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NON COMPETE AGREEMENTS SPREAD

FROM THE NY TIMES, MAY 13

How Noncompete Clauses Keep Workers Locked In
Restrictions once limited to executives are now spreading across the labor landscape — making it tougher for Americans to get a raise.

By CONOR DOUGHERTY
MAY 13, 2017
Keith Bollinger’s paycheck as a factory manager had shriveled after the 2008 financial crisis, but then he got a chance to pull himself out of recession’s hole. A rival textile company offered him a better job — and a big raise.

When he said yes, it set off a three-year legal battle that concluded this past week but wiped out his savings along the way.

“I tried to get a better life for my wife and my son, and it backfired,” said Mr. Bollinger, who is 53. “Now I’m in my mid-50s, and I’m ruined.”

Mr. Bollinger had signed a noncompete agreement, designed to prevent him from leaving his previous employer for a competitor. These contracts have long been routine among senior executives. But they are rapidly spreading to employees like Mr. Bollinger, who do the kind of blue-collar work that President Trump has promised to create more of.

 

The growth of noncompete agreements is part of a broad shift in which companies assert ownership over work experience as well as work. A recent survey by economists including Evan Starr, a management professor at the University of Maryland, showed that about one in five employees was bound by a noncompete clause in 2014.

Employment lawyers say their use has exploded. Russell Beck, a partner at the Boston law firm Beck Reed Riden who does an annual survey of noncompete litigation, said the most recent data showed that noncompete and trade-secret lawsuits had roughly tripled since 2000.

“Companies of all sorts use them for people at all levels,” he said. “That’s a change.”

Employment lawyers know this, but workers are often astonished to learn that they’ve signed away their right to leave for a competitor. Timothy Gonzalez, an hourly laborer who shoveled dirt for a fast-food-level wage, was sued after leaving one environmental drilling company for another. Phillip Barone, a midlevel salesman and Air Force veteran, was let go from his job after his old company sent a cease-and-desist letter saying he had signed a noncompete.

Then there is Mr. Bollinger, whose long-running legal battle is full of twists and turns that include clandestine photography, a private investigator, a mysterious phone call and courthouse victories later undone by losses in appeals court.

“This is the strangest noncompete case I have ever been involved with, or even heard of,” said Michael P. Thomas, Mr. Bollinger’s lawyer and a partner at Patrick, Harper & Dixon in Hickory, N.C.

Alan B. Krueger, a Princeton economics professor who was chairman of President Barack Obama’s Council of Economic Advisers, recently described noncompetes and other restrictive employment contracts — along with outright collusion — as part of a “rigged” labor market in which employers “act to prevent the forces of competition.”

By giving companies huge power to dictate where and for whom their employees can work next, noncompetes take a person’s greatest professional assets — years of hard work and earned skills — and turn them into a liability.

“It’s one thing to have a bump in the road and be in between jobs for a little while; it’s another thing to be prevented from doing the only thing you know how to do,” said Max Burton Wahrhaftig, an arborist in Doylestown, Pa., who in 2013 was threatened by his former employer after leaving for a better-paying job with a rival tree service. He was able to avoid a full-blown lawsuit.

Noncompetes are but one factor atop a great mountain of challenges making it harder for employees to get ahead. Globalization and automation have put American workers in competition with overseas labor and machines. The rise of contract employment has made it harder to find a steady job. The decline of unions has made it tougher to negotiate.

But the move to tie workers down with noncompete agreements falls in line with the decades-long trend in which their mobility and bargaining power has steadily declined, and with it their share of company earnings.

When a noncompete agreement is litigated to the letter, a worker can be barred or ousted from a new job by court order. Even if that never happens, the threat alone can create a chilling effect that reduces wages throughout the work force.

“People can’t negotiate when their company knows they won’t leave,” said Sandra E. Black, an economics professor at the University of Texas at Austin.

The Right to Walk Away

In 2011, Timothy Gonzalez started working as a labor hand for a company called Singley Construction. He was 18 years old and already a father, and the extent of his education was a high school equivalency test. In other words, he needed money and did not have many options.

Mr. Gonzalez started at a little over $10 an hour in a job he described as “pretty much shoveling dirt.” Nevertheless, he signed an employment contract that included a noncompete clause, enforceable for three years within 350 miles of Singley’s base in Columbia, Miss.

“All I heard — at that age and the situation I was in — was just, ‘If you want a paycheck, sign here,’ and so I signed there and went to work,” said Mr. Gonzalez, who is now 24 and lives in Milton, Fla.

Mr. Gonzalez was later promoted to a job where he operated an environmental drilling rig. After leaving the company two years ago, and subsequently taking a better-paying position with a competitor, Mr. Gonzalez was sued for violating his agreement not to compete.

 

Mr. Gonzalez’s new boss, Gary Hill, owner of Walker-Hill Environmental, an environmental drilling company, said he ignored the suit for two weeks because he didn’t believe it was real.

“I said, ‘There’s no way this will happen,’ but I’ll be danged if I didn’t have to attorney-up and fight the thing,” said Mr. Hill, who settled the case out of court. “It’s ridiculous — it’s slavery in the modern-day form.”

Representatives of Singley Construction declined to comment.

The surprise Mr. Gonzalez got is not uncommon. Many workers, not just blue collar but people who went to college or have an advanced degree, have only a vague understanding of what a noncompete is, and they are often asked to sign one when they have little chance to negotiate.

In a 2011 paper that surveyed technical workers who had signed noncompetes, Matthew Marx, a professor at the Sloan School of Management at M.I.T., found that employers typically presented workers with noncompete contracts when the employees lacked negotiating leverage, on their first day at work, for instance.

“By then, they had said yes to their company, and no to the other companies they were negotiating with,” Mr. Marx said.

Companies have always owned their employees’ labor, but today’s employment contracts often cover general knowledge as well. In addition to noncompete clauses, there are nonsolicitation and nondealing agreements, which prevent employees from calling or servicing customers they have worked with in the past. There are nonpoaching agreements that prevent employees from trying to recruit old colleagues.

