What You Should Know About Job Killing 'Worker Centers'

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How would you feel if someone you never met from a "worker center" went to your boss and said he represents you? What if this person took outrageous positions that might get you fired, or might make your employer move out of state, or out of the country?

If you have never heard of worker centers, you are not alone.

Worker centers are tax-exempt organizations that offer education, training, employment services, and legal advice, as is appropriate for their 501(c)(3) tax exempt status. In addition, some advocate for worker rights through demonstrations, lobbying, and community organizing. They seek to persuade employers to change wages, hours, and terms and conditions of employment.

Some worker centers' activities are similar to those of unions, which do not have 501(c)(3) status. Further, unions are required to file information about their finances with the Labor Department, and hold elections under rules put in place by the National Labor Relations Board.

Newly-confirmed Labor Department Secretary Thomas Perez began his career as a volunteer at the worker center Casa de Maryland, and rose to become president of its board of directors.

Chairman John Kline of the House Committee on Education and the Workforce and Chairman David Roe of the Subcommittee on Health, Employment, Labor and Pensions wrote to Perez on July 23, "Today, many of these ‘worker centers' are dealing with employers directly on behalf of employees. Given these activities, a case has been made that at least some ‘worker centers' are labor organizations as defined by the Labor-Management Reporting and Disclosure Act (LMRDA), which would make them subject to annual filing requirements."

With a new Labor secretary and the expected confirmation of new members of the National Labor Relations Board, the status of worker organizations and their relation to unions is becoming increasingly relevant. The Labor Department and the NLRB, as well as the Internal Revenue Service, will likely be called to weigh in.

The IRS has been criticized for disallowing the tax-exempt status of organizations supporting right-wing political groups. Why has the IRS not investigated worker centers?

No complete count is available, but there were at least 214 worker centers in the United States in 32 states in 2012, up from 5 centers in 1992, 137 in 2003, and 160 in 2007.

One well-known worker center is the Restaurant Opportunities Center and its Affiliates (ROC). The group's mission is "to improve wages and working conditions for the nation's 10 million restaurant workers." Since January 2008, when the organization started focusing on developing groups outside New York City, ROC has launched affiliates in New Orleans, Miami, Michigan, Chicago, Philadelphia, Los Angeles, Houston, and Washington, D.C. to conduct workplace justice campaigns. In 2011, the latest year available, ROC listed revenues of $2.7 million. Of that, over 99 percent came from charitable contributions.

Another example, cited in Kline's letter, is the Korean Immigrant Worker Advocates (KIWA), which picketed restaurants with the object of increasing wages. And Organization United for Respect at Wal-Mart (OUR Wal-Mart) organized a series of protests outside Walmart Stores on the day after Thanksgiving in 2012.

Following complaints from Wal-Mart, the United Food and Commercial Workers union agreed to stop the OUR Wal-Mart protests in January 2013. The UFCW wrote to NLRB Acting General Counsel Lafe Solomon that "UFCW and OUR Walmart have no intent to have Wal-Mart recognize or bargain with UFCW or OUR Wal-Mart as the representatives of Wal-Mart employees."

Labor unions cannot use extended picketing, disruptive protests, or secondary boycotts, but worker centers are not prohibited from doing so.

The powers and duties of labor organizations were specified in a succession of laws, beginning with the National Labor Relations Act, passed in 1935, also known as the Wagner Act; the Labor Management Relations Act of 1947, also known as Taft-Hartley; and the Labor Management Reporting and Disclosure Act, passed in 1959, also known as the Landrum Griffin Act.

The upshot of these laws is that employees were given the right to choose representatives in mandatory regular elections, the organizations had to be transparent and file their financial reports with the Department of Labor for review, officers now had a fiduciary duty to members in matters related to labor unions' financial assets and property, and organizations that held exclusive bargaining power were required to fairly represent any worker in a bargaining unit, regardless of membership.

Worker centers claim to represent employees, yet they are not selected by workers to represent them in their dealing with employers.

Under current law, employees decide whether or not to be represented by an organization. It is not the organization that decides whether to represent employees, who are entitled to choose their representatives using a democratic process that involves a secret ballot election. Organizations that sponsor worker centers attempt to represent employees without their consent.

Plus, worker centers disregard the basic democratic principles that the law requires of labor unions. In addition to democratic elections for their leadership, employees have a basic right to full access to the union's books to determine their finances.

Worker centers do not have to file union financial disclosure forms to the Labor Department. The required filing of these forms offers union members a degree of financial transparency, since members know how their dues are being spent and how much union officials are paid.

Since most worker centers are organized as 501(c)(3) entities, they are allowed to receive tax-deductible donations. The tax code provides a large incentive to individuals to give to recognized charities. Not only does losing the 501(c)(3) status affect the amount donated by individuals, it also affects the amount received from foundations, because many foundations are required to give only to charities.

Labor unions, on the other hand, have 501(c)(5) status, and donations to 501(c)(5) organizations are not usually tax-deductible. While losing 501(c)(3) status does not guarantee that an organization would lose all its support from individuals, corporations, and foundations, it is clear that doing so would negatively affect the organization's donations. Some of ROC's $2.7 million in 2011 revenues might not materialize.

Worker centers have experienced dramatic growth partly due to their tax benefits and their ability to circumvent transparency requirements and election of officers. They have a distinct advantage in comparison to traditional unions, which have to comply with regulations and register under a specific tax status in order to insure they are representing members' wishes and making transparent use of their funds.

Under Secretary Perez and the newly-reconstituted National Labor Relations Board, worker centers may be getting more power. They should stop masquerading as friends of workers and admit they are self-promoters. If they act like unions, they should have the same tax status, and the same responsibilities.


Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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