Back to business

Under the Trump administration, the Department of Labor and the National Labor Relations Board have been working to protect workers and job creators. While this might sound a bit obvious, this program is in stark contrast to the previous eight years, during which the Obama administration pursued one of the most aggressive, one-sided slate of changes to labor policy in modern times.

That is not an exaggerated claim; instead, it is grounded in surprising data. According to a study by the Coalition for a Democratic Workplace, a group of organizations representing businesses, the National Labor Relations Board under President Barack Obama “overturned a total 4,105 collective years of precedent in 91 cases and rejected an additional 454 collective years of case law by adopting comprehensive new [union certification] election rules.” Add that all up, and “the Obama Board upended 4,559 total years of established law.”

The board was just one of several bureaucracies, such as the Department of Labor and the National Mediation Board, that the Obama administration used to advocate for organized labor leadership, as opposed to workers and union members and in defiance of accepted rules and norms. What was needed after this determined effort to tilt the playing field toward special interests was little short of a complete bureaucratic about-face. Fortunately, that is essentially what has happened. The Trump era of labor regulations has witnessed multiple administrative changes that have helped return a semblance of fairness to all parties in federal labor policy, and it has returned the norm of reliance on precedent to its proper place. The results thus far have been, on the whole, positive — for workers, job creators, and union members.

Franchise players

For mom-and-pop businesses, one of the most welcome changes involved franchising. In 2017, the NLRB and Labor Department both returned to the traditional standard by clarifying, and effectively eliminating, the Obama administration’s reinterpretation of the “joint employer rule.”

Many entrepreneurs become franchise owners as a way of having a ready-made, branded, and templated business, which increases their odds of success. These small-business owners then run their new business and pay for the branding and some of the resources of the franchise-granting company. Employees of, say, Bob’s Burgers and Brew in Burlington, Washington, are employees of that individual franchised business, not of the larger branding company.

Unions can organize within individual franchised businesses, of course. But organizing takes effort, and unions may not want to spend the time going after multiple small businesses one at a time, especially since each one has only a few potential dues-paying members. Under the Obama administration, in an effort to make unionization easier and give a boon to trial lawyers, the NLRB and Labor Department advanced the idea that employees of your local Golden Arches represented “joint employees” of McDonald’s Corp. This meant that a union could go after McDonald’s corporate to unionize multiple stores instead of going from small business to small business.

The Obama interpretation of the joint employer rule created chaos in the franchising business. As is so often the case, this resulted in not just pain for large corporations but a significant blow to small-business owners. The latter no longer had the flexibility and freedom to start local franchises that they would own and, through their efforts, would serve their local areas. Under the Obama interpretation, the distant corporation would need, for fear of litigation, to micromanage most aspects of the local franchise owner. Local owners effectively became corporate employees simply managing a business, instead of having it as their own. Ronald Bird, chief economist for the Department of Labor under President George W. Bush, wrote in a 2019 report that lost revenues and lost job opportunities due to the joint employer rule came to between $17.3 billion and $33.3 billion and between 194,000 and 376,000 jobs per year.

In the Trump era, the NLRB and Labor Department returned to the commonsense, traditional interpretation of the joint employer standard. This change preserved the franchise model, allowing small-business owners to keep their part of the American dream. However, on Sept. 8, U.S. District Judge Gregory Woods, an Obama appointee, struck down the rule. The administration is reviewing its legal options.

Persuaders and privilege

Another major change under the Trump administration involved the right of attorney-client privilege and what’s known as the “persuader rule.” Companies that are facing the possibility of unionization elections have rights, just like everyone else. One of those rights is to retain lawyers to understand the legal thicket that lies in front of them better so that they don’t do anything wrong.

Companies don’t have to report that legal advice to anyone or disclose what advice they receive, because such a requirement would violate attorney-client privilege, which is itself a hallmark of American law. The Obama Department of Labor, however, didn’t like that idea. It enacted the persuader rule, which required the reporting of attorneys giving legal advice on unionization.

In 2016, a Texas court issued a final judgment striking down the rule. Texas Attorney General Ken Paxton, who represented one of several states that sued to stop the persuader rule, praised the court’s ruling, noting that “our adversarial legal system hinges on the right of Americans to access good counsel; that right, however, only thrives when Americans are able to seek legal advice without the fear of harassment and intimidation.”

Barely 18 months after the end of the Obama administration, the department brought attorney-client privilege back to labor law by rescinding the Obama rule. In a press release, the Labor Department said the Obama administration’s actions “exceeded the authority of the Labor-Management Reporting and Disclosure Act … impinged on attorney-client privilege by requiring confidential information to be part of disclosures and was strongly condemned by many stakeholders, including the American Bar Association.”

Ambush elections

There’s a lot at stake for both workers and businesses in unionization elections. They also require a fair amount of lead-up: The business needs to post a notice of the election, the union needs to make its case, the business needs to make its case, and workers want answers to nagging questions. During this process, some employees might just be hearing about the election, and the employer may be just having the opportunity to start talking to its employees about unionization. So, it only makes sense to give everyone a reasonable amount of time.