Put it all together, and suddenly some of the main avenues for finding a better-paying job — taking a promotion with a competitor, being recruited by an old colleague — are cut off.

Companies say this is a natural reaction in an economy that is more about knowledge and less about sweat. Data makes up a larger share of many companies’ assets, and the more people work around the clock, and remotely, often switching between company-owned and personal devices, the more difficult it becomes to guard it.

“When a person takes a trade secret and walks across the street to another company, how am I going to know that?” said Paul T. Dacier, a longtime technology executive who was once general counsel for EMC Corporation (now Dell EMC), and today serves in the same position for an agriculture technology start-up called Indigo. “And when I do find out, it’s too late.”

The problem is that it can be hard to distinguish true intellectual secrets from the accumulated skills that make workers more valuable. And since few companies want to lose good workers or give out huge raises, these agreements are making their way down the economic ladder to people like hairstylists and sandwich makers, far removed from what is thought of as the knowledge economy.

Noncompete enforcement varies from state to state, and economists have used that disparity to study how they affect businesses and the economy. The results are almost universally negative: Wages, employment and entrepreneurship are all diminished when workers have little leverage to bargain with their employer or leave a job for a better opportunity.

Some workers end up idle, collecting unemployment and using programs like Medicaid. Many others take jobs well below their means, robbing the nation of their skills.

“Two years ago, Phillip Barone left his job doing sales and marketing for a military magazine to take a similar job, with a pay increase of about 10 percent, at a rival publication. A few months later, his old employer sent a letter saying he had violated a noncompete agreement that barred him from working with other military publishers.

Since his new company was unwilling to defend him, and since he was unable to pay the legal bills himself, Mr. Barone resigned and lived on unemployment while looking for a new job, but found nothing. When his unemployment ran out, he took a $15-an-hour job with a landscape firm, where he whacked weeds and planted flowers.

“My whole mission was to do whatever I could to bring in some money to take care of my family and make sure nobody could take my house from me,” said Mr. Barone, who lives in Lake in the Hills, Ill.

Mr. Barone left his landscaping job this year and is now a sales manager elsewhere. And he will be free of his noncompete eventually.

Still, there is evidence that these agreements can reduce wages far beyond the terms of one job or contract. In January, Mr. Starr, from the University of Maryland, and others produced a study showing that technology workers who began their career in a state where noncompetes are strictly enforced made significantly less than their colleagues, regardless of whether or not they left.

“These things slow your ascent up the job ladder,” Mr. Starr said.

Moreover, many burn through their savings and pile up debt while searching for a job from a weakened negotiating position. Several years ago, Patricia O’Donnell, a market researcher in Philadelphia, spent 18 months unemployed after being laid off by a company whose noncompete prohibited her from working for a number of major pharmaceutical companies, thus limiting her prospects in a major local industry. She finally found a job, but only recently got clear of the bills she racked up.

“It took years to get rid of that credit-card debt,” she said.

Noncompetes damage regional economies as well. States with strict enforcement end up suffering a brain drain, by encouraging their best and smartest workers to move elsewhere for better pay.

The great counterexample, which comes up in just about every discussion of the subject, is the growth of Silicon Valley.

California law prohibits noncompete clauses, contributing to the inveterate poaching with which the state’s technology industry was founded. It can be brutal for employers, but it helps raise wages and has created a situation where any company looking to hire a bunch of engineers in a hurry, be it an established giant or a start-up, feels it should locate there.

“It’s not just that it allows employees to leave their company for another job,” said Mark A. Lemley, a professor at Stanford Law School. “It allows them to leave to start new companies.”

Recognizing this, several states have moved to curb the use of noncompetes. This includes Democratic-leaning states like Massachusetts as well as Republican-leaning ones like Utah, which last year passed a bill limiting the scope of the agreements.

Mike Schultz, the bill’s Republican sponsor, framed it with the most conservative of talking points: the right to work. “If an employer can fire anybody for any reason,” he said, “employees also need to have the right to walk.”

Mr. Bollinger, the factory worker in North Carolina, started working when he was 14, and by his senior year of high school, he was the assistant manager of a local shoe store. He didn’t like retail, so in 1982, shortly after graduating, he took a job in the textile industry.

He began in a position that entailed pulling the fabric off cardboard rolls, and worked his way up from there, one job to the next, hourly wages to a salaried position, until eventually he was the quality control manager for two plants owned by a company called TSG Finishing.

TSG is a 115-year-old, family-owned company that works with textile manufacturers and others. It doesn’t make fabrics but is an intermediary, treating them with chemicals and laminates, giving them special finishes and properties like fire resistance.

Mr. Bollinger, as quality control manager, worked with customers to make sure they got what they wanted. Still, he said, the job was about learning a general process, not absorbing any specialized knowledge.

“I don’t know how to make the goop, I just know how to apply the goop,” he said.

TSG would disagree. The company declined to comment beyond an emailed statement, but its lawsuit described Mr. Bollinger as instrumental to the company, and said he knew important details about things like pricing, proprietary processing methods and customer preferences.

In 2007, in exchange for a $3,500 bonus and a $1,300 annual raise that brought his salary to a little over $70,000, Mr. Bollinger had signed an employment agreement that included a confidentiality clause and noncompete agreement. The list of prohibited territories began with a list of states and ended with “North America.”

Then the financial crisis struck, leading to bankruptcies and layoffs across the textile industry. “I saw people get laid off that I didn’t think would ever lose their job,” Mr. Bollinger said.

His pay shriveled, and by 2013, after TSG had gone into and out of bankruptcy, he was on pace to make about $61,000, according to income statements he provided. Six miles away, however, the economic recovery was taking hold.

The assets of Premier Finishing, a TSG competitor that had also fallen into bankruptcy, were purchased by American Custom Finishing, which was owned by a chemist and entrepreneur named Gary Harris.

The two spoke, and eventually Mr. Harris offered Mr. Bollinger a job and a raise, to $75,000, a little above his pre-recession pay. Mr. Bollinger said American advised him to check his employment agreement, and a lawyer he hired said that the noncompete was probably unenforceable.

