Outten & Golden: Empowering Employees in the Workplace

SEC Orders Company to Pay $500K For Whistleblower Retaliation

October 7th, 2016 | Jason Zuckerman



This past week, the SEC brought its first enforcement action ever to be based solely on retaliation against a whistleblower.  On September 29, 2016, the SEC ordered International Game Technology (IGT) to pay a $500,000 penalty for terminating the employment of a whistleblower because he reported to senior management and the SEC that the company’s financial statements might be distorted.  Though this is the second time the SEC has exercised its authority under the Dodd-Frank Act to redress whistleblower retaliation, it is the SEC’s first stand-alone retaliation case.  The enforcement action underscores the high value the agency places on whistleblowers and indicates that the SEC Office of the Whistleblower will remain an aggressive advocate for whistleblowers under its new director, Jane Norberg.


The whistleblower joined IGT in 2008.  When IGT terminated his employment on October 30, 2014, the whistleblower was a division director with a budget of more than $700 million and supervisory responsibility for up to eleven direct reports.  Throughout his tenure at IGT, he received exceptional ratings and was described as the VP’s Supervisor’s top employee, as a “high potential” employee, and as an employee with a potential “future assignment” at the vice-president level.  In addition, IGT even sought authorization from senior resources managers to pay him a special retention bonus.

Starting in June 2014, the whistleblower led several projects to determine whether it was cheaper for IGT to refurbish used parts using outside vendors or through internal refurbishment.  During the project, the whistleblower became concerned that IGT was improperly accounting for costs associated with refurbished used parts.  Although the whistleblower was not an accountant in the company, he reasonably believed that the company’s current method resulted in a $10 million discrepancy in the financial statements.

On July 30, 2014, the whistleblower reported his findings to his supervisors during a presentation.  After raising concerns about the accounting method and its impact on the financial statements, the whistleblower had a heated disagreement with the executive supervisor on the issue.  Immediately following the meeting, the executive supervisor emailed the whistleblower’s supervisor regarding the presentations, stating that, “I can’t allow [the whistleblower] to place those inflammatory statements into presentations, if there is not basis in fact.”

Thereafter, IGT conducted an internal investigation into the allegations made by the whistleblower.  During the investigation, IGT retaliated against the whistleblower by removing him from job opportunities that were significant to performing his job successfully.  On October 31, 2016, the internal investigation concluded that IGT’s cost accounting model was appropriate and did not cause its financial statements to be distorted.  That same day, IGT terminated the whistleblower.

SOX’s Reasonable Belief Standard Provides Broad Protection

Although the whistleblower’s concern was ultimately incorrect, he was still protected under the SEC Whistleblower Program because he reasonably believed that IGT’s cost accounting model constituted a violation of federal securities laws.  Recently, the trend in federal courts has been to broadly construe protected activity under this reasonable belief standard.  This is a departure from the previous requirement that whistleblowers “definitively and specifically” identify the alleged violation at issue, which undermined potential whistleblowing.

The courts’ broad interpretation of the reasonable belief standard is important because whistleblowers’ must be free to make good faith disclosures, even if they end up being wrong.  As Andrew J. Ceresney, director of the SEC’s Division of Enforcement, said, “[s]trong enforcement of the anti-retaliation protections is critical to the success of the SEC’s whistleblower program.  This [IGT] whistleblower noticed something that he felt might lead to inaccurate financial reporting and law violations, and he was wrongfully targeted for doing the right thing and reporting it.”

Similarly, Jane A. Norberg, Chief of the SEC’s Office of the Whistleblower, stated that “[b]ringing retaliation cases, including this first stand-alone retaliation case, illustrates the high priority we place on ensuring a safe environment for whistleblowers.  We will continue to exercise our anti-retaliation authority when companies take reprisals for whistleblowing efforts.”

Prior SEC Enforcement Action for Whistleblower Retaliation

The IGT enforcement action is consistent with an SEC enforcement action against hedge fund advisory firm Paradigm Capital Management (“Paradigm”), which also redressed whistleblower retaliation.  On June 16, 2014, the SEC announced that it was taking enforcement action against Paradigm for engaging in prohibited principal transactions and for retaliating against the whistleblower who disclosed the unlawful trading activity to the SEC.

According to the order, Paradigm retaliated against its head trader for disclosing, internally and to the SEC, prohibited principal transactions with an affiliated broker-dealer while trading on behalf of a hedge fund client. The transactions were a tax-avoidance strategy under which realized losses were used to offset the hedge fund’s realized gains.

When Paradigm learned that the head trader had disclosed the unlawful principal transactions to the SEC, it retaliated against him by removing him from his position as head trader, changing his job duties, placing him on administrative leave, and permitting him to return from administrative leave only in a compliance capacity, not as head trader. The whistleblower ultimately resigned his position.

Paradigm settled the SEC charges by consenting to the entry of an order finding that it violated the anti-retaliation provision of Dodd-Frank and committed other securities law violations, agreeing to pay more than $1 million to shareholders and to hire a compliance consultant to overhaul their internal procedures, and entering into a cease-and-desist order.

The SEC’s press release accompanying the order includes the following statement by Enforcement Director Ceresney: “Those who might consider punishing whistleblowers should realize that such retaliation, in any form, is unacceptable.” The Paradigm enforcement action suggests that whistleblower retaliation can result in liability far beyond the damages that a whistleblower can obtain in a retaliation action and that retaliation can invite or heighten SEC scrutiny.

These enforcement actions signal to companies that retaliating against a whistleblower can result not only in a private suit brought by the whistleblower, but also in a unilateral SEC enforcement action.  The IGT action in particular indicates that employers cannot take adverse actions against whistleblowers, even when the underlying disclosure is in error.

