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CA Philanthropist Keeps BlackRock on Defensive With CEO Pay Shareholder Vote

At Wednesday’s New York shareholder meeting for BlackRock, the global investment management behemoth, it was anything but business as usual.

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Bill Raden




BlackRock headquarters in Midtown Manhattan

At Wednesday’s New York shareholder meeting for BlackRock, the global investment management behemoth, it was anything but business as usual. In the first minutes of the meeting, immediately following the routine reconfirmation of the firm’s executive management, California shareholder Stephen Silberstein was recognized and made a motion for a vote on a seemingly innocuous item called Resolution 5.

The resolution, which would have simply required BlackRock’s board of directors to issue a report to shareholders on how to bring its proxy voting practices on executive pay in line with its stated principle of linking executive compensation and performance, received four percent support. That’s enough to keep Silberstein’s resolution alive — according to SEC rules, if a proposal earns at least 3 percent of the vote the first time around, it can be resubmitted the following year.

Silberstein told Capital & Main that by surpassing the three percent threshold, the resolution sent a strong message to BlackRock’s board that there is a groundswell of investor discontent over the pay packages.

Stephen Silberstein

Stephen Silberstein

“It showed that there’s a lot of investors out there unhappy about these bloated compensations,” Silberstein said. “The vote extended the conversation at a time when you have the remaining presidential candidates — Donald Trump, Bernie Sanders and Hillary Clinton — all talking about excess CEO pay.”

Silberstein, who made a fortune as a co-founder of the education software company Innovative Interfaces, has been active on issues of income equality and has been at the head of a movement to organize institutional investors in opposing exorbitant executive salaries. He was at the shareholder meeting on behalf of the Stephen M. Silberstein Revocable Trust, which he owns and that holds its own stake in BlackRock.

Silberstein said he expected two percent of the vote. By getting twice that, he said, the message to corporations should be “that the natives are getting restless.”

Voting with Silberstein was a handful of state public pension funds, including the California Public Employees’ Retirement System (CalPERS) and the Employees’ Retirement System of Rhode Island, along with other socially minded investors.


Top executive pay has ballooned by 997% over the past 36 years. Since 2010, the average pay ratio of CEOs to median worker pay has ranged between 354-to-1 to 204-to-1, with Discovery Communications CEO David M. Zaslav topping the charts with a pay ratio of 1,951-to-1 (based on his compensation in 2014 of $156 million versus Discovery’s median worker pay of $80,000).

Two years ago, Silberstein decided to confront the CEO pay issue head on by proposing legislation in California to tie state corporate taxes to a company’s CEO-to-employee pay ratio. The bill, carried by Senator Loni Hancock (D-Berkeley), progressed further than expected – despite receiving the California Chamber of Commerce’s notorious “Job Killer” designation – but fell short of the two-thirds vote required for tax code changes.

Silberstein believes that CEO pay reform must be built into any reduction in the federal corporate tax rate, which is now being widely embraced by both Democrats and Republicans. “It’s really clear that CEO pay has gone up and the pay of other workers hasn’t,” Silberstein told Capital & Main. “You have a growing discrepancy here. The question is, What can we do to incentivize people and corporations to reduce that discrepancy? The tax code is a way to do that.”

Overall pay for the S&P 500 CEOs rose again last year, though the value of the shares of the companies declined slightly, despite massive stock buybacks designed to increase the value of those shares.

A 2016 report from As You Sow, an organization that promotes environmental and social corporate responsibility through shareholder advocacy, identified BlackRock’s CEO, Laurence D. Fink, as the 51st most overpaid CEO in the S&P. Fink’s pay was raised 8 percent last year (to $25.8 million a year), nearly three times the 2.7 percent profit posted by the company — and at a time when BlackRock shares fell nearly 5 percent in value during the year.

Ironically, Fink himself has been vocal about exhorting corporations to focus on investing in long-term growth instead of short-term rewards. But when it comes to voting against CEO pay packages of companies that practice “short-termism,” BlackRock voted to support pay practices at companies 96.2 percent of the time between July 1, 2014 and last June 30.

That, As You Sow’s executive compensation analyst Rosanna Landis Weaver told Capital & Main, means that “BlackRock is a complete outlier in terms of votes. … Of the largest money managers, funds that have a lot of assets, Fidelity voted against [CEO pay packages] 21 percent; American Funds voted against 32 percent; Schwaab voted against 35 percent; and BlackRock voted against 3 percent from the ones that we looked at.”

Even for investors that are unconcerned about how CEO pay impacts the country’s burgeoning income gap, Weaver cautioned, the compensation packages aren’t a productive use of assets.

“They’re distorted incentives that focus on short-term, non-sustainable performance,” she said. “It’s wasteful. It’s paying a CEO more than you need to, incentivizing behavior that is not in the long-term interest. These are all bad things — just basic bottom-line.”


BlackRock photo via Americasroof at English Wikipedia.

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Labor & Economy

Why 24 Hour Fitness Is Going to the Mat Against Its Own Employees

Co-published by Fast Company
24 Hour Fitness’ policies have brought the fitness chain in the crosshairs of the National Labor Relations Board, which has said the company’s employee arbitration agreements violate federal labor law.

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24 Hour Fitness headquarters in San Ramon, California. (Photo: Coolcaesar)

Relentless pressure to sign up new members made one man question the chain’s commitment to changing people’s lives.

Co-published by Fast Company

On its website, 24 Hour Fitness says it has thousands of job openings. That’s great news for fitness buffs hunting for work. Or is it?

Disgruntled former employees of the San Ramon, California-based company have filed hundreds of cases over almost two decades, some resulting in settlements in the millions of dollars.

And the large payouts appear to have made 24 Hour Fitness one of the nation’s more aggressive advocates for curtailing workers’ ability to defend their rights in court, labor lawyers say. That advocacy has also put the almost four-million-member-strong fitness chain in the crosshairs of the National Labor Relations Board, which has said the firm’s employee arbitration agreements violate federal labor law.

The company’s dispute with the NLRB may make it to the U.S. Supreme Court, which could hear oral arguments next term as to whether the contracts the firm asks workers to sign when they are hired violate historic worker protections put in place as part of New Deal legislation adopted in the 1930s. Those contracts ask employees to waive their right to come together to file class action lawsuits.

Attorney:  “24 Hour Fitness has been pretty aggressive in stripping workers of their rights.”

Some workers say the company’s single-minded focus on selling memberships caused it to run afoul of wage and hour law.

“We worked basically 8 to 8 every day no matter what, and if you got a lunch break it was usually at the club, or you went out and came right back,” said Gabe Beauperthuy, a former general manager, who worked in fitness centers in Colorado before leaving the company in 2006.

At first, Beauperthuy said, he loved the work and embraced the company’s philosophy of personal transformation. But the long days and relentless pressure to sign up new members made him question the company’s commitment to changing people’s lives, and even his own priorities. He developed a single-minded focus on bringing in the “almighty dollar” for the company because, he explained, “you’re a product of your environment.”

“I’m thankful that I realized that, and I’m thankful that I’m no longer there,” said Beauperthuy, now a competitive amateur wrestler and coach.

24 Hour Fitness declined to comment for this story.

Beauperthuy was one of more than 900 managers, sales counselors and trainers to bring a collective action lawsuit under the Fair Labor Standards Act, alleging the company had misclassified them and denied them overtime pay. After the class was decertified and following seven years of litigation, the group settled for $17.5 million in 2013, according to published reports. The company settled another lawsuit involving thousands of California employees for $38 million, the nation’s sixth largest wage and hour class action settlement of 2006.

Those cases may have made 24 Hour Fitness more steadfast in defending their employee arbitration agreement that asks employees to waive their right to bring class action lawsuits in NLRB v. 24 Hour Fitness, which the U.S. Supreme Court may review next year, depending on the outcome of a related case. The fact that 24 Hour Fitness has an employee arbitration agreement with a “class action waiver” does not make it unusual. But the company has been especially aggressive in defending its arbitration agreement in the courts, labor advocates say.

