Big Coal’s War on Its Workers

August 27th, 2015 by Phil Mattera

helmets_wide-b8e68ac63c226846ea9705fcf6fc13535c1b2b2e-s800-c85Fossil-fuel apologists have accused the Obama Administration of waging a war on coal in its effort to cut power plant greenhouse gas emissions. Yet the main source of the industry’s distress is the energy market, and the real war is the one coal companies have for years carried out against the health and safety of its workforce.

There’s no doubt that Big Coal is in trouble. One of the industry’s largest players, Alpha Natural Resources, recently filed for Chapter 11 bankruptcy protection, following the path taken by competitors such as James River Coal, Walter Energy and Patriot Coal. Financial weakness prompted the delisting of Alpha and Walter Energy from the New York Stock Exchange. Industry leader Peabody Energy has seen its share price tumble even before the current market tumult. It is now trading at around $2 a share, compared to $70 in 2011.

Given the outsize role played by coal in the climate crisis, it is difficult to work up much sympathy for the industry in its time of trouble. While it is tempting to simply let the dirty industry shrink towards disappearance, there needs to be a just transition for those who have risked their lives extracting the fossilized carbon from the ground.

The magnitude of that risk has been made clear to me recently in the preparatory work I’ve been doing for the Violation Tracker database my colleagues and I at Good Jobs First will release this fall. The initial version will cover penalties imposed by agencies such as the Environmental Protection Agency, the Occupational Safety & Health Administration and, most relevant to the current discussion, the Mine Safety & Health Administration.

Based on preliminary results, it now appears that coal mining companies will turn out to be among the corporations with the largest aggregate federal environmental, health and safety penalties during the past five years. The largest mining offender is Alpha Natural Resources, whose penalty tally will top $100 million.

That reflects the fact that Alpha is now home to two of the most controversial firms in U.S. mining history: Pittston Coal and Massey Energy. Pittston had a long record of environmental and safety violations before its operations were used in the creation of Alpha in 2002, but even more notorious was Massey, which was responsible, among other things, for the 2010 Upper Big Branch mining disaster in West Virginia that took the lives of 29 workers, the most fatalities in a U.S. coal accident in 40 years. In the wake of that disaster, which an independent report attributed to management failures, Alpha agreed to purchase Massey. We thus attribute Massey’s violations to it.

At least 20 other coal mining companies will show up in Violation Tracker with $1 million or more in total penalties. The largest amounts, in excess of $30 million each, will be linked to Murray Energy, whose head Robert Murray has vowed his firm will be the “last man standing” in the coal industry, and Patriot Coal.

Patriot, a spinoff from Peabody Energy, is a prime example of the vindictiveness of the coal industry toward miners. Its Chapter 11 filing earlier this year was its second n three years. In both cases the company has tried to use the bankruptcy court as a way to undermine its contractual commitments to United Mine Workers members and retirees, especially with regard to pension and health plan contributions. Its current move against worker benefits comes as the company, which is trying to sell of its assets, is awarding more than $6 million in executive bonuses.

A repeated health and safety violator and a raider of worker benefits. It’s hard to imagine anyone will be sad to see Patriot disappear.

Replacing Pinstripes with Prison Jumpsuits

August 20th, 2015 by Phil Mattera

Goodwin-1-e1440025102463-225x300We’ve just been treated to the rare sight of a corporate executive pleading guilty to criminal charges stemming from actions that harmed the public. This outcome was particularly satisfying given that the case was one that symbolized much of what is wrong with U.S. business and regulatory practices.

The culprit is Gary Southern, who was at the center of an incident last year in West Virginia whose details, I wrote at the time, sounded a parody: the company responsible for a toxic chemical leak into the Elk River that contaminated the water supply of hundreds of thousands of people and sickened many turned out to be named Freedom Industries and had been cofounded by a two-time convicted felon.

That felon was Carl Lemley Kennedy II, who was apparently no longer active in the company by the time the spill occurred. The man who had taken over was Southern, who is now a felon as well thanks to his plea on charges of violating the federal Clean Water Act. Five other Freedom executives had earlier admitted guilt and negligence in connection with an accident that U.S. Attorney Booth Goodwin (photo) called “completely preventable.” Southern faces up to three years in prison.

Goodwin had rejected calls to focus on restitution to the community and insisted on seeking prison time for Southern et al. “Executives are used to writing checks,” he said. “It sends a stronger message if they have to trade their three-piece suits for a prison jumpsuit.”

