Tag Archives: service employees international union

Workers Fight. . . to Automate Their Jobs

The news out of Illinois tells us that as many as 2,000 people, including 325 uniformed employees, descended on McDonalds’ headquarters recently in advance of the company’s annual shareholders meeting to demand that the company pay workers’ “what they are worth.” I am not privy to the convoluted calculations involved, and have no idea how the employees arrived at the magic number, but the general feeling seems to be they are all worth $15 an hour.

This is part of a movement pushing back against a minimum wage that many feel is too low and does not provide a livable wage. The movement bears watching because it could lead to significantly more automation, reducing the need for workers in many industries and, thus, the amount of workers’ comp and other types of insurance that cover them.

Let’s look at the core argument for a moment.

The workers at the demonstration are correct that the federal minimum wage of $7.25 an hour does not provide a livable wage. I don’t think it was ever intended to.

Honestly, I believe many people have lost sight of what the minimum wage was supposed to be. It was an “entry level” wage designed for low-skilled workers or those just entering the workforce. It was never intended to be a family-supporting, bill-paying, life-creating wage. We were supposed to start there and work our way up. And by work our way up I mean develop skills and expertise and leave that minimum wage job forever behind us — to be filled by some other unskilled or inexperienced worker.

It doesn’t matter if that new skill was fixing engines or operating on the human brain; we were supposed to do something with our lives. Not any more. Today we define worth by the rate of our respiration and pulse. “I am,” therefore you owe me. My own brother-in-law subscribes to this belief and constantly references some poor sap he read about who has worked for a fast food restaurant for a bazillion years and only makes $8 an hour. My brother-in-law really does not have a response when I say, “Wow, he should quit and find someone who values him more.”

Whether or not you agree with me, the issue here is pure, unadulterated economics. Here is what is likely to happen if the push for an increase in the minimum wage to $15 an hour succeeds.

  1. My brother-in-law, who in addition to speaking for the little man constantly complains that a fast food soda costs $1.50 when the cup and ingredients only cost the restaurant “like a nickel,” will have to get used to paying $2.50 for that soda. He is diabetic, so he shouldn’t be drinking that swill anyway.
  2. Unions, many of whom have contracts tied to the minimum wage as a base, would see immediate raises for their workers’ across the board. (That, by the way, is the real key behind unions’ support for fast food workers)
  3. Finally — and this is the BIG finally — you will see automation in these low-end jobs like you’ve never witnessed before.

That, in the end, is what these workers are really fighting for. They are fighting to be replaced by machines. It is Economics 101. Automation is not feasible at $7.25 an hour. It is at $15 an hour. A visit to a McDonald’s of the very near future may find self-service kiosks similar to those in some retail stores or airports. Customers could place their orders and pay on their own. Some of the food may be produced by automation, as well. A large machine, half freezer and half deep fryer, might cook and dispense the French fries based on what the kiosk systems tell it to do. Fast food restaurants already have self-serve soda machines based on the same principle; the fast food industry merely will expand the use of automation to other jobs within the facility.

I should not need to add that machines don’t complain, don’t have personal issues, don’t call in sick, don’t require benefits and never file grievances or workers’ compensation claims.

This automation, of course, will not be limited to the fast food industry. This will happen throughout the service and retail sector.

If the fight for a $15-an-hour minimum wage succeeds, that will make some people quite happy. The unions will be ecstatic. The robotics industry will be elated.

$1.25M Backpay Highlights Risks of Mismanaging Union Risks In Merger & Acquisition Deals

September’s National Labor Relations Board (NLRB) order requiring the buyer of a California nursing home to pay approximately $1.25 million in backpay and interest, rehire 50 employees and recognize the seller’s union reminds buyers of union-organized businesses of some of the significant risks of mishandling union-related obligations in merger and acquisition, bankruptcy and other corporate transactions under the National Labor Relations Act (NLRA) and other federal labor laws.

Buyer’s Obligations To Honor Seller’s Collective Bargaining Obligations
Under the National Labor Relations Act, new owners of a union facility that are “successors” of the seller generally must recognize and bargain with the existing union if “the bargaining unit remains unchanged and a majority of employees hired by the new employer were represented by a recently certified bargaining agent.” See National Labor Relations Board v. Burns Sec. Servs., 406 U.S. 272, 281 (1972).

In assembling its workforce, a successor employer also generally “may not refuse to hire the predecessor’s employees solely because they were represented by a union or to avoid having to recognize a union.” U.S. Marine Corp., 293 National Labor Relations Board 669, 670 (1989), enfd., 944 F.2d 1305 (7th Cir. 1991).

Nasaky, Inc. National Labor Relations Board Order
September’s National Labor Relations Board Order requires Nasaky, Inc., the buyer of the Yuba Skilled Nursing Center in Yuba City, California, to recognize and honor collective bargaining obligations that the seller Nazareth Enterprises owed before the sale and rehire and pay backpay and interest to make whole 50 of the seller’s former employees who the National Labor Relations Board determined Nasaky, Inc. wrongfully refused to hire when it took over the facility from the prior owner, Nazareth Enterprises.

