Troubled states may fight plant closings
Any recession-battered company that wants to close down an unprofitable factory these days already has a sizable public relations problem on its hands. Leaving town is guaranteed to rouse the ire not only of workers and their families, but also of supporting industries, merchants, editorial writers, and local politicians.
And now these forces have some important allies who are out to make such a move even more difficult. In 21 states, legislatures currently in session are considering bills to regulate plant closings.
Few, if any, of these are expected to pass in this session, and some governors are on record indicating that they would veto any such legislation reaching their desks. But analysts say the purpose behind introducing them now is to create a more favorable political climate for later passage.
One of the most recent states to see a plant-closing bill is New Jersey - no stranger to major shutdowns. In late February, General Motors announced it would close its big Fisher Body Plant at Trenton, N.J., within two years. The plant now employs more than 3,600 workers. Less than two years ago, in a widely publicized move, Ford Motor Company shut down its assembly plant at Mahwah, N.J. , idling 4,500 workers.
Legislation is pending in the state General Assembly, prepared by House Speaker Alan Karcher (D), that would set up a joint council of labor, management , and public officials to monitor business conditions and try to head off shutdowns.
Plant-closing legislation as such is not new. It is prevalent in Western Europe, most notably in the Netherlands and Belgium, which impose stringent requirements on any firm intending to shut a plant or even lay off large numbers of workers.
Maine has had a law on the books since 1971 that regulates shutdowns. But the Maine law, twice amended, provides for only a $500 penalty to a firm that wants to move out. The law is being tested in the courts. Wisconsin also has a plant-closing law.
Most of the states where such legislation has been introduced are in the industrial Northeast and upper Midwest, which have been hit hardest by the economic downturn of recent years. But the trend also extends to such non-Frost Belt states as Kentucky and California, according to Probe International Inc., a Stamford, Conn., political and business research firm that has just concluded a study of the subject. The California bill, in fact, is considered closest to passage of any.
These states have felt compelled to act, in the view of some analysts, not only because of the declining economy but also because no help has been forthcoming from Washington. Not one plant-closing bill has been reported out of committee in Congress. Moreover, the leading congressional authority on the subject was former Sen. Harrison Williams (D) of New Jersey, who resigned his office earlier this month. Although new plant-closing legislation may be filed in both the House and Senate this session, at least one close observer does not expect early passage.
Generally, says a Probe International report, the proposed legislation at the state level would mandate that companies:
* Announce publicly their intention to close plants from 60 days to as much as two years in advance.
* Offer one week's worth of severance pay for each year of service by an employee.
* Pay for the retraining and relocation of workers affected by the closings.
* Compensate communities where plants are shut down for their projected loss of tax revenues.
Like the Karcher bill in New Jersey, most plant-closing legislation has been filed by Democrats, with the support of organized labor unions and local activist groups.
Often, however, governors of the affected states oppose such legislation on grounds that it would needlessly tie the hands of potential investors.
Gov. William Milliken (R) of Michigan calls ''well intentioned'' a bill that would mandate two-year advance notification before a plant employing 100 or more workers could close. Nonetheless, he proclaimed last year: ''We cannot attract new jobs by imposing such restrictions . . . We can develop more jobs and retain those of Michigan's present labor force by taking steps to make (the state) a more attractive place in which to do business.''
Other opposition to plant-closing bills comes from business groups, like the Connecticut Business and Industry Association (CBIA). Responding to a bill before the Legislature in Hartford this month, the CBIA reported to its members: ''The danger . . . is that it legislates economic inefficiencies. It will inevitably mean higher costs and more inflation. The continued vitality of our economy requires the closing of old plants and replacement of declining industries with new ones.''