Yearly Archives: 2019

Will Conservative Justices Sound the Death Knell of State Action? Be Careful for What You Wish

Apr 1, 2019 Anne Marie LofasoAdd a Comment

Late last year, in Janus v. AFSCME, the Supreme Court held unconstitutional all union-security clauses in public-sector collective-bargaining agreements. Union-security clauses are contractual provisions that oblige union bargaining unit members to pay agency fees – that portion of union dues that pays for collective-bargaining-related activities such as contract negotiations and grievance-arbitration. In finding that such clauses violate the First Amendment, the Court, in a 5-4 decision, overturned Abood v. Detroit Board of Education, a 41-year old precedent with no dissenting opinion. Many labor scholars (including Joseph Slater) and activists predict that Janus will have a large economic impact on unions because, under a doctrine known as the duty of fair representation, unions must represent employees whether those employees pay full dues, agency fees, or no dues. These thinkers thus predict that unions won’t be able to collect as much money to represent all employees. As a corollary, diminished union treasuries will foreseeably harm the Democratic Party insofar as unions tend to give more to the Democrats than to other political parties.

For these reasons, Professor Slater’s thoroughly researched, brilliantly analyzed, and well-written article, Will Labor Law Prompt Conservative Justices to Adopt a Radical Theory of State Action?, presents an important question: Given that the Court has unceremoniously disturbed stare decisis to declare all public-sector union-security clauses unconstitutional, will it find a way to declare all private-sector union-security clauses unconstitutional by adopting a broad theory of state action? Professor Slater correctly concludes that such a conclusion would be incoherent in theory and unworkable in practice. This is because to conclude that all such clauses in private-sector contracts are unconstitutional, the Court would have to adopt an unbounded theory of state action, which would effectively erase the state-action requirement from constitutional analysis and obliterate the public-private law distinction that is so fundamental to our constitution.

Why then is this such an important article? As Slater points out, there have been only two areas of private-sector law with which the Court has experimented in broadening the catchment area of state action: racial discrimination qua Shelley v. Kramer (finding state action in private, racially restrictive covenants) and union-security clauses qua Railway Employees’ Department v. Hanson (holding that union security clauses under the Railway Labor Act implicated the First Amendment, but failing to find a First Amendment violation).¹ Until recently, courts had shut down both areas from further expansion. The concern then is this:  Will a conservative court, which is hostile to unions, use this expansive theory of state action to declare private-sector union security clauses unconstitutional?

Slater’s argument is cogent in its simplicity: “union security clauses in the private sector do not implicate the First Amendment because there is no state action.” This is true under modern theories of state action, which are restrictive, and some historical but experimental theories suggested under Hanson, grounded in the National Labor Relations Act’s (NLRA) and Railway Labor Act’s (RLA) exclusive representation model, and under Keller v. State Bar of California. Hanson’s theory – that the RLA involved state action because it preempts state right-to-work laws – is incorrect because “federal preemption of state laws, regarding voluntary provisions in employment or other private contracts, does not create state action.” If this were true, then Title VII preemption of discriminatory contract clauses, for example, would create constitutional as well as statutory causes of action. Similarly, exclusivity – the NLRA and RLA principle that majority unions represent all employees in the bargaining unit, not only those who voted for the union – does not implicate state action because those labor statutes do not mandate union formation, require union-security clauses, or reward parties for adopting such clauses. In other words, there is no forced-association problem. This argument was articulated most prominently in Justice Black’s dissent in Machinists v. Street, where the majority avoided the constitutional issue by deciding the case on statutory grounds. Finally, in Keller, where the Court analogized attorney bar association fees to union dues and bar activities to union activities, the Court held that compulsory bar dues may not be used for political expenditures but may be spent on “activities connected with disciplining members of the bar or proposing ethical codes for the profession.” Slater also debunks the corollary to this argument, that unions are state actors insofar as the state grants them monopolistic powers. Slater not only explains that unions have limited power² but also points out that “a government grant of monopoly powers to an otherwise private party does not make that party into a state actor even if the government also heavily regulates that party” (P. 84.)

