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are unemployed because of a strike in which they are participating only if the strike was commenced in violation of the Railway Labor Act or of the laws of the labor organization to which they belong. This difference has existed since 1938. It was consciously adopted in recognition of the fact that the procedures of the Railway Labor Act themselves subject railroad employees to much greater restrictions than are applicable to other industrial employees. It was believed that the procedures of the Railway Labor Act were such as to assure that every means of amicable adjustment of disputes would have been exhausted before a strike would occur; consequently, there was no justification for denying benefits for unemployment occurring during a strike that was not in violation of the Railway Labor Act or of the laws of the organization. Consider, by contrast, the situation of employees in other industries. Even today the Taft-Hartley Act imposes upon other industrial employees no procedures for the adjustment of disputes comparable to those of the Railway Labor Act, although it might well be that if the strike disqualifications in State unemployment compensation acts were reconsidered today in the light of the Taft-Hartley Act, they, too, might be relaxed. However, at the time the State unemployment compensation acts were being adopted the original Wagner Act was in effect; it guaranteed to employees the right to organize and bargain collectively through representatives of their own choosing without employer interference or coercion and placed no restrictions whatever upon the exercise of collective bargaining power; in fact, the exercise of that power was enhanced by the Norris-LaGuardia Act's prohibition upon the Federal Courts' enjoining strikes and similar prohibitions upon the power of State courts through State legislation in many States.
Nothing has occurred since 1938 to warrant reversal of the policy then adopted. The railroads have not undertaken to show that the nature of the present disqualification has tended to encourage strikes or to interfere with the amicable settlement of disputes in accordance with the purposes of the Railway Labor Act. They could make no such showing if they attempted it. It appears from page 47 of the annual report of the Railroad Retirement Board for 1956 that in the entire year ended June 30, 1956, out of a total of 137,600 unemployment insurance beneficiaries only 300 were unemployed by reason of strikes.
In the testimony of Mr. D. P. Loomis an effort is made to demonstrate the injustice of the limited nature of the present strike disqualification by tracing a hypothetical dispute through the procedures of the Railway Labor Act and making it appear that at every stage in the handling of the dispute the carrier is exerting every effort to achieve an amicable solution whereas the union is arbitrarily and relentlessly pressing toward a strike. This is a highly imaginary picture bearing no relation to reality. Since the enactment of the Railway Labor Act there has been only one railroad strike of major extension both in area and in duration. That was the 1955 strike on the Louisville & Nashville system which extended into 13 States and lasted for 58 days.
The circumstances giving rise to that strike are revealing. The nonoperating organizations served proposals on the railroads on a national basis pursuant to the Railway Labor Act on May 22, 1953, in which they sought improved vacations, paid holidays, premium pay for Sunday work, a comprehensive health and welfare program for employees and their dependents to be provided by the carriers, and free transportation for employees and their families. When it appeared that no settlement could be developed on the individual railroads the carriers established the customary carriers' conference committees to handle the dispute on a joint national basis. However, because of delays in securing national conferences the employees invoked the services of the National Mediation Board on October 20, 1953, 5 months after the proposals had been served. The Mediation Board arranged conferences for November 3, 1953, but the carrier committees refused to negotiate on the subjects of health and welfare and free transportation, holding those subjects not bargainable. When the employees insisted upon bargaining with respect to the entire subject matter of their proposals the carriers filed a declaratory judgment suit to determine whether they were legally required to bargain on these subjects. This suit was dismissed by the district court as not presenting a justiciable controversy and during the pendency of an appeal by the carriers from that decision the dispute progressed through mediation and the eventual establishment of an Emergency Board on December 28, 1953. The Board began its hearings on January 19, 1954, and continued hearings to April 3, 1954.
The Emergency Board made its report and recommendations on May 15, 1954, 1 week short of a year after the unions' proposals had been served. The recommendations were disappointing to the unions, particularly by virtue of the fact that only limited health and welfare protection was recommended for employees only with the employees to bear one-half of the cost. Nevertheless, negotiations proceeded between the carriers committees and the Employees' National Conference Committee resulting in a joint national agreement on August 21, 1954, which put into effect the recommendations of the Emergency Board on all the major railroads of the country except on a number of southeastern roads.
The Louisville & Nashville system railroads had a personal representative on the Southeastern Carriers' Conference Committee and participated in the national handling through conferences, mediation, Emergency Board proceedings, and subsequent negotiation until about August 10, 1954. By that time substantial agreement had been reached on the health and welfare plan providing for an equal sharing of costs between carriers and employees. The Louisville & Nashville system railroads were not in accord with the terms of the agreement reached and withdrew their authority from the Southeastern Carriers' Conference Committee.
