United States labor law sets the rights and duties for employees, labor unions, and employers in the United States. Labor law's basic aim is to remedy the "inequality of bargaining power" between employees and employers, especially employers "organized in the corporate or other forms of ownership association". Over the 20th century, federal law created a series of minimum social and economic rights, and encouraged state laws to go beyond the minimum to favor employees. The Fair Labor Standards Act of 1938 requires a federal minimum wage, currently $7.25 but higher in 28 states, and discourages unhealthy working weeks over 40 hours through time-and-a-half overtime pay. Unlike every other democratic country, there are no federal or state laws requiring paid holidays or paid family leave: the Family and Medical Leave Act of 1993 creates a limited right to 12 weeks of unpaid leave in larger employers. There is no automatic right to an occupational pension beyond federally guaranteed social security, but the Employee Retirement Income Security Act of 1974 requires standards of prudent management and good governance if employers agree to provide pensions, health plans or other benefits. The Occupational Safety and Health Act of 1970 requires employees have a safe system of work. A contract of employment can always improve standards beyond the minimum statutory rights. To get fair terms beyond the statutory minimum, and improve upon individual contracts, employees must organize a labor union for collective bargaining. The National Labor Relations Act of 1935 creates rights for most employees to organize a labor union, without any detriment through unfair labor practices. Under the Labor Management Reporting and Disclosure Act of 1959, labor union governance follows democratic principles. In any workplace where a majority of employees support a union, employing entities have a duty to bargain in good faith. Unions can take collective action to defend their interests, including withdrawing their labor on strike. There are not yet general rights to directly participate in enterprise governance, but many employees and unions have experimented with securing representation on corporate boards.
Since the Civil Rights Act of 1964, all employing entities and labor unions have a duty to treat employees equally, without discrimination based on "race, color, religion, sex, or national origin." There are separate rules for sex discrimination in pay under the Equal Pay Act of 1963. Additional groups with "protected status" were added by the Age Discrimination in Employment Act of 1967 and the Americans with Disabilities Act of 1990. There is no federal law banning all sexual orientation or identity discrimination, but 22 states had passed laws by 2016. These equality laws generally prevent discrimination in hiring, terms of employment, and make discharge because of a protected characteristic unlawful. There is not a federal law against unjust discharge, and most states also have no law with full protection against wrongful termination of employment. Job security rights in the US are not weaker than in all other industrialized countries. On the other hand, collective agreements made by labor unions and many individual contracts often require people are only discharged for a "just cause". The Worker Adjustment and Retraining Notification Act of 1988 requires employing entities give 60 days notice if more than 50 or one third of the workforce may lose their jobs. Federal law has sought to reach full employment through monetary policy and spending on infrastructure. Trade policy has increasingly attempted to put labor rights in international agreements, to ensure that open markets in a global economy do not lead to more unemployment in the United States of America.
Contracts between employees and employers (usually corporations) usually begin an employment relationship, but are often not enough for a decent livelihood. Because individuals lack bargaining power, especially against wealthy corporations, labor law creates rights that override unjust market outcomes. Historically, the law rigidly enforced property rights and "freedom of contract" on any terms, even if this was inefficient, exploitative and unjust. In the early 20th century, as more people favored the introduction of democratically determined economic and social rights over rights of property and contract in unequal markets, state and federal governments introduced law reform. First, the Fair Labor Standards Act of 1938 created a minimum wage (now $7.25 at federal level, higher in 28 states) and overtime pay of one and a half times. Second, the Family and Medical Leave Act of 1993 creates very limited rights to take unpaid leave. In practice, good employment contracts improve on these minimums. Third, while there is no right to an occupational pension or other benefits, the Employee Retirement Income Security Act of 1974 ensures employers guarantee those benefits if they are promised. Fourth, the Occupational Safety and Health Act 1970 demands a safe system of work, backed by professional inspectors. Individual states are often empowered to go beyond the federal minimum, and function as laboratories of democracy in social and economic rights, where they have not been constrained by the US Supreme Court.
Common law, state and federal statutes usually confer labor rights on "employees", but not people who are autonomous and have sufficient bargaining power to be "independent contractors". In 1994, the Dunlop Commission on the Future of Worker-Management Relations: Final Report recommended a unified definition of an employee under all federal labor laws, to reduce litigation, but this was not implemented. As it stands, Supreme Court cases have stated various general principles, which will apply according to the context and purpose of the statute in question. In NLRB v Hearst Publications, Inc, newsboys who sold newspapers in Los Angeles claimed that they were "employees", so that they had a right to collectively bargain under the National Labor Relations Act of 1935. The newspaper corporations argued the newsboys were "independent contractors", and they were under no duty to bargain in good faith. The Supreme Court held the newsboys were employees, and common law tests of employment, particularly the summary in the Restatement of the Law of Agency, Second §220, were no longer appropriate. They were not "independent contractors" because of the degree of control employers had. But the National Labor Relations Board could decide itself who was covered if it had "a reasonable basis in law." Congress reacted, first, by explicitly amending the NLRA §2(1) so that independent contractors were exempt from the law while, second, disapproving that the common law was irrelevant. At the same time, the Supreme Court decided United States v Silk, holding that "economic reality" must be taken into account when deciding who is an employee under the Social Security Act of 1935. This meant a group of coal loaders were employees, having regard to their economic position, including their lack of bargaining power, the degree of discretion and control, and the risk they assumed compared to the coal businesses they worked for. By contrast, the Supreme Court found truckers who owned their own trucks, and provided services to a carrier company, were independent contractors. Thus, it is now accepted that multiple factors of traditional common law tests may not be replaced if a statute gives no further definition of "employee" (as is usual, e.g., the Fair Labor Standards Act of 1938, Employee Retirement Income Security Act of 1974, Family and Medical Leave Act of 1993). Alongside the purpose of labor legislation to mitigate inequality of bargaining power and redress the economic reality of a worker's position, the multiple factors found in the Restatement of Agency must be considered, though none is necessarily decisive.
Common law agency tests of who is an "employee" take account of an employer's control, if the employee is in a distinct business, degree of direction, skill, who supplies tools, length of employment, method of payment, the regular business of the employer, what the parties believe, and whether the employer has a business. Some statutes also make specific exclusions that reflect the common law, such as for independent contractors, and others make additional exceptions. In particular, the National Labor Relations Act of 1935 §2(11) exempts supervisors with "authority, in the interest of the employer", to exercise discretion over other employees' jobs and terms. This was originally a narrow exception. Controversially, in NLRB v Yeshiva University, a 5 to 4 majority of the Supreme Court held that full time professors in a university were excluded from collective bargaining rights, on the theory that they exercised "managerial" discretion in academic matters. The dissenting judges pointed out that management was actually in the hands of university administration, not professors. In NLRB v Kentucky River Community Care Inc, the Supreme Court held, again 5 to 4, that six registered nurses who exercised supervisory status over others fell into the "professional" exemption. Stevens J, for the dissent, argued that if "the 'supervisor' is construed too broadly", without regard to the Act's purpose, protection "is effectively nullified". Similarly, under the Fair Labor Standards Act of 1938, in Christopher v SmithKline Beecham Corp, the Supreme Court held 5 to 4 that a traveling medical salesman for GSK of four years was an "outside salesman", and so could not claim overtime. People working unlawfully are often regarded as covered, so as not to encourage employers to exploit vulnerable employees. For instance in Lemmerman v AT Williams Oil Co, under the North Carolina Workers' Compensation Act an eight-year-old boy was protected as an employee, even though children working under the age of 8 was unlawful. However, in Hoffman Plastic Compounds v NLRB, the Supreme Court held 5 to 4 that an undocumented worker could not claim back pay, after being discharged for organizing in a union. The gradual withdrawal of more and more people from the scope of labor law, by a slim majority of the Supreme Court since 1976, means that the US falls below international law standards, and standards in other democratic countries, on core labor rights, including freedom of association.
Common law tests were often important for determining who was, not just an employee, but the relevant employers who had "vicarious liability". Potentially there can be multiple, joint-employers could who share responsibility, although responsibility in tort law can exist regardless of an employment relationship. In Ruiz v Shell Oil Co, the Fifth Circuit held that it was relevant which employer had more control, whose work was being performed, whether there were agreements in place, who provided tools, had a right to discharge the employee, or had the obligation to pay. In Local 217, Hotel & Restaurant Employees Union v MHM Inc the question arose under the Worker Adjustment and Retraining Notification Act of 1988 whether a subsidiary or parent corporation was responsible to notify employees that the hotel would close. The Second Circuit held the subsidiary was the employer, although the trial court had found the parent responsible while noting the subsidiary would be the employer under the NLRA. Under the Fair Labor Standards Act of 1938, 29 USC §203(r), any "enterprise" that is under common control will count as the employing entity. Other statutes do not explicitly adopt this approach, although the NLRB has found an enterprise to be an employer if it has "substantially identical management, business purpose, operation, equipment, customers and supervision." In South Prairie Construction Co v Local No 627, the Supreme Court found that the DC Circuit had legitimately identified two corporations as a single employer given that they had a "very substantial qualitative degree of centralized control of labor", but that further determination of the relevant bargaining unit should have been remitted to the NLRB. When employees are hired through an agency, it is likely that the end-employer will be considered responsible for statutory rights in most cases, although the agency may be regarded as a joint employer.
