Protecting the Rights of Workers and Their Unions In a Global Economy: The United States Experience1

Presented at “The International Conference on Labor Disputes Resolution System,”

Oct. 15-16, 2006 Shanghai, China

By: Reuben A. Guttman

Wolf Haldenstein Adler Freeman & Herz LLP 1920 L Street, NW, Suite 400

Washington, DC 20036 guttman@whafh.com

I. Introduction

Labor and employment laws addressing the rights of workers and their labor unions in the

United States were designed with the intention of maintaining a delicate balance of power

between employer and employee. Whether addressing the collective rights of employees or

workplace safety, these laws were authored to provide employees with swift and just remedies in

exchange for employers not having to face the potential of crushing penalties.

With the growth of a global economy and the rise of the service sector, rather than

orchestrating a balance, these laws have come to facilitate an imbalance of power in favor of

management. In the United States, an employer’s bargaining leverage has reached new heights

particularly where the outsourcing of work overseas is no longer limited to the manufacturing

1 The author wishes to thank the following for their wisdom over the years: Richard Miller, Jon Karmel, Ann Lugbill, Bob Stropp, Jack Mooney, George Murphy, Bob Sugarman and Dan Guttman all of whom have successfully waged the uphill battle to apply the law in a way that has helped countless workers in the United States. The author also wishes to thank the Service Employees International Union, the United Food and Commercial Workers International Union, and the Oil Chemical & Atomic Workers International Union whose members and their struggles have been an example of perseverance and a learning ground for the law. Aaron Welo, Greg Stone and Joy Bernstein provided invaluable insight. Finally, the author wishes to remember Tony Mazzocchi, whose struggles led to the passage of national health and safety law in the United States and whose vision was the creation of a labor party.

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sector as the growth of the internet and communications technology has enabled the outsourcing

of even service sector jobs.

While labor organizations have attempted to grapple with these problems through

traditional organizing concepts including alliances with their counterparts abroad, workers and

unions have yet to recognize in an institutional manner that operating in a global economy means

that employers have subjected themselves to a myriad of global regulations and laws which may

provide a catalyst to help restore some of the balance of power and rights between worker and

manager.

This paper analyzes the United States’ experience and points to examples of laws,

including securities laws, procurement laws, and statutory tort laws that may provide remedies

for foreign and domestic workers and their unions in the Courts of the United States even where

the wrongful conduct occurred abroad.

II. The Legal Background

Workplaces in the United States today are subject to a web of federal and state laws. It

was not until the Administration of Franklin Roosevelt, and the “New Deal” legislation of the

1930’s, that the federal government even endeavored to regulate the private workplace.

In NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1 (1937) the United States Supreme

Court justified Congressional intervention in the area of workplace regulation as a reasonable

extension of its powers afforded by the “Commerce Clause” of the United States Constitution.2

2 The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States... To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” U.S. Const. art. I, § 8, cl. 3.

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The Court explained that “[a]lthough activities may be intrastate in character when separately

considered, if they have such a close and substantial relation to interstate commerce that their

control is essential or appropriate to protect that commerce from burdens and obstruction,

Congress cannot be denied the power to exercise that control.” Thus, from the very beginning,

federal intervention into the workplace was justified not by a moral obligation to protect

workers but rather by a need to intervene for the purposes of national economic efficiency as

labor unrest meant the “obstruction” of commerce.

The Jones & Loughlin decision paved the way for an assortment of federal laws which

set workplace rights and standards for all employees and carved out specific rights for

employees individually and collectively as part of trade unions.

As the federal government has intervened in the workplace so too have the states which

have established their own, and sometimes overlapping, laws which set workplace standards and

rights.

While it is sometimes the case that the federal law allows states to impose more stringent

rights and standards, as in the case of state laws establishing minimum wages, it is also

sometimes the case that conflicts exist between state and federal law. Where these conflicts

exist, the courts look to the Supremacy Clause of the United States Constitution which holds

that issues of conflict are resolved in favor of the federal legislation which is said to “pre-empt”

state laws that stand in the way.3

3 “This Constitution, and the laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the authority of the United States, shall be Supreme Law of the land; and the Judges in every state shall be bound thereby, any thing in the Constitution or Laws of any state of the contrary notwithstanding.” U.S. Const. art. VI, cl. 2.

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Whether state or federal and whether it is a law or a standard, there is one common thread

that runs through workplace regulation in the United States: labor and employment laws exist to

promote economic efficiency through, among other things, a balance of power between labor and

management. Avoidance of labor unrest is a central goal of labor regulation.

A. A Closer Look at the Laws

In the United States “labor law,” “employment law” and “labor standards” have special

meanings. The term labor law includes those laws that define the rights of workers to act in

concert for their mutual aide or protection. It is this body of laws that protects the rights of

workers to form a labor union and the rights of the union to protect the interests of workers.

Labor laws exist to protect workers rights to organize and bargain collectively. In the United

States, bodies of labor law have been promulgated to protect the collective rights of private and

public sector workers.

In contrast, employment law is that body of law which addresses the rights of workers as

individuals without regard to whether they are acting in concert or whether they are

participating in a labor union. Employment laws can be found in statutes or in court rulings and

range from statutory proscriptions against workplace discrimination based on race, gender, and

national origin to common law rules governing the rights of employers to discharge an

employee “at will” where no labor contract exists.

Labor standards are laws or regulations promulgated at both the federal and state level

by legislative bodies or administrative agencies tasked with promulgating workplace specific

regulations. These types of laws/regulations address everything from child labor and minimum

wages to the permissible level of airborne asbestos or other carcinogens in the workplace.

