In a previous Labor Innovation essay, “Building Standards, Sector-by-Sector,” I described sectoral co-regulation as a strategy by which states can improve labor standards at the sectoral level. But many questions about how sectoral co-regulation should work remain.
Both collective bargaining and conventional regulation of labor standards are governed by well-established bodies of law: labor law and the law governing legislative and administrative processes, respectively. Co-regulation may require some governance principles of its own. Some issues will vary by sector or by state. The constitutional and administrative law of each state will set some parameters on how tripartism can be implemented. For example, state constitutional law might control whether a tripartite board can establish binding labor standards or merely recommend them, and how and by whom any subsequent review must take place.
Two questions are likely to arise, however, as to any tripartite labor standards structure, whatever the state or the sector (though the answers might vary): How should workers’ representatives be selected, and how should their activities be funded? Let us take up these questions about democratic legitimacy and fiscal sustainability.
Democratic Legitimacy and “Representativeness”
Tripartite regulatory structures include representatives of those directly affected by labor standards. That should make them more democratic and responsive than conventional forms of regulation. Currently, however, there is no established model for enabling workers to select their own representatives (except in the rideshare industry, which faces a different regulatory landscape—particularly with respect to federal labor preemption—than most of the private sector).
California’s Fast Food law, for example, required a petition from 2% of the state’s fast-food workers to trigger the launch of the tripartite council, but workers had no formal role in choosing its members. In California and other existing tripartite boards, stakeholder representatives are appointed by public officials. That arrangement is not illegitimate; this is, after all, a state regulatory process. However, if sectoral co-regulation is to democratize the regulatory process and engage and empower workers, workers should play some role in choosing their representatives. How might that work?
First, worker representatives should be organizations, or individuals designated by organizations, not just individuals. That is how workers can gain a collectivevoice through these tripartite structures. And that is how workers can be engaged, as they should be, both in standard-setting and (perhaps especially) in enforcement. At a minimum, the law should ensure that only bona fide worker organizations, not sham employer-backed entities, can sit as worker representatives. A bona fide and appropriate worker representative for these purposes should be able to demonstrate some level of support from workers. What level of support makes sense?
A majority-support requirement for worker representatives might seem logical, even ideal, but it will often be unrealistic and is, in any case, unnecessary in the context of co-regulation. Worker (and employer) representatives in these processes are not exclusive representatives. Their role is to channel input from their constituents into a standard-setting process in which public officials, chosen through normal political processes, still cast the deciding votes. And the sectoral standards that come out of these tripartite processes set only a floor and not a ceiling on what unions or individual workers might achieve at the enterprise level through bargaining, or what firms might choose to offer to become employers of choice in an industry. That is a crucial difference between sectoral co-regulation and exclusive enterprise-based collective bargaining.
Representativeness for co-regulation purposes should require something like credible support among the sector’s workers. That might be shown by, say, 30% of the sector’s officially estimated workforce signing a petition or other statement of support for the organization and its regulatory role. But a 30% threshold might be prohibitive in some large sectors with high turnover. In California’s fast-food sector, for example, that would amount to support from 150,000 to 200,000 workers. In a smaller sector with a more stable workforce, a threshold higher than 30% might be feasible and appropriate. In short, the threshold for credible support might vary with the nature and size of the sector. Of course, any threshold below 50% could, in theory, be met by more than one organization, but so be it. Sectoral councils usually include multiple seats for worker (and employer) representatives, and the seats for employee representatives could be divided among two or more organizations.
Even if state policymakers chose to stick with the prevailing practice of public officials appointing stakeholder representatives, they could improve the legitimacy and transparency of the process by prescribing statutory criteria for these appointments. For example, in the case of worker representatives, the law might require officials to consider numerical evidence of worker support for an organization based on petitions, membership, or the like, as well as an organization’s experience in representing workers in the relevant sector.
Funding and Sustainability
Another basic question is how to pay for the activities of the worker representatives on these tripartite bodies, including outreach to workers, research on sectoral conditions and the economic impact of proposed standards, and, later, monitoring compliance and contributing to enforcement across the sector. Thus far, unions have borne the costs associated with establishing and participating in tripartite boards (in New York, California, and Washington State, for example), drawing on member dues from existing collective bargaining units. Funding has been dependent, if not parasitic, on the exclusive enterprise-based bargaining system. That is not sustainable. Organizations representing workers in tripartite structures will eventually need a sustainable source of funding. And that poses familiar challenges.
