Update on Washington’s Legislative Agenda

Addressing issues such as independent contractors and the state of unions to occupational safety and supply chain security, several key bills are moving through the legislative process

by Tom Andel

Depending on your perspective, these are either the best of times or the worst of times to be associated with material handling and logistics.

In the best category, material handling and logistics is getting more attention. It’s all about labor savings, labor safety, and supply chain security—several of business’s top agenda items.

On the worst side, these are also political hot-buttons, and more regulatory attention on them means more pressure on you. Trends point to more active labor unions, a more regulatory OSHA, and more challenges to achieving supply chain integrity.

In this report, we’ll walk you through the trends you should be watching so suppliers and end users alike can avoid costly surprises that may be coming out of Washington, DC.

Labor pains
Whenever there’s a power shift in Washington, the regulatory agenda also changes. Nowhere is that more evident than in the Department of Labor.

In previous sessions on Capitol Hill, bills like S. 2044, the Independent Contractor Proper Classification Act, never had a chance. This bill, which was sponsored by then Senator Obama, would have provided “procedures for the proper classification of employees and independent contractors.” Business critics saw it as a way to raise tax revenue.

Kenneth E. Siegel, counsel with the Washington, DC law firm of Strasburger & Price LLP, expects this bill to be reintroduced in the next session. He says one of the major impacts will be on information technology (IT), since many businesses rely on independent contractors to provide this service. Using independent contractors enables companies to maintain lean workforces.

This has ramifications in warehousing. The warehousing industry uses independent contractors such as lumpers to load and unload trailers. The question becomes, are these people independent contractors or employees of whatever facility where the loading or unloading is done?

“Right now the warehouse people and the truckers treat them as independent contractors,” Siegel says. “That means you don’t withhold taxes, pay benefits or take out social security. To the government, collecting taxes from independent contractors is a lot harder than collecting taxes from an employer. In the trucking industry if this bill passes as proposed, it could eliminate the owner operator. They would be classified as employees and the benefits the trucking industry gets from using owner operators [would be lost].”

These newly designated employees would also be eligible for benefits under WARN and Family Leave provisions. The Worker Adjustment and Retraining Notification Act offers protection to workers, their families and communities by requiring employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs. Under Family Leave employers could become liable for back benefits and taxes as well as future taxes.

The state of unions
Once independent contractors become employees, they would be eligible to join a union. Enter “Card Check,” or the “Employee Free Choice Act (EFCA),” a proposed law that would change how unions are allowed to organize workers in the United States.

Card Check, as originally proposed, would replace secret ballot elections with a process requiring only signature cards. If union organizers can persuade more than 50% of workers at a facility to sign cards, the National Labor Relations Board would have to certify the union. Workers would not enjoy the anonymity that a secret ballot election would provide.

The union would not be obliged to tell an employer it is launching an organization drive. That means an employer may not be aware of this activity until the Federal government orders it to start collective bargaining.
This bill has won approval in past sessions of Congress, but it has been gridlocked in the Senate. With the election of Al Franken (D) in Minnesota, all bets seemed off. If it is reintroduced in the fall, supporters of this bill will need 60 votes to halt a Republican filibuster. With Franken, who has indicated his support for the EFCA, the Democrats have a better chance of obtaining the needed 60 votes this time around. However, the death of Ted Kennedy (D) and the timing of his successor has created some new uncertainty about the balance of power.

Another piece of proposed legislation, The Re-Empowerment of Skilled and Professional Employees and Construction Trades workers (“RESPECT”) Act, poses another threat to employer oversight.
It would narrow the National Labor Relations Act’s (“NLRA’s”) definition of “supervisors,” putting them in the same position as any employee under their watch when it comes to union activity. Employers could no longer rely on front-line supervisors to act on their behalf in matters of labor-management relations. If reintroduced and passed, the RESPECT Act could trigger a new round of litigation over whether individuals currently classified as “supervisors” are, in fact, supervisors.

“That creates an inherent conflict of interest to achieve two goals,” says Keith Smith, director of employment and labor policy for the National Association of Manufacturers (NAM). “It would expand union membership by reclassifying who can be eligible for union membership, and it would disrupt the employer’s communication flow down through its management chain. It hasn’t been introduced yet but it’s on the wish list of labor leaders.”

Occupational safety
One thing both labor and management agree on is the importance of occupational safety. However, the discipline an employer develops to document and measure safety does not always meet the standards of the Occupational Safety and Health Administration (OSHA).

To be fair, in recent years not even OSHA’s documentation efforts have been up to snuff, according to a recent report by the General Accounting Office (GAO). This report was critical of OSHA’s Voluntary Protection Program (VPP), in which companies promise to cooperate with OSHA to improve their safety.

In return for this pledge, these companies can avoid the burden of routine OSHA inspections. All they have to do is demonstrate that they have an exemplary safety and health program, have no ongoing health and safety enforcement actions, and have an injury and illness rate below the average rates for the industry.
The GAO found that not every company that signed up for the VPP lived up to those good intentions. Some even reported fatalities yet stayed in the program. The GAO recently published recommendations to salvage the VPP program, and OSHA indeed promised to beef up its oversight.

Revae Moran, acting director of the GAO, does see value in programs like the VPP and believes the GAO’s recommendations and OSHA’s adherence to them will result in program improvements. In fact, even before the GAO stepped in the program was a hit with the unions.

“Long time union members at some companies said they’ve been trying to get some of these safety and health things for years and it wasn’t until the VPP came along that they could get these things fixed,” Moran adds.

Supply chain security
Ensuring national and business security is the responsibility of all partners in a supply chain. This doesn’t always have to be an unfunded mandate, however.

Funds are being made available through the 2009 American Recovery and Reinvestment Act (ARRA) Port Security Grant Program (PSGP) to protect the U.S. port infrastructure from terrorism. Of particular interest is protection against attacks using explosives and non-conventional threats that could cause major disruption to commerce.

What the material handling industry contributes to these efforts are technologies ensuring supply chain visibility and velocity from the manufacturing floor to the sales floor. While the focus is on “port” security, much of the FEMA funding is meant to support critical operational functions.

That should be a supply chain effort, according to some. They are encouraging supply chain partners connected to ports to create consortiums that go beyond individual market sectors to include all business partners. The expectation is that this will make it easier for industry to access grant funding.

Logistics pros should also consider what they can do to make air shipment less turbulent. Under the Transportation Security Administration’s (TSA) Certified Cargo Inspection program, as of last February, half of all cargo taking off on domestic passenger flights must be screened. That changes to 100% by August 2010.
Manufacturers and distributors can apply for designation as Certified Cargo Screening Facilities (CCSFs). By offloading much of this task from the air carriers, they may be doing themselves and their customers a favor.

“If you leave it to the airlines it’ll be like loading a boat,” concludes Strasburger & Price’s Kenneth Siegel. “You need the freight there 4-5 days ahead of time because of the limited amount of equipment the airlines have to process freight for certification. So the question becomes is it worth my while to be certified to clear my own shipments for security?”

The security of people, places and things is a high priority in Washington. Material handling professionals have a golden opportunity to work with law makers so business priorities contribute to that general welfare.

Tom Andel has been covering material handling, transportation, distribution, manufacturing, and supply chain management for 29 years. He is currently a columnist and blogger for Modern Materials Handling, and a contributor to Logistics Management, both Reed Business Information publications. He was a Jesse H. Neal National Business Journalism Award finalist in both 2001 and 2004, and has been an active member of the Warehousing Education and Research Council (WERC).

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