He assumed his defection wouldn’t go over well, so on the day he gave notice, while his boss considered the rival’s offer, he quietly packed up his office and loaded things like his family pictures and a framed B.B. King concert ticket into his car. It turned out to be a good idea; a few hours later, he was escorted off the property.

Two months later, he was served papers at work: TSG had sued him for violating his confidentiality and noncompete agreements, and had asked a court to remove him from his job. The suit did not allege that Mr. Bollinger had stolen anything, but said he knew so much about TSG’s business that he would “inevitably” disclose trade secrets that the company wanted to protect.

Calvin E. Murphy, a superior court judge, did not grant TSG’s wish. In a written order, Judge Murphy said, “Enforcement of the noncompete provision in the manner articulated” by TSG would effectively bar Mr. Bollinger “from seeking employment anywhere in North America in the only profession he has practiced since graduating high school.”

TSG appealed, however, and the North Carolina Court of Appeals reversed the decision. A little after that, Mr. Harris, American’s chief executive, called Mr. Bollinger at home and told him not to return to work.

“My heart was broken,” Mr. Bollinger said.

About a year after the Appeals Court decision, TSG filed an amended complaint against Mr. Bollinger and others, alleging that he had quietly continued working for American even while the injunction was in place, and asking the court to prohibit him from working there ever again.

The new complaint cited evidence, like photos of Mr. Bollinger’s wife’s car parked at American’s facility, and a phone call TSG had received from “a female who would not reveal her identity,” who said Mr. Bollinger had continued to work there. At one point, TSG hired a private investigator to look into it.

“It is regretful that a great deal of money and resources have to be spent in our court system which could be otherwise spent on employee raises or investing in new equipment to make us more competitive,” Mr. Harris said in an emailed statement.

Perhaps more important, the whole ordeal had caused a “strain” between TSG and its customers. The complaint said that in 2015 one customer had said it planned to transfer its business to American; another had asked TSG to resolve the dispute in a way that allowed Mr. Bollinger to continue at his new job.

“When a competitor has the opportunity to poach that knowledge without making the investment in research and development, it gives them an unfair advantage, which a three-judge panel agreed happened in this case,” said Jack Rosenstein, TSG’s chief executive, in an emailed statement.

As with everything else in business, the case came down to money. This past week TSG accepted a $200,000 offer of judgment from American and the other defendants, freeing Mr. Bollinger from the lawsuit. The case had gone on so long that the noncompete has lapsed, and Mr. Bollinger has found another manufacturing job elsewhere.

But the financial scars remain: Mr. Bollinger and his wife, Sandie, drained their savings to pay the legal bill. They have borrowed from friends and relatives, and racked up $50,000 in credit card bills and other debt.

Mr. Bollinger said the saddest part to him is that such a small sum of money, the $14,000 raise from American, could have started the whole dispute in the first place.

During a recent interview, he talked about his last day at TSG and the emotions of walking away from a plant where he had worked for two decades. That job, and the advancement that came with it, had given him the means to raise a family, as well as middle-class luxuries like the musical instruments in his house and the framed concert tickets he hung on his office wall.

“If all they would have said is, ‘Keith, we want to keep you, and we are going to reinstate your pay,’” he said, “I would have taken all that stuff out of my car and hung it back up in my office.”

EEOC SUES RUBY TUESDAY RESTAURANT

FROM AN EQUAL EMPLOYMENT OPPORTUNITY COMMISSION NEWS RELEASE: 17 MAY 2017

FOR IMMEDIATE RELEASE May 17, 2017

EEOC SUES RUBY TUESDAY FOR AGE DISCRIMINATION
Boca Raton Restaurant Refuses to Hire a Qualified Applicant
Because It Wanted to ‘Maximize Longevity’, Federal Agency Charges

FORT LAUDERDALE, Fla. – Ruby Tuesday, Inc., a national casual dining restaurant chain, violated federal law by refusing to hire a qualified applicant at its Boca Raton, Fla., location because of his age, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit filed today.

According to the EEOC’s suit, the company declined to hire a qualified applicant with over 20 years of experience in the food and beverage industry for a general manager position at its Boca Raton restaurant. In response to an inquiry by the applicant as to why Ruby Tuesday declined to hire him, the company informed him it was seeking a candidate who could “maximize longevity.”

Such alleged conduct violates the Age Discrimination in Employment Act (ADEA). The EEOC filed suit against Ruby Tuesday, Inc. in U.S. District Court for the Southern District of Florida, Fort Lauderdale Division (EEOC v. Ruby Tuesday, Inc., No. 1:17-cv-21817) after first attempting to reach a pre-litigation settlement through its conciliation process. The suit seeks injunctive relief and compensatory and liquidated damages.

“In the South Florida area, we represent the interests of many different people,” said Michael Farrell, director of the EEOC’s Miami District Office. “Age cannot be a factor in whether or not someone can earn a living.”

Robert Weisberg, regional attorney for the Miami District Office, added, “The ADEA was put in place precisely to protect people against this type of conduct. The bustling hospitality industry needs to be reflective of all of the members of our community.”

One of the six priorities in the EEOC’s Strategic Enforcement Plan for 2017-2021 is to eliminate barriers in recruitment and hiring.
The Miami District Office’s jurisdiction includes Florida, Puerto Rico and the U.S. Virgin Islands.
The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination. More information is available at www.eeoc.gov. Stay connected with the latest EEOC news by subscribing to our email updates.

 

EEOC wins on Pregnancy Case

FROM A NEWS RELEASE FROM THE EEOC, 3 MAY 2017

Brown & Brown Insurance Brokerage Firm Settles Pregnancy Discrimination Lawsuit for $100,000

Job Offer Rescinded After Company Learned of Applicant’s Pregnancy, Federal Agency Charged

ORLANDO, Fla. – Daytona Beach-based insurance brokerage firm Brown & Brown will pay $100,000 and furnish significant relief to resolve a pregnancy discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC), the federal agency announced today.

