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Labor Law Changes Coming Under the New Administration--The Obama Watch

With the election of Barack Obama as president came not only a new administration but a new focus on labor law and labor relations. Those of us watching to see what the administration would do in the area of labor law didn’t have to wait too long. In fact, the first piece of legislation signed by President Obama was something called the Lilly Ledbetter Fair Pay Act. That act, explained more fully below, aims to make redress for pay discrimination easier to achieve. After Ledbetter, the question for many watching the thrust of labor law change—including the National Chamber of Commerce with its warning of “Armageddon”—is: From a long list of initiatives, what’s next? 

Lilly Ledbetter and Equal Pay 

Lilly Ledbetter worked for Goodyear most of her life, but it wasn’t until she retired that she learned that male employees in her same position, some junior to her, made anywhere from $1,000 to $2,000 more a month. She filed a claim and sued over pay discrimination. The jury sided with her and the judge ordered an award of back wages, but Goodyear appealed. The case eventually made its way to the Supreme Court, which ruled 5-4 that, though her claim was valid, Ledbetter had filed it after the 180-day statute of limitation had run its course. In so ruling, the court pegged the start of the statute as the day an employee is hired and a discriminatory pay decision is made. Ledbetter’s lawyers argued that the statute renews itself each time a paycheck reflecting discrimination is issued.

The Democrats, always friendly to labor and union issues, quickly drafted the 2007 Lilly Ledbetter Fair Pay Act, which passed the House but stalled in the Senate because the Democrats couldn’t force cloture on debate. The measure was worded to legislate the start date for pay discrimination claims just as Ledbetter’s lawyers had argued—each time a paycheck that discriminates is issued. 

Fast forward to the summer of 2008, and Lilly Ledbetter is featured as a speaker at the Democratic National Convention. Then flash further ahead to the fall of 2008 when the Democrats increase their majorities in Congress and Obama is elected president. First on the docket of the new Congress in January 2009 is none other than the resurrected Lilly Ledbetter Fair Pay Act, which not only reverses the Supreme Court’s interpretation in favor of Ledbetter’s but also establishes the effective date of the law as May 28, 2007—the day before the Supreme Court’s ruling. House and Senate both quickly pass the measure, and President Obama then signs it with Ledbetter and labor leaders in attendance.

Though the Ledbetter change is not yet the Armageddon of which the Chamber of Commerce warned, it is certainly the opening volley in what should prove to be a long battle between business and labor over the shape of the American workplace. Already many on the business side are warning of a flood of Ledbetter-enabled wage lawsuits, some perhaps dating back decades to where the evidence has grown stale, as lawyers like to say. Other analysts, not only in the business world but also in the legal profession, see the Ledbetter Act as being so worded as to give pay discrimination the same exalted status as first degree murder—no statute of limitation. This interpretation is based on the phrase “or other practice” that appears at least four times to modify both “pay compensation decision” and “decision” in general. Another clause, “when[ever] an individual is affected by application of a discriminatory compensation decision,” is so wide open that someone in retirement could argue that he or she is still being “affected” by pay discrimination because of reduced retirement savings.

From an employer’s viewpoint, there is some good news in that the Lilly Ledbetter Fair Pay Act limits awards to the two years of wages earned prior to filing a discrimination claim, but it also provides for “other damages.”

First Fair Pay, Then the Paycheck Fairness Act

The House of Representatives passed Ledbetter on Jan. 9, 2009, and on the same day approved its companion piece called the Paycheck Fairness Act. So far, the Senate has failed to act on this second legislative act, but that doesn’t mean it won’t do so in short order. This measure is a double whammy for winners of Ledbetter Fair Pay lawsuits since it permits “unlimited punitive and compensatory” damages in sex discrimination cases. It also toughens the burden on employers to prove that disparate pay decisions are justified by “business necessity” and “job performance.” The act also includes a provision that prohibits employers from ordering employees not to share salary information. If (when) passed, the Paycheck Fairness Act would open up employers to potentially huge damage and compensatory judgments, even in class action lawsuits that it also envisions and facilitates.

But it’s still not Armageddon. 

The Employee Free Choice Act (EFCA) 

By far employers’ most dreaded and reviled proposed change is the so-called Employee Free Choice Act, or EFCA, which did earn the Armageddon moniker from the Chamber of Commerce. But why is it so feared? 

The EFCA strips some teeth from the 1947 Taft-Hartley Act, which mandated that unionization efforts be subject to a secret ballot if the employer so desires. Prior to that, the 1935 Wagner Act, or National Labor Relations Act (NLRA), allowed union drives to be certified through either a card check procedure or a secret ballot but afforded employers no choice in the matter. Either method would automatically create a union to be certified by the National Labor Relations Board (NLRB); the union could then represent the workers in contract negotiations. (Taft-Hartley actually allows both methods as well but gives employers the option of forcing a secret ballot.) 

As matters stand today, pre-EFCA, a union drive first gathers signatures on unionization cards from 30 percent of the affected workforce, and then presents the cards to the employer, who invariably calls for a secret ballot. The unions gripe that once an election is set, employers launch an intimidation campaign that includes misinformation about unions, threats to employees (“we’ll close down,” “we’ll relocate” if you unionize), and even outright termination of employees favorable to unions. Still, unions win the vote more than half the time. 

