Attempting to Help the Working Poor

Every now and then, local governments try to do something innovative to help those low-income workers who take unenviable private sector jobs to earn enough money to keep them off welfare.

In the wide and growing world of poverty in America, those rare acts of local government decency can only help a relatively few people; but they could, in theory, be expanded substantially.

However, when they threaten to cost some wealthy corporate executives a few bucks, their lobbyists can usually block them. If that fails, then the executives’ talented well-paid lawyers can most often get the courts to scuttle the pro-worker proposals.

One sad example, a decade old, has just been settled. The other, even sadder, is fairly new and still unresolved.

The just-settled one involves a Las Vegas multimillionaire, Eugene Maday, who won $12.75 million from the City of Los Angeles on Jan. 8 because the city tried to help poorly paid taxi drivers and prevent Maday from breaking their union.

That story began in the 1970s, when a former Los Angeles Teamsters union official, Homer Woxberg, bought a Las Vegas taxi company with money he borrowed from the Teamsters’ Central States pension fund.

Woxberg later sold his unionized company to Maday, who quickly got rid of the Teamsters as the drivers’ representative.

Meanwhile, Yellow Cab in Los Angeles was closed down as part of a bankrupt corporation. Its drivers--Teamsters--feared that they would be permanently out of jobs unless a buyer could be found to take over the company.

So, despite the union’s experience with Maday in Las Vegas, Los Angeles Teamsters decided to help Maday persuade the City Council here to grant the franchise he was seeking to operate the defunct Los Angeles Yellow Cab.

The Teamsters helped because Maday said he would pay drivers fair wages and benefits and recognize the union as their bargaining agent.

Maday got the franchise. In 1981, though, he said he was losing money and demanded deep cuts in the wages of drivers--mostly blacks and Latinos--who were making only about $150 a week. They did have health insurance and some other benefits.

The workers offered some concessions, but Maday insisted on more. He wanted to reduce their poverty-level income and get rid of most of their much-needed health insurance.

The city moved in to assist. It offered to let Maday hike cab rates so he could make a profit without reducing the earnings or benefits of his drivers. Maday rejected the offer because he didn’t want to divulge his financial data.

The drivers refused to accept Maday’s demands and went on strike. At their union’s request, the City Council voted almost unanimously against renewing Maday’s franchise because his struck company was not providing cab service to the city.

The drivers hoped that would mean a new, more reasonable owner would take over. Instead, Maday’s lawyers sued the city for interfering in a labor dispute. The U.S. 9th Circuit Court of Appeals twice ruled Maday was wrong, but the U.S. Supreme Court came to his rescue.

The court ruled that the federal government had jurisdiction over labor disputes, and, thus, the city acted illegally. After some more legal rigmarole, Maday was awarded the $12.75 million, including a $1.5-million fee for his attorneys on Jan. 8.

The city also has to pay even more to its private attorneys, Latham & Watkins: $1.6 million for their vain fight against Maday’s legal attack. Maday said, “I am getting congratulations more about my staying power than for winning.”

The Las Vegas business executive and all of the lawyers involved on both sides won. The poverty-level drivers, their union and the taxpayers lost.

Now about the second case. The Yellow Cab victory delighted developers who want to kill another admirable attempt by the City of Los Angeles to help poverty-level workers. This instance concerns service workers in downtown hotels and office buildings--mostly minorities.

The city’s Community Redevelopment Agency said that when it helps developers regenerate downtown Los Angeles with such things as tax breaks, the developers should pay janitors, maids and other service workers a “livable income,” provide medical insurance and other benefits.

Last March, the developers protested, saying the city’s proposed plan to help workers was as good as a union contract.

Joseph Herman, attorney for one developer, may be right--legally--in predicting that the courts will kill the city’s proposal to help those who would have been hired for jobs in a planned hotel, the Ritz-Carlton. He bases his opinion on, among others, the Yellow Cab ruling.

The developer said the city’s proposed “livable wage” policy would make the hotel unprofitable, so they canceled the planned hotel.

The developer, Gemtel Corp., was so upset by the city’s proposed policy that it is suing the city for more than $70 million, arguing that the firm has already spent millions in “development costs” and is losing millions more in potential profits from the hotel it never built.

Gemtel’s lawyer, Herman, says the city cannot set any minimum wages or benefits in the private sector because authority to do that is preempted by the state and federal government.

Maybe the courts will fool us this time and rule that to be fair, the city should help workers when it helps developers.

All local governments across America should be able to join the much-neglected fight against poverty with similar rules. The Yellow Cab decision, though, is an ominous sign of what could happen to that rational idea.

But then, as former President Carter once asked, “Who ever said life is fair?”

Harry Bernstein’s column now appears on alternate Tuesdays.