Once again, if these arguments are so obvious, then why is this article so important? Slater suggests that the cases that might be used as precedent – Shelley and Steele– are better understood as occurring at a time when advocates and courts were willing to “ben[d] state action theory beyond any bounds that were previously recognized or would be recognized later, in an attempt to address the fundamental evil of racism in private economic transactions before statutes barred such discrimination” (P. 90). Accordingly, in these highly polarized times, were conservatives tempted to “ben[d] state action theory beyond any bounds that were previously recognized or would be recognized later, in an attempt to address [what they view as] the fundamental evil of [forced unionism] in private economic transactions,” Slater’s extensive research lays bare all the reasons that private-sector union-security clauses do not amount to state action. Accordingly, if an anti-union plaintiff attempts to put forward these arguments, reviewing courts will not be tempted to follow plaintiffs down this path, for fear of creating a greater evil – the elimination of state action once liberals recapture the Court. For example, an affirmative-action clause such as the one at issue in Steelworkers v. Weber, might not only create a statutory cause of action under Title VII but also a constitutional cause of action under the Fifth and Fourteenth Amendments.

In any event, Slater’s argument is important because the National Right to Work Foundation and other conservative or anti-union groups continue to argue that union-security clauses in the private sector are unconstitutional. In short, these cases remind us to be careful for what we wish. We might get it and much more.

How to Tell Other Sexual Harassment Stories

Feb 22, 2019 Charlotte S. AlexanderAdd a Comment

Tristin Green and Angela Onwuachi-Willig are interested in the act of narration, and the power that lies in the choice to include or exclude. Green explores these themes in her recent essay, Was Sexual Harassment Law a Mistake? The Stories We Tell. As Green recounts, the U.S. Supreme Court recognized hostile work environment as an actionable form of sex discrimination in Meritor Savings Bank v. Vinson. In doing so, the Court seemed to reject the prior view of such harassment as mere “‘personal’ advances of a man toward the singular woman to which he is attracted,” and to adopt a structural view, recognizing that “others in the organization and the organizational structure itself [can be] causes of ongoing hostile environments.”

However, Green excavates the Meritor record, as well as the records of four other major Supreme Court decisions on sexual and racial harassment, and uncovers substantial evidence of structural problems in those workplaces that the Court excluded from its factual recitations and legal reasoning. She finds the stories of the plaintiffs’ co-workers who were also harassed, but whose testimony barely figured in the Court’s telling, and evidence that men other than the individuals accused participated in the same or separate acts of harassment. She also notes the unacknowledged role of the organization in each of these stories. Many of the workplaces she examined were highly segregated by sex, with “leaders . . . [who] did little to nothing to learn about the culture or behaviors in their workplaces,” and in fact exacerbated cultural and structural problems by failing “to change things about which they were aware.”

As Green shows us, when stories like these are absent from the official narrative, the law’s conception of the true nature and causes of sexual harassment re-narrows, and returns to the earlier “personal advances” view. In adopting this limited view, courts shut down those who try to tell broader, structural stories, and miss opportunities to make real change.

Green pushes us to adopt a broader view, to engage with culture and structure. And in her feminist rewriting of Meritor, Angela Onwuachi-Willig does just that. Writing as Justice Onwuachi-Willig, she takes the role of narrator, and places culture and structure, as well as history, squarely at the center of the story she tells.

For a reader accustomed to the Supreme Court’s own narrative choices in Meritor, and the similar choices of courts since then, Onwuachi-Willig’s deliberate inclusion of a different set of stories stands out. She describes Vinson taking a job as a bank teller, adding, almost casually, that Vinson then became “one of the more than 80 percent of women who worked as bank tellers nationwide.” This reference to the background occupational segregation in the banking industry jumps off the page, precisely because it is so different from the usual sexual harassment story-telling. So does her telling of the larger story of the power imbalance between Taylor, “a bank vice president, a church deacon, and the father of seven,” and Vinson, “a high-school dropout and divorcée,” who was married by age fourteen to an older man. Justice Onwuachi-Willig also tells the stories of the other women whom Taylor harassed, and the willful inaction of the men who ran Meritor Savings Bank. Finally, she adds race to the narrative, engaging with the stereotyping of African-American women as sexually available – even legally unrapeable – and African-American men as sexual aggressors.

