International Labor and Employment Law: The Continuing Conflicts

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International Labor and Employment Law: The Continuing Conflicts
By Joseph Z. Fleming n1
October 2007

Introduction – Part I: The World We Live In

Thomas L. Friedman in his book, The World is Flat: A Brief History of the 20-First Century (FARRAR STRAUS AND GIROUX, New York 2005) at page 114 quoted the following African proverb:

Every morning in Africa a gazelle wakes up.

It knows it must run faster than the fastest lion or it will be killed.

Every morning a lion wakes up.

It knows it must outrun the slowest gazelle or it will starve to death.

It doesn't matter whether you are a lion or a gazelle. When the sun comes up, you better start running.

If this is not a sufficient metaphor in connection with the difficulties the transportation systems have had with their competition, then another quote from Friedman's book, discussing the ability of the United States to obtain a competitive advantage because of its labor laws, certainly is:

The United States also has among the most flexible laws in the world. The easier it is to fire someone in a dying industry, the easier it is to hire someone in a rising industry that no one knew would exist five years earlier. This is a great asset, especially when you compare the situation in the United States to inflexible, rigidly regulated labor markets like Germany's, full of government restrictions on hiring and firing. Flexibility to quickly deploy labor and capital where the greatest opportunity exists, and the ability to quickly redeploy it if the earlier deployment is no longer profitable, is essential in a flattening world.

If you survive competition within the United States you can then address the competition outside of the United States. The matter of survival of the fittest is becoming even more complicated.

Just recently the President of the United States urged Americans to welcome, rather than fear, India as an economic competitor; and, the President defended the outsourcing of American jobs to India as the reality of a global economy stating that
n1 The views expressed are solely those of the author and should not be attributed to the author's firm or its clients.
the United States should focus on new markets and noting:

"People do lose jobs as a result of globalization, and it's painful for those who lose jobs." Mr. Bush said at a meeting with young entrepreneurs at the Indian School of Business, one of the premier schools of its kind in India. Nonetheless, the president said, 'globalization provides great opportunities'". See Elizabeth Bumiller "Bush, in High-Tech Center, Urges Americans to Welcome Competition from India", NEW YORK TIMES, Saturday, March 4, 2006 page A-5, column 1.

There are major factors impacting the US transportation industry due to globalization:

1. US airlines are increasingly forced to compete with not only new entries within the US, but, also, new entries in international transportation. With the cost of fuel increasing, the nation states which have had a lock on fuel may, increasingly, become even more important competitors. Insofar as governmental entities controlling other markets are considering opening up markets they are demanding access to not only the US but the right to ownership of US business, including carriers. Not only will European Union states be negotiating with the US, but they will be among others negotiating with the US. Thus, controls as to aviation in the US are being deregulated and regulated at the same time.

2. The transportation industry within the United States on the rails is equally impacted, as market centers which chose the rails have been impacted because of international events.

Business dealings in the globalized marketplace, and their accompanying labor-management relationships, were becoming complex and evolving so rapidly, before September 11, 2002, that they blurred concepts of nationality and citizenship, which historically had influenced the determination of applicable law. In a "post 9/11 world" there are new considerations. The results create a new meaning for the term conflicts law.

Recently attention has focused on the questions as to whether global capitalism is an ailing system. A recent review of new books discussing this, by Michael Hirsch "Dollars without Borders", in the New York Times Book Review, Sunday, March 5, 2006 at page 13, noted the following:

"Global capitalism is an ailing system. The main question is whether the illness is curable or terminal. What has become especially worrisome in recent years is the increasingly unequal relationship between labor and capital. These two old rivals have long been at odds, of course, often violently. But there have also been extended periods of peace."