A similar get-tough-on-business-crime attitude was recently displayed by Manhattan District Attorney Cyrus Vance, who brought manslaughter charges against two construction managers (and the companies they worked for) in connection with the death of a worker earlier this year in an accident that occurred after the managers had, Vance alleged, ignored repeated warnings from inspectors about unsafe conditions on the site.

Let’s hope Goodwin’s message also gets through to prosecutors bringing cases against companies with a much bigger footprint than that of Freedom Industries and the New York construction firms. For a long time, large corporations and their top executives seemed to be immune from criminal prosecutions, no matter how serious the offense.

The Justice Department has started to give in to the pressure and get some big companies to plead guilty to criminal offenses, as occurred in May in a case involving allegations against Citicorp, JPMorgan Chase and other large banks in connection with the manipulation of foreign exchange markets.

Now it’s time for prosecutors to take the next step and bring individual criminal charges against Fortune 500 top executives involved in serious misconduct.

There’s no guarantee that a criminal conviction will completely reform a wayward businessperson. The Wall Street Journal has a piece about an accounting executive who, after being convicted of embezzlement and banned for life from the accounting profession, altered his name slightly (changing Stephen to Steven and adopting a different middle name) and went on providing accounting services with bogus credentials. The SEC eventually caught on and is going after him in court.

Yet we need to see whether individual prosecutions of top executives works. One way or another, we’ve got a find a way to bring an end to the corporate crime wave.

Business Crime Simple and Complex

August 13th, 2015 by Phil Mattera

thumbonscaleMuch of the corporate misconduct of the past decade has involved complicated schemes involving the likes of mortgage-backed securities and credit default swaps. A recent announcement by the Consumer Financial Protection Bureau is a reminder that old-fashioned business thievery is still very much with us.

Citizens Bank will pay $18.5 million to settle CFPB allegations that it routinely pocketed the difference when customers mistakenly filled out deposit slips for amounts lower than the sums actually transferred. Taking advantage of the carelessness of others added up for the bank: $11 million of the payment by Citizens will consist of refunds, with the rest representing penalties imposed by the CFPB under its powers granted by the industry-vilified Dodd-Frank Act.

The under-crediting attributed to Citizens is the flip side of the overcharging that is surprisingly common among large retailers. Whole Foods is facing a shareholder lawsuit and sinking sales in the wake of allegations by the New York City Department of Consumer Affairs that its local stores were systematically and egregiously overcharging customers for pre-packaged foods. The agency found that: “89 percent of the packages tested did not meet the federal standard for the maximum amount that an individual package can deviate from the actual weight, which is set by the U.S. Department of Commerce. The overcharges ranged from $0.80 for a package of pecan panko to $14.84 for a package of coconut shrimp.” The company admitted it had made “mistakes.”

In February, Target paid $3.9 million to settle allegations by half a dozen district attorneys in California that prices charged at the register were higher than those posted in the aisles.

In April, Wal-Mart was hit with a proposed class action lawsuit alleging that the company overcharged customers at its vision centers by inflating insurance co-pay amounts.

Earlier this month, Genuine Parts agreed to pay $338,000 to settle allegations by the San Diego District Attorney that its several of its NAPA Auto Parts stores were overcharging customers.

Cases such as these belie the notion that “thumb on the scale” types of simple cheating are mainly to be found among small businesses. Large companies are apparently inclined to engage in both simple and complex misdeeds.

Citizens Bank symbolizes the link between the different types of misconduct. The company is a subsidiary of the Royal Bank of Scotland, which has been deeply involved in a variety of complex financial scandals.

Earlier this year, it pleaded guilty to criminal charges of conspiring to fix foreign currency rates, along with three other major banks. RBS was fined $395 million (and another $274 million by the Federal Reserve) and put on probation for three years. The SEC gave it a waiver from a rule that would have barred it from remaining in the securities business.

In 2013 RBS had to pay $153 million to settle charges that it misled investors in a 2007 offering of subprime residential mortgage-back securities. That same year, it paid $612 million to settle civil and criminal charges that it was involved in the manipulation of the LIBOR interest rate index.

Whether simple or complex, corporate wrongdoing needs to be prosecuted aggressively.