For more information about whistleblower protections and whistleblower rewards, call the whistleblower lawyers at Zuckerman Law at 202-262-8959.

This blog originally appeared at ZuckermanLaw.com on October 4, 2016. Reprinted with permission.

Jason Zuckerman, Principal of Zuckerman Law, litigates whistleblower retaliation, qui tam, wrongful discharge, discrimination, non-compete, and other employment-related claims. He is rated 10 out of 10 by Avvo, was recognized by Washingtonian magazine as a “Top Whistleblower Lawyer” in 2007 and 2009 and selected by his peers to be included in The Best Lawyers in America® and in SuperLawyers.


Fight for $15 workers file sexual harassment complaints against McDonald's

October 6th, 2016 | Laura Clawson


Workers who are underpaid are all too often exploited and abused in other ways—after all, their employers know they’re vulnerable and need the paycheck. So we should be shocked, but not too surprised, by the contents of sexual harassment complaints against McDonald’s that the Fight for $15 has filed with the Equal Employment Opportunity Commission:

Cycei Monae, a McDonald’s worker in Flint, Michigan, said a manager showed her a picture of his genitals and said he wanted to “do things” to her, according to a complaint provided by Fight for $15. Corporate officials ignored her complaints, Monae said on a phone call with reporters on Wednesday.

In another complaint, a worker in Folsom, California, said a supervisor offered her $1,000 for oral sex.

Thirteen of the complaints were by women, and two were by men, said Fight for $15, which the Service Employees International Union formed in 2012.

gettyimages-496499558Expect McDonald’s to once again fall back on its excuse that it can’t possibly control anything about what franchisees do to their workers, even as it controls every other aspect of how franchise restaurants operate. That control is why the National Labor Relations Board has said McDonald’s should be treated as a joint employer of workers in franchise restaurants.

Issues like sexual harassment are why the Fight for $15 isn’t just about $15 an hour pay—workers say they’re fighting for “$15 and a union.” A union could represent workers facing harassment and give them power in numbers and tools to fight back. This is a fight more broadly for power and respect. Money is part of that, but it’s not the whole deal.

This article originally appeared at DailyKOS.com on October 5, 2016. Reprinted with permission.

Laura Clawson is a Daily Kos contributing editor since December 2006. Labor editor since 2011.


A governor just sued his own attorney general over LGBT employment protections

October 5th, 2016 | Zack Ford

pphlnood_400x400The attorney general said he wasn’t going to stop blocking contracts unless he was sued, so the governor sued.

Louisiana’s governor just sued its attorney general over whether lawyers the state hires should be allowed to discriminate against LGBT people.

If that sounds odd, that’s because it is. And though there’s an easy moral answer to the conundrum, the legal answer might be far more complicated.

Gov. John Bel Edwards (D) was elected last year to succeed Bobby Jindal (R). One of the first things he did when taking office was reverse Jindal’s anti-LGBT policies, including Jindal’s executive order allowing businesses to discriminate against same-sex couples without any consequence from the state. Edwards then issued his own executive order protecting state workers and contractors from discrimination on the basis of sexual orientation and gender identity. It was nearly identical to President Obama’s 2014 executive order protecting LGBT federal employees and contractors, as well as Louisiana gubernatorial executive orders protecting LGB state employees that were in place before Jindal rescinded them in 2008.

But despite both the state and federal precedent for such executive action, Attorney General Jeff Landry (R) wasn’t having it. Prompted by anti-LGBT lawmakers opposed to both Edwards’ executive order and the Obama administration’s guidance protecting transgender students, he issued an eight-page opinion in May declaring that neither was legally enforceable in the state.

“The brief answer is an Executive Order cannot expand or create state law,” Landry wrote. “‘Gender identity’ is not and has never been a legally protected class under state or federal anti-discrimination laws.” He insisted that the order protecting LGBT employees “should be interpreted as merely aspirational and without any binding legal effect.”

Even giving Landry the benefit of the doubt that he was just trying to check the power of the executive, his own anti-LGBT biases are not in doubt. He also said that the federal transgender guidance “creates an environment in which children may be more easily exposed to sexual predators.” Rules simply affirming transgender students’ identities “place the mental well-being and privacy rights of ninety-nine percent of Louisiana’s children at risk without any demonstrable evidence of benefit to the less than one percent of the population this policy purports to benefit.”

For the past four months, Landry and Edwards have engaged in this standoff, warring over state legal contracts. Edwards keeps including LGBT nondiscrimination language in proposed contracts with private lawyers, and Landry keeps blocking them specifically because of this language. He hasblocked at least 37 contracts, including 11 from the Department of Insurance. Defending his actions, Landry’s office has asserted, “The Attorney General requires antidiscrimination clauses in legal contracts to be written in conformity with State and Federal law, therefore, these provisions should not contain language exceeding what the law requires.”

Matthew Block, general counsel for the Edwards administration, explained last week that these blocked contracts are starting to have a big impact on the management of the state. “We have a lot of things that need to get attended to and we need to have people doing their work,” he told NOLA.com. “I have law firms not getting paid for the work that they are doing. I have law firms that are waiting around to start work.”

1-ttjhkebbo9sxiijhid_lyaSo on Friday, Edwards sued Landry in state court. At a press conference Friday, he was pretty blunt about the standoff. “He basically told me that if I wanted him to approve those contracts that I would have to sue him,” Edwards said. “So I’m obliging him on that.”

The lawsuit states that Landry “has refused to perform the ministerial task of approving private contracts and appointing private counsel for numerous executive agencies of the State.” He has “explicitly rejected most of the contracts on the grounds that the contracting attorneys should not have agreed not to discriminate in employment and the rendering of services” in accordance with the executive order. In other words, the lawyers who would be impacted by the LGBT protections have already agreed to them, but Landry has still denied the contracts because that language is in them.