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Laws in the United States also exist to protect monies that are held in trust to provide for

employee pensions and healthcare coverage.4 These laws govern the obligation of the trustees

who oversee the monies and address the conduct of the trustees in terms of how they may invest

the money (as in the case of pension) and spend it (as in the case of health and welfare or

medical benefit funds).

i. U.S. Labor Law_

The cornerstone of U.S. Labor Law is Section 7 of the National Labor Relations Act

(NLRA or “The Act”) which was passed by the United States Congress in 1935 as part of

President Franklin Roosevelt’s “New Deal” legislation. This Act, which addresses only the

rights of private sector workers, is a model for all labor laws in the United States. Section 7

states:

Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 8(a)(3).

The United States Congress also promulgated Section 8 which addresses the ways in

which unions and employers can violate an employee’s Section 7 rights. Section 8(a)

addresses the various violations that an employer may commit and Section 8(b) addresses the

various violations that a union may commit. Section 8(a) provides for the following:

It shall be an unfair labor practice for an employer--

4 The Employee Retirement Income Security Act (ERISA) protects worker pension fund monies. 29 U.S.C. 18 et seq.

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(1) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7;

(2) to dominate or interfere with the formation or administration of any labor organization or contribute financial or other support to it: Provided, That subject to rules and regulations made and published by the Board pursuant to section 6, an employer shall not be prohibited from permitting employees to confer with him during working hours without loss of time or pay;

(3) by discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization: Provided, That nothing in this Act, or in any other statute of the United States, shall preclude an employer from making an agreement with a labor organization (not established, maintained, or assisted by any action defined in section 8(a) of this Act as an unfair labor practice) to require as a condition of employment membership therein on or after the thirtieth day following the beginning of such employment or the effective date of such agreement, whichever is the later, (i) if such labor organization is the representative of the employees as provided in section 9(a) in the appropriate collective-bargaining unit covered by such agreement when made, and (ii) unless following an election held as provided in section 9(e) within one year preceding the effective date of such agreement, the Board shall have certified that at least a majority of the employees eligible to vote in such election have voted to rescind the authority of such labor organization to make such an agreement: Provided further, That no employer shall justify any discrimination against an employee for nonmembership in a labor organization (A) if he has reasonable grounds for believing that such membership was not available to the employee on the same terms and conditions generally applicable to other members, or (B) if he has reasonable grounds for believing that membership was denied or terminated for reasons other than the failure of the employee to tender the periodic dues and the initiation fees uniformly required as a condition of acquiring or retaining membership;

(4) to discharge or otherwise discriminate against an employee because he has filed charges or given testimony under this Act;

(5) to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 9(a).

The law is structured such that any violation of Section 7 rights always includes a violation of

Section 8(a)(1). Violations of Section 8(a) can range from a refusal to allow employees to wear

union buttons in the workplace to firing an employee because he or she organized a union.

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From the labor perspective, Sections 8(a)(3) and 8(a)(5) are the most important

provisions of Section 8. Section 8(a)(3), which makes it unlawful to discriminate against an

individual because he or she has engaged in activities protected by Section 7, was authored to

provide a viable means of redress for workers who have been, for example, terminated because

of their pro-union activity.

The obligation to bargain in good faith can be found in Section 8(a)(5). From the short

phrase found in this section is a body of case law defining the parameters of this obligation.

Focusing alone on this tiny provision of United States Labor law provides an insight into the

delicate balance of power that was sought to be orchestrated between labor and management.

Flowing from the statutory provisions of Section 8(a)(5) are an intricate body of

bargaining rules that have been developed through case law. First, the obligation to bargain is a

continuing obligation that includes not just the terms of a labor contract but the obligation to

bargain over any changes in employment conditions that occur at any time. Thus, where an

employer decides to close a factory and transfer the work overseas, the employer must bargain

over the impact of the decision. Second, the obligation to bargain includes the obligation to

provide information that is necessary and relevant to the bargaining process.5 Third, the

obligation to bargain necessitates good faith efforts which include the obligation to meet and

exchange proposals. Fourth, the obligation to bargain includes a concept called “impasse” which

means that when the parties have engaged in good faith negotiation and can bargain no more

because each side has gone as far as they can go then, and only then, may the employer

5 NLRB v. Truitt Mfg Co. 351 U.S. 149 (1956).

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implement its “last, best and final offer.”6 The notion that an employer can implement its final

offer after an impasse has been reached is akin to letting the “laws of nature take effect.”

Significantly, Section 8(a)(5) leaves the development of the substantive terms and

conditions of employment to private negotiation. The NLRA does not in any way dictate what

the specific terms of employment should be; rather, the law embodies a process that allows

for these terms to be negotiated. It is a statute that provides for a process that leads to

workplace rules and ultimately standards.

Counter-balancing the proscriptions against employer conduct found in Section 8(a)

are proscriptions against union conduct found in Section 8(b). While this section maintains the

appearance of an effort to balance the power of labor and management, the subtleties of its

provisions tip the balance ever so slightly in favor of management.

Section 8(b)(4) which addresses the use of “secondary activity” by unions is one of the

most important sections benefiting employers. To understand this section one must first

understand the distinctions between primary and secondary employers. A “primary employer” is

either an employer that employs those represented by a union or employs those a union seeks to

represent. A union is allowed to engage in certain coercive, albeit peaceful, conduct including

picketing of primary employers. A union is, however, restricted in what it can do to a non-

primary or secondary employer in order to place pressure on the primary target. Secondary

activity may include picketing a bank that lends money to a primary employer or picketing the

business of an influential member of the community who may have a friendship with someone

6 The impasse must be legitimate and any allegations that management has engaged in an unfair labor practice which would taint the bargaining process would bar impasse until the NLRB investigates and determines the validity of the unfair labor practice allegations.