The Limits of the Koch Charm Offensive

August 6th, 2015 by Phil Mattera

koch_charlesCharles and David Koch and their Koch Industries conglomerate, long known for an unapologetic defense of unfettered capitalism and hard-right politics, are said to be going soft. The brothers are taking pains to associate themselves with more progressive policies such as criminal justice reform, while their corporation has been running feel-good ads highlighting its purported commitment to enlightened principles such as sustainability.

At the same time, the Kochs are depicting themselves as backers of supposedly responsible Republican presidential candidates and shunning iconoclastic front-runner Donald Trump.

The Koch charm offensive does have its limits. A slew of groups funded by the billionaires are at the forefront of the campaign against the Obama Administration’s Clean Power Plan and are doing their best to defend fossil fuels. When it comes to environmental policy, the Kochs are still in the stone age.

That position is not merely a matter of ideology. Their opposition to environmental and other safety regulations amounts to a defense of the way the Kochs do business.

This was made clear to me in some work I’ve been doing on a new research tool called Violation Tracker that my colleagues and I at Good Jobs First are preparing. Patterned on our Subsidy Tracker, the new resource will take company-specific data on regulatory violations and link the individual entries to the parent corporations of the culprits. This will allow us to present violation totals for large firms and show which of them are the most frequent offenders.

The initial version of Violation Tracker, which will be released this fall, will cover data from the Environmental Protection Agency, the Occupational Safety & Health Administration and a few other federal health and safety agencies. Coverage on wage and hour violations, financial sector transgressions and other forms of corporate misconduct will come later.

A preliminary tally of EPA and OSHA data from the past five years indicates that units of Koch Industries have been hit with more than $3.5 million in penalties. The biggest amount comes from Flint Hills Resources, the conglomerate’s oil refining arm. For example, in 2014 the company had to pay $350,000 and sign a consent decree to resolve EPA allegations that it was violating the Clean Air Act through flaring and leaking equipment.

Georgia-Pacific, the Koch Industries forest products company, received more than $600,000 in penalties during the five-year period. These included $60,000 in penalties proposed in January by OSHA in connection with worker exposure to formaldehyde and other dangerous substances.

In 2013 the fertilizer company Koch Nitrogen had to pay $380,000 to settle allegations that its facilities in Iowa and Kansas violated the Clean Air Act.

Regulatory violations by Koch businesses began before the five-year period that will be initially covered in Violation Tracker.

For instance, in 2000 the Justice Department and the EPA announced that Koch Industries would pay what was then a record civil environmental fine of $30 million to settle charges relating to more than 300 oil spills. Along with the penalty, Koch agreed to spend $5 million on environmental projects in Texas, Kansas and Oklahoma, the states where most of its spills had occurred. In announcing the settlement, EPA head Carol Browner said that Koch had quit inspecting its pipelines and instead found flaws by waiting for ruptures to happen.

Later in 2000, DOJ and the EPA announced that Koch Industries would pay a penalty of $4.5 million in connection with Clean Air Act violations at its refineries in Minnesota and Texas. The company also agreed to spend up to $80 million to install improved pollution-control equipment at the facilities.

In a third major environmental case against Koch that year, a federal grand jury in Texas returned a 97-count indictment against the company and four of its employees for violating federal air pollution and hazardous waste laws in connection with benzene emissions at the Koch refinery near Corpus Christi. The company was reportedly facing potential penalties of some $350 million, but in early 2001 the newly installed Bush Administration’s Justice Department negotiated a settlement in which many of the charges were dropped and the company pled guilty to concealing violations of air quality laws and paid just $10 million in criminal fines and $10 million for environmental projects in the Corpus Christi area.

In 2002 Koch Petroleum Group, the Koch entity involved in most of these environment problems, was renamed Flint Hills Resources. That name change was as cosmetic as the current charm offensive.

If the Kochs really want to improve their reputation, they should go beyond public relations and make fundamental alterations in their business practices.

Preventing Death on the Job

July 30th, 2015 by Phil Mattera

dupont_laporteThe Occupational Safety & Health Administration recently put DuPont on its list of severe violators and proposed fines totaling $273,000 in connection with last year’s chemical leak at a pesticide plant in La Porte, Texas that killed four workers. OSHA called the deaths preventable and accused DuPont of having “a failed safety program.”

This was a severe blow to a company that prides itself on having a “world-class” safety system and which thinks so highly of its skills in this area that it provides safety consulting services to other companies. DuPont expressed disappointment at OSHA’s actions.