The conflict is spurring some interesting political divisions. For example, Louisiana Senate President John Alario (R), voted against LGBT nondiscrimination protections in the legislature, but he told NOLA.com that he believes the governor isn’t overstepping his authority. It’s Landry, he said, who he thinks “is stepping out of bounds.”

Landry has stood by his actions, saying in an interview that he looks forward to “defending the legislature and their priorities and their wishes.” He added that he believes the protections create “additional liabilities and expenses for the state,” but refused to answer questions about his own position on protecting LGBT people from discrimination.

It will now be up to the state courts to resolve the conflict, or at least to interpret whether Landry is within his authority as attorney general to rebuff the executive order. It could, however, be the first time that a court weighs the validity of an executive order that protects workers from discrimination.

But Louisiana is hardly an outlier for the actions Edwards took. There are 12 other states that, through executive order or similar administrative regulation, extend employment protections to state employees on the basis of sexual orientation or gender identity that exceed protections under state law. And of course, past Louisiana governors protected sexual orientation without having to sue their attorneys general to enforce them.

This article was originally posted at Thinkprogress.org on October 5, 2016.
Reprinted with permission

Zack Ford is the LGBT Editor at ThinkProgress.org. Gay, Atheist, Pianist, Unapologetic “Social Justice Warrior.” Contact him at zford@thinkprogress.org. Follow him on Twitter at @ZackFord.



Contract for Disaster: How Privatization Is Killing the Public Sector

October 4th, 2016 | S.E. Smith

mtm0ndg4mjmzmzyxodm5mzc4Privatization is bad news for federal, state and local government workers, and the communities where they live. That’s according to a new report released Wednesday by In the Public Interest, a research group focused on the effects of privatization.

The study, “How Privatization Increases Inequality,” explores the role privatization plays in the American economy—compiling data on the estimated $1.5 trillion of state and local contracts doled out each year.

“A lot of decisions are small,” says Donald Cohen, executive director of In the Public Interest, but “if you add all that up, it’s very significant.”

Many government workers in the United States enjoy a robust structure of pay and benefits, including pensions, health care and paid time off. Workers operate in a structured environment that acts, as the report says, as a ladder of opportunity. A clearly outlined framework of positions and pay grades, backed by enforcement of antidiscrimination laws, makes government jobs particularly friendly to women and people of color—20 percent of public sector jobs are held by Black workers, while nearly 60 percent of public sector jobs are held by women.

(Joe Brusky/ Flickr)

(Joe Brusky/ Flickr)

For decades, work in the public sector has been a gateway to a middle-class life. But that’s changing.

Cohen notes that the Right managed to make privatization an ideological project. This shift has generated huge profits for corporations and harmed public sector workers and their unions.

“They want to contract out not because it makes sense, but because that’s their jobs. They’re right-wingers,” he says.

Privatized workers have lower rates of unionization, are paid less than their publicly-employed counterparts, don’t have access to benefits and experience high turnover, the report shows. Sometimes they work side-by-side with government employees, as at the University of California system, something that Cohen says is deliberate.

“Part of the strategy of management is to contract out part of the work to keep the pressure on the non-contract part of the work,” he says.

That strategy leaves workers shortchanged—literally. In 2013, the National Employment Law Project found that one in five federal contractors it interviewed was using Medicaid for health care, while 14 percent needed Supplemental Nutrition Assistance (SNAP). Reliance on federal benefits shifts costs from employers to taxpayers.

Contract employees are caught in a poverty trap that hurts not just them, but their communities. Workers who aren’t making money aren’t spending it, dragging down local businesses and creating a ripple effect in regional economies.

The report argues that poor recordkeeping and limited transparency make it extremely difficult to gauge the effects of contracting, and that the public needs to have access to such information. Legislators, advocates, unions and workers should be invested in how, when, where and why contract labor is used.

Is it improving services while keeping standards high for workers? Or is it being used as an ostensible cost-cutting measure, harming workers and shifting expenses to taxpayers and their communities?

We’re seeing a new era of work in America, and the move to contractors over directly-employed government workers is highlighting that shift as well as its consequences. For government workers, privatization is an economic shell game, and they are losing.

This blog originally appeared at inthesetimes.com on September 28, 2016. Reprinted with permission.

S.E. Smith is an essayist, journalist and activist is on social issues who has written for The Guardian, Bitch Magazine, AlterNet, Jezebel, Salon, the Sundance Channel blog, Longshot Magazine, Global Comment, Think Progress, xoJane, Truthout, Time, Nerve, VICE, The Week, and Reproductive Health Reality Check. Follow @sesmithwrites.


Uber And Lyft Drivers Organize To Fight Exploitation

October 3rd, 2016 | Dave Johnson

“Gig economy” corporations depend on a low-wage economy in which lots of people are looking for ways to get by. Their business model requires disposable people willing to take low-wage jobs with long hours and no benefits so they can pay the rent, doing things for people who need to save as much as they can, so they can pay the rent.

For example, if you’re driving for “ride share” companies like Uber or Lyft, those companies are making serious money. Meanwhile you’re probably working a lot of hours just to make rent. You drive for them, you obviously are an employee, but they say are a “contractor.” Contractors are basically employees who don’t get benefits, have to pay much more into Social Security, have to withhold their own taxes and pay them quarterly, can’t claim unemployment, don’t get Workers Compensation if injured on the job and many other disadvantages. There isn’t even a limit on the hours they work and they can’t get overtime.

The drivers (and other “contractors” around the country) say they are employees and deserve the rights and benefits of employees. Uber and other big corporations that exploit their workers as a business model claim their employees are “contractors” with no rights. Various courts, agencies, departments, etc are working to determine if they will be classified as employees or contractors.

