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Don’t believe the hike, say opponents of minimum wage increase

June 12th, 2009  |  Lisa Milam-Perez

>Hold off on that next minimum wage hike, urged David Neumark, a professor of economics at the University of California, Irvine, in an opinion piece in today’s Wall Street Journal.

The federal minimum wage is scheduled to increase to $7.25 per hour in July, from the current rate of $6.55. It’s the last in a three-step increase in the minimum wage rate enacted under the Fair Minimum Wage Act of 2007, a happier time — economically speaking — when the nation’s unemployment rate stood at a modest 4.5%. The 2007 rate hike, the first in ten years, broke the longest stretch without an increase since the Fair Labor Standards Act (FLSA) was passed in 1938. But now, “with the aggregate unemployment rate at 9.4%, the teen unemployment rate exceeding 22%, and the unemployment rate for black teens nearing 40%, next month’s increase seems like the worst timing possible,” Neumark wrote. He warns that the 11% minimum wage increase will lead to the loss of an additional 300,000 jobs among teens and young adults — “on top of the continuing job losses the recession is likely to throw our way.”

“Minimum wages, like most public policies, confront us with trade-offs,” Neumark notes. “An employed, low-skilled worker who keeps his job earns a slightly higher wage. But a worker who loses his job, or a labor-market entrant or unemployed worker who cannot find a new job, pays a much higher cost.”

It’s a debate that has raged for decades: Does a minimum wage increase boost the wages of our lowest-paid workers, or does it put them out of work? It depends on whom you ask.

Minimum wage hikes increase consumer spending, says the Economic Policy Institute, a nonprofit think tank, citing a study by economists at the Federal Reserve Bank of Chicago. The organization claims the first two increases in July 2007 and July 2008 will have generated an estimated $4.9 billion of spending by July 2009, and that the coming rate hike will bring in another $5.5 billion over the following year. The results demonstrate that an increase in the minimum wage benefits not only low-income workers, but boosts consumer spending and the broader economy as well, the Economic Policy Institute says.

Hogwash, counters the Employment Policies Institute. (The similarly named think tanks have been sparring on the issue for years.) The Employment Policies Institute has long asserted “the time-tested economic consensus” that minimum wage hikes lead to job loss for low-skilled employees. Responding to the most recent study, Kristen Lopez Eastlick, its senior research analyst, said university-conducted economic research “overwhelmingly runs counter” to the Economic Policy Institute’s claims. Various studies continue to affirm that increases in the minimum wage are poorly targeted to benefit low-wage families, as Census Bureau data shows the average family income of minimum wage employees is nearly $45,000 a year.

“In fact, the federal minimum wage hike has priced employees out of the workforce, and based on recent data from the Bureau of Labor Statistics, it’s the low and unskilled workforce — especially minority teens — who are getting hit the hardest.”

On the other hand, the Fiscal Policy Institute and Policy Matters Ohio reported a few years ago that, since 1997, states with higher minimum wages have generally performed as well or better economically than states with lower minimums. The findings were consistent, the groups said, with “a growing body of economic research that has called into question the long-held prediction that a higher minimum wage will reduce the number of jobs or the number of hours worked by low-wage workers.”

To be sure, when enacted in 1938, the FLSA’s purpose was to grow jobs. The overtime provisions of the Act intended to spread the job wealth by making it costlier for employers to work their current employees more than 40 hours in a workweek. But the legislation also sought to eliminate labor conditions that were seen as detrimental “to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” (29 U.S.C. 202(a)). Thus, the minimum wage. There was a floor below which no American worker should be expected to work, Congress reasoned. It is the friction between these two competing goals, perhaps, that has led to the discord we see today.

In the end, Neumark laments: “I do not expect President Obama or congressional Democrats to give up their long-held support for a higher minimum wage.” Indeed, the minimum wage hike is likely a done deal. But the battle over its wisdom will rage on.


With paid leave for federal employees possible, are private sector employees next?

June 10th, 2009  |  Lucas Otto

>With the current economic outlook looking bleak, more and more private businesses are looking to trim payroll and cut staff in order to stay afloat. However, certain programs advancing in Congress, like the Federal Employees Paid Parental Leave Act (H.R. 626), seem to defy those cost-cutting trends as it would add, not subtract, costs. The Congressional Budget Office has estimated it could cost as much as $938 million from fiscal 2010 to fiscal 2014.

The Act, which passed the House by a vote of 258-154 on June 4, 2009, would provide paid parental leave benefits to all federal employees. It would provide all federal employees with four weeks of paid parental leave for the birth or adoption of a child, and would allow employees to use accrued sick or annual leave instead of the 12 weeks of leave guaranteed to them under the Family and Medical Leave Act.

