Today’s Labor Updates:
Obama Nominates Lauren McFerran to National Labor Relations Board
Japan overhauling overtime pay system and taking measures to reduce deaths from overwork
Paid Sick Leave Spreads to New Jurisdictions
Volkswagen opens the door to the UAW in Chattanooga
Obama Nominates Lauren McFerran to National Labor Relations Board
Sharon Block’s Nomination Withdrawn Because of Republican Objections
By Melanie Trottman
Nov. 12, 2014 7:57 p.m. ET
WASHINGTON—President Barack Obamanominated Lauren McFerran to the National Labor Relations Board and has withdrawn the nomination of Sharon Block because of GOP objections, the White House said Wednesday.
Ms. McFerran, a graduate of the Yale Law School, is currently the chief labor counsel for the Senate Committee on Health, Education, Labor, and Pensions.
The NLRB, which resolves employee-management disputes and oversees union elections in the private sector, currently has a full slate of five members, including three Democrats and two Republicans. Ms. McFerran was nominated to succeed Democrat Nancy Schiffer, whose term expires Dec. 16. The timing allows Democrats to try to confirm Ms. McFerran this year, before the GOP takes control of the Senate.
Ms. Block served on the NLRB from early 2012 to mid-2013. Mr. Obama nominated her again in July this year, but her nomination caused controversy because her earlier service had been the result of a recess appointment, which the Supreme Court later ruled invalid. Republicans said she and another Democratic recess appointee defiantly stayed on the board even though lower courts ruled their appointments invalid. A third recess appointee, a Republican, resigned in the summer of 2012 amid an information-leak scandal in which he denied wrongdoing.
A White House spokesperson on Wednesday said Ms. Block “is a highly qualified nominee who has spent her career fighting to help American workers earn fair wages, work in a safe environment, and exercise their rights.”
“Unfortunately, Senate Republicans continue to object to her confirmation due to their protest of the president’s recess appointments to the NLRB,” the spokesperson said.
Ms. Block left the NLRB to rejoin the Labor Department as a senior counselor to Secretary Tom Perez.
The NLRB had been a flash point in Congress, where Republicans have accused the board and the overall agency of being union advocates instead of umpires during the current administration.
Sen. Tom Harkin (D., Iowa), the chairman of the committee for which Ms. McFerran works, said it is “unfortunate” that Ms. Block won’t get to serve on the board again “as a result of circumstances that are completely out of her control.” Mr. Harkin, who is retiring at the end of this Congress, added that his “only consolation” is the president’s choice of Ms. McFerran, and said he knows “first hand” that President Obama “could have not found a more able successor to Ms. Block.”
He said he looks forward to a “speedy confirmation” to keep the board fully functioning.
If the board were to drop to four members—two of each political party—it could experience gridlock on controversial decisions, which are often partisan.
Ms. McFerran started on the committee as senior labor counsel for Sen. Ted Kennedy and Mr. Harkin. Before that she was an Associate at Bredhoff & Kaiser, PLLC and a Law Clerk for Chief Judge Carolyn Dineen King on the U.S. Court of Appeals for the Fifth Circuit.
Write to Melanie Trottman at melanie.trottman@wsj.com
Japan overhauling overtime pay system and taking measures to reduce deaths from overwork
Herbert Smith Freehills LLP
Peter Godwin, Dominic Roughton, David Gilmore, Elaine Wong, Christopher Hunt and Florence Cheung
Japan November 11 2014
There has been increasing awareness in Japan of the health implications and unproductivity caused by excessive overtime work. As part of recent government economic reforms, there has been a heated debate over the increased restrictions on eligibility for overtime pay. This newsletter examines the issues arising from the proposed legislation and a recent change to the law aimed at tackling deaths caused by overwork.
Overtime pay system
Employees who work over eight hours a day on any given day are required to be compensated for their overtime work. The formula for calculating this compensation is rigid and complex – different premiums apply for general overtime, overtime performed during late-night hours and overtime performed on a holiday. Where there is any overlap (for example, overtime performed during late night-hours on a holiday), the premiums are increased accordingly.
