A more sinister side to stimulus
Small companies facing added regulation through related bills
By Shankar P.
5/11/2009

While the stimulus act brings a bounty of opportunities for businesses and the promise of new jobs, there are several proposed federal laws that threaten to restrain employers.

“Any time there are more regulations that small businesses must comply with, it takes away from their focus on their core competencies,” said Don Mallo, vice president of human resources at The Extensis Group, a professional employer organization based in Woodbridge. “It is difficult for them to keep track and comply with a myriad set of regulations … they don’t have the infrastructure in place to comply.”

The federal stimulus bill, formally called the American Recovery and Reinvestment Act of 2009, and the Fair Pay Act already are law; Congress is considering another 10 measures.

“The number-one law on everyone’s mind is the Employee Free Choice Act,” Mallo said. It represents “a complete overhaul of the balance of power in labor relations.”

To become unionized, a labor organization asks an employer to recognize it by presenting signed union membership cards. Employers can either recognize the union or ask the National Labor Relations Board to hold an election by secret ballot. The proposed act takes away the right to vote, which is what makes it controversial, Mallo said. Instead, a labor organization could present membership cards representing 30 percent of the employees and automatically secure recognition, if the legislation is passed.

Ray Castro, a senior policy analyst at New Jersey Policy Perspective, a Trenton think tank, provided some context to the proposed legislation. “A lot of the original legislation in the 1930s that allowed for unionization has been watered down over the years,” he said.

The bill “represents an erosion of some fundamental rights,”said Jim Leonard, senior vice president, government relations at the New Jersey Chamber of Commerce. “We call it the Employee Forced Coercion Act.” The chamber has been building up support among its members against the proposed federal act, Leonard said.

Castro agreed that the Employee Free Choice Act represented “a problem for employers,” but “from an employee perspective, a lot of workers say they don’t have adequate benefits if they are not unionized,” he said.

Mallo said another disturbing aspect for businesses is that the proposed Employee Free Choice Act specifies that after a union wins an election, negotiations on a new contract with the employer automatically go into binding arbitration if no agreement is reached within 120 days. “That is even more radical than the loss of the secret ballot,” he said.

The Fair Pay Act of 2009 became law in January, and it gives employees additional time to bring compensation discrimination claims against employers. It’s troubling because “you have this prospect of an employment claim being resurrected that may have been made 10 years ago,” Mallo said — companies that go through mergers and acquisitions would pass on a potential liability to new owners.

Not all the proposed laws will work against employer interests, Mallo said. One, called the Family Friendly Workplace Act, gives employers the choice to offer employees paid time off in lieu of overtime payments of 1.5 times their wages.

Small businesses could benefit in particular from the bonus depreciation benefits in the stimulus act, said Lori McMahon, senior tax manager at Amper, Politziner & Mattia, an accounting firm in Edison. The act extends to 2009 the ability of a business to fully expense in the first year investment in specified assets costing up to $250,000 and placed in service that year, she said. That benefit will get phased out after the investments cross the threshold of $800,000.

Leonard said his chamber’s philosophy has always been that the employer-employee relationship is best left to those two groups. “When the government gets in between that relationship, no good will come of it,” he said.

E-mail to shankar_p@njbiz.com