Labor Regulations Take Aim at the Economy and Free Speech

Alongside evidence of weak job growth, there are also signs of recovery. What may be recovering, however, is the recession. New orders for manufactured goods declined 13.2% in August, the steepest decline since January 2009. Real average hourly earnings declined 0.6% in August and 0.3% more in September. And the number of persons working only part-time because full-time work was unavailable increased from 7.9 million in August to 8.5 million in September.

Overall, the state of the economy is somewhere between retrogressive and woeful. Detailing the policies and initiatives of the Obama administration that have kept the economy down as it struggled to recover is an immense task, but it needs to be done.

A good place to start is the regulatory burden that has given businesses reasons to think twice about hiring more people. In his last State of the Union Address, Obama claimed, “I’ve approved fewer regulations in the last three years of my presidency than my Republican predecessor did in his.” The Heritage Foundation pointed out that Obama was counting all regulations no matter their size or cost as the same. Many Bush-era regulations eased compliance costs. The Heritage Foundation calculated that in its first three years the Obama administration adopted 106 major regulations that increased costs on private-sector activity compared to 28 such regulations in the first three years of the Bush administration. The regulations of the first three years of the Obama administration imposed $46 billion in annual costs while those of the Bush administration imposed $8.1 billion in annual costs.

Proposed regulations of the Obama administration also have to be added to the toll. Businessmen—as well as farmers—have also had to be concerned about mischievous regulations that, so far, they have been able to fend off. For example, a pair of proposed labor regulations combine Obama’s antipathy for employers with his antipathy for the Constitution. One regulation coerces speech, and the other restrains speech.

The regulation that would coerce speech was adopted by the National Labor Relations Board in August 2011. Observing that union organizing efforts were badly in need of some publicity, the NLRB adopted a regulation requiring employers to post a notice with a rather slanted list of rights. The notice states that employees have a right to join a union, negotiate with an employer through the union, bargain collectively, strike, picket, and lastly choose to do none of those things. The notice does not inform employees of their right to decertify a union, refuse to pay union dues in a right-to-work state, and refuse to pay dues greater than what is required for representational purposes. The rule makes failure to hang up the notice an unfair labor practice.

The NLRB’s statutory authority for this command is dubious. Board member Brian Hayes wrote a withering dissent that opened with Justice Scalia’s observation that “agencies may play the sorcerer’s apprentice but not the sorcerer himself” and concluded that the regulation is “both unauthorized and arbitrary and capricious.”

Lawsuits were filed against the rule in federal courts in South Carolina and the District of Columbia. The lawsuits argued that the National Labor Relations Act did not authorize the National Labor Relations Board to require a poster and that the regulation compelled employers to present a pro-union message on their property and was therefore unconstitutional, like the New Hampshire law that had required “Live Free or Die” to be on every license plate. During the litigation, the NLRB repeatedly postponed implementing the rule.

The courts split on whether the NLRB exceeded its authority. The South Carolina district court said there are many federal statutes that call for the posting of notices, and the National Labor Relations Act is not one of them. Nonetheless, the D.C. district court held that the rule was somewhere within the NLRB’s rulemaking powers. Regarding the constitutional issue, the D.C. district court said the rule does not compel employers to say anything. The notice is the government’s speech, the government’s message.

Both cases are on appeal. The D.C. district court enjoined enforcement of the rule during the appeals.

The U.S. Department of Labor Unions proposed the regulation that would restrain free speech. That regulation would constrict an exemption from a reporting requirement under the Labor-Management Reporting and Disclosure Act of 1959. The Act requires employers to report in detail any agreements with or payments to a consultant who undertakes activities to persuade employees on whether or not to organize and bargain collectively. The Act has an exemption providing that reports are not required on account of advice to an employer. For years the Labor Department had interpreted the exemption to cover activities that involved both advice to the employer and persuasion of employees. In June 2011 the Department proposed a regulation, known as “the persuader rule,” changing its interpretation of the exemption so that it covers only services related exclusively to advice. If any part of the service is to persuade employees, directly or indirectly, then the exemption is lost.

The Department received hostile comments on the proposal not only from the Chamber of Commerce, as you might expect, but also from the American Bar Association. The Chamber and the Bar Association said the persuader rule’s new subjective test made the advice exemption meaningless. The Bar Association said that the persuader rule would thwart the will of Congress, conflict with the ABA Model Rule on confidentiality, and undermine both the confidential lawyer-client relationship and employers’ right to counsel.

Faced with that opposition, the Labor Department has taken no further action on the persuader rule. The Department may be waiting until after the election. The rule could be part of the unknown, unspoken agenda for a second term.

If the persuader rule ever is adopted, it too should be challenged on constitutional grounds. The Supreme Court has not yet directly addressed whether attorney advice is protected speech and, if so, what level of scrutiny should be given to regulation of it. Renee Knake argues in a recent law review article that attorney advice is protected speech and restraints on attorney advice should be given strict scrutiny. That is, they are unconstitutional unless they are necessary to further a compelling governmental interest and are narrowly tailored to do so using the least restrictive means.

These two latent regulations of the NLRB and the Department of Labor are not “regulations on Wall Street,” as Obama likes to refer to all of his regulations. Wall Street firms, not being labor intensive, would be among the enterprises least burdened by these rules.

The rules are far from the administration’s worst insult to the First Amendment (that prize goes to the suppression of the free exercise of religion by the Department of Health and Human Services), but they are part of a pattern of not allowing the First Amendment, the Recess Clause, the Presentment Clause, the Commerce Clause, or anything else get in the way of the task of suppressing the economy.

With mischief like these regulations in mind, Mitt Romney said at the second debate, “I talk to small business across the country. They say, ‘We feel like we’re under attack from our own government.’” Denying that Obama is hostile to business, Democrats insist that his infamous taunt “You didn’t build that” has to be taken in context. I agree. The context is his presidency.