There's more at stake than usual for employers in this fall's national election. Depending on which party wins control of the White House and Congress, your company may have to contend in 2009 with a new law that would make union organizing easier, as well as with other proposals that would make equal pay lawsuits much more difficult for employers to win, and which would make workforce reductions harder. Proactive strategies are essential: understand what could happen, audit your current situation, and strive for positive relationships with your employees so as to reduce your company's exposure.
The 'Card Check' Option
Labor union organizing is the number one election issue that should concern employers, and it focuses on the "card check" issue. The National Labor Relations Act (NLRA) currently makes a secret-ballot election the preferred way for employees to vote on union representation, and to get an election the organizing union must gather authorization cards signed by at least 30% of the workers it wants to represent. The NLRA also allows a union to be recognized on the basis of the authorization cards alone, without any secret ballot -- if an employer agrees. Under this "card-check" method of recognition, a bargaining unit is created if a majority of employees sign authorization cards and the employer agrees to recognize the union; otherwise, the employer currently has a right to demand that the union prevail in a secret ballot election conducted by the NLRB.
Employee Free Choice Act
Under a Democratic President and/or Congress, card check recognition may become mandatory thanks to a piece of legislation perhaps ironically called the Employee Free Choice Act (EFCA). Labeled the "card check bill," EFCA turns the NLRA requirement 180 degrees and eliminates a secret ballot election if a union can show it has authorization cards signed by a majority of employees. EFCA passed the House of Representatives in 2007 by a 241-185 vote, but it was blocked in the Senate where Democrats fell short of the 60 votes needed to end a Republican filibuster.
Barack Obama has identified the EFCA as an important initiative and has pledged his support for the passage of the EFCA upon being elected to the White House. Many of the unions which have endorsed the Senator did so based on his EFCA stance. John McCain has voiced opposition to EFCA.
Employers can prepare for the possible enactment of EFCA by taking proactive steps that build a positive relationship with employees. Employees who are treated with dignity and respect, and receive an ownership interest in "their" company, will realize that they do not need a third party's involvement. Three basic strategies can encourage an ownership interest that makes your company a better place to work:
- Share your company's successes and challenges with employees, emphasizing their contribution.
- Create an open door policy to defuse conflict and give employees a voice and an outlet.
- Conduct an employee survey every quarter and implement useful suggestions. Mine the survey results for common issues and themes, as a canary in a coal mine and move rapidly to address employee frustrations and dissatisfaction.
Paycheck Fairness Act
A second major initiative of organized labor is the Paycheck Fairness Act (PFA). The Act, if passed, would amend the Equal Pay Act to make it easier for plaintiffs to win discriminatory pay claims. Partisans on both sides point to dueling studies produced by economists, think tanks, and advocacy groups on the gap in wages between men and women. On average, in the U.S., males earn more than women. The median male working full-time earns $741 a week; the median female earns $600 a week. However, broad median studies generally do not take into account important variables which likely explain most of the "median" disparity.
When factors such as work experience, education, and occupation are calculated, the average female makes 98% of the average male wage. The headlines, however, only focus on the gross median disparity, and annually we are told that women make only 77 cents for every dollar paid males. Consequently, pressure builds periodically from advocacy groups for new laws to address the supposed disparity. Twenty years ago the push was on for "comparable worth" legislation. Today it is the Paycheck Fairness Act.
The Equal Pay Act prohibits employers from sex discrimination in the payment of wages. Currently, an employer accused of unequal pay to, for example, female employees, will prevail if it can show the wage differential is due to seniority, merit or productivity systems, or if it can show the wage differential "is based on any other factor other than sex." Thus, the employer merely needs to prove the differential is due to education, experience, evaluations, length of service, or any other factor other than sex.
The proposed PFA would replace the "any factor other than sex" defense with a "bona fide factor other than sex" defense. The courts will decide whether the factor is bona fide by requiring the employer to show the factor is job-related, or has a business purpose (but this defense fails if the employee shows that the same business purpose could have been achieved without producing the differential), and the employer must also show that the factor was applied reasonably. Even if the employer manages to successfully navigate the maze and establish the "factor other than sex," the employee can still prevail if he/she can show the employer relied on the factor due to sex discrimination.
