Labor Day Hope

The last several decades have been hard on working men and women in the United States. The decline of unions (which now represent just a little more than one sixteenth of private sector workers), job loss to Mexico, China, and other low wage countries, and a series of bad court decisions weakening the rights to effectively bargain a contract have left working Americans nearly defenseless, as wages stagnate or fall and traditional pension coverage disappears. The results are ugly: since 2000, 70 percent of Americans have seen no gain in wages, and wages have fallen for the bottom 40 percent. Traditional pensions are disappearing, to the point that less than 18 percent of workers still have this crucial benefit.

Despite that grim background, there is cause for hope, and three events this past week brought a big smile to my face and lifted my spirits. The biggest lift came from two court decisions in California and Oregon (I’m a lawyer, I can’t help it!), where a U.S. Court of Appeals struck down one of corporate America’s longest-running and most outrageous schemes to cheat workers and scam the government. FedEx, a giant in package delivery industry, has avoided payroll taxes, prevented union organizing, and escaped the laws that give workers meal breaks, overtime pay, sick leave, and family leave by entering into sham contracts with its 27,000 drivers in which it declares them to be independent contractors. Employees have employment rights, but independent contractors don’t.

An employer has to pay Social Security and Medicare taxes for employees, as well as unemployment insurance taxes and worker’s compensation premiums—but not for independent contractors. So FedEx, while maintaining control over the minutest aspects of their working lives, called its drivers contractors—shifting all of the costs and risks off of FedEx and onto its employees. As described by Judge William Fletcher, FedEx “contracts with drivers to deliver packages to its customers. The drivers must wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards. FedEx tells its drivers what packages to deliver, on what days, and at what times. Although drivers may operate multiple delivery routes and hire third parties to help perform work on those routes, they may do so only with FedEx’s consent.”

For years, FedEx successfully avoided hundreds of millions of dollars in taxes and worker’s comp costs, blocked union organizing (only employees, not contractors, may unionize), and undercut its competitors. All of those illegal savings allowed FedEx to offer lower prices and take business away from companies like UPS that played it straight, as well as the U.S. Postal Service, which has struggled to survive.

A few days ago, a three-judge panel of the 9th Circuit Court of Appeals held, unanimously, that FedEx’s scheme was unlawful under both California and Oregon law, and that its drivers are not independent contractors, no matter what their phony contracts said. About 3,000 employees involved in the class action lawsuits will directly benefit from the decisions issued by the court, but the potential benefit is even greater, since 40 separate lawsuits attacking the scheme have been filed under various state laws, and the 9th Circuit’s opinion will influence the other courts.

Misclassification of employees as independent contractors is a widespread and growing phenomenon. The Government Accountability Office estimated it was already costing the federal government $3 billion a year in lost taxes ten years ago, and every state that has audited employers finds that millions of dollars are being drained from government resources by this cheating. President Obama has recognized the problem, budgeted money to attack it and set up an interagency enforcement task force to help root it out. My hope for Labor Day is that these FedEx cases give governments everywhere the impetus to go after these dishonest businesses much more aggressively.

The second thing that happened this week was the employees’ victory at Market Basket, a big, 25,000-employee, family-owned grocery chain whose board of directors decided to sack the company’s worker-friendly CEO and replace him with a corporate bean-counter with no relationship to the workers. Surprisingly, the employees rose up in mass protest, picketed so successfully that they shut down customer traffic and cost the company $10 million a day in losses, even in the face of threats that they’d be fired (or speaking technically, “permanently replaced”). After a month of concerted activity, the workers won, and the company reinstated the beloved CEO.

It was exciting to see workers win a labor protest, even if its object was so unusual. But the lesson I draw for labor law reform is the importance of allowing supervisors and managers to join together with workers to achieve better conditions. Our labor law says supervisors don’t have the right to organize or join a union—even nurses whose only supervisory activity is directing a nursing assistant to turn a patient over or change dirty sheets. Because they have no protection against being fired for union sympathies, supervisors are typically dragooned into being the cutting edge of anti-union campaigns, where they are directed to surveil, interrogate, and threaten the employees who might support the union if left alone. If they could freely join with the employees, as the supervisors and many managers did at Market Basket—and as all supervisors were permitted to do under the original National Labor Relations Act—workers in general would have more power, and the 1 percent would have less.

Last, but not least, 27,000 home care workers in Minnesota voted for union representation, despite efforts of the Right to Work (for less) Committee to stop them, and despite a recent Supreme Court decision that held they are less than full employees and therefore have lesser rights to organize and bargain for better wages and working conditions. SEIU won more than 60 percent of the vote, which has improved the work life of home care workers in every state it has organized, winning substantial wage and benefit increases, the right to training paid for by the state, a grievance procedure, and health and safety protections that had never been afforded to them before.

Home care workers are one of the most exploited and least powerful groups of workers in the United States—overwhelmingly female and disproportionately non-white. Their jobs are important, and with an aging population will become even more important. The nation should be doing more to upgrade these jobs and ensure they pay a decent wage in order to attract more candidates and reduce turnover—a clear benefit of the contracts SEIU, AFSCME and other unions have bargained up to now. The patients and disabled people these workers care for will be better off with a trained and happy workforce. So far, the only way to get that kind of a workforce appears to be through union representation, advocacy and power.


Happy Labor Day!