Representative Carolyn B. Maloney (D-NY), a supporter of the bill, recently said that “families and family values are a top priority for President Obama and with his signature, our workforce will soon have comparable standards to professional private sector employees—and the rest of the industrialized world.” Whereas, Representative Darrell Issa, (R-Calif), who offered an amendment to H.R. 626 that was defeated—as it did not provide employees with paid parental leave—posted a video on YouTube outlining his opposition to the bill, calling it yet another government bailout.

For the private employer, one issue comes to mind: Will passage of H.R. 626 begin the process of required paid leave for private sector industries? Private sector employees must be wondering what Rep. Maloney means by “comparable standards to professional private sector employees,” as most private businesses do not provide paid parental leave beyond vacation pay. In fact, only California, Washington and New Jersey currently have family leave insurance programs, and Washington just delayed for three years (S.B. 6158), from October 2009 until October 2012, implementation of the state’s paid family leave insurance law.

If eventually signed into law, H.R. 626 would provide federal employees with another job-related “perk,” and it would certainly have private sector employees clamoring for the same kind of paid leave. How it would affect the bottom line is the critical issue. Private businesses have raised cost issues with the FMLA ever since it was passed into law (i.e., costs associated with giving employees time off, costs of litigating FMLA claims), and the FMLA only requires unpaid leave. Add paid leave to the equation, along with tough economic times, and there may be even more cost-related issues as private businesses look to trim even more staff, or even “close shop” altogether.


If a presumption falls in the woods and there’s no one there to hear it…

June 8th, 2009  |  Matt Pavich

>

This has flown somewhat under the radar, but Montana has statutorily reversed the underlying presumption of the employment at-will doctrine. Under Montana’s Wrongful Discharge from Employment Act, MONT. CODE ANN. § 39-2-901 et seq., subject to statutory exceptions, employers must have just cause before discharging at-will employees. In a recent, unpublished, 9th Circuit case, Johannsen v. Nike Inc., No. 08-35040 (9th Cir. June 2, 2009), a sales representative claimed that her company expanded her territory to such an extent that she could not reasonably cover it, resulting in a constructive discharge lacking just cause. The plaintiff won at trial and Nike appealed the denial of judgment as a matter of law.

In affirming the lower court’s verdict, the Ninth Circuit looked to the Act, which defines constructive discharge as an employee’s voluntary termination of employment stemming from a situation created by an act or omission of the employer, one so intolerable that a reasonable person would find voluntary termination to be their only reasonable alternative. Under the Montana Act, however, an employer’s refusal to promote the employee or improve terms and conditions of employment does not constitute such an action. The district court found that Nike admitted that the job as expanded was not workable and that the plaintiff’s territory had to be adjusted, but Nike failed to work with the plaintiff to design a more reasonable territory within a reasonable time frame.

The court also ruled that the employee had no reasonable alternative to resigning, as Nike failed to either negotiate with her, or respond to her complaints until after her resignation. Finally, the court held that the Act’s “terms and conditions” language did not apply because — in contrast to failing to improve conditions — Nike positively worsened the plaintiff’s working conditions. The court found that the Act’s “terms and conditions” language bars only those claims predicated on an employer’s failure to improve conditions beyond the status quo; it does not exclude allegations that conditions have worsened past the point that a reasonable person would find them intolerable.

While the case itself seems to be a relatively run-of-the-mill constructive discharge case, what strikes me as interesting is how little attention the Ninth Circuit drew to the reversal of the employment at-will doctrine. Now, the legislation isn’t all that new, but it is still somewhat surprising that the court didn’t really remark upon this provision of the Act. Montana is traditionally viewed as a politically “red” state, which may account for the lack of outcry. Still, as labor and employers battle for the upper hand in these economically difficult times, it may be worth watching whether other state legislatures will feel pressure to adopt similar laws.


If a presumption falls in the woods and there’s no one there to hear it…

June 8th, 2009  |  Matt Pavich

>

This has flown somewhat under the radar, but Montana has statutorily reversed the underlying presumption of the employment at-will doctrine. Under Montana’s Wrongful Discharge from Employment Act, MONT. CODE ANN. § 39-2-901 et seq., subject to statutory exceptions, employers must have just cause before discharging at-will employees. In a recent, unpublished, 9th Circuit case, Johannsen v. Nike Inc., No. 08-35040 (9th Cir. June 2, 2009), a sales representative claimed that her company expanded her territory to such an extent that she could not reasonably cover it, resulting in a constructive discharge lacking just cause. The plaintiff won at trial and Nike appealed the denial of judgment as a matter of law.