The EFCA takes the choice out of the employer’s hands. The workers (in truth, the unions trying to organize them) can choose to organize either by collecting signed cards from 50 percent of the employees plus one or by holding a secret-ballot election. No doubt the secret vote would disappear from the scene once unions, rather than employers, got the right to choose which option to use. At least that is certainly the fear of employers. 

Businesses and the Chamber are now warning that the “card check” system in EFCA will lead to union intimation of their employees, who will be pressured to sign cards whether or not they favor unionization. This is not an entirely hard scenario to envision. Caught in a web of pro-labor coworkers on a break or in a lunchroom, an employee could easily sign out of fear of retaliation or simply because of plain old peer pressure. 

Armageddon doesn’t stop here. EFCA increases penalties on employers for any violation of workers’ rights during union drives. It also mandates that contract negotiations begin within 10 days of a union’s certification by the NLRB and subjects employers to mediation after 90 days of bargaining (which mediation could theoretically be requested by either side). If, after 30 days of mediation, the two sides still can’t agree, the mediators (the Federal Mediation and Conciliation Service, or FMCS) can impose a binding contract for two years. 

You can see why business fears this empowerment of unions, especially in light of the fact that, under current law, savvy employers can stall in negotiations for a whole year, after which the union naturally dissolves and must start all over again. 

Clearly, labor loves this measure, and both sides have set up front organizations and Web sites to argue their cases for and against. The Chamber of Commerce has itself pledged $10 million to defeat EFCA, as has the Service Employees International Union (SEIU) to support it. Though both Barack Obama and Joseph Biden strongly supported EFCA during the presidential campaign, Obama has since equivocated a bit in public comments (though Biden continues to voice his support). Democrats have announced no timetable for reintroducing the measure, which was first broached in 2007 but faced filibuster in the Senate and a certain veto by President Bush. Still, it is almost a cinch to come up in 2009 since it is labor’s number-one legislative priority (getting Obama to repeal Bush’s regulations on financial disclosure, tellingly, is the unions’ first overall wish). 

Even the way-left-leaning filmmaker Michael Moore has argued that compromising with business and Republicans by dropping the card-check provision would still accomplish labor’s objectives because it would discipline employers into following the letter of the law and thus level the playing field during union drives. He may have a good point, but so far the unions are looking at EFCA as an all-or-nothing proposition. 

EFCA should prove to be 2009’s grandest legislative battle and drama—at least until the details of health care reform start leaking out. 

Beyond EFCA 

The labor plate for Obama and the Democrats is a full one, but in fact most of what’s envisioned was fashioned and introduced by Democrats after they seized the House and Senate in 2006. With their ranks recently enlarged, the Dems can just about ride roughshod over their opposition if they choose. They need only one Republican supporter in the Senate to choke off debate (provided the Minnesota Senate race remains in Democratic hands after a court challenge), and they have a president who probably won’t veto anything pro-labor that they pass. So what’s on the plate? 

Here in no particular order are proposed laws to be taken up in the 111th Congress: 

The Arbitration Fairness Act, introduced first in 2007, does away with arbitration clauses in employment agreements, freeing employees to sue rather than go to mandatory arbitration. Again, the goal here is to reverse a decision by the Supreme Court. In Circuit Court v. Clay, the high court held that employers could mandate arbitration in employment disputes as a condition of employment. The House version had just 91 sponsors the first time around, and the Senate just six, but that doesn’t mean the bill won’t become law sometime this year.

That this issue is still alive and ready for action was evident in February 2009 when a bill by Senators Ted Kennedy (D., Mass.) and Robert Casey (D., Penn.) was introduced to overturn an appeals court decision mandating that binding arbitration be honored in USERRA (Uniformed Service Employment and Re-employment Rights Act) claims. USERRA is meant to restore employment positions and rights after servicemen return to the workforce from active duty call-up. The proposed Servicemembers Access to Justice Act would outlaw binding arbitration and affirm that USERRA takes precedent over state law and labor contracts.

The lengthily named Bill to Repeal a Limitation in the Labor-Management Relations Act Regarding Requirements for Labor Organization Membership as a Condition of Employment does away the “right to work” provisions enacted by several states. Right to work refers to laws that allow employees to work at a unionized company but not pay union dues. This act would force all affected employees in a union workplace to pay dues. This particular piece hasn’t been introduced yet, but it would no doubt easily pass the current Congress.

The RESPECT (Re-empowerment of Skills and Professional Employees) Act redefines “supervisor” so that management has fewer allies in fights against unionization and the unions thus have more potential employees to be unionized. It amends the NLRA to define supervisors as those who 1) have authority over their employees a majority of the workday and 2) have the authority to responsibly direct employees. The act aims to make almost everyone in the workforce a non-supervisor, with obvious financial and organizational benefits for the union and onerous new challenges for management. Hearings were held on the legislation in the 110th Congress, but it has never been introduced. Again, its chances should be good if introduced.