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on the Board of Directors of the primary employer. This type of conduct is called secondary

activity. Certain types of secondary activity are unlawful including certain efforts to force a

secondary employer to boycott a primary employer. Yet, not all secondary activity is proscribed

by Section 8(b)(4) as the proscriptions of Section 8(b)(4) cannot prohibit free speech that is

otherwise protected by the First Amendment to the United States Constitution.

The slight edge given employers in Section 8(b) is the right of employers to go to court to

seek damages for a violation of Section 8(b)(4). This is a one-sided right given to employers as

there is no corresponding right where an employer violates Section 8(a). To the extent that an

employer is causing immediate harm to a union and its members through violation of section

8(a), the most the union can do is ask the NLRB to seek an injunction under Section 10(j) of the

Act. Employers also have a corresponding right to injunctive relief under Section 10(1) of the

Act.

Indeed, the entire administration of rights protected by Section 7 and the wrongs

articulated in Section 8 falls within the exclusive jurisdiction of the National Labor Relations

Board (NLRB). The NLRB or “Board” investigates and adjudicates charges of violations of

Section 7 rights which are known as “unfair labor practices.” The Board itself is known as “an

administrative agency.” Rather than create statutes that anticipate every possible combination of

events that may pose a problem, many federal statutes create “expert” agencies which can either

make specific and tailored rules to govern problems of a highly technical nature or govern a

particular setting by adjudications based on interpretations of a federal statute. The NLRB is one

agency that rules by adjudication.

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Addressing the role of the National Labor Relations Board, the United States Supreme

Court in the case of Republic Aviation Corp. v. NLRB, 324 U.S. 793 (1945) explained:

The Wagner Act did not undertake the impossible task of specifying in precise and unmistakable language each incident which would constitute an unfair labor practice. On the contrary that Act left to the Board the work of applying the Act’s general prohibitory language in the light of the infinite combinations of events which might be charged as violative of its terms.

The Board is a self contained entity that includes an office of General Counsel which

investigates and prosecutes unfair labor practice charges and “the Board” itself which includes a

body of administrative law judges (ALJ) who hear cases at trial and five Board Members who

review the decisions of the judges.

If the General Counsel to the Board conducts an investigation of a charge and finds no

cause to issue a “complaint,” the case will not proceed to review by an ALJ and the employee or

union filing the charge has no rights of redress. If the General Counsel decides to proceed with

the charge, a complaint will be issued and the charging party has the right to participate in the

prosecution of the case before the ALJ and appear before the Board if the case goes to that level.

The Board itself does not conduct trials. It merely reviews the record created at trial

before the ALJ. Decisions of the full Board are subject to review by the United States Court of

Appeals but the Court can only review the record at the Board and cannot hold a new trial.

Decisions of the Court of Appeals are subject to review by the United States Supreme Court

should the Court decide to hear the case.

In addition to its adjudicatory functions, the Board also has responsibility for

administering elections to determine whether employees actually want representation by a labor

union. Unions seeking representation status must show that there is a genuine interest in

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unionization by filing what as known as an “RC” or Representation Certification Petition with

the NLRB. The employer has a right to challenge the petition by arguing that there is not a true

showing of interest. The employer may also argue that the unit of employees sought to be

represented by the union does not have such a sufficient community of interest to merit

certification as a “bargaining unit.” These types of issues, for example, include the question of

whether service and maintenance workers should be included in a bargaining unit with nurses.

The RC process also involves questions about the identity of the employer. Though one

entity may sign the paycheck, employees may be supervised by another entity that directs the

work, provides the uniforms and disciplines the workers. These types of relationships are known

as joint employer, single employer, or alter-ego relationships. The question of who is the

employer for collective bargaining purposes is a question decided at the RC phase of the

process.7 Fact finding for this process is done before an administrative law judge with an appeal

to the full NLRB. The process is time consuming and an impediment to union organization

particularly where key union supporters may leave the workplace during the extensive time

period it takes to secure an election. Moreover, this lengthy time period allows employers an

opportunity to chill unionization through “captive audience meetings” and strategic firings of

workers.

Activity that is arguably prohibited by Section 8 or arguably protected by Section 7 falls

within the exclusive jurisdiction of the NLRB. This means that employees cannot sue an

employer directly in court where the cause of action involves activity that is “arguably prohibited

7 See, e.g., NLRB v. Browning-Ferris Industries of Pennsylvania, 691 F.2d 1117 (1982).

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and/or protected”8 including actions for wrongful termination. Where the cause of action is

deeply rooted in local feeling and responsibility, see e.g., Youngdahl et al. v. Rainfair, Inc., 355

U.S. 131 (1957), the courts have created exemptions. Thus, causes of action to restrain pickets or

to seek redress from injuries caused by violence have been allowed to proceed and are thus not

preempted.

ii. Employment Law

The Federal and state governments have promulgated statutory employment laws. In

addition, there are “common laws” governing employment that are the creations of court

proceedings.

While employers are generally left to their own devices to manage a workplace, a

cornerstone of United States employment law is that employers may not discriminate on the

basis of race, gender, religion, national origin, age or disability. These are known as “protected

classes.” The law protects all races, religions and both genders equally. It merely provides that

employment decisions may not be made on these bases. In terms of age, the law only protects

individuals who are between the ages of 40 and 70. With regard to disability, the courts have

been grappling with what constitutes a disability.

