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Why Mergers of Carmakers Like Honda and Nissan Often Falter

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The Japanese companies are considering joining forces to survive in a rapidly changing auto industry, but auto history is filled with troubled and failed marriages.The Japanese automakers Honda and Nissan are discussing a possible merger, in a bid to share costs and help themselves compete in a fast-changing and increasingly competitive industry.But a merger, even of two companies from the same country, is no guarantee of success, and the history of automotive deals is littered with failures and disappointments.Combining two large, global manufacturing operations is an incredibly difficult feat that involves reconciling different technologies, models and approaches to doing business. A merger’s success rests on getting ambitious managers and engineers who have spent decades competing with one another to cooperate. Teams and projects have to be scrapped or changed, and executives must cede power to others. In some cases, the merging companies are hamstrung by elected leaders who force them to keep operating money-losing factories.Thomas Stallkamp, an automotive consultant based in Michigan, was involved in the struggles of one of the biggest auto mergers, the 1998 merger of Chrysler and the German company Daimler. Mr. Stallkamp spent years in senior roles at Chrysler and DaimlerChrysler.“Car companies are big, complicated organizations, with large engineering staffs, manufacturing plants all over the world, hundreds of thousands of employees, in a capital-intensive business,” Mr. Stallkamp said. “You try to put two of them together and you run into a lot of egos and infighting, so it’s very, very difficult to make it work.”Honda and Nissan announced plans this year to work together on electric vehicles, and on Monday they formally began talks about extending that cooperation to a merger that could also include Mitsubishi Motors, a smaller manufacturer that works closely with Nissan. A pairing would unite Japan’s second- and third-biggest automakers, after Toyota, and create a company that would be the third largest in the world by number of cars produced, after Toyota and Volkswagen.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    If A.I. Can Do Your Job, Maybe It Can Also Replace Your C.E.O.

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    Chief executives are vulnerable to the same forces buffeting their employees. Leadership is important, but so is efficiency — and cost-cutting.As artificial intelligence programs shake up the office, potentially making millions of jobs obsolete, one group of perpetually stressed workers seems especially vulnerable.These employees analyze new markets and discern trends, both tasks a computer could do more efficiently. They spend much of their time communicating with colleagues, a laborious activity that is being automated with voice and image generators. Sometimes they must make difficult decisions — and who is better at being dispassionate than a machine?Finally, these jobs are very well paid, which means the cost savings of eliminating them is considerable.The chief executive is increasingly imperiled by A.I., just like the writer of news releases and the customer service representative. Dark factories, which are entirely automated, may soon have a counterpart at the top of the corporation: dark suites.This is not just a prediction. A few successful companies have begun to publicly experiment with the notion of an A.I. leader, even if at the moment it might largely be a branding exercise.A.I. has been hyped as the solution to all corporate problems for about 18 months now, ever since OpenAI rolled out ChatGPT in November 2022. Silicon Valley put $29 billion last year into generative A.I. and is selling it hard. Even in its current rudimentary form, A.I. that mimics human reasoning is finding a foothold among distressed companies with little to lose and lacking strong leadership.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Walmart Offers Store Managers Company Stock to Make Them Feel Like ‘Owners’

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    The retailer has been raising wages for store workers. It’s now turning its attention to improving salaries and benefits for their bosses.Walmart, the nation’s largest private employer, is raising salaries and benefits for store managers as it looks for ways to retain them.Walmart said on Monday that managers of its U.S. stores would be eligible for grants of up to $20,000 in company stock every year. The stock will vest over a three-year period, with a percentage vested each quarter.Earlier this month, Walmart said it would increase the average salary for store managers to $128,000 from $117,000. The big-box retailer also said bonuses for store managers could reach up to 200 percent of base salary, with a store’s profitability becoming a bigger factor in the calculation.Store managers are crucial in driving sales and profitability within their stores and keeping morale high in a dynamic business. The managers are also seen as an important pipeline for leadership at the company.A store manager at a Walmart Supercenter oversees hundreds of employees who work across a variety of departments, including food, apparel, pharmacies and auto centers. These stores often attract scores of shoppers and bring in millions of dollars in sales each year. At the start of the Covid pandemic, store managers were given even more responsibilities as the company adapted to changing consumer behavior, including managing e-commerce abilities like in-store pickup for online orders and navigating goods that are out of stock as well as excess inventory.“It’s fair to say that we’re asking them to act like owners and to think like owners,” John Furner, the chief executive of Walmart U.S. and previously a manager at a company store, said in a briefing with reporters. We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Private Equity Is Starting to Share With Workers, Without Taking a Financial Hit

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    In 2018, Anna-Lisa Miller was working with agricultural cooperatives in Hawaii, helping them reinvest in their communities through shared ownership.Ms. Miller, who had gone to law school and had planned to do civil rights litigation, loved the principle of workers partaking in the financial success of their employers, and the next year joined Project Equity, a nonprofit that helps small businesses transition to worker ownership. But it was slow going, with each transaction requiring customized assistance.Then she came across an investor presentation from a different universe: KKR, one of the world’s largest private equity firms. In it, a KKR executive, Pete Stavros, discussed a model he had been developing to provide employees with an equity stake in companies it purchased, so the workers would reap some benefits if it was flipped for a profit. When all goes according to plan, KKR doesn’t give up a penny of profit, since newly motivated workers benefit the company’s bottom line, elevating the eventual sale price by more than what KKR gives up.In 2021, the two met up to talk about the idea. By that time, Mr. Stavros had decided to start an organization to promote his model more broadly, hoping to reach the 12 million people who work for companies that private equity firms own. Ms. Miller saw it as a way to move much faster.“Me, as Anna-Lisa working at Project Equity — zero ability to influence private equity in any way — I thought, ‘Oh, gosh, maybe this could be a really efficient scale lever,’” Ms. Miller said. “And here’s Pete, not only doing it but wanting to start this nonprofit.”A few months later, she was the founding executive director of the new group, Ownership Works. The organization now has 25 employees working in a sleek New York office space a couple of blocks from KKR’s soaring headquarters at Hudson Yards. A couple of dozen private equity firms have signed on to give the idea a try.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Amid Strikes, One Question: Are Employers Miscalculating?

