting
small businesses and national companies grow faster and contribute more
to local communities and the wider economy. The enormous risk
associated with the PRO Act will serve only to corporatize the
franchise model, encouraging brands to grow through franchisor-owned
outlets, while shying away from offering ownership opportunities to new
entrepreneurs.
First, the bill would enshrine in Federal law a boundless ``joint
employer'' standard, making franchise brands responsible for actions
taken by small businesses at the unit level. This puts franchisors at
risk of being sued for things they never did and had no power to stop.
Faced with the PRO Act's new liability regime, franchise companies
are much less likely to partner with local entrepreneurs, which means
small business ownership opportunities will dry up on Main Street. The
joint employer standard created by the National Labor Relations Board
in 2015 led to a nearly doubling of litigation against franchise
businesses, cost franchising $33 billion per year, and preventing the
creation of 376,000 new jobs in the four ensuing years. While the NLRB
eventually restored the traditional, clear joint employer standard in
2019, the PRO Act would reverse course, make that harmful standard
permanent, and result in lower job creation and small-business
formation.
The bill's second provision directly impacting franchising is
perhaps worse. It would institute a three-part, so-called ``ABC test''
to determine when individuals can be classified as independent
contractors. The purpose is to classify more workers as direct
employees, thereby making them easier to unionize. The PRO Act's ABC
test language is so broad that it would likely define franchisees as
employees of their brand, instead of the independent small business
owners that they really are. This would eliminate the distinction at
the heart of franchising--and the opportunities and incentives within
the business model.
As one consequence, these changes would mean hiring numerous
attorneys at the franchisor level to oversee employment issues and
claims over which the franchisor has no control. Ultimately, the
additional costs to the franchisor would translate into additional cost
to independent owners like me, that would make the franchise business
model untenable. These changes would take away the equity and
independence of franchise small business owners and would put their
success and livelihoods, including mine, in jeopardy.
Ironically, these changes would encourage concentration of business
into one big corporation at the franchisor level. As franchise
contracts come up for renewal, franchise brands will be encouraged to
convert locations into corporate locations. Rather than assume the
risk, they will grow using a corporate model instead.
Without a doubt, these seismic shifts in employment policy would
hurt small businesses and provide fewer opportunities, particularly for
women and People of Color. Growing a business through the corporate
model does not provide ownership or wealth building opportunities. We
need policy and regulatory changes that will drive wealth creation and
new ownership opportunities for the most underserved communities, not
hinder it.
Due in large part to its treatment of franchise small businesses,
the PRO Act puts the national economic recovery at risk. As written,
the PRO Act would harm current franchise owners through a potential
massive expropriation of equity. It would harm potential franchise
owners through a limiting of economic opportunities available to them.
It would harm franchise employees through a sudden change of their
places of work away from their communities and into a large
corporation. Finally, it would harm franchise brands by upending the
business model that they use to grow and expand in communities across
the U.S.
California Experience
In my home state of California, small business owners are
constantly facing new public policy threats to how we operate.
One of the most invasive laws passed in California has been
Assembly Bill 5, or A.B. 5, which became effective in January 2020. The
law established California's ``ABC test'' for independent contractor
status. The upshot of A.B. 5 is that it classified nearly all wage-
earning workers as employees, and severely affected thousands of
independent contractors that operated in the state.
IFA and several other parties are challenging in court the
California ABC test's application to franchisors and franchisees. IFA
is arguing the test is preempted by the FTC Franchise Rule and the
Lanham Act, imposes excessive burdens in violation of the Commerce
Clause of the U.S. Constitution, and violates the Fifth and Fourteenth
Amendments.
Relevant to the PRO Act, the IFA lawsuit argues that California's
ABC test is irreconcilable with the Federal laws that regulate
franchising. Under Prong A of the A.B. 5 test, a person may not be
classified as an independent contractor unless that person is ``free
from the control and direction of the hiring entity in connection with
the performance of the work, both under the contract for the
performance of the work and in fact.'' Moreover, under Prong B, a
person may not be classified as an independent contractor unless that
person ``performs work that is outside the usual course of the hiring
entity's business.'' \13\ In the context of a franchise relationship,
under California law, the operation of a franchisee's business must be
``under a marketing plan or system prescribed in substantial part by
the franchisor,'' and ``substantially associated with the franchisor's
trademark.'' Without meeting these requirement of the California
Franchise Investment Law, a franchise brand's registration with the
state would be rejected, but by meeting them, they run the very real
risk of running afoul of the rigid ABC test under A.B. 5. This
dissonance between the ABC test and the franchise business model was
emphasized by the United States District Court for the District of
Massachusetts in the case of Patel v. 7-Eleven, Inc.
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\13\ California Labor Code 2775(b)(1)(B).
A.B. 5 itself recognized that it created an unworkable framework
for workers in many industries, as the law as amended currently
includes over 100 exemptions for categories of workers. These include
licensed insurance agents, certain licensed health care professionals,
registered securities broker-dealers or investment advisers, direct
sales salespersons, real estate licensees, commercial fishermen,
workers providing licensed barber or cosmetology services, and others
performing work under a contract for professional services, with
another business entity, or pursuant to a subcontract in the
construction industry. \14\
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\14\ Text of California Assembly Bill 5 (2019).
Since A.B. 5 became law, several other industry groups have fought
for exemptions to the law. App-based transportation and delivery
companies prevailed in A ballot initiative called Proposition 22 in
November 2020 passed with 59 percent of the vote and restored app-based
transportation and delivery companies as independent contractors under
California labor law. Numerous lawsuits challenging A.B. 5, in sectors
ranging from journalism to trucking, have been filed in state and
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Federal courts, and these legal challenges continue today.
As poorly drafted as California's ABC test was, the PRO Act's ABC
test is far more expansive. There are no worker exemptions in the PRO
Act's independent contractor provision. Simply put, as harmful as A.B.
5 is, it at least recognizes that the ABC test is inappropriate for
determining independent contractor status in numerous industries and
business sectors. The PRO Act in no way recognizes this fact, and
instead imports a highly flawed standard across the board, applicable
to all workers in all industries.
Franchising Already ``Heavily Regulated''
Senators should keep in mind that multiple Federal statutes
currently provide the rules of doing business by the franchising
method. Indeed, franchising is already a ``heavily regulated'' method
of doing business, \15\ as it is fundamentally governed by the Lanham
Act, the FTC Franchise Rule and multiple joint employment tests.
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\15\ Cislaw v. Southland Corp., 4 Cal. App. 4th 1284, 1288 (1992).
As mentioned earlier, the Lanham Act is the Federal law regulating
trademarks, service marks, and unfair completion, and it mandates that
owners of trademarks must ``maintain sufficient control of the
licensee's use of the mark to assure the nature and quality of goods or
services that the licensee distributes under the mark.'' \16\ Moreover,
because the Lanham Act provides that a trademark can be deemed
``abandoned'' when ``any course of conduct of the owner . . . causes
the mark . . . to lose its significance,'' \17\ franchisors have a
strong incentive to control the nature and quality of the good or
services sold by their franchisees. As a result, franchisors are
compelled to establish and monitor brand standards and provide global
oversight of their franchisees. Likewise, it is imperative that
franchisees protect their franchisors' brands, and the trademark value
of those brands. A franchisee, functioning as an independent operator
under a Brand License, is trusted and relied upon (by the franchisor)
to protect the trademark value in implementing brand standards, and to
exercise day-to-day management over the operation, since the franchisor
is not present at every individual franchise location. Because
franchising requires the collective use by franchisees and franchisors
of Marks, all stakeholders affiliated with a brand collectively share
risks and rewards. For example, if a franchisee fails to take adequate
steps to protect the brand or otherwise engages in an action that
injures the brand's reputation, the damage inflicted on the brand
impacts all of the brand's stakeholders, including all other
franchisees and the consuming public. With that being the case, it is
essential to franchising that all the stakeholders understand the
expectations for brand protection standards and take all necessary
action to ensure that those standards are met. Furthermore, these
rights and obligations are enunciated in well-drafted franchise
agreements and reviewed in advance under a prescribed set of mandated
disclosures.
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\16\ 15 U.S.C. Sec. 1064(5)(A).
\17\ 17 15 U.S.C. Sec. 1127.
The Federal Trade Commission (FTC) authorizes and regulates the
sale of franchises in the U.S., and defines a ``franchise'' in part as
``any continuing commercial relationship or arrangement'' whereby the
franchisor promises that the franchisee ``will obtain the right to
operate a business that is identified or associated with the
franchisor's trademark. . . .'' \18\ In 1978, the FTC published the
Franchise Rule, which provides prospective purchasers of franchises
information they may use to weigh the risks and benefits of a franchise
investment, and requires franchisors to provide potential franchisees
with specific items of information about the offered franchise, its
officers, and other franchisees. Importantly, the Franchise Rule
mandates that a franchisor ``exert a significant degree of control over
the franchisee's method of operation.'' \19\ However, many state
independent contractor laws require businesses to classify workers as
employees unless they are ``free from control'' and direction while
performing their work. Taken in a literal sense, this requirement would
ignore the realities of the franchise model, and so the conflicting
``control'' requirements of the FTC's Franchise Rule and the Lanham Act
must be viewed as preemptive. Below is a discussion of a recent
Massachusetts decision in which a Federal judge ruled in favor of a
franchisor based on the Franchise Rule's requirements, finding that the
Rule preempted the conflicting state independent contractor standard.
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\18\ 16 C.F.R. Sec. 436.1(h)(1) (the ``Franchise Rule'').
\19\ Ibid.
Franchising is also subject to joint employment tests under
multiple Federal laws. Under the Fair Labor Standards Act, courts
around the country have issued divergent rulings on the joint employer
issue, most of which purport to apply the Department's previous,
outdated joint employer regulation. The number of different standards
and factors employed in each test by various courts has bewildered and
frustrated employers seeking to operate franchise businesses
efficiently and profitably, without inadvertently creating joint
employment. By way of examples only, the Second Circuit has applied a
six-factor test in Zheng v. Liberty Apparel Co., while the Third
Circuit applied four different factors in Enterprise Rent-A-Car Wage &
Hour Employment Practices Litigation, the Fourth Circuit utilized a
different six-factor test in Salinas v. Commercial Interiors, Inc.,
while various cases in the Seventh Circuit have applied ``economic
realities'' tests (that are indeterminate in nature), and the Eleventh
Circuit applied an eight-factor test in Freeman v. Key Largo Volunteer
Fire and Rescue Dept., Inc. Adding to this complication, under Federal
civil rights laws, courts have applied (again, not always uniformly or
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consistently), a multi-factor ``common law'' test.
Most relevant to the PRO Act, prior to the promulgation of joint
employer regulations by the NLRB in 2020, courts and the Board
interpreted ``joint employer'' status under the NLRA inconsistently,
most notably adopting a standard in 2015's Browning-Ferris case that
would find an employer to be the joint employer of another company's
employees, where an employer exercised only indirect, limited, or
routine control of an unrelated firm's employees, or perhaps only
reserved that right to control.
As discussed above, the PRO Act would create a severe conflict in
Federal law. Long-standing Federal trademark law requires a franchisor
to exert certain brand controls over its franchisees, to protect the
franchisor, all franchisees, and most important, the consuming public,
which can know with certainty that it will have the same quality of
experience or purchase across a franchisor's numerous franchises around
the country or around the world. The PRO Act, on the other hand, would
use those legally required obligations to create liability for
franchisors for acts over which they had no control, simply because
they were fulfilling their obligations under the Lanham Act and FTC
Franchise Rule. Put most simply, the PRO Act ultimately tells franchise
brands, ``heads I win, tails you lose.''
Alternatives to the PRO Act
There are so many better ways to promote both worker AND small
business interests than the extremist PRO Act.
The franchise business community stands ready to collaborate with
senators to find policies that will better support workers and
employers. We support efforts that encourage brands to share
information and best practices with franchise owners on COVID-19 safety
measures and employee education. Thus, rather than considering the
extremist PRO Act, which would dramatically change liability rules
during a small business economic recovery, the Senate should be
proactively finding ways to encourage businesses to engage in important
corporate social responsibility activities and develop apprenticeship
training programs by providing a safe harbor for these practices from
additional liability.
Myths and Realities About Franchising
Through no fault of ours, franchise business owners have faced an
increasing number of public policy threats to our mode of operation.
One critic, Brandeis professor Dr. David Weil, whom the Committee is
currently considering to return as Wage and Hour Administrator, claimed
in his 2014 book, The Fissured Workplace: Why Work Became So Bad for So
Many and What Can Be Done to Improve It, that businesses (namely,
franchise brands) have increasingly shed their role as direct employers
of the people responsible for their products, in favor of outsourcing
work to small companies (franchise owners). While Dr. Weil may have his
own ideological motivations for promulgating his assumptions, he claims
that the result of the franchise business model has been declining
wages, eroding benefits, inadequate health and safety conditions, and
ever-widening income inequality for workers. These claims are simply
not borne out by the facts.
To test Weil's hypotheses, earlier this year the IFA asked Oxford
Economics to examine the value of the franchising model along a range
of dimensions. There were three goals for this research:
(1) Analyze pay, benefits, and training at franchised firms and
compare these attributes with similar non-franchise employers
where possible;
(2) Assess franchising as a path to entrepreneurship and
uncover areas where the business model provides vital support
to prospective business owners; and
(3) Understand how franchisees are embedded in their local
communities by examining their supply chains and charitable
giving.
While the full report will be released in Fall 2021, the primary
findings of a survey of more than 3,500 franchisees is summarized
below:
(1) FRANCHISES OFFER PAY, BENEFITS, AND TRAINING ON PAR WITH
COMPARABLE NON-FRANCHISE SMALL BUSINESSES. To determine how
wages at franchise firms stack up, the report will explore wage
data from a sample of 3,700 franchise and 137,000 non-franchise
small businesses, drawn from a payroll data base. An
econometric analysis of workers' wages controlling for a
variety of factors finds that workers at franchise firms earn
slightly more than workers at non-franchise firms, although the
difference is statistically insignificant. This is consistent
with existing academic research, including Cappelli and Hamori
(2008) and Kruger (1991). Franchise firms in our dataset are
somewhat larger on average (13.6 versus 9.6 distinct workers
per month), in line with results from the 2016 Annual Survey of
Entrepreneurs. An analysis of newly hired workers also finds
that starting wages, wage growth, and worker turnover are
extremely close between franchises and non-franchises, while
franchise workers were somewhat more likely to be promoted to
manager (14 percent of remaining workers after 19 months vs. 11
percent at non-franchises).
(2) FRANCHISING OFFERS A PATH TO ENTREPRENEURSHIP TO ALL
AMERICANS, BUT ESPECIALLY TO NEW ENTREPRENEURS AND WOMEN. The
2016 Annual Survey of Entrepreneurs (ASE) suggests that
franchise businesses tend to be larger than non-franchise
businesses. The report suggests that, on average, franchises
report sales 1.8 times as large as non-franchise businesses and
provide 2.3 times as many jobs as non-franchise businesses.
Sales and jobs in franchised businesses exceed non-franchised
businesses across all demographic cuts, including gender and
race. For example, Black-owned franchise firms earn 2.2 times
as much in sales compared to Black-owned non-franchise
businesses, on average.
(3) FRANCHISES ARE LOCALLY OWNED AND THIS KEEPS RESOURCES IN
THE LOCAL COMMUNITY. Unlike the multi-unit company-owned
business model, franchises allow franchisees to buy and own the
units they operate. By doing so, franchisees essentially become
small business owners, who live and work in their communities.
The brands they represent do not ship workers in from other
parts of the country, but rather franchisees recruit and train
local residents. The franchise model therefore encourages local
employment and wealth-sharing with local communities. \20\
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\20\ Oxford Economics (2021).
While some use Dr. Weil's core hypotheses as justification for the
PRO Act, we can now see that many of Weil's core assumptions about
franchising are incorrect. This forthcoming Oxford Economics report
will show that franchises offer wages, benefits, and training on par
with similar non-franchise small companies. The study will also show
that franchising offers a path to entrepreneurship to all Americans,
but particularly to first-time owners and women. Last, the report will
highlight how franchisees are embedded in their local communities
---------------------------------------------------------------------------
through their local supply chains and charitable giving.
In sum, all of the economic opportunity and contribution made by
businesses operating under the franchise model is on the line as the
Senate considers the PRO Act. It's not too late for lawmakers to
realize the unintended consequences of the PRO Act, to avert course,
and to protect small businesses at a time when many Main Street owners
are simply trying to pay their bills with uncertain income during the
global pandemic. Millions of workers and companies, and not just
franchises, will be harmed if the PRO Act ever becomes law.
Conclusion
Franchise small businesses are poised to lead our country's
economic recovery and are particularly well-suited to ensuring that
hard-hit minority communities have access to the opportunity and equity
they need to build back better. Unfortunately, the extremist PRO Act
jeopardizes that.
Put simply, this legislation could end the franchise business
model, the business format that has perhaps provided the most
accessible path to business ownership for entrepreneurs of all
backgrounds. It makes little sense to promote organized labor's
political power at the expense of women entrepreneurs, veteran
entrepreneurs, LGBTQ+ entrepreneurs and entrepreneurs of Color.
Thank you Madam Chair, for holding this hearing and for the
invitation to speak on behalf of small business owners everywhere.
While I am honored to participate today, it is important to recognize
and respond to the legislative overreach represented by the PRO Act. I
urge all members of this Committee to support locally owned businesses
in your states by stopping this legislation. I look forward to
answering any questions you may have.
______
The Chair. Thank you again to all of our witnesses this
morning. We will now begin a round of 5 minute questions of our
witnesses, and I ask our colleagues again to please keep track
of your clock. Stay within those 5 minutes. Mr. Pearce, the
National Labor Relations Act has not been significantly updated
since 1947.
This failure to update the law has led to significant
problems for workers trying to exercise their rights. And Dr.
Schierholz, you have led research into the impacts of union
membership for workers and the impact of declining union
membership on working families for our economy. So let me ask
both of you, what would be the impact of updating labor laws to
enable more workers to have a voice in their workplace? Mr.
Pearce, I will start with you.
Mr. Pearce. Thank you for the question, Chair Murray. The
National Labor Relations Act was created for the purpose of
providing employees with the opportunity to have workplace
democracy. Workplace democracy provides an opportunity for
employees to negotiate a collective bargaining agreement. A
collective bargaining agreement is essentially private law of
the plant where--which is mutually negotiated and gives workers
a voice. The impact of that would be to provide more
protections to employees, more opportunities for employees to
negotiate circumstances like the pandemic, to provide an
ability for both the employer and the employees themselves to
have equal voice at the table to overcome issues as they come
up, whether they be catastrophic issues or economic issues, and
wages and hours and safety issues.
The Chair. Okay, thank you.
Dr. Schierholz.
