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Double Standard at the Labor Department

SOURCE: Flickr/intangiblearts

Restoring fundamental competence and integrity of government agencies, including the Department of Labor, will be an important task for the next administration.

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The Labor Department’s Office of Labor-Management Standards is a small and relatively obscure piece of the overall federal bureaucracy, but for that reason it illustrates the enormous task that lies ahead for the winner of this presidential election. OLMS is a case study in how the management of even the more obscure niches of government under the Bush administration has fallen into the hands of people who have little regard for the programs they are charged with administering or the laws they are expected to enforce. Worse still, it is an example of how widespread the abuse of the regulatory and prosecutorial powers of government have become in the furtherance of partisan gain.

“Beyond Justice,” a report published last year by the Center for American Progress, documented how OLMS used the authorities in the Landrum-Griffin Act to harass, discredit, and weaken the U.S. labor movement. OLMS is a hotbed of regulatory activism in an administration otherwise known for relaxing enforcement of regulations ranging from food safety to workplace health, environmental protection, aircraft certification, and sound banking practices.[1] In an Appropriation Committee hearing volume released only last week, Labor Secretary Elaine Chao argued that her department be granted the funds to increase the staff of OLMS by an additional 16 percent on top of the 33-percent growth it has experienced since 2001. She pointed out that just since fiscal year 2004, audits of labor unions have increased by 50 percent and criminal prosecutions are up by one third.

In addition to dramatically expanded enforcement, OLMS has promulgated new regulations, greatly increasing the level of detail required in reporting. One union saw the size of its annual reports jump from 125 pages to more than 800. In addition to the expanded requirements for reporting by unions, OLMS drafted new regulations that will greatly increase the reporting requirements on officers, employees, and in many instances ordinary union members. For instance, under the new requirements, those required to report will have to disclose the size and terms of all mortgages, home improvement loans, and car loans from any bank or lending institution which does significant business with the corporation for which members of the union work.[2]

Labor Department efforts to force union compliance with the precise requirements of these regulations were best expressed in the FY2008 budget presentation to Congress: “In 2003, OLMS conducted a study of the percentage of unions whose reports met a minimum level of acceptability, finding that only 73 percent of the unions met the standards established. … In FY 2006, the level of acceptability reached 96 percent. OLMS expects that 97 percent of union reports will meet the minimum levels of acceptability in FY 2008.”

But the Landrum-Griffin Act requires reporting not only from unions but from businesses as well. Among the things that businesses are required to report:“Any agreement or arrangement with a labor relations consultant … to which such person undertakes activities … to persuade employees to exercise or not to exercise…the right to organize and bargain collectively through representatives of their own choosing.” [3]

This language is contained in the same section of the law as the provisions requiring reports by labor unions and their members. And the failure by businesses to report these activities carries an identical penalty—a fine of not more than $10,000 or imprisonment of not more than one year. Yet OLMS enforcement on union reporting compares to its efforts on business reporting like high noon compared to midnight. In fact, there is basically no enforcement of the business reporting requirement at all.

The Center for American Progress recently did an analysis of business reporting under Landrum-Griffin to determine the level of OLMS effort to obtain compliance. Since the law not only requires that businesses hiring consulting firms must report but also that consulting firms that are hired by such businesses must also report, we checked if the businesses reported as clients by some of the larger anti-union consulting firms had themselves filed the reports required under law.

The four consulting firms that we selected—Kulture Consulting, LLC; The Bennett Law Firm, P.A.; Cruz & Associates, Inc.; and Labor Information Services—reported having a total of 189 clients during calendar years 2005 and 2006. Of those 189 clients only 46 filed a report, while 143 or more than three quarters failed to file and were therefore in violation of criminal statute.[4]

Among the larger omissions in reporting was Fortuna Enterprises L.P., which according to Cruz & Associates paid the consulting firm $317,000 in 2006. Fortuna is owned by the Hsu family, whose patriarch Henry Hsu lives in Taiwan.[5] Fortuna’s largest holding is the 1,200 room Hilton Hotel at the Los Angeles Airport, the second-largest hotel in Los Angeles. Fortuna has been the lone hotel in Los Angeles refusing to abide by a city ordinance that requires hotel maids, porters, and bus boys to be paid a “living wage.”[6]

Another delinquent filer is Case Farms Chicken, which is headquartered in Salisbury, MD. According to Cruz & Associates, Case Farms paid Cruz $233,000 in 2005 to assist in blocking union organizing efforts.[7] Case operates poultry farms and plants in North Carolina and Ohio. According to the company website, the Ohio plant has 350 employees who process 300,000 chickens per week, or in excess of 80 million pounds of production per year.[8] According to the United Food and Commercial Workers, the plant pays only slightly above $8.00 an hour, the lowest wage paid to poultry workers in the state of Ohio.[9]

The consulting firm Labor Information Services reports that it collected $383,000 in fees from Los Angeles- and New York-based Chinese Daily News in 2005. The Chinese Daily News was also among the businesses that we identified ignoring the Landrum-Griffin filing requirements and their omission also evidently went unnoticed by the growing staff of auditors and investigators at OLMS.[10] China Daily News has a worldwide subscription base of 300,000 readers.