As Jeffry Frieden writes in his magisterial history, 'Global Capitalism,' during the high-growth decades after World War II labor and capital existed in an uneasy but prosperous equilibrium. And during the earlier golden age of globalization before World War I, he reports, labor and capital 'worked beautifully' together on a worldwide scale. As free trade supplanted mercantilism in the mid- to late 19th century, barriers to trade and immigration fell at roughly the same time. 'Unproductive Polish and Portuguese peasants who could not compete with Canadian and Argentine grain farmers,' Frieden says, 'became productive urban workers in Warsaw and Lisbon or immigrated to become productive factory workers in Toronto or farmworkers on the pampas.' Streams of investment followed.

In the last quarter-century or so, however, capital has left labor behind to choke in the dust of those pampas. Or so Jeff Faux argues in 'The Global Class War,' a much darker book that characterizes the present era as a struggle between a 'global governing class' and everybody else. Faux is clearly correct that the balance of power between labor and capital has shifted dramatically. Today, investment capital moves at blinding speed, while labor still must go by boat, train and plane--and that's if it's lucky. With much tougher immigration restrictions than existed a century ago, labor is more often confined to its home markets, waiting anxiously to see if globe-hopping capital deigns to come its way.

Introduction – Part II: The World Unions and Plaintiffs’ Desire

The world we live in involves globalization, and the movement of capital to other areas where markets and means of production (including labor) may be more cost-effective, than in those areas where there are higher labor expenses. The basic objectives of unions and plaintiff-employees, in cases where they want to proceed against management, are similar to those of management; and, they are motivated by economics. Unions often seek to control their labor monopoly, that U.S. labor laws provide them; and, they cannot do so, unless they control the representation of the employees, and the ability to protect the employees and promote their interests. Unions benefit through increased membership and dues revenue. The employees who feel that they have disputes with management, such as those which relate to employment discrimination claims that are either civil rights claims, or sometimes claims against the management and the unions, want to be able to sue and reach the deep pockets of management. They also do not want to be barred by any barricades which could prevent them from obtaining their objectives (which, in part, are remedies to eliminate their problems and which may be not just elimination of discrimination but, also, monetary relief payment of their attorneys' fees).

This generally means that unions and management want to expand the laws of the United States beneficial to them where they are operating, and employed, to cover employment issues impacting them in other areas of the world.

Set forth below are illustrations of basic union objectives as shown by cases and authorities:

1. Union desire to follow the work, and not allow the shift of work abroad to reduce, or eliminate, the labor management relationships which the unions have. A basic desire of unionization is to apply the law that is most favorable to that of the unions, and those they represent. U.S. unions want U.S. labor laws to apply to American companies and those that are operating within the United States not only in the United States, but abroad. Unions argue that the interests of the United States and their members are adversely affected if management can escape responsibilities to unions. Most unions seek extraterritorial application of U.S. laws and decisions that cover operations, and support court jurisdiction over activities which have occurred outside the territorial limits of the United States. The reality is that even examination of the union position involves a certain amount of recognition that the case law does not favor the union position. Most court decisions have severely limited the scope of U.S. laws, as shown by this article, as to operations outside of the United States. For the basic analysis of the union position and analysis, see, Applicability of U.S. Labor Laws to Issues, Disputes and Relationships that Include Foreign Conduct or Components by Stephen B. Moldof (the article is in the Course Materials of the ALI-ABA Airline, Railroad and Employment Course Book, October 2007). As demonstrated here, union desires are generally limited by virtue of the legal and factual realities. The legal realities involve the fact that the United States Supreme Court is quite conservative and increasingly conservative, and that is (for unions) going to be an increasing reality as has been shown by legal analysis and cases. See e.g. Ronald Dworkin "The Supreme Court Phalanx" New York Rev. of Books, Sept. 27, 2007 at pg. 92 (Vol. LIV. No. 4). In addition, foreign carriers are operating outside of the United States; and, the United States is not the sole airline market in the world. This means that even if the U.S. carriers through case law, or even legislation, were required to recognize unions on all U.S. systems, that would not be as significant a victory as it might have been several decades ago. It might even cause the further decline of the influence of American carriers.