Onwuachi-Willig’s story is dramatically, powerfully different from the one told by the white, male-dominated Meritor Court, and accomplishes what Green asks us to do: to recognize harassment in its full context, and to stop telling stories of individual aggressors and individual victims. Drawing on this story, Onwuachi-Willig develops a different sort of sexual harassment law from what we are used to, including strict liability for the employers of harassers. Strict liability is an important device, because it gets at structure, holding the employer – the entity that regulates the workplace – accountable for the environment it creates.

Taken together, Green’s and Onwuachi-Willig’s re-tellings of sexual harassment stories produce a very different kind of sexual harassment law than what we have now. In this age of #MeToo and Time’s Up, both are highly recommended reading to help us critique the stories we tell, and to begin to learn to tell – and understand – new ones.

Who Names the Price?

Jan 25, 2019 Matt BodieAdd a Comment

In Employees as Price-Takers, Naomi Sunshine defines employees as workers who lack “significant input into the prices charged to customers and their own pay rates.” (P. 110.) Sunshine’s proposal comes amidst a blizzard of articles, court cases, tribunal opinions, legal briefs, and white papers all examining this critical issue. It stands out amidst the snow drifts because of its simplicity, and because it provides a creative and intuitive insight. Her price-setting definition of employment has the potential to reorient current debates around this new metric.

There are several competing definitions of “employee,” and Sunshine carefully surveys the landscape. She discusses the dominant “control” test with its different variations, as well as the “economic realities” test, the “entrepreneurial opportunities” test, and the relatively new “ABC” test used in California and elsewhere. She illustrates these tests with the example of an HVAC worker as the paradigmatic independent contractor and examines how the test would categorize such a worker. Sunshine’s quiet unpacking of the entrepreneurial opportunities test is particularly deft, as she works her way down to the test’s foundational focus on the opportunity for profit or loss. She shows how the test renders the most vulnerable workers even more vulnerable, as it leaves them bereft of employment protections even when the potential for profits is merely illusory.

Employees as Price-Takers also examines the idea of an intermediate category between employee and independent contractor. The article looks at academic and policy proposals like Harris and Krueger’s “independent worker” delineation,³ as well as laws such as Canada’s “dependent contractor” statutes. She questions whether a third category is necessary if such workers could appropriately be defined as employees. Her analysis raises important questions, such as: What would the purpose of this third category be? Which “employment” protections would be extended, and which would be withheld? As Sunshine points out, the Fair Labor Standards Act has an expansive definition of employee similar to the Canadian dependent contractor—and thereby may sneakily cover the intermediate category itself. And yet many of these “third way” proposals do not extend minimum wage or hour protection to this middle category.

The primary innovation of the article is its new definition of employment. Sunshine nicely sets out the case for making control over price and pay the critical component of employment—the one that renders employees economically vulnerable. She contends: “If the company controls prices vis-à-vis the customer . . . . the worker is really just a representative of the company—the customer has sought a service from the company, and the worker is the one fulfilling that service.” (P. 149.) Sunshine here keys in on the critical difference between working independently and working as part of a firm. Employees work for an economic firm, and the firm is the economic actor within the relevant marketplace. As Ronald Coase recognized in The Nature of the Firm,⁴ firms replace markets when they can operate more efficiently as a collective outside of the market. Independent contractors, on the other hand, are not part of the alleged employer—they work as sole proprietors, or as part of a different firm. In the words of the Restatement of Employment Law, “individuals provide services as independent businesspersons if they are able to serve their own economic interests through entrepreneurial control over a significant part of their costs or opportunities for profit.”⁵ This differentiation is a fairly basic economic one, and it should be a basic legal one, as well. However, reducing the differences between markets and firms to easily discernible factors has proven quite difficult. This is where Sunshine’s ingeniously simple test comes in: who sets the price?  A worker who controls the pricesultimately charged to consumers for an end-product or service is an independent contractor; a worker who does not is an employee.

