Outten & Golden: Empowering Employees in the Workplace

Archive for May, 2004

California Executive's Opposition to Minimum Wage Increase Paralleled on the Federal Level

Friday, May 28th, 2004

The California Assembly has just passed a hike in the state minimum wage, to $7.25 (and eventually to $7.75 in 2006) from the current minimum of $6.75. However, even if the proposal passes both houses of the California Legislature, the state’s residents shouldn’t bank on the increase any time soon, as Gov. Arnold Schwarzenegger is expected to veto the increase. California’s difficulties in passing a higher minimum wage are also now echoed on a national level, as the prognosis for passing a federal increase this year is not a strong one.

Strapped with one of the nation’s highest costs of living, and a Democratic-majority legislature, California seems like a natural place for a minimum wage increase to get widespread support, both with the public and the legislature. Moreover, California’s minimum wage is the lowest in the West, with Washington ($7.16), Oregon ($7.05), and Alaska ($7.15) all outpacing California. (See San Jose Business Journal article.) Today’s vote in the Assembly was 45-29, which sends the bill to the Senate, which is acknowledged as more liberal than the Assembly, and likely to pass the bill as well. (See Los Angeles Times article.) With it being an election year, and with the bill’s easy legislative passage, it should be a slam dunk, right?

Not exactly. While Gov. Schwarzenegger (who is not up for reelection this year, unlike many state legislators) has not yet taken a position on the bill, he has said repeatedly that there are already too many regulatory burdens on California businesses. (See San Francisco Chronicle article.) And just having successfully taken on the workers’ compensation system on the basis that rising costs discouraged California firms from expanding payrolls, “I’d be very surprised if he goes with a higher minimum wage,” said political commentator Allan Hoffenblum. (See Forbes article.)

Some of the arguments against raising the minimum wage are fairly tried and true at this point. “We in government can make [higher wages] happen by ordering people to do it,” said Assemblyman Ray Haynes (R-Murrieta). “They will either do it or go out of business. They will either do it or move out of this state.” (See Los Angeles Times article.) Said Assemblyman Tony Strickland (R-Moorpark), “The free market does work, and we do have startup jobs. Not every job in California is supposed to be able to provide for a family of four.” (See San Francisco Chronicle article.) Assembly Democrats countered with statistics showing that of the estimated 1 million Californians who make the minimum wage, more than 60% were 25 or older, and that the same percentage were working full time at those wages. Democrats also argued that raising the minimum wage would keep people off welfare programs. “When wages are kept low, taxpayers make up the difference,” said Assemblywoman Sally Lieber (D-Mountain View), author of the bill. (See Los Angeles Times article.)

Even if the minimum wage increase does not ultimately pass, however, California is still one of only eleven states and the District of Columbia which set a minimum wage above the federal minimum of $5.15 per hour. Some California cities also set minimum wages above the Assembly bill’s target: San Francisco has a minimum wage of $8.50 per hour and a number of California cities have passed “living wage” measures to boost pay for certain workers above the state minimum. (See Forbes article.) In the rest of the country, workers await action by Congress to pass an increase to the federal minimum wage, which may not happen very soon either.

Since the federal minimum wage’s creation as part of the New Deal in 1938, the minimum wage has been raised 25 times, last on Sept. 1, 1997. Only in the period between 1981 and 1990 has it taken longer to raise the minimum wage. (See Houston Chronicle article.) Since the last increase to $5.15, the value of that increase has been completely eaten away, returning the minimum wage to a historically low level in terms of purchasing power. In 2004 dollars, the 1995 minimum wage was worth $5.19, compared to the current $5.15 minimum wage. A full-time worker earning the minimum wage back in 1968, when Congress raised the minimum wage more regularly to keep pace with inflation, would have made the equivalent of $15,431 today: 44% more than today’s full-time minimum wage worker. (See EPI Briefing Paper.) More and more workers are also likely to face the consequences of a low minimum wage in the days to come, as much of the job growth in this country — in such job categories as home health aides, food preparation workers, security guards, cashiers, teachers’ assistants and nursing aides — are on the bottom rungs of the income ladder. (See Houston Chronicle article.)