Uber and Lyft Drivers Fighting To Unionize

Uber and Lyft drivers are fighting to do something about this and the best way to do something when you are being exploited on the job is to join a union so you are not fighting alone. In New York, for example, 14,000 Uber and Lyft drivers have signed up to say they want to join the local Amalgamated Transit Union (ATU) branch.

ATU’s website says,

“Founded in 1892, the ATU today is comprised of over 190,000 members, including: metropolitan, interstate, and school bus drivers; paratransit, light rail, subway, streetcar, and ferry boat operators; mechanics and other maintenance workers; clerks, baggage handlers, municipal employees, and others.”

Buzzfeed has the Uber/Lyft/ATU story, in Nearly 14,000 Uber And Lyft Drivers Sign Union Cards In New York

Nearly 14,000 Uber and Lyft drivers in New York have signed up to join the local branch of the Amalgamated Transit Union, according to a union spokesperson. The group plans to rally at the NYC Taxi and Limousine Commission (TLC) headquarters next week to demand a formal vote on unionizing.

The 14,000 sign-ups exceed the 30 percent threshold that federal regulators say must trigger an official vote, the union says. The cards signed by drivers indicate that they seek ATU membership and authorize the union to act as their collective bargaining agent.

The ATU’s Local 1181 is asking the Taxi and Limousine Commission (TCL) to force Uber and Lyft to allow a union vote. Crain’s New York Business explains why, in Union seeks to organize rideshare drivers in NYC,

In a letter to the commissioner that was delivered on Tuesday, Local 1181 President Michael Cordiello asked the TLC to “schedule and conduct a free and fair election for the drivers of these corporations to determine whether they choose to be represented” by the union.

“We make this demand in conformance with the stated mission of the TLC,” he wrote, citing its status as “the agency responsible for licensing and regulating” the city’s taxis and car services.

In an interview, Cordiello added that Tuesday’s rally was only the first step in the union’s strategy.

“There are a lot of other ways we can accomplish this, such as legislation,” he said in a reference to the ordinance passed in December in Seattle that entitled Uber and Lyft drivers to union representation. “We are unfolding what we believe will be a new direction for labor and for the technology work force.”

Drivers and the ATU Local held a rally Tuesday at the TLC office in Long Island City. Vice News covered that, in NYC Uber and Lyft drivers are protesting for union rights,

Drivers for the ride-hailing service Uber turned out in the streets of Queens on Tuesday morning, demanding their right to unionize outside the New York City Taxi and Limousine Commission in Long Island City.

“We demand living wage fares, no pool fares, protection from exploitation, union representation,” read one big green sign held up by one Uber driver, a middle-aged black man with a tan jacket and blue pork pie hat.

The ride-share workers — categorized as “independent contractors” rather than employees by tech companies like Uber and Lyft — had joined up with the Amalgamated Transit Union Local 1181, which represents city bus drivers. Copies of over 14,000 signed union cards sat in a fat bundle on the table in the center of the demonstration, 10,000 cards thicker since May.

The rally had the flavor of a protest,

It was an old-fashioned rally. The ride-share workers, joined by bus drivers, marched in front of the Taxi Commission barking out chants from a bullhorn. Cop cars flanked either side of the street as people who worked inside the Commission building slowed down to check out the protest.

A few passing Uber and Lyft drivers liked what they heard and waded into the demonstration to sign union cards.

“I support this,” said Jaydip Ray, 36, a skinny guy with a blue hoodie, moments after walking away from joining up, as another young man took his place. “We need benefits. Without benefits, we don’t have any future.”

The “gig economy” means that big corporations make billionaires, while their workers are called “contractors” who have no rights and don’t make squat. It’s one more way the system has been rigged.

This post originally appeared on ourfuture.org on September 30, 2016. Reprinted with Permission.

Dave Johnson has more than 20 years of technology industry experience. His earlier career included technical positions, including video game design at Atari and Imagic. He was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.


Will Artificial Intelligence Mean Massive Job Loss?

September 30th, 2016 | Arthur MacEwan

arthurmacewan_cla_fall2012_hb_bioIn the late 1970s, my early years at the University of Massachusetts Boston (UMB), the Department of Economics had two secretaries. When I retired, in 2008, the number of faculty members and students in the department had increased, but there was only one secretary. All the faculty members had their own computers, with which they did much of the work that secretaries had previously done.

I would guess that over those thirty years, the number of departmental secretaries and other secretaries in the university declined by as many as 100, replaced by information technology—what has now become the foundation of artificial intelligence. As I started writing this column, however, I looked on the university’s web site and counted about 100 people with jobs in various parts of the Information Technology Department. Neither this department nor those jobs existed in my early years at UMB. The advance in technology that eliminated so many secretaries also created as many jobs as it eliminated—perhaps more.

My little example parallels the larger and more widely cited changes on U.S. farms in the 20th century—a century when the diesel engine, artificial fertilizers, and other products of industry reduced the percentage of the labor force working on farms from 40% to 2%. No massive unemployment resulted (though a lot of horses, mules, and oxen did lose their jobs). The great expansion of urban industrial production along with the growth of the service sector created employment that balanced the displacement of workers on the farms.

Other cases are cited in debates over the impact of artificial intelligence, examples ranging from handloom weavers’ resistance to new machinery in the early stages of the Industrial Revolution to a widespread concern about “automation” in the 1960s. Generally, however, the new technologies, while displacing workers in some realms of production, also raised productivity and economic growth. There has, as a result, been increased demand for old products and demand for new products, creating more and different jobs.

Historically, it seems, each time prophecies foretold massive unemployment resulting from major technological innovations, they turned out to be wrong. Indeed, often the same forces that threatened existing jobs created new jobs. The transitions were traumatic and harmful for the people losing their jobs, but massive unemployment was not the consequence.

