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Washington Labor & Employment Wire » The Potential Impact of the Obama Administration on the Labor and Employment Legal Landscape

The Potential Impact of the Obama Administration on the Labor and Employment Legal Landscape

  Part I - Legislative Priorities

The 2008 elections are now in the record books.  With the election of Senator Obama to the presidency, and Democrats picking up as many as 20 seats in the House and at least five seats in the Senate, the new balance of power in Washington is likely to bring dramatic change in various areas of American life.  One area that is certain to be especially active is legislation and regulation affecting the workplace.  When Congress changed hands in 2006, a cascade of bills was introduced by Democrats on various labor and employment issues.  Over the intervening two years, Democrats prodded the Bush administration–through hearings, investigations and reports–to enforce various workplace laws more aggressively.

In this five-part series, we share our thoughts on how the changes in the executive and legislative branches of government might impact U.S. labor and employment law and workplace regulation in the next few years.  Based on the various legislative efforts by the Democrats over the past two years and the many promises and pledges that President-elect Obama and others made on the campaign trail, we estimate what the next two years may hold for employers in terms of legislation, regulation and enforcement priorities affecting the workplace.  Our first installment focuses on probable legislative priorities in the workplace for the fortified Democratic Congress.

The Employee Free Choice Act - Card-Check and Binding Arbitration for First Contracts

“We’re ready to take the offense for organized labor. It’s time we have a President who didn’t choke saying the word ‘union.’ We need to strengthen our unions by letting them do what they do best — organize our workers. If a majority of workers want a union, they should get a union. It’s that simple. We need to stand up to the business lobby that’s been getting their friends in Congress and in the White House to block card check. That’s why I was one of the leaders fighting to pass the Employee Free Choice Act. That’s why I’m fighting for it in the Senate. And that’s why we’ll make it the law of the land when I’m President.”

Sen. Barack Obama, Dubuque, Iowa, Nov. 13, 2007

No single piece of labor and employment legislation has drawn as much attention in recent years as the Employee Free Choice Act (EFCA) (H.R. 800, S. 1041).  Passed by the House in 2007, the legislation stalled in the Senate, when supporters failed to garner the necessary 60 votes to invoke cloture.  As a senator, President-elect Obama was one of the original supporters of the EFCA.  The bill has the fervent support of organized labor and, with the strengthening of Democratic majorities in both the House and Senate, there is good reason to believe that it will be among the earliest priorities for the 111th Congress.

The EFCA would fundamentally change the rules in labor-management relations in the United States in two critical ways.  First, it would allow unions to bypass a secret-ballot election supervised by the National Labor Relations Board (NLRB) and, instead, become the certified bargaining representative of employees through a “card-check” recognition procedure.  Second, if the parties to a new collective bargaining relationship cannot agree on an agreement within a specified time, they must submit their disagreement to a federally appointed arbitration panel, who will then dictate the terms of the first collective bargaining agreement (CBA).  The EFCA also would significantly increase the penalties on employers who violate provisions of the National Labor Relations Act in connection with union organizing efforts.

Card-Check Certification

Under current law, a union can become the certified bargaining representative of a group of employees only if it prevails in a secret-ballot election supervised by the NLRB, or if the employer agrees to recognize the union voluntarily after the union shows that it has support from more than 50 percent of the employees.  Many employers insist on a secret-ballot election before they will recognize a union.  Under the EFCA, a union would become the certified bargaining representative by demonstrating that it collected authorization cards from a majority of the employees.  It would no longer need to seek an election or obtain the employer’s consent to voluntary recognition.

Unions typically gather authorization cards without the employer’s knowledge.  Giving unions the unilateral right to obtain certification without an election or employer consent would effectively deprive employees of the opportunity to hear the full range of arguments for and against unionization.  In effect, unions would be able to gather signatures discreetly, giving employees a pro-union argument without an opportunity for rebuttal from the employer.

The EFCA also would remove the range of protections that the NLRB has developed over the past 50 years to ensure that employees are not subject to undue influence or interference in the selection of a bargaining representative.  Unlike union elections, which must take place in “laboratory conditions,” the EFCA contains no restrictions or limitations on what unions can do to persuade employees to sign an authorization card.  Because authorization cards are valid for one year, it is conceivable that union organizers are already collecting cards in anticipation of passage of the EFCA.