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    UPS, the Hollywood studios and the Detroit automakers appear to have been taken aback by the tactics and tougher style adopted by new union leaders.The list of gains that the Hollywood writers secured to end a nearly five-month strike with studios once seemed ludicrously ambitious: not just wage increases, but also minimum staffing levels for shows, new royalties on successful series and restrictions on outsourcing writing duties to artificial intelligence.Yet far from an anomaly, the writers’ deal was the latest high-profile labor standoff that seemed to produce substantial gains for workers, and to suggest that they have more leverage than in the past.United Parcel Service employees won large pay increases for part-timers by pushing the company to the brink of a strike, while the lowest-paid academic student employees at the University of California won salary increases of more than 50 percent after a monthlong strike affected thousands of students.Given the unions’ apparent bargaining power and the economic costs to a prolonged work stoppage, the question arises: Why wouldn’t management make its eventual concessions more quickly?The answer, many union and management experts say, is that employers are increasingly miscalculating — acting from a template that applied in previous decades, when employees had little leverage, and underestimating the frustration and resolve in the postpandemic work force.“Psychologically, it’s a big shift: They’ve been in control. They have been able to tell their representatives to go and get concessions on X and Y, to make sure the wage increase is modest,” said Thomas Kochan, an emeritus management professor at the Massachusetts Institute of Technology, referring to corporate executives.“Now, they have to change their expectations internally,” Dr. Kochan added. “They have a lot of work to do.”In example after example, executives appear to have been taken aback by unions’ new, more assertive leaders and their success at rallying members and the public, as well as the ineffectiveness of the employers’ traditional bargaining approach.Sean O’Brien, the Teamsters president, right, attacked UPS over what the union referred to as “part-time poverty” jobs.Jenna Schoenefeld for The New York TimesIn Hollywood, the Alliance of Motion Picture and Television Producers, which represents entertainment companies in negotiations with writers, directors and actors, has frequently tried to forge a deal with one of the three guilds, then push the other two to accept similar terms.That appeared to be the group’s strategy this year as well: After the writers went on strike in May, the alliance reached a deal with directors the next month. But any hope that the writers would be isolated collapsed when SAG-AFTRA, the union representing more than 150,000 actors, went on strike in July.“The playbook was clearly outdated,” said Peter Newman, a longtime independent producer who heads a dual-degree master’s program in business and fine arts at New York University’s Tisch School of the Arts.Still, Mr. Newman said, the strikes saved the studios hundreds of millions of dollars on shows in the short term as Wall Street was pressuring them to cut costs.The producers’ alliance declined to comment for this article.In Detroit, the three major U.S. automakers had grown accustomed to closed-door negotiations with the United Automobile Workers union, in which the parties did not disclose the potential terms until they reached an overall agreement.But in the run-up to this year’s mid-September strike deadline, the union’s new president, Shawn Fain, appeared to wrong-foot executives at Ford Motor, General Motors and Stellantis — which makes the Chrysler and Jeep brands — by disclosing and deriding the companies’ offers. In one case, he literally threw a Stellantis proposal in the garbage.Automakers have expressed impatience with the leadership style of Shawn Fain, center, the United Automobile Workers union leader.Cydni Elledge for The New York TimesThe companies’ responses — a Stellantis executive sent employees a letter saying that “theatrics and personal insults will not help,” while Ford and G.M. have also expressed impatience — may have further galvanized members and built public support. Polls have found that the public supports the autoworkers over the companies by large margins, and that the margins increased after the U.A.W. began a limited strike.“It doesn’t seem like they were prepared for the direction he was headed with his public comments,” David Pryzbylski, a labor lawyer who represents employers at Barnes & Thornburg, said of the reaction to Mr. Fain. “The way they have responded may have escalated it further versus letting it die out.”Stellantis declined to comment. Auto industry executives argue that they have made historically generous offers, and that they haven’t been put off by Mr. Fain’s outspokenness so much as what they say are the showmanship and the unrealistic expectations he has created.Mr. Pryzbylski emphasized that it was too early to tell whether the landscape had tilted to labor’s advantage for the longer term, or just temporarily. The outcome of the U.A.W. strike remains unclear, and the workers’ resolve could diminish if the strike drags on for weeks. Talks between the sides are ongoing.Other management-side lawyers said that while a handful of executives might have miscalculated of late, there was no broader trend in this direction. They say that employers remain capable of assessing and acting in their self-interest, and that unions are equally capable of miscalculating.“People are sophisticated on both sides,” said Marshall Babson, a longtime management-side lawyer and former member of the National Labor Relations Board. “From my experience, good negotiators don’t get distracted by pyrotechnics.”But in many cases, what has changed is not so much the bluster from union leaders as their willingness to follow through — a potentially disruptive shift after years of often empty threats.When Sean O’Brien, the Teamsters president, ran to succeed his longtime predecessor, James P. Hoffa, in 2021, he promised to raise wages for part-time workers at UPS, many of whom had long felt shortchanged.And yet, according to two people close to the negotiations, the company seemed caught off guard when talks broke down over the issue on July 5 — Mr. O’Brien’s initial deadline.Mr. O’Brien and the union spent the next few weeks publicly attacking UPS over what the union referred to as “part-time poverty” jobs before the company agreed to hourly wage increases for part-timers of more than $7.50 over the life of the new five-year contract.The chief executive of UPS, Carol Tomé, said the company had expected contract talks this year “to be late and loud, and they were.”Jenna