Ms. Shierholz. What we know is over the last four decades,
inequality has risen dramatically. Wages have really stagnated
for working people for most of that period. And a big chunk of
those trends is due to declining unionization. So the Pro Act,
which would boost unionization, make it so workers who want to
join a union, are able to do so. It would reduce inequality. It
would put thousands of dollars per year in the pockets of
working people. It would raise their benefits. It would raise
their--improve their working conditions. It really would push
us toward an economy that works for all that doesn't just work
for a thin slice of people on the winning end of rising
inequality.
The Chair. Thank you. Mrs. Heldman, thank you for your
courage today in telling your story. No one should be denied
the ability to join together with other workers in the
workplace to advocate for improved wages and working
conditions. Tell us what it would mean for you to have a
greater say in your workplace.
Ms. Heldman. Well, it would mean----
The Chair. Do you want to turn on your microphone?
Thank you.
Ms. Heldman. Thank you. It would mean to have a say on
safety and issues on the workplace. And the Pro Act would give
you the right, because without the Pro Act, you don't have
that, you don't have the rights. With the Pro Act you would
have your dignity, your justice, and respect, and you are going
to be told by--when you are being stole your rights and
everything, you can be told by policemen when you want to
report this injustice, that you need a union that the law can't
protect you.
The Chair. Thank you. Dr. Shierholz, you have dedicated
your career to studying the economics of work, including union
memberships' effect on wages and job quality for workers of
color and women. Why does union membership have such a positive
impact on workers who make low wages or workers of color,
women, and other groups that face barriers in the workplace?
Ms. Shierholz. Yes, it is a good question. I can talk--I
will talk first about the impact on women. We know that the
unionization rate for men and women right now is about the
same. Like it is no longer the case that workers--that women--
that men disproportionately are in unions. And one of the
reasons for that is that unions really do help women more
because they raise their wages, raise their benefits, raise--
improve their working conditions. We know one of the things
that is still true in our society today is that women shoulder
disproportionate responsibility for care work. One of the
things unions do is make sure workers have greater paid sick
leave, they are more likely to have vacation pay, holiday pay,
more likely to have more input into their schedules, more
advance notice of their schedules.
Those are the kinds of things that make it possible for
many women who have care responsibilities to work, or at least
to work without enormous chaos added to their lives. And I will
stop there because I have taken a bunch of time. But the
benefits of unionization to workers, to the lowest wage workers
are absolutely enormous.
The Chair. Thank you very much.
Senator Braun.
Senator Braun. Thank you, Madam Chair. I think today the
conversation gets framed very well by the testimony from Mrs.
Heldman and Ms. Sarolia. As someone who has owned the business
and treated my employees like family, that is a tragic story.
That is the reason you need unions out there. But you can't
necessarily generalize upon it. And like anything that is done,
you do not want to throw a wet blanket on the point I made
earlier, that if you are making it more difficult for small
businesses to become large, you are defeating the purpose of
even what you are trying to attempt here in the Pro Act.
I think if we have a second round of questions I will have
questions for the entire panel. I am going to start with Ms.
Sarolia. You are in California. I cited earlier that my own
business got there 10 years ago. And you have got--you are in
the hotel business. What are you hearing from the abundance of
other employers, especially in California, about something like
this?
I cited 280 organizations out there thinking that this Act
is going to wreak havoc on the ability to start a small
business and maintain it. What are you hearing across the
spectrum in California?
Ms. Sarolia. [Technical problems] answer the question that
Senator Murray asked earlier is that for me, it takes away my
independence to be able to directly work for my employees. A
lot of my colleagues and I feel that we are one industry--
sorry, one of the industries that can work closely with our
employees. And I have a great story. I had one hotel in
Temecula where we groomed three general managers. So the upward
mobility of any employee starts from housekeeping to front desk
to all the way to management. We feel that this Pro Act would
impede that and take away our independence to work directly
with them.
Senator Braun. Thank you. And chances are this is not going
to pass because not all Democrats are for it. But then the next
thing that will happen is you will get an executive order. And
the bureaucracy and the regulatory side of life is just as
complicated in many cases as it is with legislation coming down
upon you. What do you--do you fear that if legislation isn't
passed, and hopefully it won't in this particular Act because
it needs a lot of refinement, what happens then? What has been
your experience dealing with regulations through a bureaucracy
as opposed to a law itself?
Ms. Sarolia. I am going to take again--so there is some--it
is not that we oppose the entire Pro Act. I do believe that
there are--we need to sit together and work on ideas that we
can work together that support laborers, but that doesn't
destroy the franchise model. So I think every time an Act is
passed, I don't think they look to how it affects small
businesses. I think we need to do a better job writing policies
that support us to be able to employ people in our community
who have livelihoods that they have to provide for their
families.
Sometimes when we don't pass the correct Act, it impedes
that. I just--25 years ago I got into this business of running
a hotel. It was family run, right, so we all had family. Ten
years later, we are employing communities. Today, our company
is run by people that are not family. Most of my team members
are outside. And anything I can do to help them grow, to pay
them more, as the standard of living increases and rises, I
want to have policies that support that. So I hope I answered
your question.
Senator Braun. I am going to get into one of the
particulars of the Pro Act and I guess that is where we need to
focus, because a lot of the general discussion I don't think is
going to be as palpable to folks in terms of what this does.
Pro Act would require employers to turn over the personal
information of their workers to unions, including their shift
information, emails, home addresses, and phone numbers. As a
business owner, would you feel comfortable doing that in light
of protecting the privacy of your employees?
Ms. Sarolia. No, and I think it is very simple. We as the
employer take the risk of our employees. So protecting them and
their interests is our No. 1 priority. When it shifts to the
franchisors, I don't know if the risk factor is there for them.
So with that to be the case, I would say that is my statement.
Senator Braun. Then this other question of the corporate
versus franchisee. Do you consider yourself an employee of your
brand company? And do you want to be an employee of your brand
company, or do you need a separation like you might lose
through this?
Ms. Sarolia. No, Senator, thank you for asking that
question. I am an independent entrepreneur. Local franchise
businesses owners like me have direct control over their own
hiring practices, working conditions, wages, and hours of
operation. I have a separate employer identification number
from all of my franchisees. They file their own taxes, are
responsible for following all applicable state, local, and
Federal law. So we are already being governed to take care of
our employees and their best interest. I just don't think--the
answer is no to your question.
Senator Braun. Thank you.
The Chair. Thank you.
Senator Hassan.
Senator Hassan. Thank you. Sorry for the delay and thank
you, Chair Murray and Ranking Member Braun this morning. And
thank you to all of our witnesses for being here. First
question to you, Mr. Pearce. We have to protect the rights of
workers to organize and collectively bargain. So-called right
to work legislation has been passed into law in a number of
states. And there are ongoing efforts to pass these bills in
other states, including my home State of New Hampshire.
We know that these so-called right to work laws are
actually right to work for less laws, making it significantly
more difficult for workers to form unions and resulting in
lower wages, more dangerous working, conditions and less access
to health care and other benefits. So, Mr. Pearce, can you
explain what Congress can do to address this and help workers
collectively bargain?
Mr. Pearce. Thank you for the question. I am so eager that
I didn't turn on my mic. Well the Pro Act deals directly with
the question of right to work laws. They eliminate that from
the National Labor Relations Act. Right to work law exists
because it was part of those compromises that were made for the
passage of the National Labor Relations Act, and it has an
insidious past. Right to work laws emanated from legislation
that was just insisted by Southern Senators in order to
substantially control people of color in the South from being
able to join and enjoy the benefits of unionization.
Those vestiges of slavery, adjacent processes need to be
removed. Otherwise you have situations where a union is trying
to effectively represent employees, including employees that do
not have to pay a dime toward those services, yet the union
would have to have a duty under the law to zealously represent,
irrespective of how expensive the process is. That has to
change.
Senator Hassan. Thank you. Another question for you. The
COVID-19 pandemic presented new health and safety challenges
for workers all across the country and highlighted widespread
inequities. The pandemic has also made it more difficult for
workers to gather and discuss challenges that they face in the
workplace. So how can Congress help address worker inequities
that the pandemic exacerbated?
Mr. Pearce. Well, the Pro Act provides opportunities for
workers to be able to unionize more freely. Those oppositions
to unionization impacts workers' ability to be able to deal
with things like the pandemic. As I stated in my opening, it is
because of many unions being present at a facility that
protections were brought in, exposures to bad policies and
vulnerabilities were made public as a result of union
intervention. The Pro Act's provisions will provide that kind
of protection for employees.
Senator Hassan. Thank you. Dr. Schierholz, I have a
question for you. We know that when workers organize, it can
result in better working conditions and benefits across the
board. This can be particularly meaningful for women whose
earnings continue to lag behind their male counterparts. So can
you talk about how expanding the rights of workers to organize
will support women in the workforce, including helping them
close the gender pay gap and increase retirement savings?
Ms. Shierholz. Yes, that is an important--that is a really
important point. And I talked a little bit about this, but I
think what unions do is that they raise wages for workers by
allowing workers to join together with their colleagues in a
union and collectively bargain. We see higher wages that
women--women in unions have higher wages than similar women who
aren't in unions, better benefits, better working conditions.
Then I mentioned this, but I will just say it again because
it is so worth repeating, this idea that, the point that
workers and unions have better schedules. They have better--
they have more control over their schedules, they have more
advanced notice over their schedules. And so what that means is
that people, predominantly women in the society who have care
responsibilities, have more predictability in their job, and
that makes their lives, their working lives much more possible.
Senator Hassan. When they earn more, too, they can save
more for retirement, right?
Ms. Shierholz. Well put. Yes.
Senator Hassan. Okay. Thank you. Last question for Mrs.
Heldman. Many workers aren't aware of the rights that they have
in the workplace, including laws to protect the rights of
workers to organize. You have tirelessly worked to collectively
organize your workplace. Do you think workers need to have
greater access to information about their right to organize
under the law? You need to----
Ms. Heldman. Yes, they do. And I mean, when we try to
organize, they always really go out there and they--some of
these people do not know their rights to organize, so they
intimidate them. And they follow you around and they take you
to these captive meetings. And as you are walking into these
captive meetings, they are yelling, vote no, vote no at the top
of their lungs. That is our supervisors, and they sit up there,
they say vote no.
You go out on the floor, and they follow you around, they
still intimidate you. And they tell these coworkers of mine,
they say, if you vote yes for the union, you are going to get
fired. And some of these people don't really know their rights
and they lie to them about the union, and they lie to them
about everything.
That is why we haven't won our union elections. If not, we
would have had it 20 years ago. We would have won the first
one.
Senator Hassan. Thank you very much. And thank you, Madam
Chair, for your indulgence.
The Chair. Thank you.
Senator Tuberville.
Senator Tuberville. Thank you, Madam Chair. And thank you
for being here today, all four of you. This a short statement
here. It is a huge topic back in my State in Alabama, huge.
Basically this is coming from the people of Alabama. The Pro
Act represents a massive power grab to override the will of the
voters. Federal power grabs like these are unconstitutional and
go against our entire system of Government. The Pro Act would
overrule the right to work laws across the country and force
tens of millions of employees to join a union.
Currently, only 27 states have a right to work laws.
Alabama is one of them. Right to work laws give workers
freedom. And more importantly, it gives workers the freedom to
choose whether to unionize or not. Alabama's right to work law
has been a huge benefit for our state because we are in the car
business. We have got about six or seven car businesses and
manufacturers from Hyundai, Honda, Toyota, Mercedes, 40,000
manufacturing jobs, 40,000. We make a million cars, trucks a
year, $8.2 billion, and we are not a union.
By forcing unionization on every worker and sector, many
industries would grind to a halt, especially in Alabama.
Employer costs would skyrocket, which could lead to a loss of
jobs, not to mention like States like Alabama lose the ability
to recruit companies. The top 10 CEO this morning was in my
office, Airbus, a large corporation. I asked him about the Pro
Act, and he said it would kill us. Absolutely kill us.
This corporation would move back to Europe and to other
countries. They have to make a profit. But they also love to
come where people have the right to choose. On top of that,
according to the State Policy Network, the Pro Act would
negatively affect 57 million American workers who call
themselves freelancers. Unions, to some degree, they have
helped this country. They have helped the country. However, in
2021 there are multiple Government entities that exist purely
to uphold workplace safety standards and protect workers. We
got the--we have got Department of Labor. We got OSHA. Are we
going to start unions and just close that down.
We need to give workers the ability to choose. This is a
free country. Choice creates competition, competition breeds
success. We used to compete in this country. We are not
competing anymore. We want everybody to be the same. Everybody
is not the same. You have got the right to do as much as you
want to do, if you put your nose to the grindstone. President
Biden says, and I quote, ``every worker should have a free and
fair choice to join a union.'' I believe in that statement. But
the Pro Act would tip the scales.
Among other things, as you have heard, it requires workers'
personal contact information to be sent to a union. We are
already having problems with that. Removes voters to a secret
ballot, subject of the union coercion, being able to vote out
loud. And limits the information workers may receive during a
union organizing campaign. That doesn't sound free to me.
This is still a free country, folks, free country, and this
Pro Act is not going to do anything for us, especially for the
people that run this country. That is the hard working
Americans. Mrs. Sarolia, you mentioned that in your testimony,
the COVID-19 pandemic hit businesses especially hard. If the
Pro Act is passed, how will this provision slow down this much
needed recovery and why?
The Chair. You can turn on your microphone, please.
Ms. Sarolia. Can you repeat it one more time?
Senator Tuberville. If the Pro Act is passed, how is that
going to affect your business?
Ms. Sarolia. More so business--it is like 25 years ago we
got--I owned my first hotel in 1996 thinking that I would be
able to employ people in my community. If the Pro Act passes, I
think the control that I had over overseeing my operation would
be given to a third party like the unionization or even our
franchisor. Someone that sits 4000 miles away from me wouldn't
be able to control that. I am going to tell you a little quick
story what happened in 2020, right.
Our Government shut us down for good reasons to make
everyone feel safe. I was scared and I asked my family members,
we are going to have to jump in and pitch in and help our
employees because we need to allow them to be comfortable doing
what they need to do. So we got--we retained 100 percent of the
people that stayed. For those that didn't stay, we had to roll
up our sleeves and start working again.
If the Pro Act passes, I don't think we would be having a
business to run anymore. That would be No. 1, because the scare
of anybody wanting to own under that Pro Act, I don't think it
is going to be a small business and I don't think it is going
to get an American dream story, and I definitely don't think I
would be an entrepreneur. So I hope I answered your question
with that.
Senator Tuberville. Thank you. Thank you, Madam Chair.
The Chair. Senator Casey.
Senator Casey. Thank you, Chair Murray. And I want to thank
you and Senator Braun. Especially want to commend and salute
the work of Senator Murray to lead the introduction of and work
to pass the Pro Act. And I want to as well thank our witnesses
for being here for your testimony. I want to especially thank
Mrs. Heldman for her testimony and her uncommon courage coming
forward. You are--that kind of courage is, as I said, all too
rare. The fact that you came forward to help others come
forward to tell their story. And we appreciate that. At the end
of your testimony, you articulated the three words that you
hope will encapsulate what a union would mean to you, dignity,
justice, and respect.
I want to commend you for reminding us that is what this
debate is all about when it comes to unionization. So I salute
your courage. I wanted to pose a question to Mr. Pearce, and I
appreciate your work in this area, for many, many years and
your scholarship, and for reminding us what the National Labor
Relations Act it is not advisory. It is a statute that was
passed in 1935. And I think we have seen it degraded for many
of the reasons you outlined.
It is interesting that we need reminders but section 1,
that you highlight on page 1 of your testimony, that outlines
the protection, ``by workers of full freedom of association,
self-organization, and designation of representatives of their
choosing.'' Nothing could be more American than that. But it
has been badly undermined not only by the National Labor
Relations Board, but by these efforts that Mrs. Heldman
outlined. These union busting tactics that have gone on for
years. I have seen it firsthand in Pennsylvania in many
contexts, usually in the context over the last 20 years in
health care, union busting law firms.
These are white-shoe law firms, big, big corporations,
really. They get paid by the hour to bust unions. Simple as
that. And it is in direct conflict with the National Labor
Relations Act. So, Mr. Pearce, I would ask you this. How can we
strengthen protections for workers when they are negotiating
with their employer for the very first time?
Mr. Pearce. Thank you, Senator Casey, for that question. It
is a vital piece of the representation process to be able to
effectively negotiate during the time that you first receive
certification. The workers are hoping for the best. The
employer sometimes does not necessarily take the union busting
tactic during the election campaign. They lay back and then
they wait for bargaining to hardball to be entrenched to be
extremely recalcitrant.
Consequently, you have statistics that the Kate
Bronfenbrenner study that I put in my testimony shows that less
than 50 percent of unions are able to get a first contract in
the first year. The Pro Act, what it does is it intensifies the
obligation during that first year of negotiations.
It requires mediation. It requires that if the parties
cannot reach an agreement, then it can be put to arbitration,
where arbitrators make a determination as to whether or not
negotiations are being properly affected. The full court press
on the first year of negotiations is a vital piece of the Pro
Act that would facilitate bargaining going forward, because
once that first year has passed and once that first contract is
negotiated, collective bargaining will benefit for everybody.
Senator Casey. Thank you very much. I will just conclude
with this Dr. Shierholz. I don't have time to ask you a
question. I will post some in writing. But on page one of your
testimony, you said, and I quote, ``a worker covered by a union
contract earns 10.2 percent more in wages than a peer with
similar education, occupation, and experience in a non-
unionized workplace in the same sector.'' That and so many
other statements that you articulated here today should be
lifted up. Thank you, Madam Chair.
The Chair. Thank you.
Senator Moran.
Senator Moran. Madam Chair, thank you very much. Let me
direct my questions to Ms. Sarolia. Thank you, first of all,
for being here today. I want to do what I can to increase the
number of jobs that are available to Americans, and one of the
likely places for that to occur is in entrepreneurship, new
businesses, startups.
One of the places that happens frequently is in franchise
relationships. So I want to see what you can tell me about how
the Pro Act would hinder or help in regard to that new business
startup and the opportunity for franchises to continue to grow.
How would the franchise business model ability to promote
entrepreneurship be affected by the Pro Act? I am sorry----
The Chair. If you can turn your mic on.
Ms. Sarolia. Apologize for always--Senator Murray for
forgetting that. The Pro Act is trying to put another barrier
between for us having direct control over our business versus
what the idea of what Pro Act is wanting to do, having the
franchisor be involved in running our business. I don't think
the ability for me to be able to grow would be there anymore,
because it wouldn't be my business that I would be running. It
would be someone else's business I would be running.
You can see how that is not really the right direction that
we should go down to. My family has been in this business since
1952. Entrepreneurship is all they have ever done. I mean, we
have grown from one hotel to if you look at my uncles and my
aunts, we probably have 32, but none of us look like we have 32
hotels.
