On June 22, 2010, the Senate, by voice vote, approved Mark G. Pearce (D) and Brian E. Hayes (R) for full terms as members of the NLRB, along with 63 other of President Obama’s stalled nominees. The deal followed a year-long impasse over the nomination of union attorney Craig Becker (D), who was initially nominated to the Board by President Obama in July 2009, along with Pearce and Hayes.

Becker, who, along with Pearce, was provided a recess appointment by President Obama in March 2010, was excluded from the package of 65 nominees after Senate Minority Leader Mitch McConnell (R-KY) and Senate Republicans raised objections to his inclusion. Pro-labor Senate Democrats initially balked at Becker’s exclusion, but eventually relented to the compromise package.

Becker’s nomination previously stalled in the Senate after opposition by Senate Republicans and business groups. His nomination for a full term on the Board is still pending, but his exclusion from the compromise likely ends any chance of overcoming a Republican-led filibuster to that nomination.

Pearce, a labor lawyer in private practice in Buffalo, New York, had not drawn significant opposition, but his nomination had been held up by the impasse over Becker’s nomination.  Hayes, a Republican Senate staffer whose nomination has been pending since July 2009, did not receive a recess appointment.

The compromise follows last week’s Supreme Court decision in New Process Steel L.P. v. NLRB, striking down hundreds decisions by the depleted two-member Board. The confirmations of Pearce and Hayes, along with the recess appointment of Becker, returns the Board to its full compliment of five members.

The terms of Hayes and Pearce run until Dec. 16, 2012 and Aug. 27, 2013, respectively. Becker’s recess appointment expires when the Senate adjourns its 2011 session.

On Thursday, June 17, the Senate Health, Education, Labor and Pensions (HELP) Committee held a hearing on preventing employers from misclassifying employees as independent contractors. The hearing focused on the Employee Misclassification Prevention Act (EMPA), a recently introduced bill intended to reduce instances of worker misclassification through new record-keeping requirements, notice requirements, and the imposition of civil penalties for employer violations.

Chairman Harkin (D-IA) opened the hearing by arguing that independent contractors are not afforded sufficient protections under the labor law, such as those provided by minimum wage standards, overtime requirements, unemployment compensation, workers’ compensation, safety and health laws and antidiscrimination provisions. Harkin asserted that a few “unscrupulous” employers thus make economic challenges “even more difficult for their workers by intentionally misclassifying them as ‘independent contractors’ to gain an advantage over their law-abiding competitors.” Harkin also argued employee misclassification costs federal and state governments “billions of dollars in unpaid revenues.” For example, it deprives governments of the payments that support unemployment and workers’ compensation systems, as employers are only required to make these payments on behalf of employees and not independent contractors. Accordingly, Harkin posited that while employer misclassification laws are currently in place in several states, a federal legislative response is necessary.

The committee’s Ranking Member, Senator Enzi (R-WY), responded by calling EMPA an example of “what’s wrong with Washington today.” He argued that the bill would saddle small businesses with additional administrative work and needless costs. Enzi also expressed concerns that EMPA would punish honest business owners for accidental administrative mistakes, while allowing employers that intentionally misclassify workers to remain under the radar. Senator Sherrod Brown (D-OH), who introduced EMPA in the Senate, acknowledged Enzi’s concerns and stated he would work to ensure the bill’s provisions do not overly burden small businesses. He emphasized, however, his belief that employers cannot be left to “self-police,” as without any regulation employers will continue to avoid and manipulate misclassification laws in order to gain a competitive advantage. He further stated that hard economic times particularly call for labor law protections, as many individuals will “do anything” to get a job and are thus at the mercy of unscrupulous employers. Senator Isakson (R-GA) also weighed in, arguing that Congress should be “very careful” not to “demonize” those employers who are currently trying to comply with employee classification laws.

The committee first heard from Seth Harris, Deputy Secretary of the U.S. Department of Labor, who testified in support of EMPA. While Harris acknowledged some employee misclassification may be the “result of uncertainty or misapplication of often complicated laws,” he asserted that “much worker misclassification is intentional.” Harris detailed the Obama administration’s efforts to combat employee misclassification, noting that the president’s fiscal year 2011 budget proposes a $25 million enforcement initiative that includes “close cooperation” between the Department of Labor and the Internal Revenue Service on misclassification issues. Harris also cited a proposed rule currently under consideration by the DOL’s Wage and Hour Division, which mirrors EMPA by requiring employers to perform written analyses and to disclose those analyses to employees before classifying them as independent contractors. Harris underlined the DOL’s belief that federal legislation is important to support these agency efforts, citing three provisions of EMPA as particularly crucial: (1) codifying employee misclassification as a violation of the Fair Labor Standards Act, (2) creating civil monetary penalties for employer recordkeeping violations, and (3) creating a legal presumption that an individual is an employee if the employer fails to keep accurate records.