While the vast majority of employees in Japan are subject to these overtime rules, there are also exceptions. Employees who belong to the narrowly-defined categories of supervisor/manager and executive secretary are partially exempted, meaning that they are not entitled to payment for general overtime and overtime performed on a holiday, but they are still entitled to overtime pay for work performed during late-night hours. In addition, employees who belong to 19 specific professions and who perform work within the ambit of those professions are also partially exempted in a similar manner. These professions include certified accountants, attorneys, patent attorneys, tax attorneys, researchers, software developers, journalists and small and medium enterprise management consultants.
However, given that employees who fall within the above exceptions are in the minority, this has led to an overtime working culture in many companies where work efficiency is not necessarily incentivised. For many employees, overtime pay constitutes a substantial portion of their monthly income and during Japan’s “bubble” era it was not uncommon for overtime pay to exceed an employee’s basic salary.
Given that the overtime rules are complicated and strict compliance requires employers to closely monitor each employee’s daily working hours (including whether any overtime claimed falls within late-night hours or on a holiday), employers in Japan often run into compliance problems. As a result, litigation by disgruntled employees over unpaid overtime work is not uncommon. Companies that overwork their employees without properly compensating them have come to be known as “black companies”.
In an attempt to change this kind of working culture, the Government has recently proposed amendments to the Labour Standards Act, which, if passed, would extend the categories of employees who are not entitled to overtime pay. It is hoped that this will promote more efficient working habits amongst employees, which could translate into overall cost savings for employers. It is also hoped that simplifying the overtime pay system will encourage compliance by employers.
The details of the bill are still being debated, but it is being suggested that white collar workers in finance, foreign exchange dealing and IT industries with an annual salary above 10 million yen be exempted from overtime pay. This has come to be known as the “white collar exemption”, and unlike the partial exemption system to date, it is being proposed that employees who qualify for this exemption be totally exempted, meaning that they would not receive overtime pay even for work performed during late-night hours.
However, it has been argued that this is a very narrowly defined category of employees with a high income threshold, and many employees who fall within this category are likely to be of supervisor/manager grade and therefore already partially exempted from the overtime payment system. As such, if the proposed bill proceeds in this manner, some have commented that there will be relatively little impact on the vast majority of employees in Japan, who will continue to be subject to the traditional overtime pay system. Although there have been attempts by the Government to propose a more standardised no-overtime pay system for all employees, these attempts have been met with opposition by employees and trade unions.
It has been announced that the Government is aiming to have a bill drawn up and passed in 2015, with the law coming into effect in the spring of 2016. Amendments to the existing law are expected to be welcomed by employers, particularly foreign companies.
Prevention of death from overwork
In the meantime, the Government enacted legislation promoting measures to prevent karoushi, meaning death due to overwork. There are generally two types of karoushi – death caused by health problems, and suicide as a result of stress.
The Act on the Promotion of Measures to Prevent Karoushi came into force on 1 November 2014. This legislation was enacted after strong lobbying by the bereaved family members whose loved ones died from karoushi. It enshrines the Government’s responsibility to conduct research on karoushi, provides for the establishment of a committee for the promotion of measures to prevent karoushi, and sets out the principle that the relevant parties (i.e. the state, local government and businesses etc) should collaborate closely to prevent such deaths.
These and other labour law reforms are an important part of “Abenomics” and are designed to increase Japan’s competitiveness in the global market.
Paid Sick Leave Spreads to New Jurisdictions
Rebekah Mintzer, Corporate Counsel
November 14, 2014
In last week’s midterm elections, voting in many jurisdictions was about more than picking a candidate. In some cases, it was also about choosing to say yes or no to state or local ballot initiatives, including referenda on offering paid sick leave to workers. In the state of Massachusetts, as well as the cities of Oakland, Calif., and Trenton and Montclair, N.J., voters passed these initiatives.
