On July 14th, the House Appropriations Committee approved a $161.6 billion draft Labor, Health, and Human Service bill that contains several provisions that would prevent the Department of Labor (“DOL”) and the National Labor Relations Board (“NLRB”) from using money to enforce recent regulations and policies that have caused considerable controversy for employers.
Specifically, the bill includes provisions that would prohibit enforcement of the fiduciary rule and the Fair Labor Standard’s Act’s (“FLSA”) overtime rule. The House Appropriations Committee characterized these provisions as “Reducing Harmful Red Tape,” and “designed to help U.S. business create jobs and grow the economy by reducing or eliminating overly burdensome government regulations[.]” The bill also includes “several policy provisions to stop the NLRB’s harmful anti-business regulations that impose additional and excessive costs on American businesses, result in job losses, and hinder economic growth,” including a prohibition on enforcement of joint-employer standards as announced in the NLRB’s decision in Browning Ferris Industries.
FLSA Overtime Rule
The FLSA provides a number of exemptions, known as “white collar exemptions,” for executive, administrative, and professional employees. To be classified as exempt, an employee must (i) be paid a certain minimum salary; and (ii) perform certain types of tasks related to his or her primary job duties. Under this rubric, before an assessment of an employee’s duties can even be made, the employee’s salary must meet an established minimum level. Under the new FLSA overtime rule, which was released on May 18th, the floor salary below which overtime must be paid nearly doubled from $23,660.00 ($455 per week) to $47,476.00 ($913 per week).
The final rule, Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees, will undoubtedly increase the number of workers who will quality for overtime pay. With the new rule set to take effect on December 1, 2016, employers should continue to evaluate their options and transitioning their workforce to ensure that the requirements of the final rule are implemented in a compliant and effective manner. As explained in a prior blog post, employers must determine how to effectively handle the exempt employee classification of all those currently exempt employees below the new threshold salary level. Employers may either have to raise certain exempt employees’ salaries or reclassify them as non-exempt and closely monitor their hours worked.
However, employers should pay close attention to the multiple efforts Congress has made to prevent enforcement of the overtime rule. In addition to the provisions included in the House Appropriations Committee Spending Bill, both the House and Senate have introduced Joint Resolutions to block the implementation of the overtime regulations.
The Senate Labor Committee was first to introduce a Joint Resolution disapproving of the overtime rule on June 7th. Senate labor committee chairman Lamar Alexander (R-Tenn.) and the Senate Homeland Security and Governmental Affairs committee chairman Ron Johnson (R-Wis.), along with 44 other Republican Senators, introduced the Joint Resolution to block implementation of the new overtime regulations. If the Joint Resolution is passed, it would nullify the DOL’s final rule and prohibit the administration from issuing a substantially similar rule absent congressional approval.
The House introduced a joint resolution on June 16th, which states that Congress disapproves of the Department of Labor’s rule defining the exemptions for executive administrative, professional, outside sales, and computer employees under the FLSA and that the rule “shall have no force or effect.”
Under the Congressional Review Act, the House and Senate may vote on a joint resolution of disapproval to stop, with the full force of law, a federal agency from implementing a rule or regulation or issuing a substantially similar regulation without congressional authorization. A resolution of disapproval only needs a simple majority to pass. The resolution of disapproval must also be signed by the President but Congress can overturn a presidential veto with a two-thirds vote in both the Senate and the House.
NLRB’s Browning-Ferris Industries Decision
The bill also seeks to eliminate the increasing efforts by the NLRB to expand the definition of “joint employer.” Under the standard announced in Browning-Ferris Industries on August 27, 2015, a company is a joint-employer if it exercises “indirect control” over working conditions or if it has “reserved authority” to do so. This was a significant departure from the traditional theory of joint employment where an entity was considered a joint employer if it had direct control over a worker. Ultimately, the relevant inquiry had been whether the company exerts a significant and direct degree of control over another business’s employees and their essential terms and conditions of employment. The departure from direct control to indirect control has caused significant confusion for employers, and it is still unclear how the Board will utilize this framework.
The Browning-Ferris decision has large implications for employers, and labor unions. For employers, the uncertainty regarding who may be considered a joint employer makes several workplace situations vulnerable to a determination of joint employer status. The Board’s decision failed to make a bright lane that can instruct employers on when they may be considered a joint employer. Labor unions can use the ruling as a union-organizing tool that will enable them to increase efforts to bring other workers, such as those supplied by staffing firms, to the bargaining table.
Congress has taken its own initiative to strike the new standard. The proposed appropriations bill specifically states:
SEC. 410. None of the funds made available by this Act may be used to investigate, issue, enforce or litigate any administrative directive, regulation, representation issue or unfair labor practice proceeding or any other administrative complaint, charge, claim or proceeding that would change the interpretation or application of the standard to determine whether entities are “joint employers” in effect as of January 1, 2014.
The differing opinions between Republicans and Democrats regarding the utility and strength of labor unions is evident, and has been contentiously litigated in the courts for decades. The Browning-Ferris decision will surely be a topic of conversation leading up to the 2016 Presidential election in November, and the current status of the law could quickly change depending on outcome. It is likely that a new Republican president would appoint NLRB members who would reverse the Browning-Ferris ruling. However, if a Democrat wins, the NLRB will probably continue to utilize the expansive holding from the Browning-Ferris decision.
The Obama administration’s efforts to implement several new rules and policies during its final months was not only noticed by employers. Congress quickly took charge of preventing enforcement of several regulations and policies that were described as anti-business and overly burdensome government regulation. The next few months will certainly be interesting as the Republican-controlled House and Senate consider the proposed joint resolutions, and the appropriations bill goes to the House floor. Employers should stay tuned for updates on these interesting political developments that could have a significant impact on the workplace.
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