The gap between (self) image and reality is nothing new at DuPont. The company’s claims to be a safety leader are not recent measures to address the fallout from the deadly accident in Texas. In his 1984 book America’s Third Revolution: Public Interest and the Private Role, former DuPont CEO Irving Shapiro called the company’s safety record “extraordinary” and made the preposterous claim that its employees “are safer on the job than at home.”

These statements flew in the face of safety problems at DuPont that extended back at least to the 1920s, when numerous workers were poisoned, some fatally, in connection with the production of tetraethyl lead for gasoline.

During the early 1970s, evidence began to emerge of high levels of bladder cancer among DuPont production workers, especially at the Chambers Works in New Jersey. Since at least the 1930s there had been evidence linking beta-nephthylamine (BNA), a chemical used in dye bases, to cancer. Yet the company went on producing BNA at Chambers until 1955, and after it was dropped DuPont went on making benzidine, another carcinogen, for ten more years.

In the years since Shapiro’s book, the safety problems have continued. In 1987 a New Jersey Superior Court jury found that DuPont officials and company doctors deliberately concealed medical records that showed six veteran maintenance workers had asbestos-related diseases linked to their jobs.  Also in 1987, the company agreed to pay fines totaling $11,100 as part of a settlement of OSHA charges relating to record-keeping at plants in Dallas and Niagara Falls, New York.

In 1995 oil company Conoco, then owned by DuPont, agreed to pay $1.6 million to settle OSHA charges related to an explosion and fire the year before that killed a worker at a refinery in Louisiana.

In 1999 OSHA announced that DuPont would pay $70,000 to settle charges that it failed to record more than 100 injury and illness cases at its plant in Seaford, Delaware.

In 2010 OSHA criticized DuPont for exposing employees to hazardous chemicals at its plant in Belle, West Virginia, where a worker had died after a ruptured hose released a large quantity of phosgene gas. The following year, OSHA cited DuPont for dangerous conditions after a contract welder was killed when sparks set off an explosion in a slurry tank at a plant in Buffalo, New York. In 2012 the U.S. Chemical Safety and Hazard Investigation Board added its criticism of the company in connection with the Buffalo accident.

In short, the accident at La Porte, which had a history of previous violations, is far from an anomaly for DuPont. The only surprising aspect of the story is why OSHA did not come down on the company much harder.

Rena Steinzor, a University of Maryland law professor and author of the book Why Not Jail?, has posted an article criticizing OSHA for not seeking criminal charges against DuPont. The Corporate Crime Reporter notes that OSHA chief David Michaels, asked about Steinzor’s critique at a recent press conference, dismissed her piece but did not explain why the DuPont case did not merit a criminal referral to the Justice Department.

OSHA has long been reluctant to go the criminal route, relying instead on civil proceedings and ridiculously low financial penalties. In its latest Death on the Job report, the AFL-CIO notes that since the agency was created fewer than 100 criminal enforcement cases have been pursued. During this same period there have been more than 390,000 workplace fatalities.

The agency’s willingness to put a large company like DuPont on the severe violators list, which is dominated by smaller firms, especially in the construction industry, is a step forward. But OSHA will need to do a lot more to address the ongoing tragedy of workplace fatalities and disease.

Toshiba’s Not-Quite-Spotless Track Record

July 23rd, 2015 by Phil Mattera

toshibaJournalists have traditionally been taught to avoid superlatives and other sweeping statements. Yet the New York Times just made that rookie mistake and ended up publishing an erroneous description of the track record of Toshiba prior to the recently disclosed accounting scandal that has led to the resignation of the top executives of the Japanese electronics giant.

“Toshiba Quickly Loses a Spotless Reputation” was the headline of the print version of the flawed effort by the Times to put the revelations in context. This may be the first case of extensive accounting fraud at the company, but Toshiba’s track record is far from spotless.

For example, like numerous other Japanese manufacturers, Toshiba has been the subject of price-fixing allegations. In 2012 the company paid $21 million to settle a U.S. class action case involving LCD flat panel screens after a jury ruled against the company and awarded $87 million to the plaintiffs. In 2010 Toshiba was fined 17.6 million euros for its role in a case brought by the European Union charging ten producers of memory chips with anti-competitive behavior.

In 1999 Toshiba committed to spend up to $2.1 billion to settle a class-action lawsuit alleging that the company had sold millions of defective laptop computers in the United States. The following year it agreed to pay $33 million to settle claims that it sold substandard equipment to federal agencies.

