Richard Epstein reacts to the recent Supreme Court decision in Epic Systems Corp v. Lewis, defending the right of employers to use arbitration and avoid class action lawsuits.

Graduate Students as Protected “Employees”


shutterstock_244570738Last week, the National Labor Relations Board held that the graduate students of Columbia University who work as teaching assistants, including any research assistants “engaged in research funded by external grants,” are statutory employees protected under the National Labor Relations Act, and thus entitled to join an elected union of their own choosing. The three-member Democratic majority held in Trustees of Columbia University v. Graduate Workers of Columbia-GWC that graduate students were employees under Section 2(3) of the NLRA. This section provides, most unhelpfully, “the term ‘employee’ shall include any employee,” with exceptions irrelevant to the issue at hand.

The Board’s decision was notable in part because a long list of research universities, led by Yale University, had filed a strong amicus curiae brief, warning against the undesirable consequences that could follow if the Board overruled its 2004 decision involving Brown University that came out the other way because “the services being rendered are predominantly academic rather than economic in nature.” These include coursework, individual research, and teaching under the close supervision of their professors, as part of an integrated program leading to an advanced degree.

The universities’ position was strongly resisted in an amicus curiae brief submitted on behalf of the American Association of University Professors making several claims and factual assertions: (1) that the change in status was no big deal; (2) that NYU had entered into a voluntary agreement with a branch of the UAW that was working well; and (3) that over 35,000 graduate students in public universities were organized outside the reach of the NLRA. The rejoinder to this assertion was twofold. The universities noted that the NYU agreement has had its ups and downs, and that public universities are very different institutions than private ones. They also urged that it was dangerous to upset an established tradition by fiat, when not a single one of these universities has ever dealt with a single unionized graduate student. At present, no one has any strong evidence either way.

In a sampling of recent news stories, Richard Epstein tackles the NLRB’s ruling allowing graduate students to unionize, a federal judge’s injunction against the Obama Administration’s transgender restroom regulations, and a move to restore voting rights for ex-cons in Virginia.

Scott Walker Talks Turkey on Labor Market Reform


shutterstock_280248305One of the central questions of the current Republican presidential campaign is when potential candidates will talk about important issues of political economy. That talk has thus far been in short supply because of the intellectual oxygen that is sucked out of the room every time Donald Trump walks into it. The recent remarks by Wisconsin Governor Scott Walker in union-dominated Las Vegas, however, have begun to change that. They represent his effort to breathe some life into his faltering campaign by harking back to his successful effort to take on public unions in Wisconsin.

High-stakes gambles like this usually lose. Indeed, to everyone’s surprise, Walker seems to have become a long-shot at this point. Nonetheless, even if his latest proposals don’t revive his candidacy, other Republicans should take up this cause. The union movement is powerful and united, but it is also vulnerable to political attack. The forces that led to the adoption of right-to-work laws in Wisconsin, Indiana, and Michigan are good evidence that many voters, including union members, realize that powerful unions are as bad for working people as they are for employers in the long run

Walker is not a theoretical type, so his speech does not offer the intellectual justifications for curbing the union power that has pervaded American life since the passage of the National Labor Relations Act of 1935. The major problem with unions is that they are monopolies. Employment markets need to be competitive, with ease of entry and exit by both firms and individuals. If you keep tabs on employer efforts to monopolize through the antitrust laws and otherwise leave the process free to function, the interplay of market forces will give both workers and employers the opportunity to work together to maximize their joint welfare by figuring ways to expand the pie and then divide the proceeds.

The NLRB’s Labor Market Mischief


shutterstock_62462134Under last week’s decision by the Democratic majority on the National Labor Relations Board, we are about to see a dramatic shift in what constitutes an “employer.” Before this ruling, that term covered firms that hire their own workers, and the NLRB subjected those firms to the collective bargaining obligations under the National Labor Relations Act. Under its new definition, the majority expanded that term to cover any firm that outsources the hiring and management of employees to a second firm over which it retains some oversight function. In its decision, the NLRB refers to such firms and those to whom they outsource the hiring as “joint employers.” No longer, the majority says, must the employer’s control be exercised “directly and immediately.” Now “control exercised indirectly—such as through an intermediary—may establish joint-employer status.” As I note in my new column for Defining Ideas:

…[T]he new joint employer rules will likely batter today’s already grim labor market, as they will not only disrupt the traditional workplace but will completely wreck the well established franchise model for restaurants and hotels. As the majority conceded, the so-called joint employer does not even know so much as the social security number of its ostensible employees. It has no direct control over the way in which the current employer treats its workers, and yet could be hauled into court for its alleged unfair labor practices. That second firm knows little or nothing about the conditions on the ground in the many businesses with which it has forged these alliances, which eases the operations for both. Those advantages will be lost if the joint employer rule holds up in court. At the very least, the majority’s decision would require each and every one of these contracts and business relationships to be reworked to handle the huge new burden that will come as a matter of course, leaving everyone but the union worse off than before.