“Historically, there have been a few companies who went out of their way to fight and defend arbitration,” says Cliff Palefsky, a San Francisco attorney who filed the unfair labor practice case resulting in the NLRB’s finding that 24 Hour Fitness had violated the law. “They’ve been pretty aggressive in stripping workers of their rights.”

About 60 million people—more than half of the non-union private sector workforce—are covered by mandatory arbitration agreements, according to an Economic Policy Institute study. These agreements require employees to resolve disputes through private arbitrators chosen by employers, rather than go through the courts.

An estimated 25 million of these arbitration agreements also include class action waivers, like those used by 24 Hour Fitness, in which employees give up their rights to band together to bring class action suits to address workplace disputes in the courts.

The contract language has received attention in recent months as the “Me Too” campaign has gained steam, and advocates pointed to the difficulty of raising workplace concerns individually in confidential arbitration proceedings that are crafted by the employer. Last year, U.S. Rep. Cheri Bustos (D-IL) introduced a bi-partisan bill that would prevent companies from keeping sexual harassment and sex discrimination claims from going to court, where the proceedings are typically in the public record.

A landmark case expected to be decided by the U.S. Supreme Court this term, National Labor Relations Board v. Murphy Oil USA, will determine whether class action waivers will be a continuing feature of employment contracts. It will also decide the fate of NLRB’s dispute with 24 Hour Fitness.

“If the NLRB loses Murphy Oil, then our case would suffer the same fate, essentially,” says Palefsky. In its Supreme Court brief, 24 Hour Fitness distinguishes its employment agreements from those at issue in the Murphy Oil case because the fitness employees are given 30 days to opt out of the class action ban.

But Palefsky counters that the rarely-used “opt out” provision is irrelevant because a worker’s right to act collectively is one that cannot be signed away.

The argument about class action waivers might seem an academic one to job seekers if 24 Hour Fitness is now complying with the law.

There have been 621 employment cases filed in the federal courts against 24 Hour Fitness since 2000. On a per-establishment basis, that’s more than eight times as many as have been filed against its competitor, Gold’s Gym, during the same time period, according to a Capital & Main review of federal court records.

The disproportionately large number of cases is likely linked to the battle that took place between 24 Hour Fitness and Beauperthuy’s attorney, Richard Donahoo, who continued to fight for his 900 or so clients even after a federal judge in San Francisco granted a 24 Hour Fitness motion in 2011 to decertify the class. (The judge’s ruling that the plaintiffs’ claims were not sufficiently similar prevented the case from moving forward as a collective action—not the class action decertification language–but the effect was similar.)

“Many times that means it’s the death of the case because people don’t want to proceed individually,” said Donahoo, who is based in Orange County. “Attorneys can’t do it economically.”

Nevertheless, Donahoo and his colleagues decided to “swallow hard” and fight for each plaintiff individually. They filed hundreds of individual petitions in federal court to compel the company to arbitrate claims in Northern California, where 24 Hour Fitness is headquartered, and successfully fended off 24 Hour Fitness’s efforts in 21 federal courts across the country to force the arbitration proceedings to take place near the clubs where each of the former employees had worked.

“Our case became a ‘careful what you wish for’ scenario for the company,” Donahoo said. The company ultimately agreed to a settlement that resolved the individual claims at once.

Since then, 24 Hour Fitness has changed ownership. AEA Investors LP, a New York-based private equity firm, Fitness Capital Partners of Palm Beach, Florida, and the Toronto-based Ontario Teachers’ Pension Plan purchased the firm in 2014 in a leveraged buyout. But reasons remain to be concerned about the practice of the fitness company, which employs about 20,000 workers and operates in a highly competitive industry.

In November, the company agreed to pay restitution and settled a lawsuit for $1.3 million filed by Orange County prosecutors, stemming from allegations the company increased annual renewal rates on prepaid memberships beginning in 2015 in violation of its contracts with customers. Customers were sold prepaid memberships and charged upfront fees with the guarantee of a low life-time renewal rate in 2006 but saw their rates rise as much as 300 percent nine years later, according to the Orange County Register. The company admitted no wrongdoing in the settlement agreement.

Last May, the ratings agency Moody’s changed 24 Hour Fitness’ investment outlook from “stable” to “negative.” In justifying the downgrade, the report pointed to the growing number of fitness centers and the fact that the company is highly leveraged. The purchase of the company in 2014 was financed with $1.35 billion in debt, about 75 percent of the total cost, according to the Moody’s report.

Moody’s also singled out rising labor costs due to increases in the minimum wage in many of the regions where 24 Hour Fitness operates, suggesting the company employs a large number of low wage workers. Most of the clubs are concentrated in three states — California, Texas and Colorado.

“The company should be able to offset some of the pressure from minimum wage increases by using labor optimization, and reallocating the labor force within clubs based upon their age and member profile,” according to Moody’s report.

The economic pressures 24 Hour Fitness faces may explain the experience of one Ms. Randle, a former Kids’ Club attendant, who asked that her first name not be used. She worked at a 24 Hour Fitness in Orange County from 2014 to 2016.

She said managers told her not to leave her post to take a break or use the rest room during her four-hour shift because the other staff on duty lacked the necessary clearance to work with children. She complained to managers and eventually to the human resources department, but had to file a complaint with the California Labor Commissioner’s Office to resolve the issue and secure back pay for missed rest breaks, she said.

Ms. Randle thought that one of her co-workers endured repeated urinary tract infections that could have been caused by not being able to take bathroom breaks. Randle felt the managers lacked proper training. “They were always focused on selling memberships,” she said. “They didn’t care too much about their employees.”

Roxane Auer provided additional research for this story.

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Freeway Robbery: Confronting Hollywood’s Wage-Theft Culture

Lawbreakers who happen to be bosses are, in cases of misclassifying employees as “contractors,” treated with an enviable amount of understanding by the IRS.

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Charles Davis




Alamy Photo

The head of a company can pay a lawyer or an accountant to tell them to break the law and then get away with doing just that.

I got a letter from the Internal Revenue Service the other day and, as far as those go, it was one of the good ones: It said I was right, and that I’d been wronged, and that soon the world would know.

“We’re going to make the enclosed copy of your Form 14430, SS-8 Determination Analysis, available for public inspection,” it said. I had filed a request for that analysis about five years earlier after having worked as a segment producer on a late-night talk show.

In 2012, I thought that job was cool: “A segment producer, in Hollywood,” is how I could describe myself. In time, however, I came to realize, as many workers do, that I was being taken advantage of, by people making a lot more than me, in ways I hadn’t considered.

Casting Producer: “You don’t want to be seen as a whistleblower. If you go down that route you’re nailing your own coffin shut. You’re fucked. You’re never going to work again.”

It began with my title: “Producer” sounds better than “writer,” but the latter is actually protected by a collective bargaining agreement, ensuring basic rates of pay and benefits; the former is not. I was not an employee at all, apparently — the questions I proposed that the host ask, sometimes written down, were ostensibly the product of my own firm, and definitely not “writing.” I was, for tax purposes, an independent contractor, denied overtime, health care and, to top it off, charged twice as much in payroll taxes — my employer (who wasn’t) did not contribute a dime to Medicare, Social Security or the unemployment insurance I would later collect.

“As is the case in almost all worker classification cases, some facts point to an employment relationship while other facts indicate independent contractor status,” the IRS said in the letter. If, however, an employer tells you what to do and when to do it, providing services that are “a necessary and integral part of your business,” that employee is in fact an employee “and not an independent contractor.” I was, according to the federal government, “a common law employee.”

And the consequences? None so far. One has to file another form for those, which at best will mean that sketchy boss of mine will pay some back taxes. But that’s not guaranteed. Lawbreakers who happen to be bosses are, in cases like these, treated with an enviable amount of understanding. According to a pamphlet from the IRS, section 530 of the tax code allows employers to skirt ramifications for their actions if, for example, “You [the employer] treated workers as independent contractors because you knew, and can substantiate, that was how a significant segment of your industry treated similar workers.”

Just because everyone else is doing something does not mean it’s safe or legal, but in the case of employers misclassifying employees, the federal government does consider it an extenuating circumstance. A boss, after being caught, can also say he or she relied on “some other reasonable basis,” like “the advice of a business lawyer or accountant who knew the facts about your business,” and be absolved of their sins under the law.