Schoenefeld for The New York TimesShortly after a tentative deal was reached in late July, the UPS chief executive, Carol Tomé, said the company had expected the negotiations “to be late and loud, and they were.” The company declined to comment for this article.Part of the challenge for employers is public opinion: Confidence in big business is at its lowest point in decades, according to Gallup, while approval of labor unions is close to its highest. Mr. Fain and Mr. O’Brien appear to have devised their public campaigns to press this advantage.Unions also appear to have benefited from new methods of keeping members focused on shared goals — as when writers erupted on social media over the news that the talk show hosted by Drew Barrymore would return before the strike ended. (Ms. Barrymore soon reversed course.)And rank-and-file members appear to have become more committed to their leaders’ negotiating strategy as unions have become more democratic and involved members more in the push for a contract, said Jane McAlevey, a longtime labor organizer and scholar.But perhaps most important, employers seem to be underestimating the determination of workers, who believe they have little to lose from striking amid rising prices and fundamental shifts in their industry that have sometimes made their jobs more precarious.A few weeks after the writers walked off the job this spring, Mae Smith, a strike captain and former writer on the Showtime series “Billions,” predicted in an interview that the economic pain of a protracted strike against the studios would not discourage the writers because “unfortunately they’ve been training us to live off very few months of work for a long time.”The prediction largely held, in something of a departure from the 2007 writers’ strike. Back then, when streaming felt like a distant threat, there were some splits within the Writers Guild over how aggressive to be, said Chris Keyser, a past president of the union.This time, the writers appeared particularly unified by the looming role of artificial intelligence, an issue on which the studios largely refused to engage for months.“A number of C.E.O.s, when we talked to them later about A.I., said that was a mistake,” recalled Mr. Keyser, a co-chair of the writers’ negotiating committee this year.(The writers did compromise on some key issues in the end — there is no ban on studios’ use of scripts they own to train A.I. tools, though the guild reserved the right to challenge instances of this.)Dr. Kochan of M.I.T. said the concession from studios on artificial intelligence was especially significant because it highlighted another shift: employers’ diminished ability to limit negotiations to conventional issues like wages and benefits while often reserving the right to control other aspects of the job, like technology adoption.“For decades, management has been able to say: ‘These are our decisions, our prerogatives. It’s none of your business,’” he said.With the breakthrough on artificial intelligence, he added, “this is a new day — that’s why the writers’ strike was so important.” More

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    Companies Are Pushing Back Harder on Union Efforts, Workers Say

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    Apple, Starbucks, Trader Joe’s and REI are accused of targeting union supporters after organizing efforts gained traction, charges the companies deny.After working for more than seven years at an Apple store in Kansas City, Mo., Gemma Wyatt ran into trouble.Last year, she said, managers disciplined her for clocking in late a few times over the previous several weeks. Then, in February, Apple fired her after she missed a store meeting because she was sick but failed to notify managers soon enough, according to Ms. Wyatt.She was at least the fifth Apple employee the store had fired since this fall, all of whom had been active in union organizing there. The terminations came after two other Apple stores voted to unionize.“It took us time to realize they weren’t firing us just because of time and attendance,” said Ms. Wyatt, who is part of a charge filed with the National Labor Relations Board in March accusing Apple of unfair labor practices.Apple said it had not disciplined or fired any workers in retaliation for union activity. “We strongly deny these claims and look forward to providing the full set of facts to the N.L.R.B.,” a spokeswoman said.A pattern of similar worker accusations — and corporate denials — has arisen at Starbucks, Trader Joe’s and REI as retail workers have sought to form unions in the past two years.Initially, the employers countered the organizing campaigns with criticism of unions and other means of dissuasion. At Starbucks, there were staffing and management changes at the local level, and top executives were dispatched. But workers say that in each case, after unionization efforts succeeded at one or two stores, the companies became more aggressive.Some labor relations experts say the companies’ progressive public profiles may help explain why they chose to hold back at the outset.“You’re espousing these values but saying this other organization claiming the same values” — the union — “isn’t good for your work force,” said David Pryzbylski, a labor lawyer at Barnes & Thornburg who represents employers. “It puts you in a little bit of corner.”Once the union wins a few elections, however, “you pull out all the stops,” Mr. Pryzbylski said.In some cases, the apparent escalation of company pushback has coincided with a slowing down of the union campaigns. At Starbucks, filings for union elections fell below 10 in August, from about 70 five months earlier, and no Apple store has filed for a union election since November.At Starbucks, the company unlawfully dismissed seven Buffalo-area employees last year, not long after the union won two elections there, according to a ruling by a federal administrative judge.A Trader Joe’s store in Louisville, Ky., which was the third at the company to unionize, fired two employees who were supportive of the union campaign and has formally disciplined several more, said Connor Hovey, a worker involved in the organizing. Documents shared by Mr. Hovey show the company citing a variety of issues, such as dress-code violations, tardiness and excessively long breaks.And in advance of a recent union election at an REI near Cleveland, management sought to exclude certain categories of workers from voting, according to the Retail, Wholesale and Department Store Union. It said the chain, a co-op that sells recreational gear, had made no such challenge in two previous elections, in which workers voted to unionize. (The union said the company had backed down after workers at the Cleveland-area store walked out, and the store voted to unionize in March.)Jess