It would be one thing, perhaps, if the majority saw the light at the end of the tunnel. But over and over again it disclaims any grand pronouncements, making the legal question of who counts as an employer a work in progress that will be finished no time soon. Against this background it is irresponsible to undo the current relationships by a party-line vote. That point should also be clear to the courts and to Congress. The quicker this unfortunate decision is scrubbed from the law books, the better.

ICYMI: The Economy Was Just Restructured


capital buildingIn recent years the iconic Capitol building has been draped in scaffolding due to a needed restoration, the first improvements since 1959-1960 to the symbol of American democracy. From afar the dome has always appeared to be a brilliant beacon conveying American exceptionalism. On a closer look, behind the countless coats of paint and patchwork, the age and weather have taken its toll. The repairs to preserve the dome will allow the Capitol to continue to shine for future generations.

For denizens of and visitors to Washington, DC, or news junkies who see the scaffolding in the digital backgrounds of daily newscasts, it’s a stark visual reminder that America itself is under reconstruction. The national “restoration” project is now in its seventh year. The steward of America’s reconstruction is perhaps the most successful President we’ve seen in our lifetimes, if you define success as achieving an agenda.

Historically, the final two years of a two-term Presidency have been the least effective time, filled with scandals and voter apathy. The “lame duck” is simply a placeholder while the country moves its attention to his replacement in the oval office. For this reason, lame ducks can be dangerous. They are old news. The press focuses on shinier, red-hat covered wayward tresses.

The Hollow Men of the NLRB


NLRBlogoT.S. Eliot’s remarkable 1925 poem, “The Hollow Men,” ends with these oft-quoted lines: “This is the way the world ends—Not with a bang, but a whimper.“ Those words capture, in a far less grand context, this week’s decision by the National Labor Relations Board involving the efforts of some Northwestern University varsity football players to organize athletes on scholarship as “statutory employees” protected by the National Labor Relations Act.

Last year, a regional NLRB ruling took the side of the players, a decision that, as I wrote here at the time, was on the shakiest of grounds. There is no reason to rehash those legal arguments, because no one wanted a decision on the merits this week. The key task now is to explore the political forces behind the decision.

NLRB rulings are normally split sharply along party lines. In this case, however, the Board issued a unanimous decision that “it would not effectuate the policies of the Act to assert jurisdiction in this case … even if we assume, without deciding, that the grant-in-aid scholarship players are employees within the meaning of Section 2(3)” of the Act. Their reasoning: because it is clear that the definition of an “employer” under Section 2(2) excludes any state (including any state-run university), any ensuing regulations would apply to teams like Northwestern but not to their public university counterparts, upsetting the competitive balance in college sports. And so it is that a widely heralded decision that gave rise to both great hopes and fears has ended with a jurisdictional whimper.

How Partisanship is Ruining the NLRB


4282658992_3e72772b5d_zThere has been so much bad news in the world of late that it is hard to find time to comment on the July 29 decision by National Labor Relations Board General Counsel Richard Griffin, Jr. to treat McDonald’s as a “joint employer” with its franchisees for the purposes of labor statutes.  That decision, if upheld, would subject McDonald’s to liability for all the actions that its franchisees take with respect to their employees.

In the particular cases before Griffin, the potential finding of liability is said to be for “activities surrounding employee protests.”  But everyone knows that these actions are just the tip of the enforcement iceberg.  Griffin’s real target is to allow individual workers, backed by union dollars, to bring actions for minimum wage and overtime violations under the Fair Labor Standards Act, and to make McDonald’s — and, by implication, all other franchisees — fair game for union organizers and reverse the major decline in union membership.