2. The plaintiffs' position is demonstrated by the basic concept in Ofori-Tenkorang vs. American Intern. Group, Inc., 460 F.3d 296 (2nd Cir. 2006), (the "AIG case") a significant decision of the Second Circuit. Appendix A. A plaintiff working in South Africa maintained that he could bring an action under 42 U.S.C. §1981; and, he lost as to activity abroad which was not covered by the U.S. law. However, the court did ruled that to the degree that certain employment actions occurred within the United States, which might have impacted the plaintiff (since he was posted in foreign nation but had originally been employed in the United States and certain benefits were controlled within the United States), the court could have jurisdiction. This is a similar type of analysis applied to the case law interpreting union agreements, as is noted. Certain civil rights claims have been expanded by legislation, overruling court cases that have restricted jurisdiction over foreign employees of U.S. companies posted in foreign locations. That analysis is provided below. Nevertheless, as with the unions, the harsh reality is that the more control employees can exercise over their conditions abroad, the less employers may tend to use American employees posted abroad. The global economy and the internet allow setting up operations abroad, which several decades ago could not have occurred.

Introduction – Part III: The World – The Management May Want to Live In

Most U.S. employers, despite their ability to move abroad, recognize that there are advantages to utilization of the U.S. workforce. The advantages are too long to list in this article, but include: continuity of service; and, ability to work under U.S. standards (which while expensive also are beneficial in terms of providing protection). An example of the difficulties of being able to ship something abroad, in terms of problems, arises in connection with the daily headlines about problems with merchandise from China. Mark Landler and Ivar Ekman, "Bucking An Industry Trend, Industries Remain in Europe" New York Times pg. C-1, col. 2, Tues., Sept. 18, 2007 (discussing "recalls of millions of Chinese-made toys, mostly because of lead paint"). There are also security issues in other countries. Some countries have privacy restrictions, which preclude obtaining information that the employer might want in a way of background; and, other countries lack ability to police the background, to ensure that the employees are who they indicate they are. The United States experiences the same situation, in connection with obvious daily reports about immigration issues, and recent social security match letters--which are discussed elsewhere in these materials--demonstrate that identities are not that easy to determine in the United States. See Martha Schoonover and Alix Mattingly article on "Social Security No-Match Regulations" in these materials. The United States, however, is still far ahead of many other countries in connection with many such areas and standards. Thus, there are advantages for retaining operations in the United States and, also, ensuring that the standards in the United States apply abroad. In an article by, Eric Lipton and Gardiner Harris, "In Turnaround, Industries Seek U.S. Regulations," The New York Times, Sunday, September 16, 2007, pg. 1A, Col. 5, it was noted U.S. industries sought standards (albeit for various reasons; and motives):

The consequences for consumers, though, are not yet clear. The tactical shift by industry groups is motivated by a confluence of self-interests: growing competition from inexpensive imports that do not meet voluntary standards, and a desire to head off liability lawsuits and pre-empt tough state laws or legal actions that were a response to laissez-faire Bush administration policies. Concerns that Democrats could soon expand their control in Washington have also prompted manufacturers or producers to seek regulations that they consider the least burdensome, regulatory experts say.

See, also, Stephen Castle and Dan Bilefsky "Europe Reconsiders Plan to Relax Consumer Safety Rules" New York Times, Tuesday, Sept. 18, 2007 pg. C4, col. 1 ("Like the United States the European Union is considering requiring toy manufacturers to have all their new products tested in independent laboratories--a move that would add to costs.")

Nevertheless, there are tradeoffs for all. The various investment potentials are complex too. Foreign carriers and foreign companies can set up businesses that enter into the United States, and other areas. See Jeff Bailey "A New Low-Fare Airline on a Web-Only Approach" NY Times, Wed., April 25, 2007 pg. C-12, col. 1 (discussing Skybus Airlines and Ryannair); Daniel Michaels "Qatar Airways Orders 80 Jets from Airbus" Wall Street Journal, Thurs, May 31, 2007, pg. B-6, col. 1; and see Leslie Wayne "The Real Owner of All Those Planes" NY Times, Thurs, May 10, 2007 pg. C-1, col. 2 (discussing Steven Udvar-Hazy head of International Lease Finance which leases nearly "half of the airplanes flying today" and who does more business with non-U.S. carriers).