Raimundo, a spokeswoman for the United Food and Commercial Workers, which is also seeking to unionize REI stores, said the co-op had formally disciplined one employee in Durham, N.C., and put another on leave and later fired him over a workplace action that took place after the workers filed for a union election last month.Starbucks, which is appealing the ruling involving the Buffalo-area employees, has said the firings and discipline were unrelated to union organizing. A Trader Joe’s spokeswoman said that the company had never disciplined an employee for seeking to unionize but that unionizing efforts didn’t exempt an employee from job responsibilities.An REI spokeswoman said that the co-op sought to exclude certain categories of workers near Cleveland because it believed their duties made them ineligible to join a union, and that it had reached an agreement on the issue independent of the walkout. The spokeswoman said the two Durham employees had been disciplined for violations of company policies, not union activity.Across the companies, the shift is such that some organizers look back on their union campaigns’ early days with an odd measure of nostalgia.“Thinking about it, I wondered why they didn’t fight harder at our store,” said Maeg Yosef, a worker and an organizer at a Trader Joe’s in Massachusetts that became the company’s first store to unionize last year. “They were like, ‘Oops, you won’ and certified us. It was really hard, but relatively easy compared to the things they could have done.”The fight at Apple followed a similar trajectory. The company did not hide its suspicion of unions when workers at a U.S. store first filed for an election in April 2022, in Atlanta. Managers emphasized that employees could receive fewer promotions and less flexible hours if they unionized, and the company circulated a video of its head of retail questioning the wisdom of putting “another organization in the middle of our relationship.”Apple’s response was similar in two other union campaigns. But although the union withdrew its election filing in Atlanta, unions won elections in both subsequent cases — first in Towson, Md., in June and then in Oklahoma City in October.According to workers, the company became more aggressive once union organizers made inroads. Around the time that employees in Oklahoma City filed for a union election in September, managers at the Kansas City store disciplined several who supported unionizing for issues related to tardiness or absences that other workers typically have not been punished for, union backers said.Terminations began before the end of the year. D’lite Xiong, a union supporter who started at the Kansas City store in 2021 and uses gender-neutral pronouns, said they were told they were being fired just before Halloween. Mx. Xiong went on leave to buy time to appeal the decision, but was officially let go upon returning in January.D’lite Xiong, a union supporter, was fired from an Apple store in Kansas City, Mo. several months ago. Will Newton for The New York Times“It didn’t make sense to me — I had recently gotten promoted,” said Mx. Xiong, who speculated that the company discovered their role in union organizing after they sought to enlist co-workers. “I was praised for doing a great job.”The Communications Workers of America, which represents Apple workers in Oklahoma and has supported workers seeking to unionize the Kansas City store, filed the unfair labor practice charge against the company over the firings in March.John Logan, a professor at San Francisco State University who is an expert on anti-union campaigns, said companies often considered the potential dissatisfaction of customers, investors and even white-collar corporate employees when calibrating their response to a union campaign.“There’s something deeply threatening about the idea that you might be on the verge of losing them,” Mr. Logan said of corporate employees.But even these considerations, he said, tend to fade once a campaign gains traction: “The overriding priority is, ‘We have to crush this.’”This year, more than 70 Starbucks corporate employees placed their names on a petition calling on the company to stay neutral in union elections and to “respect federal labor laws.” The National Labor Relations Board has issued dozens of complaints against the company accusing it of illegal behavior, which the company denies.Howard Schultz, the former Starbucks chief executive, was quick to push back against such accusations while testifying before the Senate Health, Education, Labor and Pensions Committee in March, telling one senator, “I take offense with you categorizing me or Starbucks as a union-buster.”In late April, the labor board issued a complaint accusing the company of failing to bargain in good faith at more than 100 stores.A company spokesman attributed the delay to the union, including its insistence on broadcasting sessions using video-chat software, which could make it difficult to discuss sensitive topics.Apple, too, appears intent on signaling that it is not hostile to labor. The company agreed this year to assess its U.S. labor practices for consistency with its human rights policy. And the company has reached tentative agreements with the union at its Towson store on a handful of issues, such as a commitment that workers at the store will receive any improvement in 401(k) benefits that nonunion retail workers at the company might receive.Yet despite these gestures, there has been little progress on most of the union’s top noneconomic priorities, such as grievance procedures, and the company has sought broad contract provisions that could substantially weaken the union. For example, under a proposed a management-rights clause obtained by The New York Times, Apple would have wide latitude to use nonunion workers and contractors to do work performed by union members, which could shrink union membership. Labor negotiations typically start with noneconomic issues before moving to matters like wages and paid time off.Apple did not comment on the contract negotiations, but the workers in Oklahoma City have characterized their initial bargaining sessions as “very productive.”Mr. Pryzbylski, the lawyer who represents employers, said Apple’s preferred management-rights clause was “about as robust and aggressive as you can make it,” though he said it was not unusual for companies to seek such broad rights in their first contract.Workers expressed frustration at the breadth of the management proposal. “Everyone from the union at the table had never seen one so long,” said Kevin Gallagher, who serves on the bargaining committee in Towson. “They basically wanted to maintain all the rights of not having a union.” More

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    You’re Now a ‘Manager.’ Forget About Overtime Pay.