When people start work, there will almost always be a contract of employment that governs the relationship of employee and the employing entity (usually a corporation, but occasionally a human being). A "contract" is an agreement enforceable in law. Very often it can be written down, or signed, but an oral agreement is also a fully enforceable contract. Because employees have unequal bargaining power to almost all employing entities, most employment contracts are "standard form". Most terms and conditions are photocopied or reproduced for many people. Genuine negotiation is rare, unlike in commercial transactions between two business corporations. This has been the main justification for enactment of rights in federal and state law. The federal right to collective bargaining, by a labor union elected by its employees, is meant to reduce the inherently unequal bargaining power of individuals against organizations to make collective agreements. The federal right to a minimum wage, and increased overtime pay for working over 40 hours a week, was designed to ensure a "minimum standard of living necessary for health, efficiency, and general well-being of workers", even when a person could not get a high enough wage by individual bargaining. These and other rights, including family leave, rights against discrimination, or basic job security standards, were designed by the United States Congress and state legislatures to replace individual contract provisions. Statutory rights override even an express written term of a contract, usually unless the contract is more beneficial to an employee. Some federal statutes also envisage that state law rights can improve upon minimum rights. For example, the Fair Labor Standards Act of 1938 entitles states and municipalities to set minimum wages beyond the federal minimum. By contrast, other statutes such as the National Labor Relations Act of 1935, the Occupational Safety and Health Act of 1970, and the Employee Retirement Income Security Act of 1974, have been interpreted in a series of contentious judgments by the US Supreme Court to "preempt" state law enactments. These interpretations have had the effect to "stay experimentation in things social and economic" and stop states wanting to "serve as a laboratory" by improving labor rights. Where minimum rights do not exist in federal or state statutes, principles of contract law, and potentially torts, will apply.
Aside from terms in oral or written agreements, terms can be incorporated by reference. Two main sources are collective agreements and company handbooks. In JI Case Co v National Labor Relations Board an employing corporation argued it should not have to bargain in good faith with a labor union, and did not commit an unfair labor practice by refusing, because it had recently signed individual contracts with its employees. The US Supreme Court held unanimously that the "very purpose" of collective bargaining and the National Labor Relations Act 1935 was "to supersede the terms of separate agreements of employees with terms which reflect the strength and bargaining power and serve the welfare of the group". Terms of collective agreements, to the advantage of individual employees, therefore supersede individual contracts. Similarly, if a written contract states that employees do not have rights, but an employee has been told they do by a supervisor, or rights are assured in a company handbook, they will usually have a claim. For example, in Torosyan v Boehringer Ingelheim Pharmaceuticals, Inc the Supreme Court of Connecticut held that a promise in a handbook that an employee could be dismissed only for a good reason (or "just cause") was binding on the employing corporation. Furthermore, an employer had no right to unilaterally change the terms. Most other state courts have reached the same conclusion, that contracts cannot be altered, except for employees' benefit, without new consideration and true agreement. By contrast, a slight majority on the California Supreme Court, appointed by Republican governors, held in Asmus v Pacific Bell that a company policy of indefinite duration can be altered after a reasonable time with reasonable notice, if it affects no vested benefits. The four dissenting judges, appointed by Democratic governors, held this was a "patently unfair, indeed unconscionable, result – permitting an employer that made a promise of continuing job security... to repudiate that promise with impunity several years later". In addition, a basic term of good faith which cannot be waived, is implied by common law or equity in all states. This usually demands, as a general principle that "neither party shall do anything, which will have the effect of destroying or injuring the right of the other party, to receive the fruits of the contract". The term of good faith persists throughout the employment relationship. It has not yet been used extensively by state courts, compared to other jurisdictions. The Montana Supreme Court has recognized that extensive and even punitive damages could be available for breach of an employee's reasonable expectations. However others, such as the California Supreme Court limit any recovery of damages to contract breaches, but not damages regarding the manner of termination. By contrast, in the United Kingdom the requirement for "good faith" has been found to limit the power of discharge except for fair reasons (but not to conflict with statute), in Canada it may limit unjust discharge also for self-employed persons, and in Germany it can preclude the payment of wages significantly below average.
Finally, it was traditionally thought that arbitration clauses could not displace any employment rights, and therefore limit access to justice in public courts. However, in 14 Penn Plaza LLC v. Pyett, in a 5 to 4 decision under the Federal Arbitration Act of 1925, individual employment contract arbitration clauses are to be enforced according to their terms. The four dissenting judges argued that this would eliminate rights in a way that the law never intended.
While contracts often determine wages and terms of employment, the law refuses to enforce contracts that do not observe basic standards of fairness for employees. Today, the Fair Labor Standards Act of 1938 aims to create a national minimum wage, and a voice at work, especially through collective bargaining should achieve fair wages. A growing body of law also regulates executive pay, although a system of "maximum wage" regulation, for instance by the former Stabilization Act of 1942, is not currently in force. Historically, the law actually suppressed wages, not of the highly paid, by ordinary workers. For example, in 1641 the Massachusetts Bay Colony legislature (dominated by property owners and the official church) required wage reductions, and said rising wages "tende to the ruin of the Churches and the Commonwealth". In the early 20th century, democratic opinion demanded everyone had a minimum wage, and could bargain for fair wages beyond the minimum. But when states tried to introduce new laws, the US Supreme Court held them unconstitutional. A right to "freedom of contract", argued a majority, could be construed from the Fifth and Fourteenth Amendment's protection against being deprived "of life, liberty, or property, without due process of law". Dissenting judges argued that "due process" did not affect the legislative power to create social or economic rights, because employees "are not upon a full level of equality of choice with their employer".
After the Wall Street Crash, and the New Deal with the election of Franklin D. Roosevelt, the majority in the US Supreme Court was changed. In West Coast Hotel Co v Parrish Hughes CJ held (over four dissenters still arguing for "freedom of contract") that a Washington law setting minimum wages for women was constitutional because the state legislatures should be enabled to adopt legislation in the public interest. This ended the "Lochner era", and Congress enacted the Fair Labor Standards Act of 1938. Under §202(a) the federal minimum wage aims to ensure a "standard of living necessary for health, efficiency and general well being". Under §207(a)(1), most employees (but with many exceptions) working over 40 hours a week must receive 50 per cent more overtime pay on their hourly wage. Nobody may pay lower than the minimum wage, but under §218(a) states and municipal governments may enact higher wages. This is frequently done to reflect local productivity and requirements for decent living in each region. However the federal minimum wage has no automatic mechanism to update with inflation. Because the Republican Party has opposed raising wages, the federal real minimum wage is over 33 per cent lower today than in 1968, among the lowest in the industrialized world.
Although there is a federal minimum wage, it has been restricted in (1) the scope of who it covers, (2) the time that counts to calculate the hourly minimum wage, and (3) the amount that employers' can take from their employees' tips or deduct for expenses. First, five US Supreme Court judges held in Alden v Maine that the federal minimum wage cannot be enforced for employees of state governments, unless the state has consented, because that would violate the Eleventh Amendment. Souter J, joined by three dissenting justices, held that no such "sovereign immunity" existed in the Eleventh Amendment. Twenty-eight states, however, did have minimum wage laws higher than the federal level in 2016. Further, because the US Constitution, article one, section 8, clause 3 only allows the federal government to "regulate Commerce... among the several States", employees of any "enterprise" under £500,000 making goods or services that do not enter commerce are not covered: they must rely on state minimum wage laws. FLSA 1938 §203(s) explicitly exempts establishments whose only employees are close family members. Under §213 the minimum wage may not be paid to 18 categories of employee, and paying overtime to 30 categories of employee. This include under §213(a)(1) employees of "bona fide executive, administrative, or professional capacity". In Auer v Robbins police sergeants and lieutenants at the St Louis Police Department, Missouri claimed they should not be classed as executives or professional employees, and should get overtime pay. Scalia J held that, following Department of Labor guidance, the St Louis police commissioners were entitled to exempt them. This has encouraged employers to attempt to define staff as more "senior" and make them work longer hours while avoiding overtime pay. Another exemption in §213(a)(15) is for people "employed in domestic service employment to provide companionship services". In Long Island Care at Home Ltd v Coke, a corporation claimed exemption, although Breyer J for a unanimous court agreed with the Department of Labor that it was only intended for carers in private homes.
