Comrades in arms

What had been a button-down event about regulation switched gears as the silver-haired leader of the nation’s largest trade association launched into a fire-breathing attack on President Obama’s administration.

Obama was orchestrating a multi-front attack on the American businessman on behalf of Democratic Party donors, he said, and the National Labor Relations Board’s violations case against McDonald’s was “explicitly designed as a sop to the unions and the plaintiff’s bar,” as were other recent board actions.

PART 1: Fiscal train wreck

The Federal Communications Commission’s recent decision to regulate broadband with “net neutrality” rules showed that its commissioners were operating under orders “directly from the White House.”

The business community had little hope that Congress could block many of these actions, Donohue conceded, and a bill Republicans had passed to block a board rule accelerating workplace unionizing elections had “no chance” of surviving a presidential veto.

PART 3: Business on 2016 frontline

But the Chamber would win in the end, he said. “If all else fails, if we have no other option, we’ll sue them. We spend half of our time trying to reduce the number of suits by class-action lawyers and the other half of our time suing the hell out of the government. We sue the federal government and units of the federal government and some state governments, 180-90 times a year. We have got the best people and the best track record and the best results in this city.”

When the vintage Donohue performance concluded and he strode from the room, the conference returned to delving into the minutiae of the federal policy making.

• Chamber mobilizes

The contrast was a perfect snapshot of the Chamber during the Obama years: An aggressive, determined opponent of the president fighting battles of attrition in the legal and bureaucratic trenches of Washington.

For the past seven years, the Chamber has battled a multi-front war with Obama over labor and employment policy. The administration has allowed organized labor to run the show, the Chamber contends, pushing for new rules to make union organizing easier and burden businesses with higher costs and heavier legal liabilities.

Pushing back persistently, the Chamber has emerged as arguably Obama’s most effective foe. Its strength lies in being able to fight on several levels.

“The legislation is the stuff at the very top of the pyramid that everyone focuses on. But below that is the regulatory rulemaking and below that is the enforcement of those rules. We play in all of these spaces,” said Randel Johnson, the Chamber’s senior vice president for labor, immigration and employee benefits. He calls it “a cluster of tactics” but sometimes uses a different phrase — “guerrilla warfare.”

The 2009-2010 battle over card check legislation, formally known as the Employee Free Choice Act, shows how effective the Chamber can be.

Card check topped organized labor’s wish list after Obama’s first election. The president was an enthusiastic supporter, declaring as far back as a March 2007 rally in Chicago, “We will pass the Employee Free Choice Act. It’s not a matter of if, it’s a matter of when. We may have to wait for the next president to sign it, but we will get this thing done.”

The legislation would have adjusted the National Labor Relations Act by eliminating the right of an employer to call for a federally monitored workplace election when a union claimed it had the support of a majority of workers.

That union support is typically shown through signed cards, hence the name “card check.” In practical terms, card check would have meant a union could use just the cards to declare majority support and get federal recognition, without holding a secret ballot.

For unions, it was a way to stymie union-busting and the best hope they had to reverse a three-decade slide in membership. Critics warned it was a recipe for fraud and abuse.

Obama failed to deliver on his promise. The Senate, even with a Democratic majority, did not vote on the legislation, largely because of pressure from the Chamber, which mobilized its local members. They contacted lawmakers, especially wavering Democrats, and countered the pressure they were getting from labor unions and the administration. The Chamber arranged “massive fly-ins” of local business owners to talk with lawmakers in Washington.

It also poured $33 million into the 2009-2010 election cycle, twice what it spent in the 2008 cycle, according to the Center for Responsive Politics. On Election Day, it won 87 percent of the races in which it had endorsed a candidate. It backed 21 friendly Democrats such as Arkansas Sen. Blanche Lincoln, who was being targeted by organized labor for opposing card check. Lincoln won a brutal primary with the Chamber’s help, though she lost the general election to Republican Jim Boozman. The Chamber targeted almost 40 other Democrats and was a factor in the defeat of about a dozen, including Wisconsin Sen. Russ Feingold.