According to the EEOC’s suit, Brown & Brown made a written job offer to the applicant and also sent her an employment agreement for a “personal lines technical assistant” position at its Daytona Beach location and proposed employment start dates. Upon receipt of the offer letter, the applicant affirmed her interest by email and sought to ask a few questions regarding the offer. About two hours later, the applicant spoke with the department leader’s assistant and inquired about maternity benefits because she was pregnant. The assistant immediately advised the department leader of the applicant’s pregnancy and, minutes later, according to the suit, the applicant received an email from the company rescinding the job offer, stating that it “had a very urgent need to have somebody in the position long term …We appreciate you telling us beforehand.”

Pregnancy discrimination violates Title VII of the Civil Rights Act of 1964, as amended by the Pregnancy Discrimination Act. EEOC filed suit in U.S. District Court for the Middle District of Florida, Tampa Division (EEOC v. w Brown & Brown of Florida, Inc., Case No. 6:16-cv-1326-ORL18-DAB) after first attempting to reach a pre-litigation settlement through its conciliation process.

The consent decree resolving this case provides for the adoption and distribution of a policy on pregnancy discrimination, training of managers, supervisors and human resources personnel at the company’s Daytona Beach location, as well as employees at all other Brown & Brown Florida locations. The training will cover sex discrimination, including pregnancy discrimination. Brown & Brown also agreed to provide annual inform­ation to EEOC during the two-year monitoring period concerning its handling of pregnancy discrimination complaints.

“The Pregnancy Discrimination Act requires that pregnant employees be treated the same as non-pregnant employees who are similar in their ability or inability to work,” said Michael Farrell, the EEOC’s Miami District director. “This includes treating pregnant employees the same as others at the hiring stage.”

EEOC Miami District Regional Attorney Robert Weisberg added, “The decision to hire should be based upon an applicant’s qualifications, not stereotypical assumptions about pregnancy, motherhood or other caretaking responsibilities.”

The Miami District Office’s jurisdiction includes Florida, Puerto Rico and U.S. Virgin Islands. Further information is available at www.eeoc.gov.

The EEOC advances opportunity in the workplace by enforcing federal laws prohibiting employment discrimination. More information is available at www.eeoc.gov.  Stay connected with the latest EEOC news by subscribing to our email updates.

Hugging can create a hostile work environment

FROM LA TIMES, FEBRUARY 23

Hugging can create a hostile work environment.

In a decision Thursday, a three-judge panel of the U.S. 9th Circuit Court of Appeals revived a sexual harassment lawsuit against Yolo County Sheriff Edward G. Prieto, who was charged with hugging a female correctional officer more than 100 times over a 12-year period.

Prieto argued he also hugged male employees. If he hugged women more, his lawyers said, it was because of “genuine but innocuous differences in the ways men and women routinely interact with members of the same sex and the opposite sex.”

But the 9th Circuit said hugging can create an abusive work environment if it is both unwelcome and pervasive.

Victoria Zetwick, the correctional officer who sued the sheriff, also charged that Prieto once kissed her when congratulating her on her marriage to another deputy.

She said she saw Prieto hug dozens of other female employees during her 12 years in the department but give male employees mere handshakes.

In defending against the suit, Yolo County said Zetwick admitted that she had hugged male co-workers occasionally.

The county also pointed to a declaration in which Zetwick described Prieto’s hugs as brief. He made no sexual comments or touched her otherwise, the county said.

Still, the court said, Zetwick argued his hugs were “chest to breast.”

A federal district judge dismissed Zetwick’s lawsuit in 2014. But the 9th Circuit said she had offered enough evidence to possibly persuade a reasonable juror that she had suffered from sexual harassment.

“She submitted evidence from which a reasonable juror could conclude that, even if Prieto also hugged men on occasion, there were `qualitative and quantitative differences’ in the hugging conduct toward the two genders,” wrote District Court Judge Mark W. Bennett, a senior judge from Iowa who was filling in on the 9th Circuit.

She said in her suit that Prieto’s conduct made it difficult for her to concentrate. She was constantly stressed and anxious, she said, and she had to resort to taking medication for sleep.

Prieto’s hugs, she argued, had sexual overtones.

A spokesman for the sheriff’s office said he could not comment on the decision while the litigation was pending.

FRANCE HAS NEW LAW ON SMARTPHONES FOR WORKERS

WILL THIS LAW SPREAD TO USA?

Paris (AFP) – French companies will be required to guarantee a “right to disconnect” to their employees from Sunday as the country seeks to tackle the modern-day scourge of compulsive out-of-hours email checking.

From January 1, a new employment law will enter into force that obliges organisations with more than 50 workers to start negotiations to define the rights of employees to ignore their smartphones.

Overuse of digital devices has been blamed for everything from burnout to sleeplessness as well as relationship problems, with many employees uncertain of when they can switch off.

The French measure is intended to tackle the so-called “always-on” work culture that has led to a surge in usually unpaid overtime — while also giving employees flexibility to work from outside the office.

“There’s a real expectation that companies will seize on the ‘right to disconnect’ as a protective measure,” said Xavier Zunigo, a French workplace expert, as a new survey on the subject was published in October.

“At the same time, workers don’t want to lose the autonomy and flexibility that digital devices give them,” added Zunigo, who is an academic and director of research group Aristat.

The measure was introduced by Labour Minister Myriam El Khomri, who commissioned a report submitted in September 2015 which warned about the health impact of “info-obesity” which afflicts many workplaces.

Under the new law, companies will be obliged to negotiate with employees to agree on their rights to switch off and ways they can reduce the intrusion of work into their private lives.

If a deal cannot be reached, the company must publish a charter that would make explicit the demands on and rights of employees out-of-hours.

Trade unions in France which see themselves as guardians of France’s highly protected workplace and famously short working week of 35 hours have long demanded action.

But the new “right to disconnect”, part of a much larger and controversial reform of French labour law, foresees no sanction for companies which fail to define it.

