Labor

Talking Points

  • American labor law is out of date in America’s modern economy. Congress drafted it for an industrial economy in the 1930s that no longer exists. Congress should bring labor law into the 21st century.
  • Federal law should allow employers and employees to agree to flex-time schedules. It should permit workers a voice on the job outside of traditional labor unions. The law should not prevent unionized employers from giving individual workers performance bonuses.
  • Congress should reject organized labor’s attempts to force workers into unions. The government should guarantee that all workers can vote in a secret-ballot election before unionizing.
  • Federal employees make 30 percent more than similarly skilled private-sector workers. Congress should bring federal pay in line with the private sector. This should involve raising the federal retirement age above 56 years of age and reducing the amount of paid leave federal employeesreceive.

The Issue

The economy, labor market, and labor–management relations have changed dramatically since the 1930s. Federal labor laws have not. The government needs to bring labor policy into the 21st century to address the challenges that today’s workers face.

American labor law was written for an industrial economy in which employees’ unique skills and abilities mattered little on the assembly line. The law assumed that workers’ individual needs could be met entirely through collective representation. It also assumed that workers had little need for flexible schedules.

In today’s knowledge economy, these assumptions no longer hold. Laws that prohibit flexible schedules feel less like workplace protections than shackles. Today’s workers expect to be rewarded for their individual contributions. Workers want a voice on the job, but one-size-fits-all union contracts have lost much of their appeal. Only in government does union membership remain widespread.

The union movement has responded by attempting to make it more difficult for workers to decline their services. Workers increasingly need protection from union overreach. Unions are attempting to deprive workers of a secret ballot during organizing drives while spending workers’ dues on political causes with which they frequently disagree. Union officers who expose corruption have no protections against retaliation. In the government, taxpayers need protection from unions that put union private interests ahead of the common good.


Recommendations

  1. Modernize the Fair Labor Standards Act (FLSA). The Fair Labor Standards Act was written to deal with challenges facing the manufacturing economy of the 1930s. The economy has changed dramatically since then, with more than four in five workers employed in the service sector. Technology has changed where and how employees work.

    The FLSA requires employers to pay time-and-a-half overtime for work beyond a 40-hour workweek with exemptions for salaried professional employees. Criteria for determining whether an employee classifies as exempt are confusing and out-of-date. Figuring out when the workday begins can also be challenging. Are convenience store managers exempt employees? Does checking e-mail and voicemail before leaving for work start the clock? Courts in different states have come to different conclusions about these issues.

    Workers also want—and need—flexible schedules to help balance their work and family lives. They want to be able to take time off to be with their families as needed and make up those hours later. The FLSA often prohibits this. Workers covered by the overtime law must receive cash pay if they work more than 40 hours a week. They may not choose to earn compensatory time instead—even if they value that flexibility. To modernize the FLSA, Congress should:

    • Permit employees and employers to elect to institute compensatory time programs voluntarily;
    • Clarify that checking e-mail or voicemail or similar activities before driving into work do not start the workday and do not require employers to pay workers while they commute to work; and
    • Modernize the exemption standards for computer employees and salesmen to reflect today’s work practices.
  2. Expand options for employee voice. The National Labor Relations Act (NLRA) also was written for the industrial economy of the 1930s, and Congress has not seriously amended it since 1947. Many provisions of the NLRA hurt modern workers. Section 8(a)(2) prohibits an employer from dominating or interfering with the formation or administration of any labor organization, which the National Labor Relations Board has construed to prohibit many employer communications with workers without going through their unions. In many cases, employees either speak through a union, or they have no formal voice in the workplace. Many employees (and employers) would like other options, such as discussing workplace issues with employee involvement (EI) programs, work councils, or labor–management work groups. Surveys show that 60 percent of workers prefer such programs to more government regulations or labor unions, but the law forbids such cooperative labor–management discussions. Congress should permit EI programs and work councils without requiring that they be run by an outside union.
  3. Allow union members to accept raises. Today’s workers also expect to be rewarded for their individual contributions. However, the NLRA prevents unionized companies from paying union members more than their contract calls for without negotiating with the union. For example, the Giant Eagle grocery store in Edinboro, Pennsylvania, gave two-dozen junior employees raises for good performance. Their union filed a grievance, arguing that this violated their seniority system. The arbitrator agreed and forced Giant Eagle to rescind the raises. Under the law, union contracts set not just a wage floor, but also a wage ceiling. Without this restriction, many unionized businesses would offer performance pay to encourage greater productivity. Greater productivity raises workers’ earnings and corporate profits: Both labor and management come out ahead. Congress should allow unionized companies to pay workers more than their union rate.
  4. Protect employee rights. The interests of unions sometimes conflict with the interests of the workers they seek to represent. Unions want to collect dues from as many workers as they can—whether or not those workers want union representation. Businesses can legally recognize a union on the basis of publicly signed union cards without a secret-ballot election. This is known as “card-check” recognition. Card-check tells union organizers which workers support them and which do not. They return again and again to the homes of workers who have not signed and press them to change their minds. This makes it much harder for workers to say “no.”