Senate Republicans have thus far prevented a proposed minimum wage increase, sponsored by Sen. Edward M. Kennedy, from going forward. Even if it were to pass through Congress, it would face a president who feels similarly to California’s Gov. Schwarzenegger. “As governor of Texas, [President George W.] Bush was responsible for the lowest minimum wage in the country. His record is not somebody who’s likely to be pushing this issue,” says Josh Mason, policy director of the Working Families Party. Democratic presidential candidate John Kerry supports a minimum wage increase, however, so the November election will help determine whether workers at the bottom rung see higher wages any time soon. However, as President Franklin Roosevelt pointed out before the first minimum wage law was passed,

No business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By living wages I mean more than a bare subsistence level—I mean the wages of a decent living.

Additional Resources on the Minimum Wage:

Economic Policy Institute: No Longer Getting By:An Increase in the Minimum Wage Is Long Overdue

Working Families Party: $5.15 Is Not Enough

Wild Weeks for Workers in Washington

Wednesday, May 19th, 2004

After weeks of relative quiet in our nation’s capital, at least when it came to workplace issues, those in Washington have been very busy in the last two weeks doing all kinds of things that could affect the workplace in the months and years to come. Whether it’s overtime, judicial nominations, or unemployment benefits, what’s happening now will undoubtedly have an impact on the American worker.

Overtime

As recently reported here, the Department of Labor released its final version of changes to overtime regulations in late April, with the changes slated to go into effect on August 23. When the changes were first released, many questioned whether some of the positive adjustments made from the Administration’s initial proposal would be enough to satisfy critics of the policy. It appears not: while the proposal was significantly improved from its first iteration, it remains problematic and destined to deny workers who now count on overtime the ability to collect overtime in the future.

Sen. Tom Harkin (D-IA), who has been spearheading the fight against the new overtime regulations, chose to continue the fight before the Senate. On May 5, the Senate voted 52-47 to prevent the new regulations from going into effect. (See CNN.com article.) This vote came after a failed Republican effort, led by Sen. Judd Gregg (R-NH) to blunt the impact of the changes by guaranteeing that certain professions would not be affected. That proposal passed 99-0, but was nonetheless deemed insufficient by the Senate majority who supported the Harkin proposal. While it protected a total of 55 job categories at risk under the Department of Labor’s revised proposal, there were another 834 job classifications that remain at risk without specific guarantees of protection.

Things did not proceed so smoothly in the House, however: on two different occasions in the past week, the House has tackled this issue, and despite successful efforts opposing overtime changes a few months ago in the House, this time, the measures failed to pass on two separate occasions. The most recent vote, which took place on Tuesday, May 18, was 216-199 in opposition to Rep. George Miller’s (D-CA) proposal which would require the Labor Department to retain the eligibility of all workers who currently qualify for overtime pay. (See San Francisco Chronicle article.)

So unless something changes in the next few months, the overtime proposal will go into effect in August. However, it being an election year, anything can happen, and what should happen is that the working public speaks out and lets their members of Congress (especially members of the House who are all running for re-election) just how important this issue is.

Extension of Unemployment Benefits

Another hot-button issue in this election year is whether Congress will move to extend unemployment benefits for those who have exhausted their benefits, in an economy where many workers are staying unemployed for longer periods than ever before. It was recently reported that in January 2004, more individuals than ever during the entire 30-year history of reported data exhausted their benefits that month. (See Alameda Times-Star article.) On May 11, the Senate tried to extend benefits, but ultimately came up short: one vote short. The measure to extend benefits actually commended a 59-40 majority, with several Republicans crossing over to support the bill, but 60 votes were needed to overcome Republican objections that the proposal violated last year’s budget resolution. The one missing vote out of 100 senators: Sen. John Kerry, who was on the campaign trail. Democrats charged the vote was a political stunt designed to embarrass Kerry, as several Republicans were reportedly poised to change sides if the bill appeared likely to pass. (See The Hill article.) While supporters vowed to bring the bill to the floor again this year, it remains to be seen what, if any, progress will be made on this issue, given its volatility in an election year. It also remains to be seen whether the voters will blame President Bush’s stewardship of the economy or challenger Kerry’s failure to cast a vote.