In 2000, all 150 employees at the Daily News agreed to be represented by the Newspaper Guild-Communications Workers of America, and in 2001 that choice was confirmed in an election supervised by the National Labor Relations Board.[11] Nonetheless, the paper refused to acknowledge the election and persisted in forcing employees to work 12-hour days without breaks or overtime pay. This spring a federal judge ordered the paper to pay $5.2 million in back pay to current and former employees and $3.5 million in penalties and damages.[12]

The four consulting firms whose records we happened to examine were among dozens of firms that reported labor consulting activities with the Labor Department. In total, the four firms collected $6.7 million, of which only $1.5 million was reported by employers.[13]

Some firms clearly made a greater effort to let their clients know that they would be in violation of federal law by not filing. Kulture Consulting, LLC sent letters to all clients telling them that the law “requires every employer who has engaged in any such agreement to File and Employer Report.” More than 40 percent of Kulture’s clients did file. That compares with clients of the Bennett Law Firm, none of whom filed.[14]

It also appears that at least some consulting firms also failed themselves to file—in fact it is possible that a great many did not. The Bennett Law Firm, for instance, reported having clients each year between 2000 and 2003, and reported having 28 clients in 2006. Yet they failed to file in 2004 and 2005.[15] It is unlikely that the firm had no clients in those years and particularly unlikely that it had no clients in 2005, as the law firm website displays copies of press releases taking credit for helping clients win two separate anti-union organizing campaigns in that year.[16]

The bottom line is that OLMS enforcement of business reporting has been so lax no one has any idea how much anti-union consulting is taking place, what employers are engaging in it, how much is being spent, or what it is being spent on. The asymmetry between what is being demanded of unions with threats of fines and jail time for noncompliance and what is being tolerated from employers with little or no apparent expectation of compliance is stunning.

The problem facing the next president is not that OLMS is an isolated problem area that could not be straightened out over time with good staff and the right direction. The problem is that you can walk down the hall from the OLMS offices in the Francis Perkins Building and find any one of a significant number of agencies or subagencies with similar problems. You could go to the Mine Safety and Health Administration, where a regional director was transferred a few years ago after refusing to back down to demands from a mine operator who informed the regional director that he was close friends with a senator who had a lot of influence with the department. The operator obviously knew what he was talking about.[17]

You could go the Wage and Hour Division, where a recent General Accountability Office report found that the division flagrantly failed to meet its responsibility to enforce laws intended to prevent worker exploitation.[18] You could go to the Employment and Training Administration, an agency with a $10 billion budget where multi-million dollar “sole source grants” were handed out like popcorn to constituent-friendly politicians and allied organizations.[19]

And the problem is certainly not confined to the Department of Labor. Similar problems can be found at the Department of Housing and Urban Development, the General Services Administration, and the Department of Homeland Security, where one could speculate endlessly about which of that department’s agencies was more troubled, riddled with incompetent political appointees, or incapable of performing the mission it was created to perform.

The next administration may have many lofty policy goals, but none will be more important or more daunting than restoring the fundamental competence and integrity of government agencies.

Scott Lilly is a Senior Fellow at the Center for American Progress. Anne Shoup is a Research Associate for the Fellows Department.

Endnotes

[1] Scott Lilly, “Beyond Justice: Bush Administration’s Labor Department Abuses Labor Union Regulatory Authorities” (Washington: Center for American Progress, 2007).

[2] Ibid.

[3] The Labor-Management Reporting and Disclosure Act of 1959, as amended, Office of Labor-Management Standards, available at http://www.dol.gov/esa/olms/regs/compliance/compllmrda.htm.

[4] Online Public Disclosure Room, Office of Labor-Management Standards, available at http://www.dol.gov/esa/olms/.

[5] Joe Mathews, “Hotel’s owners dig in for labor fight,” Los Angeles Times, July 6, 2007, available at http://articles.latimes.com/2007/jul/06/local/me-hotel6.

[6] Howard Fine, “Hilton takes last stand in war on ‘living wage’: injunction could put a halt to pay ordinance this week.” Los Angeles Business Journal, July 7, 2008, available at http://www.thefreelibrary.com/Hilton takes last stand in war on ‘living wage’: injunction could put…-a0181855574

[7] Online Public Disclosure Room, Office of Labor-Management Standards, available at http://www.dol.gov/esa/olms/.

[8] History, Case Farms Chicken, available at http://www.casefarms.com/about/history.cfm.

[9] Lee Morrison, “Case Farms workers to rally.” The Times-Reporter, September 8, 2008, available http://www.timesreporter.com/news/x997994594/Case-Farms-workers-to-rally.

[10] Online Public Disclosure Room, Office of Labor-Management Standards, available at http://www.dol.gov/esa/olms/.

[11] “Chinese Daily News Workers – two years of waiting for Union Representation.” UNI Global Union, available at http://www.union-network.org/uniindep.nsf/40aef7aec291d327c125682c00489744/4f3e82f6b1e7dc80c1256c8e00244add?OpenDocument.

[12] “Paper must pay in labor case,” Los Angeles Times, March 1, 2008, available at http://articles.latimes.com/2008/mar/01/business/fi-newspaper1.

[13] Online Public Disclosure Room, Office of Labor-Management Standards, available at http://www.dol.gov/esa/olms/.

[14] Ibid.

[15] Ibid.

[16] Bennett Law Firm Press Release, “Hudson, New Hampshire sales associates of Lepage Bakeries reject union,” April 6, 2005, available at http://www.thebennettlawfirm.com/press/2005/040605.htm.

[17] “Two for the Money,” Lexington Herald-Leader, October 20, 2006, available at http://www.kentucky.com/233/story/11062.html.

[18] Government Accountability Office, “Fair Labor Standards Act: Better Use of Available Resources and Consistent Reporting Could Improve Compliance.” July 15, 2008, available at http://www.gao.gov/new.items/d08962t.pdf.

[19] Scott Lilly, “End Pet Projects: Earmarks are a Presidential Problem, Too” (Washington: Center for American Progress, 2008); Scott Lilly, “Sole Sourcing: Handing Out Tax Dollars at the Labor Department” (Washington: Center for American Progress, 2007).

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