In affirming the lower court’s verdict, the Ninth Circuit looked to the Act, which defines constructive discharge as an employee’s voluntary termination of employment stemming from a situation created by an act or omission of the employer, one so intolerable that a reasonable person would find voluntary termination to be their only reasonable alternative. Under the Montana Act, however, an employer’s refusal to promote the employee or improve terms and conditions of employment does not constitute such an action. The district court found that Nike admitted that the job as expanded was not workable and that the plaintiff’s territory had to be adjusted, but Nike failed to work with the plaintiff to design a more reasonable territory within a reasonable time frame.

The court also ruled that the employee had no reasonable alternative to resigning, as Nike failed to either negotiate with her, or respond to her complaints until after her resignation. Finally, the court held that the Act’s “terms and conditions” language did not apply because — in contrast to failing to improve conditions — Nike positively worsened the plaintiff’s working conditions. The court found that the Act’s “terms and conditions” language bars only those claims predicated on an employer’s failure to improve conditions beyond the status quo; it does not exclude allegations that conditions have worsened past the point that a reasonable person would find them intolerable.

While the case itself seems to be a relatively run-of-the-mill constructive discharge case, what strikes me as interesting is how little attention the Ninth Circuit drew to the reversal of the employment at-will doctrine. Now, the legislation isn’t all that new, but it is still somewhat surprising that the court didn’t really remark upon this provision of the Act. Montana is traditionally viewed as a politically “red” state, which may account for the lack of outcry. Still, as labor and employers battle for the upper hand in these economically difficult times, it may be worth watching whether other state legislatures will feel pressure to adopt similar laws.


Don’t shoot yourself in the foot by asking applicants about their guns

June 5th, 2009  |  Deborah Hammonds

>Job applicants have legal rights under federal and state laws even before they become employees, which is why employers must be careful about what questions they ask applicants during the hiring process. Employers should avoid certain questions because they cannot discriminate in the hiring process based on the applicant’s race, national origin, sex, pregnancy, age, disability, genetic information or religion. State laws may also specify additional protected classes, such as sexual orientation or gender identity. But what about gun ownership? Is that a protected category? Well, it is in Oklahoma.

A law that took effect May 22 prohibits Oklahoma private and public employers from asking job applicants whether or not they own or possess a firearm. Private employers violating the law would be guilty of a misdemeanor, punishable by a fine of up to $1000. Public employers and public officials violating the law would be acting outside the scope of their employment and accordingly barred from seeking immunity under the Governmental Tort Claims Act.

Were Oklahoma applicants facing a barrage of questions about gun ownership? Where did this come from? Sponsored by Rep. Rex Duncan (R-Sand Springs), the bill was introduced in direct response to question 59 in a seven-page, 63-item questionnaire given to Obama Administration job applicants. It asked about gun ownership, including registration information, usage and whether the gun had caused any personal injuries or property damage. The law comes only a few months after the Tenth Circuit’s decision holding that OSHA does not preempt “guns-at-work” amendments to Oklahoma’s Firearms Act and the Oklahoma Self-Defense Act permitting employees to store guns in their locked vehicles on company property.

Quick to respond, the NRA supports the Oklahoma law and is taking the Obama Administration to task over the questionnaire. Why are such questions even necessary, the NRA asks, explaining that if misuse of a gun results in applicants having a criminal record, that would be disclosed in other questions—about criminal investigations, arrests, charges or convictions—asked in the questionnaire. (Note that because arrests and investigations alone aren’t reliable evidence that a person has actually committed a crime, employers shouldn’t reject applicants solely because of a prior conviction unless they can demonstrate a relationship between the conviction and the job requirements).

Peter Hamm, Communications Director for the Brady Center, wonders if the Oklahoma law is simply a “solution in search of a problem.” Are such questions really commonplace in the hiring process of most employers?, asked Hamm, who confirmed that the Brady Center does not ask applicants questions about gun ownership, even if the Obama Administration is vetting applicants differently.

While Oklahoma is the first to recognize gun ownership as a prohibited class, it may not be the last. Senator Jim DeMint (R-SC) has declared his intent to enact federal “legislation to prohibit this type of discrimination,” according to ABC News. What does all this mean? First and foremost, all employers should remember to ask applicants only questions that relate directly to their qualifications and ability to do the job. But, for now, Oklahoma employers had better train their staff not to ask applicants about hunting, target or skeet shooting or any other activities that might include gun ownership.