President Barack Obama
Well, that didn't take long. In the lead-up to this fall's elections, corporate America took a wait-and-see approach when it came to employment policy. Many businesses put long-term hiring and other labor and employment plans on hold, unsure of how the outcome might alter tax policy, the regulatory landscape, and the fate of President Barack Obama's controversial Affordable Care Act (ACA).
It was a "choice election," said pundits, and for many employers, the clear choice was Mitt Romney. The GOP candidate promised to fight for right-to-work legislation, waive state requirements under "Obamacare," and remove what he said were "crippling" uncertainties that prevented businesses from hiring.
But after Obama was reelected, employers had to begin planning in earnest for four more years of what they saw as a hostile environment. By the end of November, ominous signs, at least for employers, started to appear. On Black Friday, some workers at Wal-Mart Stores Inc., the nation's largest private employer, went on strike. The walkouts capped off a week of more than 1,200 such actions carried out in stores throughout 48 states. Fast-food workers walked out of dozens of restaurants across New York a week later. Members of the Fast Food Forward campaign came from a sampling of chains. They asked for union representation and wages of $15 an hour, or more than double the federal minimum.
What are employers fretting about most in the president's second term? A binder full of issues—the health care law, and stepped up activity at both the National Labor Relations Board and the U.S. Equal Employment Opportunity Commission—to name some of the big ones. Employers expect to see a wave of agency guidance defining their responsibilities under the ACA, increased NLRB efforts to facilitate union formation, and heightened EEOC scrutiny of discrimination, particularly at the hiring stage.
All of the unknowns are making it difficult for businesses to budget. Michael Lotito, a partner in the San Francisco office of Littler Mendelson, says, "The biggest problem that business has today is that over the next four years they don't know what their unit labor costs are going to be." Those numbers are a key component of any company's overall cost structure. In certain industries, says Lotito, labor costs can exceed 50 percent of total business expenditures. "Once you can budget that number," he says, "then you can figure out how you're going to survive in a competitive environment."
One of the most contentious issues during the presidential campaign was the health care law. In the beginning of 2014, so-called exchanges will be up and running and large and midsize employers will be required to offer health care to full-time workers. Under what's known as the "Pay-or-Play" provision, businesses with 50 or more employees will be charged an excise tax if they don't offer coverage. The tax will be waived for the first 30 workers, above which the employer will pay $2,000 a head.
That penalty may be lower than the cost of providing coverage, but for many employers, deciding how they'll implement the law is far from an easy decision. During a panel at the 2012 NLJ Regulatory Summit, hosted in early December by Corporate Counsel sibling publication The National Law Journal in Washington, D.C., employment lawyers discussed the penalty. Panelist Ilyse Schuman from Littler Mendelson said employers have a great deal of anxiety and uncertainty about how they'll implement the law.
During the session, titled "Impact of the 2012 Elections on Labor, Employment and Benefits Law," she said that terms in the law such as "affordable" and "minimum value" need to be fleshed out. "All of those terms mean a lot to employers, not just with respect to their benefits strategy, but to their business strategy and their basic workforce structure," said Schuman. "Unfortunately," she said, "employers are really up against a wall, absent clear guidance."
To avoid triggering the requirement for employer-sponsored coverage, some businesses are cutting back on staff. Panelist Ed Gilroy, director of workforce policy for the House Education and Labor Committee, said employers are looking for ways to get under the 50-worker threshold—either by holding down employment or by scaling back employee hours. Last October, for example, Darden Restaurants Inc., parent company of popular chains Olive Garden and Red Lobster, began analyzing the potential effects of the ACA by eliminating full-time positions at some restaurants. From his committee's perspective, Gilroy said, "That's absolutely the last thing we'd want employers to be doing in this current economy."
Such measures aren't likely to be confined to retail and hospitality sectors, where part-time work is often the norm. Panelist Joseph Trauger, vice president of human resources policy for the National Association of Manufacturers, said that although he hasn't heard any members indicate that they're planning to cut hours or staff, he isn't ruling out the provision's potential effect on NAM. "I don't think it's going to be isolated to any particular industry or sector of business," said Trauger. "I think it's going to have to be a matter of what makes sense from a business standpoint."
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