Labor and Employment Changes Expected in Obama Administration

January 9, 2009

With the seating of a new Congress this week and the Presidential Inauguration fast approaching, significant changes to a variety of federal labor and employment laws figure prominently on the political agenda.  The labor movement spent hundreds of millions of dollars to support President-elect Obama and elect a near filibuster-proof Senate through which it hopes to enact far-reaching legislation giving unions the upper hand with management so that they can reverse decades of declining membership.  The President-elect and sizeable majorities of the House and Senate also believe that many current employment laws disfavor employees, and that enforcement in the Bush Administration was lax.  Political observers expect employment legislation, regulation, and enforcement to be among the top priorities in the new Administration.

This newsletter offers a summary of employment areas where the greatest activity is expected in the new Administration.

Unionization 

• Labor unions have made “card check” legislation a top priority.  The concept has enjoyed widespread congressional support, was co-sponsored by President-elect Obama, and is receiving extensive media coverage.  The measure would require companies to bargain with a union if a majority of employees sign cards supporting unionization, without the protections of a secret ballot election or prior notice to the company.  Notwithstanding the recent well-publicized difficulties of traditionally unionized industries and continuing economic challenges facing the country, organized labor will press aggressively for passage of such legislation as recognition for its support in the last election.
• A separate provision of the “Employee Free Choice Act,” or “EFCA,” would empower arbitrators to craft binding collective bargaining agreements out of whole cloth if the company and newly certified union cannot agree to terms within 120 days.  By binding employers for two years to labor contracts to which they had not agreed, this provision would alter one of the key underpinnings of labor relations for more than half a century.
• Under the “RESPECT Act,” co-sponsored by then-Senators Obama and Biden, the definition of supervisory employees not subject to union representation would be narrowed to exclude first-line, working supervisors.  That change would create bargaining units composed of both rank-and-file employees and the “bosses” who direct their work, depriving employers of the ability to use those closest to the workforce as an effective voice in organizing campaigns.
• The “Patriot Employers Act” would amend tax code to provide tax incentives to employers who satisfy certain criteria, including providing employees with certain levels of compensation and retirement benefits and funding at least 60% of employee health care coverage.  Infrequently emphasized, however, is the bill’s requirement that employers remain “neutral” in union organizing campaigns, thus creating a tax penalty for employers who exercise their free speech rights to resist union organizing.

“Equal Pay” and Non-Discrimination 

• Although strong opposition is expected to the card check and binding arbitration provisions of the Employee Free Choice Act, other employment legislation that has stalled during the Bush Administration is expected to move quickly, perhaps as a compromise on EFCA.  High priorities for labor unions and employee advocates include legislation that would facilitate class actions alleging underpayment of women and minorities, prohibit clauses requiring arbitration of workplace disputes as a condition of employment, and eliminate caps on damages—including punitive damages—in cases alleging discriminatory termination, failure to promote, and the like.
• Legislation very likely to pass is some version of the “Lilly Ledbetter Fair Pay Act,” which would overturn recent Supreme Court precedent on the timeliness of challenges to pay decisions.  Under the proposed law, allegedly discriminatory pay decisions made years—or even decades—ago would be subject to challenge each time an employee received a new pay or benefit check reflecting the decision.  The approach would expose employers to liability for decisions occurring far back in a worker’s employment history.
• The Family and Medical Leave Act may be expanded—President-elect Obama has said that one of his key priorities in the employment area is to “stop[] talking about family values and start pursuing polices that truly value families, such as paid family leave, flexible work schedules, and telework.”  The “Working Families Flexibility Act” would require individual negotiations with employees about their work hours, imposing civil fines on employers who fail to comply and a range of remedies for employees who experience retaliation.
• With mass layoffs expected to continue, the Worker Adjustment and Retraining Notification (WARN) Act may be expanded to cover a broader range of reductions-in-force and to require more advance notice to employees.
• The “Employment Non-Discrimination Act” would prohibit discrimination in the workplace based on sexual orientation, but its provisions regarding gender identity raise difficult issues (such as which workers may use which workplace restrooms) that, along with opposition from religious groups, may prevent its passage in the near term.

Enforcement 

• Among the easiest changes for a new Administration to implement are new enforcement policies.  The coincidence of the declining stock market and new leadership at the Labor Department will result in increased ERISA “stock drop” investigations and cases alleging that corporations and their officers violated fiduciary duties by retaining company stock in their 401(k) plans.  Often CEO’s, CFO’s, and corporate general counsels are plan fiduciaries with individual liability.
• Corporate-wide audits of hiring, pay, and promotion practices by government contractors can be expected to increase under the new administration.  Likewise, federal wage-hour litigation—which has been quiet in the last eight years relative to the boom in state-law litigation in California—likely will increase.
• Through its capacity to require new safety equipment, different work practices, and in some instances wholesale redesign of work facilities, OSHA can impose enormous costs on large corporations and entire industries.  A return of “ergonomics” regulation is expected, which would have imposed billions of dollars of costs on employers and was one of the most controversial regulatory issues during the Clinton Administration.  The OSHA statute is likely to be amended to substantially raise civil and criminal penalties and potentially create a private right of action for unions and workers.