Before Nasaky, Inc. bought the nursing home, many of the employees at the nursing home were represented by the Service Employees International Union, United Healthcare Workers West (Union). After Nasaky, Inc. agreed to buy the facility but before it took control of its operations, Nasaky, Inc. advertised in the media for new workers to staff the facility and told existing employees at the facility that they must reapply to have a chance of keeping their jobs under the new ownership.

When Nasaky, Inc. took operating control of the facility, facility operations continued as before with the same patients receiving the same services. The main difference was the workforce. The new staff included 90 employees in erstwhile bargaining unit positions, of which forty were former employees of the predecessor employer and fifty were newcomers. Nasaky, Inc. then took the position that the change in the workforce excused it from responsibility for recognizing or bargaining with the union or honoring the collective bargaining agreement between the union and seller Nazareth Enterprises.

When the union demanded that Nasaky, Inc. recognize the union and honor the union’s collective bargaining agreement with Nazareth Enterprises, Nasaky, Inc. refused. Instead, Nasaky, Inc. notified the union that it would not allow the union on its premises, would not honor the union’s collective bargaining agreement with the seller, and did not accept any of the predecessor’s terms and conditions of employment. The union then filed charges with the National Labor Relations Board, charging that Nazareth Enterprises had breached its obligations as a successor under the National Labor Relations Act.

After National Labor Relations Board Regional Director Joseph F. Frankl agreed and issued a complaint, California Administrative Law Judge Gerald Etchingham found all the allegations true based on a two-day hearing. He rejected all of Nasaky’s explanations for why it declined to hire most of those who had worked for the previous employer. See the Administrative Law Judge Decision. Since Nasaky, Inc did not file exceptions, the National Labor Relations Board ordered Nasaky, Inc. immediately to recognize and bargain with the union, hire the former employees and make them whole. The amount of backpay and interest is expected to approximate $1.25 million.

Managing Labor Exposures In Business Transactions
The National Labor Relations Board’s order against Nasaky, Inc. highlights some of the business and operational risks that buyers and sellers can face if labor-management relations are misperceived or mismanaged in connection with business transactions. Because the existence of collective bargaining agreements or other labor obligations can substantially affect the operational flexibility of a buyer, buyers need to investigate and carefully evaluate the potential existence and nature of their obligations as part of their due diligence strategy before the transaction. A well-considered understanding of whether the structure of the transaction is likely to result in the buyer being considered a successor for purposes of union organizing and collective bargaining obligations also is very important so that the buyer and seller can properly appreciate and deal with any resulting responsibilities.

Beyond the potential duty to recognize a seller’s collective bargaining obligations, buyers and sellers also should consider the potential consequences of the proposed transaction on severance, pension, health, layoff and recall and other rights and obligations that may arise. At minimum, the existence of these responsibilities and their attendant costs are likely to impact the course of the negotiations.

When a worksite is union-organized, for instance, additional obligations may arise in the handling of reductions in force or other transactions as a result of the union presence. For example, in addition to otherwise applicable responsibilities applicable to non-union affected transaction, the Worker Adjustment Retraining Act (WARN) and other plant-closing laws and/or collective bargaining agreements may impose special notification or other requirements before a reduction in force or other transaction related activities.

Similarly, the existence of collective bargaining agreements also may trigger obligations for one or both parties to engage in collective bargaining over contemplated changes in terms and conditions of employment, to provide severance, to accelerate or fund severance, benefits or other obligations, to provide continued health or other coverage, to honor seniority, recall or other rights or deal with a host of other special contractual obligations.

Where the collective bargaining arrangements of the seller currently or in the past have included obligations to contribute to a multiemployer, collectively-bargained pension or welfare plan, the buyer and seller also need to consider both the potential for withdrawal liability or other obligations and any opportunities to minimize these exposures in structuring the allocation of the arrangement. In this case, both parties need to recognize that differences exist between the federals for determining when successor liability results under the withdrawal liability rules than typically apply to other labor and employment law purposes.

While buyers and sellers often presume that the stock versus assets sale distinction that typically applies for many other legal purposes will apply, this can be an expensive mistake in the case of determining a buyer’s obligation to honor the seller’s collective bargaining obligations post deal. Likewise, buyers can be exposed to multiemployer successor liability from asset transactions, although it may be possible to mitigate or avoid such liabilities by incorporating appropriate representations in the sale documents or through other steps. Since these multiemployer withdrawal and contribution liabilities generally attach on a controlled group basis, both parties need to properly appreciate and address these concerns early in the transaction to mitigate their risks and properly value the transaction.

In light of these and other potential labor-related risks that may affect corporate and other business transactions, parties contemplating or participating in these transactions are urged to engage and consult with competent legal counsel with specific experience in such labor-management relations and multiemployer benefit plan matters early in the process.