– Work-life balancing act –

Left-leaning French newspaper Liberation praised the move in an editorial on Friday saying that the law was needed because “employees are often judged on their committment to their companies and their availability.”

Some large groups such as Volkswagen and Daimler in Germany or nuclear power company Areva and insurer Axa in France have already taken steps to limit out-of-hours messaging to reduce burnout among workers.

Some measures include cutting email connections in the evening and weekends or even destroying emails automatically that are sent to employees while they are on holiday.

A study published by French research group Eleas in October showed that more than a third of French workers used their devices to do work out of hours every day.

Around 60 percent of workers were in favour of regulating to clarify their rights.

But computing and work-life balance expert Anna Cox from University of College London (UCL) says that companies must take into account demands from employees for both protection and flexibility.

“For some people, they want to work for two hours every evening, but want to be able to switch off between 3-5 pm when they pick their kids up and are cooking dinner,” she told AFP.

Others are happy to use their daily commute to get ahead before they arrive in the office, she explained.

Furthermore, the world of work is changing as rapidly as technology, with more and more employees working remotely or with colleagues in other time zones.

“Some of the challenges that come with flexibility are managing those boundaries between work and home and being able to say ‘actually I am not working now’,” she said.

One of the positive effects of the law will be to encourage “conversations with people working together about what their expectations are.”

Hourly Wage Rates in Various States and Cities, 2017

IN 2017, STARTING IN EITHER JANUARY OR JULY THESE ARE THE MINIMUM HOURLY WAGE RATES FOR VARIOUS STATES AND CITIES

Minimum Wage Going up in These Places
Here is the complete list of new minimum wage rates ordered by state, city and county. Is your business located in on of these communities?
States
Alaska – $9.80
Arizona – $10.00
Arkansas – $8.50
California – $10.00 for small employers; 10.50 for large employers
Colorado – $9.30
Connecticut – $10.10
Florida – $8.10
Hawaii – $9.25
Maine – $9.00
Maryland – $9.25 (as of July)
Massachusetts – $11.00
Michigan – $8.90
Missouri – $7.70
Montana – $8.15
New Jersey – $8.44
New York – Varies across state from $9.70 to $11 (as of 12/31/16)
Ohio – $8.15
Oregon – $10.25 (as of July)
South Dakota – $8.65
Vermont – $10.00
Washington – $11.00
Cities and Counties
California

Cupertino – $12.00
El Cerrito – $12.25
Los Altos – $12.00
Mountain View – $13.00
Oakland – $12.86
Palo Alto – $12.00
Richmond – $12.30
Sacramento – $10.50 (large employers)
San Diego – $11.50
San Mateo – $12.00
San Jose – $10.50
Santa Clara – $11.10
Sunnyvale – $13.00
In District of Columbia:
Washington, D.C. – $12.50 (as of July)
Iowa

Johnson County – $10.10
Linn Country – $8.25
Wapello County – $8.20
Maine

Portland – $10.68
New Mexico

Albuquerque – $8.80
Bernalillo – $8.70
Las Cruces – $9.20
New York

New York City – $11.00 (as of 12/31/16)
Long Island and Westchester, N.Y. – $10.00 (as of 12/31/16)
Washington

Seattle – $15.00
SeaTac – $15.35
Tacoma – $11.15

 

$15 Minimum Wage In Florida

The Impact of a $15/hour Minimum Wage in Florida

From Florida Tax Watch, Jun 29, 2016

In states across the nation, minimum wage policies continue to dominate political and economic discussions. Recently, two of the nation’s largest states, New York and California, have both passed laws that will gradually raise the minimum wage in those states to $15 per hour. While these decisions have been met with support and criticism, the impacts in each state will be followed closely across the nation.

The idea of a $15 per hour minimum wage has also been discussed by state legislators in Florida. During the 2016 legislative session, Senate Bill 6 and House Bill 109 were introduced and proposed raising Florida’s minimum wage to $15 per hour starting in January of 2017.1 The bills would have replaced Florida’s existing floating minimum wage, which is currently $8.05 per hour. Florida’s minimum wage is reviewed each year, and either remains steady, or is increased to account for changes in the cost of living. While both bills died during the committee meeting process, the fight to raise Florida’s minimum wage to $15 per hour is likely to continue.2 With this in mind, it is important that taxpayers and policymakers understand how an increase in the minimum wage to $15 per hour would impact businesses, the job market, and the everyday lives of Florida residents.

Businesses

Currently, businesses in Florida employ approximately 183,000 minimum wage workers, roughly 2 percent of those employed throughout the state. While minimum wage workers are employed in a variety of fields, evidence points to the fact that a majority work in industries with small profit margins, such as restaurants and retail.3

The minimum wage in Florida has increased steadily over the past decade,4 but some businesses, such as JM Family Enterprises, have chosen to implement company-wide minimum wages that are above the state and federal guidelines.5 While these companies have had the ability to succesfully implement increases on their own, the vast majority of businesses may not be able to absorb an increase in the minimum wage to $15 per hour.

Using the most recent available data from the U.S. Bureau of Labor and Statistics, Florida TaxWatch estimated the overall labor costs of businesses employing minimum wage workers in the state of Florida. A conservative estimate shows that with an abrupt increase to $15 per hour Florida businesses could expect to see a nearly $2 billion ($1,834,618,188) increase in the cost of minimum wage labor. This estimate only accounts for an increase in the cost of those workers that are currently making minimum wage ($8.05 per hour); however, an increase in the minimum wage to $15 per hour would raise the cost of labor of all those employees making less than $15 per hour. Because the median wage in Florida is $15.29 per hour,6 the proposed increase would raise the cost of nearly half of Florida’s workforce, significantly impacting how businesses in Florida operate.

The Job Market
This Florida TaxWatch Economic Commentary is also available in PDF format:
“The Impact of a $15/hour Minimum Wage in Florida”

Such a dramatic increase in the cost of labor would force companies to adapt to a new business climate in the state, and the results could bring about unintended consequences that negatively impact the job market in Florida.

