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Employers on the Public’s Dime: The Judicial Amendment that Put Money in the Company’s Pocket

(Image: Jared Rodriguez / Truthout)

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Dollar man turns back on people(Image: Jared Rodriguez / Truthout)If there is anything “everybody” knows, it is that the NLRA’s remedies are weak, especially when it comes to back pay for employees who have been fired illegally. What is puzzling is that the NLRA’s policies – found in Sections 1 and 7 – show that Congress required that NLRA remedies be strong remedies. Congress has never amended the NLRA to require weak remedies, so the command for effective remedies still exists.

What most people are not aware of is the judicial amendments that cut back pay owed employees whose NLRA rights have been violated. A couple weeks ago, we discussed the judicial amendment that requires an employee to get a new job as quickly as possible “to mitigate” the amount an employer owes the employee. If the employee fails to mitigate what the employer owes, the employee’s back pay is reduced. By putting money in the violator’s pocket, this judicial amendment gives the wrongdoer less incentive to obey the law.

A second judicial amendment from Republic Steel Corporation v. National Labor Relations Board, 311 U.S. 7 (1940) cuts back pay by requiring that remedies not be punitive to the law violator.

Republic Steel, an Ohio corporation, was founded in 1899. Beginning in 1926, it became a major steel manufacturer by buying and merging with other steel plants. “Republic Steel was known for its labor problems during the Depression. On Memorial Day, May 26, 1937, a strike escalated into the Memorial Day massacre of 1937, in which Chicago police fired into an unarmed group of protesters, and killed ten, outright.” (Wikipedia.) Republic committed a number of NLRA violations during that period, including establishing a company-dominated union and firing 7,000 employees for their legally protected union activities.

Although an employer that illegally fires employees owes them back pay, Republic Steel argued that it owed nothing to its fired employees because they had been given jobs through the New Deal’s Works Progress Administration (WPA). Republic Steel argued before the Supreme Court that Republic Steel should not have to reimburse the federal government for $2 million paid by the WPA to the illegally fired workers. The NLRB and the Court of Appeals took the traditional position that the wrongdoer here – the company – should pay.

The Supreme Court majority, however, said that requiring Republic Steel to reimburse the federal government would be punitive. The majority’s analysis said nothing about the role of remedies in promoting compliance with the law. Instead, the majority decision treats the issue as if it were akin to musical chairs – who is sitting in a chair when the music stops. Of course, in this game, the federal government has less money to provide public services, while the violator of the law gets a windfall. But the majority didn’t see it that way. The majority said:

The amounts earned by the employees before reinstatement were directed to be deducted from their back pay manifestly because, having already been received, these amounts were not needed to make the employees whole. That principle would apply whether the employees had earned the amounts in public or private employment. Further, there is no question that the amounts paid by the governmental agencies were for services actually performed. Presumably these agencies, and through them the public, received the benefit of services reasonably worth the amounts paid. There is no finding to the contrary.

The payments to the Federal, State, County, or other governments concerned are thus conceived as being required for the purpose of redressing, not an injury to the employees, but an injury to the public – an injury thought to be not the less sustained although here the respective governments have received the benefit of the services performed. So conceived, these required payments are in the nature of penalties imposed by law upon the employer . …

Congress gave the NLRA the authority to decide the appropriate remedy in each case. The Supreme Court in Republic Steel judicially amended the law to undermine the NLRA’s authority to use its expertise to determine what remedy would promote Congress’ intent.

The “rule” that remedies not be punitive to the wrongdoing employer is with us today and continues to undermine the act’s policies by limiting the incentives for scofflaws to comply with the law.

Requiring Republic Steel to reimburse the employees rather than the public’s bearing the cost would have been far more likely to persuade the employer to abide by the law. Allowing the employer to impose the costs of its violation on the public is likely to persuade the employer – and other employers – that breaking the law carries with it no effective sanction .

The dissenters, Justices Black and Douglas, were the only two justices who seemed capable of reading and understanding the plain language of the NLRA. They said:

The statute commands that the Board must order ‘back pay’ if the policy of the Act will thereby be effectuated. … The central policy of the Act is protection to employees from employer interference, intimidation and coercion in relation to unionization and collective bargaining. We cannot doubt but that a back pay order as applied to the employer will effectually aid in safeguarding these rights. We believe, as did the Board and the court below, that it may well be said that the policies of the Act will be effectuated by denying to an offending employer the opportunity of shifting to government relief agencies the burden of supporting his wrongfully discharged employees. The knowledge that he may be called upon to pay out the wages his employees would have earned but for their wrongful discharge, regardless of any assistance government may have rendered them during their unemployment, might well be a factor in inducing an employer to comply with the Act.

And the construction of the provision for back pay is not helped by labeling the Act’s purpose or the Board’s action as either ‘punitive’ or ‘remedial.’ The ‘back pay’ provision is clear and unambiguous. Hence, it is enough here for us to determine what Congress meant from what it said.

What the court majority did in this case was to shift costs that the law imposed on the wrongdoing employer to the employee victim and other taxpayers. As a result, the Court’s judicial amendment took away incentives for the lawbreaker to act as a good, law-abiding citizen. The decision also fits within a tradition of giving financial and legal subsidies to corporations and the privileged.

That same dynamic of rewarding the well-off by shifting power and wealth to the powerful and wealthy while imposing harm on the public exists today in many forms. One recent example is the Supreme Court’s decision in Citizens United. Other examples are laws that provide tax havens for companies moving work and money overseas and lower tax rates for hedge fund traders and billionaires than for people who work hard and are paid poverty wages. As Warren Buffett pointed out, his secretary pays taxes at a higher tax rate than he does.

For those who want to know more, the adequacy of NLRA remedies has been discussed by many people. Here are a few examples.

Rethinking NLRB Remedies: Real Reform Right Now

No Rights Without a Remedy

NLRA Values, Labor Values, American Values

This is the 18th article in the Judicial Amendment Project series on the history of the National Labor Relations Act. The stories in the series, to date, include:

Why the National Labor Relations Act Is a Weak Law Today – and How We Can Restore its Power

Judicial Amendments and the Attack on Worker Rights

Solidarity NOT Forever: How the Supreme Court Kicked Retirees Into the Gutter

Strike and You’re Out: The Supreme Court’s Destruction of the Right to Strike

A Strike Is a Strike and Only a Strike

At an Impasse: Collective Bargaining Under the Judicial Amendments

The Supreme Court Empowers Employers to Lock Out Workers

The Judicial Amendments’ 1-2-3-4 Punch to Collective Bargaining

Extra! Extra! Rich Corp Execs Shut Down the NLRB! Then and Now

The Dues and Don’ts of Union Dues

Union Dues and Don’ts: How Conservative Interest Groups Are Reducing Unions’ Financial Resources

Lechmere: The Employer’s “Right” to Keep Employees Isolated and Uninformed

Judicially Amended “Remedies” Fail to Promote Purposes of NLRA

Turning the NLRA into Groundhog Day, the Movie

Judicially Amended “Remedies” Fail to Promote Purposes of NLRA

What Ifs? The Sad Tale of Darlington Mills

Judges’ “Mitigation of Damages” Doctrine Harms Injured Employees

Employee “Disloyalty” Leads to Discharge – Employer Disloyalty is Good for Business

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