We are normal people, we roll up our sleeves, we are
cleaning toilets, making rooms. I don't know if we would be
able to do that if a franchisor gets to have better control
over our business. I don't know if I answered your question.
Senator Moran. You did. And I am sorry that you had to
answer it twice. Three hearings, all at 10 o'clock this
morning. Ms. Sarolia, the California AB5 experience with the
ABC test led, I think, to some pretty real consequences for
many, many California workers who had their livelihoods
uprooted as a result of these policies. As you know, AB5 ended
up being amended to allow exemption for certain category of
workers.
The Pro Act contains no workers exemption. Given the broad
consequences of AB5 and the ABC test on California workers,
does it seem like an appropriate standard for the Federal
Government? Does AB5 seem like it should be the standard for
what we might do in Congress?
Ms. Sarolia. The answer to that question is no. While the
Pro Act proposes to amend the National Labor Relations Act in
AB5 amended California State law, franchises' reaction to the
risk involved with both proposals has to be identical.
Corporate franchise brands will react to the increased risk
by not franchising, taking back contracts when they are up for
renewal, or otherwise taking away opportunities to risk what
they created by both proposals. So what I am trying to say is
that maybe my franchisor doesn't want to go into business with
me because of the Pro Act, which definitely takes away from
being an entrepreneur and a small business owner.
Senator Moran. Thank you for your answers. Thank you, Madam
Chair.
The Chair. Senator Kaine.
Senator Kaine. Thank you, Madam Chair and Senator Braun.
And thank you to the witnesses. So I do think we all come at
this from our own perspective. And it has been helpful to hear
Mrs. Heldman and Mrs. Sarolia and Senator Braun share
perspectives. So I will just offer mine in a minute. I grew up
in a in a household very familiar with unions and small
businesses. My dad ran an ironworking shop in the stockyards of
Kansas City, Missouri, Iron Crafters. Iron worker organized,
union members.
Five employees and a tough year, plus my mom and my two
brothers and me. And in a really great year, maybe eight or
nine employees, and union and a small business were just fine
within the franchise. So I am hearing there are different
business models, but union and small business work just fine. I
am sure my dad had some disagreements over time with unions in
a negotiation. You are going to do that.
But he always would tell us my business acumen will put my
workers' kids through college, and their artistry and skill
will put you boys through college. He told my two brothers and
me that a lot. And I saw that they were artists. My dad, one of
the honors of his life, was at one time the Iron Workers
National Pension Fund, which has a board, three union reps, and
three employer reps. Asked my dad to be on the board and he
said, I only have five employees.
I mean, this is a national union. Yes, but you are fair.
You are a good business owner. We want you on the board. And he
did that for about 10 or 15 years, and it was one of the
professional honors of his life. I want to clear up a couple of
misconceptions or maybe elaborate a little bit about the Pro
Act. So a statement was made earlier that it would take away
people's right to vote secretly in a union election. And my
understanding is that is not true at all.
The Pro Act basically maintains a requirement for secret
ballot, except in this condition if an employer commits an
unfair labor practice. And the unfair labor practices are so
serious that it jeopardizes the ability to have a fair
election, then the NLRB can order a rerun election by card
check rather than by secret ballot.
But everybody gets to cast a secret ballot in union
election under the Pro Act unless the employer violates the law
and violates it so seriously that intimidation is so likely
that a card check is allowed. Am I wrong about that? That is
how I read the Pro Act.
Mr. Pearce. Is that to me?
Senator Kaine. Yes, if you would.
Mr. Pearce. Yes, sure. You are absolutely correct. And I
also would like to take the opportunity, if I could, to
create--correct the record with respect to another thing. In
terms of personal--the supply of personal information, the
Senators should know that Excelcia Underwear, which is a
Supreme Court case, stated that unions have the right to get
the names, the addresses, and the phone numbers of the workers
that they are trying to organize because, of course, they are
outside of the facility.
Senator Kaine. Because in an election, the employer would
have that information. And so to make it even, Steven, you
would want to have a second issue. So I think it is really
important, people have a right to secret ballot, and it is only
after a finding of an unfair labor practice that it could be
ordered by card check.
Second, this is a really important thing. Mrs. Heldman
talked about how hard it is to win a union election against the
onslaught of an anti-union campaign. When you finally do win an
election and when the employee say we want a union, I think it
so outrageous that having lost an election the employer is able
to stonewall for sometimes years at a time and not get a
contract.
I mean, it is like trying to overturn the results of an
election. We saw an effort to do that here on January 6th. It
wasn't too good. An election should have meaning. And so the
provision in the first year to--if there is an election, if the
employee say we want a union, that should be able to be
converted into a contract in a reasonable period of time.
Finally right to work. Virginia is a right to work state.
But I want to focus on something that most people don't focus
on, which is if the employees choose a union, then the union is
required by law to negotiate for every last member of the
bargaining unit, whether or not the person wants to join a
union. That is a requirement of union, is it not?
Mr. Pearce. That is correct.
Senator Kaine. Right. So if the union is required by law to
negotiate for everyone, then I don't think it is unfair for
somebody to say, well, I don't want to join the union, but for
there to be an agency fee.
Okay, you may not want to join the union. You may not want
to contribute to the union's political activities or whatever,
but since the union is required by law to negotiate for you and
you are getting the pension benefit and you are getting the
salary and you are getting the health care benefit that the
union is negotiating for you to say not only I don't want to
join the union, but I also don't want to pay for the benefit of
the representation that the union is required to carry out on
my behalf, I just--I think the notion of the agency fee,
letting that be negotiated, and if it is negotiated into a
contract, letting that contract be upheld, just like we would
uphold other contracts at law, seems to me to be very, very
fair. With that, Madam Chair, I yield back.
The Chair. Thank you.
Senator Cassidy.
Senator Cassidy. If there is ever a hearing that contrasted
the two parties, it would be this, with this side interested in
expanding corporate power, both the power of the company that
would franchise to others, as well as the power of the union
over the individual making her own decision, this is a bill
that draws that contrast. My staff gave me, we should call this
the Consolidation of Corporate Power Act, which the
alliteration being CCP with all the kind of implications of
that.
By the way, there are some really specious logic in here.
All due respect, Mr. Pearce, somehow in your discussion of the
origins of right to work, you suggest that it is somehow
embedded in racism, that the current practice is embedded in
racism. I will tell you, in my State of Louisiana, Alabama,
Tennessee, South Carolina, Mississippi, right to work states
have the highest percentage of African-Americans in the Nation.
The ability to attract good paying jobs with right to work laws
has created untold economic opportunity for people of all
races, but certainly those who are of color.
Now, my gosh, we could say now you just go ahead and stay
up North, where the unions traditionally discriminated against
Blacks. Instead, we opened up the laws. People moved south. And
now folks who formerly didn't have jobs, have great paying
jobs, not because they are unionized, but because that is the
industry standard. Now Dr. Shierholz, I am reading this
thinking I am a doctor, I am not an economist, but in medicine,
we contrast between association and causation.
The fact that union membership has fallen, and income
inequality has risen in many respects has no relationship
whatsoever. If I may, it is clear that what has happened is the
number of unionized manufacturing jobs has declined. Those of
the service industry, SCIU has greatly increased. Because those
manufacturing jobs have declined, in part because companies
moved manufacturing overseas because inflexible work rules,
inflexible work rules, created a cost disadvantage over
factories, manufacturing plants that were located overseas.
You can make the case that right to work laws is actually
created the opportunity for manufacturing to remain in the
United States because it is not just the wage, it is also the
inflexibility of work rules that make it difficult. One example
of this, and I would love your opinion on this, we are speaking
about how union laws make things so much safer. There is
Federal employees that didn't work for 14 months? They didn't
work from home. They didn't work in the office.
We paid billions in salaries to people who didn't work for
14 months. So I called the supervisor. I can't get a passport
for someone. Why are they not working? Well, the union won't
agree to work rules. Wait, the union won't agree to work rules?
Yes, they won't agree to the PPE requirements that would allow
people to come in and work safely in order to process passports
and so therefore we have got this backlog for however long. You
want to take your, some--apparently there is a lot of people
that want to get married in [inaudible].
My office had to handle a lot of those, done by
supervisors. May have changed now. 14 months, unions objected
to that. Those are the kind of work rules that increased cost.
And if it is not the taxpayer who just kind of sucks it up and
takes it on the chin, if it is a manufacturing plant, they move
elsewhere. I kind of dispute this motion--this notion that we
are getting all this value added from this insistence on
safety.
By the way, I thought we had OSHA guidelines that kind of
demanded safety. I thought OSHA--if not, we better go after the
OSHA people if they are not doing their job. One example, I
will just say this, your figure showing income equality as
union membership. Think about your hospital, your major
hospital in New York City, that CEO is probably making $5
million, totally unionized workforce, totally unionized. And
yet there is no relationship between she or he making $5
million or maybe more, I am probably being conservative, well I
am conservative all the time, but conservative for a New York
CEO of a hospital.
Relative to what the--it is all unionized. Again, just
because you have an association doesn't mean a causation. We
have been evolving from a manufacturing to a service industry.
And as that happens, union membership has disproportionately
moved to the public sector. Now, Ms. Shierholz, I see you
writing things down. What would you say?
Ms. Shierholz. Thank you. Thank you for the ability to talk
on this. So you are absolutely right that causation doesn't--
that correlation does not mean causation. And in that
testimony, that figure A that showed the really rough
relationship between rising inequality and unionization, the
text in there pointed out that this thing really does show the
correlation. Rigorous research that digs in and really gets at
causality does show that about a third of the increase in
inequality between typical workers and workers at the high end
was over the last 40 years, was due to the decline in
unionization.
It is not the whole--the whole rising inequality is not due
to unionization, but a big chunk of it. And the decline in
unionization is not primarily the result of the change in
sectors from manufacturing, the shift from manufacturing to the
service sector in this country. That had something to do with
it. But if you look, there has been a decline in unionization
both within manufacturing and within services. So a shift from
one to the other doesn't--isn't the cause----
Senator Cassidy. But in part, and I know I am over time,
Madam Chair. I apologize. But that in part is because of right
to work laws used as an economic development tool that brings
benefits to people, people of color included, who otherwise
would not have in states formerly impoverished, but now doing
better.
Ms. Shierholz. I will just say that rigorous----
Senator Cassidy. Somebody else wishes to speak, that is
fine. But she is giving me the nod.
The Chair. Thank you. Thank you so much.
Senator Murphy.
Senator Murphy. Thank you very much. I was walking over
here during Senator Cassidy's questioning, and he may have been
covering some of the same ground that I hope to cover with you,
Dr. Schierholz, on this sort of extraordinary increase in the
gap between the pay of CEOs and average workers. And it sounds
like that was the space that Senator Cassidy was into. Maybe I
will just give you an opportunity to sort of continue to expand
on your answer. But what is in people's heads just shake, I
mean, frankly, Republicans, Democrats, conservatives, liberals,
when you tell them that today the pay ratio for S&P 500
companies from CEO to worker are 299 to 1.
I mean, Connecticut, we have got a cable company which is a
regulated industry in which the CEO is making 687 times the
median worker at that cable company. Just doesn't make sense to
anybody. And so maybe I will ask the why question. Right, you
have got sort of a lot of data to sort of explain how
unionization can shrink that differential between CEO executive
pay and worker pay, which has never been bigger than it is
today. But what drives that? Why is that the case?
Ms. Shierholz. That is a really good question. I think the
way that I think about this is, as we talked about, the decline
of unionization explains a huge share of the rise in inequality
over the last four decades. And the rise in CEO pay is a really
big part of the rise in inequality over the last four decades.
I think a useful way to think about it is the decline of
unionization has led to a big shift, a big upward
redistribution in money from workers to corporate executives
and shareholders. And that is where the skyrocketing CEO pay
really comes in. And that we just have this incredibly
unbalanced playing field right now.
Legislation like the Pro Act would do things that would
just make it possible for workers who want to join a union,
want to join together with their colleagues, to be able to do
that.
Senator Murphy. I think it is a really good point. Without
the ability for unions to argue for a bigger share of that
money that ends up in their pockets, and without other
effective checks on the explosion of CEO pay, that imbalance
just gets worse and worse. Mr. Pearce, I know we have talked in
and around this subject of abuses that happen during organizing
drives.
Again, maybe I am treading on a little bit of ground that
has already been covered. But we had an instance in Connecticut
where groups of workers were trying to organize at McDonald's
restaurants that were part of our rest stops along the highway.
And there is reporting to suggest that as a means of trying to
intimidate those workers, McDonald's actually called ICE and
sent in immigration enforcement officials to threaten family
members of workers.
Just absolutely extraordinary, absolutely extraordinary
tactics. There are much more sort of mundane and more
pedestrian intimidation tactics that take place all the time.
And it seems that our current enforcement structure is just not
nearly strong enough to incentivize these kind of abuses. Why
does the current system not work to create a level playing
field? Why does it allow for so many employers to get away with
captive audience meetings and threats and sort of low level
intimidation?
It just--at least anecdotally in Connecticut, as I talk to
folks that are trying to organize workers and I talked to
workers, the breadth of intimidation and harassment seems to
have exploded. And it just doesn't seem like our current
regulatory structure can keep up with the ways in which
employers and union busters innovate to try to prevent folks
from being able to cast a legitimate, free, and fair ballot as
to whether they want to join a union.
Mr. Pearce. It is a simple cost of doing business because
the penalties are so light. We are talking about an agency that
is incapable of enforcing its orders and we are talking about
an agency that cannot impose any kind of sanctions that have a
meaningful bite to it. Quite frankly, and I have said this
before, I would submit that an employer can fire an individual
who is trying to start a union and put the money that would
probably be owed to that employee when reinstated in a simple
interest bearing bank account.
By the time the employer was obliged to have to pay the
employee back, the employer would have made money and would
have been able to stop unionization and probably write the
expense off as a business expense. This is why the Pro Act
changes the game. One, it gives solid damages to the employees
if the employer has engaged in these unfair labor practices.
Two, it requires, it mandates that the General Counsel go
in and seek injunctions when employees get terminated so
employees are not caught in the weeds for inordinate periods of
time before justice comes about.
Senator Murphy. Well said. Thank you both. Thank you very
much.
The Chair. Thank you.
Senator Marshall.
Senator Marshall. Thank you, Madam Chair. The first time I
heard of the Pro Act or reviewed it, I asked myself what is
broken? What are they trying to fix? And I concluded, if it
ain't broke, don't fix it, right. And worse is that it harms
small businesses. And I am going to submit a letter for the
record.
I am going to quote, this is from the NFIB, ``the radical
legislation would dramatically upend longstanding employment
law in favor of labor unions at the expense of small businesses
and employees.'' I could not have said it better. And Madam
Chair, I would like to ask unanimous consent to submit this
letter from the NFIB for the record.
The Chair. Without objection.
[The information referred was not submitted for the
record.]
Senator Marshall. Thank you. My first question to Dr.
Shierholz. Across the country, thousands of Americans have
realized their American dream of owning a small business
through the franchise business model. The Pro Act would
dramatically expand the joint employer standard, putting the
Government squarely in the middle of the employer, employee
relationship and potentially making business owners liable for
actions taken by other companies. My question, would you agree
that the expansion of the joint employer definition threatens
the ability of small businesses to utilize independent
contractors?
Ms. Shierholz. No, I wouldn't. What that joint employer
standards does is it if--what it does is it actually helps
small businesses, it helps franchisees. They are already
required to be at the bargaining table under the NLRA with a
union. What the joint employer standard would do is, strengthen
joint employer standard, and the Pro Act would do, would make
it so the big company, the franchisor would also be able--would
also be required to be there if they actually do have control
over the conditions of those workers.
Senator Marshall. You really think that 10 percent of
franchised companies would agree with you, or would it be less
than that?
Ms. Shierholz. I have no idea how much franchise companies
would agree with me, but what I know is I did a very in-depth,
rigorous look at what the joint employer rule, the Trump joint
employer rule that limited that weakened the joint employer
standards, the impact of that on workers, and found that it
would cost workers more than $1.3 billion a year by reducing
their ability to bring all work, all firms who have control
over their conditions of work to the bargaining----
Senator Marshall. We will just have to agree to disagree. I
think it would destroy the franchise model, which is the
backbone of so many small businesses and so many success
stories as well. My next question for Mr. Pearce. Only 6
percent of the private sector employees belong to a union, and
recent unions drive across the country have failed.
Additionally, 27 states have passed right to work laws,
including my home State of Kansas, protecting a combined 81
million workers nationwide from being forced to pay union dues
in order to retain a job. I also have a list, Madam Chair, to
ask unanimous consent to submit the document highlighting
Democrat leader support for right to work laws to the record.
The Chair. Without objection.
[The information referred was not submitted for the
record.]
Senator Marshall. My question, Mr. Pearce, is this, why
should the Federal Government restructure Federal law in their
favor when unions are failing to make a compelling case to
workers?
Mr. Pearce. Unions are failing to make a compelling case to
workers because unionization is being blocked by unfair labor
practices and it is difficult for workers to be able to vote
for a union. Statistics and studies have shown that the
majority of workers surveyed, if had the opportunity to join a
union, that they would.
What has happened is high percentages, close to 50 percent
of unfair labor practices occur during the organizing campaign.
Further, unions don't have access to the facility. It is like
two candidates running for an election, but one has to campaign
outside of the country in order to get elected.
There is an added basic inequity in the process and
therefore that has to be changed and the process has to go to a
neutral site so that unions have a fair opportunity.
Senator Marshall. I got a yes or no question. The Pro Act
would--and I will go back to you, Mr. Pearce. The Pro Act would
force workers to pay $1,000 or more in mandatory annual dues.
Speaking of inequities, do you agree this would
disproportionately impacts low income workers? Yes or no?
Mr. Pearce. No.
Senator Marshall. Thank you. I yield back.
The Chair. Thank you.
Senator Smith.
Senator Smith. Thank you, Chair Murray and Senator Braun,
and welcome for our witnesses. It is great to be here with you
today. So I start from the place that everyone in this country
should have the right to come together and collectively
organize for better wages, better benefits, better working
conditions, safer working conditions. And that when working
people--when this happens, working people have the opportunity
to reap the actual value of their labor.
The right to organize people empowers working families like
Ms. Heldman's. And in short, it gives Americans, all Americans
the freedom and the opportunity to build the lives that they
want. To me, this is what is at stake in this moment as we
think about strengthening and modernizing labor laws that, as
you all know, many of you have said so eloquently are so out of
date.
Dr. Schierholz, I would like to ask you a question, really
to respond to this argument that I hear from time to time,
which is that strengthening labor rights comes at the expense
of U.S. competitiveness, that basically if workers have more
power and more representation, this argument goes that this
hurts businesses. They become less competitive, they create
fewer jobs, and that slows economic growth. So, Dr. Schierholz,
could you address this argument?