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    New evidence shows that many employers are mislabeling rank-and-file workers as managers to avoid paying them overtime.For four years beginning in 2014, Tiffany Palliser worked at Panera Bread in South Florida, making salads and operating the register for shifts that began at 5 a.m. and often ran late into the afternoon.Ms. Palliser estimates that she worked at least 50 hours a week on average. But she says she did not receive overtime pay.The reason? Panera officially considered her a manager and paid her an annual salary rather than on an hourly basis. Ms. Palliser said she was often told that “this is what you signed up for” by becoming an assistant manager.Federal law requires employers to pay time-and-a-half overtime to hourly workers after 40 hours, and to most salaried workers whose salary is below a certain amount, currently about $35,500 a year. Companies need not pay overtime to salaried employees who make above that amount if they are bona fide managers.Many employers say managers who earn relatively modest salaries have genuine responsibility and opportunities to advance. The National Retail Federation, a trade group, has written that such management positions are “key steps on the ladder of professional success, especially for many individuals who do not have college degrees.”But according to a recent paper by three academics, Lauren Cohen, Umit Gurun and N. Bugra Ozel, many companies provide salaries just above the federal cutoff to frontline workers and mislabel them as managers to deny them overtime.Because the legal definition of a manager is vague and little known — the employee’s “primary” job must be management, and the employee must have real authority — the mislabeled managers find it hard to push back, even if they mostly do grunt work.The paper found that from 2010 to 2018, manager titles in a large database of job postings were nearly five times as common among workers who were at the federal salary cutoff for mandatory overtime or just above it as they were among workers just below the cutoff.“To believe this would happen without this kind of gaming going on is ridiculous,” Dr. Cohen, a Harvard Business School professor, said in an interview.Under federal law, employers are required to pay time-and-a-half overtime to salaried workers after 40 hours if they make about $35,500 or less.Scott McIntyre for The New York TimesDr. Cohen and his co-authors estimate that the practice of mislabeling workers as managers to deny them overtime, which often relies on dubious-sounding titles like “lead reservationist” and “food cart manager,” cost the workers about $4 billion per year, or more than $3,000 per mislabeled employee.And the practice appears to be on the rise: Dr. Cohen said the number of jobs with dubious-sounding managerial titles grew over the period he and his co-authors studied.Federal data appear to underscore the trend, showing that the number of managers in the labor force increased more than 25 percent from 2010 to 2019, while the overall number of workers grew roughly half that percentage.From 2019 to 2021, the work force shrank by millions while the number of managers did not budge. Lawyers representing workers said they suspected that businesses mislabeled employees as managers even more often during the pandemic to save on overtime while they were short-handed.“There were shortages of people who had kids at home,” said Catherine Ruckelshaus, the general counsel of the National Employment Law Project, a worker advocacy group. “I’m sure that elevated the stakes.”But Ed Egee, a vice president at the National Retail Federation, argued that labor shortages most likely cut the other way, giving low-level managers the leverage to negotiate more favorable pay, benefits and schedules. “I would almost say there’s never been a time when those workers are more empowered,” he said. (Pay for all workers grew much faster than pay for managers from 2019 to 2021, though pay for managers grew slightly faster last year.)Experts say the denial of overtime pay is part of a broader strategy to drive down labor costs in recent decades by staffing stores with as few workers as possible. If a worker calls in sick, or more customers turn up than expected, the misclassified manager is often asked to perform the duties of a rank-and-file worker without additional cost to the employer.“This allows them to make sure they’re not staffing any more than they need to,” said Deirdre Aaron, a former Labor Department lawyer who has litigated numerous overtime cases in private practice. “They have assistant managers there who can pick up the slack.”Ms. Palliser said that her normal shift at Panera ran from 5 a.m. to 2 p.m., but that she was often called in to help close the store when it was short-staffed. If an employee did not show up for an afternoon shift, she typically had to stay late to cover.Gonzalo Espinosa said that he had often worked 80 hours a week as the manager of a Jack in the Box but that he had not received overtime pay.Max Whittaker for The New York Times“I would say, ‘My kids get out of school at 2. I have to go pick them up, I can’t keep doing this,’” said Ms. Palliser, who made from about $32,000 to $40,000 a year as an assistant manager. She said her husband later quit his job to help with their child-care responsibilities.She won a portion of a multimillion-dollar settlement under a lawsuit accusing a Panera franchisee, Covelli Enterprises, of failing to pay overtime to hundreds of assistant managers. Panera and representatives of the franchise did not respond to requests for comment.Gassan Marzuq, who earned a salary of around $40,000 a year as the manager of a Dunkin’ Donuts for several years until 2012, said in a lawsuit that he had worked roughly 70 hours or more in a typical week. He testified that he had spent 90 percent of his time on tasks like serving customers and cleaning, and that he could not delegate this work “because you’re always short on staff.”Mr. Marzuq eventually won a settlement worth $50,000. A lawyer for T.J. Donuts, the owner of the Dunkin’ Donuts franchise, said the company disputed Mr. Marzuq’s claims and maintained “that he was properly classified as a manager.”Workers and their lawyers said employers exploited their desire to move up the ranks in order to hold down labor costs.