In essence, the head of a company can pay someone to tell them to break the law — to advise them that breaking it would not in fact be illegal — and then get away with doing just that.

In the entertainment industry, everyone ignores the labor code,” said Christiane Cargill Kinney, an attorney at the firm LeClairRyan who focuses on employment issues within Hollywood. “There’s obvious reasons for that,” she said in an interview, “and it’s not exclusive to entertainment as far as the misclassification goes. But it is rampant.”

For one, there is the way that things have always been done. A manager may treat workers on a production as independent contractors because that’s what the person before them did — and those employee “contractors” may be accustomed to it as well. And complacency begets a culture. But the main reason, “obviously, is employers and production companies have a great incentive to misclassify: They can save thousands of dollars,” Kinney noted.

And if a worker doesn’t like it? In Hollywood, there are plenty more willing to make yet another sacrifice to make their dreams come true.

Workers like Lisa know this. She currently works as a casting manager on a cable television show, the sort of thing she’s done for the last 12 years. She’d always been treated as a traditional employee — until 2018, when she accepted a position, doing what she’s always done, but as an “independent contractor.”

“I took it because I desperately need the money,” she said, asking that her last name not be used. She works on a show aired by a well-known cable news network. As with most productions, the show is actually made by a separate production company, not the network itself, which allows for some plausible deniability. For example, when the makers of a Showtime documentary on basketball star Kobe Bryant were caught using unpaid researchers, Showtime proclaimed innocence and blamed the production company.

Françoise Carré is the research director for the Center for Social Policy, based at the University of Massachusetts, Boston. She’s seen this before. “When lead firms set up either chains or networks,” she said, “and then the lead firm essentially determines the level of resources in the system, the more segments in the chain or the more intermediaries, the more working conditions for workers on the periphery will be undermined.”

That is: A big company can hire a smaller company, give it a tiny budget, and look the other way with respect to how that budget is met. And if someone down the line gets caught, so what? In a 2015 report for the Economic Policy Institute, Carré noted that, “As a rule, companies found to be misclassifying workers and violating tax laws by the Internal Revenue Service usually do not get penalized by federal authorities due to legal constraints on the IRS.”

In her case, Lisa doesn’t even work for the production company hired by the network, but by a separate casting company that the former hired. She complains of a bait and switch, having accepted the rate offered, thinking it meant 40 hours a week, but in practice it meant “about 80 hours,” for roughly half the paycheck an employee entitled to overtime would collect.

“My boss has texted me every day, even on weekends, saying, ‘We need this. We need that,’” she said. “And because I want a job again, I gotta do it.”

She will, at least, have gained an appreciation for the difference between a W-2 and a 1099: lots of money, the latter requiring her to pay another 7.7 percent in taxes on her wages to make up for those her employer should be paying but does not. (Independent contractors do get some benefit from the 2017 federal tax law, which lets them deduct the first 20 percent of their earnings.) A 1099 also means no paid sick days or employer health insurance.

Lisa does plan on filing unemployment after this gig is over. And she will get it, despite her employer having classified her a contractor and not paying any money in to the state insurance program.

When assessing an alleged contractor’s unemployment claim, California’s Economic Development Department applies much the same test as the federal government. Does the employer “control the manner and means by which the work is performed”? If yes (if one’s hours, for example, are set by one’s boss) the employee is an employee and entitled to an unemployment check.

The other things an employee is entitled to, however, require more work to attain, and most won’t bother appealing to the IRS — not for a formal determination, much less the back taxes owed by past, delinquent employers that require yet more paperwork. That hurts the employee, but it also deprives the state of revenue and puts at a disadvantage other businesses that do follow the rules.

It is not like bosses don’t know what the rules are, even if that’s what some claim when the IRS comes around. Entertainment Partners, one of the largest payroll firms in Hollywood, is unequivocal: as far as it is concerned, in film and television production there is no such thing as an independent contractor.

“The federal government considers any person under your direction or control an employee,” the company states on its website. “As such, withholding, as well as employer taxes (e.g., FICA, [state unemployment insurance] and [federal unemployment insurance]), are due on wages and taxable allowances,” it says, noting that a failure to comply means “potential liabilities exist for all unpaid federal/state/municipal taxes…. Therefore, EP does not pay independent contractors.”

But culture often trumps the letter of the law, and the same culture that for so many years condoned unpaid internships — before the class-action lawsuits came — tolerates this particular form of wage theft as just another cost of doing business. That culture is, of course, the product of power dynamics: What’s a worker going to do: say no? Turning down a job or burning a bridge by defending one’s rights can cost a career.

“You don’t want to be seen as a whistleblower,” said Christina, a casting producer on a popular network dating show. She has been working in the entertainment industry since 2009, almost always as an independent contractor. She complains to her friends, but not to the state. “If you go down that route you’re nailing your own coffin shut,” she said. “You’re fucked. You’re never going to work again.” (She did not want her last name used for this story.)

So much depends on individual initiative, in terms of catching employers who misclassify. And there’s also the question for understaffed state agencies: Where to start?

“It’s a whack-a-mole dilemma,” said Kinney. “There’s so many people that have been misclassified. We’re talking [such] vast, vast numbers, that our bodies of government that are designated with regulating these things cannot manage. So people are going to get away with it.”

Misclassification, then, remains a systemic issue treated as an individual’s problem, with misbehaving employers given the benefit of the doubt — a benefit that no worker who has run afoul of the law is likely to receive.

There have been efforts to change that, however.

In 2013, Ohio Democrat Sherrod Brown introduced legislation in the U.S. Senate that would have eliminated the get-out-of-an-audit provision in the current tax law for employers who misclassify their employees. Among its 10 cosponsors were some big names — Vermont Senator Bernie Sanders, Massachusetts Senator Elizabeth Warren and Illinois Senator Dick Durbin, the second-highest ranking Democrat in the chamber — none of whom were Republicans.

The bill went nowhere.

States could pick up the slack, but the 2017 tax law that reduces some of the financial burden on contractors also makes it harder to raise revenue for state-level enforcement of labor and tax laws. That won’t change under the current president. What potentially could, however, is the culture: A status-conscious industry like ostensibly liberal Hollywood can arguably be shamed into living up to its alleged values. In fact, a crusade against misclassification can be seen as consistent with, if indeed not part of, the Me Too campaign: under federal law, independent contractors have a much harder time fighting sexual harassment in the workplace.

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Labor & Economy

Five Takeaways From the Disneyland “Homeless” Report

New research reveals that 11 percent of 5,000 Disneyland workers surveyed—custodians, food workers, musicians, cashiers, concierges—have been homeless at least once in the past year.

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It’s the report being read ’round the world. “Working for the Mouse: A Survey of Disneyland Resort Workers,” co-authored by the Economic Roundtable and the Urban and Environmental Policy Institute at Occidental College, has conclusively revealed Orange County’s dirtiest secret: The Happiest Place on Earth is little more than the embodiment of scarcity economics for many of its workers (known in Disneyspeak as “cast members”).