JOBS Bill

Yet another recent Congressional vote which could affect workers is the corporate tax measure known in the Senate as the JOBS (Jumpstart Our Business Strength) bill, S. 1637. While the primary purpose of the bill was to ensure the United States did not continue to be fined for its export rules, and that manufacturers affected by the change in tariffs received a tax break instead, the final version contained a large (pork) barrel-full of provisions destined to please almost everyone. The good news is that thanks to NELA’s leadership, the JOBS bill contains a provision that would prevent the taxation of attorneys fees, one of the three key provisions of the Civil Rights Tax Relief Act (HR 1155/S 557) The bill now goes to the House for consideration, as legislators sort through the hundreds of pages of amendments to determine what will make the cut. Some version of the bill is likely to pass, hopefully sooner rather than later, so that the U.S. does not face billions in fines from the World Trade Organization. However, it remains to be seen whether all the additional provisions will be retained by the House.

Judicial Nominations

Workers and their advocates will also need to pay attention to the number of new judges who will soon reach the federal bench as a result of a deal struck in Washington this week. The Senate had been at an impasse when it came to confirming judicial nominees (or any presidential nominees, for that matter), after Sen. Tom Daschle (D-SD) refused to let any nominees come to the Senate floor. Daschle adopted this strategy after President Bush made his second recess appointment to put William Pryor on the 11th Circuit bench, after making a similar appointment of Charles Pickering to the 5th Circuit bench in January. Both Pryor and Pickering were extremely controversial nominees whose nominations had been successfully stalled in the Senate before the President used his appointment power to temporarily install both men on their respective benches, hoping that their lifetime appointment would be easier to attain after both were already serving on their respective courts. However, a deal was struck this week, where the President agrees not to make any more recess appointments of controversial nominees, and the Democrats agree to go ahead allow votes on 25 nominees deemed “non-controversial” to proceed sooner rather than later. (See Reuters article, and Sen. Leahy’s Statement for the list of 25 nominees affected by the deal.)

Unfortunately, one nominee that should have been given a little more scrutiny before being added to the “non-controversial” category is Diane Sykes, who NELA and other civil rights groups have chosen to strongly oppose for her consistent opposition to the rights of employees and individual citizens. (See NELA Position Statement.) It is now anticipated that votes on the remaining controversial nominees, which include Carolyn Kuhl, Priscilla Owen, Brett Kavanaugh, and Janice Rogers Brown will take place after Labor Day, when both sides can attempt to spotlight their differing approaches in close proximity to the November election.

Congress will spend the next week on its Memorial Day recess, so we’ll have a breather, but it should be an interesting summer as legislators position themselves for this fall’s election. So hang on, as it is likely to continue to be a wild ride for a while.

Retiree Health Benefits: An Endangered Species?

Friday, May 7th, 2004

One of the most pressing concerns today for many reaching retirement age is whether they will be able to afford adequate health insurance, given the inadequacies of Medicare. One of the most pressing concerns today for those working for major employers throughout the United States is whether their employer’s promises–the basis for a lifetime of financial planning–will ultimately be kept. Now, as a result of a recent Equal Employment Opportunity Commission decision, retirees from major corporations have both sets of headaches. Retirees who counted on their employer’s promise to provide health benefits with more expansive coverage than Medicare provides will no longer be able to do so if the EEOC’s proposed rule goes into effect.

The types of benefits that retirees can count on when leaving full-time employment for good is now in what can only be termed a freefall. Employees who have spent decades planning their retirement based on employer-provided pensions and health benefits are increasingly finding that their employers want to change the rules, just when it’s too late for the retiree to do much about it. Over the past 20 years, the number of traditional pensions has declined from around 130,000 to about 32,000, with many firms instead substituting 401(k)-type plans, in which the employee contributes his own money (often with an employer match) and bears all of the investment risk. (See Washington Post article.) And for those firms retaining traditional pensions, many are converting them to “cash-balance” plans which limit benefits to those paid in on the employee’s behalf over the years, rather than honoring the expectation long-term employees had about the level of benefits, which in many cases significantly exceeded the “cash-balance” calculation. So for employees already wondering if they will have enough money to adequately fund their retirement despite what they’ve been told over the years, the news that they may now have to assume significant health care expenses they believed would be covered by their employer’s insurer is nothing less than terrifying.