Equally important was that the Chamber won the rhetorical fight. While advocates claimed card check boosted workers’ rights, the Chamber repeatedly countered that it “would strip away America’s tradition of secret ballot elections and expose workers to intimidation and coercion.”

“It was a poorly written bill, and both the substance and the easy soundbites were on our side,” Johnson said.

By May 2009, even Andy Stern, then the president of the Service Employees International Union, was telling the Los Angeles Times his side had lost the fight over framing the issue. “[T]here’s a discussion about are there ways to change what is affectionately called card check to make it more like a secret ballot and less like what people are concerned about, being coerced or intimidated by the union side to try to sign it?” Stern said.

It was a bitter, if unacknowledged, defeat for the White House and it seems to have taught officials there a lesson: Forget Congress and instead focus on expanding the president’s executive powers.

• Digging into the weeds

Since the card check fight, the Chamber’s lobbying hasn’t been as useful because Obama has more often sidestepped Congress. The Chamber is still involved — supporting legislation, testifying at hearings and keeping tabs on how lawmakers vote. But its main energies are elsewhere.

“[T]he real day-to-day substantive ‘action’ of employment law is far removed from the Congress and lies in the enforcement agencies and in the courts,” the Chamber noted in 2013 study.

Obama has shown a marked preference for that route, with his agencies issuing executive orders and memoranda to Cabinet secretaries and agency heads to use their power under the rule making process.

New federal rules aren’t put in place with the stroke of a pen. Due to the 1946 Administrative Procedure Act, it takes months and gives courts oversight of the resulting regulations.

That means Chamber officials can affect the rules if they get deep into the weeds of the process, monitoring announcements, submitting comments after the proposed rules are announced and challenging them in court if the final version goes too far.

Submitting comments may seem futile when an agency has final say. But it serves two important purposes: It signals to the administration and Congress that business groups are interested in a proposed rule, and it can lay the groundwork for a legal challenge. It also lets the agency know it needs to take the comments seriously or face push back from the Chamber and its congressional allies. If the agency presses forward, it will probably have to defend the rule in court.

“If you don’t submit comments, you don’t have the foundation to challenge the rule making in court,” Johnson said. “We will submit comments on an upcoming Labor Department overtime rule. I am quite confident [the department] will look at them.”

Obama directed the Labor Department last year to issue a new overtime rule that would expand how many workers get paid overtime. Workers currently must make at least $26,000 annually before they can be considered exempt managerial employees. The final rule is due soon. Liberal groups have called for that floor to be raised to $52,000. But the administration is reportedly considering $41,000.

• The EEOC gets creative

The Obama administration mostly uses two relatively minor agencies, the Equal Employment Opportunity Commission and the National Labor Relations Board, to promote its agenda to expand workers’ rights and executive power on wages and employment. It has relied principally Title VII of the Civil Rights Act, which prohibits discrimination based on race and gender; the Americans with Disabilities Act; the Age Discrimination in Employment Act; and the National Labor Relations Act, which protects workplace rights.

The first three are the province of the Equal Employment Opportunity Commission. The EEOC has used novel legal tactics in litigating cases, which the Chamber says is new with Obama’s tenure, and has often been slapped down by courts.

That has led, ironically, to the commission winning less through litigation despite more cases being filed. The EEOC received about 80,000 cases a year in the decade before Obama took office. Since then, it has received an average of 95,000 a year, an increase of about 18 percent. Yet it recovered only $22.5 million for discrimination victims in fiscal 2014, down from $168 million a decade ago under President George W. Bush.

The Chamber is a constant thorn in the side of the EEOC, representing employers who are being targeted, or weighing in through amicus briefs. While the impact of briefs is hard to quantify, it can be significant, particularly if a case moves on to higher courts. “Certainly the Supreme Court has cited the Chamber’s briefs,” Johnson said.

In the case EEOC v. CRST Van Expedited, the commission pursued a discrimination case on behalf of 270 women working at an Iowa trucking company. In its filings, the commission did not explicitly assert a pattern or practice of discrimination. Ultimately, all the charges were thrown out except for the one that started the case, which was settled for $50,000. Sixty-seven cases were tossed out because the commission did not seek pre-trial reconciliation, a requirement before it can file a suit.