Any organization that would represent workers in sectoral co-regulatory processes will confront a supersized version of the free-rider problem that unions face in a single bargaining unit: Sectoral regulatory standards achieved and enforced in part by worker representatives will benefit all workers in the sector, whether or not they contributed to the costs of representation. Hence the difficulty with relying solely on voluntary dues or contributions from workers.
An “agency fee” solution to this free-rider problem (compelling workers across the sector to pay a fee to the organization that represents them in standard-setting) would probably be unconstitutional. The fees would likely be viewed under the Janus v. AFSCME precedent unconstitutional “compelled speech” imposed by state action. But even if Janus could be wished away, it would be difficult to justify exacting mandatory fees from workers to support organizations that neither they as individuals nor a majority of their co-workers chose to represent them.
But let’s step back and ask: why should workers have to bear the costs associated with implementing a state regulatory process? A solution may lie in state funding, perhaps derived from a small surcharge on the sector’s products or services. In California’s fast-food sector, for example, a 0.1% surcharge would add less than two cents to an average fast-food order. As long as the funds go to support the public process of devising and enforcing decent labor standards for workers in the industry, that would be a legitimate use of public taxing power and tax revenues, and would be a fair tax on the beneficiaries of labor, be they individual consumers or businesses.
Public funding should not support electoral politicking or union organizing for purposes of collective bargaining. But even if the organizations at issue are engaged in either or both of those activities, this is an accounting problem that can be solved along lines established in the agency-fee context. “Chargeable” activities would be those germane to co-regulation, or representation of workers in devising, implementing, administering, and enforcing sectoral standards (and probably not the costs associated with organizing and demonstrating “credible support”). “Nonchargeable” activities would include traditional union organizing and electoral politicking. Public funding of worker representatives along these lines could help to create an economically sustainable foundation for sectoral co-regulation with genuine worker representation.
Some Strategic Questions for Worker Advocates
Some worker advocates might worry that sectoral standard-setting will undercut enterprise-based union organizing. That is not because of any direct conflict between sectoral standards and higher collectively bargained standards at the enterprise level; there is none. It is simply because some workers might get enough of what they want through sectoral regulation to discourage them from undertaking the risks and costs of union organizing or striking. In other ways, however, higher sectoral standards can facilitate organizing and bargaining at the enterprise level; raising the wage floor for nonunion competitors should muffle employers’ incentive to resist unionization. The Fair Labor Standards Actitself was meant to complement collective bargaining both by protecting workers who were unlikely to form effective unions and by raising the floor from which workers could bargain collectively. Sectoral standards might do both of those things even better in some settings.
Worker advocates might also worry that sectoral labor standards will detract from efforts to raise the jurisdiction-wide floor, especially for wages. If subsets of workers with political juice can gain higher wages for themselves, that might deplete the coalition needed to raise minimum wages for the more marginalized workers who remain. Stated differently, drawing worker activism into sectoral channels might detract from class-wide solidarity. But the tension between particularistic objectives and class-wide solidarity would seem to be greater in the case of enterprise-based collective bargaining, which focuses worker activism and solidarity on even narrower groups of fellow workers. Fortunately, solidarity is not a zero-sum affair. Moreover, there is much that workers in an enterprise might want that sector-wide standards will not get them.
These strategic concerns are not trivial. The two conventional models of labor standard setting, enterprise-based bargaining and jurisdiction-wide minimum standards, might be different enough from each other to limit competition between them. Sectoral regulation of labor standards splits the difference between those two approaches and might compete more directly with both of them. But the potential for competition arises largely from the advantages of sectoral regulatory strategies: their ability to improve labor standards for some workers who are left outside of the collective bargaining system.
Well-crafted tripartite labor standards processes offer a democratic and sustainable way to improve labor standards in low-wage sectors that remain stubbornly unorganizable under the NLRA’s collective bargaining model. If sectoral co-regulatory strategies can do that, then it might be worth taking some risks and developing union organizing strategies that build on these regulatory innovations.
That brings us to the possible legal hurdles to sectoral co-regulation, most importantly the law of federal preemption. That will be the topic of my next post.
Cynthia Estlund is the Crystal Eastman Professor at the New York University School of Law and the author of four books and more than 80 articles and essays on the law of work in the United States and beyond.