Shortly after the Civil War between the States, Congress passed 42 U.S.C. § 1981 making

it unlawful not to enter into a contract with an individual because of his or her race.9 Other than

8 See, San Diego Building Trades Council v. Garmon, 359 U.S. 236 (1959). 9 This statute states:

Equal rights under the law

(a) Statement of equal rights

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proscriptions on discrimination found in the Fifth and Fourteenth Amendments to the

Constitution, this is perhaps the earliest law addressing race discrimination and it has been

applied to contracts of employment.

In 1964 the United States Congress passed Title VII of the Civil Rights Act of

196410which was signed into law by President Lyndon Johnson. The law bars discrimination

in employment based on race, gender, religion or national origin. In promulgating Title VII,

Congress established the United States Equal Employment Opportunity Commission (EEOC)

which is charged with investigating and bringing claims of violations of the law.

Any claim of discrimination based on race, gender, religion or national origin, must first

be brought to the EEOC. In contrast to the exclusive jurisdiction of the NLRB General Counsel

who has the sole right to proceed with a case before the National Labor Relation Board, an

aggrieved employee can ask for a “right to sue letter” which allows him or her to proceed

directly to a United States District Court.

In the United States, claims of discrimination principally break down into three

categories. “Disparate treatment” involves conduct that by itself directly discriminates. Firing

All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to

sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed

by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other.

(b) “Make and enforce contracts” defined

For purposes of this section, the term “make and enforce contracts” includes the making, performance, modification, and termination of contracts,

and the enjoyment of all benefits, privileges, terms, and conditions of the contractual relationship.

(c) Protection against impairment

The rights protected by this section are protected against impairment by nongovernmental discrimination and impairment under color of State

law.

10 42 U.S.C. § 2000(e).

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someone because they are a member of a protected class is one example of a disparate treatment

claim.11 Employer conduct that is facially neutral but has the impact of discriminating is called a

“disparate impact” claim12. An example would be requiring all employees to work overtime on a

particular day with the impact of that decision largely falling on particular set of employees who

celebrate a religious holiday on that day. The third type of claim was developed by the United

States Supreme Court over two decades after the passage of the law and it is known as a “hostile

environment claim.”13 Under this theory of the law, it is a violation of Title VII for an employer

to allow its workers or managers to engage in conduct that is so hostile to a particular “protected

class” that it makes them uncomfortable in the workplace. For example, allowing the repeated

use of racial slurs may be conduct that would violate the Act.

While Title VII was considered a progressive law, it was not until amendments to the law

in 1990 that Congress allowed courts to impose punitive damages for egregious violations of the

statute. Even with the passage of these amendments, punitive damages are quite limited and may

not be sufficient enough to deter wrongful conduct.

In addition, the statute of limitations for filing charges with the EEOC is limited to no

less than 180 days and no more than 365 days depending on the state where the claim is

brought. Employees often wait too long to bring their claims and thus the claims are time-

barred. This occurs because it often takes a pattern of conduct for an employee to realize that

discrimination is occurring. By the time the employee puts the facts together, the statute of

limitations may have expired. 11 McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973). 12 Griggs et al. v. Duke Power Co., 401 U.S. 424, (1971). 13 Meritor Savings Bank, FSB, v. Vinson et al., 477 U.S. 57 (1986).

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States have also promulgated laws which parallel Title VII or expand upon its

proscriptions. The District of Columbia Human Rights Act, for example, makes it unlawful to

discriminate against anyone - including an employee - because of their “source of income” or

“place of business.”

Whistleblower protections have become extremely popular in the United States and

many laws contain protections for workers who “blow the whistle” on employer violations.

Environmental laws, safety and health laws and even a new corporate law, the Sarbanes-Oxley

Act (“SOX”)14 contain whistleblower protections. In addition, certain states have promulgated

laws protecting employees who are discharged for vindicating public policy rights such as

reporting a violation of a law or standard. New Jersey, for example, has the Conscientious

Employee Protection Act (“CEPA”).

State courts have also fashioned common law remedies to protect whistleblowers. These

remedies are exceptions to the rule that employees who do not work under contract can be

terminated at the will of an employer. This is known in the United States as the “employment at

will” doctrine. Where these common law remedies exist, workers may bring law suits under a

theory known as “discharge in violation of public policy.” An employee who reports that his or

her employer is violating a law or standard and is discharged in retaliation for making such a

report can bring suit under this theory or “discharge in violation of public policy.”

14 The Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204 (2002).

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A new twist to the protection of employee rights in the United States is compulsory

arbitration. Employees who agree to arbitrate their employment disputes as a condition of

employment are barred from seeking relief in a court of law and must arbitrate their claims15

The exception to this rule is where the arbitration clause is found in a labor contract and the

claim is personal as opposed to collective.16

iii. Labor Standards

In addition to labor and employment laws, the federal and state governments have

promulgated labor standards which include some of the following examples:

• Proscriptions against child labor;

• Minimum wages for all workers;

• Pay at time and one half for all work in excess of 40 hours in one week;

• Safety and health standards protecting employees from workplace injury or

illness.