The committee also heard testimony in support of EMPA from New York State Department of Labor Commissioner Colleen C. Gardner, who detailed her own state’s efforts to combat the problem of employee misclassification, and Legal Co-Director of the National Employment Law Project, Catherine Ruckelshaus, who urged the members to pass the legislation in order to afford greater protection to low-income workers. Business owners Frank Battaglino, representing the Sheet Metal and Air Conditioning Contractors’ National Association and the Campaign for Quality Construction, and Gary Uber, on behalf of the Private Care Association, Inc., a member of the Coalition to Preserve Independent Contractor Status, also testified before the committee. Battaglino testified in support of the legislation, detailing the problems his own construction business faces with “unfair, low-wage competition,” resulting from competitors’ misclassification of workers. Uber, in contrast, cautioned the committee against passing EMPA, noting the difficulties his own business would have meeting the bill’s record-keeping requirements.

Senator Brown introduced EMPA in the Senate on April 22, 2010 (S. 3254). Rep. Lynn Woolsey (D-CA) introduced parallel legislation in the House on the same date (H.R. 5107). The House version of EMPA is currently before the House Committees on Education and Labor and Ways and Means.

A webcast of the hearing, as well as written witness testimony, is available on the HELP Committee’s website.

Core Provisions: This legislation would amend the Fair Labor Standards Act (FLSA) to strengthen enforcement and penalties for misclassification of employees as independent contractors. 

The bill creates new record-keeping requirements and requires employers to provide notice to employees and those classified as non-employees (1) of their classification, (2) that their rights to “wage, hour, and other labor protections” depend upon proper classification, and (3) directing them to the Department of Labor for further information about the rights of employees.  Failure to keep the required records or provide the required notice would create a rebuttable presumption that an individual who is remunerated for the performance of labor and services by an employer is an employee of that employer.

The legislation would impose civil penalties of up to $1,100, or up to $5,000 for repeated or willful violations, for each misclassification or violation of the record-keeping or notice provisions. If a misclassification accompanies violations under the FLSA’s maximum hours or minimum wage requirements, a worker could recover double his or her liquidated damages.

The legislation would also require state unemployment insurance agencies to conduct auditing and investigative programs to detect employers that misclassify or fail to properly report compensation to workers with the effect of excluding employees from unemployment compensation coverage. Additionally, the legislation would require the DOL to target industries it determines to have frequent incidence of misclassifying workers for audits.

Secretary of Labor Hilda Solis issued a statement supporting the bill and affirming the DOL’s committing to targeting worker misclassification.

Status: H.R. 5107 was introduced by Rep. Woolsey (D-CA) on April 22, 2010, and referred to the House Committees on Education and Labor and Ways and Means.  S. 3254 was introduced by Sen. Brown (D-OH) on April 22, 2010 and was referred to the Committee on Health, Education, Labor, and Pensions.  Both the House and Senate introduced similar bills in the 110th Congress, but both bills failed to make it out of committee.

A proposed rule published in the Federal Register on April 14, 2010 would no longer allow federal contractors to claim reimbursement from the government for costs incurred in persuading employees regarding union organizing and collective bargaining. The proposed rule was issued under Executive Order 13,494, Economy in Government Contracting, signed by President Obama on January 30, 2009. The order was intended to maximize government efficiency by cutting certain costs “not directly related to the contractors’ provisions of goods and services to the Government.” Costs of activities that were aimed at influencing employees and thus would no longer be reimbursable under the proposed rule include:  preparing and distributing materials, hiring or consulting legal counsel or consultants, holding meetings, including paying the salaries of those attending the meetings, and planning by managers, supervisors, or union representatives during work hours.

While the executive order disallows reimbursement to the employer for “activities undertaken to persuade employees” regarding their decision to form unions or engage in collective bargaining, the order allows reimbursements for costs “incurred in maintaining satisfactory relations between the contractor and its employees,” including the costs of labor-management committees and employee publications.

On March 19, 2010, the Department of Labor (DOL) published a notice of proposed rulemaking (NPRM) under Executive Order 13495, “Nondisplacement of Qualified Workers Under Service Contracts.” Once regulations take effect for this order, employees working on federal service contracts and subcontracts of $100,000 or more will generally be entitled to an offer of employment on the contract or subcontract if it is awarded to a successor and the work is to be performed in the same location. Existing employees of the original contractor, not including managers or supervisors, will be given a right of first refusal under the new contract. The deadline for submitting comments for this NPRM is May 18, 2010.           

