The effects of employment regulations continue to influence policy discussions. Our attention this week was initially drawn to the topic by this article in GeekWire on challenges to Seattle’s Uber union law. (Also reported by the Puget Sound Business Journal.)
The city of Seattle will ask a federal judge this week to throw out a lawsuit filed by the U.S. Chamber of Commerce over legislation that would allow Uber, Lyft and other “for hire” drivers to unionize.
The U.S. Chamber of Commerce filed the lawsuit in March against the city of Seattle, arguing the legislation violates several federal laws and would “burden innovation, increase prices, and reduce quality and services for consumers.”
Then we read this extended Washington Research Council post reviewing the economic consequences of labor regulation in California, noting that often employment policies can often impose extraordinary burdens and even be in conflict with other regulations. We recommend reading the Research Council post, and will give some highlights here.
The WRC cites some recent research published by the U. S. Chamber.
First, the Chamber looks at how employment regulations affect California’s economy. Some of the findings are more broadly applicable—for example, the report finds that “There is an inverse relationship between the level of state employment regulation and economic performance.”
The WRC highlights the researcher’s conclusion.
…the weight of the evidence indicates that there is a significant connection between labor market regulation and economic performance. Indeed, the evidence suggests that an increasing thicket of labor and employment mandates is jeopardizing the long-run performance of California’s economy.
Pointing to its own 2012 research report reviewing Washington’s “many labor policy mandates,” the WRC says,
As each is considered on a piecemeal basis, their cumulative effect is easy to overlook. Employers cannot afford to discount these costs, however. The economics—the math—is straightforward. And as employers run the calculations, Washington becomes less competitive.
The Council also reviews U.S. Chamber research, done with the International Franchise Association, on the effects of the recent National Labor Relations Board expansion of the definition of “joint employer.” As the WRC explains,
Over the past few years, the National Labor Relations Board (NLRB) has broadened the definition of “joint-employer”—both as regards franchisees and franchisors and companies that contract with other companies.
The expansion, particularly what’s called the BFI standard established in a ruling on Browning-Ferris Industries, has had the presumably unintended consequence of creating problems for companies that have launched their own human resource initiatives to improve working conditions for employees of contractors. The WRC reports,
Meanwhile, Microsoft has filed a brief in the BFI appeal asking the court to reverse the decision. In 2015, Microsoft announced that it would require its large suppliers to provide paid leave to their employees (who work on Microsoft projects). But, since announcing the new policy,
a union representing employees of one of Microsoft’s suppliers demanded that Microsoft engage in collective bargaining with the union. Relying on BFI, and citing Microsoft’s paid leave eligibility criteria for suppliers, the union argued that Microsoft was now a “joint employer” subject to the National Labor Relations Act’s collective bargaining requirements. Microsoft declined on the basis that it is not a joint employer of the supplier’s employees. The union responded by filing an unfair labor practice charge against Microsoft with the NLRB. That charge remains pending. Microsoft’s [corporate social responsibility (CSR)] efforts have thus lead to substantial and growing legal expenses and great uncertainty.
Further, “Companies with existing CSR initiatives now have a strong incentive to terminate them, and others considering such policies will be more likely to table their plans.”
As we wrote in our foundation report,
Washington employers and residents alike place a high priority on the equitable compensation and protection of those in the workforce. Policymakers must carefully consider wage and benefits mandates and system to ensure that such protection are maintained in a cost-effective manner so that employers can create more job opportunities for Washington citizens.
There’s a point at which the higher regulatory standards become a bar too high, leading to job losses and reducing employers’ incentive to adopt innovative, flexible labor policies. The research makes a strong case that the point has been reached and passed.