After the agreement of August 21, 1954, the National Mediation Board again sought to settle the dispute with the Louisville & Nashville system railroads as well as a number of other southeastern railroads who had similarly withdrawn from national handling. The organizations patiently persisted in their efforts to achieve an amicable settlement and eventually settlements corresponding to the national agreement were made with the other wihdrawing carriers, but the Louisville & Nashville system railroads remained adamant. The major point at isue was the unwillingness of the carrier to require 100 percent participation of its employees in the health and welfare plan on a contributory basis. The organizations pointed out that the contributory basis was not of their seeking but had been recommended by the Emergency Board and indicated their willingness to accept a noncontributory plan. The efforts to arrive at a settlement continued until March of 1955 at which time the carriers unilaterally put into effect a nonnegotiated health and welfare plan of their own. This left the organizations no alternative but a strike.
After a successful strike of 58 days the organizations nevertheless agreed to submit the dispute to a sole arbitrator, agreeing to accept his determination as binding; and returned to work during the arbitration proceedings.
Notwithstanding the geographic extent and duration of this strike, the number of unemployed beneficiaries who were unemployed on account of strike during the benefit year 1954–55 was only 18,000 out of a total of 305,900 beneficiaries. This appears from page 66 of the Annual Report of the Railroad Retirement Board for 1955.
In light of these facts, experience would indicate that the retention of the present limited disqualification is warranted. It does not unduly load the economic scales in favor of the employees. On the contrary, the carrier proposal would unduly load the scales the other way. Workingmen today have many more fixed charges than they used to have. As living standards have improved they have obligated themselves with insurance programs, purchases of homes, other installment obligations, etc., which gives the loss of wages during a strike a much more formidable impact than it used to have. People can still tighten their belts and eat from soup kitchens during strikes as in times gone by. But when the loss of wages means the loss of investments accumulated over a period of time the bargaining position of the employees has been substantially impaired.
Another disqualification which the carriers propose to change is that relating to voluntary leaving of employment. An individual who voluntarily leaves his employment is now disqualified for a period of 30 days; thereafter he may draw benefits provided he is available for work but he is not able to find, and the Board is not able to find for him, any suitable work. The railroads would continue this disqualification until after a return to railroad employment. This amounts to a permanent penalty, si nce under the present law it is a condition of his continued receipt of benefits that he return to employment whenever a suitable job is available.
The railroads also propose to disqualify employees who are discharged for cause. Such a disqualification was contained in the original act in 1938 but was removed almost immediately thereafter. The reason for its removal was recognition of the fact that what is proper cause for discharge is usually highly controversial and is often the subject of sharp conflict between the carrier and the organizations representing employees. Furthermore, under the Railway Labor Act the National Railroad Adjustment Board is the tribunal established for the solution of such controversies. It was considered most undesirable
that the Railroad Retirement Board should resolve such controversies incidentally to the adjudication of unemployment insurance claims or that it should delay the payment of claims pending resolution of the controversy by the National Railroad Adjustment Board. Nothing has occurred since that time to cast any doubt upon the wisdom of Congress in removing that disqualification.
The railroads further propose that there be an employee contribution to the payment of benefits for unemployment due to sickness, although that proposal is not contained in the bills that have been introduced. In making this proposal the carriers are going contrary to the universal trend in other industries and in the railroad industry itself.
It is true, as the railroads point out, that only a few unemployment compensation acts provide sickness benefits and in those few an employee contribution is provided for. But this is only a fragment of the story. Outside the railroad industry, provision for compensation for wages lost through sickness as well as medical and hospital care are generally provided for through the collectively bargained health and welfare plans. These plans have tended more and more to be set up on a noncontributory basis or to be converted to a noncontributory basis if initially set up on a contributory basis. Today the overwhelming preponderance of such plans are on a noncontributory basis.
In the railroad industry itself the nonoperating employees are provided hospital and medical care, as distinguished from reimbursement for wage loss, through a collectively bargained national plan. This plan was first set up under the agreement of August 21, 1954. In a little over 1 year it was converted to a noncontributory basis so far as employee protection was concerned and on November 1, 1956, it became noncontributory with respect to dependents protection as well as employee protection.
The final assault that the railroads propose to make on the railroad unemployment insurance system is a reduction in benefit levels. This is to be accomplished by the elimination of base year earnings as a measure of the daily benefit rate and by the substitution therefor of 60 percent of take-home pay after deduction of withholding taxes and railroad retirement taxes. At first blush, the proposal to pay 60 percent of take-home pay may appear generous as compared with the present minimum of 50 percent of the last daily rate of pay, especially when combined with the railroads' representation that the base year measure now has little practical application. The practical effect of the proposals, however, is vicious.