Ms. Shierholz. [Technical problems]--turned off my
talking--it is a really important question. What the evidence
shows on unions is that they have real productivity enhancing
features, like, for example, when job quality is better because
unions are there to do things like get better wages, benefits,
working conditions, turnover goes down. Turnover is incredibly
expensive and productivity draining for companies. So that is
one thing, like one really important thing that unions do.
Another thing is they can make a company just run much more
efficiently, because what it does, it allows for an entity that
can aggregate worker interests and worker information and
communicate that to management, which can really be an
important way to help an organization run more productively,
actually more efficiently, be more competitive. So this is, I
think this is typically just--it doesn't bear out when you look
at what really goes on.
Senator Smith. Well, and also, as you are--there seems to
be such strong evidence that the rights of individuals to
organize and increase their incomes, that makes our economy
more fair and more fair economy is, I would argue, a more
competitive economy. That actually--a more fair economy
actually creates more growth rather than stifling growth. Is
that--would you agree with that?
Ms. Shierholz. Yes, exactly. One of the ways that I would
also characterize that is, as we have seen, rising inequality
is a much higher share of overall income is going to people who
already have a lot of money. That actually hurts our economy
because people who already have a lot of money, if they get a
little bit more, they are not likely to spend it on goods and
services because they already have what they need.
What unions do by getting money in the pockets of working
people, by getting money in the pockets of middle class people,
it really does stimulate economic activity because those are
folks that if they get an extra thousand dollars a year, they
get an extra few thousand dollars a year, it is going to go
right into the economy.
Senator Smith. Right. The Economic Policy Institute has a
really compelling chart, which it shows productivity growth
compared to worker compensation over time. And what is
interesting about this chart is during most of the postwar
period, productivity growth and worker's compensation kind of
they sort of moved together. But then that changes.
After a while, starting in around 1979, those lines
diverge. The two lines begin to separate, which essentially
means that the way I understand it, I am not an economist
either, that workers are not benefiting from that productivity
growth. So could you explain that to us? And can you explain
what impact kind of like how that matches up with what is
happening with unionization in this country?
Ms. Shierholz. Yes, you explained it really well, that what
we have seen since the 80's is the economy growing relatively
strongly, productivity increasing, but the gains of that
productivity growth not going to working people largely. It is
largely being captured by people at the--who already have the
most.
One reason for that, one key reason for that is the decline
of unionization that really does do this sort of upward
redistribution of money from workers to corporate executives,
shareholders. So fundamental reform like the Pro Act really
would help halt and reverse those trends and move us toward an
economy that works for everyone, not just for a little slice at
the top.
Senator Smith. Right. I mean, I think that what we have
seen--thank you for that. What we have seen is after years of
concerted, coordinated effort to whittle away at workers'
rights, that it is time for Congress to address that imbalance.
And by addressing that imbalance, we will be able to address
the greater imbalances in our economy. That means that it
doesn't work for everyone. And as Paul Wellstone from my State
of Minnesota used to say, we can get back to a place, hopefully
to a better place, where we all do better when we all do
better. Thank you.
The Chair. Thank you.
Senator Baldwin.
Senator Baldwin. Thank you, Madam Chair, for hosting this
incredibly important hearing. And thank you to the Ranking
Member also. Mr. Pearce, as a former National Labor Relations
Board Chairman, you have witnessed how worker misclassification
has hurt the interests of workers and their efforts to
collectively bargain. There has been a lot of misinformation
out there about what the Protecting the Right to Organize Act
will do to address worker misclassification.
I would like to just urge us, let's be clear and address
this once and for all. What problem is the Pro Act to
protecting the right to organize acts ABC test trying to fix,
and how will it work, and will it require freelance workers to
become W2 employees?
Mr. Pearce. Thank you so much for the question, Senator. I
am glad to have the opportunity to clear that up. First of all,
the ABC tests more or less basically said it has the ability to
discern whether or not an individual worker is truly an
employee under the National Labor Relations Act for the
purposes of the ABC's coverage. The ABC test assumes that
someone is an employee if unless the worker is free from the
employer's control or direction in performing work, the work
that takes place--the work takes place outside of the usual
business. So if somebody has a bakery and they have a worker,
have somebody--they hire somebody to install ovens, clearly
that is not baking.
That is not going to be considered the same as being an
employee. And customarily do the work that is being performed
is independently done. So if the person is installing ovens, do
they have a business of installing ovens? Well clearly they are
not employees of that employer.
The ABC test discerns that. And it is not new. It is being
done by half of the states in this country for the purpose of
wage and hours and other benefits and unemployment insurance.
So the--what it does is codify that standard so that it would
apply in discerning who is eligible for coverage under the
National Labor Relations Act.
Senator Baldwin. Thank you. Ms. Heldman, thank you so much
for your testimony and your presence here and your efforts to
organize your workplace. As you know, the Protecting the Right
to Organize Act allows the NLRB to assess monetary penalties
for labor law violations and imposes personal liability on
executives responsible for such violations. How would your
employer perhaps have acted differently during your union drive
if they knew that they could be liable for fines of up to
$50,000 per labor violation?
Ms. Heldman. Well, if they knew that, we would have won our
first election and we have not we lost that election, and they
would have thought twice about firing union supporters and how
they treated people and how they pulled us into office and
interrogated us and told us to vote no and be out there on the
floor right on our faces and telling us to vote no and
following us wherever. And send us posts to vote no because we
don't need a union. That would make them think twice. I really
think that would make them think about what they are doing.
Senator Baldwin. Thank you.
The Chair. Thank you.
Senator Rosen.
Senator Rosen. Thank you, Chair Murray, Senator Braun, and
really thank you for holding this hearing today so we can have
a discussion about the important--how important the right to
organize is to ensure our good paying safe jobs for workers all
across our states. And I come from Nevada. Nevada, built by
union workers. It runs today because of the work that the union
members do.
The Nevada AFL-CIO has worked to raise wages, secure
benefits, and ensure safe working conditions for workers all
over our state. The ACIU and Teamsters locals in Nevada, well,
has COVID right now. So they are fighting for our nurses, our
caregivers, they are fighting for our convention workers, bus
drivers, other men and women all across our state. I want to
say hardest hit in the Nation with unemployment this last year.
And I also want to mention that our Culinary Union 226 turned
85 years old last year and celebrated decades of providing
hundreds of thousands of Nevada hospitality workers a pathway
to the middle class.
During the darkest days of the pandemic, unions delivered
food to the furloughed workers, helped them sign up for their
unemployment benefits, ensured they had a right to return to
their jobs as Nevada carefully reopens and welcomes back
visitors. And I myself am a former member of a Culinary Union
226. I am proud of that and Unite Here and our other Nevada
unions that are fighting to protect workers, secure benefits
for their families.
My grandmother was a lifelong member of the Baker and
Confectioners Union. And so I know a little bit about unions,
and I want to thank all of you for fighting for that. But, Mr.
Pearce, we tend to hear a lot, my colleagues are talking about,
these competing narratives, that is the Pro Act really
necessary? People will do the right thing. Businesses will do
the right thing. And is it necessary for achieving workplace
democracy?
Can you explain that concept of workplace democracy? Why it
is important and how strengthening our right to organize cannot
only help us achieve a more democratic workplace, but I would
say a more harmonious workplace?
Mr. Pearce. Thank you so much, Senator, for this
opportunity. So often I am hearing that what unions are doing
is undemocratic. It is violating employees' democratic rights.
What folks fail to realize is that without legislation, there
is no democracy in the workplace. It is the National Labor
Relations Act that provided democracy in the workplace. And the
whole idea was balance the playing fields, bring workers an
opportunity to have a seat at the table.
The Pro Act provides and facilitates collective bargaining
in an enhanced way in environments that are comparable to the
21st century so that employees have a better chance to be able
to bring democracy into the workplace. I talked about the value
of the collective bargaining agreement. It is the contract, the
constitution of the of the workplace mutually negotiated.
It is important because it provides abilities for people to
have safe working conditions to employees, to be able to be
hired and retain their jobs with just cause standards and not
be subject to cronyism or possible racism. All of those things
that are vital to have workplace integrity. And that is
important.
Senator Rosen. Well, you speak about some of this, and we
know all too well that the pandemic this last year has really
laid bare the disparities that have always existed. So, Dr.
Schierholz, Black and Latino unemployment at their peaks were
higher than unemployment for white workers, including in my
home State of Nevada, which has one of the largest Latino
populations in the country. Can you talk about the benefit of
unionization for Black and Latino workers in particular please?
Ms. Shierholz. Yes, it is really an important thing to
highlight. I think that there is this idea because unionization
started and it didn't have a lot of people of color originally
was mostly men, that there is this idea that is still how it
is, and it could not be farther from the truth. The unions
really do reflect the diversity of our Country as it is today.
And we--there is enormous benefits to people of color of union.
Black workers get a--and Hispanic workers get a bigger
boost to being in unions than white workers do. And workers get
a boost of being in unions. But it is more important the boost
is bigger for people of color.
Black workers are more likely to be in unions than white
workers. And you put all that together, unions are just an
incredibly important force for racial economic justice in this
country. It is just--if we take seriously this national
discussion we are having about racial economic justice, a
really important thing that we have to do there is boost
unionization.
Senator Rosen. Thank you. I appreciate all of your time
here today.
The Chair. Thank you.
Senator Hickenlooper.
Senator Hickenlooper. Thank you, Madam Chair. And I want to
just briefly go over some territory that I think Senator Casey
touched on. And Dr. Schierholz, you have commented on that
parallel between the shrinking of the middle class of America
with the reduction, the shrinking of the percentage of workers
who are represented by organized labor. Has that been pretty
consistent over the whole--when you look back over the last
five decades. Has that been a pretty consistent process?
Ms. Shierholz. I think I understand your question. But,
yes, as we have seen--as we have seen union unionization
decline, that has been accompanied by this increase in
inequality. And if you look over the whole period, you really
can look and see that it is that decline in unionization was
causally related. A big chunk was--was the reason for a big
chunk of that rising inequality. I am not sure if I answered
that question.
Senator Hickenlooper. I was asking more about just looking
at the size of the middle class, how you want to define it in
the United States, that has been shrinking by almost every
measure over the last 50 years. That causality.
Ms. Shierholz. Yes, that is--it is interesting. There is a
sort of a structural trend over time in stagnant wages for
working people over most of that period. There has been some
breaks like when we have strong expansions, the expansion of
the late 90's, we did see some gains for working people. But
the broader trend really has been just over that whole period,
just a steady erosion of the sort of the ability of our economy
to deliver for all workers.
Senator Hickenlooper. Got it. Appreciate. And also, when I
was Governor of Colorado, I signed an executive order that set
up an, we called it the enforcement task force to--we were
looking at alleged worker misclassification, basically tax
fraud, payments under the table in the construction industry.
We did this because not everyone was playing by the same rules.
It really penalizes those that do play by the rules, the law
abiding businesses. They were being undercut.
I think when some workers within an industry are allowed to
join a union and others not, again, it creates an unleveled
playing field. I have heard concerns from some of my friends in
the business community about the ABC test within the Pro Act is
being applied more broadly, possibly outside the NLRA.
Can you confirm and just reiterate that the ABC test within
the Pro Act will only be used regarding workers' rights to join
a union? And then can you explain how this test could help--how
it would help level the playing field?
Ms. Shierholz. Yes, that is a good question. And you are
absolutely right. The Pro Act would only amend the NLRA, no
other worker protection statute. So it would only test for an
employee in the bill would only apply to rights workers have
under the NLRA, which is essentially unions and collective
bargaining. So that is 100 percent true. And then the--what the
test would do is just help ensure that all workers are properly
classified.
I think you brought up a really important point. Most
employers actually classify their workers correctly. But what
this would do is make it so those bad apple companies that are
unable to miss--are less able to misclassify their workers and
gain that competitive advantage. So in that way, it really does
help level the playing field amongst all companies.
Senator Hickenlooper. Great. And then, Mr. Pearce, most
business owners do everything they can to comply with the law,
oftentimes with limited resources. I was a small business
myself, a small businessperson myself for many years.
We have heard some concerns that the Pro Act will force
small businesses to comply with excessively burdensome Federal
regulations. How would you respond to those concerns? And how
can we better educate and equip business owners to facilitate
their compliance with the law?
Mr. Pearce. Well, I guess I just disagree that it would
require employers to comply with more burdensome Federal
regulations. The Pro Act does nothing toward making employers
have to comply with anything more than they already are obliged
to.
If anything, the Pro Act would enable employers to have a
little bit more clarity with respect to their rights and
obligations under the law. They would have the opportunity to
be further educated with respect to a union and employee rights
under the National Labor Relations Act. So it is not going to
be an invisible situation.
Many employers, given my many years involved with the
National Labor Relations Board, oftentimes fall into situations
where they commit unfair labor practices out of ignorance. I
mean, some employers do it with malicious intent, but some just
do it because they don't know the program to provide an
educational system for that everybody to be aware of.
There would be a requirement that notices be posted so
people would know what their rights are now. Now, employers
would have to, would be obliged to report when they are hiring
persuaders to union bust, and that would be certainly a new
obligation on the part of the employer. But that's all.
Senator Hickenlooper. Right. Great. I appreciate you for
that clarification. Thank you all. Thank you all for being
here. I yield back to the Chair.
The Chair. Thank you.
Senator Braun.
Senator Braun. Robust conversation here today. And I want
to make a couple of comments. I think bad apple companies like
Mrs. Heldman talked about, is a reason we need to have the
discussion. Senator Murphy was talking about a public company
CEO pay and never would be for stuff like that were you have
got a proportion of 290 or even 200 or even 100 to 1. That
gives companies a bad name. But I don't think you can
generalize upon that because it gets back to my thesis on all
of this.
If this Act in any way impinges upon small business, I
think it hurts the future of unions and businesses to get
large. I want you to answer as briefly as you can, Mr. Pearce,
Dr. Schierholz, I view this as a flattened triangle with small
businesses at the bottom, unions and larger businesses at the
top. This will be a bill that is a one-size fits all.
Do you think there is a place to where you differentiate so
you don't kill the golden goose that produces large companies
over time, creates jobs, generally is the progenitor of them?
Would you be comfortable with something that distinguished
between unions and large business and how this might impact
small business?
Mr. Pearce.
Mr. Pearce. What I would say is this, the vast majority of
bargaining units in the United States are average at about 20
to 25 employees. So the unionization was pretty much created in
an atmosphere that under current standards would be a small
business atmosphere. Small businesses are the backbone of this
country. And I agree, I believe that the Pro Act does nothing
to jeopardize small businesses' abilities to function and
proceed. And in fact, the Pro Act provides opportunity for
clarity.
As I indicated to Senator Hickenlooper, there will be a
greater understanding of rights and obligations and those
businesses that love their employees and provide more for them.
Those employees may believe that they don't need to be
unionized.
Senator Braun. I make the point that the difference between
unions and a small business and business owners just taking
care of their employees is almost no difference. I think where
it comes into play and even though the average might be there,
I think the bigger issues are with larger entities.
Dr. Shierholz.
Ms. Shierholz. Yes, I would say that just like you said,
small business owners are the ones who know their employees.
They are like family. They know their kids. They know they know
what is going on in their lives. They are--want to be able to
pay their workers more, provide them benefits, all the things
that make a good quality job.
If larger union busting firms are able to crack down on
unions and so doing reduce wages, reduce benefits, that
actually hurts the small businesses' competitive advantage. So
leveling that playing field actually makes these small
businesses who want to do right by their workers better off.
The Pro Act will actually----
Senator Braun. I am careful throw the baby out with the
bathwater there. So just as a food for thought. And real
briefly, devils are always in the details. I think this is
going to affect the gig economy. It is a growing freelance part
of our economy that is growing. Independent contractor status,
which many small employers have to use because they don't have
a position that could hire an individual.
We have got to be careful that we don't attenuate them. And
in this case, in terms of binding arbitration that you can
trigger within 100 days and basically have a panel come in and
put a working agreement or a contract out there is not good.
And then finally, very briefly, Ms. Sarolia, do you want to add
anything else to wrap up the conversation from an independent
business owner?
Ms. Sarolia. I do, Senator Braun. There were so many
questions that were asked of my colleagues that are sitting
next to me. I wish I would have really----
[technical problems] respond to but just a couple of points
that I want to reiterate. If there are any ideas that we all
like me too, can work together to support workers by not
destroying the franchise model, I am going to sign myself up to
make it my work. So understand that everyone sitting in this
room.
The second thing I know, we talked about what keeps
turnover--what keeps turnover from our businesses. Small
business owners, creating the right culture and paying a
standard of living, which is what my company has done that
really attributes to keeping the turnover. And I am not great
with statistics, but I can tell you with my gut instinct of
doing this job, all the jobs that are employed under me and
their work, we are one of the only industry, I think, the
hospitality, travel, and tourism where we all started out
cleaning rooms or folding towels, delivering laundry at the age
of nine, which labor wasn't part of it back then, but we did
that at a younger age, so we have a lot of respect for those
that we actually employ. But we want to do nothing but to see
them also be a part owner of the business that we are.
Who better than our industry to be able to do that? So that
is that. The other thing is how does it threaten this business?
I want to end with this one, Senator. The Pro Act is such a
mammoth proposal, it would upend in my business in two ways.
And it is the first two provisions in the bill specifically
that I am really passionate about.
First, the Pro Act's joint employer standard is
unpredictable. No one here can assure a franchise brand that
its business may not run afoul of nebulous, indirect, and
reserve control standard. Ultimately, the Pro Act's joint
employer standard would take away the incentives to franchise.
These are changes that would take away the investment, the
equity, and the independence of franchise small business owners
like me.
Who really wants to be under the ABC test. I don't want to
be the employer of the franchisor when it is my business that I
own. Just doesn't make sense. Second, the Pro Act's independent
contractor test features an a-prong that most franchises would
likely fail. That is because the a-prong sets up a conflict of
laws with the Laymen Act, which requires franchises to have the
same control that the Pro Act prohibits.
There is a lot of inconsistencies in that language. And I
want to end with that in terms of what it would do and impact
me as a small business. Thank you, Senator Braun.
Senator Braun. Thank you.
The Chair. Thank you. I have one additional question before
our hearing end, and that is to you, Mrs. Heldman. And I really
appreciate your testimony here. But you, like millions of other
essential workers, continued to go to your work site during the
pandemic to make sure that Americans had access to what they
needed, needed goods and services. And like many essential
workers, you feared for your safety and the economic impact of
the illness on yourself and your colleagues and your families.
I wanted to just have you tell us how the pandemic affected
your views on the need for a union.
Ms. Heldman. Well, they would hire new people and they
would bring them, treat them out, in and out right next to you.