The decision here is properly understood as a gatekeeper decision. Before the decision, the gates against the NLRB were shut tightly by the conventional tests used to determine whether any given party should be treated as an “employer” under the NLRA. Most unhelpfully, the act defines an employee as including “any person acting as an agent of an employer, directly or indirectly” (after which it exempts a whole host of government employers from the statutory definition). Some further clarity is added to the discussion by the statutory definition of an “employee,” which does not include “any individual having the status of an independent contractor.”

A Quick Reaction to the NLRB Ruling


Supreme_Court_US_2010I think the decision today in NLRB v. Noel Canning is correct. It brushes back Obama’s unprecedented stretching of executive authority to appoint lower officials without the Senate, but it preserve the more traditional power for the next President. The whole affair puts on display President Obama’s abuse of presidential power for small-ball politics. Previous presidents have claimed expansive powers in the face of great emergencies, whether it be the Civil War, the Great Depression and the rise of fascism, the Cold War, or the 9-11 attacks. Obama risked the executive power built by generations of presidents just to win a few pro-union decisions on the NLRB.

It is clear that Justice Scalia has the better reading of the original Constitution. He and the conservative justices Thomas, Alito, and Chief Justice Roberts, would have held that the President cannot make appointments except for vacancies that arise between the first session of Congress and the second session of Congress, which generally matches the first and second years between House elections. That is the better reading of the constitutional text. If Scalia had been able to attract the swing vote of Justice Kennedy, he would have succeeded — ironically, given his long support for a robust executive — in permanently restricting presidential power.

Instead, the majority — Justice Breyer writing — upheld a long historical practice of Presidents filling vacancies, even those that occur when the Senate is in session. The majority found that Senates have long allowed Presidents to fill vacancies during recesses that are as short as 10 days. But the Court rejected Obama’s unprecedented claim that he could use this power even when the Senate was currently meeting. Obama made the dangerous argument that he could decide when the Senate was really conducting business or not — a claim foreclosed by the Constitution, which gives to Congress the sole power over its own proceedings. This was a bridge too far for every member of the Court, liberal or conservative.

The Dire Consequences of the Northwestern Football Decision


It is commonly supposed that the recent decision by National Labor Relations Board Regional Director Peter Sung Ohr — allowing college football players at Northwestern University to unionize — may not matter all that much, for the Northwestern players can always decline Ohr’s invitation, even if the National Labor Relations Board decides to uphold his rather novel decision.

That benign assumption is mistaken. The key point  is that Ohr’s decision basically held that the common law definition of employment —whereby one person receives a wage in exchange for taking the direction of another — is sufficiently broad that the Northwestern dispute becomes a footnote in a larger institutional struggle. I have already explained why I think that Ohr’s decision represents a frightful error here and here. But there is much more to worry about.

The Libertarian Podcast: Is Unionization the Future of College Football?


In this week’s installment of The Libertarian podcast from the Hoover Institution, Professor Epstein and I discussed the recent NLRB decision allowing unionization for college football players at Northwestern University.

Is it legitimate for college athletes to claim “employee” status? Can college sports survive the implications of this ruling? Is it an injustice for these students not to be paid? And would higher education be better off being decoupled from athletics, especially those that are functionally semi-pro? Those are some of the questions we explore in this episode:

The NLRB, Northwestern Football, and the Theater of the Absurd


footballsThis is a case where the caption says it all. The National Labor Relations Board’s decision as to whether football players at Northwestern University can unionize is introduced in the opinion as “Northwestern University — Employer, and College Athletes Player Association — petitioner.” That simple but bold verbal stroke renders the rest of NLRB Regional Director Peter Sung Ohr’s decision largely redundant. If Northwestern is classified as an employer, how then can the football players be anything other than employees? And, if they are employees, then surely they have the power to form a union or players’ association under the aegis of the Act.

Taken in this robotic fashion, a major question of labor policy is reduced to a mindless syllogism that manages to ignore all the difficult institutional issues on this case, some of which I addressed in my earlier Ricochet post on this question, soberly entitled “No Good Answers on Reforming College Sports.” What is striking about the long but aimless opinion of Regional Director Ohr is that it is virtually devoid of any serious examination of the difficult issues that are involved here.

The opinion is roughly divided into two parts. The first half is a detailed (indeed, tedious) examination of all the strict controls that Northwestern University imposes on its football players before, during, and after the football season. The purpose of this demonstration is to tell us what we already know: that the students who receive football scholarships are subject to strict oversight with respect to every aspect of their behavior. We should hardly expect less.