In a move that received considerable attention among lawyers, the court also ordered the EEOC to pay the company $4.7 million in legal fees, arguing that the litigation had been frivolous.

The commission turned that stinging defeat into a victory on appeal, when the 8th Circuit Court threw out the legal fee award in December. The court said that because the EEOC cases were mostly dismissed on pre-trial technical grounds, the company hadn’t won the case “on the merits” and therefore wasn’t entitled to any award.

The commission’s response was telling. It not only claimed victory but also argued that the ruling created a higher standard for proving that the agency acted abusively.

When Mach Mining, an Illinois company fighting a sex discrimination charge, said in court that the EEOC didn’t try in good faith to settle the case, the commission did not dispute the claim. Instead, it said the courts had no oversight regarding its settlement efforts.

Mach Mining, represented by the U.S. Chamber Litigation Center, took the case to the Supreme Court, which unanimously ruled against the commission last month. The opinion, written by Justice Elena Kagan, an Obama appointee, seemed to find the commission’s position baffling, arguing that Congress clearly intended courts to have oversight when it wrote the law.

“Congress rarely intends to prevent courts from enforcing its directives to federal agencies,” Kagan noted.

Despite the defeat, the commission’s general counsel, David Lopez, issued a statement claiming the ruling was “great news” and indicated the agency would use the same tactics in the future.

The commission has been aggressive in the use of the “disparate impact” legal theory, which holds that it is not necessary to prove any intent to discriminate, merely that a company policy hurt a minority group.

That came into play in a 2011 case called EEOC v. Peoplemark, in which the commission sued a Michigan temp agency for allegedly having a policy of not hiring convicted felons. The commission argued that the policy had the effect of discriminating against African Americans. The Chamber weighed in, filing a brief supporting Peoplemark.

During discovery, it was confirmed that the company did not actually have a no-felons policy — a manager had been mistaken. The commission pursued the case anyway, arguing that the fact that a manager may have considered a potential hire’s criminal background was itself sufficient grounds for a challenge. A federal judge disagreed and made the commission pay $752,000 in attorneys’ fees for the company.

The commission has interpreted the Americans With Disabilities Act in novel ways too. In 2013, in EEOC v. U.S. Steel, it sued a company for instituting random alcohol screening for new employees who work with the furnaces that produce ingredients for molten steel. It argued that under the law the practice amounted to an unfair “medical testing.” The company fought the suit, claiming that screening was necessary to prevent workplace injuries. The courts agreed, calling the testing a reasonable precaution.

• Labor board expands its scope

Before Obama came to power, the National Labor Relations Board, which enforces federal labor law, was a bureaucratic backwater, notable for a backlog of cases and, thanks to congressional gridlock, functioning much of the time without the five members it is supposed to have.

Urged on by unions, Obama made it a priority to put pro-union majority board in place. He gave Craig Becker, a former SEIU lawyer, a recess appointment in 2010. He made three more the following year when the Senate wasn’t even in recess, a move the Supreme Court declared unconstitutional in its 2014 Noel Canning decision.

The case was another win for the Chamber’s litigation center, which had represented Noel Canning. It meant that more than a year’s worth of board rulings and actions from the beginning of 2012 were retroactively voided.

Obama wasn’t able to get a full board approved by the Senate until mid-2014 as part of a deal to preserve the filibuster.

Under Obama, the board has been expanding its authority. In 2011, it filed a complaint against Boeing, saying the airline maker’s decision to open a new plant in South Carolina amounted to retaliation against the union that represented its machinists in Washington state, where most of its manufacturing is located.

Boeing was not moving production. It had not closed any factories or laid anybody off. The South Carolina plant was an expansion. Boeing chose South Carolina largely because the state had offered it $900 million in tax incentives.

The board’s then-Acting General Counsel Lafe Solomon rested his case primarily on a few comments from management that past strikes in Washington had influenced the location decision. South Carolina is a right-to-work state with weak unions.