“Some of us want a better opportunity, a better life for our families,” said Gonzalo Espinosa, who said that in 2019 he often worked 80 hours a week as the manager of a Jack in the Box in California but that he did not receive overtime pay. “They use our weakness for their advantage.”Mr. Espinosa said his salary of just over $30,000 was based on an hourly wage of about $16 for a 40-hour workweek, implying that his true hourly wage was closer to half that amount — and well below the state’s minimum wage. The franchise did not respond to requests for comment.The paper by Dr. Cohen and his co-authors includes evidence that companies that are financially strapped are more likely to misclassify regular workers as managers, and that this tactic is especially common in low-wage industries like retail, dining and janitorial services.Still, lawyers who bring such cases say the practice also occurs regularly in white-collar industries such as tech and banking.When companies are financially strapped or in low-wage industries like retail and fast food, they are more likely to misclassify regular workers as managers, a recent report found.Max Whittaker for The New York Times“They have a job title like relationship manager or personal banker, and they greet you, try to get you to open account,” said Justin Swartz, a partner at the firm Outten & Golden. “They’re not managers at all.”Mr. Swartz, who estimated that he had helped bring more than two dozen overtime cases against banks, said some involved a so-called branch manager inside a big-box store who was the only bank employee on site and largely performed the duties of a teller.The practice appears to have become more difficult to root out in recent years, as more employers have required workers to sign contracts with mandatory arbitration clauses that preclude lawsuits.Many of the cases “are not economically viable anymore,” said Mr. Swartz, citing the increased difficulty of bringing them individually through arbitration.Some lawyers said only an increase in the limit below which workers automatically receive overtime pay is likely to meaningfully rein in misclassification. With a higher cutoff, simply paying workers overtime is often cheaper than avoiding overtime costs by substantially increasing their pay and labeling them managers.“That’s why companies fought it so hard under Obama,” said Ms. Aaron, a partner at Winebrake & Santillo, alluding to a 2016 Labor Department rule raising the overtime limit to about $47,500 from about $23,500. A federal judge suspended the rule, arguing that the Obama administration lacked the authority to raise the salary limit by such a large amount.The Trump administration later adopted the current cutoff of about $35,500, and the Biden administration has indicated that it will propose raising the cutoff substantially this year. Business groups say such a change will not help many workers because employers are likely to lower base wages to offset overtime pay. More

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    Wave of Job-Switching Has Employers on a Training Treadmill

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    The rise in turnover since the pandemic started has a cost in productivity: “It’s taking longer to get stuff out the door.”One after another, employees at the New Hampshire manufacturer W.H. Bagshaw said goodbye.One went to a robotics company in nearby Boston. Another became an electrician’s apprentice. In all, 22 workers have left W.H. Bagshaw in the past two years — no small matter for a company that has a work force of fewer than 50. That level of departures was also far from normal: In 2019, the company lost just one or two employees; the turnover rate in 2022 was over 30 percent.W.H. Bagshaw, which makes precision machined parts for the aerospace and medical industries, was mostly able to replace the workers who left — but at a cost. Hiring employees and bringing them up to speed could include teaching them how to operate complex, multi-axis turning machines. That took time and energy, preventing the company from running at full capacity.Production slowed. The number of on-time deliveries to customers slipped.“It’s taking longer to get stuff out the door,” said Adria Bagshaw, the company’s vice president.A hallmark of the pandemic era has been the surge in employee turnover. Since 2021, an extraordinary number of Americans have been quitting their jobs — some flexing their power in a white-hot labor market, others re-evaluating their priorities amid a destabilizing pandemic.In November 2021, more than 4.5 million workers voluntarily left their jobs, according to government data, the most in the two decades that the government has been keeping track. That number has slowly been declining in recent months, but it is still far higher than before the pandemic. The churn has been particularly high in low-wage sectors such as leisure and hospitality, where intense competition for labor led workers to pursue better-paying opportunities.All that turnover has taken a toll on productivity — for individual companies, and perhaps for the economy as well.Economists say the wave of job-switching could be one factor in the weak productivity growth that the U.S. economy has experienced in recent years. Early on, some experts expected the pandemic to unleash productivity by forcing companies to embrace new technologies and ways of working. Instead, productivity has fallen slightly over the past two years.“All that turnover, all that hiring, all that training you have to do — that takes away from your day job,” said Sarah House, an economist at Wells Fargo. “So it’s essentially less output at the end of the day.”At W.H. Bagshaw, the perpetual need to train employees has been a central reason for the production slowdown.“Anytime we bring in a new hire, they’re not productive on Day 1 — usually they’re shadowing someone for a few weeks or months,” Ms. Bagshaw said. “You’re investing in someone for the future. Whoever is doing the training, they’re slowed down from their normal productivity.”The State of Jobs in the United StatesEconomists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.Disabled Workers: With Covid prompting more employers to consider remote arrangements, employment has soared among adults with disabilities.Productivity — in its simplest form, the value of the goods and services that a typical employee can produce in an hour of work — is notoriously difficult to measure accurately. But it is one of the most important measures of the health of an economy, particularly during a period of rapid inflation. Productivity is what allows the economic pie to grow: If workers can produce more in the same amount of time, then their employers can afford to pay them more per hour without either raising prices or cutting into profits.When productivity stagnates, however, pay becomes a zero-sum game: If workers want to make more money, then the money has to come from somewhere else.“Really the issue at the heart of everything — from inflation to growth to companies and head count — it’s about productivity, and that turnover concern is huge,” said Nela Richardson, chief economist for ADP, a payroll processing firm.Sobeyda Rodriguez, a machine operator at W.H. Bagshaw in Nashua, N.H.M. Scott Brauer for The New York TimesW.H. Bagshaw makes parts for the aerospace and medical industries.M. Scott Brauer for The New York TimesIn the past two years, 22 workers have left W.H. Bagshaw, which has a work force of fewer than 50.M. Scott Brauer for The New York TimesOrdinarily, economists consider turnover good for productivity. A healthy amount of job-switching allows workers to find the most suitable jobs, and employers to find the employees who will be the best fit. Over time, the most productive firms — which can afford to pay the most — will tend to attract the most productive workers, lifting the economy as a whole. In the years before the pandemic, many economists fretted about the declining rate of turnover, which they worried was a sign of an increasingly stagnant, even ossifying labor market.But the impact of the Great Resignation is complicated: Too much turnover all at once can create its own problems.For nearly two years, companies have complained that they are caught in an unending cycle of hiring and training workers, only to see them leave in a matter of weeks or months. Constant recruiting and training drains management resources, and new hires often do not stick around long enough for that investment to pay off. Veteran employees are often asked to pick up the slack, leading to burnout.These challenges have been on vivid display in the hospitality industry, which experienced much-higher-than-normal turnover rates in this period.