The Department of Labor has been extorting admissions of employment law violations from American blueberry farmers. Two judges have found that the Department's use of "hot goods" orders for perishable goods to be coercive. Yet, the Department continues to appeal its case and its actions were the subject of a Congressional hearing last week.
The "hot goods" provision of the Fair Labor Standards Act of 1938 was created to even the playing field between employers that complied with employment laws and those that did not. President Franklin Roosevelt, in pushing for the adoption of this provision, argued that allowing the shipment of "contraband" goods, those produced by companies that failed to meet wage and safety requirements, would undermine interstate commerce and place law-abiding employers at a competitive disadvantage. Therefore, Congress granted the Wage and Hour Division at the U.S. Department of Labor the authority to ban the sale of these goods.
While a hot goods order is in place, companies are unable to ship their goods and they must stop production. For farmers with perishable goods, the financial consequences are severe. To get a hot goods order lifted before perishable agricultural goods lose all their value, growers must admit guilt and waive all future rights of appeal. They are also required to pay back-wages, whether or not they actually underpaid workers, and a fine for the unproven violation of employment standards. Instead of taking the government to court, they waive their rights and admit guilt since doing so is the only financially feasible option.
The House Subcommittee on Horticulture, Research, Biotechnology, and Foreign Affairs held a hearing last week about the dangers of hot goods orders on perishable goods. In the hearing, Ranking Member Kurt Schrader (D-OR) reminded members that hot goods orders were never used on perishable goods from 1983 until 2008.
Brad Avakian, Oregon's Commissioner of Labor and Industries (an elected, nonpartisan position that protects Oregon workers and businesses), was one of the witnesses in the hearing. Avakian is no apologist for businesses that skirt employment laws--last year his agency conducted over 2,000 investigations and returned more than $2 million to underpaid Oregon workers. Yet he is rightly concerned about the lack of due process for Oregon agricultural growers.
Even though they had signed away their right to do so, two blueberry growers, Pan-American and B&G Ditchen, challenged the Department of Labor in court on the grounds that they were under duress. They were vindicated, and U.S. Magistrate Judge Thomas Coffin wrote in his January ruling, "While the proposed back wages and penalty were substantial, the potential losses due to a continuing hot goods objection pending litigation dwarfed the proposed judgments' impact on defendants. The defendants... were left with no choice but to accept the judgments."
In April, U.S. District Judge Michael McShane agreed that the government's actions were coercive and illegal. Still, the Department of Labor is refusing to return the growers' money and is seeking to appeal the ruling.
In addition to being coercive, the methods used by the Department of Labor to determine employment violations are suspect.
To determine the violations, the Department of Labor used a formula that said any workers who pick over the average amount of berries were supported by ghost workers (workers that share employment cards with other workers). This added up to 287 ghost workers for Pan-American. The Department's questionable use of statistics was not backed up by actual observations--only two workers were actually seen picking on the same employment card.
Regardless, in order to have the hot goods order lifted, Pan-American had to pay $41,778 in back wages and a penalty of $7,040. During the week the hot goods order was in effect, Pan-American had 400,000 pounds of berries held up and about 280,000 pounds that were not picked. B&G Ditchen had to pay $156,616 in back wages and another $13,200 in penalties to end its hot goods order. In addition to this $170,000, B&D Ditchen claims revenue losses of nearly $90,000 from rotting and overripe berries. In the face of these growing losses, is it any wonder the companies decided to admit guilt?
Judge Coffin indicated concern that if employers cross the Department of Labor by fighting against its rulings or recommendations, they are likely to be singled out for adverse treatment in the future. This is another abuse of power.
David Weil, the leader of the Wage and Hour Division at the U.S. Department of Labor, also testified at the hearing. He stressed the importance of hot goods orders while admitting it was a seldom-used tool. He also argued that his division works to educate employers and employees first and discipline second. Still, the incidence of selective enforcement without proof of guilt speaks for itself.
The possibility of selective enforcement creates all the more reason for a strong respect of due process rights. While delaying the shipment of non-perishable goods such as clothing can still wreak havoc on supply chains, the goods themselves do not lose all, if any, of their value. In the case of perishable goods, an extralegal hot goods designation destroys 100 percent of their value. When they are being extorted by government, producers cannot stand up for their rights.
Government agencies may single out individuals or employers for harassment for many reasons. Congress should take away the possibility of government coercion of innocent people before it can happen. While the hot goods provision itself is workable, but far from ideal, as an enforcement mechanism in terms of non-perishable goods, it runs contrary to the principles of justice when applied to perishable goods. The Wage and Hour Division has other, more sensible tools at its disposal to combat employers that break the law.
Employment violations in the agricultural sector need to be determined though a legal system that enables the accused to respond and respects due process. Extorting confessions from possibly-innocent individuals shows no more respect for the law than does refusing to enforce the law.
Subcommittee Chairman Austin Scott (R-GA) and Rep. Schrader have introduced H.R. 1387, a bill that would bar the Department of Labor from using hot goods orders on perishable agricultural goods. As the Department of Labor's power continues to expand, this bill is a welcome step to reining in its growth. Let us hope a companion bill is proposed in the Senate and that Congress sends the bill to President Obama for his signature. Meanwhile, the Labor Department should leave agricultural products off their hot goods list.
Jared Meyer is a policy analyst at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.
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