But that’s precisely what this group of employees now have to worry about, after the EEOC’s ruling on April 23. The EEOC had been asked to issue an opinion on whether employers could reduce health benefits for retirees who have become eligible for Medicare (generally at age 65) without running afoul of the Age Discrimination in Employment Act, which prohibits discrimination against older workers. Prior to the year 2000, there were conflicting views about whether employers could have different tiers of benefits for their younger and older retirees, but it was the EEOC’s view that these arrangements were illegal. In 2000, the Third Circuit Court of Appeals was the first federal appeals court to rule that an employer violated the ADEA if it reduced or eliminated retiree health benefits when retirees became eligible for Medicare, unless the employer could show either that the benefits available to Medicare-eligible retirees were equivalent to the benefits provided to retirees not yet eligible for Medicare or that it was expending the same costs for both groups of retirees. (See Erie County Retirees Ass’n v. County of Erie.) Following this ruling, the position taken by the Erie court was formally adopted as the position of the EEOC.

But some groups weren’t satisfied with that. Employer groups, and even some labor groups, lobbied the EEOC by claiming that if they were forced to pay equal benefits to all retirees, they would be forced to reduce or eliminate coverage altogether, especially since they were not bound by law to offer retiree health coverage at all. So last summer, the EEOC announced its intent to reconsider its policy, and withdrew its prior policy determination. Notably, the composition of the EEOC also changed in the intervening time period between 2000 and 2003, with President Bush now having replaced all of President Clinton’s former appointees to the Commission.

The EEOC’s new determination, the result of a 3-1 vote, demonstrates that the lobbying has paid off, because the EEOC has staked its position on the belief that unless employers are allowed to make distinctions between younger and older retirees due to Medicare eligibility, they will not offer retiree health coverage at all. According to Commission Chair Cari M. Dominguez, “This rule is intended to ensure that the ADEA does not have the unintended consequence of discouraging employers from providing valuable health benefits to retirees.” (See EEOC Press Release.) The dissenting vote came from Commissioner Stuart Ishimaru, the lone Democratic appointee on the commission, who said “I came to the commission as a civil rights lawyer. Before making an exemption to a major civil rights law, you need a compelling reason, which I have not seen.” (See CBS News article.)

Given that the question posed was whether the practice of setting up differential benefits was age discrimination, the rationale for the policy was truly puzzling. When an employer creates one set of benefits for a younger set of employees, and another set of benefits for an older set of employees, it is clearly discriminating against the older set of employees. All an employer was required to do, in order to comply with current law, is either spend the same amount on each type of coverage, or create ensure equal coverage (which could be done at significantly less costs for older retirees, given their Medicare eligibility.)

The upshot of the EEOC’s ruling, then, is that discrimination isn’t discrimination if it saves the employer a lot of money (even more than they’re already saving by virtue of Medicare’s existence.) So what employers were really asking to be able to do is shift the burden of health care costs to those employees least able to assume it–those over 65, whose employment options are most limited and whose health care costs are likely to be highest–and who least deserve it, given the many additional years of promises they’ve heard along the way. What’s more, the ruling doesn’t even guarantee that employers won’t still drop retiree health coverage, which of course isn’t getting any cheaper. One could argue that the decision only delays the inevitable day when no retiree will be able to expect health care coverage from their employer at the end of a lifetime of work, and instead will spend their retirement years choosing between the comfortable retirement they had planned and paying for health care to extend their much less comfortable existence.

The ruling will go into effect in the next week or two, and AARP, the advocacy organization for older Americans, has vowed to fight it. (See AARP Bulletin.) It remains to be seen whether courts will believe that the EEOC extended its authority, as AARP and other groups claim, by issuing a ruling on health care benefits rather than focusing on its mandate to interpret anti-discrimination laws. But regardless of what happens, retirees need to focus their efforts on staying healthy, because there’s not much left in the way of protection for those who aren’t.

Additional Articles:

Charlotte Observer: Prepared to be Healthy Retiree?

Baxter Bulletin (AR): Employers, Retirees Still Trying to Gauge Rule Change

Minneapolis Star-Tribune: Sorting Out Ruling on Retiree Benefits

San Jose Mercury News: EEOC Defends Ruling on Retiree Benefits

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