And this was at the beginning of the pandemic. And they had no
mask for us. They didn't give us masks until Mondalese gave a
mask, gave us masks. And I just, I told them, I feel they
trying to get me to get COVID-19 because they see trains of
just people in and out. And I asked them, I go, why are you
guys doing this? This is the beginning of a pandemic.
The girl for the IS office that takes these new people
around, she just went like f and this f and my f-ing boss, this
and that. And I was like, wow, I went to the office, and I
said, you know what, she doesn't need to talk to me like that.
I used to ask her why are you guys doing this? This is the
beginning of a pandemic. And the girl gave me a lame excuse, I
don't remember what it was, but it was just an excuse.
Then she said, well, did you have any witnesses out there?
Because she made it sound like I was trying to cause trouble or
whatever. And I go, yes, I have witnesses that they watched do
this and tell me the stuff. Yes, I do. And she calm down
because I think they were going to try and get me fired or
something. And then we had like 73 by the fall, we had 73
cases.
Once we had done our voting, they quit telling us what our
cases were up to. We weren't allowed to have no more
information.
The Chair. You didn't know who else was being----
Ms. Heldman. No. But in January, a lady passed away. She
was in the hospital from November to January, and then she
passed away from COVID. And then July 1st, we just lost the guy
who was 50 years old. And that day when the guy died, they said
you guys don't need to wear your mask anymore. And people said,
some of them decided to not wear the mask. But then you got a
lot of them that are wearing their mask. And then also, I mean
all these captive meetings, they were just grandmas in there.
It was like, are we really serious? This is the middle of a
pandemic. Are you guys really serious.
I mean, they would put like semis on the street, like they
crammed into this tent, 150 of us, and then they put cement
barrels right along them trailers. And all then all of
supervisors were out there. And some of the supervisors were
sitting out there with us yelling, vote union no.
Then where we would stand and hand bills and talk to
people, they went out there and they put cement barrels all
along the public sidewalk so we wouldn't be able to stand out
there and talk to people or stand out there, period. This is a
public sidewalk and then they put chains on them, so we weren't
able to be hang out there.
I mean, we had a girl come in and she told them she goes I
am not feeling good today. And they took her temperature, and
they didn't pay attention to her. Well, she went out there and
she worked all day and then she had the pandemic. She--finally
she got a fever, I think, later on in the day. And then they
sent her home, and she had the quarantine and then she came
back. But just stuff like that. And that is how they handled
the pandemic.
The Chair. Thank you so much for sharing your personal
experience.
Ms. Heldman. Thank you.
The Chair. Really appreciate it. And I want to thank all of
our witnesses today and all of our colleagues for their
participation. Mr. Pearce, Dr. Schierholz, Mrs. Heldman, Ms.
Sarolia, thank you for sharing your time and your expertise
with the Committee today. I seek unanimous consent to put on
the record six letters from organizations in support of the Pro
Act. So ordered.
[The information referred was not submitted for the
record.]
The Chair. For any Senators who wish to ask additional
questions, questions for the record will be due in 10 business
days, August 5th, 5 p.m. The hearing record will remain open
until then for Members who wish to submit additional material
for the record.
This Committee will next meet Tuesday, July 27th in Dirksen
430 for a hearing on how we learn the lessons of this pandemic
and strengthen our Nation's public health and preparedness
systems. The Committee stands adjourned.
ADDITIONAL MATERIAL
Entrepreneur Magazine
series on negative impacts of the pro act and how it would destroy
entrepreneurship in america
Why Entrepreneur Stands Against the PRO Act
``But today, for the first time, Entrepreneur is entering the world
of advocacy on a single issue: It is to oppose a bill called the
Protecting the Right to Organize Act, which is currently being
considered in Congress, and which could do lasting harm to the small-
business and franchise community.'' (Entrepreneur, 6/21/21).
Women Franchise Owners Fear The PRO Act
`` . . . [T]he Protecting the Right to Organize Act, or PRO Act,
which is currently being considered by Congress . . . contains language
called the joint-employer standard, which some legal experts say could
force corporate franchise brands to become the employer of their
individual franchisees' staff. That would eliminate franchisees'
autonomy. If the franchise industry is disrupted, then many women's
careers are disrupted too. Women now open one out of every three new
franchises, in a business model where about 30 percent of the owners
are women.'' (Entrepreneur, 7/12/21).
Parents and Caregivers Say PRO Act Would Harm Their Families
``I'm hoping to go another 20 years with good health,'' Hosty says.
``I'll be 59 in July, and I really love what I do. I hope to be driving
until I'm 80 years old.' But that likely would not be possible if
Congress passes the Protecting the Right to Organize Act, or PRO Act.
Its ABC Test would target companies that hire independent contractors
in all kinds of professions, and reclassify those contractors as
employees under labor law. Those affected would include owner-operator
truckers like Hosty, who says the idea makes no sense at all.''
(Entrepreneur, 7/1/21).
Small Business Owners Fear the PRO Act's ABC Test
``Today, Reyes is watching in disbelief as Federal lawmakers say
they intend to follow California's lead. The same ABC Test is in the
Protecting the Right to Organize Act, or PRO Act--which proponents are
promoting as `civil rights legislation' despite the economic harm this
ABC Test caused for marginalized people like Reyes, along with other
Californians in hundreds of professions. `You cannot create blanket
legislation to cover all of these different professions and say you're
protecting them,' Reyes says. `You're actually making life harder.' ''
(Entrepreneur, 6/24/21).
Older Women Say PRO Act Unfairly Targets Them
``That's why she is among those enraged that Federal lawmakers are
even considering the Protecting the Right to Organize Act, or PRO Act.
Under the proposed law, many independent contractors would have to be
reclassified as employees of their clients--stripping them of the
career flexibility they prefer . . . `I was looking for W2 work--I
wanted the steady paycheck,' she says. `I wanted all the things like
benefits that go with a W2 job. But the more I did independent work,
the more I realized that I was so much happier. I actually like being
my own boss.' '' (Entrepreneur, 6/24/21).
What is the ABC Test, and how Could it Harm Freelancers and Independent
Contractors?
``Freelancers and independent contractors in America may soon face
a test--and if they don't pass it, their ability to earn a living could
radically change. The test is called the ABC Test, and it's included in
Federal legislation called the Protecting the Right to Organize Act
(commonly known as the PRO Act) that's currently being considered by
Congress. If freelancers or independent contractors pass the test, they
can continue working independently. If they fail it, they'd be
classified as employees of their clients for the purposes of labor
law--which means they may no longer be able to operate independently.''
(Entrepreneur, 6/21/21).
This Legal Change Could ``Severely Disrupt'' Franchising. Learn About
The PRO Act's Joint-Employer Standard
``The PRO Act includes a change to language known as `joint
employer,' which means that, in certain circumstances, the franchisee
and the franchisor might both be considered the cashier's employer. The
franchisor could be legally on the hook for an individual franchisee's
mistakes, or for mistakes made by the franchisee's employees, and may
even force a change to the franchisee's own relationship with the
franchisor. The implications are substantial. There are nearly 800,000
franchises in the United States, many of them beloved brands such as
McDonald's, 7-Eleven, Ace Hardware, Marriott International and Re/Max.
All of them, according to industry and legal experts, could be
harmed.'' (Entrepreneur, 6/21/21).
______
State Policy Network
1655 North Fort Myer Drive, Suite 360 Arlington, VA.
July 29, 2021.
Hon. Patty Murray, Chair,
Hon. Richard Burr, Ranking Member,
Senate Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.
Dear Chair Murray and Ranking Member Burr:
As state economies, small business owners, and workers recover and
persevere through a global pandemic, we strongly urge the Senate
Health, Education, Labor, and Pensions (HELP) Committee to oppose the
Protecting the Right to Organize (PRO) Act. Instead of helping workers
and small businesses get back on their feet, the PRO Act burdens job
creators with layers of red tape and infringes on individuals' right to
earn a living.
While supporters of the PRO Act suggest it advances workers'
rights, the provisions of the legislation speak otherwise. A key
provision gives organized labor greater power to compel workers to join
a union in order to keep their jobs. Further eroding workers' rights,
the PRO Act threatens the privacy of workers by giving unions their
private information--email, phone number, home address--without any
ability to opt-out.
Unemployment levels remain well above pre-pandemic levels. Now is
not the time to move forward with the PRO Act or any other legislation
that overturns worker freedom throughout the country, stifles
independent workers' ability to support their families, harms small
businesses, and increases burdens on job creators.
The PRO Act Undermines Federalism, Worker Freedom, and Economic Growth
One provision of the PRO Act would effectively overturn state
right-to-work laws and nullify the ability of states to pass these laws
in the future. Undercutting state right-to-work laws strikes against
the core democratic principle of federalism and weakens the individual
rights of workers.
Repealing right-to-work laws is not merely a poor policy decision--
one that would strip workers of their freedom to choose whether to join
a union--but it's also an overriding of the will of the people in the
27 states that have enacted right-to-work laws. Workers in several
states have enjoyed these protections since the 1940's. \1\ Voters in
these states have voiced their preference to give workers the right to
opt out of joining a union, a decision the Federal Government should
respect.
---------------------------------------------------------------------------
\1\ ``Right to Work States Timeline,'' National Right to Work
Committee, accessed July 24, 2021, https://nrtwc.org/facts/state-right-
to-work-timeline-092016/.
In part, right-to-work laws are popular and enacted in most states
because they positively impact economic growth and employment. States
with right-to-work laws outperform their counterparts in several
---------------------------------------------------------------------------
categories.
For example, between 2001 and 2016:
Private sector employment grew by 27 percent in right
to work states, compared to 15 percent in non-right-to-work
states.
Personal income rose by 39 percent in right to work
states, compared to 26 percent in non-right-to-work states. \2\
---------------------------------------------------------------------------
\2\ Jeffrey A. Eisenach, Ph.D., ``Right-to-Work Laws: The Economic
Evidence,'' NERA Economic Consulting, May 2018, https://www.nera.com/
content/dam/nera/publications/2018/PUB-Right-to-Work-Laws-0518-web.pdf.
Surveys and research find states with right-to-work laws are viewed
as business-friendly \3\ and play a role in the location of industry--
particularly manufacturing. \4\ Results from one study found states
that recently enacted right-to-work laws experienced more growth in
total manufacturing employment than non-right-to-work states. \5\
---------------------------------------------------------------------------
\3\ Ron Starner, ``Right-to-work laws turn the Southeast U.S. into
a factory for the world,'' Site Selection Magazine, 2004, https://
siteselection.com/issues/2004/jul/p500/.
\4\ Thomas Holmes, ``The Effect of State Policies on the Location
of Manufacturing: Evidence from State Borders,'' Journal of Political
Economy, August 1998, https://www.journals.uchicago.edu/doi/abs/
10.1086/250026?journalCode=jpe.
\5\ Eunbi Kim, ``The impact of right-to-work legislation on
foreign manufacturing employment in the United States,'' International
Journal of Urban Sciences, 2021, https://www.tandfonline.com/doi/full/
10.1080/12265934.2021.1919183.
Anecdotal evidence supports the above research, as explained by
Kentucky state representative Damon Thayer: ``We passed right-to-work.
One week later, Amazon announces in Northern Kentucky that they're
coming with a $1 billion dollar investment and a few months later here
Toyota comes with a $1.3 billion dollar investment, and I still think
the best is yet to come.'' \6\
---------------------------------------------------------------------------
\6\ Josh James ``Georgetown Toyota Plant Set for $1.33B Injection,
Bevin Says More to Come,'' WUKY.org, April 10, 2017, https://
www.wuky.org/post/georgetown-toyota-plant-set-133b-injection-bevin-
says-more-come#stream/0.
---------------------------------------------------------------------------
The PRO Act Restricts Independent Work
A provision of the PRO Act establishes a near statutory prohibition
on independent work, a change that could cost millions of individuals
the opportunity to earn a living and support their families.
The legislation would consider all workers, even those who
currently make their living as contractors, as full-fledged employees
unless they can satisfy a stringent three-pronged test, known as the
ABC Test:
The worker must be able to set his/her own schedule,
timeline, and be able to dictate how the work is completed.
The worker must provide a service or product that's
outside the normal business of the client. For example, a
writer could create content for a hotel website as a contractor
but would not be permitted to do freelance writing for a news
website.
The worker has an independently established,
professional business that focuses on the service being
provided.
In a time of economic recovery, government policy should not
discourage individuals from engaging in any form of work, including
independent entrepreneurship. Implementing the ABC Test nationwide
would reduce independent contracting and slow economic recovery. It
would jeopardize the livelihoods of the 38.2 million Americans who
engage in some form of independent work to start businesses, earn
income, improve skills, or take on passion projects. \7\
---------------------------------------------------------------------------
\7\ MBO Partners, ``The State of Independence in America,'' 2020,
https://www.mbopartners.com/state-of-independence/ps://
www.mbopartners.com/state-of-independence/.
Research shows independent contractors greatly contributed to the
economic recovery from the last recession: ``Between 2010 and 2014,
independent contractors grew 11.1 percent (2.1 million workers) and
represented 29.2 percent of all jobs added during that time period.''
\8\ Other research indicates work as an independent contractor also
offers critical opportunities and earnings for the unemployed while
they search for new work. \9\
---------------------------------------------------------------------------
\8\ Ben Gitis, Douglas Holtz-Eakin, and Will Rinehart, ``The Gig
Economy: Research and Policy Implications of Regional, Economic, and
Demographic Trends,'' American Action Forum and Aspen Institute,
January 10, 2017, https://www.americanactionforum.org/research/gig-
economy-research-policy%20-implications-regional-economic-demographic-
trends.
\9\ McKinsey Global Institute, ``Independent Work: Choice,
Necessity, and the Gig Economy,'' October 2016, https://
www.mckinsey.com/featured-insights/employment-and-growth/independent-
work-choice-necessity-and-the-gig-economy.
Furthermore, several individuals became ``coronavirus
entrepreneurs'' over the last 16 months. Independent work was a
lifeline for many Americans during the pandemic. Between March 2020 and
March 2021, 4.4 million new businesses were started in the United
States. \10\
---------------------------------------------------------------------------
\10\ Brooke Fox, ``The Covid entrepreneurs: Americans start
millions of new businesses,'' Financial Times, March 8, 2021, https://
www.ft.com/content/400ae372-0cb2-48bb-8767-7986848ed9a6.
Policy should encourage, not restrict, independent work.
Independent contractors make up a significant amount of economic
activity in the United States, and this type of work offers significant
benefits like flexibility, autonomy, and opportunity to learn new
skills. In addition, satisfaction among independent contractors is
high. Less than one out of every 10 independent contractors would
prefer a traditional employment relationship, according to research
from the Bureau of Labor Statistics. \11\
---------------------------------------------------------------------------
\11\ Bureau of Labor Statistics, ``Contingent and Alternative
Employment Arrangements News Release,'' 2018, https://www.bls.gov/
news.release/conemp.htm.
The PRO Act Makes Doing Business More Difficult
The PRO Act is sweeping legislation that makes dozens of
substantial changes to the National Labor Relations Act. Such radical
legislative change imposes high compliance costs on small businesses,
many of which do not have ready access to legal advice or staff
responsible for staying up to date on emerging regulatory issues.
Research over the past several decades confirms the cost of
regulation disproportionately falls on small businesses. According to a
recent study, ``Small firms with fewer than 50 employees incur
regulatory costs ($11,724 per employee per year) that are 17 percent
greater than the average firm. The cost per employee is $10,664 for
medium-sized firms and $9,083 for large firms.'' \12\
---------------------------------------------------------------------------
\12\ Mark and Nicole Crain, ``The Cost of Federal Regulation to
the U.S. Economy, Manufacturing and Small Business,'' National
Association of Manufacturers, September 2014, https://www.nam.org/wp-
content/uploads/2019/05/Federal-Regulation-Full-Study.pdf.
The PRO Act exacerbates this problem by increasing regulatory costs
on small firms, making job creation and business formation more
difficult. For example, the legislation would restore a costly Obama
administration rule that greatly expands joint employer liability. The
objective of the policy is to hold one company liable for bargaining
responsibilities and violations of another employer, a policy that, in
practice, would punish large companies for violations of a small
company they contract with. This negatively impacts small businesses by
discouraging larger employers from outsourcing functions. Bringing more
functions in-house at higher labor costs will result in fewer jobs and
fewer opportunities for entrepreneurs. Estimates find that the joint
employer standard could result in 1.7 million fewer jobs. \13\
---------------------------------------------------------------------------
\13\ Ben Gitis, ``The NLRB's New Joint Employer Standard, Unions,
and the Franchise Model,'' American Action Forum, April 26, 2017,
https://www.americanactionforum.org/research/nlrbs-new-joint-employer-
standard-unions-franchise-business-model/.
Increased regulatory costs are one of many pitfalls for small
businesses. Currently, the National Labor Relations Board is a remedial
agency with limited authority to issue monetary penalties. But under
the PRO Act, job creators would be subject to heavy civil penalties,
fines, and punitive damages for minor or merely technical violations of
---------------------------------------------------------------------------
the law, ranging from $500 to $100,000 per violation.
On top of increased monetary costs, employers face a greater
likelihood of workplace disruptions under the PRO Act. Currently,
striking is only allowed at businesses that have some involvement with
a labor union, but the PRO Act would allow secondary strikes and
boycotts of completely neutral parties. For example, if a union is
involved in a dispute with an auto manufacturer, it could also picket
and protest in front of a parts supplier that provides material to the
manufacturer, even though the supplier is not involved with the dispute
or has no way to solve it.
Such strikes, boycotts, and picketing could cause massive
disruption of the entire economy and many industries. For example, a
regular car contains 30,000 parts that are made by suppliers throughout
the world. The supply chain is massive, ranging from the aluminum,
steel, and plastics used in the car to the tinting for windshields,
boxes for shipping, laminates, nuts and bolts, leather, cleaning
products, and so on. The unintended consequences of allowing secondary
strikes and boycotts on these neutral parties in the supply chain are
unknowable. What is known, however, is the PRO Act would allow unions
to severely disrupt the supply chains of most industries. That is not
good for the Nation, workers, industries, or consumers.
Thank you, Chair Murray, Ranking Member Burr, and all the Members
of the HELP Committee for considering our viewpoint on the PRO Act.
Sincerely,
Tracie Sharp,
President and CEO State,
Policy Network.
______
NATIONAL ASSOCIATION OF WHOLESALER-DISTRIBUTORS
1325 G Street N.W., Suite 1000, Washington, DC
July 21, 2021.
Hon. Patty Murray, Chair,
Hon. Richard Burr, Ranking Member,
Senate Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.
To Chair Murray and Ranking Member Burr, and Members of the Senate
HELP Committee::
I am writing today on behalf of the National Association of
Wholesaler-Distributors (NAW) to express our strong opposition to S.
420, the ``Protecting the Right to Organize (PRO) Act,'' which the U.S.