Second, because §206(a)(1)(C) says the minimum wage is $7.25 per hour, courts have grappled with which hours count as "working". Early cases established that time traveling to work did not count as work, unless it was controlled by, required by, and for the benefit of an employer, like traveling through a coal mine. For example, in, Anderson v Mount Clemens Pottery Co a majority of five to two justices held that employees had to be paid for the long walk to work through an employer's Mount Clemens Pottery Co facility. According to Murphy J this time, and time setting up workstations, involved "exertion of a physical nature, controlled or required by the employer and pursued necessarily and primarily for the employer's benefit." In Armour & Co v Wantock firefighters claimed they should be fully paid while on call at their station for fires. The Supreme Court held that, even though the firefighters could sleep or play cards, because "[r]eadiness to serve may be hired quite as much as service itself" and time waiting on call was "a benefit to the employer". By contrast, in 1992 the Sixth Circuit controversially held that needing to be infrequently available by phone or pager, where movement was not restricted, was not working time. Time spent doing unusual cleaning, for instance showering off toxic substances, does count as working time, and so does time putting on special protective gear. Under §207(e) pay for overtime should be one and a half times the regular pay. In Walling v Helmerich and Payne Inc, the Supreme Court held that an employer's scheme of paying lower wages in the morning, and higher wages in the afternoon, to argue that overtime only needed to be calculated on top of (lower) morning wages was unlawful. Overtime has to be calculated based on the average regular pay. However, in Christensen v Harris County six Supreme Court judges held that police in Harris County, Texas could be forced to use up their accumulated "compensatory time" (allowing time off with full pay) before claiming overtime. Writing for the dissent, Stevens J said the majority had misconstrued §207(o)(2), which requires an "agreement" between employers, unions or employees on the applicable rules, and the Texas police had not agreed. Third, §203(m) allows employers to deduct sums from wages for food or housing that is "customarily furnished" for employees. The Secretary of Labor may determine what counts as fair value. Most problematically, outside states that have banned the practice, they may deduct money from a "tipped employee" for money over the "cash wage required to be paid such an employee on August 20, 1996" – and this was $2.13 per hour. If an employee does not earn enough in tips, the employer must still pay the $7.25 minimum wage. But this means in many states tips do not go to workers: tips are taken by employers to subsidize low pay. Under FLSA 1938 §216(b)-(c) the Secretary of State can enforce the law, or individuals can claim on their own behalf. Federal enforcement is rare, so most employees are successful if they are in a labor union. The Consumer Credit Protection Act of 1968 limits deductions or "garnishments" by employers to 25 per cent of wages, though many states are considerably more protective. Finally, under the Portal to Portal Act of 1947, where Congress limited the minimum wage laws in a range of ways, §254 puts a two-year time limit on enforcing claims, or three years if an employing entity is guilty of a willful violation.
People in the United States work among the longest hours per week in the industrialized world, and have the least annual leave. The Universal Declaration of Human Rights of 1948 article 24 states: "Everyone has the right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay." However, there is no general federal or state legislation requiring paid annual leave. Title 5 of the United States Code §6103 specifies ten public holidays for federal government employees, and provides that holidays will be paid. Many states do the same, however, no state law requires private sector employers to provide paid holidays. Many private employers follow the norms of federal and state government, but the right to annual leave, if any, will depend upon collective agreements and individual employment contracts. State law proposals have been made to introduce paid annual leave. A 2014 Washington Bill from United States House of Representatives member Gael Tarleton would have required a minimum of 3 weeks of paid holidays each year to employees in businesses of over 20 staff, after 3 years work. Under the International Labour Organization Holidays with Pay Convention 1970 three weeks is the bare minimum. The Bill did not receive enough votes. By contrast, employees in all European Union countries have the right to at least 4 weeks (i.e. 28 days) of paid annual leave each year. Furthermore, there is no federal or state law on limits to the length of the working week. Instead, the Fair Labor Standards Act of 1938 §207 creates a financial disincentive to longer working hours. Under the heading "Maximum hours", §207 states that time and a half pay must be given to employees working more than 40 hours in a week. It does not, however, set an actual limit, and there are at least 30 exceptions for categories of employee which do not receive overtime pay. Shorter working time was one of the labor movement's original demands. From the first decades of the 20th century, collective bargaining produced the practice of having, and the word for, a two-day "weekend". State legislation to limit working time was, however, suppressed by the US Supreme Court in Lochner v New York. The New York State Legislature had passed the Bakeshop Act of 1895, which limited work in bakeries to 10 hours a day or 60 hours a week, to improve health, safety and people's living conditions. After being prosecuted for making his staff work longer in his Utica, Mr Lochner claimed that the law violated the Fourteenth Amendment on "due process". Despite the dissent of four judges, a majority of five judges held that the law was unconstitutional. The whole Lochner era of jurisprudence was reversed by the US Supreme Court in 1937, but experimentation to improve working time rights, and "work-life balance" has not yet recovered.
Just as there are no rights to paid annual leave or maximum hours, there are no rights to paid time off for child care or family leave in federal law. There are minimal rights in some states. Most collective agreements, and many individual contracts, do provide for paid time off, but vulnerable employees who lack bargaining power will often get none. There are, however, limited federal rights to unpaid leave for family and medical reasons. The Family and Medical Leave Act of 1993 generally applies to employers of 50 or more employees in 20 weeks of the last year, and gives rights to employees who have worked over 12 months and 1250 hours in the last year. Employees can have up to 12 weeks of unpaid leave for child birth, adoption, to care for a close relative in poor health, or because of an employee's own poor health. Child care leave should be taken in one lump, unless agreed otherwise. Employees must give notice of 30 days to employers if birth or adoption is "foreseeable", and for serious health conditions if practicable. Treatments should be arranged "so as not to disrupt unduly the operations of the employer" according to medical advice. Employers must provide benefits during the unpaid leave. Under §2652(b) states are empowered to provide "greater family or medical leave rights". In 2016 California, New Jersey, Rhode Island and New York had laws for paid family leave rights. Under §2612(2)(A) an employer can make an employee substitute the right to 12 unpaid weeks of leave for "accrued paid vacation leave, personal leave or family leave" in an employer's personnel policy. Originally the Department of Labor had a penalty to make employers notify employees that this might happen. However, five judges in the US Supreme Court in Ragsdale v Wolverine World Wide, Inc held that the statute precluded the right of the Department of Labor to do so. Four dissenting judges would have held that nothing prevented the rule, and it was the Department of Labor's job to enforce the law. After unpaid leave, an employee generally has the right to return to his or her job, except for employees who are in the top 10% of highest paid and the employer can argue refusal "is necessary to prevent substantial and grievous economic injury to the operations of the employer." Employees or the Secretary of Labor can bring enforcement actions, but there is no right to a jury for reinstatement claims. Employees can seek damages for lost wages and benefits, or the cost of child care, plus an equal amount of liquidated damages unless an employer can show it acted in good faith and reasonable cause to believe it was not breaking the law. There is a two-year limit on bringing claims, or three years for willful violations. Despite the lack of rights to leave, there is no right to free child care or day care. This has encouraged several proposals to create a public system of free child care, or for the government to subsize parents' costs.
In the early 20th century, the possibility of having a "retirement" became real as people lived longer, and believed the elderly should not have to work or rely on charity until they died. The law maintain an income in retirement in three ways (1) through public social security created by the Social Security Act of 1935, (2) occupational pensions managed through the employment relationship, and (3) private pensions or life insurance that individuals buy themselves. At work, most occupational pension schemes originally resulted from collective bargaining during the 1920s and 1930s. Unions usually bargained to have employers across a sector to pool funds, so that employees could keep their pensions if they moved jobs. Multi-employer retirement plans, set up by collective agreement became known as "Taft-Hartley plans" after the Taft-Hartley Act of 1947 required joint management of funds by employees and employers. Many employers also voluntarily choose to provide pensions. For example, the pension for professors, now called TIAA, was established on the initiative of Andrew Carnegie in 1918 with express requirement for participants to have voting rights for the plan trustees. These could be collective and defined benefit schemes: a percentage of one's income (e.g. 67%) is replaced for retirement, however long the person lives. But more recently more employers have only provided individual "401(k)" plans. These are named after the Internal Revenue Code §401(k), which allows employers and employees to pay no tax on money that is saved in the fund, until an employee retires. The same tax deferral rule applies to all pensions. But unlike a "defined benefit" plan, a 401(k) only contains whatever the employer and employee contribute. It will run out if a person lives too long, meaning the retiree may only have to rely only on minimum social security. The Pension Protection Act of 2006 §902 codified a model for employers to automatically enroll their employees in a pension, with a right to opt out. There is no right to an occupational pension, but the Employee Retirement Income Security Act of 1974 does create a series of rights for employees if one is set up. It also applies to health care or any other "employee benefit" plan.
