Tag Archives: Economic Policy Institute

Do Employers Have The Right To Set Conditions Of Employment?

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The Hill posted a story today about today’s Supreme Court ruling that employers can include clauses in employment contracts that force employees to settle disputes individually with a third-party arbitrator.

There are a few aspects of this ruling–the most obvious one is that employers can write employment contracts without government interference. Another is whether or not employers have the right to include in employment contracts clauses that include the prohibition of class-action lawsuits to settle disputes over wages and working conditions.  These clauses preventing class-action lawsuits in employment contracts are fairly common. It should also be noted that many companies have mandatory arbitration procedures–that is the proper way to deal with conflicts. Our society has often been too quick to seek legal action as a way to gain instant wealth. Not all class-action lawsuits have merit. We live in a society where people are free to change jobs. If salaries or working conditions are unacceptable, a company will not be able to find quality employees. The system will police itself. There are also federal avenues available to address valid salary or working condition complaints.

The Hill reports:

The EPI ( Economic Policy Institute (EPI), a liberal think tank) found in a survey last year that 53.9 percent of nonunion private-sector employers already have mandatory arbitration procedures.

Software company Epic Systems Corp., accounting and financial firm Ernst & Young LLP and Murphy Oil USA Inc. were the employers at the center of three cases the court consolidated that argued in support of the agreements.

The government, which changed its position under President Trump, had also intervened in support of the employers, arguing that Congress enacted the Federal Arbitration Act in 1925 to “overcome judicial resistance to arbitration.”

The court’s decision settles a deep split among the lower courts. The 2nd, 5th and 8th circuit courts of appeal and the California and Nevada supreme courts had ruled these arguments are fully enforceable, while the 7th and 9th circuits, along with the National Labor Relations Board, ruled the agreements violate the NLRA.

Government does not belong in the business of writing employment contracts or telling employers what to put in them.

With A Stroke Of The Pen…

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Yesterday Investor’s Business Daily posted an article about President Obama’s new Executive Order to change the rules for American workers regarding overtime pay.

The article reports:

Currently, businesses that pay salaried workers less than $455 a week have to pay overtime as well. Obama complains that this threshold has been raised only once since 1975. (He conveniently leaves out the fact that the last increase came during President Bush’s “jobless recovery.”)

As a result, he says, too many companies are “skirting basic overtime laws, calling somebody a manager when they’re stocking groceries and getting paid $30,000 a year.”

Obama plans to raise the threshold to $50,400, which he says will make 5 million more workers eligible for time-and-a-half pay.

So let’s take a look at this. If you are working hard, it’s always nice to get a pay raise, particularly if you are putting in a lot of overtime. However, it seems to me that the decision to pay you overtime should be made by the company you work for (since they are going to be required to come up with the money to pay you). If you understand that companies are in business to make a profit (otherwise there is no point in being in business), then you understand that this Executive Order is not going to have the result that President Obama seems to think it will have. The head of a company is now placed in a position where he has to figure out if it is cheaper to pay someone overtime or hire someone part time. He also has to consider if he wants to replace one person who was previously not paid overtime with two part-time people paid less. At any rate, the unintended consequences of this Executive Order are going to hurt workers more than they are going to help them.