Going back further, Toshiba was involved in a scandal in 1987 over allegations that one of its subsidiaries violated Western export controls by selling submarine sound-dampening equipment to the Soviet Union. The incident led to resignations of top executives and temporary restrictions on U.S. imports of certain Toshiba products.

The lesson that the Times failed to grasp is that corporate misconduct rarely emerges out of nowhere. In fact, the 300-page report on the accounting scandal prepared by outside lawyers and accountants (the English version of which as of this writing has not been made public) charges that improprieties such as the overstatement of profits had been going on for at least seven years. Given what came to light in the Olympus scandal of a few years back, it is possible that subsequent revelations will show that Toshiba was cooking the books for a much longer period.

One thing that can be said about Japanese corporate scandals is that they usually lead to rapid resignations of top executives. Toshiba is also replacing half the members on its board of directors. Such house cleaning does not always occur at U.S. corporations involved in misconduct cases.

We have examples such as JPMorgan Chase, which has had to pay out billions of dollars to settle a variety of lawsuits and regulatory actions, including a recent one involving manipulation of foreign exchange markets that required the bank to plead guilty to a criminal charge. Throughout this all, Jamie Dimon had remained in place as CEO and, unlike apologetic Japanese executives, has loudly denounced regulators and prosecutors. American business does not believe in shame.

Getting Tough with El Corpo

July 16th, 2015 by Phil Mattera

get_out_of_jail_freeAs part of my summer reading I’ve been taking another look at some of the key works of the past on corporate crime to consider their relevance for today.

One of the titles on my list is Russell Mokhiber’s Corporate Crime and Violence, which profiled three dozen of the most egregious cases of environmental, workplace hazard and defective product abuses that had occurred in the years leading up to the publication of the book in 1988. Among the culprits were Dow Chemical (Agent Orange), Occidental Petroleum (Love Canal), Johns Manville (asbestos), General Electric (PCBs) and Ford Motor (exploding Pintos).

Mokhiber, editor of the excellent newsletter Corporate Crime Reporter, also reviewed the debates on how to define and how to address corporate misconduct and presented his own “50-Point Law & Order Program to Curb Corporate Crime.”

What strikes me is how little has changed in the past 27 years. Now, as then, we are faced with a seemingly endless series of incidents in which large corporations have caused serious harm to communities, the environment, workers and consumers. BP has had to pay around $20 billion to settle the many charges and claims brought against it in connection with the Deepwater Horizon catastrophe in the Gulf of Mexico. An ignition switch defect that General Motors failed to correct has been linked to more than 100 deaths. Safety lapses by coal miner Massey Energy (now part of Alpha Natural Resources) allegedly led to a methane explosion that killed 29 workers.

One difference is that we now also have an epidemic of serious financial crimes by major banks. Bank of America, Citigroup, JPMorgan Chase and Wells Fargo have each had to pay billions to settle allegations relating to the sale of toxic securities in the period leading up to the financial, foreclosure abuses and other issues. European banks such as Credit Suisse, HSBC and UBS have paid billions more to U.S. and European regulators to settle issues such as tax evasion, violations of economic sanctions and manipulation of the LIBOR interest rate index.

As in 1988, there is little consensus these days on what to do about corporate miscreants. Mokhiber focused on the debate between two camps. On the one side were those who wanted to exempt corporations from criminal charges (because these non-human persons supposedly could not exhibit criminal intent or have a criminal state of mind) and instead use exclusively civil cases to extract more burdensome financial penalties.

On the other side were those, including Mokhiber, who called for applying criminal law more aggressively, arguing, among other things, that the stigma of a criminal conviction would serve as a powerful deterrent against corporate misconduct.

While the debate was never resolved, a quarter of a century later the remedies proposed by both camps have come to pass. Civil penalties have risen to unprecedented levels. Billion-dollar settlements are now commonplace in cases involving large corporations, and in a few cases such as BP, Bank of America and JPMorgan Chase, the payouts have reached eleven figures.

At the same time, settlements in which major corporations plead guilty to criminal charges are becoming more common. Responding to public pressure, the Justice Department first extracted such pleas from subsidiaries of foreign banks UBS and Credit Suisse; this year it got Citigroup and JPMorgan Chase to do the same in a case involving manipulation of foreign exchange markets.

The sad reality is that the application of penalties that seemed so bold in the 1980s seem to be doing little to chasten big business.