The most intricate set of rules are those governing health and safety in the workplace. In

1970, Congress passed the Occupational Safety and Health Act which created an agency of the

Department of Labor known as the Occupational Safety and Health Administration (“OSHA”).17

OSHA is charged with promulgating workplace specific regulations which protect employees

from exposure to an array of toxic chemicals, carcinogens, and workplace hazards. There are

rules governing exposure to benzene, asbestos, bloodborne pathogens, and an assortment of

15 Robert D. Gilmer, Petitioner v. Interstate/Johnson Lane Corporation, 500 U.S. 20 (1991). 16 Barrentine et al. v. Arkansas-Best Freight System, Inc. et al., 450 U.S. 728 (1981). 17 29 U.S.C. § 651.

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hazards particular to the construction industry. The rules address exposure levels, personal

protective equipment (PPE) including respirators and even prophylactic measures as in the

requirement that employees who are within the orbit of exposure to bloodborne pathogens are

entitled to hepatitis B vaccinations at the employer’s expense.

United States’ safety and health law has some basic key concepts:

First, every employee is entitled to a workplace free from recognized hazard that

may cause serious injury or illness.18 Specifically, the Occupational Safety and Health Act

(Section 5(a)(1)) states:

Each employer shall furnish to each of his (sic) employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees.

This catch all piece of the legislation, known as “The General Duty Clause,” allows the

Secretary of Labor to issue citations against employers that have not violated any specific

regulation but that have otherwise maintained a hazardous workplace.

The second important concept is the doctrine of “right to know.” Every employee has a

right to know the hazards of the workplace so that he or she may take proper precautions.

Regulations promulgated by the Secretary of Labor which implement OSHA address the matter

of “hazard communication” which is known as HAZCOM.19 HAZCOM regulations require

everything from the right to inspect Material Safety Data Sheets (MSDS) which report on every

toxic chemical in the workplace to the right to inspect logs which report on employee workplace

injury and illness. HAZCOM may also involve training with regard to hazards in the workplace.

18 29 U.S.C. § 654(a)(1) . 19 Although not specifically articulated in the law, unions have bargained for the right to refuse to perform work if the employer has failed to take the appropriate precautions.

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iv. Compensation Systems

Compensation schemes are an integral element of workplace regulation. States have

promulgated laws providing for “worker’s compensation” which provides for health care

coverage for employees who have sustained a work related injury or illness. This compensation

also provides employees with lost wages based on the extent of the disability. State worker’s

compensation schemes actually provide schedules of compensation setting forth the amount of

money or percentage of wages to paid to employees based on, for example, the loss of a leg, a

hand, an arm, or an eye.

In consideration of being able to receive worker’s compensation, most injured

employees cannot file a lawsuit against their employer where they have sustained a workplace

injury. Some states have extended this worker’s compensation “bar” to preclude the filing of

lawsuits even where the employer’s conduct amounted to gross negligence or intentional

wrongdoing.

In addition to “worker’s compensation,” state laws also provide for unemployment

insurance which compensates a worker in the event he or she loses his job through no fault of

his or her own. Employers are required to pay into state created unemployment insurance funds

which are administered by state governments.

III. Union Organizing: The Background

Though labor leaders in the United States point to relatively recent events as a cause for

the demise of labor union representation, or “density,” noted economist Jon Kenneth Galbraith

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wrote back in 1967 in his book The New Industrial State20 about the decline of union power. At

that time, Galbraith noted that the union “is also much less essential to the worker. What the

techno structure gives to the union, it can also give without a union or to avoid having a union.”

In some respects Galbraith’s comments are remarkable because they speak about an era which

contemporary United States’ labor leaders look back on as the height of union power.

Perhaps it was initially, as Galbraith noted, the conservative behavior of labor unions in

the 1960s or that changes in the workplace driven by labor’s own initiatives had benefited all

workers making the unions less relevant. Today, however, new obstacles stand in the way of

labor union resurgence in the United States.

One major obstacle for labor is the growth of a global economy. Unions in the United

States were highly successful in organizing workers around industrial sectors in the North. In the

textile, steel and automotive industries, work at the plant was the best job to be found and the

clearest path toward a better way of life was not through pursuit of a better job with a new

employer but through pursuit of enhanced conditions with the existing employer. Simply stated,

the job was good enough to make it worth fixing. The union was the catalyst to facilitate this

change. Yet, when labor unions organized factories in the northern United States where attitudes

and state laws were more amenable to unionization, factory owners began to move production to

the South where they could benefit from state laws giving workers the right not to pay

compulsory union dues or their equivalent which could be required under a labor contract.

As unions began to make in roads into the South, plant owners, where practicable, moved

their operations overseas. The best example of this comes from the study of the American

20 Galbraith, John, Kenneth, The New Industrial State, Houghton-Mifflin (copyright 1967)

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Clothing and Textile Workers Union (ACTWU) decade long efforts to organize North Carolina’s

Cannon Mills plant. After multiple NLRB elections to determine whether employees wanted

representation by ACTWU, the union finally won the right to represent workers. A contract was

negotiated and signed but ultimately the company closed its plant and moved operations

overseas.

The second problem faced by labor today is the growth of the service economy where

workers are paid slightly above minimum wage with no retirement or health and welfare

benefits. Jobs in the service economy include work in the hotel, retail, and fast food industries.

One prime example is Wal-Mart which employs over one million workers. Most of the Wal-Mart

workers are part-time with no pension or health care benefits. The Wal-Mart experience in many

respects typifies the challenges faced by unions in the service sector. In contrast to organizing

workers in industrial sectors, organizing workers at Wal-Mart is extraordinarily difficult if not

impossible. Because the compensation is so low and the relative skill level necessary to perform

the work is similarly low, the employee’s clearest path to enhancing working conditions is

finding a new job. For the Wal-Mart worker, it is easier to get a better job than to form a labor

union. This was not the case with jobs in the old industrial economy. Because service sector jobs

are “disposable,” workplace turnover is extremely high. Unions that have studied Wal-Mart have

noted that the majority of the workforce turns over at a rate near 100% each year. With this rate

of turnover, unions have found that their core supporters leave the work environment before an

organizing campaign can be completed.