Media outlets from the New York Times to NPR (and even Breitbart) reported on the study’s most explosive findings: that 11 percent of the 5,000 workers surveyed—custodians, food workers, musicians, cashiers, concierges and more—have been homeless at least once in the past year, that three-quarters of them “do not earn enough money for basic expenses every month” and that 85 percent make less than $15 an hour, despite years of record-breaking profits by Disney. But a deeper reading of the 126-page report uncovers even more damning information. Here are five underreported angles:

  • Seniority Doesn’t Matter  Among cast members who’ve worked more than 15 years, 52 percent don’t make above $15 an hour, and 67 percent “can’t afford to pay their monthly bills.” It makes sense, then, that while 75 percent of cast members feel “they are treated with respect on the job,” only 35 percent of senior employees do. And emphasis on the senior: The number of cast members over 55 has jumped from nine percent of the total Disney work force in 2002 to 18 percent in 2017.
  • Those Omnipresent Cast-Member Smiles Cost Them  Forty-one percent of full-time employees forsook needed dental work in the past year because they couldn’t afford the premiums on Disney’s insurance or had no insurance at all.
  • Disney Loves Kids — Unless They’re Employees’ Kids  Fifty-seven percent of workers with children missed at least one shift in the past year because they couldn’t find a babysitter. Seventy-nine percent of employees who pay for child care say they’re food-insecure. Meanwhile, the Disneyland Resort has no onsite, subsidized child care facility; 79 percent of workers surveyed said they would use this service if Disney offered it. “I would love that for my 2 year old and 3 year old to know that they would be on property close to me,” one part-time ticket seller told researchers, “and would not have to worry about rushing home in two hours of traffic to go get them.”
  • Disney Workers Live Far Worse than the Average California Worker  While 44 percent of Californians rent, nearly two-thirds of cast members do so. Fourteen percent of California renters live in households with more than one person per room; 52 percent of cast members do. Meanwhile, four percent of workers in Los Angeles and Orange counties commute more than one hour to their jobs, compared with 31 percent of Mouse workers. That daily drive for them “is so onerous,” according to the report, that 21 percent of all Disney employees “sometimes stay with friends, rent a hotel room, or sleep in their cars rather than return home and then come back to work for their next shift.”
  • Few Disneylanders Live in South Orange County  “Working for the Mouse” mapped out where the majority of Disney workers live, a blob roughly bounded by the 55, 91, 15, 10 and 710, freeways. Relatively few Disney workers live in South Orange County, OC’s richer, whiter, more recently developed area—further proof that a Disney job marks the worker as a member of the working poor.

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How Elon Musk’s Traffic Tunnel Could Harm Los Angeles

Co-published by Fast Company
The Tesla CEO’s proposal to bore a high-speed commute tunnel under the Westside of Los Angeles may amplify many of the county’s most deeply entrenched disparities.

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Julianne Tveten




Boring Company's digging machine. (Photo: The Boring Co.)

Like the idea behind freeways, the Boring Company’s proposal misses a fundamental principle in reducing traffic: limiting the number of cars on the road.

Co-published by Fast Company

On January 22, employees of Elon Musk’s the Boring Company took the floor in front of Culver City’s city council. Over the course of 45 minutes, operations coordinator Jehn Balajadia sought to justify the company’s flagship project: To dig a 20-mile tunnel stretching from the South Bay California city of Hawthorne, to West Los Angeles and the Sepulveda Pass beyond in order to transport vehicles at high speeds.

Characterizing Culver City as “forward-thinking,” Mayor Jeffrey Cooper opined that “it would be foolhardy of us to just say no.” Councilmember Meghan Sahli-Wells, however, wasn’t impressed. “I asked a lot of questions. I didn’t get any answers,” she told Capital & Main. “They sent us the PR people. They didn’t send us the planners. I, so far, have not seen a plan.”

Map shows Boring Company’s proposed Phase 1 in red. (Image: The Boring Co.)

Sahli-Wells’ frustrations are revealing. Conceived by Musk in 2016 as a way to bypass the region’s freeway gridlock, Boring Company’s putative purpose is to construct networks of subterranean tunnels in California, Chicago, and the East Coast, through which personal cars and multi-passenger “pods” would travel on electric skates at speeds hovering around 125 to 150 miles per hour, with no stops between origin and destination. Beneath the veneer of its otherworldly grandeur, however, the company has had little to show for itself, investing far more in publicity gambits—namely, its buzzing campaign to sell branded flamethrowers—than in its own blueprint.

A privatized subterranean transport scheme might appeal to city governments for a number of reasons. “There’s a cool factor and there’s a fantasy factor,” Sahli-Wells said, particularly in the wake of Musk’s recent launch of a Tesla Roadster into space. More tangible motives exist as well—namely, the pressure to relieve congestion in Los Angeles, which has topped at least one list of the world’s most heavily trafficked cities for six consecutive years. In addition, the Boring Company has stated that it would singlehandedly fund its underground expressway, asking no government subsidies; combined with fees from tunneling and other permits, the prospect would ostensibly require little to no public investment.

Transportation Expert: “If I could drive from Brentwood to Hawthorne in 45 minutes, and I can take this tunnel in five minutes — but it takes me 30 minutes in line to get into it, then really, what’s the point?”

These factors, apparently, have charmed officials in Hawthorne, where Musk’s SpaceX’s headquarters is located. Last August, its city council approved Boring’s request to drill a two-mile underground test track extending west from the SpaceX offices. Such a project will augment what the company had already constructed as of last summer: a shaft and tunnel entrance in an old SpaceX parking lot, across the street from its headquarters.

Yet the evidence that the Boring Company will deliver on its central promise of mitigating traffic appears to be sparse. Theoretically, one or more additional layers of roads would reduce the number of cars on surface streets, thereby decongesting them. The company, however, has neglected to address the mechanics of the surface-level points of entry and exit above the tunnel—on-ramps, of sorts, that could far too easily cause jams.

“If there is a way to [travel] very fast—essentially a teleportation from one side of L.A. to the other—there’s going to be a big line for that, just like right now there’s a line during peak hours to go from a surface street to a freeway in Los Angeles,” Juan Matute, associate director of the University of California, Los Angeles’ Lewis Center and the Institute of Transportation Studies, told Capital & Main. “If I could drive from Brentwood to Hawthorne in 45 minutes, and I can take this tunnel in five minutes, but it takes me 30 minutes in line to get into it, then really, what’s the point?”

According to Streetsblog LA editor Joe Linton, the tunnel project’s combination of seduction and naiveté evokes a traffic-reducing proposition of yore: freeways. Originally advertised as a means by which to alleviate surface-street crowding, freeways soon generated much of the traffic they were designed to manage and prevent, exemplifying a concept known as induced demand. “In the ’50s, highway builders, car infrastructure folks [said], ‘If we can build more capacity, if we can widen another freeway, build another freeway, congestion is going to get better.’ What we’ve seen is the opposite,” he said. “The more capacity you have, the more congestion you get.”

Like the idea behind freeways, the Boring Company’s proposal misses a fundamental principle in reducing traffic: limiting the number of cars on the road. Critics claim that, in merely seeking to accommodate those cars, it perpetuates, rather than challenges, the system of car dependence responsible for Los Angeles’ congested roads—an apparent manifestation of Musk’s own self-interest. Last year, Musk garnered much opprobrium for his animus toward public transit, which he’s called “a pain in the ass.” But his greatest incentive, most likely, isn’t so much ideological as financial: For the owner of electric-car company Tesla, an atomized, driver-centric future of transit is simply good for business. (The Boring Company did not respond to requests for comment.)

The tunnel network might also be construed as a symptom of what writer Jarrett Walker terms “elite projection,” or “the belief among relatively fortunate and influential people that what those people find convenient or attractive is good for the society as a whole.” After all, as has been noted, the Westside tunnel parallels  Musk’s own commute: The SpaceX founder owns five houses in Bel Air and works in Hawthorne.

The proposed tunnel is primarily “within the wealthy Westside of Los Angeles,” Sahli-Wells pointed out. “Show me the plan that serves communities that are not wealthy. Communities that need more access to schools, jobs, medical facilities — you name it.”

The Boring Company claims its fares would be comparable to those of current public transportation—$1.75 one way in the city of Los Angeles, $1 in Culver City—but the reasons to be skeptical are legion. Privatized transit, at least in theory, wouldn’t receive the government subsidies of public transit. What’s more, Matute predicts that the company may take a number of approaches to pricing that would restrict accessibility, including a subscription or tiered model in which users pay regular fees to use the tunnels or a pay-per-trip schema. Considering the precedents of Big Tech’s attempts to “disrupt” transportation—namely, Uber and Lyft—a “flex-pricing” model wherein fares rise with demand is equally conceivable.

The Boring Company would likely not only neglect to transport low-income communities, but also threaten to displace them. As of 2016, the city of Hawthorne’s per-capita income was $21,182, with 19.2 percent of residents living in poverty—an existence whose precarity would only heighten amid an influx of young tech professionals.