Sunshine does not resolve every theoretical and doctrinal issue related to this new test, nor would one expect her to do as much in a single article. She makes clear from the beginning that her test is best addressed to workers who interact directly with the customers, forming a triangular relationship between firm, worker, and customer. (Pp. 111-12.) In a bilateral relationship, the employee will always have a say over her pay, as it is (in theory) negotiated between the two parties. This distinction is why I initially found her reference to price and pay, rather than just price, to be confusing. However, her insights into the nature of control over contracting might also apply, in some ways, to bilateral relationships. Sunshine should go back to her HVAC example and think through how her insights on price might apply there.

One other wrinkle for Sunshine’s “price-pay” test is the algorithm used by Uber and other platform companies. Uber claims that it is not a transportation company, but rather an information services company that connects riders with drivers. The argument has some intuitive appeal: no one argues that eBay is a retailer when it provides a marketplace for goods. But Sunshine’s new test resolves this nicely, because the eBay sellers and buyers set their own prices. Uber, on the other hand, has established a metric for price-setting that drivers and customers do not control. If Uber were truly a marketplace, it would allow the drivers and riders to individually “bid” for rides using their own prices. But Uber’s control over prices means that it acts as the employer.

In creating a new price-oriented test for triangular employment relationships, Sunshine offers a more straightforward path through rocky terrain for judges, advocates, and workers themselves than now exists. As she recognizes, there may be a category of non-employees who nevertheless are dependent enough and vulnerable enough to deserve certain employment protections. But we harm the coherence of the “employee” category if we try to jam these workers in there. Employment is a category relating to the legal and economic context in which the worker labors. Sunshine’s article goes a long way in helping us conceptualize and define this category.

Labor Power and Industrial and Political Democracy

Jan 10, 2019 Catherine FiskAdd a Comment

Like everybody else, I’ve been thinking a lot lately about democracy. How can we nurture faith in democracy when significant segments of the working class feel so disempowered that they either don’t vote at all or turn to nihilist, xenophobic, racist, or hateful visions of American life offered by speakers who seem to have less interest in governance than in nurturing grievances? Although turn-out in the mid-terms was high,⁶ as mid-term elections go anyway, still many people who could have voted did not vote. This invites the question about what law can do to build institutional structures and a culture that convinces the disaffected that they can join together to build a better world. One of the very few things on which one can find agreement between the right and the left today is that a lot of poor people and working people have been left behind by the elites that seem increasingly to control their work lives, their economy, and politics. But the agreement stops there, and the sense of polarized stalemate only breeds cynicism and despair.

I found an antidote to despair in reading Ewan McGaughey’s forthcoming paper, Democracy in America at Work: The History of Labor’s Vote in Corporate Governance. It is a perceptive, broadly synthetic, and snappily-written account of the past and possible future of labor’s role in corporate democracy. The paper enriched my thinking about re-linking democracy in political life with democracy in work life. It bubbles over with ideas about how law could create a more accountable form of capitalism. Based on an admirably succinct survey of the history of labor involvement in corporate governance, McGaughey articulates a bold, provocative, and exciting thesis: “Democratic voice in the economy is embedded in American tradition, efficient, legitimate, and (even without federal law reform) could be written into state laws today.” (P. 3.)

The paper opens with the father of modern American corporate law, A.A. Berle, who (according to McGaughey) had quite a bit to say in favor of democracy in the economy; giving labor rights to limit the “power of corporate managements with respect to wages and labor relations” would strengthen political and economic democracy because “democracy in the economy would follow the ‘corporate’ revolution,’ just as democracy in politics followed the industrial revolution.”⁷ The paper then name-checks a variety of bills recently introduced in Congress (with no hope of passage, of course) that would require things like employee election of 40% of the board seats in $1 billion companies, or 33% of board seats in listed companies, or 50% of seats on boards of single-employer pension plans. (P. 2.) McGaughey’s task in this paper is to normalize these proposals – to show they are not unprecedented in history, or inefficient or otherwise outrageous as a matter of corporate law. Along the way he suggests reasons why labor and progressive scholar-activists should pay more attention to whose money is on Wall Street (the modest retirement savings of a lot of working people) and the legal rules affecting who has a say over what Wall Street financiers do with Louis Brandeis famously, and still accurately, called “Other People’s Money.”⁸