To complicate matters for labor unions, the growth of the internet and communications

technology has now made it possible to “out-source” even some service sector jobs to

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employers overseas. For example, some companies are having their phones answered by

operators abroad.

Amidst the growth of the service economy, the United States has also seen growth in high

tech industries including hardware and software. Again, however, domestic producers including

Dell and Gateway Computers are outsourcing much of their production to foreign manufacturers.

While there are obviously many high tech jobs in the United States, employers in this

sector have learned to pay their employees sufficiently high wages so as to preclude the risk of

unionization. These employers recognize that if employees are paid enough, they will not gamble

their jobs on the potential that a union relationship will make things better.

IV. Unions and the Law

Against this backdrop, traditional United States labor law is not conducive to

unionization. First, the lengthy NLRB election process does not work where core union

supporters may leave their jobs before an election occurs. Second, because the NLRA contains

no punitive damages or real penalties that would de-incentivize an employer from violating the

law, selective violations of the law have become a routine tool in thwarting union efforts. For

example, it may be cost efficient to fire a union supporter to “chill” an organizing campaign

rather than risk having to pay everyone wage and benefit increases if the union gains

representation status. The risk to an employer is minimal because the employer would only be

liable for back-pay and that liability would cease once the employee found a new job. Under law,

if an employee does not look for a new job, it will be presumed that he or she should have been

working and thus the employer’s liability for pay would be cut off. In simple terms, firing an

employee who makes $18,000 per year is cost efficient because at most an employer would be

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responsible for back pay during the three or four months it took the employee to find a new job.

This means that a superstore operator with 300 employees can chill unionization by selectively

firing two or three workers with minimal back pay exposure. Third, most penalties for violation

of law include only a requirement that the employer agree not to engage in the wrongful conduct

and that it post a notice in the workplace which acknowledges its impropriety and advises

employees of their rights.

Today, unions look to non-traditional “labor laws” as mechanisms to level the playing

field with employers. First, unions have become aggressive advocates for enforcing workplace

labor standards in non-union settings. Enforcing OSHA and wage and hour regulations are

integral components of labor organizing campaigns. Second, in addition to enforcing standards,

labor unions have orchestrated or become catalysts for litigation under Title VII and state

common laws to vindicate employee rights. Finally unions have looked to laws that regulate the

employer itself as a means to level the playing field. This means that unions have begun to think

about their members as corporate owners which means the enforcement of rights provided

shareholders. Employees can either directly own stock in their employer through a 401(k)

retirement plan or through their pension fund, often a creation of a labor agreement, and may

own large amounts of stock in publicly traded companies. It is a growing trend that employee

pension plans have become vocal watch dogs over employer conduct.

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V. The Enforcement of United States’ Laws Against Companies Doing Business Abroad or Against Companies that Transact Business in the United States or Trade their Stock on U.S. Exchanges

United States labor laws and standards have to some degree incentivized U.S. companies

to escape domestic labor standards and laws by exporting production to countries with less

stringent regulations. United States’ retailers that once prided themselves on selling goods made

in America are now marketing goods produced abroad. The most notable example of this is

Wal-Mart which no less than a decade ago was touting its “made in America” label.

Globalization of production and procurement does not, however, mean a total escape from

United States laws.

A. Corporate Law and Shareholder Rights

Entities that are incorporated in the United States can still be held accountable for

their actions under the law of the state of incorporation. In addition, any corporation -

whether foreign or domestic - that trades its securities in United States markets can be

held accountable for wrongful conduct under federal securities laws. Suits can be brought

by investors without regard to their citizenship or location.

i. Securities Laws

Federal securities laws dating back to the early 1930s require that publicly traded

corporations be truthful in their communications to shareholders and the public. This

requirement, which has been bolted into Rule 10b-5 promulgated by the Securities and

Exchange Commission, was designed to protect those who invest in publicly traded

corporations. Information distributed by a corporation is reviewed by analysts whose

work plays a role in establishing the market price for a particular stock or security. The

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individual investor then relies on the market price as an accurate reflection of that

company’s value. When that market price turns out to be predicated on false

information, the revelation of which causes the stock price to plummet, individual

investors can bring claims under the Federal securities laws to recover damages.

Plaintiffs in these suits can include citizens of countries other than the United States. In

addition, foreign corporations that trade on United States markets can be subject to

litigation in United States courts of law.

Securities fraud, however, is not just about cooking the books and manipulating a

corporation’s finances to make its economic performance look better. Securities fraud may also

occur when corporate officers fail to disclose material information that a reasonable investor

would want to know, such as functionality problems with a product, failing, or improper

relations with a customer, and any number of things that could impact share price.21 The failure

to disclose improper labor practices, if material, could also be a predicate to securities litigation

ii. Derivative Actions

Corporations are incorporated under the laws of particular states and are subject to

the corporate laws of the state of their incorporation. An entity incorporated in the State

of Delaware, for example, is subject to Delaware corporate law. The corporate law of a

particular state will regulate a corporation from cradle to grave. Corporate laws address

21 Rule 10b-5—Employment of Manipulative and Deceptive Practices. “It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails, or of any facility of any national securities exchange, (1) to employ any device, scheme, or artifice to defraud, (2) to make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (3) to engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.