Massachusetts is the third state, after Connecticut and California, to require employers to offer paid sick leave, and these municipalities join a host of other local jurisdictions that have recently enacted paid sick leave laws. “I don’t pretend to have a crystal ball, but I certainly think it will be a growing trend,” Christopher Kaczmarek, a shareholder at Littler Mendelson, told CorpCounsel.com.
Kaczmarek, who works in his firm’s Boston office, explained that the Massachusetts law, which goes into effect July 1, 2015, will have total coverage: “It literally affects every single employer in the state.” Under the new law, all employers have to provide sick leave for employees, and those with 11 or more employees must give paid leave.
Not all jurisdictions include such small businesses in their laws. Many will cut the threshold for coverage off at around five employees. Kaczmarek guesses that the Massachusetts employers in the 11-50 employee range will have the most trouble, as they have a good number of workers but may not be used to implementing organizationwide measurements of employee work, leave and compensation (partly because they are not covered by the Family and Medical Leave Act and therefore are not used to complying with it). “I think this is going to be a real game changer for them in terms of having to use more sophisticated methods to track time and deal with these issues,” Kaczmarek said.
Marc Mandelman, a senior counsel in the labor and employment law department at Proskauer Rose, and cohead of both the reductions in force/managing change and employment law counseling and training groups at the firm, told CorpCounsel.com that he also expects smaller companies will feel burdened by such laws. “It means a lot of administrative headaches and processes that may have to be put into place that they may not have the infrastructure to do,” he said.
Part of the mandate for these companies is tracking work hours to decide how much leave time employees have accrued. The Massachusetts law requires employers to provide a minimum of an hour of sick leave for every 30 hours that an employee works. Other jurisdictions have similar standards. California also requires an hour of leave per 30 hours worked, while the Connecticut threshold is 40 hours. There also are varying caps on the number of hours of paid sick time employees can get.
Companies that have paid time off policies might already fulfill these requirements, if the time off they give their workers meets or exceeds the standards in their jurisdiction. “Many companies that operate in multistate environments already have PTO for their workers,” Jane Lauer Barker, a partner at Pitta & Giblin, told CorpCounsel.com.
The issue of navigating new sick leave laws when there are employees working for one company in several jurisdictions has raised some concerns. Although having employees in different jurisdictions with different paid sick leave standards sounds like it could get confusing, Barker said that companies often are accustomed to these situations, citing differing state minimum wages as an example.
Jim Ryan, head of the commercial litigation department at Cullen and Dykman and chairman of the firm’s employment litigation practice, told CorpCounsel.com that his firm has recommended clients juggling multijurisdictional concerns about leave defer to the state with the most employee-friendly leave policies. “Figure out which ones are the most generous and use that,” Ryan said. “That way you’re not ever going to run into a problem.”
Volkswagen opens the door to the UAW in Chattanooga
By Brent Snavely, Detroit Free Press 9:55 a.m. CST November 12, 2014
Volkswagen is announcing a new policy today that will open the door for multiple labor organizations — including the UAW — to represent workers at its plant in Chattanooga, Tenn., giving the beleaguered union a key achievement in the South.
For the UAW, winning an opportunity to officially represent workers at an assembly plant in the South would be a major accomplishment after years of losing elections at German and Asian auto plants in the U.S.
“We recognize and accept that many of our employees are interested in external representation and we are putting this policy in place so that a constructive dialogue is possible and available for everyone,” Sebastian Patta, executive vice president of human resources for Volkswagen Chattanooga, said in a statement provided exclusively to the Free Press.
Revealed: Details of VW labor policy
However, Volkswagen’s new policy falls short of providing the UAW with a path towards the clear-cut, exclusive recognition that the union had been hoping for.
That’s because Volkswagen’s policy fails to recognize the UAW as the only bargaining agent. In fact, Volkswagen’s policy provides three tiers of representation for “labor organizations” and allows any group to act as a representative with at least 15% of workers signed up as members.
