Labor Law Lunacy

The Wall Street Journal on February 1, 2008 had a page one article "In a French Twist, Infamous Trader Gets Hero Treatment."  The article continues the saga of a low-ranking bond trader named Jerome Kerviel who cost the bank $7.2 billion by making unauthorized trades that lost money.  Earlier articles had explained how Mr. Kerviel concealed his illicit trading and spoke of the bank's need to beef up its oversight.

The February 1 article took a different slant.  The article opens:

Societe Generale [Kerviel's employer] says wayward trader Jerome Kerviel lost the bank $7.2 billion.  But that was last week.  Now he's on his way to cult celebrity--and he still hasn't lost his job.

The article explains that before any French employee can be fired, the employer must meet with him and explain the reasons for the firing.  The employee has a right to be represented by a lawyer, a trade union official, or anyone else whom he decides to bring along.

There's just one difficulty.  The French court which is investigating Mr. Kerviel's activities to see if a crime or crimes were committed has forbidden him to talk to the bank during the investigation.  The bank can't talk to him, so they can't fire him, at least not formally.

"This is not like America or England.  We have rules that protect employees no matter what they do wrong," says Stephane Boudin, a Paris lawyer specializing in labor disputes.  "...Ms. Meyer [Kerviel's lawyer] said the bank had left Mr. Kerviel in a bind: He can't go to work, but because he's still technically an employee, he can't sign up for unemployment benefits.

This article gives us reason for optimism.  Some Americans have been concerned about the dollar's fall against the Euro.  If this is a sample of the workings of France's labor laws, two points become clear:

• We can understand President Sarkozy's campaigning on the idea that French labor laws lead to excessive costs and that they need to be reformed.
• Changing the ways of the labor bureaucracy is like sprinting through treacle.  Given recent resistance to Mr. Sarkozy's efforts at reform, we needn't worry much about long-term French competition, they're well into the downside of the Confucian Cycle.

We should worry about Chinese competition; the Chinese have fewer labor laws than we do.

We Do It Too

Before we get too complacent, we need to remember that US labor practices can be pretty gruesome.  The UAW contract makes it nearly impossible to fire Big Three union members even when they sleep on the job or steal from their employer.

I worked at a Detroit engine plant some years ago and learned of a group of UAW members who'd conspired to steal an engine per day over a period of years.  Their scheme involved changing the counts in the plant computers so the books would balance; the same basic technique is used to fiddle voting machines.

They were caught when plant management added another count point for some other purpose and the counts could not be reconciled between the new computer and the old ones.  They couldn't be fired, however, that would have been excessive exploitation of the downtrodden laboring masses by greedy blood-sucking capitalist management.

The UAW didn't mind their members stealing from contractors either.  My team was installing a computer-based vision system and one of our cameras went missing over a weekend.  About a week later, we heard that one of the plant electricians had been complaining that our camera burned out his VCR and that he wanted us to replace it.  Things didn't get quite that far in that he never made a formal request, but we didn't get our camera back either.  We ended up keeping all our parts locked up tightly and we even had to chain our $5.95 kitchen stool to our cabinet.

Rumor has it that it has become a bit easier to fire UAW slackers and thieves.  As one who believes that it would be good to retain at least some manufacturing capability in the US, I hope that this is true.