There also are increasing situations in which foreign capital invests in U.S. companies which, then, create businesses and entities abroad. A recent example of this was the investment by the Chinese government in Blackstone. See, "China Puts Cash To Work in Deal with Blackstone," Wall Street Journal, Monday, May 21, 2007, pg. 1A, Col. 5 ("China said it would invest $ 3 billion in Blackstone.") Recently China gave Blackstone the opportunity to take over a major industry in China. See, Deutsche Presse-Argenturg GmbH 2007 confirming that:

"The U.S. Private Equity Firm, The Blackstone Group, on Monday, September 10, 2007 was granted an investment of up to $ 600 Million for a 20% stake in Chinese chemicals, The China National Bluestar Corporation known as ("Bluestar").

Bluestar was a wholly owned subsidiary with China National Chemical Corporation (Chemchina), and the article pointed out that this is the first investment since the "Beijing government paid around 3 billion dollars in May for a 9.4% stake in the U.S. investment group."

U.S. investment groups can be a source of funding and attractive investments for those in foreign nations. Foreign nations may then allow entities which they have invested in to have access to their markets as an additional way of obtaining American know-how and management skills. There is no reason why business entities, or even foreign countries, cannot invest in U.S. entities, or create entities abroad that trade in their markets, which are controlled by U.S. investors (and which, in turn, may run or have some interest in international operations).

Unions have recognized this; and, they are increasingly analyzing how to cope with such issues. See, "What's Offline: Outsourcing the Picket Line," NY Times, Sat., March 11, 2006 pg. B5, col. 3. (SEIU President Stern "envisions a federation of worldwide unions, organized by sector, which would bring to bear cross-border union leverage to organize entire industries rather than individual companies, thereby lifting standards of workers"). See also Tim Johnson "Labor Unions: U.S. Labor Leaders Woo China's Federation, Miami Herald, Wed. May 23, 2007 pg. 1-C, col. 2.

For the foregoing reasons, there are ways by which U.S. investors and businesses may be as aggressive as their counterparts are. No doubt unions have all engaged in international organizing; and, no doubt businesses will encounter such organizational efforts. Thus, the following analysis is of the existing law, but it may change. Even the positions of the parties may change. There are periods when unions and plaintiffs seem to have the advantage, or seem to lose the advantage. There will, also, be periods when the management will seem to have the advantage, or lose the advantage. The key is to appreciate, the various laws that can apply and the ways by which they can be impacted.

Notwithstanding issues raised by the foregoing it is becoming increasingly important to understand that the concept of globalization which is affecting markets and, in turn, labor, takes place in the context of different nation states which have different laws. The result creates conflict.

This is an analysis of extraterritorial application of employment laws, including those which regulate collective bargaining and individual rights, with an emphasis on the laws of the U.S. A gridlock, or what we even could refer to here as a "law lock", can result--in that each country can seek to regulate the affairs of multi-national corporations and corporations in global commerce (based upon the new technologies) in a manner that creates a new need for resolving what were traditional conflict questions.

  1. The U.S. Labor and Employment Overview

In a classic text book on the Conflicts of Law by E.E. Cheatham, E.N. Griswold, W.L.M. Reese, M. Rosenberg (University Casebook Series, Brooklyn, The Foundation Press, Inc. 1964), the authors, using a sense of humor, introduced their text with a photograph of the Courthouse on the island in Tobago with a quotation from a leading English case, Buchanan v. Rucker Court of Kings Bench 1808, 9 East 192, in which Lord Ellenborough, C.J. asks:

Can the island of Tobago pass a law to bind the rights of the whole world?