Five main rights for beneficiaries in ERISA 1974 include information, funding, vesting, anti-discrimination, and fiduciary duties. First, each beneficiary should receive a "summary plan description" in 90 days of joining, plans must file annual reports with the Secretary of Labor, and if beneficiaries make claims any refusal must be justified with a "full and fair review". If the "summary plan description" is more beneficial than the actual plan documents, because the pension fund makes a mistake, a beneficiary may enforce the terms of either. If an employer has pension or other plans, all employees must be entitled to participate after at longest 12 months, if working over 1000 hours. Second, all promises must be funded in advance. The Pension Benefit Guaranty Corporation was established by the federal government to be an insurer of last resort, but only up to $60,136 per year for each employer. Third, employees' benefits usually cannot be taken away (they "vest") after 5 years, and contributions must accrue (i.e. the employee owns contributions) at a proportionate rate. If employers and pension funds merge, there can be no reduction in benefits, and if an employee goes bankrupt their creditors cannot take their occupational pension. However, the US Supreme Court has enabled benefits to be withdrawn by employers simply amending plans. In Lockheed Corp v Spink a majority of seven judges held that an employer could alter a plan, to deprive a 61-year-old man of full benefits when he was reemployed, unbound by fiduciary duties to preserve what an employee had originally been promised. In dissent, Breyer J and Souter J reserved any view on such "highly technical, important matters". Steps to terminate a plan depend on whether it is individual, or multi-employer, and Mead Corp v Tilley a majority of the US Supreme Court held that employers could recoup excess benefits paid into pension plans after PBGC conditions are fulfilled. Stevens J, dissenting, contended that all contingent and future liabilities must be satisfied. Fourth, as a general principle, employees or beneficiaries cannot suffer any discrimination or detriment for "the attainment of any right" under a plan. Fifth, managers are bound by responsibilities of competence and loyalty, called "fiduciary duties". Under §1102, a fiduciary is anyone who administers a plan, its trustees, and investment managers who are delegated control. Under §1104, fiduciaries must follow a "prudent" person standard, involving three main components. First, a fiduciary must act "in accordance with the documents and instruments governing the plan". Second, they must act with "care, skill and diligence", including "diversifying the investments of the plan" to "minimize the risk of large losses". Liability for carelessness extends to making misleading statements about benefits, and have been interpreted by the Department of Labor to involve a duty to vote on proxies when corporate stocks are purchased, and publicizing a statement of investment policy. Third, and codifying fundamental equitable principles, a fiduciary must avoid any possibility of a conflict of interest. He or she must act "solely in the interest of the participants... for the exclusive purpose of providing benefits" with "reasonable expenses", and specifically avoiding self-dealing with a related "party in interest". For example, in Donovan v Bierwirth, the Second Circuit held that trustees of a pension which owned shares in the employees' company as a takeover bid was launched, because they faced a potential conflict of interest, had to get independent legal advice on how to vote, or possibly abstain. Remedies for these duties have, however, been restricted by the Supreme Court to disfavor damages. In these fields, according to §1144, ERISA 1974 will "supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan". ERISA did not, therefore, follow the model of the Fair Labor Standards Act of 1938 or the Family and Medical Leave Act of 1993, which encourage states to legislate for improved protection for employees, beyond the minimum. The preemption rule led the US Supreme Court to strike down a New York that required giving benefits to pregnant employees in ERISA plans. It held a case under Texas law for damages for denying vesting of benefits was preempted, so the claimant only had ERISA remedies. It struck down a Washington law which altered who would receive life insurance designation on death. However, under §1144(b)(2)(A) this does not affect 'any law of any State which regulates insurance, banking, or securities.' So, the Supreme Court has also held valid a Massachusetts law requiring mental health to be covered by employer group health policies. But it struck down a Pennsylvania statute which prohibited employers becoming subrogated to (potentially more valuable) claims of employees for insurance after accidents. Yet more recently, the court has shown a greater willingness to prevent laws being preempted, however the courts have not yet adopted the principle that state law is not preempted or "superseded" if it is more protective to employees than a federal minimum.
The most important rights that ERISA 1974 did not cover were who controls investments and securities that beneficiaries' retirement savings buy. The largest form of retirement fund has become the 401(k). This is often an individual account that an employer sets up, and an investment management firm, such as Vanguard, Fidelity, Morgan Stanley or BlackRock, is then delegated the task of trading fund assets. Usually they also vote on corporate shares, assisted by a "proxy advice" firm such as ISS or Glass Lewis. Under ERISA 1974 §1102(a), a plan must merely have named fiduciaries who have "authority to control and manage the operation and administration of the plan", selected by "an employer or employee organization" or both jointly. Usually these fiduciaries or trustees, will delegate management to a professional firm, particularly because under §1105(d), if they do so, they will not be liable for an investment manager's breaches of duty. These investment managers buy a range of assets, particularly corporate stocks which have voting rights, as well as government bonds, corporate bonds, commodities, real estate or derivatives. Rights on those assets are in practice monopolized by investment managers, unless pension funds have organized to take voting in house, or to instruct their investment managers. Two main types of pension fund to do this are union organized Taft-Hartley plans, and state public pension plans. Under the amended National Labor Relations Act of 1935 §302(c)(5)(B) a union bargained plan has to be jointly managed by representatives of employers and employees. Although many local pension funds are not consolidated and have had critical funding notices from the Department of Labor, more funds with employee representation ensure that corporate voting rights are cast according to the preferences of their members. State public pensions are often larger, and have greater bargaining power to use on their members' behalf. State pension schemes invariably disclose the way trustees are selected. In 2005, on average more than a third of trustees were elected by employees or beneficiaries. For example, the California Government Code §20090 requires that its public employee pension fund, CalPERS has 13 members on its board, 6 elected by employees and beneficiaries. However, only pension funds of sufficient size have acted to replace investment manager voting. Furthermore, no general legislation requires voting rights for employees in pension funds, despite several proposals. For example, the Workplace Democracy Act of 1999, sponsored by Bernie Sanders then in the US House of Representatives, would have required all single employer pension plans to have trustees appointed equally by employers and employee representatives. There is, furthermore, currently no legislation to stop investment managers voting with other people's money as the Dodd-Frank Act of 2010 §957 banned broker-dealers voting on significant issues without instructions. This means votes in the largest corporations that people's retirement savings buy are overwhelmingly exercised by investment managers, whose interests potentially conflict with the interests of beneficiaries' on labor rights, fair pay, job security, or pension policy.
The Occupational Safety and Health Act, signed into law in 1970 by President Richard Nixon, creates specific standards for workplace safety. The Act has spawned years of litigation by industry groups that have challenged the standards limiting the amount of permitted exposure to chemicals such as benzene. The Act also provides for protection for "whistleblowers" who complain to governmental authorities about unsafe conditions while allowing workers the right to refuse to work under unsafe conditions in certain circumstances. The Act allows states to take over the administration of OSHA in their jurisdictions, so long as they adopt state laws at least as protective of workers' rights as under federal law. More than half of the states have done so.
The central right in labor law, beyond minimum standards for pay, hours, pensions, safety or privacy, is to participate and vote in workplace governance. The American model developed from the Clayton Act of 1914, which declared the "labor of a human being is not a commodity or article of commerce" and aimed to take workplace relations out of the reach of courts hostile to collective bargaining. Lacking success, the National Labor Relations Act of 1935 changed the basic model, which remained through the 20th century. Reflecting the "inequality of bargaining power between employees... and employers who are organized in the corporate or other forms of ownership association", the NLRA 1935 codified basic rights of employees to organize a union, requires employers to bargain in good faith (at least on paper) after a union has majority support, binds employers to collective agreements, and protects the right to take collective action including a strike. Union membership, collective bargaining, and standards of living all increased rapidly until Congress forced through the Taft-Hartley Act of 1947. Its amendments enabled states to pass laws restricting agreements for all employees in a workplace to be unionized, prohibited collective action against associated employers, and introduced a list of unfair labor practices for unions, as well as employers. Since then, the US Supreme Court chose to develop a doctrine that the rules in the NLRA 1935 preempted any other state rules if an activity was "arguably subject" to its rights and duties. While states were inhibited from acting as "laboratories of democracy", and particularly as unions were targeted from 1980 and membership fell, the NLRA 1935 has been criticized as a "failed statute" as US labor law "ossified". This has led to more innovative experiments among states, progressive corporations and unions to create direct participation rights, including the right to vote for or codetermine directors of corporate boards, and elect work councils with binding rights on workplace issues.
Freedom of association in labor unions has always been fundamental to the development of democratic society, and is protected by the First Amendment to the Constitution. In early colonial history, labor unions were routinely suppressed by the government. Recorded instances include cart drivers being fined for striking in 1677 in New York City, and carpenters prosecuted as criminals for striking in Savannah, Georgia in 1746. After the American Revolution, however, courts departed from repressive elements of English common law. The first reported case, Commonwealth v Pullis in 1806 did find shoemakers in Philadelphia guilty of "a combination to raise their wages". Nevertheless, unions continued, and the first federation of trade unions was formed in 1834, the National Trades' Union, with the primary aim of a 10-hour working day. In 1842 the Supreme Court of Massachusetts held in Commonwealth v Hunt that a strike by the Boston Journeymen Bootmakers' Society for higher wages was lawful. Chief Justice Shaw held that people "are free to work for whom the please, or not to work, if they so prefer" and "to agree together to exercise their own acknowledged rights". The abolition of slavery by Abraham Lincoln's Emancipation Proclamation during the American Civil War was necessary to create genuine rights to organize, but was not sufficient to ensure freedom of association. Using the Sherman Act of 1890, which was intended to break up business cartels, the Supreme Court imposed an injunction on striking workers of the Pullman Company, and imprisoned the leader, and future presidential candidate, Eugene Debs. The Court also enabled unions to be sued for triple damages in Loewe v Lawlor, a case involving a hat maker union in Danbury, Connecticut. The President and United States Congress responded by passing the Clayton Act of 1914 to take labor out of antitrust law. Then, after the Great Depression passed the National Labor Relations Act of 1935 to positively protect the right to organize and take collective action. After that, the law increasingly turned to regulate unions' internal affairs. The Taft-Hartley Act of 1947 regulated how members can join a union, and the Labor Management Reporting and Disclosure Act of 1959 created a "bill of rights" for union members.