Is This Time Different?

Today, as we move further into the 21st century, many people are arguing that artificial intelligence—sophisticated robotics—is different from past technological shifts, will replace human labor of virtually all types, and could generate massive unemployment. Are things really different this time? Just because someone, once again, walks around with a sign saying, “The world is about end,” doesn’t mean the world really isn’t about to end!

In much of modern history, the substitution of machines for people has involved physical labor. That was the case with handloom weavers in the early 19th century and is a phenomenon we all take for granted when we observe heavy machinery, instead of hand labor, on construction sites. Even as robotics entered industry, as on automobile assembly lines, the robots were doing tasks that had previously been done with human physical labor.

“Robotics” today, however, involves much more than the operation of traditional robots, the machines that simulate human physical labor. Robots now are rapidly approaching the ability, if they do not already have it, to learn from experience, respond to changes in situations, compare, compute, read, hear, smell, and make extremely rapid adjustments (“decisions”) in their actions—which can include everything from moving boxes to parsing data. In part, these capabilities are results of the extreme progress in the speed and memory capacity of computers.

They are also the result of the emergence of “Cloud Robotics” and “Deep Learning.” In Cloud Robotics, each robot gathers information and experiences from other robots via “the cloud” and thus learns more and does so more quickly. Deep Learning involves a set of software that is designed to simulate the human neocortex, the part of the brain where thinking takes place. The software (also often cloud-based) recognizes patterns—sounds, images, and other data—and, in effect, learns.

While individual robots—like traditional machines—are often designed for special tasks, the basic robot capabilities are applicable to a broad variety of activities. Thus, as they are developed to the point of practical application, they can be brought into a wide variety of activities during the same period. Moreover, according to those who believe “this time is different,” that period of transition is close at hand and could be very short. The disruption of human labor across the economy would happen virtually all at once, so adjustments would be difficult—thus, the specter of massive unemployment.


People under thirty may take much of what is happening with information technology (including artificial intelligence) for granted, but those of us who are older find the changes awe-inspiring. Nonetheless, I am persuaded by historical experience and remain skeptical about the likelihood of massive unemployment. Moreover, although big changes are coming rapidly in the laboratories, their practical applications across multiple industries will take time.

While the adoption of artificial technology may not take place as rapidly and widely as the doomsday forecasters tell us, I expect that over the next few decades many, many jobs will be replaced. But as with historical experience, the expansion of productivity and the increase of average income will tend to generate rising demand, which will be met with both new products and more of the old ones; new jobs will open up and absorb the labor force. (But hang on to that phrase “average income.”)

Real Problems

Even if my skepticism is warranted, the advent of the era of artificial intelligence will create real problems, perhaps worse than in earlier eras. Most obvious, even when society in general (on average) gains, there are always losers from economic change. Workers who get replaced by robots may not be the ones who find jobs in new or expanding activity elsewhere. And, as has been the case for workers who lost their jobs in the Great Recession, those who succeed in finding new jobs often do so only with lower wages.

Beyond the wage issue, the introduction of new machinery—traditional machines or robots—often affects the nature and, importantly, the speed of work. The mechanized assembly line is the classic example, but computers—and, we can assume, robotics more generally—allow for more thorough monitoring and control of the activity of human workers. The handloom weavers who opposed the introduction of machines in the early 19th century were resisting the speed-up brought by the machines as well as the elimination of jobs. (The Luddite movement of Northwest England, while derided for incidents of smashing machines, was a reaction to real threats to their lives.)

More broadly, there is the question of how artificial intelligence will affect the distribution of income. However intelligent robots may be, they are still machines which, like slaves, have owners (whether owners of physical hardware, patents on the machines, or copyrights on the software). Will the owners be able to reap the lion’s share of the gains that come with the rising productivity of this major innovation? In the context of the extremely high degree of inequality that now exists as artificial intelligence is coming online, there is good reason for concern.

As has been the case with the information technology innovations that have already taken place—Microsoft, Apple, Google, and Facebook leap to mind—highly educated or specially skilled (or just lucky) workers are likely to share some of the gains from artificial intelligence. But with the great inequalities that exist in the U.S. educational system, the gains of a small group of elite workers would be unlikely to dampen the trend toward greater income inequality.

Income inequality in the United States has been increasing for the past 40 years, and labor’s share of total income has fallen since the middle of the last century—from 72% in 1947 to 63% in 2014. The rise of artificial intelligence, as it is now taking place, is likely to contribute to the continuation of these trends. This has broad implications for people’s well-being, but also for the continuation of economic growth. Even as average income is rising, if it is increasingly concentrated among a small group at the top, aggregate demand may be insufficient to absorb the rising output. The result would be slow growth at best and possibly severe crisis. (See “Are We Stuck in an Extended Period of Economic Stagnation?” D&S, July/August 2016.)

Over the long run, technological improvements that generate greater productivity have yielded some widely shared benefits. In the United States and other high-income countries, workers’ real incomes have risen substantially since the dawn of the Industrial Revolution. Moreover, a significant part of the gains for workers has come in the form of an increase in leisure time. Rising productivity from artificial intelligence holds out the possibility, in spite of the trends of recent decades, for a shift away from consumerism towards a resumption of the long-term trend toward more leisure—and, I would venture, more pleasant lives.

Yet, even as economic growth over the past 200 years has meant absolute gains for working people, some groups have fared much better than others. Moreover, even with absolute gains, relative gains have been limited. With some periods of exception, great inequalities have persisted, and those inequalities weigh heavily against the absolute rises in real wages and leisure. (And in some parts of the last two centuries—the last few decades in particular—gains for working people have followed from rising productivity and economic growth.)