Would the world submit to such an assumed jurisdiction?

In the process of examining the laws of the United States and their extraterritorial application, as an illustration, we are not attempting to be provincial but, rather, recognizing that this seminar is sponsored by the American Law Institute-American Bar Association. If we are going to analyze a legal system and do so in a manner that is not only analytical but critical (and intended to cause debate) the author proposes to use the author's country as an illustration as opposed to offending others.

The purpose of this initial outline is to discuss concepts. Case citations for discussion of specific extraterritorial issues are also in other articles in this course book.

Set forth below is an initial outline of the basic United States legal concepts that relate to "extraterritoriality":

A. Unless a statute is specifically given extraterritorial effect, the presumption is that it does not apply outside of the United States. EEOC v. Arabian American Oil Co., 499 U.S. 244, 55 FEP 449 (1991). In EEOC v. Arabian American Oil Co., supra, the Supreme Court held that Title VII of the Civil Rights Act of 1964, as amended, did not apply extraterritorially to regulate the employment practices of United States employers employing U.S. Citizens abroad. Overriding this Supreme Court decision, Congress amended Title VII to reverse the Court's decision and included within Title VII protection U.S. citizens who work overseas for U.S. businesses. See Section 109(a) of the Civil Rights Act of 1991, Title VII, 42 U.S.C. § 2000e(f) 1991). See, also, Carnero v. Boston Scientific, 433 F3d 1 (1st Cir. 2006) (Sarbanes-Oxley did not have extra-territorial application).

B. When Congress legislates with an intent to express extraterritorial impact, the courts in the United States will recognize that intent but only if the work is for a U.S. controlled company. See, e.g., Gantchar v. United Airlines, 1995 U.S. Dist. LEXIS 5358 (N.D. Ill. Apr. 20, 1995).

C. When there is a gray area, the Courts will also determine the results by judicial interpretation. Id. See, also, Denty v. SmithKline Beecham Corp., 907 F. Supp. 879 (E.D. Pa., Nov. 6, 1995).

D. When there has not been a Congressional expression, judicial interpretation can result in application of laws in a fashion that still impacts in an extraterritorial manner. See ALPA v. TACA, 748 F. 2d 965 (5th Cir. 1984), cert. denied, 417 U.S. 1100 (1985). See also, the AIG case (Appendix A).

E. When there has been an intent to have extraterritorial impact, the courts can interpret the law in a manner that allows defenses and qualifications:

1. There can be qualifications within the law. The classic case is the decision not to apply civil rights laws prohibiting religious discrimination to an airline's pilot qualifications when they would apply to an airline that flies into Mecca which cannot allow non-Muslim pilots, because they will be beheaded. See also Kern v. Dynalectron Corporation, 577 F. Supp. 1196 (N. Tex. 1983), aff'd, 746 F.2d 810, 40 EPD 36,317 (5th Cir. 1984) (holding conversation to Islam was a B.F.O.Q. for a pilot flying helicopters to Mecca since non-Moslems flying into Mecca are, if caught, beheaded.)

2. The courts can eliminate extraterritorial effect when it would create a conflict with laws of other countries to enforce legal disputes based upon United States law under the Constitutional theory involving the Act of State Doctrine. See, e.g. Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398 (1964)(applying the "Act of State Doctrine"). The Act of State Doctrine precludes inquiry into the validity of public acts of a recognized foreign power committed within its own territory.

3. There can be other defenses. See the "Foreign Compulsion" defense. ALPA v. TACA, supra at 971-972.

The difficulty that we have in terms of accessing the need to avoid global gridlock is that we have as our starting place our experiences as attorneys in the United States. It is important to understand the international flavor of the issue that goes with the international laws relating to labor and employment disputes. This can be done by appreciating the concept of multi-national bargaining and litigation arising out of it as well as the factors that cause this type of bargaining and, then, understanding the factors that relate to the bargaining. These points are outlined below.

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