While union governance is founded upon freedom of association, the law requires basic standards democracy and accountability to ensure members are truly free in shaping their associations. Fundamentally, all unions are democratic organizations, but they divide between those where members elect delegates, who in turn choose the executive, and those where members directly elect the executive. In 1957, after the McClellan Committee of the US Senate found evidence of two rival Teamsters Union executives, Jimmy Hoffa and Dave Beck, falsifying delegate vote counts and stealing union funds, Congress passed the Labor Management Reporting and Disclosure Act of 1959. Under §411, every member has the right to vote, attend meetings, speak freely and organize, not have fees raised without a vote, not be deprived of the right to sue, or be suspended unjustly. Under §431, unions should file their constitutions and bylaws with the Secretary of Labor and be accessible by members: today union constitutions are online. Under §481 elections must occur at least every 5 years, and local officers every 3 years, by secret ballot. Additionally, state law may bar union officials who have prior convictions for felonies from holding office. As a response to the Hoffa and Beck scandals, there is also an express fiduciary duty on union officers for members' money, limits on loans to executives, requirements for bonds for handling money, and up to a $10,000 fine or up to 5 years prison for embezzlement. These rules, however, restated most of what was already the law, and codified principles of governance that unions already undertook. On the other hand, under §501(b) to bring a lawsuit, a union member must first make a demand on the executive to correct wrongdoing before any claim can be made to a court, even for misapplication of funds, and potentially wait four months' time. The Supreme Court has held that union members can intervene in enforcement proceedings brought by the US Department of Labor. Federal courts may review decisions by the Department to proceed with any prosecutions. The range of rights, and the level of enforcement has meant that labor unions display significantly higher standards of accountability, with fewer scandals, than corporations or financial institutions.
Beyond members rights within a labor union, the most controversial issue has been how people become members in unions. This affects union membership numbers, and whether labor rights are promoted or suppressed in democratic politics. Historically, unions made collective agreements with employers that all new workers would have to join the union. This was to prevent employers trying to dilute and divide union support, and ultimately refuse to improve wages and conditions in collective bargaining. However, after the Taft-Hartley Act 1947, the National Labor Relations Act of 1935 §158(a)(3) was amended so that employers could not refuse to hire a non-union employee. An employee can be required to join the union (if such a collective agreement is in place) after 30 days. But §164(b) was added to codify a right of states to pass so called "right to work laws" that prohibit unions making collective agreements to register all workers as union members, or collect fees for the service of collective bargaining. Over time, as more states with Republican governments passed laws restricting union membership agreements, there has been a significant decline of union density. Unions have not, however, yet experimented with agreements to automatically enroll employees in unions with a right to opt out. In Machinists v Street, a majority of the US Supreme Court, against three dissenting justices, held that the First Amendment precluded making an employee be a union member against their will, but it would be lawful to collect fees to reflect the benefits from collective bargaining: fees could not be used for spending on political activities without the member's consent. Unions have always been entitled to publicly campaign for members of Congress or Presidential candidates that support labor rights. But the urgency of political spending was raised when in 1976 Buckley v Valeo decided, over powerful dissents of White J and Marshall J, that candidates could spend unlimited money on their own political campaign, and then in First National Bank of Boston v. Bellotti, that corporations could engage in election spending. In 2010, over four dissenting justices, Citizens United v FEC held there could be essentially no limits to corporate spending. By contrast, every other democratic country caps spending (usually as well as regulating donations) as the original Federal Election Campaign Act of 1971 had intended to do. A unanimous court held in Abood v Detroit School Board that union security agreements to collect fees from non-members were also allowed in the public sector. However, in Harris v Quinn five US Supreme Court judges reversed this ruling apparently banning public sector union security agreements, and were about to do the same for all unions in Friedrichs v California Teachers Association until Scalia J passed away, halting an anti-labor majority on the Supreme Court. This led campaign finance reform to be one of the most important issues in the 2016 US Presidential election, for the future of the labor movement, and democratic life.
Since the industrial revolution, collective bargaining has been the main way to get fair pay, improved conditions, and a voice at work. The need for positive rights to organize and bargain was gradually appreciated after the Clayton Act of 1914. Under §17, labor rights were declared to be outside of antitrust law, but this did not stop hostile employers and courts suppressing unions. In Adair v United States, and Coppage v Kansas, the US Supreme Court, over powerful dissents, asserted the Constitution empowered employers to require employees to sign contracts promising they would not join a union. These "yellow dog contracts" were offered to employees on a "take it or leave it" basis, and effectively stopped unionization. They lasted until the Great Depression when the Norris–La Guardia Act of 1932 banned them. This also prevented the courts from issuing any injunctions or enforcing any agreements in the context of a labor dispute. After the landslide election of Franklin D. Roosevelt, the National Labor Relations Act of 1935 was drafted to create positive rights for collective bargaining in most of the private sector. It aimed to create a unified federal system so that, under §157, employees would gain the legal "right to self-organization", "to bargain collectively" and use "concerted activities" including strikes for "mutual aid or other protection". The Act was meant to increase bargaining power of employees to get better terms in than individual contracts with employing corporations. However §152 excluded many groups of workers, such as state and federal government employees, railway and airline staff, domestic and agriculture workers. These groups depend on special federal statutes like the Railway Labor Act of 1926 or state law rules, like the California Agricultural Labor Relations Act of 1975. In 1979, five US Supreme Court judges, over four forceful dissents, also introduced an exception for church operated schools, apparently because of "serious First Amendment questions". Furthermore, "independent contractors" are excluded, even though many are economically dependent workers. Some courts have attempted to expand the "independent contractor" exception. In 2009, in FedEx Home Delivery v NLRB the DC Circuit, adopting submissions of FedEx's lawyer Ted Cruz, held that post truck drivers were independent contractors because they took on "entrepreneurial opportunity". Garland J dissented, arguing the majority had departed from common law tests. The "independent contractor" category was estimated to remove protection from 8 million workers. While many states have higher rates, the US has an 11.1 per cent unionization rate and 12.3 per cent rate of coverage by collective agreement. This is the lowest in the industrialized world.
At any point employers can freely bargain with union representatives and make a collective agreement. A collective agreement will often be long, but aim to get rights including a fair day's wage for a fair day's work, reasonable notice and severance pay before any necessary layoffs, just cause for any job termination, and arbitration to resolve disputes. A union can encourage an employing entity through collective action to sign a deal, without using the NLRA 1935 procedure. But, if an employing entity refuses to deal with a union, and a union wishes, the National Labor Relations Board (NLRB) may oversee a legal process up to the conclusion of a legally binding collective agreement. By law, the NLRB is meant to have five members "appointed by the President by and with the advice and consent of the Senate", and play a central role in promoting collective bargaining. First, the NLRB will determine an appropriate "bargaining unit" of employees with employers (e.g., offices in a city, or state, or whole economic sector), The NLRB favors "enterprise bargaining" over "sectoral collective bargaining", which means US unions have traditionally been smaller with less bargaining power by international standards. Second, a union with "majority" support of employees in a bargaining unit become "the exclusive representatives of all the employees". But to ascertain majority support, the NLRB supervises the fairness of elections among the workforce. It is typical for the NLRB to take six weeks from a petition from workers to an election being held. During this time, managers may attempt to persuade or coerce employees using high-pressure tactics or unfair labor practices (e.g. threatening job termination, alleging unions will bankrupt the firm) to vote against recognizing the union. The average time for the NLRB to decide upon complaints of unfair labor practices had grown to 483 days in 2009 when its last annual report was written. Third, if a union does win majority support in a bargaining unit election, the employing entity will have an "obligation to bargain collectively". This means meeting union representatives "at reasonable times and confer in good faith with respect to wages, hours, and other terms" to put in a "written contract". The NLRB cannot compel an employer to agree, but it was thought that the NLRB's power to sanction an employer for an "unfair labor practice" if they did not bargain in good faith would be sufficient. For example, in JI Case Co v NLRB the Supreme Court held an employer could not refuse to bargain on the basis that individual contracts were already in place. Crucially, in Wallace Corp v NLRB the Supreme Court also held that an employer only bargaining with a company union that it dominated was an unfair labor practice, as it should have recognized the truly independent union affiliated to the Congress of Industrial Organizations (CIO). However, in NLRB v Sands Manufacturing Co the Supreme Court held an employer did not commit an unfair trade practice by shutting down a water heater plant, while the union was attempting to prevent new employees being paid less. Moreover, after 2007 President George W. Bush and the Senate refused to make any appointments to the Board, and it was held by five judges, over four dissents, in New Process Steel LP v NLRB that rules made by two remaining members were ineffective. While appointments were made in 2013, agreement was not reached on one vacant seat. Increasingly it has been made politically unfeasible for the NLRB to act to promote collective bargaining.