Senate Committee on Health, Education, Labor, and Pensions (HELP) will
be considering during their hearing entitled ``The Right to Organize:
Empowering American Workers in a 21st Century Economy''.
NAW is the ``national voice of wholesale distribution,'' an
association comprised of employers of all sizes, and national,
regional, state and local line-of-trade associations spanning the $5.94
trillion wholesale distribution industry that employs almost 6 million
workers in the United States. Approximately 30,000 enterprises with
almost 395,000 places of businesses in all 50 states and the District
of Columbia are affiliated with NAW.
You should know that this legislation is not only organized labor's
top legislative agenda but that of business as well. S. 420 is an
inappropriate and obvious response to organized labor's threat to stay
on the sidelines in the 2022 elections unless the Senate Democratic
majority passes the PRO Act. As the country begins to turn the corner
on the COVID-19 pandemic, Congress should focus on helping businesses
stay open and workers employed after the past devastating year and a
half. Instead, the Senate HELP Committee is holding a hearing on a bill
that would directly benefit their organized labor allies by enacting
Federal policies that would increase the number of dues-paying union
members at the expense of workers, small and local businesses, and
entrepreneurs.
This radical legislation would impose policies that were rejected
by the judicial system, opposed on a bipartisan basis in Congress, and/
or abandoned by the agencies asked to enforce them. Unions continue to
push this legislation to unfairly tip the playing field in their favor
at the expense of the fundamental rights of workers to choose for
themselves whether to accept or reject union representation.
S. 420 attempts to dramatically change the way labor unions conduct
organizing drives by disallowing government-supervised secret ballot
elections to certify a union as a recognized collective bargaining
agent and replacing it with a zombie reiteration of ``Card Check.'' For
more than seventy years, employees have largely decided on unionization
through a secret ballot election. This legislation, however, would
force reluctant workers to accept union representation, not when a
majority of their co-workers vote by secret ballot to accept the union,
but when 50 percent plus one of those workers simply acquiesce to union
organizers' efforts to obtain their public signature on a card. This
provision is intended to ensure that labor unions win organizing
campaigns by removing a worker's right to vote ``no'' or ``yes''
without fear of recrimination by either the union or employer. As a
Member of the Senate who was elected to your position by a secret
ballot, you understand that eliminating the fundamental right to vote
by secret ballot would expose voters--in this instance workers--to
intimidation and possible harassment.
The PRO Act would also quash employees' rights to privacy by
mandating that employers provide the contact information for all
employees without prior approval from the employees themselves.
Furthermore, employees would not have the right to opt-out of this
disclosure of their personal information nor would they have a say in
which contact information is provided. These are basic privacy rights
afforded by acts of Congress to American citizens, which this bill
would deny to workers solely to advantage union organizers.
This legislation would also codify many requirements of the
Department of Labor's 2016 ``persuader'' regulation, including the
provisions that would force a breach of attorney-client
confidentiality, which was struck down by the courts when it was found
to be ``defective to its core'' and ``undermine[d] the attorney-client
relationship and the confidentiality of that relationship.''
S. 420 also eliminates Right-to-Work protections nationwide,
superseding the Right-to-Work laws passed in twenty-seven states,
forcing workers to fund union activity they may not support and
removing their protection from being fired if they decline to pay union
dues. The bill would remove existing law that limits unions to thirty
days of picketing unless they file a representation petition, which
could allow unions to engage in recognition picketing indefinitely.
Additionally, the legislation would permit unions to engage in so-
called secondary boycotts, which have been unlawful since 1947,
exposing consumers, employers, suppliers, vendors, franchisors,
franchisees, and all other businesses to picketing, boycotts, and
similar tactics, regardless of whether they have any dispute with the
union.
The PRO-Act would also codify the National Labor Relations Board's
controversial Browning-Ferris Industries joint-employer standard that
threatens small and local businesses; curb opportunities for people to
work independently through traditional independent contractor roles or
gig economy platforms, and prohibit arbitration agreements in
employment contracts.
Union ``density'' has fallen dramatically in recent years, but
rather than address that decline by persuading workers of the merits of
union representation, labor unions are asking Congress to put its thumb
on the scale in their favor. If Congress kowtows to the demands of
labor by passing this legislation the idea of fair elections and due
process rights for workers and employers alike will be systematically
dismantled.
NAW urges you to reject S. 420, the PRO Act, and instead focus on
helping America recover from the Coronavirus pandemic instead of trying
to rob workers of their right to a secret ballot and silence the voice
of employers.
Sincerely,
Seth M. Waugh,
Associate Vice President,
Government Affairs.
______
Coalition For A Democratic Workplace
July 21, 2021.
Hon. Patty Murray, Chair
Hon. Richard Burr, Ranking Member
Senate Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.
Dear Chair Murray and Ranking Member Burr:
The Coalition for a Democratic Workplace (CDW), a broad-based
coalition of hundreds of organizations representing hundreds of
thousands of employers and millions of employees in various industries
across the country, and the 280 undersigned organizations write in
opposition to the Protecting the Right to Organize (PRO) Act, S. 420.
This radical legislation would violate workers' free choice and
privacy rights, jeopardize industrial stability, cost millions of
American jobs, threaten vital supply chains, and greatly hinder our
economic recovery from COVID-19. The PRO Act includes dozens of
provisions that would boost union membership and dues revenue streams
at the expense of the rights of workers, employers, and consumers
alike. Forbes Tate Partners (FTP) conducted a survey of over 1,000
registered voters and found that respondents overwhelmingly were
concerned with the various policies of the bill, some of which are
explained below. \1\
---------------------------------------------------------------------------
\1\ Survey results can be viewed at http://myprivateballot.com/wp-
content/uploads/2021/06/PRO-Act-National-Survey-Summary-6.28.21.pdf.
The PRO Act would infringe on worker privacy and freedom of choice.
The bill requires employers to give union organizers employees'
personal information without prior approval from the employees
themselves. This includes home addresses, phone numbers, email
addresses, work shifts and locations, and job classifications.
Employees couldn't opt out of this requirement or choose which
information is shared, exposing them to potential harassment,
intimidation tactics, stalking, and online bullying. FTP's survey found
---------------------------------------------------------------------------
that 75 percent of respondents were concerned with this policy.
The PRO Act would also destabilize US industrial operations and the
economy and threaten supply chains by reversing current bans on
intermittent strikes and secondary boycotts. Under the PRO Act, unions
would be able to conduct a series of short intermittent strikes to
disrupt business operations if an employer doesn't concede to their
demands, potentially disrupting the economy and critical supply chains,
including those fundamental to our COVID-19 response. One of the
fundamental goals of the National Labor Relations Act is to help ensure
industrial peace. Intermittent strikes, however, would leave unionized
and nonunionized employers alike in constant fear of work stoppages--
further threatening the already fragile stability of our economy.
The PRO Act would also rescind all restrictions against ``secondary
boycotts,'' or activity used by unions to impose economic injury on
neutral third parties, including consumers, companies, or other unions,
that do business with a company involved in a labor dispute with the
union. These activities were banned in the 1940's and 1950's after
unions engaged in excessive and abusive tactics. Allowing secondary
boycotts will once again expose all consumers, unions, and businesses
to coercion, picketing, boycotts, and similar tactics.
Additionally, the bill drastically shortens the timeframe between
union organizers petitioning for a union representation election and
the holding of that election, ensuring employees do not have adequate
time to hear both sides of the debate over whether union representation
is right for them. The PRO Act would greatly expand the National Labor
Relations Board's power to force union representation on employers and
employees without an election, depriving workers of their right to a
vote.
The PRO Act would also eliminate right-to-work protections across
the country, including in the twenty-seven states whose populations and
representatives voted for and implemented such laws. Right-to-work laws
allow workers to choose not to pay union dues to a labor organization
whose policies and advocacy efforts do not align with their own
beliefs. These laws ensure workers can continue to work without being
forced to join a union. According to the FTP survey, 57 percent of
registered voters believe workers should not be forced to join a union
as a condition of employment, while 67 percent were concerned with the
bill's efforts to eliminate right-to-work protections and force workers
to choose between paying union dues or losing their jobs.
Furthermore, the PRO Act would impose nationwide California's
recently adopted and failed ``ABC test'' to determine whether a worker
is an employee or independent contractor. The ABC test makes it very
difficult to qualify as an independent contractor, so nationwide
application would result in many workers losing their independent
contractor status. This is at odds with what independent contractors
actually want. Time and again, these workers explain that they choose
independent work for the flexibility and autonomy it offers.
Additionally, the ABC test will force businesses that contract with
such workers to no longer use them for various services out of fear of
the liability such contracts could trigger. This would threaten small
businesses that rely on those contracts. This policy was concerning to
70 percent of FTP's survey respondents.
Finally, the PRO Act would codify into law the NLRB's controversial
2015 Browning-Ferris Industries (BFI) decision that expanded and
muddled the standard for determining when two separate entities are
``joint-employers'' under Federal labor law. Joint-employers are
mutually responsible for labor violations committed against the jointly
employed workers as well as bargaining obligations with respect to
those workers, so the liability associated with joint-employer status
is immense. The BFI decision overturned decades of established labor
law and undermined nearly every contractual relationship, from the
franchise model to those between contractors and subcontractors and
suppliers and vendors. The BFI standard also hampered businesses'
efforts to encourage ``corporate responsibility'' throughout their
supply chains and business partners. In FTP's survey, 65 percent of
voters were concerned about the bill upending the franchise business
model, a business ownership structure that attracts first time small
business owners from a diverse range of backgrounds and experiences.
These are only a few of the dangerous policies included in the PRO
Act. CDW and the 280 undersigned organizations urge the Committee to
reject this radical legislation and protect the rights of America's
workers, small businesses, and consumers.
Sincerely,
The Coalition for a Democratic Workplace,
AGC Florida East Coast
AGC Maine
AGC of California
AGC of Kansas
AGC of Kentucky
AGC of Metropolitan Washington DC
AGC of Minnesota
AGC of Ohio
AGC of South Dakota, Highway-Heavy-Utility Chapter
AGC of Wyoming
Air Conditioning Contractors of America
Alabama AGC
Alabama Restaurant & Hospitality Association
Alaska Cabaret, Hotel, Restaurant & Retailers Association
American Bakers Association
American Foundry Society
American Home Furnishings Alliance
American Hotel & Lodging Association
American Mold Builders Association
American Pipeline Contractors Association
American Rental Association
American Seniors Housing Association
American Society of Employers
American Staffing Association
American Supply Association
American Trucking Association
Americans for Tax Reform
Arizona Builders Alliance
Arizona Restaurant Association
Arizona Rock Products Association
Arkansas Hospitality Association
Arkansas Ready Mixed Concrete Association
Arkansas State Chamber of Commerce
Asian American Hotel Owners Association
Associated Builders and Contractors
Associated Builders and Contractors Alabama Chapter
Associated Builders and Contractors Alaska Chapter
Associated Builders and Contractors Arkansas Chapter
Associated Builders and Contractors Carolinas Chapter
Associated Builders and Contractors Central California Chapter
Associated Builders and Contractors Central Florida Chapter
Associated Builders and Contractors Central Ohio Chapter
Associated Builders and Contractors Central Pennsylvania Chapter
Associated Builders and Contractors Central Texas Chapter
Associated Builders and Contractors Chesapeake Shores Chapter
Associated Builders and Contractors Connecticut Chapter
Associated Builders and Contractors Cornhusker Chapter
Associated Builders and Contractors Cumberland Valley Chapter
Associated Builders and Contractors Delaware Chapter
Associated Builders and Contractors Eastern Pennsylvania Chapter
Associated Builders and Contractors Empire State Chapter
Associated Builders and Contractors Florida East Coast Chapter
Associated Builders and Contractors Florida First Coast Chapter
Associated Builders and Contractors Florida Gulf Coast Chapter
Associated Builders and Contractors Georgia Chapter
Associated Builders and Contractors Greater Baltimore Chapter
Associated Builders and Contractors Greater Houston Chapter
Associated Builders and Contractors Greater Michigan Chapter
Associated Builders and Contractors Greater Tennessee Chapter
Associated Builders and Contractors Hawaii Chapter
Associated Builders and Contractors Heart of America Chapter
Associated Builders and Contractors Illinois Chapter
Associated Builders and Contractors Indiana/Kentucky Chapter
Associated Builders and Contractors Inland Pacific Chapter
Associated Builders and Contractors Iowa Chapter
Associated Builders and Contractors Keystone Chapter
Associated Builders and Contractors Maine Chapter
Associated Builders and Contractors Massachusetts Chapter
Associated Builders and Contractors Metro Washington Chapter
Associated Builders and Contractors Minnesota/North Dakota Chapter
Associated Builders and Contractors Mississippi Chapter
Associated Builders and Contractors Nevada Chapter
Associated Builders and Contractors New Hampshire/Vermont Chapter
Associated Builders and Contractors New Jersey Chapter
Associated Builders and Contractors New Mexico Chapter
Associated Builders and Contractors New Orleans/Bayou Chapter
Associated Builders and Contractors North Alabama Chapter
Associated Builders and Contractors North Florida Chapter
Associated Builders and Contractors Northern California Chapter
Associated Builders and Contractors of Louisiana
Associated Builders and Contractors of Michigan
Associated Builders and Contractors Northern Ohio Chapter
Associated Builders and Contractors Ohio Valley Chapter
Associated Builders and Contractors Oklahoma Chapter
Associated Builders and Contractors Pacific Northwest Chapter
Associated Builders and Contractors Pelican Chapter
Associated Builders and Contractors Rhode Island Chapter
Associated Builders and Contractors Rocky Mountain Chapter
Associated Builders and Contractors San Diego Chapter
Associated Builders and Contractors South Texas Chapter
Associated Builders and Contractors Southeast Texas Chapter
Associated Builders and Contractors Southeastern Michigan Chapter
Associated Builders and Contractors Southern California Chapter
Associated Builders and Contractors Texas Coastal Bend Chapter
Associated Builders and Contractors Texas Gulf Coast Chapter
Associated Builders and Contractors Texas Mid-Coast Chapter
Associated Builders and Contractors Utah Chapter
Associated Builders and Contractors Virginia Chapter
Associated Builders and Contractors West Tennessee Chapter
Associated Builders and Contractors West Virginia Chapter
Associated Builders and Contractors Western Michigan Chapter
Associated Builders and Contractors Western Pennsylvania Chapter
Associated Builders and Contractors Western Washington Chapter
Associated Builders and Contractors Wisconsin Chapter
Associated Equipment Distributors
Associated General Contractors of America
Associated General Contractors of America, Nebraska Chapter
Associated General Contractors of Michigan
Associated General Contractors of NH
Associated General Contractors of Virginia
Associated General Contractors of Wisconsin
Associated General Contractors South Texas Chapter
Associated Industries of Arkansas, Inc.
Bidgesource, LLC
Brick Industry Association
California Restaurant Association
Carolinas AGC
Carolinas Ready Mixed Concrete Association
Catapult, Formerly CAI & TEA
CAWA--Representing the Automotive Parts Industry
Center for the Defense of Free Enterprise
Coalition of Franchisee Associations
Colorado Restaurant Association
Connecticut Restaurant Association
Consumer Technology Association
Delaware Restaurant Association
Education Market Association
Florida Restaurant & Lodging Association
FMI--The Food Industry Association
Foodservice Equipment Distributors Association
Franchise Business Services
Gases and Welding Distributors Association
Georgia Restaurant Association
Global Cold Chain Alliance
Global Market Development Center
Hawaii Restaurant Association
Heating, Air-conditioning, & Refrigeration Distributors
International
Hospitality Maine
Hospitality Minnesota
Hospitality Tennessee
HR Policy Association
IAAPA, the Global Association for the Attractions Industry
ICSC--Innovating Commerce Serving Communities
Idaho Lodging & Restaurant Association
Illinois Restaurant Association
Independent Electrical Contractors
Independent Electrical Contractors Atlanta Chapter
Independent Electrical Contractors CenTex Chapter
Independent Electrical Contractors Central Ohio Chapter
Independent Electrical Contractors Central Pennsylvania Chapter
Independent Electrical Contractors Chesapeake Chapter
Independent Electrical Contractors East Texas Chapter
Independent Electrical Contractors Florida West Coast Chapter
Independent Electrical Contractors Fort Worth/Tarrant Co. Chapter
Independent Electrical Contractors Georgia Chapter
Independent Electrical Contractors Greater Cincinnati Chapter
Independent Electrical Contractors Indy Chapter
Independent Electrical Contractors Kentucky & So. Indiana Chapter
Independent Electrical Contractors Lubbock Chapter
Independent Electrical Contractors Midwest IEC Chapter
Independent Electrical Contractors Montana Chapter
Independent Electrical Contractors New England Chapter
Independent Electrical Contractors New Jersey Chapter
Independent Electrical Contractors Northern New Mexico Chapter
Independent Electrical Contractors Northwest Pennsylvania Chapter
Independent Electrical Contractors Oregon Chapter
Independent Electrical Contractors Texas Gulf Coast Chapter
Independent Electrical Contractors Wichita Chapter
Independent Professionals and Self Employed Association
Indiana Restaurant & Lodging Association
Industrial Fasteners Institute
Interlocking Concrete Pavement Institute
International Foodservice Distributors Association
International Franchise Association
International Warehouse Logistics Association
Iowa Association of Business and Industry
Iowa Restaurant Association
Kansas Chamber of Commerce
Kansas Restaurant & Hospitality Association
Kentucky Concrete Association
Kentucky Restaurant Association
Leading Builders of America
Littler Workplace Policy Institute
Louisiana AGC
Louisiana Restaurant Association
Manufactured Housing Institute
Maryland Ready Mix Concrete Association
Massachusetts Restaurant Association
Metals Service Center Institute
Michigan Concrete Association
Michigan Restaurant & Lodging Association
Mid-South Independent Electrical Contractors
Mississippi Hospitality & Restaurant Association
Missouri Restaurant Association
Modular Building Institute
Montana Contractors Association
Montana Restaurant Association
Motor & Equipment Manufacturers Association
National Apartment Association
National Association of Chain Drug Stores
National Association of Chemical Distributors
National Association of Home Builders
National Association of Manufacturers
National Association of Mutual Insurance Companies
National Association of Sporting Goods Wholesalers
National Association of Wholesaler-Distributors
National Club Association
National Council of Chain Restaurants
National Federation of Independent Business
National Franchisee Association
National Grocers Association
National Lumber & Building Material Dealers Association
National Marine Distributors Association
National Multifamily Housing Council
National Ready Mixed Concrete Association
National Restaurant Association
National Retail Federation
National Roofing Contractors Association
National Small Business Association
National Stone, Sand & Gravel Association
National Tooling and Machining Association
National Utility Contractors Association
NATSO, Representing America's Travel Plazas and Truck Stops
Nebraska Restaurant Association
Nevada Chapter AGC
Nevada Restaurant Association
New Jersey Motor Truck Association
New Jersey Restaurant & Hospitality Association
New Mexico Restaurant Association
New York State Restaurant Association
North American Die Casting Association
North Carolina Restaurant & Lodging Association
North Dakota Hospitality Association
Ohio Hotel & Lodging Association
Ohio Restaurant Association
Oklahoma Aggregates Association
Oklahoma Restaurant Association
Open Competition Center
Oregon Restaurant & Lodging Association
Outdoor Power Equipment
Pennsylvania Restaurant & Lodging Association
Pet Industry Distributors Association
Petroleum Equipment Institute
Plastics Industry Association
Portland Cement Association
Power & Communication Contractors Association
Precision Machined Products Association
Precision Metalforming Association
PRINTING United Alliance
Promotional Products Association International
Puerto Rico Restaurant Association
Restaurant Association of Maryland
Restaurant Association of Metropolitan Washington
Retail Industry Leaders Association
Rhode Island Hospitality Association
SNAC International
South Carolina Restaurant & Lodging Association
South Dakota Retailers Association
Southern Illinois Builders Association
Texas Restaurant Association
TEXO, The Construction Association
The Associated General Contractors of Texas
The Coalition for a Democratic Workplace
Tile Roofing Industry Alliance
Truck Renting and Leasing Association
U.S. Chamber of Commerce
United Motorcoach Association
Utah Restaurant Association
Virginia Manufacturers Association
Virginia Ready Mixed Concrete Association
Virginia Restaurant, Lodging & Travel Association
Virginia Trucking Association
West Virginia Hospitality & Travel Association
Western Carolina Industries
Western Electrical Contractors Association
Western Growers
Wisconsin Ready Mixed Concrete Association
Wisconsin Restaurant Association
Workforce Fairness Institute
Wyoming Lodging & Restaurant Association
______
app-based work alliance
The PRO Act and Worker Reclassification: Myths vs. Facts
Myth: Most app-based workers want to be reclassified as employees
instead of independent contractors.