Executive Order 13495 effectively revokes a Bush administration order and reinstates an order put in place by President Clinton, Executive Order 12933. While the Obama administration order tracks the Clinton order, it is broader in scope. For example, the NPRM covers all contracts above $100,000, instead of only covering contracts for the maintenance of public buildings. The Obama order also eliminates exemptions found in the Clinton order, including exemptions for the military, NASA, the Veterans Administration, and the Postal Service.

Other modifications to the Clinton order include definition of the terms managerial and supervisory employees, and a requirement that contractors include in their subcontracts a term requiring the subcontractor to agree with the nondisplacement provisions. While subcontractors below the $100,000 threshold are excluded from the order, if a contractor above the threshold discontinues the services of a subcontractor, it would have to offer the right of refusal to the subcontractor’s employees.

On March 11, the Senate Committee on Health Education Labor and Pensions (”HELP”) convened a hearing on the problem of gender pay inequity entitled, “A Fair Share for All: Pay Equity in the New American Workplace.”In his opening remarks, Senator Tom Harkin (D-Iowa), Chairman of the Committee, noted that despite passage of the Equal Pay Act in 1963 women today make only 77 cents for every dollar a man makes. Sen. Harkin characterized pay inequity as “not just a women’s issue, but a family issue” and expressed strong support for the Paycheck Fairness Act introduced by Senators Christopher Dodd (D-Connecticut) and Barbara Mikulski (D-Maryland), which was passed overwhelming by the House in January. Harkin said the legislation would provide the same pay for equivalent jobs, require employers to disclose pay scales and job descriptions, and give women more information to enable to negotiate better deals for themselves.

Ranking Member Michael Enzi (R-Wyoming) expressed his concern that the Paycheck Fairness Act would subject employers to more litigation, particular large class actions. He also criticized the bill for adding more “burdensome government reporting requirements,” and argued that improved job training nationwide and an improved economy would resolve many pay inequity issues. Sen. Dodd rejected criticism about the possibility for increased litigation and argued that the legislation would simply ensure women get the pay that they deserve.

The first witness at the hearing was the Honorable Rosa DeLauro, U.S. Representative for Connecticut’s 3rd District. She stated that the Paycheck Fairness Act would “close numerous longstanding loopholes in the Equal Pay Act” and stiffen “penalties for employers who discriminate based on gender.” Rep. DeLauro noted that the legislation would strengthen remedies to include punitive and compensatory damages, remedies already afforded to victims of race-based discrimination under the law. In response to the prediction that the legislation would result of in torrent of class actions lawsuits, Rep. Delauro argued that employers would successfully adjust to the new legislation and avoid any increased litigation effect, just as employers did in response to the passage of race-based discrimination laws.

The next witness was Stuart Ishimaru, Acting Chairman of the Equal Employment Opportunity Commission (”EEOC”). In addition to reiterating many of the facts showing that the gender wage gap persists, Ishimaru noted that caregiver discrimination is a part of the problem. Ishimaru explained that women are more than twice as likely to work part time, often because they need to provide care for kids and other family members, and that part time work pays less and is less likely to come with benefits. Ishimaru stated, “gender-based wage discrimination is especially untenable now, in this economy, as most families have come to rely on the incomes brought in by working women to make ends meet.” Ishimaru continued that EEOC’s “work would undoubtedly be strengthened by the passage of the Paycheck Fairness Act” and that the legislation would “provide essential tools” such as improved wage data “towards realizing the promise of equal pay.”

Heather Boushey, Senior Economist at the Center for American Progress, also testified before the panel stressing that women lose an average of $434,000 over a lifetime due to the gender wage gap. Boushey stated that the “largest chunk of the gender pay gap is due to combined effect of the segregation of men and women into different industries and occupations.” Boushey argued that the “data provisions of the Paycheck Fairness Act will allow employees to access the information they need to understand if their pay is at the market rate.”

The remaining witnesses were Deborah L. Brake, Professor of Law at the University of Pittsburgh, Deborah L. Frett , Chief Executive Officer of the Business and Professional Women’s Foundation, and Jane McFetridge, a partner at Jackson Lewis, LLP.