Once collective agreements have been signed, they are legally enforceable, often through arbitration, and ultimately in federal court. Federal law must be applied for national uniformity, so state courts must apply federal law when asked to deal with collective agreements or the dispute can be removed to federal court. Usually, collective agreements include provisions for sending grievances of employees or disputes to binding arbitration, governed by the Federal Arbitration Act of 1925. For example, in United Steelworkers v Warrior & Gulf Navigation Co a group of employees at a steel transportation works in Chickasaw, Alabama requested the corporation go to arbitration over layoffs and outsourcing of 19 staff on lower pay to do the same jobs. The United Steelworkers had a collective agreement which contained a provision for arbitration. Douglas J held that any doubts about whether the agreement allowed the issue to go to arbitration "should be resolved in favor of coverage." An arbitrator's award is entitled to judicial enforcement so long as its essence is from the collective agreement. Courts can decline to enforce an agreement based on public policy, but this is different from "general considerations of supposed public interests". But while federal policy had encouraged arbitration where unions and employers had made agreements, the US Supreme Court drew a clear distinction for arbitration over individual statutory rights. In Alexander v Gardner-Denver Co an employee claimed he was unjustly terminated, and suffered unlawful race discrimination under the Civil Rights Act of 1964. The Supreme Court held that he was entitled to pursue remedies both through arbitration and the public courts, which could re-evaluate the claim whatever the arbitrator had decided. But then, in 2009 in 14 Penn Plaza LLC v Pyett Thomas J announced with four other judges that apparently "[n]othing in the law suggests a distinction between the status of arbitration agreements signed by an individual employee and those agreed to by a union representative." This meant that a group of employees were denied the right to go to a public court under the Age Discrimination in Employment Act of 1967, and instead potentially be heard only by arbitrators their employer selected. Stevens J and Souter J, joined by Ginsburg J, Breyer J dissented, pointing out that rights cannot be waived even by collective bargaining. An Arbitration Fairness Act of 2011 has been proposed to reverse this, urging that "employees have little or no meaningful choice whether to submit their claims to arbitration". It remains unclear why NLRA 1935 §1, recognizing workers' "inequality of bargaining power" was not considered relevant to ensure that collective bargaining can only improve upon rights, rather than take them away. To address further perceived defects of the NLRA 1935 and the US Supreme Court's interpretations, major proposed reforms have included the Labor Reform Act of 1977, the Workplace Democracy Act of 1999, and the Employee Free Choice Act of 2009. All focus on speeding the election procedure for union recognition, speeding hearings for unfair labor practices, and improving remedies within the existing structure of labor relations.
To ensure that employees are effectively able to bargain for a collective agreement, the NLRA 1935 created a group of rights in §158 to stall "unfair labor practices" by employers. These were considerably amended by the Taft-Hartley Act of 1947, where the US Congress over the veto of President Harry S. Truman decided to add a list of unfair labor practices for labor unions. This has meant that union organizing in the US may involve substantial levels of litigation which most workers cannot afford it. The fundamental principle of freedom of association, however, is recognized worldwide to require various rights. It extends to the state, so in Hague v. Committee for Industrial Organization held the New Jersey mayor violated the First Amendment when trying to shut down CIO meetings because he thought they were "communist". Among many rights and duties relating to unfair labor practices, five main groups of case have emerged.
First, under §158(a)(3)-(4) a person who joins a union must suffer no discrimination or retaliation in their chances for being hired, terms of their work, or in termination. For example, in one of the first cases, NLRB v Jones & Laughlin Steel Corp, the US Supreme held that the National Labor Relations Board was entitled to order workers be rehired after they had been dismissed for organizing a union at their plant in Aliquippa, Pennsylvania. It is also unlawful for employers to monitor employees who are organizing, for instance by parking outside a union meeting, or videotaping employees giving out union fliers. This can include giving people incentives or bribes to not join a union, so in NLRB v Erie Resistor Corp the Supreme Court held it was unlawful to give 20 years extra seniority to employees who crossed a picket line while the union had called a strike. Second, and by contrast, the Supreme Court had decided in Textile Workers Union of America v Darlington Manufacturing Co Inc that actually shutting down a recently unionized division of an enterprise was lawful, unless it was proven that the employer was motivated by hostility to the union. Third, union members need the right to be represented, in order to carry out basic functions of collective bargaining and settle grievances or disciplinary hearings with management. This entails a duty of fair representation. In NLRB v J Weingarten, Inc the Supreme Court held that an employee in a unionized workplace had the right to a union representative present in a management interview, if it could result in disciplinary action. Although the NLRB has changed its position with different political appointees, the DC Circuit has held the same right goes that non-union workers were equally entitled to be accompanied. Fourth, under §158(a)(5) it is an unfair labor practice to refuse to bargain in good faith, and out of this a right has developed for a union to receive information necessary to perform collective bargaining work. However, in Detroit Edison Co v NLRB the Supreme Court divided 5 to 4 on whether a union was entitled to receive individual testing scores from a program the employer used. Also, in Lechmere, Inc. v. National Labor Relations Board the Supreme Court held 6 to 3 that an employer was entitled to prevent union members, who were not employees, from entering the company parking lot to hand out leaflets. Fifth, there are a large group of cases concerning "unfair" practices of labor organizations, listed in §158(b). For example, in Pattern Makers League of North America v NLRB an employer claimed a union had committed an unfair practice by attempting to enforce fines against employees who had been members, but quit during a strike when their membership agreement promised they would not. Five judges to four dissents held that such fines could not be enforced against people who were no longer union members.
The US Supreme Court policy of preemption, developed from 1953, means that states cannot legislate where the NLRA 1935 does operate. The NLRA 1935 contains no clause requiring preemption as is found, for example, in the Fair Labor Standards Act 1938 §218(a) where deviations from the minimum wage or maximum hours are preempted, unless they are more beneficial to the employee. The first major case, Garner v Teamsters Local 776, decided a Pennsylvania statute was preempted from providing superior remedies or processing claims quicker than the NLRB because "the Board was vested with power to entertain petitioners' grievance, to issue its own complaint" and apparent "Congress evidently considered that centralized administration of specially designed procedures was necessary to obtain uniform application of its substantive rules". In San Diego Building Trades Council v Garmon, the Supreme Court held that the California Supreme Court was not entitled to award remedies against a union for picketing, because if "an activity is arguably subject to §7 or §8 of the Act, the States as well as the federal courts must defer to the exclusive competence of the National Labor Relations Board". This was true, even though the NLRB had not given any ruling on the dispute because its monetary value was too small. This reasoning was extended in Lodge 76, International Association of Machinists v Wisconsin Employment Relations Commission, where a Wisconsin Employment Relations Commission sought to hold a union liable for an unfair labor practice, by refusing to work overtime. Brennan J held that such matters were to be left to "be controlled by the free play of economic forces". While many of these judgments appeared beneficial to unions against hostile state courts or bodies, supportive actions also began to be held preempted. In Golden State Transit Corp v City of Los Angeles a majority of the Supreme Court held that Los Angeles was not entitled to refuse to renew a taxi company's franchise license because the Teamsters Union had pressured it not to until a dispute was resolved. Most recently in Chamber of Commerce v Brown seven judges on the Supreme Court held that California was preempted from passing a law prohibiting any recipient of state funds either from using money to promote or deter union organizing efforts. Breyer J and Ginsburg J dissented because the law was simply neutral to the bargaining process. State governments may, however, use their funds to procure corporations to do work that are union or labor friendly.
The Norris-LaGuardia Act of 1932 outlawed the issuance of injunctions in labor disputes by federal courts. While the Act does not prevent state courts from issuing injunctions, it ended what some observers called "government by injunction", in which the federal courts used injunctions to prevent unions from striking, organizing and, in some cases, even talking to workers or entering certain parts of a state. Roughly half the states have enacted their own version of the Norris-LaGuardia Act.
While collective bargaining was stalled by US Supreme Court preemption policy, a dysfunctional National Labor Relations Board, and falling union membership rate since the Taft-Hartley Act of 1947, employees have sought voting rights for corporate boards of directors and in work councils. Labor law has increasingly converged with corporate law. In 1919, under the Republican governor Calvin Coolidge, Massachusetts became the first state with a right for employees in manufacturing companies to have employee representatives on the board of directors, but only if corporate stockholders voluntarily agreed. Also in 1919 both Procter & Gamble and the General Ice Delivery Company of Detroit had employee representation on boards. Board representation for employees spread through the 1920s, many without requiring any employee stock ownership plan. In the early 20th century, labor law theory split between those who advocated collective bargaining backed by strike action, those who advocated a greater role for binding arbitration, and proponents codetermination as "industrial democracy". Today, these methods are seen as complements, not alternatives. A majority of countries in the Organization for Economic Cooperation and Development have laws requiring direct participation rights. In 1994, the Dunlop Commission on the Future of Worker-Management Relations: Final Report examined law reform to improve collective labor relations, and suggested minor amendments to encourage worker involvement. Congressional division prevented federal reform, but labor unions and state legislatures have experimented.