Mandatory Arbitration

In addition to facilitating the certification process, the EFCA expedites the bargaining process for a first contract by creating a mediation and arbitration process to settle bargaining disputes over first collective bargaining agreements.  The EFCA provides 90 days for an employer and union to negotiate a first-time collective bargaining agreement.  If they are unsuccessful after 90 days, either party can demand mediation before the Federal Mediation and Conciliation Service.  After 30 days of mediation, an FMCS-appointed arbitration panel shall render a decision resolving the dispute, with the decision binding upon the parties for a period of two years, unless amended by written consent of the parties during that period.

This binding arbitration construct represents a fundamental shift in American labor policy.  Currently, employers are only required to bargain with a union but are not required to agree on any terms.  Under the EFCA, a third party could decide the proper wages, benefits, and terms and conditions of employment.

Increased Fines and Damages

Finally, the EFCA would drastically increase an employer’s potential liability for unfair labor practices.  Currently, employers are generally only liable for back pay and reinstatement of any wrongfully terminated employees.  Under the EFCA, for unfair labor practices committed during elections and first contract bargaining, an employer would be subject to treble damages through a liquidated damages provision that requires payment of twice the amount owed in back pay, as well as a civil penalty of up to $20,000 for each violation.  The EFCA has no corresponding increase in penalties for union violations.

The Road Ahead

The business community and the labor movement have girded for battle over the EFCA.  As of election day, several hundred trade groups, unions and companies had registered to lobby in connection with the legislation.  Web sites of many major unions feature significant sections devoted to EFCA.  The business community has also formed coalitions to oppose the EFCA.  The U.S. Chamber of Commerce and an umbrella group known as the “Coalition for a Democratic Workplace” have launched efforts to fight or limit the EFCA.

The fight over the EFCA is likely to become pitched in early 2009.  The EFCA passed the House in 2007 by a margin of 241-185.  Supporters failed by just 9 votes to obtain the necessary margin to obtain cloture in the Senate, and Sen. Tim Johnson, a co-sponsor of the legislation, missed the cloture vote due to illness.  The only Republican who voted in favor of cloture was Sen. Arlen Specter.  However, in his floor statement, Sen. Specter made clear that while he supported imposing cloture, he was not expressing a conclusion on the underlying merits of the bill, and voiced his support for a bipartisan compromise solution to the problems.  Sen. Specter noted his concern over improper activities by both unions and employers in the organizing process, and expressed misgivings about the slow process to remedy violations.  He cited favorably the Canadian procedure by which elections are held within five to ten days after petitions are filed, as well as the major labor law reform legislation that failed to pass Congress in 1977, which included such a provision.

The 2008 elections created an entirely new landscape that is substantially more favorable to supporters of EFCA.  We expect that Democrats in Congress will reintroduce the legislation early in the 111th Congress and attempt to deliver a bill to the new president’s desk soon after inauguration.  At this time, there remains uncertainty in the Minnesota, Georgia, Oregon and Alaska Senate races.  In the event that the cloture vote is close, Sen. Specter might be able to play some compromise role in shaping a final bill that would pass the Senate.

The Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers (RESPECT) - Redefinition of Supervisor for Union Organizing

The EFCA is part of a broader agenda of organized labor to create a more favorable landscape for union organizing.  Another important component of this agenda is the Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers (RESPECT) Act (H.R. 1644, S. 969), which would effectively narrow the definition of a “supervisor” under the National Labor Relations Act.  The net effect of the legislation, which President-elect Obama co-sponsored in the Senate, would be to both expand the number of employees eligible for unionization and limit management’s ability to use most front-line supervisors to communicate the company’s viewpoint on unionization.

In 2006, in response to direction from the Supreme Court (NLRB v. Kentucky River Community Care, Inc., 532 U.S. 706 (2001)), the National Labor Relations Board issued three decisions that provided for a broad definition of who could qualify as a supervisor-and, therefore, be ineligible for participation in a union-under the NLRA.  The cases held that an employee is a “supervisor” if he assigns other employees to overall duties, is held accountable for directing subordinates to undertake specific tasks and has the discretion to do so without close direction from management. See Oakwood Healthcare, Inc., 348 NLRB No. 37 (Sept. 29, 2006); Golden Crest Healthcare Center, 348 NLRB No. 39 (Sept. 29, 2006); Croft Metals, Inc., 348 NLRB No. 38 (Sept. 29, 2006).