    The government should require a secret-ballot vote before unions can represent workers. The government should also give workers more say in how unions spend their dues. Unions frequently spend heavily on political activism with little regard for their members’ views. Several states have passed “paycheck protection” laws requiring unions to get their members’ permission before spending their dues on political activism. Union political spending subsequently dropped dramatically. Given the choice, most union members did not want their money spent on politics. Congress should pass a national paycheck protection law requiring unions to get their members’ permission before using their dues for political purposes.

  5. Reform federal pay. The government should aim for pay parity between the private sector and the federal government. Federal pay varies wildly from market rates in both directions. Some high-performing federal workers earn less, and many other federal workers make more than they would make in the private sector. This averages out to a 22 percent cash wage premium for federal workers. Federal employees also receive much more generous pension, health care, and paid leave benefits than private-sector workers. Adding these benefits raises the average federal compensation premium to 30 percent. Federal employees also enjoy job security guarantees unheard of in the private sector.

    Congress should bring federal compensation in line with the private sector. The General Schedule should be scrapped and replaced with a performance pay system tied to market rates of pay. Congress should bring benefits in line with private-sector standards. In addition, Congress should make it easier to remove poorly performing federal employees.

  6. Restrict government unions. The founders of the labor movement saw unions as a vehicle to protect workers from being exploited and to get workers a share of the profits they created. Consequently, they never proposed unionizing the government. The government earns no profits. Government unions organize against voters and taxpayers. Unions pressure the government to put their interests ahead of public interests. Not until the late 1950s did the union movement begin to argue that collective bargaining belonged in government.

    In most agencies, collective bargaining means less efficiency and higher costs. In national security agencies, it can cost lives. That is why Congress prohibits collective bargaining in the FBI, CIA, and Secret Service. However, the Obama Administration recently decided to begin collective bargaining at the Transportation Security Administration. Canada has a similar policy. In 2006, union protests in Toronto led to 250,000 passengers boarding their flights without being screened. National security must come first. Congress should end collective bargaining at all agencies in the Department of Homeland Security.


Facts & Figures

  • In 2000, plaintiffs filed 1,854 Fair Labor Standards Act suits in federal court. By 2010, that number had risen to 6,081 suits. Modernizing the FLSA would prevent unnecessary litigation.
  • Webcor Packaging, Inc., a manufacturing company in Flint, Michigan, formed a plant council consisting of five elected employees and three appointed managers to examine ways to improve work rules, wages, and benefits. The National Labor Relations Board forced Webcor to disband the council. Under the NLRA, employees must choose between union representation or no representation at work.
  • Union members are half as likely to earn performance pay as non-union workers, primarily because unions oppose allowing hard workers to earn more. The president of a Teamsters division called letting employees accept performance-based raises the “bosses’ pet” provision.
  • The federal government spends an average of $32,800 a year per employee on non-cash benefits, triple the average non-cash compensation of the average private-sector worker ($10,900 a year).
  • Federal employees receive both a defined-benefit and a defined-contribution pension plan. Employees with enough tenure may retire with full pension benefits at 56 years of age.
  • A federal employee with three years of experience receives four weeks of paid vacation, 10 federal holidays, and 13 days of paid sick leave. A comparable private-sector worker earns an average of 10 fewer days of paid leave.
  • Sixty percent of union members object to unions spending their dues on politics. Two-thirds of union members say that unions should have to get permission before spending dues on politics.
  • A majority (51 percent) of union members now work in government. More than twice as many union members work in the Post Office as in the entire domestic auto industry.
  • Government unions accounted for three of the top five outside political spenders in the last midterm elections.
  • In 1959, the AFL–CIO Executive Council declared, “In terms of accepted collective bargaining procedures, government workers have no right beyond the authority to petition Congress—a right available to every citizen.”

Selected Additional Resources

Heritage Experts on Labor


  • Derrick Morgan

    Vice President, Domestic & Economic Policy


  • James Sherk

    Senior Policy Analyst in Labor Economics

To talk to one of our experts, please contact us by phone at 202-608-1515 or by email.