Corporations are chartered under state law, the larger mostly in Delaware, but leave investors free to organize voting rights and board representation as they choose. Because of unequal bargaining power, but also historic caution of labor unions, shareholders monopolize voting rights in American corporations. From the 1970s employees and unions sought representation on company boards. This could happen through collective agreements, as it historically occurred in Germany or other countries, or through employees demanding further representation through employee stock ownership plans, but they aimed for voice independent from capital risks that could not be diversified. By 1980, workers had attempted to secure board representation at corporations including United Airlines, the General Tire and Rubber Company, and the Providence and Worcester Railroad. However, in 1974 the Securities and Exchange Commission, run by appointees of Richard Nixon, had rejected that employees who held shares in AT&T were entitled to make shareholder proposals to include employee representatives on the board of directors. This position was eventually reversed expressly by the Dodd-Frank Act of 2010 §971, which subject to rules by the Securities and Exchange Commission entitles shareholders to put forward nominations for the board. Instead of pursuing board seats through shareholder resolutions the United Auto Workers, for example, successfully sought board representation by collective agreement at Chrysler in 1980. The United Steel Workers secured board representation in five corporations in 1993. Some representation plans were linked to employee stock ownership plans, and were open to abuse. At the energy company, Enron, workers were encouraged by management to invest an average of 62.5 per cent of their retirement savings from 401(k) plans in Enron stock against basic principles of prudent, diversified investment, and had no board representation. When Enron collapsed in 2003, employees lost a majority of their pension savings. For this reason, employees and unions have sought representation because they invest their labor in the firm, and do not want undiversifiable capital risk. Empirical research suggests by 1999 there were at least 35 major employee representation plans with worker directors, though often linked to corporate stock.
As well as representation on a corporation's board of directors, or top management, employees have sought binding rights (for instance, over working time, break arrangement, and layoffs) in their organizations through elected work councils. After the National War Labor Board was established by the Woodrow Wilson administration, firms established work councils with some rights throughout the 1920s. Frequently, however, management refused to concede the "right to employ and discharge, the direction of the working forces, and the management of the business" in any way, which from the workforce perspective defeated the object. As the US presidency changed to the Republican party during the 1920s, work "councils" were often instituted by employers that did not have free elections or proceedings, to forestall independent labor unions' right to collective bargaining. For this reason, the National Labor Relations Act of 1935 §158(a)(2) ensured it was an unfair labor practice for an employer "to dominate or interfere with the formation or administration of any labor organization, or contribute financial or other support to it". This was designed to enable free work councils, genuinely independent from management, but not dominated work councils or so called "company unions". For example, a work council law was passed by the US government in Allied-occupied Germany called Control Council Law, No 22. This empowered German workers to organize work councils if elected by democratic methods, with secret ballots, using participation of free labor unions, with basic functions ranging from how to apply collective agreements, regulating health and safety, rules for engagements, dismissals and grievances, proposals for improving work methods, and organizing social and welfare facilities. These rules were subsequently updated and adopted in German law, although American employees themselves did not yet develop a practice of bargaining for work councils, nor did states implement work council rules, even though neither were preempted by the National Labor Relations Act of 1935. In 1992, the National Labor Relations Board in its Electromation, Inc, and EI du Pont de Nemours, decisions confirmed that while management dominated councils were unlawful, genuine and independent work councils would not be. The Dunlop Report in 1994 produced an inconclusive discussion that favored experimentation with work councils. A Republican Congress did propose a Teamwork for Employees and Managers Act of 1995 to repeal §158(a)(2), but this was vetoed by President Bill Clinton as it would have enabled management dominated unions and councils. In 2014, workers at the Volkswagen Chattanooga Assembly Plant, in Chattanooga, Tennessee, sought to establish a work council. This was initially supported by management, but its stance changed in 2016, after the United Auto Workers succeeded in winning a ballot for traditional representation in an exclusive bargaining unit. As it stands, employees have no widespread right to vote in American workplaces, which has increased the gap between political democracy and traditional labor law goals of workplace and economic democracy.
Since the US Declaration of Independence in 1776 proclaimed that "all men are created equal", the Constitution was progressively amended, and legislation was written, to spread equal rights to all people. While the right to vote was needed for true political participation, the "right to work" and "free choice of employment" came to be seen as necessary for "life, liberty and the pursuit of happiness". After state laws experimented, President Franklin D. Roosevelt's Executive Order 8802 in 1941 set up the Fair Employment Practice Committee to ban discrimination by "race, creed, color or national origin" in the defense industry. The first comprehensive statutes were the Equal Pay Act of 1963, to limit discrimination by employers between men and women, and the Civil Rights Act of 1964, to stop discrimination based on "race, color, religion, sex, or national origin." In the following years, more "protected characteristics" were added by state and federal acts. The Age Discrimination in Employment Act of 1967 protects people over age 40. The Americans with Disabilities Act of 1990 requires "reasonable accommodation" to include people with disabilities in the workforce. Twenty two state Acts protect people based on sexual orientation in public and private employment, but proposed federal laws have been blocked by Republican opposition. There can be no detriment to union members, or people who have served in the military. In principle, states may require rights and remedies for employees that go beyond the federal minimum. Federal law has multiple exceptions, but generally requires no disparate treatment by employing entities, no disparate impact of formally neutral measures, and enables employers to voluntarily take affirmative action favoring under-represented people in their workforce. The law has, however, succeeded in eliminating the gender pay gap, and disparities in income by race, health, age or socio-economic background.
The right to equality in employment in the United States comes from at least six major statutes, and limited jurisprudence of the US Supreme Court, leaving the law inconsistent and full of exceptions. Originally, the US Constitution entrenched gender, race and wealth inequality by enabling states to maintain slavery, reserve the vote to white, property owning men, and enabling employers to refuse employment to anyone. After the Emancipation Proclamation of 1863 in the American Civil War, the Thirteenth, Fourteenth and Fifteenth Amendments attempted to enshrined equal civil rights for everyone, while the Civil Rights Act of 1866, and 1875 spelled out that everyone had the right to make contracts, hold property and access accommodation, transport and entertainment without discrimination. However, in 1883 the US Supreme Court in the Civil Rights Cases put an end to development by declaring that Congress was not allowed to regulate the actions of private individuals rather than public bodies. In his dissent, Harlan J would have held that no "corporation or individual wielding power under state authority for the public benefit" was entitled to "discriminate against freemen or citizens, in their civil rights".
By 1944, the position had changed. In Steele v Louisville & Nashville Railway Co, a Supreme Court majority held a labor union had a duty of fair representation and may not discriminate against members based on race under the Railway Labor Act of 1926 (or the National Labor Relations Act of 1935. Murphy J would have also based the duty on a right to equality in the Fifth Amendment. Subsequently, Johnson v Railway Express Agency admitted that the old Enforcement Act of 1870 provided a remedy against private parties. However, the Courts have not yet accepted a general right of equality, regardless of public or private power. Legislation will usually be found unconstitutional, under the Fifth or Fourteenth Amendment if discrimination is shown to be intentional, or if it irrationally discriminates against one group. For example, in Cleveland Board of Education v LaFleur the Supreme Court held by a majority of 5 to 2, that a school's requirement for women teachers to take mandatory maternity leave was unconstitutional, against the Due Process Clause, because it could not plausibly be shown that after child birth women could never perform a job. But while the US Supreme Court has failed, against dissent, to recognize a constitutional principle of equality, federal and state legislation contains the stronger rules. In principle, federal equality law always enables state law to create better rights and remedies for employees.
Today legislation bans discrimination, that is unrelated to an employee's ability to do a job, based on sex, race, ethnicity, national origin, age and disability. The Equal Pay Act of 1963 banned gender pay discrimination, amending the Fair Labor Standards Act of 1938. Plaintiffs must show an employing entity pays them less than someone of the opposite sex in an "establishment" for work of "equal skill, effort, or responsibility" under "similar working conditions". Employing entities may raise a defense that pay differences result from a seniority or merit system unrelated to sex. For example, in Corning Glass Works v Brennan the Supreme Court held that although women plaintiffs worked at different times in the day, compared to male colleagues, the working conditions were "sufficiently similar" and the claim was allowed. One drawback is the equal pay provisions are subject to multiple exemptions for groups of employees found in the FLSA 1938 itself. Another is that equal pay rules only operate within workers of an "enterprise", so that it has no effect upon high paying enterprises being more male dominated, nor child care being unequally shared between men and women that affects long term career progression. Sex discrimination includes discrimination based on pregnancy, and is prohibited in general by the landmark Civil Rights Act of 1964.
