Johnson: Businesses Need Total Flexibility

Posted May 14, 2009 at 2:11pm

Labor and employment policy stands at an important crossroads, as a confluence of political and economic factors have created an environment where these issues are now at the forefront.

New employment mandates and more rigid labor rules lend themselves to easy sound bites, as evidenced by the Lilly Ledbetter Fair Pay Act, the first bill signed into law by President Barack Obama. Yet Congress needs to exercise caution in considering these proposals, lest it irreparably harm the labor market and the regulatory environment that has made the U.S. the envy of the world in its economic resilience.

While we don’t know exactly what sectors of the economy will form the basis for economic growth and the creation of high-paying jobs in the years ahead, we do know that they will come from industries that operate efficiently, with maximum flexibility, and are able to respond with maximum agility to competitive pressures that will arise from abroad.

None of these requirements are compatible with enactment of the misnamed Employee Free Choice Act or the rest of organized labor’s agenda, which is tied to a view of the workplace that is frozen in time with the early post-war period where employers provided few benefits and unsafe workplaces and there was little international competition.

Today’s competitive workplace and global economy are radically different — employers voluntarily provide robust benefit packages and are keenly aware of what competitors in other countries are doing, and wages are driven by market forces. Nevertheless, at the forefront of the labor agenda are numerous proposals that would decrease flexibility and further hinder employers’ ability to create and retain jobs.

Front and center in the debate is organized labor’s top priority, “card check.— While the secret-ballot provision of this bill appears to have lost support from many key Senators, its compulsory interest arbitration provisions are still being hotly debated. This would effectively throw away the system of collective bargaining that employers and unions have used for more than 70 years and replace it with a system in which government-appointed arbitrators would set not just wages and benefits, but many of the most important decisions made in the workplace. This includes management rights, subcontracting, work rules and others that would be binding on the employer and union, without the possibility for appeal.

Add to that the fact that these decisions would likely be made by arbitrators with little experience in the relevant business, and you have a recipe for rigidity and unworkable provisions that is likely to cripple businesses struggling to compete today.

But there is much more on the labor and employment agenda coming after card check. Other legislative proposals that are likely to move forward in the current Congress include eliminating the caps on punitive and compensatory damages under Title VII, which will only exacerbate the problem with frivolous discrimination claims that employers must investigate and defend; expanding employer mandates, such as paid sick leave, without adequate accounting for the very real costs and administrative burdens that will be imposed; and expanding equal pay laws to such an extent that employers will find routine compensation decisions second-guessed by government agencies and the courts.

Beyond the upcoming legislative fight in Congress, there will be major battles in the agencies. For example, Obama signed four labor-related executive orders applicable to federal contractors earlier this year, all of which require some level of rulemaking to implement. Likewise, the Occupational Safety and Health Administration and other agencies at the Labor Department are likely to have an aggressive agenda, as has already been evidenced by proposals to roll back union financial disclosure rules.

As Congress prepares for the coming debate over these important issues, it would be wise to consider the words of the World Bank, which annually reviews global labor practices. As its 2008 Doing Business Report summarized, “more flexible labor regulations boost job creation— and “laws created to protect workers often hurt them … their employment opportunities vanish. They end up in the informal economy. … And if they are abused by their employer, they have fewer protections.—

Sweeping new mandates should only be imposed when there is a compelling national need as demonstrated through clear evidence established on the record through adequate hearings, and then only with the least impact possible on job growth and an employer’s ability to compete. Further, Congress needs to look at the entire effect of these proposals on employers, rather than through its existing piecemeal, bill-by-bill, myopic manner.

The labor and employment agenda may lend itself to scoring quick political points, but behind that veneer, it has the potential to do irreparable damage to U.S. competitiveness.

Randel K. Johnson is vice president of labor, immigration and employee benefits at the U.S. Chamber of Commerce.