So even though I’m skeptical that artificial intelligence will generate massive unemployment, I fear that it may reinforce, and perhaps increase, economic inequality.

This article originally appeared at dollarsandsense.org on September 29, 2016. Reprinted with permission.

 is professor emeritus of economics at UMass-Boston and a Dollars & Sense Associate.


No Justice, No Peeps! Workers Walk Off the Job At Pennsylvania Peeps Factory

September 28th, 2016 | Mario Vasquez

Mario VasquezWorkers employed by candy manufacturer, Just Born Quality Confections, in Bethlehem, Pennsylvania, are on strike over the company’s pension plan proposal. The strike, workers allege, hits the company—which makes Peeps, as well as Mike and Ike and Hot Tamales candies—just as next year’s Easter orders are meant to be made.

“This is my livelihood,” says Alex Fattore, a mechanic who has been at Just Born since 1980. “We make Easter happen. I want to go back in there and make Easter happen.”

Roughly 400 workers walked off the job September 7, drawing a hard line against the company’s attempt to switch new hires to a 401(k), instead of the multiemployer pension plan that workers are presently a part of. They are represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM) Union Local 6.

The company claims that it’s concerned about the pension plan’s long-term viability. The plan reported assets of $5 billion and liabilities of $8 billion, and projected insolvency within 14 years, according to the company. The union, however, counters that the company is not allowed to put pension details on the negotiating table, per pension fund rules. The company is pushing its plan as a part of collective bargaining negotiations for an agreement that expired in June.

“The company is growing,” says chief shop steward Keith Turner, a machinist with 21 years of Just Born experience, alluding to its claims of double-digit growth. “It’s kind of ironic that they would turn around now and tell us that they can’t afford anything.”

Workers additionally claim that if the move to a 401(k) plan for new hires were to go into effect, it would only further weaken the multiemployer pension fund, forcing the fund’s trustees to reduce retiree benefits.

Just Born did not respond to a request to comment, but it released a statement that read, in part: “Our proposal—to have existing associates remain in the current pension plan and to have future hires participate in a 401(k) plan—provides a respectful path that honors our current associates’ existing benefits, and provides a sustainable retirement benefit for our future hires.”

“It’s the equivalent of—let’s say you signed a 30-year mortgage, and after 20 years you decide, you know I don’t want to pay this part of it anymore so I’m just not going to—and you just can’t do that,” Turner tells In These Times.

The Pennsylvania AFL-CIO has called for a boycott of Just Born products.

While this is the first strike at a Just Born facility in decades, this is not the first time the company has attempted to impose a change in pension plans, according to union officials. Last year, the company implemented a final contract including the same 401(k) plan proposed at the Bethlehem plant, after declaring an impasse in its contract negotiations with the roughly 35 workers at its Goldenberg’s Peanut Chews factory in Philadelphia. BCTGM challenged the change with the National Labor Relations Board but was denied, leading the union to take the matter to federal court in a case that is still pending, a year and a half later.

“We’ll say, a few years from now, if we didn’t stand up and stand our ground—that we had the opportunity to stand our ground with this company and say we aren’t going to take this,” Fattore tells In These Times. “We’re going to stand our ground and we’re going to fight (for) what’s right.”

Since workers voted to strike, they have tried to keep up morale. An unfair labor practice charge was filed by Local 6 after allegedly discovering that an individual affiliated with Just Born contacted striking workers, posing as a union official, telling them to return to work. The complaint, filed with the National Labor Relations Board, is pending.

Another, more public, company action that is causing substantial worry among striking Just Born workers is the hiring of replacement workers at the facility, with about 175 reportedly attending a job fair and another 600 applying for jobs online. As of press time, both sides have agreed to come back to the bargaining table alongside a federal mediator this week.

“We pretty well know from people inside, and from what we can see on the outside, that they haven’t made a Peep yet,” says Turner. “The longer that this goes on, the more squeezed that they are for their Peep production. We’re hoping that a little bit of hunger from us, and a little bit of hunger from them, makes something happen.”

This blog originally appeared at inthesetimes.com on September 27, 2016. Reprinted with permission.

Mario Vasquez is a writer from southern California. He is a regular contributor to Working In These Times. Follow him on Twitter @mario_vsqz or email him atmario.vasquez.espinoza@gmail.com.


Trying to Teach Old Dogs New Tricks

September 26th, 2016 | William Spriggs

Last December, after a long period of keeping the Fed funds rate near zero, the FOMC voted unanimouslyto raise the Fed funds rate by one-quarter to one-half points. It was anticipated that would be the first in a series of increases of similar small amounts. But, over the course of this year, the economy has run rather flat. Employment in the areas sensitive to interest rates like construction and manufacturing, after employment gains during 2015, ran flat. Durable goods manufacturing, which had been declining during 2015, continued to fall. In 2015, the unemployment rate fell from 5.7% in January to 5.0% in October. It has since remained stuck at about that level.

Ideally, when the Federal Reserve gets things right, the economy runs neither too hot or too cold. Eight months of flat unemployment rates and tepid GDP growth would suggest the Fed has clearly succeeded in finding a landing that, so far hasn’t meant crashing the economy. At least, on Wednesday, the evidence from modest GDP growth, flat unemployment and very low inflation convinced the six Board of Governors and the president of the New York Federal Reserve Regional Bank to hold steady; a tribute to Janet Yellen’s leadership to stay focused on the data and the real economy.

But, the other three regional bank presidents, Esther George of Kansas City, Loretta Mester of Cleveland and Eric Rosengren of Boston, all voted to raise the rate now. Another point of context is understanding the global economy is growing slower. The other major world economies, Europe, Japan and China, are struggling with slow growth. Their central banks are operating with either zero or negative interest rates. America’s modest growth looks very good next to their anemic performance. So this is making the dollar very strong. And that helps to explain the weakness of U.S. manufacturing because a strong dollar hurts U.S. exports. So even modest increases in U.S. interest rates are big by global standards and could further disadvantage U.S. manufacturing.