Democrats have criticized these three cases, arguing that they deny a class of workers the right to unionize, and President-elect Obama has repeatedly expressed his disagreement with them.  The RESPECT Act would overturn this “Kentucky River trilogy” and its progeny by (1) amending the definition of “supervisor” so as not to include employees whose only supervisory duties involve “assigning” or “directing” other employees, and (2) requiring that supervisors spend the majority of the workday in a supervisory capacity.  Even if the RESPECT Act does not pass, Obama-appointed National Labor Relations Board members will likely narrow the definition of “supervisor” through subsequent NLRB decisions.

The Lilly Ledbetter Fair Pay Act - Continuing Violations for Discriminatory Pay Decisions

Significant legislative activity is expected in the area of employment discrimination.  With the help of a larger Democratic majority in the Senate, President-elect Obama will likely push for early passage of the Lilly Ledbetter Fair Pay Act.  The bill (H.R. 2831, S. 1843), named for the female plaintiff on the losing end of the controversial Supreme Court decision Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. ___ (May 29, 2007), would amend Title VII to allow claims brought within 180 days of receiving any paycheck affected by a discriminatory pay decision, no matter how far in the past an act of discrimination allegedly occurred.  Previously, the Supreme Court read Title VII’s statute of limitations narrowly, requiring such a suit to be brought within 180 days of the actual discriminatory decision.  This Supreme Court precedent rejected the “continuing violation” approach, which resets the limitations period each time a new paycheck is issued.

President-elect Obama and congressional Democrats favor expanding the statute of limitations by including the continuing violation doctrine in Title VII.  Currently, two approaches have been advanced by Democrats:  (1) writing the continuing violation doctrine into Title VII by allowing claims brought within 180 days of receiving any paycheck affected by a discriminatory pay decision (H.R. 2831, S. 1843), and (2) extending the statute of limitations period, as proposed by Rep. Ruppersberger, D-Md. in H.R. 2660.  The Republican approach-the Title VII Fairness Act (S. 3209)-would delay the start of the filing period until the plaintiff has or can be reasonably expected to have adequate information supporting a reasonable suspicion of discrimination, but would reject including the continuing violation doctrine in Title VII.  Senate Democrats have rejected this approach.

Republican leadership and business groups have opposed the legislation, warning that the proposed revisions would allow plaintiffs to sit on their claims for several years and accumulate massive potential damage awards.  They have also warned that the bill encourages frivolous and vexatious litigation, potentially leading to windfall profits for trial lawyers.

Senate Democrats, including Sen. Obama, failed to achieve the 60 votes necessary for cloture in the Senate on April 23, 2008, falling three votes short.  Although the results of several Senate races are not final, it appears that Democrats have likely captured at least three additional votes in favor of cloture when the bill comes up for a vote in 2009.  Thus, unless one or more moderate Republicans who voted for cloture changes his or her position, the Lilly Ledbetter Fair Pay Act should pass in the 111th Congress.

The Equal Remedies Act and the Civil Rights Act of 2008 -Expansion of Employer Liability and Employee Remedies

As a senator, President-elect Obama cosponsored the Equal Remedies Act (S. 1928) and the Civil Rights Act of 2008 (S.2554, H.R. 5129), both of which would remove the current $300,000 cap on compensatory damages and punitive damages for violations of Title VII and the Americans with Disabilities Act.  In addition, this legislation would, inter alia, (1) expand disparate impact age discrimination liability by incorporating Title VII’s disparate impact standards into the Age Discrimination in Employment Act, (2) prohibit pre-dispute arbitration agreements unless there is a post-dispute waiver or consent or the agreement was part of a valid collective bargaining agreement; (3) replace the opt-in collective action procedures with traditional Rule 23 opt-out class procedures for Equal Pay Act claims; (4) authorize compensatory and punitive damages for FLSA retaliation claims; and (5) amend the Immigration and Nationality Act to prohibit denying backpay or other relief to undocumented workers, such as claimants in NLRB unfair labor practice proceedings.  Representing a “wish list” for civil rights advocates and labor organizations, this bill would significantly increase employer liability and damages for a variety of employment practices.