The Civil Rights Act of 1964 is a general anti-discrimination statute. Titles I to VI protects the equal right to vote, to access accommodation, public services, schools, it strengthens the Civil Rights Commission, and requires equality in federally funded agencies. Title VII bans discrimination in employment. Under §2000e-2, employers must not refuse to hire, discharge or discriminate "against any individual with respect to his compensation, terms, conditions or privileges of employment, because of such individual's race, color, religion, sex, or national origin." Segregation in employment is equally unlawful. The same basic rules apply for people over 40 years old, and for people with disabilities. Although states may go further, a significant limit to federal law is a duty only falls on private employers of more than 15 staff, or 20 staff for age discrimination. Within these limits, people can bring claims against disparate treatment. In Texas Dept of Community Affairs v Burdine the US Supreme Court held plaintiffs will establish a prima facie case of discrimination for not being hired if they are in a protected group, qualified for a job, but the job is given to someone of a different group. It is then up to an employer to rebut the case, by showing a legitimate reason for not hiring the plaintiff. However, in 1993, this position was altered in St Mary's Honor Center v Hicks where Scalia J held (over the dissent of four justices) that if an employer shows no discriminatory intent, an employee must not only show the reason is a pretext, but show additional evidence that discrimination has taken place. Souter J in dissent, pointed out the majority's approach was "inexplicable in forgiving employers who present false evidence in court".
Disparate treatment can be justified under CRA 1964 §2000e-2(e) if an employer shows selecting someone reflects by "religion, sex, or national origin is a bona fide occupational qualification reasonably necessary to the normal operation of that particular business or enterprise." Race is not included. For example, in Dothard v Rawlinson the state of Alabama prohibited women from working as prison guards in "contact" jobs, with close proximity to prisoners. It also had minimum height and weight requirements (5"2 and 120 lbs), which it argued were necessary for proper security. Ms Rawlinson claimed both requirements were unlawful discrimination. A majority of 6 to 3 held that the gender restrictions in contact jobs were a bona fide occupational qualification, because there was a heightened risk of sexual assault, although Stewart J suggested the result might have differed if the prisons were better run. A majority held the height and weight restrictions, while neutral, had a disparate impact on women and were not justified by business necessity. By contrast, in Wilson v Southwest Airlines Co, a Texas District Court held an airline was not entitled to require women only to work as cabin attendants (who were further required to be "dressed in high boots and hot-pants") even if it could show a consumer preference. The essence of the business was transporting passengers, rather than metaphorically "spreading love all over Texas", so that there was no "bona fide occupational requirement". Under the ADEA 1967, age requirements can be used, but only if reasonably necessary, or compelled by law or circumstance. For example, in Western Air Lines, Inc v Criswell the Supreme Court held that airlines could require pilots to retire at age 60, because the Federal Aviation Authority required this. It could not, however, refuse to employ flight engineers over 60 because there was no comparable FAA rule.
In addition to prohibitions on discriminatory treatment, harassment and detriment in retaliation for asserting rights is prohibited. In Meritor Savings Bank v Vinson the Supreme Court unanimously held that a bank manager who coerced a woman employee into having sex with him 40 to 50 times, including rape on multiple occasions, had committed unlawful harassment within the meaning of 42 USC §2000e. If employees or managers create a "hostile or offensive working environment", this counts as discrimination. In Harris v Forklift Systems, Inc the Court held that a "hostile environment" did not have to "seriously affect employees’ psychological well-being" to be unlawful. If the environment "would reasonably be perceived, and is perceived, as hostile or abusive" this is enough. Standard principles of agency and vicariously liability apply, so an employer is responsible for the actions of its agents, But according to Faragher v City of Boca Raton an employing entity can avoid vicarious liability if it shows it (a) exercised reasonable care to prevent and promptly correct any harassment and (b) a plaintiff unreasonably failed to take advantage of opportunities to stop it. In addition, an employing entity may not retaliate against an employee for asserting his or her rights under the Civil Rights Act of 1964, or the Age Discrimination in Employment Act of 1967. In University of Pennsylvania v Equal Employment Opportunity Commission, the Supreme Court held that a university was not entitled to refuse to give up peer review assessment documents in order for the EEOC to investigate the claim. Furthermore, in Robinson v Shell Oil Company the Supreme Court held that writing a negative job reference, after a plaintiff brought a race discrimination claim, was unlawful retaliation: employees were protected even if they had been fired. It has also been held that simply being reassigned to a slightly different job, operating forklifts, after making a sex discrimination complaint could amount to unlawful retaliation. This is all seen as necessary to make equal rights effective.
In addition to disparate treatment, employing entities may not use practices having an unjustified disparate impact on protected groups. In Griggs v Duke Power Co, a power company on the Dan River, North Carolina, required a high school diploma for staff to transfer to higher paying non-manual jobs. Because of racial segregation in states like North Carolina, fewer black employees than white employees had diplomas. The Court found a diploma was wholly unnecessary to perform the tasks in higher paying non-manual jobs. Burger CJ, for a unanimous Supreme Court, held the "Act proscribes not only overt discrimination, but also practices that are fair in form, but discriminatory in operation." An employer could show that a practice with disparate impact followed "business necessity" that was "related to job performance" but otherwise such practices would be prohibited. It is not necessary to show any intention to discriminate, just a discriminatory effect. Since amendments by the Civil Rights Act of 1991, if disparate impact is shown the law requires employers "to demonstrate that the challenged practice is job related for the position in question and consistent with business necessity" and that any non-discriminatory "alternative employment practice" is not feasible. On the other hand, in Ricci v DeStefano five Supreme Court judges held the City of New Haven had acted unlawfully by discarding test results for firefighters, which it concluded could have had an unjustified disparate impact by race. In a further concurrence, Scalia J said "resolution of this dispute merely postpones the evil day" when a disparate impact might be found unconstitutional, against the equal protection clause because, in his view, the lack of a good faith defense meant employers were compelled to do "racial decision making" that "is... discriminatory." In dissent, Ginsburg J pointed out that disparate impact theory advances equality, and in no way requires behavior that is not geared to identifying people with skills necessary for jobs.
Both disparate treatment and disparate impact claims may be brought by an individual, or if there is a "pattern or practice" by the Equal Employment Opportunity Commission, the Attorney General, and by class action. Under the Federal Rules of Civil Procedure, Rule 23 a class of people who share a common claim must be numerous, have "questions of law or fact common to the class", have representatives typical of the claimants, who would "fairly and adequately protect the interests of the class". Class actions may be brought, even in favor of people who are not already identified, for instance, if they have been discouraged from applying for jobs, so long as there is sufficiently specific presentation of issues of law and fact to certify the action.
Some state and federal laws presume workers who are not covered by a collective bargaining agreement or an individual employment agreement have "at-will employment". This is a policy that employees' may be dismissed without notice and for no stated reason. However state and federal laws prohibiting discrimination or protecting the right to organize or engage in whistleblowing activities modify that rule by providing that discharge or other forms of discrimination are illegal if undertaken on grounds specifically prohibited by law. An employment relationship could be terminated by either party at any time without a reason. Starting in 1941, a series of laws prohibited certain discriminatory firings. That is, in most states, absent an express contractual provision to the contrary, an employer can still fire an employee for no or any reason, as long as it is not a reason in violation of public policy.
Most states have modified the general rule that employment is at will by holding that employees may, under that state's common law, have implied contract rights to fair treatment by their employers. US private-sector employees thus do not have the indefinite contracts (similar to US academic tenure) traditionally common in many European countries, Canada and New Zealand.
Public employees in both federal and state government are also typically covered by civil service systems that protect them from unjust discharge. Public employees who have enough rights against unjustified discharge by their employers may also acquire a property right in their jobs, which entitles them in turn to additional protections under the due process clause of the Fourteenth Amendment to the United States Constitution.
The Worker Adjustment and Retraining Notification Act (the WARN Act) requires private sector employers to give sixty days' notice of large-scale layoffs and plant closures; it allows a number of exceptions for unforeseen emergencies and other cases. Several states have adopted more stringent requirements of their own.
In 1959, California added the Division of Fair Employment Practices to the California Department of Industrial Relations. The Fair Employment and Housing Act of 1980 gave the division its own Department of Fair Employment and Housing, with the stated purpose of protecting citizens against harassment and employment discrimination on the basis of: age, ancestry, color, creed, denial of family and medical care leave, disability (including HIV/AIDS), marital status, medical condition, national origin, race, religion, sex, transgender and orientation. Sexual orientation was not specifically included in the original law but precedent was established based on case law. On October 9, 2011, California Governor Edmund G. "Jerry" Brown signed into law Assembly Bill No. 887 alters the meaning of gender for the purposes of discrimination laws that define sex as including gender so that California law now prohibits discrimination on the basis of gender identity and gender expression.
The state also has its own labor law covering agricultural workers, the California Agricultural Labor Relations Act.
In 1945, New Jersey enacted the first statewide civil rights act in the entire nation.  with the purpose of protecting citizens against harassment and employment discrimination on the basis of: age, color, nationality, age, disability, creed, national origin, ancestry, sex, pregnancy, domestic partnership, sexual orientation, perceived sexual orientation, civil union status, marital status, affectional orientation, gender identity or expression, genetic information, military service, or mental or physical disability, AIDS and HIV related illnesses and atypical hereditary cellular or blood traits.
Nineteen states that have legislation that prevents trade unions from signing collective agreements with employers requiring employees pay fees to the union when they are not members (frequently called "right-to-work" laws by their political proponents). These are Alabama, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Michigan, Nebraska, Nevada, North Carolina, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, and Wyoming. In addition, Arizona, Arkansas, Florida, Mississippi, and Oklahoma have the right to not support a union enacted in their constitutions. The territory of Guam also has an equivalent law.