“There’s a lot of demand to get from Hawthorne to Brentwood because there are a lot of jobs on the Westside,” Matute said. “This would greatly increase demand to live in the Hawthorne area, the South Bay, for people who work in the types of jobs that are in Santa Monica, Westwood — maybe even Century City. Just like putting a new Google Bus route into a different neighborhood in San Francisco can bring up prices along where those stops are, this would have, I think, a similar effect because it changes the accessibility of those neighborhoods on the other end.”

Can cities afford to take this risk, especially when issues of equity and accessibility already plague would-be public-transit riders? A recent UCLA study found that public transit ridership is declining, while car ownership is increasing. One cause is poor service quality: Within Southern California’s Imperial, Los Angeles, Orange, Riverside, San Bernardino and Ventura counties, bus speeds have slackened, due in large part to mounting congestion. This development marks a vicious cycle: As buses slow, riders become discouraged and, if they’re able to do so, begin to drive, aggravating the traffic that caused the buses’ inefficiency in the first place.

“We spent billions and billions of dollars on a system that you need to own a car for,” said Linton.  Such a requisite “presents a huge fiscal burden on low-income families that buy cars,” he added.

To allay the burdens of traffic and car dependency, Sahli-Wells advocates for an extensive network of mass public transit in which cars become the least, rather than the most, convenient mode of transportation. In addition to the recently approved transit extension measure, which includes a considerable broadening of the rail system for Los Angeles County, she, along with Linton and Matute, recommends more dedicated bus lanes, which would effectively exempt buses from traffic; Linton posits such adjustments as all-door boarding, boosting bus frequency, and thinning the number of stops for non-express lines.

The fate of such a public-works project remains to be seen, as does that of the Boring Company. Still, what’s clear is that, if allowed to proceed, the company’s initiative may amplify many of Los Angeles County’s most deeply entrenched disparities. In the meantime, until Musk can shed more light on his project, Sahli-Wells will continue to look elsewhere for transit solutions.“Even if Mayor Cooper says we would be foolish to say no,” she cautioned, “I think we’d be foolish to say yes.”

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Labor & Economy

Port Truckers’ Lawsuit Tells Company the Gig’s Up

Truck drivers spend unpaid hours awaiting assignments from dispatchers, as well as burning up time at vehicle inspections or completing shipping paperwork—time that would be compensated if they were classified as hourly or salaried employees, instead of as contractors.

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Bobbi Murray




Angel Omar Alvarez, driver and lawsuit plaintiff.

Lawyer: Drivers can receive what amount to negative paychecks, even after a 60-hour work week, due to unlawful company deductions.


The term on-demand economy probably brings to mind Uber and Lyft drivers. But truckers, not so much

Short-haul truck drivers who move cargo from portside to railroad yards and warehouses are part of the “gig economy” that requires service-providers (i.e., the workers) to front their own operational costs.

On Monday lawyers filed a class-action lawsuit in Los Angeles Superior Court against XPO Logistics Cartage on behalf of approximately 160 truck drivers at the ports of Los Angeles and Long Beach, arguing that truckers should be classified as employees, not contractors. The litigation seeks restitution of lost wages but also calls for an injunction to halt what it calls XPO’s unlawful practices.

XPO is one of the world’s 10 largest providers of transportation and logistics services, and worth $15 billion in annual revenues. It moves freight for such marquee brands as Amazon, Toyota, Procter & Gamble and Sony.

According to attorney Julie Gutman Dickinson, truck drivers spend unpaid hours awaiting assignments from dispatchers, as well as burn up time at vehicle inspections or while completing shipping paperwork—time that would be compensated if they were classified as hourly or salaried employees instead of as contractors. Dickinson is a partner at Bush Gottlieb, the firm which, along with the law offices of C. Joe Sayas Jr., filed the lawsuit. She said deductions for expenses include insurance, computer tablet fees and administrative costs.

Drivers can receive what amount to negative paychecks, even after a 60-hour work week, Dickinson added. “They actually owe money to the trucking company due to unlawful deductions because they are illegally misclassified as contractors instead of employees.”

An XPO spokesman denied that the company engages in these practices.

This is not the first proceeding against XPO Logistics Cartage and subsidiaries alleging misclassification. The California Division of Labor Standards Enforcement has ruled that its drivers are misclassified as contractors. Appeals are pending. A 2013 class-action suit against the company, then called Pacer Cartage, resulted in a 2016 settlement for $2,687,500—but did not re-classify the truckers as employees.

In an emailed statement XPO asserted that the vast majority of port drivers want to maintain their independence as contractors. “This business model lets drivers decide who they work for and when. It also means we can offer contractors competitive pay while keeping service levels high for customers. We’ll continue to defend this way of doing business.”

Angel Omar Alvarez, one of the lawsuit’s plaintiffs, has worked for XPO for eight years. He described being responsible for the costs of diesel and repairs, as well as the level of control the employer can exercise.

If a driver rejects a dispatcher’s assigned haul because it’s too time-consuming to be worthwhile, he said, there is retaliation. Sometimes drivers don’t get assignments, other times “they give you the worst load that takes six to seven hours to pick up. They make your life miserable if you reject the load.

“That’s what happens, that’s the reality that we suffer with this company. It happens every day.”

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Historian: Why Economic Libertarianism Is an Overwhelmingly White Cause

While the eyes of most journalists and citizens have been fixed on Washington and Donald Trump, a Duke University professor warns, Charles Koch-funded groups and politicians are quietly lining up the state authorizations needed for a new constitutional convention.

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Nancy MacLean is a historian in a hurry. Leaning forward, hands pressed on the table in front of her, she is telling a room full of activists that an assault on democratic institutions has created an “all-hands-on-deck emergency” on a scale that “we have not seen in our lifetime.” MacLean has a dramatic flair in her writing and in her personal presentations. She speaks with the urgency of someone who recognizes a pivotal historical moment when she see one.

Seated in the windowless basement of a union hall that is shared with a local economic justice non-profit, she is dressed in a white blouse and blazer.

Those assembled take turns expressing dismay over a divided country, over the daily attack on immigrants, and over the legendary discipline of an extreme right-wing political movement that has advanced all the way to the White House.

“Economic libertarianism produces a kind of social Darwinism — the idea that anyone who is not thriving in the economy must have something wrong with them.”

The Duke University professor says she discovered the intellectual underpinnings of the country’s rightward tilt while digging through the archive of a Southern economist named James McGill Buchanan. She laid out her argument in her impassioned and highly readable 2017 book, “Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America. That history holds important lessons for those resisting the right’s ascendance, she tells the group.

The “days of silos are over,” says MacLean. Whereas the left has been focused on discrete campaigns and issues, the extreme right, she warns, has undertaken “an audacious bid that has been six decades in the making to fundamentally change the relationship between the government and the people — and to do so permanently.”

Buchanan, who was 93 when he died in 2013, provided a key set of anti-democratic ideas that propelled the libertarian right’s effort to dismantle the liberal state, while giving plutocrats free rein, according to MacLean. Part of his agenda, MacLean says, included shielding the “makers” from the “takers” by eroding the public’s faith in government as a means to protect the rights of the property-owning class.

Buchanan, a Nobel Prize winner, favored requiring supermajority votes to approve tax increases, making it more difficult for public officials to meet the needs of ordinary citizens. In a long and varied career, he advocated dismantling Social Security, counseled the government of Chilean dictator Augusto Pinochet and nurtured generations of scholars at Southern universities, including at a center he founded at George Mason University with the help of $10 million from the right-wing billionaire Charles Koch.

One of her book’s insights is how conservative legal scholars and economists have understood the degree to which the devil lay in the mind-numbing detail of policy.

“The wicked genius of Buchanan’s approach to binding popular self-government was that he did it with detailed rules that made most people’s eyes glaze over. In the boring fine print, he understood transformations can be achieved by increments that few will notice, because most people have no patience for minutiae,” she writes.

That passage refers to the advice he gave Pinochet’s government, which she argues has hampered Chile’s current president, Michelle Bachelet, from enacting social programs in spite of a strong popular mandate.

Now MacLean is warning progressive activists that the Republican tax bill and its projected $1.5 trillion deficit could help fuel a growing right-wing clamor for a state-led constitutional convention, whose first order of business would be a balanced budget amendment to curtail future government spending.