Groups that can prove they have 15% of members can meet monthly with Volkswagen’s human resources executives. Groups that can prove they represent 30% and then 45% of workers gain additional representation rights, according to a copy of the policy obtained by the Free Press.
However, any labor group that wants to become the exclusive bargaining agent must apply to the National Labor Relations Board and prove it represents more than 50% of workers.
An anti-UAW group that calls itself American Council of Employees has said it also wants to represent Volkswagen workers.
But even with the possibility of multiple labor groups representing workers, Kristin Dziczek, director of the labor and policy group at Center for Automotive Research, said the UAW has passed a major milestone in its battle to gain members in the South.
“We are no longer talking about whether or not there will be a union at Volkswagen. We are talking about which union or unions will be there,” she said.
The UAW claims it already represents a majority of workers through UAW Local 42, a chapter it established in Chattanooga in July.
UAW Secretary-Treasurer Gary Casteel told the Free Press in September that more than 750 workers have joined. “We are confident that Volkswagen is going to deal with them as a members union on issues that pertain to them.”
Under the new VW policy announced today, an organization at the Chattanooga plant must exist for the primary purpose of representing employees and their interests to employers consistent with the National Labor Relations Act.
Volkswagen said its “Community Organization Engagement” policy offers labor unions a three levels of engagement, depending on the number of employees represented.
The automaker said it plans to use an outside auditor to verify membership. That verification process has not yet occurred.
“Of course, any employee can approach Volkswagen at any time with an idea or a concern,” said Ryan Rose, general manager of human resources at the Chattanooga plant. “But we wanted to extend these additional opportunities to groups of employees who want to talk with Volkswagen about issues of common interest.”
Maury Nicely, a labor lawyer who works with anti-UAW workers, said Volkswagen’s new policy could be viewed as a win for both the UAW and the American Council of Employees.
“As I understand it, the policy is going to offer the opportunity for any group that gets 15% of support to get a seat at the table with Volkswagen,” Nicely said. “It actually is going to open the door to groups in addition to the UAW.”
Tennessee Gov. Bill Haslam on Tuesday was downplaying the new policy even before it was officially announced.
“I don’t think there’s really any new news in this beyond what they said before, but we need to let them speak for themselves on this,” Haslam told the Associated Press.
Still, Volkswagen — to a greater extent than any other Asian or German automaker with plants in the South — has been receptive to the idea of union representation at its plant.
The German automaker has labor union representation at all major plants around the world through a system called a Works Council.
“Volkswagen has a long tradition of positive employee engagement at our plants around the world and we welcome this in our company,” Patta said.
Volkswagen signed a neutrality agreement with the UAW in January several weeks before a representation election was held. But politicians in Tennessee — including Haslam and Sen. Bob Corker — urged workers at the plant to reject the UAW.
In February, workers at the three-year-old Chattanooga factory voted 712-626 against UAW representation.
The loss shocked UAW leaders, who accused Tennessee politicians of interfering with the election. The UAW initially filed a challenge to that election with the National Labor Relations Board but dropped the charge in April.
The UAW’s drive to organize workers in the South also includes organizing drives at a Mercedes-Benz plant in Alabama and Nissan plants in Tennessee and Mississippi.
The union is desperate to organize more workers because its membership has plummeted from 1.5 million in 1979 to less than 400,000.
The UAW has gained some members in recent years as the Detroit Three have hired more workers and as it has won organizing drives with casinos and higher education workers.
Nevertheless, the UAW’s Bob King, when he was elected president in 2010, said the union’s survival depends on organizing Asian- and German-owned auto plants because it can only effectively bargain for better wages and benefits if it represents workers across the automotive industry.
King, along with current UAW President Dennis Williams, aggressively courted officials from the influential German labor union IG Metall.
In September, IG Metall and Volkswagen’s Global Group Works Council signed an agreement outlining their joint efforts to gain labor representation at the Chattanooga plant, including the goal of the UAW gaining “exclusive majority status and recognition of this by Volkswagen.”