The Working Families Flexibility Act, cosponsored by Obama himself when he was in the Senate, follows the European model of allowing employees to request changes in their working arrangements. Such changes could involve the number of hours to be worked, the hours in the day to be worked, and the location of the work itself. Employers would be mandated to meet and discuss with their employees each such request and then to provide a written decision, which must include detailed reasons for rejecting the request if a denial is being issued. The employee could then file a request for reconsideration, which starts the process all over again. Finally, if the employee is ultimately dissatisfied, he or she can file a complaint with the Wage and Hour Division (WHD) of the Department of Labor (DOL).  The WHD could impose fines or order “equitable relief.” If enacted, the law would apply to businesses with 15 or more employees. With Obama solidly behind this, it could easily pass so long as his political goodwill (capital) holds out.

The Civil Rights Act of 2008 is a real grab bag of remedies to what the Democrats and labor view as detrimental Supreme Court decisions. The bill’s goal is to “restore, reaffirm, and reconcile legal rights and remedies under civil rights statutes,” but basically what it does is eliminate damage caps in Title VII and ADA cases and add compensatory and punitive damages for equal pay violations (which seems to overlap the Paycheck Fairness Act). Much like the Arbitration Fairness Law, this act also restricts the use of mandatory arbitration clauses. Because of the overlapping nature of the various initiatives, the Civil Rights Act may well be reworked, or see other legislation folded into it. Still, it’s easy to see the big picture of what the Democrats in the 111th Congress hope to accomplish civil rights-wise.

The Employment Non-Discrimination Act, which passed the House in 2007, has the strong support of Senator Ted Kennedy in the Senate and will no doubt be reconsidered in this session. The bill forbids employment discrimination based on an individual’s actual or perceived sexual orientation (defined as “homosexuality, heterosexuality, and bisexuality”) and gender identity. The bill does not apply to the Armed Forces and does not require employers to treat, for benefits purposes, same-sex couples the same as married couples in states that forbid same-sex marriages. However, in states where such marriages are legal, employers must offer same-sex couples the same benefits they do other married couples.

The Forewarn Act of 2007 reworks the currently existing WARN (Worker Adjustment and Retraining Notification) Act by shrinking the requirement for implementation from businesses with 100 employees to those with 50 employees. It also ups the time-frame for advance warning of layoffs from 60 to 90 days and lowers the threshold that kicks in the warning requirement to 25 employees at a plant closing and 100 employees in a mass layoff. (The threshold for mass layoffs must be counted over an expanded 180-day period, called an aggregation period.) Forewarn also increases the penalty for violations to double back pay for affected employees for each calendar day up to 90 days total.

Protecting America’s Workers Act extends OSHA (Occupational Safety and Health Administration) protections to federal and state government employees. It also increases fines that can be levied: A “serious” violation of any OSHA standard would jump from $7,000 to $10,000; one resulting in the death of an employee would range from $20,000 minimum to $50,000 maximum. A “willful” violation would increase from $70,000 to $100,000 for any OSHA standard, and willful violations resulting in death would carry a minimum penalty of $50,000 and a maximum of $250,000.

Gauging Obama’s Priorities 

For those who wish to see where Obama and his administration stand on any of these laws (and the list above is by no means comprehensive), the site WhiteHouse.gov includes a section entitled “Agenda.” Curiously (because of Biden’s continued support for it), EFCA is not mentioned anywhere on the agenda. Workplace flexibility is prominently featured, however, as is an expansion of the Family Medical Leave Act (FMLA) to businesses with as few as 25 employees (currently, FMLA kicks in at 50 employees in a 75-mile radius), while increasing the categories available for taking unpaid leave. The “Agenda” also declares that “Barack Obama and Joe Biden will require that employers provide seven paid sick days per year.”

More concretely—and visibly—Obama unveiled two new initiatives in his proposed 2009 federal budget. One would create a mandatory retirement fund (dubbed “automatic savings”) for all employees at businesses that currently do not offer retirement plans. Employees would be allowed to opt out, but otherwise a portion of their earnings would be automatically socked away. The system is designed to work alongside Social Security and would, according to the budget proposal, raise the workplace retirement savings rate from 15 percent to 80 percent of employees. The other thrust, though still hazy in detail, would transform extended unemployment benefits into an “automatic stabilizer” during certain economic conditions. The goal is to make unemployment into a “more effective social safety net.” Details to be supplied later, evidently.

Again, most of these initiatives are going to hinge on the continuation of Obama’s strong political goodwill, called “capital,” and the support of the public, and a lot of that will depend on how the economy fares. Still, both business and labor are digging in for many protracted and heated battles in 2009 and beyond. Fasten your seatbelts for a wild ride.

Personnel Concepts, the leader in the labor law poster compliance industry, provides a muscular set of tools for employers to stay current with federal and state workplace regulations, which are constantly in flux. Boookmark and revisit often PersonnelConcepts.com for the full range of these vehicles and workplace solutions.

About the author:
Gary McCarty is a researcher and Web Content Manager for Personnel Concepts.


Note: The details in this white paper are provided for informational purposes solely. All answers are general in nature, not legal advice and not warranted or guaranteed. Readers are cautioned not to rely on this information. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.

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