Fact: In poll after poll over the past decade, the overwhelming
majority of app-based workers have consistently said they do not want
to be reclassified as employees and want to remain independent
contractors. The vast majority of app-based workers choose to work less
than 40 hours a week and like app-based work because it is flexible and
allows them to set their own schedule.
MAY 2021 POLL: More than 90 percent of app-based
workers said they wouldn't be able to continue with app-based
work if they didn't have the flexibility they currently have.
More than 70 percent of app-based workers, including 69 percent
of workers of color, say they do not support measures to
reclassify drivers as employees.
APRIL 2021 POLL: 77 percent of app-based workers
would rather be independent contractors than employees, and 91
percent said they would stop working with the app-based
companies if they lost the flexibility they currently enjoy.
FEBRUARY 2021 POLL: Nationwide, 79 percent of app-
based workers want to remain independent contractors, with only
13 percent expressing a desire to become employees.
AUGUST 2020 POLL: Both drivers and workers
overwhelmingly support plans to remain independent contractors
while having access to benefits.
Myth: The ABC Test in the PRO Act won't hurt independent workers or
lead to a loss of earning opportunities.
Fact: The ABC Test could lead to the elimination of earning
opportunities for millions of independent workers who choose to work on
their own terms. The ABC Test is an outdated legal standard that
determines who is an employee and who isn't. It does not take into
consideration the changes that have taken place in the workforce since
some states adopted ABC tests in the 1930's and is not compatible with
the 21st century economy. This isn't a theoretical argument--we know
that the ABC Test will hurt workers because it's the same language that
was included in California's failed Assembly Bill 5, which resulted in
uncertainty and lost jobs for California workers.
It's why the core of AB5 was rejected by a 17 percent
margin in California with Proposition 22 last year, but that
option won't exist for a Federal law like the PRO Act, which
would lock-in AB5-style inflexibility nationwide.
AB5 caused so many problems that California had to
exempt 100+ occupations to make it work. Even then, it
disrupted thousands of businesses and caused some companies to
move work out of state.
The PRO Act, by contrast, contains no exceptions.
Doctors, lawyers, journalists--all of them would have to pass
the ABC test to avoid reclassification. The PRO Act would
therefore disrupt an even broader swath of the economy--not
just in California, but across the Nation.
Myth: The PRO Act only affects the National Labor Relations Act and
does not apply to the IRS or Wage/benefit law in the FLSA. It won't
impact how other state and Federal agencies, such as the Department of
Labor, view independent contractors' employment status.
Fact: This is a disingenuous argument. Once the test for
classifying a worker as an employee is established for one Federal
agency, it sets a precedent for other agencies, as well as states and
courts who are deciding cases on this issue, to follow suit and do the
same. That's what will happen if the PRO Act passes with California's
ABC test.
Myth: The ABC test in the PRO Act simply gives workers the ability
to unionize, and means that app-based workers and others can stay
independent contractors if they choose.
Fact: This is false. If the PRO Act passes, it could reclassify
thousands of independent contractors as traditional employees, even
those who have said overwhelmingly they don't want to be. This would
come as a direct result of the ABC Test in the bill. The ABC Test is a
word-for-word copy of California's AB5, and just like AB5, this
provision could lead to independent workers being reclassified as
employees. Under the PRO Act, even those workers who don't want to be
part of a union would still be bound by all of the conditions
negotiated by unions on their behalf, even if they disagree with those
conditions.
Myth: App-based companies want to keep the status quo so they don't
have to give benefits or protections to the workers who drive, deliver,
and grocery shop with their platforms.
Fact: App-based companies support and have advocated for an
``independence plus benefits'' model that would allow earners on their
platforms to keep their independent status while having access to
important benefits and protections.
Myth: The employee classification debate is a Democratic vs.
Republican issue, and Democratic voters support classifying drivers as
employees.
Fact: An overwhelming majority of voters across the political
spectrum, including Democratic voters, support keeping app-based
workers as independent contractors with benefits. In one recent poll,
88 percent of Democratic voters and 89 percent of all young voters aged
18-34 said they support an ``independence plus benefits'' proposal that
would keep app-based workers classified as ICs. Another poll found that
78 percent of Democratic voters from every region of the country
support an ``independence plus benefits'' model.
______
National Association of Manufacturers
733 10th Street, NW Suite 700 Washington, DC.
July 21, 2021.
Hon. Patty Murray, Chair
Hon. Richard Burr, Ranking Member
Senate Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.
Dear Chair Murray and Ranking Member Burr:
On behalf of the National Association of Manufacturers, the largest
manufacturing association in the United States representing 14,000
manufacturers in every industrial sector and in all 50 states, I write
in response to today's public hearing, ``The Right to Organize:
Empowering American Workers in a 21st Century Economy.'' Manufacturers
remain committed to protecting employees' freedom to associate and
their choice to accept or reject labor union representation but
strongly oppose S. 420, the Protecting the Right to Organize Act.
Manufacturers are united in their opposition to S. 420 because the
legislation will dramatically alter a carefully balanced equilibrium
guiding labor and management relations. In March 2021, 97 percent of
respondents to the NAM Manufacturers' Outlook Survey said the PRO Act
would negatively impact business operations and damage relationships
with employees. \1\ Further, the PRO Act would lead to long-lasting
damage to manufacturing workers' rights and their privacy by shifting
the long-established role of the employer away from a company
supervisor to a union shop steward.
---------------------------------------------------------------------------
\1\ https://www.nam.org/wp-content/uploads/2021/03/NAM-Outlook-
Survey-Q1-2021.pdf.
The PRO Act goes beyond supporting a worker's right to organize and
advances a workplace environment that could lead to privacy violations,
employee intimidation and suppression of communications from employers.
An individual's free and confidential choice to join a union will be
lost in this new labor-management paradigm. Further, 27 states will
lose their right-to-work status if this legislation is enacted,
representing a significant Federal overreach that harms employers and
---------------------------------------------------------------------------
individuals alike.
As our Nation emerges from the depths of the COVID-19 pandemic and
confronts new challenges, manufacturers cannot afford to become more
restrictive and less competitive by the hand of our Federal Government.
I appreciate your attention to these concerns and look forward to
working with you on proposals that instead support manufacturing and
its workers.
Sincerely,
Robyn Boerstling
______
National Ready Mixed Concrete Association,
National Stone, Sand and Gravel Association,
Portland Cement Association.
July 20, 2021.
Hon. Patty Murray, Chair
Hon. Richard Burr, Ranking Member
Senate Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC.
Dear Chair Murray and Ranking Member Burr:
On behalf of the National Stone, Sand & Gravel Association (NSSGA),
the National Ready Mixed Concrete Association (NRMCA), and the Portland
Cement Association (PCA), we write to share our views on proposed
legislation as you prepare for the upcoming hearing to examine the
``Right to Organize: Empowering American Workers in a 21st Century
Economy''.
The aggregates, cement, and concrete industries are paramount to
our Nation and quite literally building the foundation of the U.S.
economy, as our products are used to construct almost any type of
infrastructure project, building, or home. Cement and concrete products
manufacturing employs over 600,000 people--directly and indirectly--in
our country and contributes over $100 billion to our economy. America's
stone, sand and gravel industry is responsible for 100,000 direct jobs
and over $25 billion in economic impact. The vast majority of our
membership in the ready mixed and aggregates sectors are family owned,
small businesses. Across all industries, we are proud to provide
meaningful, stable long-term careers with many opportunities for growth
and advancement. Our industries support high paying jobs, with average
compensation over $75,000.
Our member companies support the right of workers to choose to
organize, and many of our employers across the country partner with
labor organizations to provide high-earning jobs to the men and women
responsible for producing construction materials. We are proud of our
strong relationship with labor organizations to address the Nation's
infrastructure challenges.
However, legislative proposals like the misleadingly named
``Protecting the Right to Organize'' (PRO) Act is an unprecedented
attempt to fundamentally change dozens of well-established labor laws
at a time of tenuous economic recovery. While there have been no
reported barriers with workers seeking to consider unionizing in our
industry, this legislation would disrupt the rights of workers and
employers and add unworkable mandates that would severely impact the
ability to efficiently produce and deliver construction materials. It
is a solution in search of a problem.
The PRO Act would effectively eliminate right-to-work laws that
have been democratically adopted in 27 states, undermining numerous
state constitution and our workers constitutionally protected rights.
This is a dramatic overreach by the Federal Government.
Further, the PRO Act would hinder opportunities for individuals to
work through traditional independent contractor roles, which are
critical in the transportation of construction materials to job sites.
Specifically, the legislation would amend the National Labor Relations
Act (NLRA) to include the California Supreme Court's recently adopted
and failed ``ABC test,'' which makes it very difficult to qualify as an
independent contractor. This would result in many workers, who play a
critical role in transporting aggregates and concrete to job sites,
losing their independent contractor status. This will lead to
confusion, increased costs and uncertainty as we are working to supply
the growing demand for construction materials across the country.
Further, data shows that implementing the so-called ``ABC Test''
standard could threaten as much as 8.5 percent of the Nation's gross
domestic product (GDP).
Finally, we have great concerns with other provisions included in
the PRO Act that would hinder employers and employees' rights and
privacy, including:
shortening the time window for a union election;
employers would not be able to challenge union
misconduct during union elections;
codifying the ``quickie'' election rules, limiting
employees' opportunity to consider information about the union
seeking to represent them;
right to counsel on complex labor laws would be
practically eliminated; and
employers would be forced to disclose employee's
personal information without employees consent or their ability
to opt out, and secondary boycotts would be permitted, allowing
unions to target neutral third parties and cause them economic
injury even if those entities have no underlying labor dispute
with the union.
Many of these provisions would be particularly burdensome on small
employers who do not have the resources to confront new regulatory
challenges. This is especially troubling as Congress is working
feverously with the Biden administration to advance a long-awaited,
bipartisan infrastructure proposal. Unnecessary mandates proposed under
the PRO Act would lead to delays and cost increases as our members
supply the materials needed to improve our outdated infrastructure.
For these reasons, as you examine labor rights in today's
workplace, we implore you to oppose this misguided legislation and work
with us to ensure unnecessary Federal mandates are not included in any
infrastructure package that advances through the Congress.
Thank you for your consideration of our member's views and please
do not hesitate to contact us we may be of any further assistance.
Sincerely,
National Ready Mixed Concrete Association,
National Stone, Sand & Gravel Association,
Portland Cement Association.
______
American Council of Life Insurers,
March 4, 2021.
Hon. Nancy Pelosi Speaker
Hon. Kevin McCarthy Minority Leader
U.S. House of Representatives,
H-222, H-204, U.S. Capitol,
Washington, DC.
Dear Speaker Pelosi and Minority Leader McCarthy:
As the Chief Executive Officers of trade associations that
collectively represent more than 100,000 individual small business
owners, broker-dealers and insurance companies providing financial
services to more than 112 million American families, we are writing to
express our members' strong concerns with H.R. 842, The Protecting the
Right to Organize (PRO) Act. This legislation seeks to change the
definition of ``independent contractor'' in a way that would cause
significant disruption to the independent financial services and
property casualty insurance industries and the customers we serve.
The current model provides financial services professionals with
multiple avenues for advising and helping American families and
businesses build secure financial futures and protect their assets.
Some choose to engage in this work as employees, while many others
prefer the freedom and independence that comes from operating their own
business utilizing the independent contractor status. Many have
substantial relationships with one or more insurance companies, broker
dealers, or registered investment advisors, which allows them to offer
expanded options to their customers. These small business owners enter
into written agreements with insurance companies (or general agents of
insurance companies), broker dealers or registered investment advisors
that carefully set forth the terms of the independent contractor
status. It would be enormously disruptive to negate these agreements
through Federal legislation.
By effectively reclassifying independent contractors as employees,
the PRO Act would create unintended consequences for the industry, and
specifically insurance producers and independent financial advisors.
These individuals are vital to ensuring that Main Street Americans have
access to the important advice, products and services necessary to
achieve their financial goals and protect their homes, families and
businesses. In times of catastrophe, insurers engage independent
contractors to provide a faster response for consumers experiencing
loss. The PRO Act's ``ABC test'' could eliminate the choice a majority
of practitioners have made to serve clients independently. In turn that
could drastically reduce clients' ability to access high quality advice
for their insurance, investment and retirement security needs.
Additionally, affiliated financial advisors have a long history of
appropriate classification as independent contractors and are not
involved in the worker classification problems found in other
industries. They are not employees for purposes of determining
applicability of Federal (ERISA and EEO1) reporting requirements and
State wage and benefit provisions. Compensation practices in the
securities industry are carefully recorded, with IRS Form 1099
reporting universally required. As a result, the problems of cash
payments and unreported income that may exist in other industries do
not exist in the securities and insurance professions. Furthermore, the
insurance industry and independent broker dealers are highly regulated.
As you consider H.R. 842, we hope that you will be mindful of the
negative impact that this legislation will have on customers, agents
and advisors working to ensure that their clients have the resources to
make wise financial decisions and ensure financial security for
themselves and their families.
Sincerely,
Susan K. Neely,
American Council of Life Insurers.
David A. Sampson,
American Property Casualty Insurance Association.
Christopher A. Iacovella,
American Securities Association.
Marc Cadin,
Finseca.
Ken A. Crerar,
Council of Insurance Agents and Brokers.
Dale Brown,
Financial Services Institute.
Bob Rusbuldt,
Independent Insurance Agents
and Brokers Association of America.
Wayne Chopus,
Insured Retirement Institute.
Jim Hodges,
National Alliance of Life Companies.
Chuck DiVencenzo,
National Association for Fixed Annuities.
Janet Trautwein,
National Association of Health Underwriters.
Kevin M. Mayeux,
CAE,
National Association of Insurance and Financial Advisors.
Chuck Chamness,
National Association of Mutual Insurance Companies.
Kenneth E. Bentsen, Jr.,
Securities Industry and Financial Markets Association.
______
QUESTIONS AND ANSWERS
Response by Heidi Shierholz to questions of Senator Lujan and Senator
Casey
senator lujan
My family raised me to understand that our communities are stronger
when workers are protected and empowered. My grandfather was a union
carpenter, my dad was a union ironworker in Local 495, and my mom
worked for the public schools. My brother is IBEW and my nephew was
just accepted into an IBEW apprenticeship.
I've said this before, but I believe that everybody in America
should have the same opportunity my grandfather, father and siblings
have had: to work hard, to build real economic security, and to pass
something better on to your children and grandchildren. Those are the
values I learned growing up, and ones I continue to fight for in
Congress. The testimony we heard today from our witnesses includes a
number of troubling statistics.
Question 1. Ms. Shierholz, between 1979 and 2020, how much did the
union coverage rate drop?
Answer 1. Between 1979 and 2020, the share of workers covered by a
collective bargaining agreement dropped from 27.0 percent to 12.1
percent. \1\ This means the union coverage rate is now less than half
where it was four decades ago.
---------------------------------------------------------------------------
\1\ Economic Policy Institute, ``Union Coverage,'' The State of
Working America Data, last updated February 2021.
Question 2. Ms. Shierholz, would you agree that as union membership
---------------------------------------------------------------------------
declines are correlated with increased income inequality?
Answer 2. Yes.
Question 3. Ms. Shierholz, and how much of the growth in inequality
between typical workers and the rich can be explained by de-
unionization?
Answer 3. Recent research shows that de-unionization accounts for
one-third of the growth in inequality between typical workers and
workers at the high end of the wage distribution in recent decades. \2\
---------------------------------------------------------------------------
\2\ Lawrence Mishel, The Enormous Impact of Eroded Collective
Bargaining on Wages, Economic Policy Institute, April 8, 2021.
Question 4. Ms. Shierholz, what is the share of workers in 2020 who
---------------------------------------------------------------------------
said they would join a union if given the opportunity?
Answer 4. Research shows that nearly half (48 percent) of all
nonunion workers who say they would vote for a union if given the
opportunity--a 50 percent higher share than when a similar survey was
taken in 1995. \3\
---------------------------------------------------------------------------
\3\ Thomas A. Kochan et al., ``Worker Voice in America: Is There a
Gap Between What Workers Expect and What They Experience?'' ILR Review
72, no. 1 (January 2019): Figure 3, https://doi.org/10.1177/
0019793918806250.
In addition, a 2020 Gallup poll finds that 65 percent of Americans
approve of labor unions--the highest percentage in 16 years. \4\
---------------------------------------------------------------------------
\4\ Megan Brenan, ``At 65 percent, Approval of Labor Unions in
U.S. Remains High,'' Gallup website, September 3, 2020.
Question 5. Ms. Shierholz, why should we make it easier to organize
---------------------------------------------------------------------------
and form unions if we want to reduce economic inequality?