While the provisions relating to the "factor other than sex" defense have gotten the most publicity, one other change may have an even greater impact. Currently, the Equal Pay Act is applied on an establishment basis -- that is, one looks at the wages of males and females in the same jobs within a particular facility, plant, office, etc. The PFA would eliminate all references to "within an establishment." The effect upon employers could be staggering. Pay a female in New York City at a higher pay rate than a male in the same job in Little Rock, and the Little Rock employee has a prima facie claim under the PFA. Class actions also become easier under the PFA.
As for damages, the PFA provides not only for actual lost wages and liquidated damages of 1x the amount of lost wages, but also for unlimited compensatory and punitive damages even if the wage inequality was unintentional. The House passed the PFA in July 2008. The Senate is not likely to reach the Act prior to the elections and the end of the year. Senator Obama has endorsed the PFA; trial attorneys certainly hope that the Senator gets the opportunity to sign the bill into law.
If it becomes law, the PFA will present a potential legal and economic nightmare for employers. However, there are steps you can take to minimize your company's PFA risk:
- Audit your pay practices. Look for disparities between males and females in the same or similar jobs.
- Require the HR Department or the applicable managers to justify any disparity by demonstrating a bona fide, concrete reason other than sex for the disparity. Make sure the reason is valid. Consider using an employment attorney to review the audit results and to challenge the "bona fide factors other than sex" explanations. An ounce of cure...
- Address any unexplained disparity now. Don't wait for a plaintiff's attorney or the Department of Labor to seize the initiative; the result will be far costlier than taking voluntary action.
Senator Obama is a co-sponsor of proposed legislation which is often referred to as the FOREWARN Act. This proposal would expand the Workers' Adjustment & Retraining Act ("WARN") to apply to employers who employ 50 employees instead of the current application only to employers with 100 or more employees, and would both expand the notice provisions of plant closings to 90 days (from the current 60 days) and cut in half (to 25 employees) the definition of a "mass layoff."
Even if Senator Obama does not win the presidency, a Democratic-controlled Congress may have the votes to make EFCA, PFA and FORWARN law over a Republican presidential veto.
Another aspect contributing to a positive work environment is how a company handles politics in the workplace. With the 2008 election focusing on highly charged issues, employers have the right and responsibility to ensure that work environments are safe, free of hostility and conducive to productivity. That includes protecting employees from being badgered or pressured by overzealous coworkers. Federal and state laws which prohibit hostile work environments on the basis of sex, race and religion could also be used to prohibit workplace political activity that constitutes harassment to persons under the anti-discrimination statutes.
The First Amendment's protection of free speech does not apply to the private workplace. Political discussion should never be allowed to devolve into debates over race, national origin, or religion. This campaign season makes it especially difficult for employers because the first African-American could be elected President, or the first female elected Vice President. Talk about the candidates could easily involve comments that some construe as discriminatory -- and the dangers run from distracting management and employees from their jobs, to justifying a harassment lawsuit against the company. Employers can prevent this danger, and maintain a positive work environment by:
- Communicating a clear, easily understood policy on the rules of political expression.
- Training supervisors on what to do if they hear or observe inappropriate workplace conduct.
- Initially, using reminders or coaching, rather than severe discipline, to enforce company policy.
- Responding quickly by investigating any employee complaints of harassment.
Winds of Change
There's no question that the winds of change will be blowing for employers no matter who voters choose for President and Congress. While not every initiative of the new President and Congress are guaranteed to become law, the potential impact of even some of the changes that the candidates are discussing on the campaign trail should cause employers to take notice and precautions. Be aware of what's proposed and how your employees are reacting to it. Companies must accept and adapt to change, or suffer the consequences. If you take the initiative to understand proposals that could become law and make a concerted effort to prepare your company for the challenges the new laws may present, your company will be in a position to weather the winds of change. If not, you may instead reap the whirlwind.
Larry McNamara, Founding Shareholder, Spencer, Crain, Cubbage, Healy & McNamara has over 30 years of experience, with litigation and labor and employment law. He counsels and defends companies in matters relating to discrimination, wrongful discharge and employment torts, employer-union relations, employment agreements, non-competition covenants, trade secrets and confidential information, fair labor standards, safety and health, pension and benefits. He can be reached at [email protected]