An individual who is fully employed during his base year at a daily rate of pay of $15.33 or more would earn $4,000 or more in his base year and would thus qualify for unemployment benefits at the daily rate of $8.50 under the present law even though that is in excess of the minimum of 50 percent of his last daily rate of pay. Under the carrier proposal, however, this rate, for purposes of measuring benefits, would be reduced by $1.85 (in the case of an employee with one dependent) of income tax withholding and $0.95 railroad retirement tax leaving $12.53 as the rate upon which benefits would be based. Sixty percent of that rate produces a benefit of approximately $7.50 or $1 less per day than the present law provides.
The disingenuous explanation that take-home pay is the proper basis for measuring wage loss becomes particularly odious upon analysis. Congress has exempted unemployment insurance benefits from income taxation in order to avoid any diminution of these meager means of support. The railroads' proposal to reduce the daily rate of pay as a measure of benefits by the amount of income tax withholdings is in effect to diminish the unemployment benefit by the equivalent of income taxes thereon and to retain such amount in the Railroad Unemployment Insurance Account to the advantage of the carriers. In other words, what Congress has seen fit to forego by way of income taxes on unemployment insurance benefits the railroads would in effect recapture for their own advantage. The proposal as concerns railroad retirement taxes is even more shocking. Unemployment insurance benefits are not compensation and the employee receives no credit either in time or money toward his railroad retirement benefits. Nevertheless, the railroads' proposal would in effect levy the railroad retirement tax on the unemployment insurance benefits without giving any railroad retirement credit therefor.
The use of the last daily rate of pay as the exclusive measure of benefits operates unfairly in another respect. By operation of seniority rules, in a period of declining employment, employees are frequently bumped from higher paying positions to lower paying positions. Consequently, employees with some years of seniority who become unemployed may be holding positions immediately prior to unemployment on which the rate of pay bears no relationship to the rate of the position held during most of the base year. The carrier proposal would make the lowest rate of pay drawn immediately prior to layoff the exclusive measure of benefit payment.
It is true that the level of railroad unemployment insurance benefits is somewhat higher than that generally prevailing under the State Unemployment Compensation Acts. This is not because the railroad level is too high but because the level under State laws has been allowed to become obsolete. The obsolete nature of the benefit levels under State laws is eloquently attested by the rapid spread of collectively bargained supplemental unemployment benefit plans in other industries. It is my personal judgment that it would have been preferable if the level of benefits under State laws had kept pace with the requirements and had thus obviated the necessity for supplemental plans. I suspect that the reason they have not done so is that groups of industrial employees have had the collective bargaining strength to obtain more adequate benefits for themselves through supplemental plans but may not have felt that they had the political strength to obtain adequate benefits for all workers under the State plans through legislation. The nature and extent of these supplemental plans is discussed in more detail in the testimony and supplemental statement of Mr. Oliver. We have not sought supplemental plans in the railroad industry. The fact that we have not done so is no reason why the level of benefits under the Railroad Unemployment Insurance Act should be depressed to the levels of State laws.
SUPPLEMENTARY STATEMENT ON BEHALF OF RAILWAY LABOR EXECUTIVES' ASSOCIA
TION AND BROTHERHOOD OF LOCOMOTIVE ENGINEERS BY E. L. OLIVER, ECONOMIC ADVISER, APRIL 26, 1957
The principal issues involved in the consideration of H. R. 4353 and H. R. 4354 were covered in my original statement to the committee. This statement is directed to comment upon evidence given by the carriers.
Statements presented by carrier representatives were largely based upon two contentions that are not themselves well founded. The first is the claim that benefits provided under proposed changes in the Railroad Unemployment Insurance Act are unduly liberal, because the laws of the various States provide lesser benefits. The second is the claim that proposed changes in retirement and unemployment compensation laws would impose serious added costs upon an industry already in a critical financial condition.
With respect to the first of these contentions, it is neither sound nor equitable to base criticism of the proposed railroad legislation upon comparisons with existing State laws, for unemployment or sickness compensation. State legislation in this field, as in so many others, is primarily concerned with the establishment of minimum standards. Those standards are now being supplemented by additional compensation, provided in collective bargaining agreements, for a very large part of American industry. These supplementary compensation provisions are adapted to the needs of the individual industries in a way that is impossible for those industries through State laws. Such adaptation, however, is not only feasible but is also well recognized procedure for the railway industry under Federal legislation.