A second context is that the excess level of savings, globally, is chasing down projections of interest rate levels. Currently, the consensus at the Fed is that in the midterm, the Fed funds rate is likely to be around 1.9% at the end of 2018, and in the long run the normal rate is expected to be about 2.9%. On the eve of the Great Recession, the Fed funds rate was 5.25%. Compared to 2.9%, a raise to between one-half and three-quarters is not small. It isn’t like when the “normal” rate was above 5%.

The current tension in the FOMC between the Board of Governors and the regional bank presidents continues the controversy whether banks have too much say. Independence of the Fed from the political process is important. But, so too is Fed independence from the banks they need to regulate and oversee to make sure we have economic stability. The vote from Wall Street was positive. The stock market gains show a consensus the Fed is doing it right.

This blog originally appeared in aflcio.org on September 23, 2016.  Reprinted with permission.

William E. Spriggs serves as Chief Economist to the AFL-CIO, and is a professor in, and former Chair of, the Department of Economics at Howard University. Follow Spriggs on Twitter: @WSpriggs.


AFL-CIO Backs Dakota Access Pipeline and the “Family Supporting Jobs” It Provides

September 23rd, 2016 | Kate Aronoff

o3ytsjwl_400x400The American Federation of Labor and Congress of Industrial Organizations (AFL-CIO) came out this week in support of the Dakota Access Pipeline, the construction of which was delayed last week by an order from the Obama administration—a decision that itself stemmed from months of protests led by the Standing Rock Sioux.

In a statement, Richard Trumka, AFL-CIO president, said, “We believe that community involvement in decisions about constructing and locating pipelines is important and necessary, particularly in sensitive situations like those involving places of significance to Native Americas.”

This week has shown a stark divide between parts of American labor and today’s social movements. Progressive unions face an uphill battle on many issues, within and outside of organized labor. (Peg Hunter/ Flickr)

This week has shown a stark divide between parts of American labor and today’s social movements. Progressive unions face an uphill battle on many issues, within and outside of organized labor. (Peg Hunter/ Flickr)

But it “is fundamentally unfair,” he added, “to hold union members’ livelihoods and their families’ financial security hostage to endless delay. The Dakota Access Pipeline is providing over 4,500 high-quality, family supporting jobs.

“(Trying) to make climate policy by attacking individual construction projects is neither effective nor fair to the workers involved. The AFL-CIO calls on the Obama Administration to allow construction of the Dakota Access Pipeline to continue.”

It’s an open secret in labor that North America’s Building Trades Unions—including many that represent pipeline workers—have an at-times dominating presence within the federation’s 56-union membership. Pipeline jobs are well-paying union construction gigs, and workers on the Dakota Access Pipeline (DAPL) can make some $37 an hour plus benefits. As one DAPL worker and Laborers International Union member told The Des Moines Register, “You’ve got to make that money when you can make it.”

But an old blue-green mantra says, “there are no jobs on a dead planet.” The parts of organized labor that have taken that phrase to heart are far from unified around Trumka’s DAPL backing—even within the AFL-CIO. National Nurses United (NNU) has had members on the ground at Standing Rock protests and others around the country have participated in a national day of action.

“Nurses understand the need for quality jobs while also taking strong action to address the climate crisis and respecting the sovereign rights of First Nation people,” said RoseAnn DeMoro, NNU’s executive director and a national vice president of the AFL-CIO.

In response to the federation’s endorsement, DeMoro cited the work of economist Robert Pollin, who found that spending on renewable energy creates approximately three times as many jobs as the same spending on maintaining the fossil fuel sector.

NNU isn’t alone. As protests swelled this month, the Communications Workers of America (CWA) released a statement in support of the Standing Rock Sioux, stating that “CWA stands with all working people as they struggle for dignity, respect and justice in the workplace and in their communities.”

Unions like the Amalgamated Transit Union and the United Electrical Workers have each issued similar statements supporting protests against the pipeline, and calling on the Obama administration to step in and block the project permanently.

For those who follow labor and the environment, however, the above unions might be familiar names. Many were vocal advocates for a stronger climate deal in Paris, and sent members to COP21 at the end of last year. They were also those most vehemently opposed to the Keystone XL pipeline, and all supported Bernie Sanders’ primary campaign against Hillary Clinton. While friendly to progressives, these unions have tended to have a relatively limited impact on bigger unions, like the American Federation of Teachers and the American Federation of State, County and Municipal Employees (AFSCME).

According to Sean Sweeney, though, this small group of unions might now be gaining strength. “Progressive unions are becoming a more coherent force,” he told In These Times.

Sweeney helped found a project called Trade Unions for Energy Democracy, which works with unions around the world on climate change and the transition away from fossil fuels, including the National Education Association and Service Employees International Union (SEIU) Local 32BJ in the United States. He also runs the International Program for Labor, Climate and the Environment at City University of New York’s Murphy Institute.

“It could be said that it’s just the same old gang making the same old noise, but for health unions and transport unions to go up against the building trades and their powerful message and equally powerful determination to win … that was a bit of a cultural shift in the labor movement,” he said, referencing the fights against the Keystone XL and Dakota Access pipelines. “That suggests that it’s going to continue.”

Sweeney mentioned, too, that it wasn’t until much later in the fight around Keystone XL that even progressive unions came out against it. “A lot of these unions,” he added, “know a lot more about energy and pollution and climate change than they did before.”

