Protesters participate in a September rally outside a Burger King on Chicago's south side as labor organizers escalate their campaign raise the minimum wage for employees to $15 an hour. (AP File Photo/M. Spencer Green)
Minimum wage loophole written to help labor unions
Many of the minimum wage laws passed in recent years, including in major cities such as Los Angeles, San Francisco and Chicago, include waivers allowing unionized businesses to pay their employees below the minimum.
The waivers in effect make unionizing workers a low-cost option for businesses unwilling or unable to pay the new minimum wage, which in cities such as San Francisco and SeaTac, Wash., which also has a waiver, will climb as high as $15 an hour when fully phased in. In those cities, businesses can sign a collective bargaining agreement with a union that sets the wages below the local minimum.
Similar waivers were included in recent minimum wage increases in Long Beach, San Jose, Richmond and Oakland, Calif., as well as Milwaukee County, Wisc. according to a study by the U.S. Chamber of Commerce, titled "Labor's Minimum Wage Exemption." In addition, the Washington, D.C., Council passed a minimum wage ordinance last year that included a union waiver, but Mayor Vincent Gray vetoed it. Later that year, Gray and council approved an increase without the union waiver.
The waivers are a good deal for the business, which gets lower labor costs, and the union, which gets more members. It's not such a good deal for the workers, though, since they would be paid less than the minimum wage and would be obligated to join the union and pay it membership dues or, if they decline to join, at least pay it a representation fee.
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The waivers invert the common understanding of collective bargaining's purpose, which is to get workers better wages and benefits than they would otherwise get, and that of a higher minimum wage, which is to boost struggling workers. Critics say that shows that the unions' real intention is to boost their membership, not help the workers.
"By creating a carve-out from minimum wage laws, unions are hoping employers will embrace unionization to avoid costly new mandates. They are enlisting the coercive power of government to make labor the 'low-cost' option," said Glenn Spencer, vice president of the Chamber's Workforce Freedom Initiative, which produced the study.
Organized labor has been a major supporter of the movement to raise the minimum wage, with service-industry unions such as the United Food and Commercial Workers, UNITE HERE and the Service Employees International Union at the forefront. Unions accounted for 98 percent of the $1.7 million spent to promote Sea-Tac's Proposition 1, which voters approved last year, setting its $15 minimum wage.
In the case of San Francisco, the collective bargaining waiver language was established by the city in 2006. A successful November ballot initiative, sponsored by organized labor, will raise the rate to $15 for all employers by 2018. However, the ballot initiative left the waiver language in place, giving businesses a way to opt-out provided they have a union. SEIU Local 1021 designed the initiative, according to the San Francisco Chronicle.
Donna Levitt, manager of the San Francisco Office of Labor Standards Enforcement, said the city had included similar language in its ordinance requiring employers to provide paid sick leave. The purpose of the language is to give the employer and the union room to negotiate, she says. A union might opt for lower pay to boost other benefits or to shore up a pension.
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"The parties are well aware of their rights under the ordinance and they are choosing to trade it for something else," Levitt said.
She cautioned also that she had never seen any waiver language in a contract and had no idea how often unions and management struck such agreements. "It has never been an issue," she said, since no parties to a collective bargaining contract have ever filed a complaint based on the waiver language.
Most contracts are private documents, noted the Chamber's Spencer, so it is hard to tell how often unions are undercutting their own members. "It's not really possible to know the wages that are being paid without looking at the contracts, which we do not have access to," he said.
SEIU and UNITE HERE offices in Los Angeles did not respond to requests for comment, nor did UNITE HERE offices in San Francisco.
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