Employment Non-Discrimination Act of 2007 - Sexual Orientation as a Protected Class

In the campaign, President-elect Obama pledged his support for the Employment Non-Discrimination Act (ENDA) and proposed legislation that would amend federal employment statutes to make it illegal for an employer to discriminate with respect to an individual’s actual or perceived sexual orientation.  Under the legislation, employers would be liable for discriminatory decisions regarding hiring, firing, compensation and other terms, conditions or privileges of employment.  The bill further prohibits employers from adversely limiting, segregating or classifying employees or applicants because of actual or perceived sexual orientation.  It is expected that any bill passed by the 111th Congress would not prohibit discrimination based on actual or perceived gender identity, an additional protection sought by some supporters of the ENDA.

As introduced in 2007, the legislation exempts religious employers and would only apply to employers with 15 or more employees.  H.R. 3685, absent gender identity protections, passed in the House on November 7, 2007, but was not taken up by the Senate in the current Congress.

The passage of the ENDA would create an additional protected class of employees and expand the universe of potential litigation faced by employers.  In response to the passage of the legislation, employers will need to evaluate existing employment and human resources policies to avoid claims of discrimination on the basis of sexual orientation.  However, many states and municipalities already forbid employment discrimination on the basis of sexual orientation, and companies in those jurisdictions may already be familiar with compliance with sexual orientation anti-discrimination laws.

Fair Pay Act of 2007 - Equal Pay for Equal Worth

President-elect Obama has also promised to pass the Fair Pay Act (H.R. 2019, S. 1087), a bill he cosponsored with Sen. Harkin (D-IA).  The bill seeks to address pay disparities between equivalent jobs segregated by sex, race and national origin.  The legislation sets up an “equal worth” system, rather than an “equal work” system.  Under this system, employers must pay employees in a job dominated by employees of a particular sex, race or national origin at the same wage rate at which the employer pays employees in another job that is dominated by employees of the opposite sex or a different race or national origin where the jobs are “equivalent.”  Employers would still be able to differentiate in wage rates based on seniority systems, merit systems and systems that measure earnings by quantity or quality of production.  Aggrieved employees would have the choice of filing a charge with the Equal Employment Opportunity Commission (EEOC) or proceeding directly to federal court.  The bill would permit compensatory and punitive damages against non-government employers and allow plaintiffs to pursue Rule 23 class actions. instead of the present opt-in collective action mechanism used for Equal Pay Act and Fair Labor Standards Act (FLSA) actions.

Protecting America’s Workers Act - Safety Regulation Expansion

President-elect Obama also co-sponsored the Protecting America’s Workers Act (S.1244) (PAWA), which would expand federal occupational safety regulation in four ways.  First, the bill would expand occupational safety standards to include federal, state and local employees.  Second, PAWA would increase whistleblower protections for those who report unsafe workplace conditions.  Third, the bill would increase penalties against employers for repeated and willful violations of the law, including making felony charges available when an employer’s repeated and willful violation of the law leads to a worker’s death or serious injury.  Finally, PAWA would strengthen an employer’s duty to provide safety equipment, such as goggles, gloves, respirators or other personal protective equipment, to their workers.

On his campaign Web site, President-elect Obama expressed a desire for a more activist OSHA that more vigorously prosecutes employer violations.  PAWA dovetails with this goal by giving OSHA a greater scope and authority to levy larger fines.

The Patriot Employer Act - Tax Credits for Voluntary Adoption of Favored Employment Policies

The Patriot Employer Act, a legislative initiative to encourage businesses to increase wages and benefits and adopt a position of neutrality in unionization drives, was a centerpiece of the campaign of President-elect Obama, who co-sponsored the Senate version of the Patriot Employer Act (S. 1945) in August 2007.

The bill provides a one percent tax credit to qualifying “Patriot” employers, encouraging businesses to provide generous benefits to their employees.  To be designated a “Patriot” employer, a business must-

▪           maintain headquarters in the United States

▪           pay 60 percent or more of employee health care premiums

▪           observe a policy of neutrality in union drives

▪           preserve or increase full-time positions in the United States (relative to full-time positions in other countries)

▪           provide the difference in salary and benefits to employees in the National Guard and Reserve, who would otherwise lose pay when called to active duty

▪           provide a specified living wage and retirement benefit to employees.

Unlike the House of Representatives counterpart (H.R. 5907), the version of the bill President-elect Obama supported does not give government contracting preference to qualifying companies.

