Crains New York - September 17, 2012 - (Page 11)

M As gov’t jobs drop, the economy drags ost New Yorkers have the impression that the city is bloated with government workers. It turns out that it is not true, at least according to a statistic that is assuming new importance in the debate over the role the public sector should play in the economy.The metric is government employees as a percentage of the population, and it’s being emphasized by liberal think tanks like the Economic Policy Institute, as well as economist and New York Times columnist Paul Krugman. Since the peak of public-sector employment in August 2008, governments have cut 680,000 jobs, according to the EPI. If the sector had grown at the rate it did in the Bush administration, there would be 1.1 million more jobs. Given the multiplier effect, the total loss to the country is something like 2 million. If those jobs had not been eliminated, the nation’s employment picture would be much better. Beyond the economic impact, the cutbacks show how America is unwilling to make the investments needed for the future. As the U.S. population grows, Mr. Krugman argued earlier this month, so should the public sector. We need more teachers for more students, right? I asked the Independent Budget Office to calculate government employment per capita to see how New PUBLIC WORKS Gov’t employees per capita U.S. New York state New York City 0.076 0.071 0.066 1990 Source: Independent Budget Office 2011 GREG DAVID York City compares with the rest of the country.As the chart shows,New York City has fewer government workers per capita than the nation or the state, and the decline in publicsector employment during the recession has been even more severe here. It is important to remember that this tracks federal and state workers, as well as the city head count. All statistics need context,so here is what else needs to be considered. How does New York compare with the other largest cities in the country? As far as I can tell, no one has looked at that issue. It is important because it could be that the larger a city is, the more efficiently it can provide services. So why are taxes so much higher in New York than in any other big city? That answer is probably that workers here cost more in wages and benefits than elsewhere. If the New York economy has done so much better than the rest of the nation, as Mayor Bloomberg insists, why have we reduced workers? One of the great secrets of New York is that the economy and budget do not track. The budget is dependent on Wall Street, and as profits have plunged and pay has contracted, revenues have been squeezed. What does this mean if the city’s population continues to grow? At some point, the public-sector workforce will have to increase. MICHAEL WEBER T When lawyers are the only winners he hospitality industry is under siege by attorneys who stand to gain big fees from huge class-action settlements. The same gains do not apply, however, to the waitstaff and other restaurant employees on whose behalf these lawsuits are filed. On a federal level, wage and hour claims are brought under the Fair Labor Standards Act,passed in the 1930s to address intolerable conditions, such as child labor and six-day workweeks collect hundreds of dollars per week in tips, which is often the case. When faced with class actions, most restaurants have few options. Potential damages often amount to double the wages or tips owed, dating back from two to six years. Prejudgment interest rates can be as high as 9%, depending on the state, and plaintiffs’ “reasonable” attorneys’ fees can be enough to put many operations out of business. Not included here are the costs of defense counsel, the hit to the restaurant’s reputation, and the disruption of daily operations. For many owners, settling the plaintiffs’claims,regardless of their merit,is the most reasonable business decision. of 10- to 12-hour days without overtime pay. Such conditions were long ago eradicated from most restaurants and other establishments, but the FLSA, as well as state wage and hour laws, have continued to expand by prohibiting common practices that many eateries have followed for years. Customers might be surprised to learn, for example, that while a restaurant is permitted to require front-of-the house employees to “pool” their tips, the pool may be illegal if it is shared with employees who interact with customers only indirectly. And if the pool is illegal, regardless of the reason, the restaurant can incur enormous liabilities to employees, even if those employees each However, it is not the employees who are the winners in such scenarios. The plaintiffs’ attorney often takes home one-third of the class settlement and sometimes more, enough for years of Michelin-star dinners, leaving the plaintiffs ordering off the dollar menu. This disparity could be easily rectified. First, the FLSA could require employees or their counsel to provide advance notice of potential claims with an opportunity to cure—the employer could then pay the employees what they may be due, avoiding the time and expense of class-action litigation. Lawsuits might also be barred so long as the employer could demonstrate that it paid overtime after 40 hours, otherwise followed customary practice in the industry, and that the alleged violation was not willful. In the event that employees and their counsel filed a lawsuit even after the employer made the required remedial payments and established that it did not knowingly violate the law, they would be required to eat the defendant’s attorneys’ fees—their just deserts. Only when plaintiffs’ attorneys have some “skin in the game” will they think twice about filing lawsuits that have limited legal support but are often settled because of the extortive effect of these claims. Michael Weber is an employment and laborlaw attorney based in Manhattan. September 17, 2012 | Crain’s New York Business | 11 http://www.crainsnewyork.com/lists

Table of Contents for the Digital Edition of Crains New York - September 17, 2012

IN THE BOROUGHS
IN THE MARKETS
THE INSIDER
BUSINESS PEOPLE
OPINION
GREG DAVID
SMALL BUSINESS
REPORT: REAL ESTATE
THE LIST
REAL ESTATE DEALS
FOR THE RECORD
CLASSIFIEDS
NEW YORK, NEW YORK
SOURCE LUNCH
OUT AND ABOUT
SNAPS

Crains New York - September 17, 2012