With respect to sickness benefits, the statement of Mr. Leonard Calhoun, for the Association of American Railroads, refers to the State disability insurance laws of New York, New Jersey, California, and Rhode Island, pointing out that "in general the cost of such benefits is paid by the employees." These State laws only establish minimum standards; they specifically permit private plans to be substituted, only laying down minimum requirements for such private plans. In July of 1954, according to the United States Department of Labor, private plans covered 48 percent of California workers, 65 percent of New Jersey workers, and an estimated 97 percent of New York workers. What these private plans provide is in part indicated by a national study of the subject, made by the Bureau of National Affairs in 1956. The Bureau of National Affairs is a reporting agency supplying information and advice to employers on collective bargaining standards. This Bureau reported that 16 percent of union contracts provided paid sick leave for employees; 43 percent of all contracts studied provided for sickness and accident insurance. All sick leave is paid for by employers; in nearly 60 percent of union agreements providing health and welfare insurance, employers pay the entire cost. This, incidentally, is the basis of health and welfare insurance in the railway industry—which does not include sickness and accident benefits.
Specific illustrations of private sickness benefit plans in the States with disability insurance laws may best be taken from the local transit and overthe-road bus industries. The largest bus transportation company operating in the State of New Jersey—and one of the largest in the United States—is the Public Service Coordinated Transport Co. That company has an agreement with the Amalgamated Association of Street, Electric Railway and Motor Coach Employes of America, providing for sickness and accident benefits of $30 per week, for a period of 26 weeks, paid for entirely by the company. As an illustration of a common alternative practice, in another of the States with disability insurance by law, full paid sick leave of varying amounts is provided in collective bargaining agreements covering employees of local bus companies in Oakland, Sacramento, Monterey, San Mateo, Los Angeles, Alhambra, and San Diego, in California, and of the Pacific Greyhound Co., with headquarters in San Francisco, Calif. Employees of the municipally owned street railways in San Francisco are granted paid sick leave, cumulative to 6 months, without cost to them.
Benefits and other provisions of State unemployment compensation laws are even less representative of the practice actually prevailing in major American industries, under supplemental unemployment benefit systems.
In my earlier statement to the committee, dealing in part with this subject, it was pointed out that many such supplemental unemployment compensation systems exist. More than 200 of the collective bargaining agreements were specifically cited covering millions of employees. Benefits payable under three of the principal agreements were compared with those that would be paid under the proposed amendments to the Railroad Unemployment Insurance Act.
The three collective bargaining agreements were in the steel, automobile, and container industries. The unions, parties to those agreements, were three of the largest in the Nation—the United Steelworkers of America, the United Automobile Workers, and the International Association of Machinists. The maximum weekly benefits under each of those agreements (added to payments under State laws) now exceed the maximum payable to railway workers under the Federal law-and even with the proposed amendments, railway workers will still not be eligible for weekly benefits as large as those payable in these representative major industries. Maximum annual benefits under the present Railroad Unemployment Insurance Act are lower than those available to employees in any of the three industries; with the proposed amendments, maximum annual railway benefits will still be below those available to employees in the steel or container industries.
So far as the duration of benefits under the Railway Unemployment Insurance Act is concerned, it is equally unsound to go to State laws for comparisons. The peculiar conditions of the railway industry have led to specific provisions for longer term employee protection, in Federal railway legislation, in Interstate Commerce Commission action, and in the Washington agreement between the carriers and the railway labor organizations. These precedents have already been cited, by representatives of the employees, in these hearings. Incorporation of this proposed change in pending railroad unemployment compensation legislation is not to be judged by State laws fixing minimum standards applicable indiscriminately to all industries, or by private plans specifically adapted to the needs of other major industries, but rather by legislative and other precedents in the railway industry of 20 years and longer history. By those precedents, the proposed duration of unemployment benefits is fully justified.
The second basic contention of the carriers is that the railway industry is in critical financial condition, unable to stand the increased costs particularly of the proposed improvements in the Railroad Unemployment Insurance Act. There is especial reference to the cost of extended benefits for displaced employees of long service.
Statistics presented to the committee in connection with my previous statement demonstrate the possibility of reemployment on the railways of older railway workers being released as a result of technological and other change. The railways are annually hiring many more new and inexperienced workers than the number of older, experienced workers being displaced from the industry. Even under the provisions of the law as it now stands, the carriers have incurred substantial needless cost, by this policy of leaving older experienced workers to draw unemployment compensation, and replacing them with inexperienced new workers. An incalculable additional cost has been incurred in the training of the new employees. If that policy is, as it can and should be, changed to give high priority to experienced workers in filling vacancies, the