Corporations have adjusted to the big penalties, which in some cases are not as large as they seem because they may be tax deductible. The payments are seen as a cost of doing business, and even at their unprecedented levels, the costs are usually well below the financial benefits the culprit companies enjoyed from the illicit activity.

Being convicted felons has not changed things much for banks such as Citigroup and JPMorgan Chase. There is no sign that this stigma has cost them many customers, and their ability to continue to operate in regulated areas has been assisted by special waivers given to them by agencies such as the SEC.

Like the escaped Mexican drug lord called El Chapo, large corporations – El Corpo, so to speak – have an extraordinary and frustrating ability to neutralize measures designed to punish them for their misdeeds. If we are ever going to get corporate crime under control, we’ll have to get a lot more creative. Let’s hope it doesn’t take another 27 years to figure it out.

Same-Industry Marriages

July 9th, 2015 by Phil Mattera

mergersSame-sex unions are not the only kind of marriage on the rise. In the business world, same-industry combinations are happening at breakneck speed as large corporations join with their rivals.

The same-industry marriages that will probably affect the largest number of people are those being proposed in the health insurance industry, where Aetna is seeking to buy Humana, and Anthem (formerly known as Wellpoint) is playing the mating game with Cigna, though UnitedHealth may get in on the act. Additional concentration does not bode well for keeping insurance premiums under control.

There’s a lot more going on. This was driven home to me recently while I was updating the parent-subsidiary linkages in the Subsidy Tracker database I oversee in my role as research director of Good Jobs First. I had to make adjustments relating to dozens of recently completed mergers.

Among these are the combination of Heinz and Kraft Foods arranged by Warren Buffett and the Brazilian investment firm 3G Capital, the union of deep-discount chains Dollar Tree and Family Dollar, and the merger of packaging giants MeadWestvaco and Rock-Tenn into a combined firm called WestRock.

An interesting trend is increasing German control over what remains of the U.S. industrial sector. Siemens recently completed its purchase of the industrial equipment firm Dresser-Rand, and ZF Friedrichshafen acquired TRW Automotive.

Other deals still in the pipeline include Staples’ bid for Office Depot, Expedia’s plan to acquire Orbitz (after gobbling up Travelocity), Monsanto’s offer for Syngenta, and AT&T’s plan to buy Dish Network, which in the meantime is looking to acquire T-Mobile.

Thanks to all this activity, 2015 could set a new record for M&A activity. Along with the economic benefit of consolidation, large companies are taking advantage of the mostly lax regulatory climate. Business apologists complain when the occasional deal — such as the attempted mergers of Sysco and US Foods, and Comcast and Time Warner Cable — is blocked, but the fact is that a large portion of proposed combinations face little opposition. And when regulators do protest, they can often been placated with relatively minor concessions, such as the requirement that Dollar Tree sell off only 330 out of the more than 8,000 outlets in the Family Dollar chain.

These corporate combinations are all about profit. In a country that claims to revere free competition, large corporations tend to move in the opposite direction: they want to control markets. While human marriages, as Justice Kennedy put it, are all about dignity, these business unions are about power and are thus one kind of marriage we should not be celebrating.

Redistributing Work Hours

July 2nd, 2015 by Phil Mattera

punching inThe Obama Administration’s new overtime proposal is an important and long overdue reform, but those who see it primarily as a way to address stagnant wages are missing the point. If the rule works properly, the main benefit will come in the form of time rather than money.

Noam Scheiber, the new labor reporter for the New York Times, exhibited the misconception in a news analysis arguing that the proposal “falls well short of helping substantially increase middle-class wages.” The piece compounded the problem by quoting Sen. Chuck Schumer calling the step “the middle-class equivalent of raising the minimum wage.”

Enacted in 1938, the overtime provision of the Fair Labor Standards Act (FLSA) is designed to discourage employers from compelling workers to work excessive hours. The time-and-a-half provision is meant not as a wage bonus but rather as a penalty for firms that overwork their staffs rather than increasing the headcount.

Under pressure from business interests, Congress wrote language into the FLSA providing an exemption from the overtime provisions for executive, administrative and professional employees. The rationale was that such persons would be paid a salary rather than a hourly wage, and their compensation would be high enough to make some extra hours tolerable.

It was left to the Labor Department to define exactly which employees would be covered by the exemption. It chose to set criteria that referred mainly to job content but also set a compensation level below which overtime had to be paid regardless of the nature of the job.