In its current form, the Patriot Employer Act would only apply to businesses with an average of 50 or more employees per fiscal year.  Compliance with the bill would be voluntary because the available tax credits would encourage, but not compel, employers to participate.  Critics argue that the bill is protectionist and they object to the union neutrality provision, which could strengthen national unions.  They also assert that the bill would both limit participating employers’ ability to operate overseas and increase labor costs.  Additionally, some have raised concerns that the provisions requiring employers to replace the lost salary and benefits of National Guard and Reserve employees could perversely lead employers to terminate and refuse to hire such employees.

President-elect Obama’s past cosponsorship of the Patriot Employer Act is consistent with two key planks of his campaign: (1) his pledge to end tax breaks to companies who send jobs overseas and (2) the New American Jobs Tax Credit, which would provide American businesses with a $3,000 tax credit for each new job created in the United States.  The anti-offshoring provisions of the Patriot Employer Act provide a “carrot” instead of a “stick”; these provisions reward companies who do not send jobs overseas instead of terminating existing tax breaks.  President-elect Obama has, however, repeatedly stated a desire to also provide a “stick” to offshoring-his intention to end tax breaks for companies who send jobs out of the United States.

Arbitration Fairness Act - Elimination of Pre-Dispute Arbitration Agreements

Although not a cosponsor of the Arbitration Fairness Act (H.R. 3010, S. 1782), President-elect Obama will likely support this dramatic overhaul of the Federal Arbitration Act (FAA) if it is reintroduced in the 111th Congress.  The Arbitration Fairness Act would amend the FAA to invalidate any pre-dispute arbitration agreement requiring arbitration of an employment, consumer or franchise dispute, or any dispute arising under any statute “intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power.”  The 2007 bill also provides that the “validity or enforceability of an agreement to arbitrate shall be determined by the court, rather than the arbitrator, irrespective of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement.”

The Arbitration Fairness Act reverses a series of recent Supreme Court cases, including Buckeye Check Cashing Inc. v. Cardegna, 546 U.S. 440 (2006), which held that arbitrators, rather than state courts, determine the validity of arbitration provisions.  As proposed in 2007, the legislation would apply to any dispute arising after the legislation’s enactment, regardless of the date of the pre-dispute arbitration agreement, but would not invalidate arbitration clauses in collective bargaining agreements.

The Arbitration Fairness Act would represent a dramatic challenge to businesses who broadly utilize arbitration agreements, shifting numerous disputes from arbitrators to state courts.  Explicitly intended to address the “power imbalance” between businesses and employees or consumers, the legislation would inhibit employers from enforcing pre-arbitration agreements in contracts with their employees and consumers.  This legislation would channel a flood of disputes, including frivolous complaints, into state court systems.  Rather than arbitrating these disputes-many of which are routine in nature and without merit-companies would have to shoulder the burden of litigating disputes in the courts, tying up valuable time and resources.

Employee Misclassification Prevention Act

President-Elect Obama, with Sens. John Kerry (D-MA) and Edward Kennedy (D-MA), co-sponsored the Employee Misclassification Prevention Act (S. 3648), which would amend the FLSA to increase penalties and enforcement against employers who misclassify employees as independent contractors.  The measure would impose fines of up to $10,000 per violation for employers “repeatedly or willfully” misclassifying workers.  S. 3648 and its House counterpart, H.R. 6111, also provide for double liquidated damages where employers violate FLSA maximum hours or minimum wage requirements in addition to engaging in worker misclassification.

The Employee Misclassification Prevention Act would limit employers’ ability to hire independent contractors and would mandate multiple compliance measures for employers.  Under the measure, employers would be required to keep records of workers’ employment classification and notify those classified as “non-employees” in writing of (1) their classification; (2) the significance of the classification (i.e., that their rights to “wage, hour, and other labor protections” depend on proper classification); and (3) their ability to contact the Department of Labor if they need further information or seek to dispute their classification.

The Employee Misclassification Prevention Act also would step up enforcement against employers by (1) requiring state unemployment insurance agencies to conduct auditing and investigative programs and (2) requiring the Secretary of Labor to ensure that at least 25 percent of Wage and Hour Division audits are focused on potential classification violations.

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In our next installment, we will focus on various Democratic legislative initiatives that seek to expand workplace leave policies.