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. Technology has made it much easier for Americans to work for themselves.

The government has responded by trying to shoehorn workers into rules designed for a different economy. New National Labor Relations Board (NLRB) rules aim to foist unions on workers by destroying the franchise business model. Government agencies have tried to shut down innovative “new economy” jobs which allow Americans to work for themselves. Government should help workers adapt to a changing workforce instead of trying to keep the economy frozen in the past.


Enable Permission-less Innovation. Technology has created jobs that did not exist at the turn of the millennium. Uber allows passengers to order rides directly from their smartphones. Airbnb allows ordinary Americans to rent out their homes while they are away. Etsy enables craftsmen and -women to sell homemade goods to customers worldwide. These platforms have created opportunity for hundreds of thousands of Americans. However, taxi companies, hotels, and many other businesses dislike competition from these “new economy” jobs. They have lobbied heavily for regulations designed to shut down the new competition. The government should instead embrace permission-less innovation. Workers and companies should not need government permission to enter new markets and challenge existing firms. Absent pressing health and safety concerns the government should not prevent workers and companies from challenging existing industries.

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.

Rein in the NLRB. Today, most workers see little benefit from union representation. As a result, private-sector union membership has dropped below 7 percent. Union allies on the NLRB have responded by heavily tilting the rules of union elections to favor union organizers. The Obama NLRB has cut the time frame for union elections in half, allowed unions to gerrymander bargaining units, restricted access to secret ballot elections, and declared business clients and franchisors co-employers of their contractors’ and franchisees’ workers. The Obama Labor Department also rescinded important union transparency rules that enabled workers to see how their union spends their dues. These changes threaten the ability of workers to make an informed choice about union representation. They also threaten the viability of the franchise business model. If the government holds corporate brands legally liable for the actions of their franchises then they must control those actions. That means taking direct ownership of the hundreds of thousands of franchises currently operated as small businesses across America.

Workers have the right to join a union if they choose, but the government should not attempt to foist union representation on workers. Congress and the next Administration should rein in the NLRB and promote worker choice by:

  • Repealing the Obama Board actions on ambush elections, micro-unions, secret ballot decertification votes, and joint employer standards;
  • Requiring unions to regularly stand for re-election so workers can hold them accountable for their representation; and
  • Reinstating the union transparency requirements for union executive compensation, union trust funds, government union locals, and for potential conflicts of interest the Obama Administration rescinded.

Expand Options for Employee Voice. The National Labor Relations Act (NLRA) 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) was intended to prohibit “company unions.” However, its language also prohibits employers’ 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. Instead it requires workers to either choose an outside union or have no formal workplace representation. This hurts workers who do not want a union but would like formal channels to communicate with their employers. Recently, Volkswagen employees in Chattanooga, Tennessee, voted against United Auto Workers representation. This prevented them from having a works council that both they and the company wanted. Congress should permit EI programs and work councils without requiring that an outside union run them.

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 only 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.

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.

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. Federal employees also receive much more generous pension, health care, and paid leave benefits than private-sector workers. In total federal employees average 15 percent to 30 percent higher compensation than comparable private-sector workers. Federal employees also enjoy job security guarantees unheard of in the private sector.

Congress should bring federal compensation, including benefits, in line with the private sector. In addition, Congress should make it easier to remove poorly performing federal employees.

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 and Figures

  • In 2000, plaintiffs filed 1,854 FLSA suits in federal court. By 2015, that number had risen to 8,781 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 NLRB forced Webcor to disband the council. Under the NLRA, employees must choose between either 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 performance-based raises the “bosses’ pet” provision.
  • The federal government spends an average of $35,000 a year per employee on non-cash benefits, triple the average non-cash compensation of the average private-sector worker ($12,200 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 between 55 and 57 years of age, depending on when they were born.
  • 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.
  • Half of of union members now work in government. More than twice as many union members work in the U.S. Postal Service as in the entire domestic auto industry.
  • 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

James Sherk, “Creating Opportunity in the Workplace,” Heritage Foundation Backgrounder No. 2962, December 16, 2014.

James Sherk, “Inflated Federal Pay: How Americans Are Overtaxed to Overpay the Civil Service,” Heritage Foundation Center for Data Analysis Report No. CDA10-05, July 7, 2010.

James Sherk, “Opportunity, Parity, Choice: A Labor Agenda for the 112th Congress,” Heritage Foundation Special Report No. 96, July 14, 2011.

James Sherk, “Proposed Union Rules Harm Workers and Job Creation,” Heritage Foundation Backgrounder No. 2584, July 20, 2011.

James Sherk, “Time to Restore Voter Control: End the Government–Union Monopoly,” Heritage Foundation Backgrounder No. 2522, February 25, 2011.

James Sherk and Lindsey Burke, “Automation and Technology Increase Living Standards,” Heritage Foundation Backgrounder No. 3016, July 20, 2015.

James Sherk and Ryan O’Donnell, “RAISE Act Lifts Pay Cap on Millions of American Workers,” Heritage Foundation Backgrounder No. 2270, June 19, 2012.