Recently, Seattle, Washington enacted a plan to steadily increase their minimum wage to $15 per hour.7 The affluent city with a relatively low unemployment rate seemed to be well-suited to absorb the higher labor costs that stem from an increase in the wage floor; however, data show that the city has experienced an increase in the unemployment rate and in the number of those unemployed since the implementation of a $15 minimum wage plan.8 Since April of 2015 (when the city began to phase in the minimum wage increase), Seattle has seen unemployment rise from 3.3 to 4.4 percent, and the number of those unemployed has risen by nearly 5,000 individuals.9 Many of the job losses can be attributed to businesses that have relocated, shut down, cut staff hours, or have put a freeze on hiring.10 Going forward, many business owners have raised concerns regarding their ability to adapt to the new minimum wage climate, understanding that failing to do so could result in having to close their businesses.11

In California, where they have also enacted a plan to raise their minimum wage to $15 per hour, the change in minimum wage laws has forced businesses to contemplate relocation in order to remain profitable. Fred Donnelly, president of commercial airplane parts manufacturer, California Composites, announced that he intended to move his company to Fort Worth, Texas. Donnelly claimed the increase in the minimum wage left him no choice but to move his company, and the primary factor in the decision came down to the fact that California Composites is already locked into long term contracts with set prices. With the increase in California’s minimum wage, Donnelly fears his company would fail to stay profitable if it were to stay in the state.12

Increasing the cost of labor also has companies looking for ways to adapt by automating more of their day-to-day functions. Businesses have already begun installing self-checkout stations that allow multiple checkouts to be overseen by one employee, cutting down on the number of cashiers that are needed;13 however, as wage floors continue to rise, companies will find it cost-effective to automate even more operations. Companies are already looking into various automated technologies that work in fields of customer service, order processes, and even cooking and preparing food at restaurants.14, 15 A significant increase in automation due to rising labor costs could cut down on the number of available jobs for low-skilled individuals, leaving many worse-off than they currently are.

1 The Florida Senate. Senate Bill 6. 2016.
2 The Ledger. Battle for $15 minimum wage coming to Florida. 17 April 2016.
3 Manhattan Institute for Policy Research. Issue Brief. July 2015.
4 Florida Department of Economic Opportunity. Florida Minimum Wage History 2000-2013.
5 Sun Sentinel. JM Family raises minimum wage to $16 an hour. 5 August 2015.
6 U.S. Bureau of Labor Statistics. Occupational Employment and Wage Estimates Florida. May 2015.
7 Office of the Mayor of Seattle. $15 Minimum Wage.
8 U.S. Bureau of Labor Statistics. Local Area Unemployment Statistics. May 2016.
9 U.S. Bureau of Labor Statistics. Local Area Unemployment Statistics. May 2016 *Data set used from April of 2015 to February of 2016.
10 NPR. Seattle Restaurants Scramble To Pay A Higher Minimum Wage. 9 May 2015.
11 NPR. Seattle Restaurants Scramble To Pay A Higher Minimum Wage. 9 May 2015.
12 89.3KPCC. Ahead of $15 minimum wage, 1 company leaves California for Texas. 25 April 2016.
13 Investor’s Business Daily. Wendy’s Serves Up Big Kiosk Expansion As Wage Hikes Hit Fast Food. 11 May 2016.
14 Business Insider. Here’s The Burger-Flipping Robot That Could Put Fast-Food Workers Out Of A Job. 11 April 2014.
15 Brookings. Rising minimum wages make automation more cost-effective. 30 September 2015.
The Economy and Everyday Lives of Consumers

Increasing the cost of labor, and thus the cost of operations, will force businesses to adapt. While this could include reducing staff hours, closing shop, or relocating, it will likely also lead to price increases for customers.

One example of labor costs being transferred to consumers can be seen in San Francisco, California. After the Bay Area enacted a plan to increase the city’s minimum wage to $15 per hour, fast food giant Chipotle responded by increasing the cost of menu items 10-14 percent in all the area’s restaurants.16 In response to the increase in prices, Chris Arnold, Chipotle’s Communications Director, stated that the increases were done “in part to offset higher labor costs.”17 The price increases are not just affecting burrito lovers. Data from the U.S. Bureau of Labor Statistics show that prices for dining out in San Francisco, California rose 4.8 percent over a 12 month period beginning in February of 2015,18 which is significantly higher than the 2.6 percent increase observed on the national level during the same period.19

With increases in the costs of goods and services, consumers are likely to react in a few different ways. For one, consumers can choose to do business in neighboring states that are not affected by high wage floors and therefore do not have to increase the cost of their products.20 In turn, local businesses that are not able to match the lower prices of their neighboring competitors would be at risk of losing customers. Secondly, consumers may choose to buy fewer goods in the market place due to higher prices,21 forcing businesses to close. If this were to happen, it could create a snowball effect of shrinking the market, therefore lowering the competition among businesses.

Conclusion

With many cities and states, including Florida, considering an increase in their minimum wage to $15 per hour, it is vital that taxpayers and policymakers understand the possible effects such an increase can have on the states’ businesses, job market, and economy. Early evidence has shown that even some of the most affluent areas in the U.S. have felt some negative effects, including an increase in unemployment and prices, after raising their wage floors. In a state like Florida, where the median wage is close to $15, an immediate increase in the minimum wage to $15 per hour would likely have negative effects on the state’s economy and job market. It is important that policymakers in Florida closely follow how businesses and economies in states like New York and California acclimate to increases in the minimum wage, and use the data to help make decisions regarding Florida’s minimum wage going forward.

16 American Enterprise Institute. Who’d a-thunk it? SF minimum wage increased 14% and local Chipotles just raised prices by 10-14%. 6 July 2015.
17 Entrepreneur. Chipotle Raises Prices in San Francisco After Minimum Wage Hike. 9 July 2015.
18 U.S. Bureau of Labor Statistics. Consumer Price Index, San Francisco Area. February 2016.
19 U.S. Bureau of Labor Statistics. CPI Detailed Report. February 2016.
20 Fortune. Seattle’s min wage is America’s highest, but here’s the downside. 6 June 2014.
21 NPR. Seattle Restaurants Scramble To Pay A Higher Minimum Wage. 9 May 2015.

