Unions target wages to further agenda

DSN Retailing Today, July 11, 2005 by Ken Rankin

The past 20 years or so have been a frustrating time for organized labor bosses here in Washington, but nothing has annoyed them more than watching the employees at major retail chains such as Wal-Mart and Target repeatedly reject overtures from union organizers.

Unable to make any significant inroads into non-union retail companies, organized labor has switched to "Plan B"--a concerted campaign to drive up the cost of doing business for these chains.

That's precisely what's behind the continuing effort to tar and feather Wal-Mart for not voluntarily raising wage levels to enable each worker to support a family of four. By playing that card, labor leaders have managed to generate ill will against the company--at least among those who think employees should be paid according to their family size rather than the value of their work.

To a large extent, Plan B is also what's behind the latest flurry of legislation that is being introduced on Capitol Hill by the congressional friends of organized labor.

Earlier this year, for example, Sen. Edward Kennedy (D-Mass.) came just four votes short of securing Senate approval for a 41% increase in the national minimum wage--a move that would have added at least $4,000 a year to the cost of employing every one of the retail industry's minimum wage workers. If enacted, that bill would have forced many non-union retailers to scale back on their expansion and hiring plans for years to come.

Labor lobbyists are hoping that the narrow Senate snub was just a temporary setback. In fact, they've already fallen behind new legislation sponsored by Sen. Richard Durbin (D-Ill.) that would go even farther than Kennedy's proposal.

In addition to boosting the national minimum wage rate to $7.25 an hour, the new legislation would effectively unravel the overtime pay reforms that were put into place by the Labor Department's wage and hour division just last year.

Under last year's reforms, all workers earning less than $455 per week ($23,600 a year) are automatically eligible for premium overtime pay for hours worked in excess of 40 per week. That legislation entitled millions of additional Americans to overtime pay benefits regardless of their job duties or title--including many retail industry assistant managers and department heads who didn't qualify under the old system.

Although retailers wound up facing higher payroll costs because of the increased overtime pay threshold, the industry supported the reforms because they eliminated a lot of the confusion surrounding the murky Labor Department "salary and duties tests" used to determine which white-collar managerial, administrative and professional employees are entitled to overtime pay.

Organized labor, on the other hand, loved the ambiguity and confusion associated with the old, difficult-to-interpret standards. Because they were so tricky to apply, retailers and other employers were constantly being forced to defend their payroll decisions in the courts and before regulators--a costly situation that advanced the goals of Plan B.

The big labor unions and their friends in Congress maneuvered to derail the Labor Department's reforms, but they were ultimately unsuccessful. Durbin's plan would reopen that issue by raising the salary threshold for determining overtime pay eligibility by a whopping 30%.

If that legislation is approved, every worker earning less than $30,732 annually--including millions of managers and other employees now exempt from the Fair Labor Standards Act--would become immediately eligible for a 50% increase in pay for all hours worked in excess of 40 per week.

Retailers and their customers would pay the price for this change, either through higher payroll costs or disrupted work schedules. And the architects of Plan B would notch another victory against non-union retailers.