“A lot of restaurants are in survival mode, and survival mode creates a vicious circle,” said Dominic Benvenuti, an owner of Boston Pie, which owns more than two dozen Domino’s locations in New England.Store managers can’t hire enough workers, Mr. Benvenuti said, so they demand too much from new employees too quickly, sending them out on deliveries or putting them to work in the kitchen without sufficient training. When those workers inevitably fail, they quit, compounding the labor shortage and continuing the cycle.“They are thrown into such chaos and stress that it overwhelms them, and they leave,” he said. “It is never-ending if someone doesn’t end it.”The solution, Mr. Benvenuti said, is to focus on training and to recognize that new hires won’t be as productive as 10-year veterans right away. But that is easier said than done when customers are calling to ask why their pizzas are late.There may be some relief in sight for businesses. The turnover rate has declined somewhat since its peak at the end of 2021, and many employers, both public and private, expect that trend to continue this year. That could give companies a chance to focus on tasks neglected during the pandemic chaos, like training employees and updating business processes.But some workplace experts say higher-than-normal turnover rates are likely to persist, particularly in white-collar industries where remote work has become more common. For employees who work from home some or all of the time, job hunting no longer requires manufacturing an excuse to be out of the office or worrying about a boss finding a résumé on the office printer.“It’s just easier to switch jobs now,” Ms. Richardson said. “Back in the old days, you had to meet at a Starbucks, and if you ran into another employee who was at that same Starbucks that was five blocks away from the closer Starbucks, you knew they were on a job interview.”Now, she said, “if you’re working from home, you can do a whole day’s interview from the comfort of your living room and no one’s the wiser.”Many economists say it is still possible that the pandemic-era increase in turnover will be beneficial for productivity, even if that isn’t the case yet. People who thrive working from home will gravitate toward companies that embrace remote work; people who do better in person will be snapped up by companies that require employees to come into the office. Industries that remade themselves to survive the pandemic — like restaurants, retailers and hotels — will figure out which changes will work in the long term, and which employees are well-suited to the new way of doing business.“You’re investing in someone for the future,” said Adria Bagshaw, W.H. Bagshaw’s vice president.M. Scott Brauer for The New York TimesThe pandemic’s disruption contributed to a surge in entrepreneurial activity, a key driver of the kind of innovation that could lead to a more productive economy. The dynamics have also spurred many companies to re-evaluate or adapt long-held practices to increase efficiency.“There’s an enormous amount of experimentation going on right now, and it’s showing up in so many different ways,” said John Haltiwanger, a University of Maryland economist who studies job turnover.“I think it will be healthy, but not immediately,” he added. “There’s a long-term payoff to this, but it could literally take years, not months, for this to kick in.”When Rahkeem Morris started the company HourWork several years ago, his goal was to help fast-food companies and other businesses hire more efficiently. But last year, the company pivoted to a new focus: retention.A fast-food worker typically takes six months to reach full productivity, Mr. Morris said, but at many companies, the typical employee in the industry leaves after just 75 days. HourWork now offers a service to help store owners keep in touch with staff members by text message and to analyze their responses to identify issues that could be causing employees to quit — an approach the company says can reduce turnover, particularly among new hires.Mr. Morris, who worked in fast food as a teenager before getting degrees from Cornell and Harvard Business School, said companies had long tried to deal with staffing shortages by focusing on recruitment. He likened that approach to trying to fill a leaky bucket — if companies do not also try to keep their workers, no amount of recruiting will solve their problem.The Great Resignation, however, may finally have led companies to rethink that approach.“We’re starting to see the tide shift and the sentiment around that change,” Mr. Morris said. “Fixing the leaky-bucket problem will get these restaurants to full productivity.” More

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    Activists Crashed Exxon’s Board, but Forcing Change Will Be Hard

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    The tension between climate goals and lifting Exxon Mobil’s profits could make it difficult for activists to make progress.The growing urgency to address climate change and concerns about the financial performance of Exxon Mobil aligned this week to help activist investors place two directors on the company’s board.But it is not clear if the activists can deliver on their dual goals — reducing the emissions that are warming the planet and lifting the profits and stock price of Exxon. The potential tensions between those objectives could doom the investor effort to transform the company and the oil industry.Getting Exxon, a behemoth company with $265 billion in revenue in 2019 and oil and gas fields around the world, to switch to cleaner energy will be a yearslong and difficult process. It is unlikely to produce quick returns and could sap profits for a while as the company spends a small fortune to retool itself.And the biggest investment firms, which lent critical support to the activists and control a lot of Exxon’s stock, may be too timid to keep the pressure on company executives and board members who are determined to resist big changes.The manifesto put together by Engine No. 1, the hedge fund with a tiny stake in Exxon that led the dissident effort, is not particularly extreme. Nor does it contain a lot of details. The two people who won seats on the board declined interview requests, citing their new roles.