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shareholder rights, the obligations of the officers and directors, the obligations of the

corporation to the officers and directors, the obligations of the officers and directors to

shareholders, and the obligations of the majority to the minority. State corporate law also

addresses access to information about the corporation, and when shareholders can bring

suits in the name of the corporation against those who have done injury to the

corporation. Such suits are known as derivative actions. Derivative actions can be

brought by any shareholder without regard to their own personal citizenship.

ii. The Role of Institutional Investors

In the United States, employee pension funds are now leading the way in taking a hard

look at corporate conduct abroad. They have become active plaintiffs in securities or derivative

actions and have used their status as shareholders to impact corporate behavior. Many of these

funds are creations of labor agreements or are at least controlled by trustees who come from

labor unions. This is true of both private and public sector funds.

If a publicly traded company is cited for discrimination or is faced with charges that it

engages in wrongful employment practices abroad, what role, if any, can or should these pension

funds play? According to H. Carl McCall 22, the former Comptroller of the State of New York

and former sole trustee of the State’s $100 billion pension plan:

“Funds have to be as active as necessary to protect their interests. They have a

fundamental responsibility to protect the assets under their control and if the actions of a

22 Mr. McCall was interviewed by research assistant Aaron Welo for an article in the publication, the Corporate Insider which can be located at www.thecorporateinsider.com.

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corporation are viewed negatively by the people who purchase from it, this can damage the

long-term interests of a company.”

According to Mr. McCall, activism also includes securities litigation, and actions

under state law to fully vindicate the rights of shareholders to insure that corporate

managers are honoring their obligations to the corporation and its owners.

Today, pension funds are taking an active role in the internal workings of

corporations. From raising concerns about Wal-Mart’s employment practices to taking

stances on environmental compliance and accounting rules, pension funds of all sizes

have been active in a broad range of issues that impact the internal operations of

corporations. As corporate expert and economist Peter Drucker noted in The Harvard

Business Review:

“[The pension funds] are not owners because they want to be owners but because they have no choice. As such, they have more than mere power. They have the responsibility to ensure performance and results in America’s largest and most important companies.23

Shareholder activism has a strong history of changing corporate behavior. Perhaps the

best known example is the divestment campaign from apartheid-era South Africa, where a broad

coalition of Taft-Hartley Funds, public employee pension funds, government, religious

organizations and social activists came together to force companies to reduce or cut off business

dealings with that country. In addition to government sanctions, the divestment campaign helped

to stunt South Africa’s economic growth, holding it to 4.7% for the entire period of 1981-87 and

23 Peter Drucker, Harvard Business Review, 316-318 (1991).

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thus contributed to the undermining of the government’s authority and increasing the pressure

for political change.24

By the mid-1980s, most of the approximately 350 American companies doing business in

South Africa had agreed to abide by what were known as “The Sullivan Principles,” created by

the Reverend Leon Sullivan, the first African-American board member at General Motors.

Among other things, they agreed “to press for broad changes in South African society, including

the repeal of apartheid laws and policies.” Two years later, the Reverend Sullivan expanded this

campaign and with a coalition of funds representing as much as $100 billion in assets began

either actively selling their holdings of companies doing business in South Africa or supporting

shareholder resolutions encouraging companies to cease operations in South Africa. By 1990,

most apartheid-era laws had been repealed and in 1994, Nelson Mandela became president.

The South African example is extraordinary and was the product of an

overwhelming injustice, yet it demonstrates the power of institutional investors to effect

meaningful changes in objectionable corporate policy and behavior. In the United States,

racial discrimination lawsuits at Texaco and Coca-Cola in the 1990s were brought to a

head by pressure from public pension funds. After a secret recording of senior Texaco

executives making racist remarks was released in 1996, the City of Philadelphia divested

itself of its $5.8 million in holdings in Texaco stock. Meanwhile, H. Carl McCall, then

Comptroller of the State of New York and responsible for overseeing the fund’s holding

of more than $114 million in Texaco stock, wrote a letter to Texaco Chief Executive

24 Institute for International Economics, Case Studies in Sanctions and Terrorism, Case 62-2 UN v. South Africa (1962-1994: Apartheid; Namibia) and Case 85-1 US, Commonwealth v. South Africa (1985-91: Apartheid). www.iie.com/research/topics/sanctions/southafrica3.htm#economics

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Officer Peter I. Bijur stating that: “[a] company cannot thrive when it denies

opportunities and discourages cooperation among employees” and calling for an

accounting of its “disregard for the law and overt racial hostility.25 With pressure

building, its share price falling and its stature compromised, Texaco settled with the

plaintiffs in the racial discrimination class action lawsuit that same month for $176.1

million and committed to substantial changes within the company in consultation with

Mr. McCall’s office. Reflecting on the Texaco case, Mr. McCall stated that, “[w]e had a

major investment in Texaco and we had to determine that it was sound.”

