On Monday President Obama unveiled his $3.8 trillion proposed budget for fiscal year 2013. (pdf) Setting the stage for upcoming budget debates in Congress, the President’s request reveals the Administration’s policies and priorities. Notably, the budget signals that employers are facing expanded enforcement and regulatory activity by the federal agencies. Although the overall funding level suggested for the Department of Labor (DOL) is less than that provided to the agency in 2012, a number of DOL departments would receive greater amounts for 2013 in order to bolster enforcement of worker misclassification laws and whistleblowing programs, among other initiatives. According to the DOL proposed budget (pdf), the agency would receive $12 billion in discretionary funding, a slight decrease from last year’s funding level. Despite the overall drop in funding, the DOL would receive approximately $1.8 billion for worker protection agencies. Specifically, the budget would provide the Occupational Safety and Health Administration (OSHA) with $565 million; the Wage and Hour Division (WHD) with $238 million; the Office of Federal Contract Compliance Programs (OFCCP) with $106 million; the Office of Labor-Management-Standards (OLMS) with $42 million; and the Employee Benefits Security Administration (EBSA) with $183 million.
In addition, the budget request sets forth funding levels for other independent agencies. (pdf) Notably, the Equal Employment Opportunity Commission (EEOC) would receive about $374 million for 2013, up from $360 million it received for FY 2012. According to its budget request, the priority for agency resources continues to be litigating systemic cases and maintaining a manageable inventory of cases. The National Labor Relations Board (NLRB) would similarly receive a boost in funding. For 2013 the agency would receive $293 million, up $15 million from the prior year. The National Mediation Board (NMB) would receive an increase of $1 million over last year’s $13 million funding allotment.
During a web chat to discuss the budget, DOL officials, including Labor Secretary Hilda Solis, responded to specific questions about the funding proposals.
Whistleblower Protection Programs and Other OSHA Initiatives
The amount of funds allocated to OSHA is $5 million more than the amount the agency received for 2012. The additional funding would be slated for enforcement of the 21 whistleblower statutes over which OSHA has jurisdiction. According to information provided in the budget, “these resources will be paired with administrative efforts to improve the transparency and effectiveness of the program.” In addition, OSHA's FY 2013 budget request includes an additional $1,750,000 “to support the agency's Modernization of Injury and Illness Data Collection initiative, the costs of which are more than offset by the elimination of the OSHA Data Initiative, which this would replace.”
David Michaels, Assistant Secretary for OSHA, claimed during the web chat that “the significant increase in OSHA whistleblower funding will help the agency address persistent backlogs and heavy and increasing caseloads for its whistleblower investigators.” The budget requests funding for 37 new whistleblower investigators, but no additional compliance officers.
In response to a question about OSHA’s Voluntary Protection Program (VPP), Michaels said that the agency:
will continue to recognize worksites that demonstrate safety and health excellence through its [VPP] and will continue to implement initiatives targeting federal agencies, Fortune 500 companies, and the construction industry for VPP participation. The agency anticipates approving 60 new VPPs in FY 2013 and recertifying 280. The agency also plans 18 new partnerships in FY 2013 in high-hazard industries with a focus on safety and health topics that are common causes of injuries, illnesses, and fatalities.
As for the budgetary amount that would apply to agency rulemaking efforts, Michaels noted that OSHA is scheduled to publish three final standards in FY 2012 “that include electric power, consultation agreements and confined spaces in construction. OSHA will also continue its work on silica, injury and illness prevention programs, combustible dust, infectious diseases and other worker protection priorities.”
Michaels stated also that the agency expects to issue its proposed rule on the Hazard Communication Standard (HCS) soon. According to Michaels, “this rulemaking will align OSHA’s HCS with the Globally Harmonized System of Classification and Labeling of Chemicals (GHS), which was developed by the United Nations. As discussed in the proposal, this rule will establish a uniform system of labeling and layout for safety data sheets. The training required in the current HCS will be retained.”
Overtime and FMLA Violations
The WHD would receive an increase of $6.4 million to bolster its enforcement of the Fair Labor Standards Act (FLSA) and the Family and Medical Leave Act (FMLA), particularly in the area of overtime violations. This increase would be accomplished partially from a program increase of $3.9 million and 36 full-time employees (FTE) and partially through a reallocation of funds of $2,500,000 and 21 FTE from the Women’s Bureau. The agency’s budget request “includes sufficient funding to maintain staffing increases implemented in FY 2009 through FY 2011 which sought to restore WHD to FY 2001 staffing levels. The request is sufficient to enable the program to conduct more targeted investigations, provide meaningful compliance assistance, and respond promptly and appropriately to complainants and others who need the services of the agency.”
The WHD budget increase would support the 57 additional investigators to enforce FLSA overtime provisions and FMLA enforcement. Part of the $6.4 million request would also address the FLSA Section 14(c) program.