“While the eyes of most journalists and citizens have been fixed on Washington” and Trump, she warns, “scores of organizations and elected officials funded by Charles Koch and his donor network” have been “quietly lining up the state authorizations” needed for a constitutional convention that will curtail legislators’ ability to serve the needs of the governed. “They now have 28 of the 34 states needed to call such a constitutional convention under Article 5 [of the U.S. Constitution].”

Such a move, she adds, would put the country further down the path toward the “glorious period of liberty” favored by Koch and Buchanan — a place in which workers have “no legal right to organize for collective voice and power” and where corporations are “all but free of democratic accountability” — and where privatization had eliminated Social Security, Medicaid, and Medicare.

Nobody is immune from the right-wing attack on government, says MacLean. “Every civil rights activist, every feminist, every environmentalist, every queer and every retirees’ group who goes to government to move a public agenda is a target for this and will suffer if it goes through,” she says.

Yet this creates a “perverse source of strength,” she says. “Our common need for government can potentially unite all these constituencies across groups to protect and expand democracy.”

MacLean’s fifth book has received a slew of positive reviews from major publications and a National Book Award nomination. Not surprisingly, Democracy in Chains has also drawn an avalanche of attacks from the very right-wing think tank networks that she critiques, as well as complaints from some left academics.

MacLean’s claim of Buchanan’s centrality to the rise of libertarianism, wrote political scientists Henry Farrell and Steven Teles, could be misleading to a progressive movement “liable to overestimate the extent to which the right is operating by a single plan. The most serious danger is that the left might look to this mistaken understanding of the right’s success as a model for how it should organize itself.”

Speaking to Capital & Main, MacLean actually gives some credit to Buchanan, who in spite of his deeply reactionary politics, was “probably the most original thinker about democracy in the last 50 years,” she said.

But Buchanan’s “very, very reductionist analysis” was deployed to erode popular trust in government, she argues.

“He sought to build a case that government could not do what it promised because politicians were not really seeking to advance the public interests as they claimed. They were just trying to get themselves elected using other people’s money. The same was true of all public actors, according to Buchanan,” as she told the union-hall gathering.

MacLean’s book anchors Buchanan’s thinking in the South’s troubled history of segregation and slavery. He advocated for state-funded voucher systems for private schools in the late 1950s, after local officials had closed public schools as part of massive resistance against court-ordered desegregation.

MacLean is careful to say her research found no evidence that Buchanan operated on the basis of racial animus — although he must have understood the context of his proposal for school privatization. MacLean joins conservative scholars in connecting Buchanan’s ideas to those of antebellum South Carolina Senator and plantation owner John C. Calhoun, who thought democracy needed to be curbed because it failed to preserve the liberty of the slave-owning elite.

And what about today’s libertarians? She believes there is a reason libertarianism has remained an overwhelmingly white cause.

“Economic libertarianism,” she told this website, “produces a kind of social Darwinism — the idea that anyone who is not thriving in the economy must have something wrong with them. There’s always this slippage between [economic libertarianism] and the really ugly white-supremacist right,” she says.

MacLean’s fundamental message is that Buchanan – and the extreme right – have an Achilles heel. Their ideas are extremely unpopular and so they have had to proceed by stealth – whether through voter suppression laws, gerrymandering or other means.

“We’ve had the most radical gerrymandering in American history,” MacLean told Capital & Main. “And they’re trying to destroy labor unions without actually saying that they don’t want working people to have a collective voice.”

“However much they may offer bromides to freedom or liberty in the abstract,” she added about the far right, “what they’re really talking about is freeing corporations, and the wealthiest taxpayers, who don’t support what the majority of their fellow citizens do.”

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Labor & Economy

Legal Scholar: Sliver of Hope for Labor After Janus Hearing

The Janus v. AFSCME case that landed before the U.S. Supreme Court Monday may not only affect the destiny of public-sector unions, but also how much equal access to the democratic process Americans will have in the future.

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Bill Raden




Illustration: Define Urban

The U.S. Supreme Court heard oral arguments Monday in Janus v. American Federation of State, County and Municipal Employees, the much-anticipated case in which plaintiffs are seeking to overturn the court’s 1977 Abood v. Detroit Board of Education decision.

That landmark ruling established the legality of public-employee unions to charge fair-share fees from members who have opted out of paying dues, and formed the basis for thousands of collective bargaining agreements for the nation’s 21 million government workers. The public-employee labor movement Abood ushered in is widely seen as a bulwark of Democratic Party power in the U.S. A decision is expected by the end of the court’s current term, in late June or early July.

Capital & Main spoke by phone with Seattle University School associate professor of law Charlotte Garden, who was in the court today, about her takeaways for Janus’ prospects.


Capital & Main: What is this case about?

Charlotte Garden: Janus is about whether it violates the First Amendment for a state and a union to agree that represented public-sector union members can be required to contribute to their share of the costs of union representation.

Most observers believe that the decision to outlaw public-sector union fair-share fees is a foregone conclusion. That’s because a similar case argued in 2016, Friedrichs v. California Teachers Association, deadlocked only due to the death of Justice Antonin Scalia, who was replaced by conservative Justice Neil Gorsuch. Did today’s arguments suggest any chance for a reprieve for labor?

Garden: I think they did. I wouldn’t go so far as to say I’m optimistic. I went into Friedrichs hopeful and left feeling completely hopeless; and I went into argument today feeling hopeless and left with maybe a sliver of hope. That is in part because Justice Gorsuch and Chief Justice Roberts really didn’t tip their hats. So it’s not entirely clear what they think. Now the way to bet is that they are going to strike down fair share fees. That’s what Justice Roberts voted for in Friedrichs and, with this issue becoming an increasingly partisan one, and given Justice Gorsuch’s votes in other cases so far, I think the way to bet is that he’ll also vote to strike down fair share fees.

The briefs, especially the union’s brief, were really drafted in a way that was designed to get at what are likely to be Justice Gorsuch’s concerns. So the union’s brief, for example, talked about originalism quite a bit and the history of First Amendment protection for public employees in a way that targeted Justice Gorsuch.

Was that the most striking difference for you from the Friedrichs arguments?

Garden: That was one difference. I think the other things were that the union and the State [of Illinois] just sharpened their arguments about why Abood, this 40-year-old precedent that the court is considering striking down in Janus, really is consistent with the way the court has treated public-sector employee speech in lots of other contexts.

There have been something like 79 amici curiae briefs filed on behalf of both sides of Janus. They argue everything from the disproportionate harm that overturning Abood will represent for women and persons of color, who greatly benefit from public-sector union membership, to the legal can of worms the court will be inviting in establishing a First Amendment precedent to challenge on far more trivial matters of government employment concerns. How much weight do those briefs traditionally carry with the court?

Garden: There’s a little bit of research about how influential amicus briefs are, and I think amicus briefs have become more prevalent, especially in high-profile cases over the last couple of decades. There is probably sort of a tipping point, and I’m not sure whether this case would have gone past this, where there’s a trade-off between the number of amicus briefs that are filed and the justices are sort of [being] deluged — and the ability of the briefs to round the case out and really put it in context.

But in this case there were a couple of amicus briefs that I think stand out as being [potentially] influential: One of them is the brief by Charles Freed and Robert Post. That was mentioned by name in oral arguments as a potential kind of compromise position. The other one is a brief by Eugene Volokh and William Baude, two prominent libertarian constitutional scholars, who weighed in on the side of the state and the union, saying that there isn’t really a substantial line of First Amendment case law establishing that there’s some kind of right to avoid compelled subsidization of speech.

Because there’s actually a conservative interest in preserving Abood, right?

Garden: Exactly. Think about all the ways that public-sector employment benefits are bound up with private companies, or are administered by private companies. If you’re a public sector employee and you’ve got some kind of pension, for example, it’s probably administered by a private corporation and a share of your pay every week goes towards that corporation’s fees to administer this fund for you. That corporation probably engages in all sorts of political spending that you might agree or disagree with, and yet nobody has ever really thought before that that might pose some sort of First Amendment problem. Whereas if the court overruled Abood, then I would expect to see more challenges to that sort of arrangement.

