Volume 2, Issue 7
April 15th, 2014
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In earlier issues we have discussed how the Obama Administration uses federal agencies to hand policy victories to its union allies after failing to deliver its promise on card check legislation when Democrats controlled both houses of Congress and the White House.
Beginning in 2013, and continuing in 2014, with the President’s re-election no longer a moderating factor and a problematic national election for Democrats looming this fall, the attack on employers – and in particular nonunion employers – has intensified.
You need look no further than the President’s own declaration that he intends to spend his political capital and deploy the recourses of his office to attack a problem that no poll has shown is of major concern to most citizens: income inequality.
Whether you regard this as an attempt to address an important if not necessarily popular issue, or as a cynical maneuver to district attention away from the disastrous implementation of Obamacare, sluggish employment growth and foreign policy missteps, if your job requires you to meet a payroll, the resulting regulatory changes will impact you.
Take the current nationwide campaign to raise the minimum wage at the local, state and federal levels. While Democrat politicians from big cities, Blue states and in Congress echo Obama’s rationale that these workers deserve a raise (meaning: “our opponents think they don’t”), the Congressional Budget Office estimates that raising the minimum wage to $10.10 per hour would eliminate 500,000 jobs.
The President already has raised the minimum wage for federal contractors, and more recently he directly ordered changes in wage regulations governing overtime pay and the definition of exempt employees.
In a March 13 memo to the Secretary of Labor, Obama declared that “regulations regarding exemptions from the Act’s overtime requirement, particularly for executive, administrative, and professional employees (often referred to as ‘white collar’ exemptions) have not kept up with our modern economy. Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage.”
Speaking at a recent congressional hearing Labor Secretary Thomas Perez said actions can be expected to include raising the minimum salary for exempt employees from the current $455 a week and altering the standard where employees who perform management functions only a small percentage of their work time are exempt from overtime. (This follows a recent court determination confirming that truck dispatchers are legally considered management employees).
Adjusted for inflation, the exempt weekly salary minimum, which was adopted a decade ago, would be a little more than $560 today. However, for decades the Department of Labor rejected the idea of inflation-adjustment as a basis for setting the minimum because that approach gives no weight to other considerations.
Neither the presidential memo nor comments from other federal officials have been forthcoming with any details about what the proposed changes can be expected to look like. In addition, any changes are likely to be two years away because of the demands of administrative procedural law.
One stumbling block the President and Perez face is that the Fair Labor Standards Act – the federal law that governs overtime pay and defines exempt versus non-exempt status – contains provisions they can’t get around unless new legislation is passed.
For example, the FLSA exempts certain computer employees in terms largely identical to provisions contained in the current DOL regulations. Changing that would require congressional action.
Although other federal agencies are working with each other and unions to advance a pro-labor agenda, the President’s actions show that DOL is expected to form the leading wedge of the war on economic inequality. Speaking at an event last October, Perez explicitly linked the war on poverty to a strong labor movement.
The department recently either has issued or is ready to publish 24 final rules in the months ahead. In addition, DOL is working on 31 rules at the proposed stage, 11 regulatory actions in the pre- rule category, and six long-term regulatory efforts.
One positive development is that DOL recently postponed issuing its “Persuader” rules, which would require employers to report on companies and individuals who give them labor relations advice. Lawyers – who have almost as much influence on Democratic policymaking as organized labor – objected to what they view as improper interference in attorney-client confidentiality.
The unions and an alphabet soup of other federal agencies continue to work together on a host of initiatives we regularly cover. In some cases this inter-agency collusion is informal, in others it results in published Memoranda of Understanding laying out how the agencies will cooperate.