 

Pizza Maker ordered to pay $800k in wage theft

5 June 2016

 

A Papa John’s pizza franchise in New York must pay its workers nearly $800,000 in unpaid wages over allegations the business underpaid employees and failed to pay overtime, a state judge ruled last week.

New York Attorney General Eric Schneiderman in December sued Emstar Pizza Inc., which operates seven Papa John’s franchise locations in Brooklyn and Queens, alleging that Emstar underreported hours worked by employees over the past six years, rounded employee hours down to the nearest hour, and did not pay overtime.

Attorney General Schneiderman is also considering legal action against the franchisor, Papa John’s International Inc., on the theory that it is a joint employer and thus liable for the actions of its franchisees, according to reporting from the New York Post.

The National Labor Relations Board in July ruled McDonald’s a joint employer and thus liable for labor or wage violations at its franchise locations in a first-of-its-kind decision that represents a significant victory for workers’ rights advocates. Corporations like Papa John’s and McDonald’s employ about two-thirds of the low-wage workers in this country, but have so far mostly avoided liability for the illegal actions of their franchise owners under the theory that, despite sharing a common corporate brand, each franchise is independently owned and operated.

OVERTIME PAY RULE REVISED

FROM USA TODAY, 16 MAY 2016

Moving to fatten low- and middle-income paychecks that have languished for years, the Obama administration on Tuesday unveiled a long-awaited rule that will make millions of Americans newly eligible for overtime pay.

While some businesses welcome the measure, many say it will simply force them to reshuffle salaries to get around the regulation. Others fear it will mean demoting white-collar workers and altering workplace cultures.

Businesses adopt myriad responses to overtime rule

The rule, slated to be formally released Wednesday, would essentially double the threshold at which executive, administrative and professional employees are exempt from overtime pay to $47,476 from the current $23,660. That’s expected to make 4.2 million additional workers eligible to receive time-and-a-half wages for each hour they put in beyond 40 a week.

Labor Secretary Thomas Perez said the salary threshold was originally intended to exempt high-paid executives but instead has denied overtime to low-level retail supervisors and entry-level office workers who often toil 50 to 70 hours a week.

“Too few people are getting the overtime that (federal law) intended,” he told reporters. “It’s simply not right.”

Vice President Biden called the change a critical part of the White House’s goal of “restoring and expanding access to the middle class. The middle class is getting clobbered.”

The rule represents the administration’s most prominent initiative to lift middle-class wages. President Obama’s call to raise the federal minimum wage from $7.25 an hour to more than $10 has been stymied by Republicans in Congress. The share of full-time workers who qualify for overtime has fallen from 62% in 1975 to 7% today, according to the administration. The new rule, which would take effect Dec. 1, would allow 35% of workers to qualify.

Many companies expect to convert salaried workers to hourly employees who will need to punch a clock and track their hours, hurting morale in some cases. Some will likely maintain the status of salaried employees, but will still have to monitor their hours and net the extra pay for logging more than 40. Others will lift workers’ base pay to the new threshold to avoid paying overtime.

Many small businesses can’t absorb the added cost and will instruct employees to work no more than 40 hours a week, bringing on part-time workers to pick up the slack, says Dan Bosch, head of regulatory policy for the National Federation of Independent Business. Perez said that will still be a plus because it will restore leisure time to overworked employees.

Yet some businesses plan to cut employees’ base pay to offset the overtime, effectively skirting the requirement.

“The Obama rule puts a huge cost and regulatory burden on employers, who will face pressure to cut back on benefits and full-time employees,” says Trey Kovacs, policy analyst with the Competitive Enterprise Institute.

But U.S. Rep. Mark Takano, D-Calif., said it’s “long overdue,” adding that “millions of employees are working long hours without fair compensation.”

The administration, which initially proposed the rule last summer, did make concessions in response to the 270,000 public comments it received. It lowered the new salary threshold to $47,476 from the proposed $50,544.

And it’s allowing employers to apply bonuses and incentive payments to up to 10% of the new salary threshold. The threshold also will be updated every three years instead of annually, rising to $51,000 on Jan. 1, 2020.

Perez said the new rule also clarifies the types of duties white-collar employees must perform to be exempt. That potentially makes eligible an additional 8.9 million workers now misclassified, he said, such as certain administrative employees who don’t supervise anyone.

Aribitration in wrongful termination

FROM THE NY TIMES, 15 MAY 2016

Tara Zoumer thought she had found her dream job when she was hired at WeWork, a $16 billion start-up that rents office space to young entrepreneurs. The walls were adorned with Pop Art. Neon light fixtures encouraged employees to “Hustle harder,” and there was beer on tap.

“It was like walking onto a set of a movie,” Ms. Zoumer said.

But shortly after she became an associate community manager in WeWork’s office in Berkeley, Calif., reality set in. Ms. Zoumer said she was feeling pinched because her annual salary was only $42,000, a sum that, on some weeks, left her without money to ride the subway.

She said she thought many of her duties — leading tours for prospective tenants, tidying up, answering phones and changing the kegs — were more suited to an hourly wage with a possibility for overtime.

Ms. Zoumer tried to enlist colleagues to file what she hoped would be a class-action lawsuit to fight for overtime pay. But the company had instituted a policy that could force employees to ultimately resolve disputes through arbitration instead of the courts, which essentially shut down Ms. Zoumer’s lawsuit, since arbitration bars individuals from joining in a class action.

When Ms. Zoumer refused to sign the new policy, she was fired.

As once-plucky start-ups like WeWork grow — the company’s work force has swelled to 1,500 from 300 a year ago — they are taking a page from the playbook of big corporations, which are increasingly using arbitration to thwart employees from bringing any meaningful legal challenge in court, an investigation by The New York Times found last fall.