Answer 5. When workers are able to come together, form a union, and
collectively bargain, their wages, benefits, and working conditions
improve. \5\ Further, when union density is high, nonunion workers
benefit, because unions effectively set broader standards--including
higher wages--that nonunion employers must meet in order to attract and
retain the workers they need. The combination of the direct effect of
unions on union members and this ``spillover'' effect to nonunion
workers means unions are crucial in raising wages for working people
and reducing income inequality. \6\
---------------------------------------------------------------------------
\5\ Josh Bivens et al., How Today's Unions Help Working People:
Giving Workers the Power to Improve Their Jobs and Unrig the Economy,
Economic Policy Institute, August 2017.
\6\ Jake Rosenfeld, Patrick Denice, and Jennifer Laird, Union
Decline Lowers Wages of Nonunion Workers, Economic Policy Institute,
August 2016.
---------------------------------------------------------------------------
senator casey
Dr. Shierholz, in your testimony, you state that on average, a
worker covered by a union contract earns 10.2 percent more in wages
than a peer with similar education, occupation, and experience in a
nonunionized workplace in the same sector, and that more than nine in
ten workers covered by a union contract have access to paid sick days.
You also state that as union membership has declined, income inequality
has increased.
Question 1. Can you discuss how declines in unionization over time
have impacted wages and benefits, like paid sick leave and health care,
for American workers as a whole?
Answer 1. When union density is high, workers with strong unions
have been able to set industry standards for wages and benefits that
help all workers, both union and nonunion. For instance, recent
research finds the erosion of collective bargaining lowered the median
hourly wage by $1.56, a 7.9 percent decline from 1979 to 2017. These
losses from de-unionization are the equivalent of $3,250 annually for a
full-time, full-year worker. \1\
---------------------------------------------------------------------------
\1\ Lawrence Mishel, The Enormous Impact of Eroded Collective
Bargaining on Wages, Economic Policy Institute, April 8, 2021.
Unions have also been a key part of efforts to pass laws that
provide economic security, strong communities, and dignity on the job
for all workers. The labor movement helped pass and defend the
Occupational Safety and Health Act, the Civil Rights Act, the Social
Security Act, Medicare and Medicaid, and numerous other laws benefiting
all workers and their communities. Further, cities and states that have
adopted paid sick days laws, $15 minimum wage, and other progressive
legislation have some of the highest union density and strongest labor
movements. \2\
---------------------------------------------------------------------------
\2\ See Table 1 in Economic Policy Institute, Unions Help Reduce
Disparities and Strengthen Our Democracy (fact sheet), April 23, 2021.
---------------------------------------------------------------------------
______
Response by Gracie Heldman to questions of Senator Lujan
senator lujan
Question 1. Ms. Heldman, what would having the opportunity to join
a union mean to you and your coworkers?
Answer 1. As my manager told me, ``You have no rights once you walk
into the factory.'' Joining a union would give us true representation
with a real voice and rights. To have the ability and right to
negotiate over our wages, benefits and working conditions would mean
the world to the majority of us working at the bakery. To have a union
contract where we, the workers, have rights and a grievance procedure
guaranteed and to be treated with dignity and respect are all my co-
workers and I want.
Question 2. Ms. Heldman, what penalties and changes that would be
brought about by the PRO Act would improve your workplace?
Answer 2. The PRO Act would eliminate the ``mandatory captive
audience'' meetings management holds every time the workers try to join
the BCTGM Union. These meetings are very intimidating where one top
manager or union avoidance speaker talks very negatively about the
union, threatening us with possible loss of wages and benefits if we
vote yes for the union.
While we're in a large group in the middle of the room the rest of
the room is surrounded by supervisors who are staring and observing our
reactions to everything that is being said by the Speaker.
The PRO Act would also personally penalize the top corporate
officials for violating the law or for discriminating against those of
us who support organizing as a union.
The PRO Act would also force the company and the union to reach a
first contract. This is another threat managers and union busters tell
us during an organizing campaign. If we win, we'll never get a contract
and if we strike, we'll be permanently replaced.
Response by Mark Gaston Pearce to questions of Senator Lujan, Senator
Burr, and Senator Tim Scott
senator lujan
Question 1. I am a strong supporter of the PRO Act, which would
greatly strengthen workers' ability to join a union. A Massachusetts
Institute of Technology study found that nearly half of all nonunion
workers--or more than 60 million people--would join a union today if
given the chance, yet today only 12 percent of all workers, or 16
million, are actually represented by a union. The right to a union and
collective bargaining is also directly relevant to our urgent national
response to the pandemic. Without unions, many workers are forced to
work without personal protective equipment or access to paid leave or
premium pay. The Economic Policy Institute recently estimated that
workers in low-wage sectors, traditionally with low union
representation, were six times less likely to be able to work from
home. However, with a union, workers can negotiate additional pay,
health and safety measures, paid sick leave, and job preservation.
Unionized workers also feel more secure speaking out about hazards. To
ensure more workers can join a union and secure safer working
conditions in the wake of the pandemic, it is vital we pass the PRO
Act. Mr. Pearce, how would passing the PRO Act increase workers'
ability to join a union and secure safer workplaces?
Answer 1. Two specific ways that the PRO Act increases workers'
ability to form a union is by limiting employer interference in
determining the makeup of the bargaining unit and by mandating that
pre-election hearings occur no later than 8 days after the NLRB issues
a notice of election. Today, when employees present their
representation petition to the Board, employers intending to quash
their employees' voices can effectively control the timing of the
election by challenging the scope of the employees' proposed bargaining
unit. This forces a pre-election hearing on the issue, which itself can
then be further postponed or dragged out by employers.
A 2011 investigation by the U.C. Berkeley Labor Center found that
in cases where pre-election hearings are held, the actual election
occurs an average of 124 days after the petition is filed, \7\ during
which time employees are often subject to the employer's anti-union
campaign messaging and intimidation. The same study found a
``considerable causal relationship'' between the length of election
delay and the number of unfair labor practice charges filed against
employers, \8\ which can further delay the vote and increase rancor
between parties. In the worst of these scenarios, employers will target
the leaders of the incipient union and discipline or discharge them,
resulting in a chilling effect across the whole bargaining unit. By
reducing employers' opportunities to suppress union support through a
prolonged elections process, the PRO Act will increase the likelihood
that workers will navigate the process to a successful end.
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\7\ John Logan, et al., Research Brief: New Data: NLRB Process
Fails to Ensure a Fair Vote, June 2011, available at https://
laborcenter.berkeley.edu/pdf/2011/NLRB-Process-June2011.pdf.
\8\ Id.
With regard to safer workplaces, workplace safety has long been
considered a paradigmatic mandatory subject of bargaining. An employer
may not unilaterally change a mandatory subject of bargaining without
negotiating with the incumbent union. By making the process of gaining
union representation less arduous, the PRO Act will increase the number
of workers who will get a say in their employer's workplace safety and
COVID policies, e.g., social distancing/masking at the workplace,
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access to personal protective equipment, vaccines, and more.
Question 2. Mr. Pearce, how would passing the PRO Act combat the
decline in unionization we have seen over the past several decades?
Answer 2. In addition to the streamlined election procedure making
the process of unionization less fraught, the PRO Act will stem the
decline in unionization by addressing the perverse incentives employers
have to violate their employees' Section 7 rights.
Today, employers are not subject to monetary penalties for
retaliating against workers for union support, and workers are only
entitled to remedial damages if they are fired in violation of Section
8(a)(3). A study conducted by the Peterson Institute for International
Economics concluded that ``a typical firm may have an incentive to fire
a worker illegally for union activities if this illegal firing would
reduce the likelihood of unionization at the firm by as little as 0.15-
2 percent.'' \9\ The PRO Act greatly increases the costs for employers
who choose to suppress union organizing by engaging in unfair labor
practices. Not only does the PRO Act expand the list of employer unfair
labor practices to include bans on captive audience meetings, the
withdrawal of recognition from a union without certification, and
permanent replacement of economic strikers, it also includes monetary
penalties of up to $50,000 per unfair labor practice violation, and
$100,000 for repeat violators. Employees who win their jobs back may
also receive front pay, consequential damages, punitive damages and
attorneys' fees.
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\9\ Anna Stansbury, Do US Firms Have an Incentive to Comply with
the FLSA and the NLRA?, June 2021, available at https://www.piie.com/
sites/default/files/documents/wp21-9.pdf.
For a sense of how just one of those new unfair labor practices
will force firms to change their calculus in dealing with unionizing
employees, one only needs to read the Hearing Officer's Report on
Objections in the Amazon election in Bessemer, Alabama. \10\ The report
revealed that Amazon ``held [captive audience] meetings 6 days a week,
18 hours a day.'' \11\ If each captive audience meeting triggered a
penalty as high as $50,000, even the largest companies in the country
would be wise to consider a more cooperative approach to their dealing
with a unionizing workforce.
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\10\ Amazon.Com Services LLC, Hearing Officer's Report on
Objections, Case 10-RC-269250, Aug. 2, 2021.
\11\ Id. at p.6.
But even if a giant company was prepared to absorb the new monetary
penalties to sabotage a unionization drive, the PRO Act directs the
Board to set aside election results that have been tainted by unfair
labor practice violations, and to issue a bargaining order if the
employees can show that they had majority support in the previous year
(for example, by having a majority of the bargaining unit sign union
---------------------------------------------------------------------------
authorization cards).
By streamlining the election process and addressing the perverse
incentives that encourage employers to violate the law to avoid dealing
with their employees as equals, the PRO Act will go a long way toward
making sure that those 60 million American workers who want a union
will have a fair chance at building one.
______
senator burr
Question 1. During the hearing, you testified that the ABC worker
classification test included in the PRO Act is `` . . . not new, it's
been done by half of the states in this country for the purposes of
wage and hours and other benefits and unemployment insurance.''
My understanding is that some form of the ABC test is
used in 21 states. However, 19 of those 21 states use a
different and less restrictive version of the test than is used
in the PRO Act. Legal experts with the firm Morgan Lewis have
written, ``Only Massachusetts and California have adopted the
PRO Act's strict version of the ABC test to determine employee
status . . . '' They add that ``California adopted 48 industry
and occupation exemptions'' to its ABC test and that ``the
majority states'' do not use any version of the ABC test ``to
determine if a worker is an employee for wage and hour
purposes.''
Would you please provide the Committee a list of
states that use the exact same version of the ABC test in the
PRO Act along with a copy of the respective states' statutory
language as compared to the statutory language in the PRO Act's
ABC test?
Answer 1. I am attaching a chart which reflects states which have
adopted an ABC test as of April 21, 2021 but I am not certain this is
exhaustive or completely up to date. I have not studied those laws
extensively and am not an expert on state employment laws in all fifty
states.
Question 2. In Sept. 2019, California Gov. Gavin Newsom signed AB5,
which codified the strict ABC test used in the PRO Act as the legal
test in California for determining whether a worker is properly
classified as an independent contractor rather than a traditional W2
employee. The test immediately ran into difficulties and a ``clean-up''
bill needed to be passed to exempt 109 categories of work from the ABC
test. More workers such as ride-sharing drivers and delivery providers
fought for and won their exemption through a ballot initiative approved
by an overwhelming majority of Californians. The PRO Act's ABC test
contains zero exemptions.
Do you believe any such exemptions should exist? If
so, please provide the Committee a list of work categories that
you believe should be exempted from the ABC test.
California's Proposition 22, which granted an
exemption to ride-sharing drivers as well as others, passed
with nearly as big of a majority as President Biden achieved in
the state. Do you believe that the backlash the ABC test
received in California, likely the most liberal state in the
Nation, suggests that the state government went too far?
Answer 2. As noted in my response to the previous question, I am
attaching a chart which reflects the states that have passed an ABC
test at least as of April 21, 2021 but I am not certain this is an
exhaustive list. I have not carefully examined all the provisions in
each of these state laws and am not an expert on state employment laws
in all fifty states and would not venture an opinion regarding statutes
I have not carefully reviewed.
sentor tim scott
A-B-C Test
Question 1-5. During the hearing, in a response to a question from
Senator Baldwin, you indicated that the ABC test ``is not new . . .
it's being done by half of the states in this country for the purpose
of wage and hours and other benefits and unemployment insurance . . .
so, what it does is codify that standard so that it would apply in
discerning who is eligible for coverage under the National Labor
Relations Act.''
Please answer the following with specificity:
I. Please list the states that have enacted the ABC test as
outlined in the Protecting the Right to Organize Act. For
reference, the text of the provision in the PRO Act is provided
below.
II. For instances where states have adopted some form of an ABC
test, but it differs from the PRO Act, please provide the
Committee with a list of those states.
III. If there are differences between the ABC test provision in
the PRO Act and ABC tests at the state level, please provide
the Committee with your perspective on the rationale for such
differences.
IV. Is there a version of the ABC test that more states have
enacted than the ABC test that is included in the PRO Act?
V. Do you believe that the ABC test that is in the PRO Act
should extend beyond the National Labor Relations Act to other
wage and hour laws, such as the Fair Labor Standards Act?
``(2) EMPLOYEE.--Section 2(3) of the National Labor Relations Act
(29 U.S.C. 152(3)) is amended by adding at the end the following: ``An
individual performing any service shall be considered an employee
(except as provided in the previous sentence) and not an independent
contractor, unless----
``(A) the individual is free from control and direction in
connection with the performance of the service, both under the
contract for the performance of service and in fact;
``(B) The service is performed outside the usual course of the
business of the employer; and
``(C) The individual is customarily engaged in an independently
established trade, occupation, profession, or business of the
same nature as that involved in the service performed.''
Answer 1-5. I am attaching a chart which reflects states which have
adopted an ABC test as of April 21, 2021 but I am not certain this is
exhaustive or completely up to date. I have not studied those laws
extensively and am not an expert on state employment laws in all fifty
states.
Response by Jyoti Sarolia to questions of Senator Tim Scott
sentor tim scott
A-B-C Test/Independent Contractor
Before my time in Congress, I was a businessman. I was a
franchisee, I was a direct seller, and I ran multiple small businesses.
So when it comes to legislation like the PRO Act, which would be the
most sweeping labor legislation in multiple generations, I know exactly
what it would do to folks that are small business owners or independent
contractors today.
As a someone who worked as a direct seller early in my career--and
benefited substantially from being able to work as an independent
contractor--I'm deeply concerned by recent efforts to nationalize the
so-called ``A-B-C'' test for worker classification, which represents a
staggering departure from decades of precedent.
The Department of Labor estimates that there are 15.6 to 22.1
million individuals who are IC status, and the Bureau of Labor
Statistics found that almost 80 percent of independent contractors
prefer that arrangement over being an employee.
It's no secret why! It gives them greater flexibility and ownership
over their work--and this is true across dozens of sectors, not just
within the so-called gig economy.
California has presented us with a case in point of what happens
when you attempt to impose the ABC test on a diverse workforce. AB-5,
which put in place the new test, had roughly 100 exemptions by the end
of the legislative process. When you need that many carve-outs, you
know you've got a lousy law.
The people of deep-blue California agreed. Nearly 60 percent voted
to support a referendum ensuring that app-based and delivery drivers
could continue to operate as independent contractors, which was
overwhelmingly their preference.
After seeing the mayhem in California unfold over this disastrous
legislation, I don't see how anyone could support nationalizing the
exact rule that was voted down by the people of California.
I know folks in South Carolina do not want to be a part of this
failed experiment.
Please answer the following with specificity:
Question 1. Do you agree that the PRO Act's ABC test would
significantly disturb numerous sectors including freelance journalists,
app-based drivers, insurance agents, and more?
Answer 1. The PRO Act's ABC test to determine independent
contractor status would have significant implications for many
industries, including the franchise business model. First, the ABC test
would take away the independence of small franchise owners and mislabel
every franchise owner and their employees as employees of the national
brand, making franchised businesses no different than corporately owned
and operated locations. It would undoubtedly rid franchise business
owners like myself of the hard-earned equity and effort we have
invested into our hotels and other establishments.
Second, I understand that most app-based driver and freelance
workers also prefer the autonomy in their work. Most freelancers and
app-based drivers almost always fail prong `B' of the ABC test. Since
the nature of, and reliance on independent contracting varies by
industry, a one-size-fits-all policy ignores the complexity and nuance
of such work arrangements.
The flexible nature of their work also allows them to spend more
time outside of work with their families, and loved ones.
Question 2. If there is such a high degree of satisfaction among
those who choose to earn a living as an independent contractor, then
why do we need an ABC test that would force them to be reclassified as
employees, or worse lose their jobs, as we saw in California?
Answer 2. Respectfully, we do not need a one-size-fits-all approach
to defining who is an employee and/or and independent contractor. When
it comes to independent contractor status, an imbalanced approach only
serves to needlessly disrupt the economy. Given the potential for
chaos, lawmakers must find a better way to assist the minority of
workers who engage in alternative work arrangements but would prefer
more traditional forms of work.
Under the ABC test, all three elements must be met for a worker to
remain independent. Fail one prong, and you must be considered an
employee. This is problematic for most industries, including businesses
like mine where we would become employees of the brand, rather than
staying independent business owners.
Lawmakers in California were forced to amend AB 5 in 2020, creating
dozens of additional exceptions. Some of those still working under the
ABC test can at least leave California if the burden proves too much.
However, if the ABC test becomes Federal law, there is nowhere to
escape.
Right-to-Work
South Carolina is one of 27 right-to-work states. Those 27 states
protect 61 million workers from being forced to pay mandatory union
dues whether or not they want to be represented by a union.
While tens of thousands of South Carolinians are union members, and
I fully respect their right to join a union, I also strongly support
the right of every worker to keep his or her job without being forced
to join or financially support a union.
I believe this issue comes down to a worker's freedom to choose for
themselves.
Unfortunately, the PRO Act is not about worker freedom at all.
Instead it's more about increasing the amount of money that goes to
union bosses.
The PRO Act would take away the right of a worker to choose whether
to pay into a union or not--and instead require it, and it would
increase dues by $9 billion annually at the expense of workers, small
businesses, entrepreneurs, and consumers.
South Carolina enacted its right-to-work law in 1954 and our right-
to-work protections for workers have translated into robust growth in
jobs, personal income, and economic output for the state.
South Carolina is home to a number of industries and manufacturers
that have chosen to locate to the Palmetto State because of our pro-
growth, pro-worker policies.
That is what you get when you give workers the right to choose.
When you take that choice away, the only winners are the union bosses.
Please answer the following with specificity:
Question 1. Do you think it would be in the interest of workers to
repeal state level right-to-work laws and if not why?
Answer 1. California is not a right-to-work state, so I can only
speak from my personal experience. That being said, there are several
studies published that have found that states with a right-to-work law
are associated with higher wages and more economic growth. In addition,
studies have also found that an enactment of a right-to-work law
increases self-reported current life satisfaction, expected future life
satisfaction, and improves sentiments about current and future economic
activity among workers. These effects are especially large among union
workers. The PRO Act already has several harmful provisions for small
businesses and their workers, and repealing dozens of state laws in
this area appears to be another one.
______
[Whereupon, at 12:15 p.m., the hearing was adjourned.]
[all]