During the web chat, Nancy Leppink, Deputy Administrator of the WHD, stated that the WHD “has indicated that it will use all tools available, including the FLSA hot goods provision, to ensure compliance among violators and to deter violations among other employers. The division will continue to focus on low-wage industries that employ vulnerable workers, including agriculture and garment.”
According to WHD’s Budget Justification, “expanded investigations of overtime complaints, particularly in key high-risk industries, would allow WHD to pursue corporate and enterprise-wide settlements and litigation when the agency identifies patterns of ‘off-the-clock’ and ‘misclassified 541’ violations, which represent the most common reasons for overtime violations.”
With respect to FMLA enforcement, the Budget Justification states that:
With the need to promote work and family balance, WHD is examining its FMLA enforcement policies to ensure a more comprehensive approach to compliance. WHD is developing strategies that will provide more in-depth review of the employer’s business practices and leave policies.
Worker misclassification is once again a budgetary priority. The budget specifically allocates $14 million to combat the misclassification of employees as independent contractors and strengthen and coordinate federal and state efforts to enforce labor violations arising from misclassification. This request includes $10 million for grants to states to identify misclassification and recover unpaid taxes.
During the web chat, Leppink said that the WHD has requested $3.8 million and 35 full-time employees for increased enforcement related specifically to misclassified workers. These requests are partially offset by a proposed decrease of $2,029,000 and 12 full-time employees for the elimination of employer compliance assistance requiring investigator resources and the toll-free call center. According to Leppink:
In FY 2010, the division collected nearly $4 million in back wages for minimum wage and overtime violations that were a result of employers misclassifying their employees as independent contractors, or otherwise not treating them as employees. This is a significant increase over FY 2008, when WHD collected just over $1.3 million in unpaid back wages for the same reason.
The division’s Budget Justification explains that: “to combat the problem of misclassification, WHD will explore options for additional memoranda of understanding to increase the coordination and sharing of information between WHD and other stakeholders.”
EBSA budget request includes funds to continue:
(1) a multi-faceted enforcement program that effectively targets the most egregious and persistent violators; (2) a strong regulatory framework with an active regulatory agenda; (3) to undertake significant additional responsibilities and workload in response to Congressional action in the health benefits arena; (4) to provide innovative outreach and education that assists workers in protecting their pension and health benefits; and (5) to conduct a well-integrated research program based on evidence and comprehensive analysis.
In order to support greater retirement savings, the budget would create a system of automatic workplace pensions and double the small employer pension plan start-up credit:
Under the proposal, employers who do not currently offer a retirement plan will be required to enroll their employees in a direct-deposit IRA account that is compatible with existing direct deposit payroll systems. Employees may opt-out if they choose. To minimize burdens on small businesses, those with ten and fewer employees would be exempt. Employers would also be entitled to an additional credit of $25 per participating employee—up to a total of $250 per year—for six years. To make it easier for small employers to offer pensions to their workers in connection with the automatic IRA proposal, the Budget will increase the maximum tax credit available for small employers establishing or administering a new retirement plan from $500 to $1,000 per year. This credit would be available for four years.
The agency also plans to implement new registration requirements for Multiple Employer Welfare Arrangements (MEWAs).
As OFCCP’s Budget Justification explains, the agency is “engaged in an aggressive regulatory agenda.” Accordingly, the agency is making significant investments in its regulatory activity, primarily in the promulgation of new rules. In FY 2012, OFCCP plans to issue new regulations for federal contractors and subcontractors in the construction industry that strengthen the employment opportunities and protections of women and underrepresented minorities, regulations protecting the employment rights of workers with disabilities, and regulations revising Section 4212 on the employment of covered veterans.
In addition, OFCCP is updating its compliance evaluation manual with revised enforcement procedures. Once completed in FY 2012, the agency explains that this manual will support a “more robust and thorough compliance evaluation process, as well as create a level of consistency across regions.” OFCCP will continue to conduct more full-desk audits, additional onsite investigations, focus reviews, and stakeholder education.
The proposed budget would allocate funds for the following programs:
- Extension of the payroll tax cut and unemployment insurance benefits for the remainder of 2012;
- Business write-offs of the full amount of new capital investments;
- Tax credit that would enable small businesses that add jobs and wages a tax cut equal to 10 percent of wages added up to $500,000;
- $5 million for a state paid leave fund to help states set up paid leave programs.
With respect to the unemployment insurance program, Jane Oates, Assistant Secretary for the Employment and Training Administration (ETA), explained during the web chat that the budget would offer the following proposals to aid employers and states and improve the solvency of the unemployment insurance program:
- Suspend FUTA credit reductions (employer tax increases) for calendar years 2012 and 2013.
- Reinstate the 6.2 percent (currently 6.0 percent) FUTA tax rate in Calendar Years (CY) 2013 and 2014.
- Increase the FUTA taxable wage base from $7,000 to $15,000 in 2015, and index the wage base in future years based on average wage growth.
- Reduce the FUTA tax rate to 5.77 percent in 2015 (net effective FUTA tax rate reduced from 08 percent to 0.37 percent).
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