McGaughey recounts many examples of labor’s involvement in corporate governance from the nineteenth century through the twentieth. Along the way, he finds examples of many of the labor law reforms being proposed today, including tripartite wage boards, sectoral bargaining, works councils promoted by the National War Labor Board during World War I, and union membership on corporate boards. A cigar manufacturer in 1879 settled a strike by creating a tripartite board to resolve disputes over wages and working conditions. The UAW negotiated, successfully, to have a labor representative on Chrysler’s board of directors from 1980 to 1984. In between, he examines some isolated examples of tripartite systems for setting working conditions and numerous examples of labor involvement in pension plan administration. And he gives sustained attention to a Massachusetts law enacted in 1919, signed by then-governor Calvin Coolidge and still on the books today, that allows “a manufacturing corporation [to] provide by by-law for the nomination and election by its employees of one or more of them as members of its board of directors.” Boston’s famous clothing store, Filene’s, had four of its eleven board members chosen by employees in 1922.

The historian in me wanted much more on each of these examples – what they actually accomplished for labor, what conditions gave rise to them, whether they reflected actual power for workers, and why they disappeared. But that would, of course, make a pithy article into a tome. But what they suggest about what might be done today is more significant to McGaughey than what they achieved and why they failed. He uses them as contrast for the narrative that has become so familiar since Thomas Picketty, and others before and since, have charted the rise of inequality against the decline of unions.⁹ McGaughey points out that it’s not just that, when workers had unions, unions were able to negotiate that the fruits of capitalism were shared more equitably (though never even close to equally) between the top 1 percent and everyone else. Rather, it’s that without unions, capitalism has been more undemocratic – more autocratic – than at any time in modern American history because corporate leadership, financial analysts, and the leaders of elite financial institutions make all the decisions about other people’s jobs. Even more appalling, however, is that they do so using the pension investments and savings accounts of ordinary people; they run the economy using other people’s money.

McGaughey then explodes the myth that shareholder primacy in corporate law means shareholder democracy, or even any real form of corporate accountability to the majority of shareholders. Rather, he explains, the only accountability that the modern law and theory of “shareholder primacy” delivers is to the financial advisors who work with a small handful of large institutional investors. As he says, “Asset managers control shareholder voting rights with other people’s money.” (P. 42.) And this is not a system that emerged out of a natural search for an efficient system of corporate governance. “The monopolization of shareholder votes by asset managers is not a system that emerged in a competitive environment, but one backed by the coercive power of federal law, and the unequal bargaining power of captured capital.” (P. 43.) These advisors have, he points out, such deep and strong conflicts of interest that it’s a myth to imagine they are acting in the interest of shareholders at all. And the results, he argues, are not even efficient, or productivity-maximizing, or wealth maximizing in economic terms.

Finally, McGaughey explores ways that states, through their corporate law, could lead the way in adopting legal reforms that would create the conditions for actual democracy at work. He asserts that law of three blue- or blue-leaning states (California, New York, and Delaware) account for the vast majority of incorporations. (P. 45.) He argues that there are no federal legal barriers to these three states enacting laws requiring labor representation on the corporate board of directors. (This assertion may vastly overstate Delaware’s willingness to jeopardize its position as a leader of corporate law by doing anything at all that would upset corporate leadership, and it may also underestimate the seriousness of the race-to-the bottom problem if states were to try to regulate membership on corporate boards.) He proposes how states could play a role in creating a more accountable form of capitalism by requiring the creation of truly independent works councils, along the lines that the United States occupying force wrote for Germany in 1946. (P. 45.)

This is a relatively lean article for all that it aspires to do (47 double-spaced pages in manuscript). Much of it is suggestive rather than exhaustive. But that means it’s suggestive of future work rather than exhausting to read. I hazard no opinions on McGaughey’s analysis of corporate law. But I appreciate the ambition to think of ways that capitalism could be made more democratic. And in this time of political alarm or malaise, I welcome creative ideas about how law could provide tools to enable the working class to feel more empowered at work and in the economy.