That latter provision turned out to be essential. It would be all too easy for an employer to give a position superficial managerial or administrative responsibilities with the aim of making it exempt from overtime. The problem was that the wage cutoff was set too low, and revisions tended to be slow in coming. After the cutoff was raised to $155 a week in 1975, it took another 29 years before it was increased again.

In the meantime, employers did everything possible to shrink the portion of the workforce eligible for overtime pay. This was perhaps most common in the retail sector, where workers were given bogus titles such as assistant store manager while most of their responsibilities were not managerial or administrative in nature. Once they were off the overtime clock, it was profitable for the real bosses to work them long hours.

Obama’s proposal, which would raise the cutoff to $970 a week, did not come out of the blue. Groups such as the Economic Policy Institute and the National Employment Law Project have been campaigning on the issue for years.

There’s also been a battle going on in the courts. A slew of lawsuits have been brought against major retail companies for misclassifying people as overtime exempt. Earlier this year, for example, a federal judge approved a $30 million settlement of overtime claims brought by so-called managers at Publix Super Markets. Payless Shoesource has agreed to a $2.9 million settlement of similar allegations.

Dollar stores, which are obsessive in their cost-cutting efforts, have been the target of numerous overtime suits brought by purported managers. Dollar General paid $8.3 million to settle one such case.

The employer class is, of course, up in arms over the proposed new standard, making the usual foolish claims about job cuts and loss of freedom. The Washington Post quoted one chief executive as saying: “Everything in this proposed rule is anti-American work ethic and culture.”

That in a sense is true, if one acknowledges that our work culture is now one in which some people are forced to work excessive hours and others, especially in the sprawling retail and restaurant sectors, are kept in involuntary part-time status with unpredictable schedules and not enough hours to piece together a decent living.

A measure of the success of the new overtime rule will be the extent to which it rectifies this lopsided distribution of working hours.

Who are the Real Champions of Sports Corruption?

June 25th, 2015 by Thomas Mattera

sports-moneyGuest Post by Thomas Mattera

Though FIFA’s corruption scandal dominated headlines for weeks, the inevitable has happened: the revelations have slowed to a trickle and sporting world has started to move on. Most previously captivated onlookers will return to the scene of these crimes again for one of only two reasons: to see if the next two World Cups will be moved or if FIFA President Sepp Blatter will mercifully fulfill his currently hollow promise to resign.

In turning the page, many in the United States are confident that the sports they enjoy domestically are free from misconduct contained in the FIFA accusations.

Unfortunately, this is a serious misconception. Though FIFA and its Cups have deservedly garnered the spotlight for alleged misappropriation of public funds, cover-ups, and labor violations, American sports have many of the same issues. The important difference: here they have been legalized and, gradually, normalized.

It shocks the world when kickbacks and campaign finance illegalities facilitate a taxpayer-funded, $900 million World Cup stadium in Brazil that currently functions as a bus depot. Meanwhile, this is public policy as usual in the United States as massive amounts of American public dollars annually go to a small group of billionaires, leaving stadium boondoggles with features like a multimillion dollar aquarium behind home plate.

Heads roll at its Zurich headquarters when FIFA is accused of suppressing incriminating evidence. Across the pond, the National Football League never has to admit guilt as it litigates away its cover up of the discoveries it made regarding the serious health implications of playing football professionally.

Finally, there is no shortage of international coverage surrounding the fact the World Cup generates billions in profit while the impoverished, unrepresented construction workers who make it happen risk serious injury for almost no compensation. Strangely enough, there is an eerie American equivalent that, although often criticized, continues on mostly unchanged.

This is not to say that American sports are free from unsanctioned trespasses. One only has to look at the recent revelation that the St. Louis Cardinals of Major League Baseball allegedly hacked into the database of a rival team to be reminded of that.

Nor is futbol’s governing body without its own maneuvers that operate dubiously yet legally. Case in point: like the NFL did for decades, FIFA has billions in the bank yet still masquerades as a nonprofit to claim tax-exempt status.

However, the fact remains that the FIFA allegations captivated the the sporting world while events in American sports that yield similar outcomes go unpunished and comparatively unnoticed every day. Though their sport suffered great embarrassment over the past two weeks at least, world soccer fans can at least find solace in the fact that the sources of their sporting injustice have been revealed, reviled, and now hopefully redeemed. Unfortunately, that is far more than can be said for the everyday injustice of the sporting landscape of their fellow sports fans stateside.