How radical an act of judicial activism would it represent to overturn Abood?

Garden: I think it would be remarkable for the court to turn away from not just this 40-year-old precedent, but also this long line of cases, including both older cases and more recent cases about the rights of public employers to manage their workforces as they see fit. So it’s one thing to overturn a stand-alone case, but that’s not what would happen here. It would really require some hard work, and maybe some kind of fancy footwork for the court to come up with a reason that agency fees are somehow different than all the of the ways that states currently restrict public employee speech.

Is that now it for Janus, or could a mass march on Washington influence the court?

Garden: I think there are probably some historical examples where public opinion has played a role in swaying the court. I’m not sure how likely this case is to be one of them. In part, that’s a reflection of the fact that its heart is a kind of complicated legal issue that only part of the public is interested in. It’s not like a Brown v. Board of Education or a gay marriage case, where lots of people are really focused on the issue. So I’m not so sure about that.

If you’re in a public-sector union or you’re represented by a public-sector union, now is the time to be talking with your coworkers — talk to them about why union membership is important. I’d add that if you care about the political gerrymandering cases [or] about equal access to the democratic process, then you should also care about this case.

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Labor & Economy

Taming the Ups and Downs of Workers’ Incomes With Even’s Quinten Farmer

Quinten Farmer, co-founder of the banking app provider, explores on the latest episode of The Bottom Line podcast how Even’s open culture helped it to get its product right.

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Late last year, Even generated a lot of buzz when it was announced that the banking app provider had signed up Walmart—the nation’s largest employer—so that its 1.4 million workers can draw in advance on their next paycheck and thereby smooth out their financial ups and downs. But this huge success notwithstanding, Even’s own path has been anything but smooth.

“We’ve only just recently exited this experimental stage,” Quinten Farmer, Even’s co-founder and chief operating officer, told me on the latest episode of my podcast, The Bottom Line.

Launched in 2014, Even displays an all-too-rare sense of humility in a world where many startups feel a constant need to swagger. This doesn’t mean that the company is timid; Even is plenty eager to put forth bold ideas. But it is also willing to be transparent about what isn’t panning out—and change directions when necessary.

To this end, when Even brought on a head of research a few years ago, “her mandate was to make sure that we as a company didn’t lie to ourselves,” Farmer explains. She has since used the company’s blog to, in Farmer’s words, “essentially live our product development experience in public.”

Making Even’s embrace of this fishbowl existence all the more extraordinary is that things were bound to get messy given that the company had chosen to take on an immense social challenge: income volatility.

Because of erratic work schedules, the need to take time off to care for a loved one, and other issues, many American households face wild swings in their earnings—25% or more on an annual basis and even bigger fluctuations month to month. This makes it “difficult for families to plan, pay regular expenses, save, or pay down debt,” the Pew Charitable Trusts has pointed out. Often, they’re forced to turn to expensive options, such as payday loans or overdraft protection, to cover the bills.

Even’s original way of trying to solve this was through a product called Pay Protection, which Walmart quietly piloted.

“Basically they said, ‘You know, we think you guys are pretty small. We think this is pretty early. But there’s something here. Can we figure out a way to work together?’” Farmer recalls.

Under Pay Protection, the system would establish an average income for you based on your pay history. If you earned more than the average during a particular period (because you worked a bunch of overtime, for instance), it would direct you to save your money. If you earned less (because, say, you had to miss work), Pay Protection would either take money from your savings or float funds from Even to make up the shortfall. All of this was made available for a subscription fee of just $3 a week.

“You can kind of imagine this nice, elegant smoothing function,” Farmer says.

The trouble was, what Farmer and his colleagues imagined didn’t match the way that people actually lived their lives. As it turned out, many folks were routinely running into a cash squeeze before their next payday, when the Even app was designed to intervene. Action, however, was required immediately.

“The classic example really is rent is due two days before payday,” Farmer says. “It’s purely a timing problem.”

And so the company ditched Pay Protection and introduced a new solution called Instapay, which allows people to withdraw part of their paycheck early. Because this is offered as a benefit by employers, Even knows how much money in total is coming to the individual. This ensures that it won’t extend funds, willy-nilly, beyond what someone has earned, helping to keep them financially healthy.

For Farmer, the entire process—trying something, failing, and finally seeming to nail it—is exactly what Even promised its earliest investors. “We don’t know all the answers,” Farmer remembers telling them. “We don’t know what the right approach is. We’re pretty confident we can find it.”

You can listen to my entire interview with Farmer here, along with Molly Nugent reporting on one woman’s struggles to cope with her own financial instability, and Rachel Schneider examining how our assumptions about gender are shaping the future of work.

The Bottom Line is a production of Capital & Main

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Culture & Media

Young Marx in Love

A revolutionary buddy film from the director of I Am Not Your Negro.

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August Diehl as a 20-something Karl Marx. (All Photos by Kris Dewitte.)

Actor August Diehl’s Marx is part revolutionary, part young Mick Jagger.


Among the best films about revolutionaries are 2000’s Lumumba, which documented the life of the Congo’s murdered independence leader, and last year’s I Am Not Your Negro, a brilliant reintroduction to James Baldwin’s revolutionary writing. Now the director of those acclaimed films, Haitian Raoul Peck, has once again trained his lens on revolution, but this time in a largely unexpectedly way.

While Peck’s past work has been marked by intensity and grit, The Young Karl Marx instead relies less on invention and on more conventional tropes. That approach is not necessarily a bad thing. It allows the filmmaker to make accessible the seemingly daunting challenge of documenting the young life of a philosopher/writer whose work takes place mostly in his head and on paper.

Dynamic Duo: Marx (August Diehl), right, and Engels (Stefan Konarske).

Written by Peck and Pascal Bonitzer, the film begins in the mid 1800s, when Europe’s Industrial Revolution has underscored the economic disparity between the ruling class and the working poor, or proletariat. This inequality has spawned a slew of young writers and thinkers who are circling philosophically, individually and collectively, what they hope will become a better society. Among them are journalist Marx (August Diehl) and his wife (Vicky Krieps), who live a meager existence–escaping creditors and cops, sleeping in and screwing when not discussing socioeconomic theory. The couple is soon exiled from Germany to France, where they meet Friedrich Engels (Stefan Konarske), a factory owner’s son who has been the first to study and write about the plight of the working class. An instant bromance Between Marx and Engels ensues.

Most of the film follows the duo as they argue and pontificate their way through Europe, honing their philosophy until it can all be memorialized in 1848’s The Communist Manifesto. Diehl has incredible charisma and his Marx is part revolutionary and part young Mick Jagger. With Konarske’s Engels as his more grounded Keith Richards, they aren’t quite enfants terribles, but they do shake things up, quickly rising as leaders of those trying to understand the world around them. And what a glorious world that is. Production designers Benoit Barouh and Christophe Couzon have fashioned a stunning representation of 19th-century Europe. What emerges is a costume buddy film, as if Merchant Ivory produced Butch Cassidy and the Sundance Kid.

Ultimately, though, viewers’ personal views of Marx, and their political views in general, will probably decide whether they enjoy the film. By focusing on the genesis of Marx’s ideological oeuvre, Peck avoids having to deal with the man’s ultimate mixed legacy. Regardless, some will undoubtedly find the filmic fuss over Marx misplaced. But for many, The Young Karl Marx will be a fulfilling view of a time when young idealists were trying to make sense of the world in a far more robust way than the current political spewing of modern-day television pundits.

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10,000 Laid-off Workers Later, Sam’s Club “Transforms” Its Business

Co-published by Fast Company
Mass layoffs are never pleasant news. In America they are particularly disruptive, thanks to a meager safety net.

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Photo by Walmart

A decades-old plant-closing law provides an important protection to laid-off Sam’s Club workers, according to labor advocates.

Co-published by Fast Company

Last October a representative of the Walmart Foundation headlined a workshop entitled “The Just Transition” at a conference focused on corporate responsibility in Huntington Beach, California.

Julie Gehrki, the foundation’s vice president of programs, was optimistic about the future of a retail workforce that faces automation and has been beset by store closures. She touted Walmart’s recent investment in training academies and efforts to incorporate virtual reality into training workers to be battle-ready for Black Friday.