Between Trumka’s DAPL endorsement and the Fraternal Order of Police’s endorsement of Donald Trump for president, this week has shown a stark divide between parts of American labor and today’s social movements. Progressive unions face an uphill battle on many issues, within and outside of organized labor. The question now—on the Dakota Access Pipeline—is whether today’s “Keystone moment” can break new ground in the jobs versus environment debate.

This blog originally appeared at InTheseTimes.org on September, 13, 2016. Reprinted with permission.

Kate Aronoff is a writing fellow at In These Times covering the 2016 election and the politics of climate change. Follow her on Twitter @katearonoff


Why the Wells Fargo Scandal Shows the Need to End Forced Arbitration

September 22nd, 2016 | Aaron Jordan

aaron_jordanAnother day, another scandal at the big banks.

Since the financial crisis, banks like Barclays and UBS have been caught manipulating interest rates; J.P. Morgan has reluctantly handed over billions for its association with Bernie Madoff, illegal hiring practices, and lax oversight of its own traders among its other misdeeds; while Goldman Sachs has been fined billions for selling toxic subprime mortgages to investors. This past week the Consumer Financial Protection Bureau (CFPB) fined Wells Fargo $185 million for creating fake accounts and assigning them to unwitting customers. While this outrage shows the need for tighter regulation, it also exposes the urgent need to end the anti-consumer practice of forced arbitration in financial service agreements. If consumers cannot access the courts, scandals will be harder to uncover and victims will find it nearly impossible to achieve justice.

OAKLAND, CA - OCTOBER 11: A sign is posted in front of a Wells Fargo bank on October 11, 2013 in Oakland, California. Wells Fargo reported a 13 percent increase in third-quarter profits with a net income of $5.6 billion, or 99 cents a share compared to $4.9 billion, or 88 cents a share one year ago. (Photo by Justin Sullivan/Getty Images)

(Photo by Justin Sullivan/Getty Images)

Over the last decade, Wells Fargo has pioneered a business strategy called “cross-selling.” The idea is to get customers to use other products sold by the bank. If you have a checking account, try out a credit card. If you like our investment services, why not get a mortgage? High level managers bullied subordinates into hitting impossible account-creation targets. The result was massive fraud: according to the CFPB, Wells Fargo opened 1,534,280 deposit accounts and 565,443 credit-card accounts “that may not have been authorized, by using consumers’ information without their knowledge or consent.” More than 100,000 of these accounts were charged fees: in other words, Wells Fargo customers paid late fees for accounts they never opened and never wanted.

The scope of the scandal is breathtaking. Wells Fargo has already fired more than 5,300 employees and the victims of its illegal scheme likely number in the hundreds of thousands. On its face, this would seem the perfect instance for a class action lawsuit (in which similarly situated plaintiffs come together to bring a lawsuit). Wells Fargo, however, has a notoriously stringent arbitration agreement. Instead of allowing those who have a “disagreement” with the company to bring a lawsuit, they force them into an out-of-court arbitration.

Arbitrators aren’t required to follow precedent, nor do they abide by encoded rules of procedure. They can make their decisions on a whim and without a hearing, and these rulings cannot be appealed. Their income depends on being rehired by the companies themselves.  Studies consistently show that arbitrators favor their corporate benefactors. This is unsurprising: corporations wouldn’t be rushing to write new forced arbitration agreements if this alternative system was more likely to favor the consumer.

Wells Fargo’s forced arbitration clause is particularly harsh and exceptionally broad. Paul Bland, an attorney at Public Justice, has called it “one of the most anti-consumer, egregious”clauses in the industry while attorney John Keating found it “startlingly unconscionable.” According to Wells Fargo’s 2016 business account agreement, all clients “irrevocably…waive the right to a trial by jury.”

Noting the stark language of the agreement, federal Judge Vincent Chhabria found that the agreement was broad enough to cover any dispute between the bank and its clients, thus denying defrauded clients access to the courts. Never mind that consumers can hardly agree to anything with regard to accounts they never opened or desired in the first place.

Federal agencies are taking steps to curb the use of forced arbitration. The CFPB has released a proposed rule that would prohibit class action bans in arbitration clauses, while the Department of Education is considering similar provisions in education contracts (for-profit colleges are infamous for their iron clad mandatory arbitration clauses). President Obama has signed an Executive Order granting the Labor Department authority to prohibit companies with federal contracts of more than $1 million from enforcing such clauses. The Department of Defense, having seen the unfairness of forced arbitration on our men and women in uniform, has prohibited forced arbitration in credit cards and auto loans to service members.

These steps, if finalized, will not only help ensure justice for those already wronged, but prevent future scandals. If wrongdoing is exposed before a public court of law instead of behind closed doors, corporations will be less likely to cheat their customers. And if companies must confront an impartial judge and jury, wronged consumers are much more likely to win relief.

Ending forced arbitration would not only help the victims of this Wells Fargo scandal, it may prevent the next one.

This blog originally appeared in afj.org on September 20, 2016. Reprinted with permission.

Aaron Jordan serves as a Dorot legal fellow at Alliance for Justice. As a member of the Justice program, he works on and writes about judicial nominations, the Supreme Court, and the civil justice system. Aaron received his B.A. in History from Davidson College and his J.D. from the University of Pennsylvania Law School. At Penn, Aaron was the Articles Editor for the Journal of International Law, a Project Coordinator for the International Human Rights Advocates, and a Teaching Assistant in Constitutional Law for Professor Rogers Smith. During law school, Aaron had internships for the organizations Voices on the Border and Human Rights First, and worked as a law clerk for Congressman Gregory Meeks (D-NY) and Senator Patrick Leahy (D-VT). After graduating from college, Aaron spent a year teaching in Honduras, where he started an ongoing scholarship to fund the education of deserving, underprivileged children.


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