“[W]e’ve had strikes three out of the last four times we’ve had a labor negotiation with the [International Association of Machinists],” Boeing Commercial Airplanes head Jim Albaugh told the Seattle Times in 2010. “[W]e’ve got to get to a position where we can ensure our customers that every three years they’re not going to have a protracted shutdown.”

Attempting to avoid strikes amounted to illegal retaliation against the union, Solomon reasoned. The board suggested Boeing be forced to build the first ten 787 airplanes it made each month at the Seattle facility. Only after that could it use the South Carolina facility to complete remaining orders. Boeing had been planning on building 10 planes a month, so the board was effectively saying the company had to shutter the South Carolina plant.

The case sent shockwaves through the business community. The board appeared to be creating a precedent that a company could not factor the economic costs of union activity into decisions about where to conduct business. It also appeared to be establishing that expanding to a right-to-work state was itself proof of illegal anti-union activity.

For all of the hoopla it caused, the board quietly withdrew the complaint in December 2011 after Boeing settled with the union. The case nevertheless signaled the board’s aggressive new direction under Obama. The most worrisome aspects of that direction, according to the business lobby, are:

• Micro-unions

In a 2011 case called Specialty Healthcare, the board reversed decades of precedent and allowed unions to organize subsections of a workplace rather than the whole business. For example, it allowed unions to organize just the cosmetics section of a department store instead of the entire store. The smaller groups are commonly called “micro-unions.”

Prior boards had seen this practice as prohibited by the National Labor Relations Act, which was created partly to prevent companies from having to deal with rival unions inside their workplaces. That’s why the act confers “exclusive representation” rights to unions.

Organized labor has warmed to the idea of micro-unions, since they offer a way to gain footholds in companies they otherwise would not be able to organize.

The Chamber is leading a business coalition seeking to get the movement overturned in Macy’s v. NLRB, a case currently before the 5th Circuit Court of Appeals.

• Speedy elections

In late December, the board adopted what has become known as the “speedy election” rule — or, as the Chamber calls it, the “ambush election” rule. The board had been attempting to get the rule completed since at least 2011. An earlier version was thrown out of court because the board had lacked a proper quorum due to Obama’s recess appointments.

The new rule would allow for most workplace unionization votes to be held about two weeks after the board authorizes them, a process that takes one to two months.

It gives companies only a week after a vote is authorized to raise concerns, such as whether certain employees should be eligible to vote. If the employers miss the deadline, they forfeit the right to raise objections.

The rule also limits evidence employers may use in their objections and allows the board’s regional directors to defer ruling on them until after the vote. While ostensibly to prevent delays, it would render many objections moot because the company would be unionized by the time the board investigated them.

Finally, the rule would require companies to turn over contact information for all employees including home and cellphone numbers as well as email addresses, regardless of whether the workers had authorized sharing the information.

The rule went into effect on April 14. Republicans tried to overturn the decision, but Obama in March vetoed their bill. Republican congressional leaders tabled an effort to override the veto on May 6, essentially conceding defeat.

The Chamber is leading a coalition challenging the rule in court. The case is before the U.S. District Court for the District of Columbia.

In December, the board ruled in another case called Purple Communications that employers must allow workers to use company email systems for union organizing. It rejected the argument that the servers were company property and therefore under its control. In effect, it said companies must help subsidize and facilitate union organizing campaigns. The company is appealing the decision and the Chamber is supporting the appeal.

• Franchising rules

In December, the board charged the McDonald’s Corp as a “joint employer” in a series of unfair-labor-practice complaints against its franchised restaurants, although the franchises were mostly privately owned, and therefore legally separate businesses.

The decision has caused uproar among businesses, which, as Donohue indicated, see it has intended to help unionize companies that franchise. The new standard would allow unions to focus on the corporate parent rather than having to unionize each franchise individually.

Making corporations responsible for the actions of individual franchises is such a vast expansion of legal liability, the Chamber argues, that it would result in many businesses pulling out of franchising altogether.