About three months after the conference, Walmart’s Sam’s Club chain announced it would close 63 stores, including three in hurricane-ravaged Puerto Rico.

The retail chain’s laying off of about 10,000 workers was prompted by a new plan to target a wealthier demographic—families with annual incomes of between $75,000 and $125,000, Sam’s Club CEO John Furner told the Wall Street Journal in late January.

“The strategy isn’t to close clubs,” he said. “The strategy is to transform the business.” About a dozen locations are expected to be converted into “eCommerce fulfillment centers” to better serve the growing number of customers shopping online.

Lining up early at a closing Sam’s Club in San Fernando. (Photo: Jessica Goodheart)

Was this the “Just Transition” envisioned by Canadian labor activist Brian Kohler, who coined the phrase in 1998? Mass layoffs are never pleasant news, and American-style mass layoffs can be particularly disruptive, given a safety net that’s meager, relative to some other industrialized countries, and employers’ minimal legal responsibilities to affected workers.

The layoff news arrived  the same day Sam’s Club announced a plan to raise hourly wages for new employees from $10 to $11 and to expand other benefits.

The Sam’s Club layoffs were no exception to that disruption, according to workers who seemed shaken by the sudden news. But because the membership-only warehouse chain employs so many workers, it triggered a decades-old plant-closing law that provides an important protection to some U.S. workers, labor advocates say. In addition, Sam’s Club says it will provide severance to long-term and full-time employees who qualify.

The layoff news arrived January 11, the same day the company announced a plan to raise hourly wages for new employees from $10 to $11, expand maternity and parental leave benefits, and offer one-time bonuses to eligible workers.

That was small comfort to employees across the country who learned about the closure by phone, email, in store meetings, by FedEx and sometimes, according to news reports, via a locked door.

At the Sam’s Club in the city of San Fernando, a working-class Los Angeles suburb, an overnight associate who only gave his name as Rudy sat outside at metal tables.

The store would be closing for good in three days, and a line of about 60 waiting customers—some wrapped in blankets—had started to form along the warehouse store’s wall and back toward a Home Depot at 6 a.m.

On break, Rudy munched on crackers and sipped soda with a co-worker. “They didn’t give us enough time,” he said. “It was all of a sudden.” Rudy is 50, a perilous age to be out of work. A 10-year Sam’s Club veteran and father of two teens, he is the sole breadwinner for his family.

Later in the morning, two blue-vested Walmart representatives headed into the Sam’s Club to participate in a job fair. The two women said the jobs on offer were all part-time.

Photo: Jessica Goodheart

“We’re sad, but you have to continue,” said Juan Casada, a supervisor and another 10-year veteran, pausing for a moment on his way through the parking lot. Casada complained, too, about the short notice and the job fair’s minimal offerings.

“Part-time jobs are everywhere,” he said. “You don’t just find a [full-time] job overnight.”

A few yards away, Sam’s Club shopper Ricky Crouch, who had two infants at home, waited patiently in line along with the other deal-seeking customers. He’d come in search of baby wipes at rock-bottom prices. Crouch lamented the store’s impending closure but consoled himself that he still had Costco two miles away from the San Fernando Sam’s Club, and Walmart, a seven-mile jaunt, as shopping options.

“It sucks,” he said. “I feel bad for all the workers.”

Sam’s Club’s employees will get paychecks until mid-March, thanks to the 1988 Worker Adjustment Retraining and Notification Act, a key protection for U.S. workers subjected to mass layoffs. A January 11 letter from Sam’s Club to San Fernando’s mayor cites the WARN Act in its subject line and provides information about all the occupations of the 178 displaced employees. The federal law requires large employers to provide 60-days of notice to workers and local government in advance of mass layoffs.

According to the letter, hourly employees would not be officially terminated until March 16, and managers were given yet another month of official employment.

“It’s a good law,” says Nicholas de Blouw, a California employment attorney, who points out that the WARN Act also provides protections for less densely populated areas of the country that may be heavily reliant on large employers, their services or sales taxes. (The Naperville, Illinois store, for example, provided $1 million in annual sales tax to the city, according to the Chicago Tribune.)

The act “is meant to protect employees and their families and really sometimes the community as a whole,” de Blouw said.

And after the 60 days?

“Associates with one to three years of continuous service will receive three weeks of pay and one week of pay for every additional year of service,” Laura Ladd Poff, a Sam’s Club representative, wrote in an email.

The company is also providing severance to laid-off part-time workers “who have been with the company for five continuous years and have not secured another position within the company.”

The company has held job fairs with local economic-assistance agencies. “We know this is difficult news for our associates and we are working to place as many of them as possible at nearby locations,” Sam’s Club’s Furner said in a statement.

Jobs at Sam’s Club tend to be better paid than those at Walmart, which are increasingly part time, according to Dan Schlademan, a spokesman for OUR (Organization United for Respect), which advocates for current and former Walmart employees. OUR has been holding workshops on the WARN Act for laid-off Sam’s Club workers.

Photo: Jessica Goodheart

Cheren Payne, an administrator with Los Angeles County’s Workforce Development, Aging & Community Services, said that part-time jobs can serve as “stop-gap employment” for laid-off workers until they find permanent work through local job centers.

At the October Huntington Beach workshop on “The Just Transition,” moderator Susan Winterberg floated another approach to mass layoffs, in which companies consult with unions and local government in advance, and create a layoff plan with workers’ representatives.

Winterberg, who works for BSR (formerly Businesses for Social Responsibility), distributed a two-page handout to the 40 or so attendees, illustrating contrasting approaches to layoffs. During four decades of Rust Belt decline, for example, workers “frequently learn[ed] about their layoff on the same day.” However, the tech firm Nokia used a different approach to laying off 18,000 people as it lost market share to Apple and Samsung.

Nokia, which is headquartered in Finland, was required to consult with unions and local governments to create a transition plan that resulted in a €50 million ($61.3 million) assistance package, three to 18 months of notice, career fairs, grants for volunteering or sabbaticals, and a start-up fund for new businesses.

But such an approach to labor relations is not necessarily forged at a corporate conference workshop. In Europe, “in many cases, the worker owns the job, and firms negotiate with their workers’ committee when layoffs are necessary,” according to Franco-American business professor Michael Segalla, who teaches at HEC Paris School of Management (Ecole des Hautes Etudes Commerciales de Paris). In France, where workers are much more militant, the terms of large-scale layoffs “almost always need the approval of regional or national governmental entities,” he adds.

U.S. workers, meanwhile, have the WARN Act, which may not be helpful for those employed in smaller stores. Also, American workers can access assistance from local workforce development agencies. Typically, at least 50 employees must be laid off to trigger the WARN Act.

That’s not to say employers shutting down a smaller location cannot provide severance, assistance or notice or all three, but it’s at their discretion, and information about the layoffs may be harder to come by.

A giant like Walmart, which employs 1.5 million workers in the U.S., is perpetually opening and closing stores. Just a year ago, Walmart announced plans to close 269 stores globally and eliminate some 10,000 jobs in the United States, including all of those in its small-format Express stores, even as it planned to open scores more supercenters and neighborhood markets. As with the recent Sam’s Club layoff, workers not hired by nearby locations would get 60 days pay and severance if eligible, according to Business Insider.

Photo: Jessica Goodheart

De Blouw, the employment attorney, says that workers should always talk to a lawyer before they sign a severance agreement, which typically requires them to waive their right to sue the company. To determine whether a company is complying with the WARN Act also requires a “case by case” analysis, and employees may have other reasons not sign away those rights.

“You always, always, always want to contact an attorney to get some legal advice as to whether or not you should sign” a severance agreement, de Blouw said.

Several workers at the San Fernando store said they had signed a confidentiality agreement that prevented them from talking to a reporter.

Alex Vega, 28, is a former Sam’s Club employee in Naperville, Illinois. He was displaced in the recent layoff but says he does not remember seeing a non-disclosure agreement. Vega described chaotic days following news of the closure when information was “scarce” at his store and “managers were almost nowhere in sight.”

“I’m pretty inexperienced,” he said. “I might have skimmed over that.”

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