Core Provisions: The Corporate Executive Accountability Act (S. 3049)comprises part of the Democrats’ comprehensive financial regulatory reform package, building on separate legislation previously passed in the House (H.R. 3269). The Act aims to reform executive pay practices by granting shareholders a non-binding vote on executive pay packages and requiring companies to disclose the ratio of CEO pay to median company worker pay in their annual reports. Additionally, the Act would hold executives accountable for failure or fraud by giving regulators and investors the authority to seize bonuses from executives who have engaged in misconduct, and by prohibiting “golden parachute” arrangements for executive who are fired for cause. The Act would also prohibit the executives of publicly listed companies from cashing out all of their vested equity compensation at once in order to encourage long-term corporate viability over short-term profitability practices that encourage excessive risk taking. The Act is sponsored by Sen. Robert Menendez (D-NJ).

Bill Status: The Bill was introduced in the Senate on February 26, 2010 and referred to the Senate Committee on Banking, Housing and Urban Affairs.

On February 18, 2010, the Equal Employment Opportunity Commission (EEOC) issued a notice of proposed rulemaking (NPRM) to amend its regulations to more clearly define the “reasonable factors other than age” (RFOA) defense under the Age Discrimination in Employment Act (ADEA). This proposed rulemaking seeks to address the scope of the RFOA defense under EEOC’s proposed regulations concerning disparate impact under the ADEA, which were published on March 31, 2008.

This NPRM follows two important Supreme Court cases on the RFOA defense - Smith v. City of Jackson, 544 U.S. 228 (2005) and Meacham v. Knolls Atomic Power Laboratories, 128 S. Ct. 2395 (2008). In Smith, the Supreme Court allowed disparate impact claims of discrimination under the ADEA and, following the Court’s decision, EEOC has said that the “reasonable factors other than age” test is the appropriate standard for determining the lawfulness of a practice that disproportionately affects older individuals. Subsequently, in Meacham, the Supreme Court held that an employer bears both the burden of production and the burden of persuasion for a RFOA defense in an ADEA disparate-impact claim.

EEOC’s proposed rules clarify that the applicability of the RFOA defense turns on the facts and circumstances of each particular situation and whether the employer acted prudently in light of those facts. This standard is lower than Title VII’s business-necessity test, but it is higher than the Equal Pay Act’s “any other factor” test.

Relying on the “reasonable person” principles of tort law, EEOC proposed a non-exhaustive list of relevant factors including, among others, 1) the extent to which the employment practice is a common business practice; 2) the severity of the impact of the practice on individuals within the protected age group, both in degree of injury and scope of impact; and 3) the extent to which the employer took steps to assess and ameliorate the adverse impact of the practice on older workers.

The proposed regulations carry a 60-day public comment period. Written comments should be submitted by April 19, 2010, to Stephen Llewellyn, Executive Officer, Executive Secretariat, Equal Employment Opportunity Commission, 131 M Street, NE, Suite 4NW08R, Room 6NE03F, Washington, D.C. 20507. Comments may also be submitted electronically at www.regulations.gov.

On February 12, 2010, the Department of Labor (DOL) published a new rule regarding the H-2A temporary agricultural worker program. This rule will strengthen worker protections for both U.S. and foreign workers and ensure the integrity of the H-2A program. Major features of the rule include: 

• Requires documentation from employers showing compliance with the prerequisites for bringing H-2A workers into the country. Employers can no longer simply attest compliance.
• Returns to the USDA Farm Labor Survey, instead of the Occupational Employment Statistics Survey, as the basis for the determining the Adverse Effect Wage Rate;
• Reinstates the requirement that State Workforce Agencies inspect and approve employer-provided housing before the Department issue H-2A labor certification;
• Creates a national electronic job registry for all H-2A job orders to improve US worker access to agricultural jobs;
• Requires employers to provide workers with copies of the job orders before departure and to display a poster describing employee rights in a language common to the workers at the work site;
• Prohibits the use of multi-area itineraries by H-2A labor contractors

            The rule will become effective March 15, 2010.

On February 9, 2010, Republican Senators, joined by two Democrats, blocked a floor vote on the controversial nomination of Craig Becker to the National Labor Relations Board. By a 52-33 vote, Senate Democrats fell short of the 60 votes necessary to move Becker’s nomination to a floor vote. Sens. Ben Nelson (D-NE) and Blanche Lincoln (D-AR) voted against Becker, who is associate general counsel to the Service Employees International Union (SEIU). Newly-seated Massachusetts Sen. Scott Brown (R-MA) joined his Republican colleagues in voting against the Becker nomination.

Becker was originally nominated to the NLRB in 2009, but Sen. John McCain (R-AZ) placed a “hold” on the nomination and requested that Sen. Tom Harkin (D-IA) hold a hearing. After the nomination was returned to the White House when the Senate adjourned in December, President Obama re-nominated Becker and Sen. Harkin agreed to hold a hearing. A summary of the February 2 hearing is posted here.