The Recruiting Animal welcomed me on his BlogTalkRadio show for the 3rd time Wednesday, April 6, 2011, to discuss contract issues for recruiters and their principals. My segment lasts about 10 minutes. More specifically, we discussed legal issues concerning a company’s contract to utilize a recruiter’s skills for a position to be filled on a commission only basis. The interview is here as an MP3 file. It’s not the whole show, but just my segment.
Also, on April 13th, my article and editorial Thoughts on Private and Public Sector Union Relations was published on Slate.com’s BizBox, a small business blog. Thanks to Steve Viuker who manages the blog. The full text is below.
In the Private Sector
I recently completed my third union negotiation and dispute resolution of the past six months. One case involved a successful union decertification, and the other two involved settlements before the National Labor Relations Board (NLRB). Due to confidentiality clauses in settlements and not wanting to upset people and disturb my clients’ business operations, I won’t get too specific about my clients or these unions.
What I’ve learned from these negotiations and dispute resolution processes, and the current labor struggles, is that in most private sector industries unions aren’t needed. Sure, in any vocation involving mining, long distance transportation or any other heavy industrial or physically and mentally dangerous activities, unions sometimes serve a valuable safety purpose (i.e., monitoring, inspection and enforcement), but short of safety, unions don’t do much for private sector businesses and employees.
With one client, which is a small business that had a handful of union employees, we were forced to layoff most of the union employees in order to prevent bankruptcy. We did this knowing that these layoffs would be litigated. It took almost a year to get this case to trial before the NLRB. Finally, on the day that trial was supposed to start, and all of the threats and innuendo had been set aside to discuss reality, we settled the case. My client won very, and I emphasize the word very, favorable terms. Thus, this decades old business will remain open and bankruptcy is no longer being discussed.
Many of the businesses I deal with, including the above-mentioned client, have no history of union grievances or unfair labor practice charges, and some rarely communicate with their union at all. Furthermore, due to continuing influences of racism, sexism and religious bias, unions these days still serve as a barrier for minority and female hiring. Although, out of desperation and reality unions have improved in their egalitarianism, many of the reasons for which they were founded (e.g., wage inequality, hours and conditions of employment) no longer exist to the extent that unions can remedy or assist with these concerns. For example, unions have been largely silent when it comes to the “glass ceiling” that still confronts many women, immigration issues, and they’re too slow reacting to job classification changes and changes in the economy.
Essentially, both private and public sector unions today are largely pension fund managers. They exist to fulfill their pension obligations. They need new and existing members in order to keep their pensions funded so they can stay current on payouts. Most of the unions that I’ve dealt with have pensions which are significantly declining in value since economic shakeup 2008. One particular fund that I examined lost billions in less than a year. A few are doing well considering the circumstances. Nevertheless, like Social Security and Medicare, most union pensions have dismal long-term prospects.
Moreover, many of these funds are plagued by corruption regarding fund management choices. These funds invested in risky securities (and in my opinion, did this with the hope of a kickback or insider information like free investment advice). Some funds have a lack of oversight to the extent that their officers and directors often take expensive trips to resorts and similar destinations for meetings amongst themselves, investment advisors and potential investors (part of the kickback they receive). Some of this information is obtainable through these funds’ federal filings (not the insider information/kickbacks of course; for that you need access to personal financial records).
Unfortunately, many private and public sector employees will only get pennies on the dollar due to government pension takeovers (i.e., the PBGC-Pension Benefit Guranty Corporation), bankruptcy and other refinancing schemes. And, many pensioners will probably never receive their pensions if they don’t plan on staying in America because they’ll have to arrange to receive their pensions in other countries, and they won’t know how to retrieve it. Some will get worn down by the retrieval process or will even forget that they’re owed a pension, or realizing that the pension is a ripoff, they’ll take an early withdrawal for a fraction of what they’ll be owed if they waited until they’re fully vested.
In short, many of today’s private and public sector workers who are covered by these pensions don’t understand their rights and obligations. Some employees I speak with even believe that somewhere out there is a retirement account with their name on it. With pensions, that’s not true. It’s a fund that has tens to thousands of enrollees, and all that money is commingled.
When you add all of this to the multi-employer pension withdrawal liability that’s mandated by ERISA–Employee Retirement Income Security Act, any reasonable person should see that these many of these funds don’t have the wherewithal to survive.
In the Public Sector
Many of these same issues are now affecting the public sector. If you examine some of the reporting and editorializing going on, there’s much discussion about public sector unionized employees (and public sector employees in general) earning more than their private sector counterparts. This compensation variance isn’t always reflected in salaries but may be more apparent when factoring the overall costs of benefits (insurance, retirement funds, etc.). Generally this leads to a larger government, and a larger government historically leads to economic stagnation, inflation, corruption and lack of innovation.
For an interesting analysis of this dynamic see www.npr.org/2011/02/25/134065799/Truth-Squading-Public-Private-Pay-And-Benefits.
Furthermore, when government employees (elected and non-elected) start to earn more than their private sector counterparts, a greater and sustained sense of entitlement to higher compensation becomes ingrained (how common are tax rollbacks and cuts?). Once we start paying government employees more, and the size of government increases, it’s very difficult to revert to a smaller, cheaper and more efficient form of government.
What may be even more troublesome, if you believe in the free market, the private sector and entrepreneurialism, is that for the first time in U.S. history, the number of unionized employees in the public sector, 7.6 million, exceeds the number in the private sector, 7.1 million (see http://stats.bls.gov/news.release/pdf/union2.pdf and http://stats.bls.gov/news.release/union2.nr0.htm). It appears that we’re becoming less of a producing economy and more of a civil service and regulatory oriented economy.
What’s happening now in government and in states like Illinois, Indiana, California and Wisconsin is a reflection of the frustration and fear that the economic collapse of 2008 brought on. There’s a growing divide among many sectors of our society as to how to alleviate this frustration and fear.
For example, it’s not just citizens vs. government and Republicans vs. Democrats, but big business vs. small business (some big businesses seemingly faired well during the downturn due to government/taxpayer aid and little of this aid has “trickled down” to smaller and medium-sized businesses). In short, people are angry that highly paid public sector employees are the people who made the decisions to help big business weather the storm, whereas many smaller businesses had to rely purely on market forces for survival.
What all this means for private sector labor unions is that as smaller businesses cut back operations, change locations or close because there’s not enough profit (as my clients are contemplating and doing), and their percentage of profit lost compared to taxes paid increases, there will be decreased private sector unionizing, less compensation for union employees, and much greater frustration and discomfort over what their public sector union “brothers” are earning compared to their “brothers” in the private sector. Less “brotherhood” will result too.
Meanwhile, all unions lobby for increased union rights, salaries and benefits, but where will the money to fund this come from? Who funds a bigger government and weaker dollar?