In the current wave of corporate scandals, some funds have taken a leading role in

policing corporate behavior in order to protect their investments. The California Public

Employees Retirement System (CalPERS) has historically taken the lead among large

United States public pension funds in developing many corporate policing tools. Some of

CalPERS efforts include: The Corporate Governance Focus List, which spotlights five

corporations annually for their serious corporate governance shortcomings and The

CalPERS Shareowner Forum, which provides information on executive compensation,

proxy votes, corporate governance, securities litigation and other related topics. It is

CalPERS position that “fully accountable governance structures produce over the long-

term, the best returns for shareowners.26

In its “Global Proxy Voting Principles,” CalPERS explains its position:

25 Thomas S. Mulligan, “Texaco Takes a Beating as Race Scandal Widens,” Los Angeles Times, Nov. 6, 1996. 26 CalPERS, Global Proxy Voting Principles, Revised June 9, 2005, available at www.calpers.org 28

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The twin duties of loyalty and care [as specified for a fiduciary under ERISA] prohibit CalPERS fiduciaries from placing non-financial considerations over risk/return considerations in the evaluations of investment decisions, including proxy voting. However, actions taken by Ca1PERS as a shareowner can be instrumental in encouraging action as a responsible corporate citizen by the companies in which the Fund invests. Moreover, through its Economically Targeted Investment (ETI) policy, the Board has recognized that the interests of Ca1PERS’ beneficiaries can be served by considering - in addition to maximizing investment returns to the Fund - collateral benefits to the national, regional and state economies.27

Additionally, CalPERS adopted the “Global Sullivan Principles of Corporate

Social Responsibility” in 1999, an updated version of the Reverend Sullivan’s original

principles. Among those principles, CalPERS urges corporations to “provide a safe and

healthy workplace; protect human health and the environment; and promote sustainable

development.” CalPERS principles of corporate responsibility state that:

If a company operates in a country or environment where serious human rights violations occur, the Board expects to see maximum progressive practices toward elimination of these violations. For employees who are disadvantaged because of such violations, the Board expects the companies to persist in availing themselves of every reasonable and legally permissible means to ensure that all of their employees and their families have what they need to pursue a life of dignity and personal well-being.

Social responsibility derelictions not immediately tied to a company’s bottom line can in

the long run injure a company financially. Consistent with this viewpoint, in 2005 Ca1PERS

embarked on a corporate governance initiative which would encourage companies to disclose

more environmental data. “We expect environmental corporate stewardship to play a greater role

in corporate governance over the next ten years,” said Priya Mathur, Vice Chair of Ca1PERS

Investment Committee. In furtherance of this agenda, a coalition of 85 investor and public

27 CalPERS, Global Proxy Voting Principles, Revised June 9, 2005, available at www.calpers.org.

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interest groups known as CERES, representing more than $300 billion in assets, has been

working to raise awareness of corporate environmental responsibility and the threat posed by

global warming and other environmental consequences to the business models of many

corporations.

As these examples clearly demonstrate, pension funds play an important role in

monitoring and regulating corporate behavior and in prodding corporations to act as responsible,

law-abiding, and as much as possible, forward-thinking entities. As H. Carl McCall puts it,

“Good corporate governance leads to good performance. Poor corporate governance leads to a

diminution of assets.” Since corporate executives often fail to protect the interests of their

corporations as they pursue short-term gains for their individual benefit, it is clear that activism

on the part of pension plans to actively oversee corporate behavior will lead to positive results

for plan participants and the wider community.

Finally, the question of question of securities laws, derivative actions, and corporate

governance cannot be analyzed in isolation of foreign law. Where a company trades its stock on

a United States’ exchange, shareholders have a legitimate interest and concern about whether

the company is complying with the laws of its home country. And, for example, where a foreign

company comes to the United States to conduct an Initial Public Offering (IPO) to sell its stock

on public markets, it must make representations and disclosures about whether it is complying

with the laws of its home country. With regard to China, for example, investors on United

States markets have a legitimate interest in knowing whether a company doing business in

China is complying with Chinese labor and employment laws. Thus, compliance with Chinese

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(or foreign) labor law is always a question that can be raised by investors and potentially

mandated through actions under United States corporate and securities laws.

VI. Other Relevant laws

A. False Claims Act

Many publicly traded corporations depend on the United States Government and local

and state governments as customers. Indeed, revenue from government contracts often provides

a material income stream for many corporations. United States money even flows into projects

abroad through assistance programs and subsidies. Where United States money is at play, even

citizens of foreign companies may have rights to bring a certain type of claim in courts of the

United States.

During the presidency of Abraham Lincoln, Congress passed the Federal False Claims

Act, (a law that was strengthened in the 1980s) which allows individuals to bring suit in the

name of the United States Government against anyone who has by misrepresentation cheated

the government out of money in the course of a contractual relationship. The Act applies as long

as United States federal dollars are involved.

This law has been applied to health care providers that overbill the Medicare system. It

has also been applied to defense contractors that provide the government with defective products

or overcharge for those products. It has specifically be applied where foreign governments are

cheated on contracts that were paid for with United States assistance dollars.

The essence of the False Claims Act is that anyone doing business with the federal

government must honor the regulations governing that business and the terms of any contract

that memorializes the relationship between the government and the private actor.

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B. The Alien Tort Claims Act

The Alien Tort Claims Act serves as a potential vehicle to seek redress against

corporations transacting business in the United States where their treatment of workers

abroad is so egregious that it is the type of conduct that is universally recognized as

improper.28 The statute specifically provides that: “[t]he district courts shall have original

jurisdiction of any civil action by an alien for a tort only, committed in violation of the

law of nations or a treaty of the United States.” 28 U.S.C. § 1350.

VII. Conclusion

The global economy has created new challenges for workers and their trade unions.

Although there is no clear solution to level the playing field, it is readily apparent that those

representing the interests of workers must be conversant in a broad array domestic and foreign

laws that regulate the global employer.

28 Fort v. Suarez-Mason, 672 F. Supp. 1531 (N.D. Cal. 1987).

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