Uber and Lyft, the ride-hailing services, make their drivers sign an arbitration clause. Square, the mobile payment processor, also requires that employees agree to bring disputes to arbitration. In advice to start-ups, Brotman Law, a tax firm in San Diego, promotes the benefits of arbitration for “companies doing business over the Internet,” emphasizing that it “can save significant costs.”

Amazon and Google also use arbitration to resolve disputes with customers.

Far from burying its arbitration clause in its employment contracts, WeWork is proud of its policy. The company’s top executives said they thought that by adopting an arbitration clause as part of a broader dispute resolution program, they were staying true to their principles, which prize all levels of employees as members of a single community. WeWork says its employees are eligible for bonuses and equity in the company in addition to their salaries.

Tara Zoumer, who was fired from WeWork for refusing to sign an arbitration clause. Ms. Zoumer earned a salary of $42,000, but she said she felt her duties were more suited to an hourly wage with the possibility of overtime. She tried to enlist her co-workers in what she hoped would be a class-action suit to gain overtime pay. Credit Jason Henry for The New York Times
For start-ups — many of which began in Silicon Valley — the clauses can seem to conflict with professed goals of upending business as usual and being open with employees. Arbitration, by its very nature, is a secretive process that is often lopsided in favor of the employer. That secrecy, federal labor officials said, can allow widespread problems to persist because the process bars employees from sharing their experiences with others who might be in similar positions.

“They give their young workers Ping-Pong tables and take away their constitutional rights,” said Cliff Palefsky, an employment and civil rights lawyer in San Francisco.

This month, the Consumer Financial Protection Bureau proposed a rule that would limit financial companies from using arbitration to prevent their customers from filing class-action lawsuits. But the rule does not apply to arbitration used in employment disputes.

As Silicon Valley companies grow from small start-ups into major employers, their labor practices are coming into focus. Despite the popular image that the industry is predominantly made up of nerdy millionaires, many of these growing companies depend increasingly on lower-paid employees.

And with some technology companies now working harder to raise money, there are growing pressures on these companies from investors to cut costs — pressures that can fall disproportionately on the workers at the lower rungs.

At WeWork, Ms. Berrent said, arbitration is part of a multistep process to resolve disputes. The company adopted the policy after months of discussion about how to deal most fairly with complaints.

At the outset of the process, WeWork requires employees to raise any complaints with their managers. If that does not work, the employee and WeWork must try mediation. Only if that fails does the issue go before an arbitrator, whose decision is binding.

Ms. Berrent said this process was in keeping with the company’s values, settling problems “through open collaboration” rather than the courts. She confirmed that Ms. Zoumer was fired for not signing the arbitration clause.

She said the employees who hold the job that Ms. Zoumer used to have were the “soul” of the company and its “brand ambassadors.” She said they performed tasks that were far from menial and were not suited to an hourly wage.

Ms. Berrent also notes that while lawsuits are both costly for the employee and confrontational, the company pays for arbitration no matter who wins.

Unprotected by an arbitration clause, companies can face litigation that could result in huge settlements. The drug company Novartis paid $175 million to settle a class-action suit brought by female employees over promotions and pay. And more than money can be at stake; Nike had to overhaul its business practices after African-American employees sued over discrimination.

At large corporations, many employees have come to expect the clauses as standard. But those working at smaller firms that claimed to treat their employees like family tend to be surprised when they collide with one.

When Kevin Ziober, a Navy reservist in Costa Mesa, Calif., first joined BLB Resources, which manages foreclosed properties, the company was just beginning; Mr. Ziober was the 18th person hired.

Mr. Ziober had already been at the company for several months when he was asked to sign the arbitration policy in January 2011. He did so without a second thought.

It was a decision he would regret. In the fall of 2012, he informed BLB Resources that he was being deployed to Afghanistan. On his last day, the company threw him a farewell party, complete with a cake shaped like an American flag.

“I was on Cloud 9,” Mr. Ziober said, recalling how he phoned his family to tell them about the party.

That afternoon, as Mr. Ziober said he was packing up his cubicle, he was called into the human resources office and was “summarily” fired, according to his legal appeal.

The reason for his termination, the company said, was that he was not being included in a federal contract that the company was applying for.

 

In 2014, after returning from Afghanistan, he sued BLB Resources for violating a federal law, known informally as Userra, that protects the jobs of service members while they are deployed. A California judge ruled that he would have to take his claim to arbitration.

Mr. Ziober’s lawyer, Peter Romer-Friedman, has appealed the case, arguing that Userra preserves the rights of service members to go to court.

BLB said in a statement that “the company is extremely disappointed about Mr. Ziober’s allegations and denies them wholeheartedly.”

With their appeal, Mr. Ziober has waded into an intense battle playing out across the country. In Washington, a group of bipartisan lawmakers introduced a bill in 2014 that would exempt service members from having to take claims of wrongful auto repossession or improper debt collection to arbitration. An almost identical bill was quashed after intense lobbying by big banks and credit card companies, never making it out of committee. A bill in California that would have prevented companies from requiring employees to sign arbitration clauses suffered a similar fate when Gov. Jerry Brown vetoed it last year.

The legislative skirmishes point to just how valuable arbitration has become to companies and just how far they will go to defend it.

Despite WeWork’s arbitration requirement, Ms. Zoumer decided to sue the company on her own, hoping she would prevail in overturning the clause. Ms. Zoumer’s lawyer, Ramsey Hanafi, filed her case in December over wrongful termination and unfair labor practices, and Boies, Schiller & Flexner, a top corporate defense firm, is representing WeWork.

Ms. Zoumer, 31, said she knew she was taking a risk when she challenged WeWork over arbitration. She told the company she needed at least a week to review the policy before deciding whether to sign it. In an email to colleagues, she encouraged them to do the same, citing The Times’s investigation into arbitration.

Ms. Berrent said Ms. Zoumer was the only employee who refused to sign other than two employees who had planned to leave the company anyway. Ultimately, no other employees joined Ms. Zoumer’s lawsuit.

“Younger people don’t want to pick fights, but we are losing our rights,” Ms. Zoumer said.