In 2014, the Obama NLRB ditched the idea of deliberation in favor of a veritable stampede. Critics, such as the U.S. Chamber of Commerce, dubbed the new, sped-up process “ambush elections.” Previously, the average election season was 38 days; the rule shortened it to as little as 10.

This is significant. Unions are the ones that file for the election, and they would be campaigning to garner the necessary votes for weeks or months before filing with the NLRB for an election. This means that the employer may not even know an election is coming until less than two weeks before the vote. Imagine a presidential election in which one campaign gets to start working in January and the other doesn’t even know it is in the race (or even that there will be an election) until mid-October.

In 2019, the Trump NLRB reversed the rule. As Chairman John F. Ring said, “The new procedures will allow workers to be informed of their rights and will simplify the representation process to the benefit of all parties.” Republican leaders on the House Education and Labor Committee, such as Chairwoman Virginia Foxx and Rep. Tim Walberg, applauded the 2019 action, saying, “The controversial 2014 rule drastically altered union election policies, crippling workers’ rights in order to benefit union bosses. … Today’s rule will ensure that ambush elections are a thing of the past.” Since the 2019 change, there has been a back-and-forth in the courts, but the majority of the rule still stands and is protecting workers.

Wait, there’s more

The Trump administration has changed course in several other ways as well. In politics, when district boundaries are drawn to include or exclude certain pockets of voters, and thus guarantee a win for a particular party, it’s called a gerrymander. The union equivalent of a gerrymander is a “micro unit” or “micro union.” Micro units allow unions to go into a larger workforce that is not interested in them and slice and dice the workforce until they get to a small, specific unit they can organize.

The Obama NLRB went a long way toward recognizing micro unions in a number of cases, starting with its 2011 Specialty Healthcare decision. According to labor-management relations group Proskauer, this decision “led to an influx of smaller bargaining units comprised of, for example, a single department of employees instead of the more traditional broader units of employees sharing interests across an organization.” This standard, as David French, the vice president of the National Retail Federation, noted, “undermined retail operations and limited opportunities for hardworking employees for the sole purpose of empowering Big Labor.” In contrast, the Trump NLRB issued the “PCC Structurals” decision in 2017, which reinstituted the traditional standard of who should be considered part of the same unit and thus allowed to vote in a certification election.

The Obama Department of Labor also attempted to hike the ceiling for when a company must pay overtime to an employee who works more than 40 hours a week — from $23,660 annually to $47,476. The rule was so broadly and poorly written that a federal judge struck it down. The Trump administration took a middle course in 2019. It viewed sticker shock from the Obama regulation as costing workers potential hours and pay. At the same time, it decided to push the ceiling up slightly, to track closer to inflation, moving it to $35,568 a year.

There were some more fiscally conservative features to the Trump Department of Labor’s approach, notably the counting of compensation as income for various regulations. Still, it should consider ways to promote worker flexibility. Instead of having only “overtime” (typically time-and-a-half pay), more workers should have “flex time” (typically an hour and a half off of work for every overtime hour worked) available. That option was not reflected in the final rule of the Trump administration and should be considered by Congress.

A lot more flexibility was on full display in the Trump administration’s update of its “regular rate” rule. Regular rate is a calculation of an employee’s total compensation divided by the number of hours he or she works in a week. This change, which the department bragged was the “first significant update … in over 50 years,” made it much easier for businesses to offer all kinds of perks to their employees without triggering additional overtime liabilities. The possibilities include perks such as paid parking, wellness programs, discounts for goods and services, tuition support, and adoption assistance, among many others. This rule opened up whole new ways for firms to compete for and reward employees.

Finally, under President Trump, the Office of Labor-Management Standards is requiring unions to disclose involvement in trusts that they either own a majority stake in or control. This will allow union members to understand better how their dues are being spent. “Historically,” the department noted in finalizing the rule, “this information has largely gone unreported despite the significant impact such trusts have on a labor organization’s financial operations and their members’ interests.”

In Michigan, for example, the United Auto Workers used its collective bargaining agreement to establish the UAW Chrysler Skill Development & Training Program. With over $20 million in assets, it was less about training and more about enrichment for union leadership. Federal investigations have revealed such outrages as $30,000 spent on a private party and $37,500 spent on a Montblanc pen. Membership dues were used for condominiums for those in power, golf outings, and lavish meals. Also, a Ferrari. Workers deserve to know about such things. With the new rule, they’ll have that chance.

The Department of Labor and the National Labor Relations Board have come a long way, but there is still more to be done. Union transparency needs to be updated and advanced by allowing union members to see the finances of more unions through the Labor Department’s Intermediate Bodies rule. This would require midlevel unions with only public employees to report their finances, similar to private-sector unions. The transparency forms themselves should also be modernized. Pensions need protecting by stopping fiduciaries from investing for politics instead of what is best for plan participants and beneficiaries. Independent contracting also needs protection from attacks that seek to make people working for themselves into employees.

In the matter of labor policy, the last three and a half years have been a marked departure from the policies of the past administration. This new direction has produced many results that are better for workers, better for job creators, better for transparency, and better for the American economy.

F. Vincent Vernuccio is a senior fellow at the Mackinac Center for Public Policy’s Workers for Opportunity project. The views expressed are his own and may not reflect the views of the Mackinac Center.

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