“Two votes on a board of a dozen directors doesn’t win the day,” said Dan Becker, director of the Center for Biological Diversity’s Safe Climate Transport Campaign. Still, he argued that it was “enough to bring a message” to the rest of the board. “Will it change everything? Probably not quickly.”Engine No. 1’s victory, which was not expected and came in the face of fierce opposition from management, has delivered a jarring reminder of the perils of doing too little to change — and veteran oil executives say it will encourage activists to push for change at other companies like Chevron, the second-largest U.S. oil company after Exxon.“This is an example of the domino theory,” said Jorge Piñon, a former senior executive at Amoco and BP who is now at the University of Texas at Austin. “One piece has fallen and you will see others follow. Exxon and Chevron are going to face quite a bit of pressure that in my opinion they are not going to be able to withstand and they will have to give in to new demands.”With governments around the world making ambitious commitments to cut emissions, including offering incentives for electric vehicles, and requiring utilities to shut down power plants powered by fossil fuels, the demand for Exxon’s main products could decline, depressing profits. Investors say Exxon and Chevron have been too slow to adapt to that shift compared with European oil companies like BP and Royal Dutch Shell.“If you want to be a public company in a carbon-intensive industry you are going to have to convince investors that you still have a viable business in a low-carbon future,” said Mark Viviano, a managing partner at Kimmeridge, an energy-focused private equity firm.Exxon management says it realizes it must prepare for a lower-carbon future, and has supported the goals of the Paris climate agreement. But the company gave up on solar energy decades ago, and today its efforts to remake itself for an energy transition rely on some moonshot ideas that may not work out.It is a global leader in capturing carbon from industry and storing it below ground, and in recent weeks it has proposed an enormous $100 billion carbon capture and storage project along the Houston Ship Channel that could be a model for the world. But for the plan to be economically viable, the federal government would have to impose a carbon tax or another kind of price on carbon, a tough sell in Washington these days.Exxon has also worked for years to make advanced biofuels from algae, a project that other companies have abandoned. And it continues to bet heavily on exploration for oil and gas at a time when demand for such products may be peaking.Shareholders voted to retain Darren Woods as chief executive and chairman, a move that a Morgan Stanley research report viewed as an endorsement of his strategy to spend less on capital projects, reduce costs and continue to pay a generous dividend.“I’m not sure Exxon is going to change how they are going to deal with the energy transition,” said Mark Boling, a former executive vice president at Southwestern Energy, a Texas oil and gas company. “I think they have made a decision on how they are going to go and a few new board members are not going to make a difference.”Engine No. 1 managers are not saying much about their plans.“We’ve redefined what’s possible,” Chris James, founder of Engine No. 1, said in an interview after the vote. “Our overall goal is really greater transparency, which brings accountability, transparency on the impacts of what the business does as well as accountability on how to manage those impacts.”The two Engine No. 1 nominees who won election so far, Gregory Goff and Kaisa Hietala, have deep experience in the energy industry. Mr. Goff was chief executive of Andeavor, a refining and marketing company, while Ms. Hietala was executive vice president at Neste, a Finnish refiner and pioneer in biofuels.Engine No. 1 managers come across as cautious and modest in interviews. They don’t make brash pronouncements or hurl insults at Exxon as many climate activists often do.“There is no one big change,” said Charlie Penner, Engine No. 1’s head of active engagement. “Nothing is going to happen quickly.”Some big asset managers contend that companies like Exxon will have a better performance over the long run if they reduce their reliance on selling oil and gas, which many believe will fall in price if the world moves toward electric vehicles.Bryan Derballa for The New York TimesThe votes of giant asset management firms with big stakes in Exxon were critical in securing victory for Engine No. 1’s nominees. But it’s not clear how hard asset managers that voted for the hedge fund’s candidates like BlackRock, Exxon’s second-biggest shareholder, and Vanguard, its largest, will now push for climate-focused objectives.Laurence D. Fink, BlackRock’s chief executive, has said in recent years that he sees climate change as a big threat — and his firm has often used its enormous voting power to influence companies, and frequently targeted directors.In explaining its Exxon votes, BlackRock said Wednesday that the company had not done enough to assess the impact of a reduction in demand for fossil fuels, and contended this had “the potential to undermine the company’s long-term financial sustainability.”These big investors place a lot of faith in companies and the profit motive to make changes that can cost trillions of dollars. This year, Mr. Fink wrote that he had “great optimism about the future of capitalism and the future health of the economy — not in spite of the energy transition, but because of it.”But investors have not always rewarded companies that have announced ambitious plans to reduce emissions and move toward cleaner energy.Over the last five years, Exxon’s shares have fallen by about a third — a period over which the S&P 500 stock index was up about 100 percent. Its stock has done worse than the shares of other large oil companies. Yet, the shares of BP and Shell, two European companies that are investing a lot in cleaner sources of energy, are also lower — BP is down more than 17 percent over five years and Shell is down more than 26 percent.And despite their efforts, energy companies as a whole have not reduced emissions by nearly enough to stop temperatures rising above levels that scientists believe are dangerous for the planet, and many experts are calling for more far-reaching changes. The International Energy Agency said last week that countries needed to stop approving new oil and gas fields immediately for the world to reach net zero carbon emissions by 2050.Roberta Giordano, finance program campaigner for the Sunrise Project, an environmental group, said BlackRock, Vanguard and other asset managers needed to go much further, starting with the removal of Mr. Woods as Exxon’s chief executive.“Once again this shareholder season, BlackRock has failed to fully use its massive voting power on climate,” she said.But more optimistic analysts argue that Exxon could help the world reduce emissions and make money doing it. For example, the company’s experience with offshore oil drilling could be used to build offshore wind farms, said Geoffrey Heal, a professor at Columbia Business School. And Exxon could spend more on technology that removes carbon from the atmosphere and help make it affordable.“If I was one of the directors,” Mr. Heal said, “I’d be pushing for that.” More