If the new standard sticks, existing franchisees would be bought out by corporate parents or see their contracts expire. Entrepreneurs would lose one of the surest ways to break into the business. Corporations would lose one of the surest ways to expand.

The board’s action reversed its own decades-long precedent that said the business entities were legally separate even when the franchiser maintained influence over the franchisee.

The old theory was that the franchiser had a responsibility to maintain the corporate brand and therefore had more leeway to interact with franchises. Otherwise, the franchises were the workers’ sole employers since they alone hired, managed and paid the workers.

Last summer, though, Richard Griffin, the board’s general counsel, instructed his attorneys to treat McDonald’s Corp as a “joint employer” in the cases of illegal firing and disciplining of franchisee workers. In December, the full board affirmed the decision.

Business groups are worried that the new definition could be expanded beyond labor’s right to include cases involving race, sex and disability-based discrimination.

The original complaints had been initiated by the SEIU through a subsidiary nonprofit activist group, Fast Food Forward. Griffin is a former senior attorney for the International Union of Operating Engineers.

Griffin’s legal rationale for the charges against McDonald’s is not clear since the charging documents only say that the company is also an employer, without giving any further explanation.

However, in a rare speech to University of West Virginia law students in November 2014, Griffin said McDonald’s had crossed a line by providing its franchisees with software that helped them to adjust their staffing to meet customer demand.

“They have programs that run an algorithm that say once these costs get to a certain percentage of these costs, you have got to start sending people home. Now, that type of involvement in the hour and terms and conditions, we argue, goes beyond protecting the brand,” Griffin said.

If that is the main argument, it’s weak, Chamber lawyers argue, saying they’re confident it will get thrown out in court.

Even if the Chamber does win, the labor board has a related case called Browning-Ferris that could have a similar impact. In that case, though, the issue is whether a company can be legally responsible for the employment practices of a subcontractor.

A board ruling was expected months ago. The Chamber once again joined in the case, filing an amicus brief on behalf of the company.

If the board finds a business is liable for its subcontractor, it will be a harder case to fight, Chamber lawyers concede. A contractor dictates the terms of the financial relationship to the subcontractor, so even if it doesn’t involve itself in the subcontractor’s practices, it could do so if it chose.

• Employee manuals

While union organizing and discrimination are major concerns, no issue appears too small for the NLRB.

The board issued a rule in 2011 requiring the prominent posting of signs in all workplaces explaining workers’ rights to form a union. The Chamber’s litigation center sued, saying it was unfair to require employers to help union organizers and that the board didn’t have the authority to issue the rule. The Chamber won in federal court in 2012, and the board dropped its plans to appeal the ruling.

In March, Griffin released a memorandum stating that companies had to eliminate any company policies in their employee manuals that interfered with employees’ rights to take part in union-related activity.

The memorandum interpreted the rights in an extraordinarily broad manner, saying, in effect, that any company rule that a employee decided was an interference to his rights to form a union, no matter how tangentially, was now prohibited. This sowed a legal minefield that has had employers combing through their manuals ever since.

Griffin’s own examples of prohibited rules are vague and sometimes contradictory.

A company policy to “avoid the use of offensive, derogatory or prejudicial comments” was deemed unlawful since it could be “reasonably construed to limit protected criticism of supervisors and managers.” But two pages later, the same memorandum said a company policy prohibiting the “use of racial slurs, derogatory comments or insults” was lawful.

The memorandum was directed to non-union companies as well as unionized ones. While the protections of the National Labor Relations Act cover all workers, the board has traditionally busied itself with cases involving disputes with unions and had little to do with companies that weren’t unionized. The memorandum signaled that this was no longer the case.

Since the memorandum isn’t a formal rule but rather a new interpretation of an existing rule, there are no legal grounds for a challenge yet. But should the board pursue a case, the Chamber will fight.

The flurry of activity underscores that the perception of the Obama years as one of congressional gridlock is misleading. Presidents don’t need Congress on many issues, and Obama is stretching those powers even further.

“No matter what happens with Congress, the regulatory state rolls on regardless,” Johnson said. As far as the Chamber is concerned, there are still many more rounds in this fight.