Employers Prepare for Rules and Regulations in a Second Obama Term

Shannon Green

Corporate Counsel

11-08-2012

Texas Congressman Ron Paul may not see any difference between Democratic President Barack Obama and failed GOP challenger Mitt Romney, but employers and their lawyers sure do. In the wake of Tuesday’s election victory for Obama, management-side employment firms are focusing on the realities of “four more years.”

John Meyers, partner in the Atlanta office of Barnes & Thornburg, says that based on the Affordable Care Act issue alone, “most companies were hoping Romney would win.” Even ahead of the election, he says, employer uncertainty over how to comply with the so-called “Obamacare” law, as well as how much it might cost, led to a pre-election chill in hiring. 

Michael Lotito, a partner in the San Francisco office of Littler Mendelson, says that how the law is actually going to work—as well as the increased costs and penalties associated with it—are certainly on the minds of employers. 

Romney, the former Massachusetts governor, had vowed to repeal the law if elected. “Before last night, at least for some,” says Lotito, “the question was, ‘Do we even need to worry about it?’ ” 

Now, obviously, the answer to that question is: Yes. “I think that the employer community is waiting for the regulatory avalanche, which will come soon,” Lotito says, “as to how issues such as part-time status and minimum coverage and the like are going to be interpreted by the administration.”

But health care legislation isn’t the only thing employers are concerned about. 

“The regulatory rubric and court appointments are where our clients have felt a lot of pain,” says Meyers, “and they’re going to see a lot more pain.” In light of big union contributions to the president’s re-election, Meyers predicts the administration will act favorably toward those donors during the next term. “They are looking for their payback,” he says.

Lotito expects to see Republicans pick up seats in both congressional chambers in the mid-term elections, and says that the Obama administration is likely to be most active in the two years between now and November 2014. “There’s a moment in time,” he says, “and that moment is now.

Employers need to be aware that agencies probably are going to become more aggressive in enforcement, says Lotito. Despite the lack of legislation likely to come out of the still-divided Congress, Lotito says to look for the greatest action to take place at the regulatory level. 

Both Lotito and Meyers expect a flurry of activity by the U.S. Department of Labor, the National Labor Relations Board, and the Equal Employment Opportunity Commission, as well as stepped-up enforcement from the Occupational Safety and Health Administration and the Office of Federal Contract Compliance Programs.

The DOL will continue to focus on employee misclassification issues, says Meyers. 

The “right-to-know” rule proposed rule under the Fair Labor Standards Act in 2010 is also a likely move forward now that Obama has been re-elected, he says. 

The rule would require employers to notify workers of their rights under the FLSA, and to provide information regarding hours worked and wage computation. Employers that seek to exclude workers from FLSA coverage would be required to perform a classification analysis in case enforcement personnel request it.

The rule would also place a significant administrative burden on employers, says Meyers. “You’d have to come up with this analysis for every Tom, Dick, and Harry you hire as an independent contractor,” he notes. Because the rule would highlight the misclassification issue for employees, Meyers also predicts an increase in the potential for litigation over the issue.

Lotito suggests that the right-to-know issue is huge. “I can see every plaintiffs lawyer in every class action demanding the employer’s documentation that led to its conclusion that Category A is exempt versus nonexempt.”

But the biggest problem companies are likely to face, according to Meyers, is the EEOC.The agency has been better funded under Obama, he says: “They have more lawyers and more investigators, and EEOC lawyers are getting involved in charges earlier in the process.” 

Lotito predicts there will be a lot more EEOC scrutiny of the hiring process. The agency updated its guidance on the use of criminal background in the hiring process in April. Lotito says employers shouldn’t be surprised to see the addition of protections for long-term unemployment. And refusing to hire applicants who have been unemployed for 12 months or more could be seen as having a disparate impact on minority applicants, he says. “I could see the EEOC looking for those kinds of opportunities to expand the breadth of the statute in very creative ways.”

Regarding the future of the NLRB, Lotito says a big challenge for employers is a lack of certainty concerning its recess appointments. Republicans have argued that the Senate wasn’t in recess when the president appointed three lawyers to the board in January. “Employers can deal with almost anything except uncertainty,” he says. The uncertainty of the NLRB, and whether its decisions are even valid, presents a big challenge for employers, he says. 

Lotito also advises employers to keep an eye on what he says has been a “sleeper issue” up until now. Employers have long been required to let the DOL know when it hires a “persuader” to talk to employees about unionization. Lotito wrote in The Hill’s Congress Blog last month that a proposal extending the “persuader” definition to include attorneys working with companies on a range of issues could have a serious impact.

Meyers recommends that employers proceed carefully as they look to the president’s next and final term. Corporate leaders need to be introspective, he says” “They need to examine many of their policies and procedures,” and be careful about classification of workers. 

And of course, Meyers recommends that employers listen very closely to counsel: “They need to develop a relationship with competent outside labor and employment counsel who can help guide them through, in a proactive way, what’s coming and what’s already transpiring.”

See also: “Obama's Win Puts Dodd-Frank Reforms on Firmer Footing,” CorpCounsel, November 2012.