Backgrounder

Preserve Freedom of Con⁠t⁠rac⁠t⁠s ⁠i⁠n Flor⁠i⁠da’s Labor Marke⁠t⁠

By: The James Madison Institute / February 18, 2013

The James Madison Institute

Backgrounder

February 18, 2013

By Randall G. Holcombe, Ph.D. DeVoe Moore Professor of Economics, Florida State University Research Fellow, The James Madison Institute

View Full Backgrounder: Preserve Freedom of Contracts in Florida’s Labor Market

Foreword Robert F. Sanchez Policy Director, The James Madison Institute
The State of Florida and many of its local governments have provided millions of dollars in incentives for businesses to locate, remain, and/or expand in this state. The goal has been to boost the economy, expand the tax base, and reduce poverty by fostering the creation of good job opportunities throughout the state.

To help achieve this goal, the state has offered tax relief, reduced onerous regulations, improved its schools, and sent state and local officials on trade missions around the world, on recruiting trips to other states, and on sales calls to Wall Street.

These officials know full well that in today’s global economy, both capital and labor are highly mobile. Therefore, for Florida to succeed, its business climate must remain highly competitive — both in reality and in reputation.

Unfortunately, Florida is now emitting mixed signals with regard to its business climate. In several jurisdictions — including but not limited to Miami-Dade, Broward, Orange, and Alachua counties — local elected officials, possibly with the best of intentions, have begun enacting or considering county ordinances that tend to create an uncertain climate for businesses while also adding to their administrative burdens and compliance costs. Such higher costs are inevitable, especially for businesses that operate in many locales, when these kinds of rules vary widely from one jurisdiction to the next.

This study by Florida State University economist Dr. Randall G. Holcombe focuses on two types of these local ordinances. One type mandates an employee benefit — forms of leave, primarily paid sick leave.

The other type establishes local procedures for dealing with a totally different kind of issue, allegations of a crime known as “wage theft.”

Both actions, though enacted with the noble intention of helping workers, are misguided and may well have the opposite effect. Indeed, that’s what happened after Connecticut passed a state law requiring businesses to provide paid sick leave. As a study by the highly respected Employment Policies Institute reported:

“Of the 156 businesses that responded to the survey, 86 had started providing sick leave to comply with the new law. Prior to the law taking effect in January 2012, 31 of the businesses surveyed had scaled back on employee benefits or reduced paid leave (or both) to account for the cost of the new law. Twelve had cut back employee hours, and another six reduced employee wages. Nineteen businesses raised consumer prices and six laid off employees. Sixteen businesses indicated they had decided to limit or restrict their expansion within the state.”

In this study, Dr. Holcombe calculates that if Florida emulated Connecticut and mandated paid sick leave statewide, the annual cost to the state’s businesses could exceed $3 billion. Even having paid sick leave mandated in some of the state’s major metropolitan areas would be quite costly — in terms of dollars to the businesses affected and in terms of Florida’s reputation as a good place to do business.

Therefore, with regard to paid leave, what’s needed now is a state law preempting local ordinances on this matter. Historically, because commerce transcends political boundaries, labor law has properly been the province of the federal and state governments. As a result, employers are already subject to numerous federal and state statutes, rules, and regulations intended to protect workers.

Beyond those, however, at least some degree of freedom should be left for employers and employees throughout the state to negotiate the terms of employment, whether individually or through collective bargaining.

As for “wage theft,” which occurs when employers fail to pay employees what they’re owed, local officials in some counties have heard credible testimony that it does indeed occur. Moreover, often the victims are low-income individuals such as homeless day laborers or undocumented immigrants whose ability to seek redress is extremely limited. In the absence of an adequate statewide procedure for dealing with wage theft, several local governments have acted.

The result, however, has been a patchwork of differing procedures that sow confusion and even fear among legitimate businesses that have done nothing wrong but may incur untoward expenses defending themselves if they are accused — and increased administrative costs even if the issue never arises. For some businesses, there is also a concern that some of the procedures established under the local ordinances tilt the playing field in favor of the complainants. Some nonunion shops, for instance, fear that they’ll be the target of frivolous wage theft complaints ginned up by union organizers.

These kinds of disputes should not be settled by a mere county administrator. Instead, they deserve to be settled in a court of law with a competent jurist presiding over proceedings governed by the same legal doctrines — sworn testimony, right to counsel, presumption of innocence, etc. — that apply to other disputes over money.

Moreover, the same procedures should apply statewide. After all, it is reasonable to assume that if wage theft occurs in some Florida counties, it undoubtedly occurs in others. Employees — and employers — deserve the protection and reassurance that would come from having adequate, uniform, fair-to-all procedures to adjudicate wage-theft cases throughout the state.

Therefore, the Legislature not only should pre-empt local ordinances on wage theft, but it should also review the current state statutes dealing with wage theft to ensure that they provide an adequate set of statewide procedures that are consistent and fair to all. Such consistency and fairness will not be secure, however, if local governments are allowed to opt out, whether via a referendum of the voters or via a “supermajority” vote of local elected officials. If the statewide procedures are sufficient and fair, there will be no need for local ordinances.

After all, beyond the matters of statewide consistency and of fairness to workers and their employers, the reputation of Florida’s business climate is also at stake. Indeed, after all the money the taxpayers have invested to promote this state as a great place to do business, it would be counter-productive to let the well-meaning actions of a few local jurisdictions ruin it.