Washington D.C. Employment Law Update : Washington D.C. Employment Lawyer & Attorney : Littler Mendelson Law Firm : Virginia, Tyson's Corner

In his opening statement, Committee Chairman John Kline (R-MN) criticized a number of DOL rules that he said were “designed to favor Big Labor at the expense of small businesses.” In addition, he stated that “workers and their employers need simple and fair rules of the road that promote health, safety, and accountability; they do not need a bureaucracy that continues to grow in size and complexity and stifles the freedom and innovation our economy desperately needs to grow and prosper.”

During the hearing, Labor Secretary Hilda Solis defended (pdf) the DOL’s policies and regulations, and responded to specific questions about the department’s budget request. More than one committee member questioned the DOL’s decision to increase funding allocation to the aforementioned divisions, but not for the Office of Labor Management Standards (OLMS), which administers and enforces most provisions of the Labor-Management Reporting and Disclosure Act (LMRDA). According to Solis, the OLMS will receive the same level of funding, but will be “more strategic” in carrying out its job functions. Solis clamed that in 2010, it conducted more investigations (145) and issued more indictments than it had in recent years.

In response to questions about “card check” and the Employee Free Choice Act (EFCA), Solis said that her agency did not have the authority to implement provisions of this failed bill administratively or through regulations, and acknowledged that it lacked sufficient votes to advance at this time.

A number of members were also critical of the administration’s position in favor of project labor agreements (PLAs), and its withdrawal of the union reporting LM-2 form. In response, Solis claimed that the use of PLAs reduces costs and uncertainty, and the LM-2 form was “duplicative in nature.”

Committee member Judy Biggert (R-IL) raised concerns about a possible conflict of authority between the EBSA and the SEC over a proposed rule that will amend who is to be considered a “fiduciary” under ERISA. Biggert noted that the SEC is in the process of developing regulations under the new financial reform law commonly known as the Dodd-Frank Act, and wondered if the DOL is coordinating efforts with that agency. Solis said that Assistant Secretary of Labor for the EBSA, Phyllis Borzi, has, indeed, been having discussions with the SEC on this issue.

In defending the budget request’s impact on jobs, Solis claimed that the health care industry experienced the largest job growth within the past year, and will continue to expand. She also said that should the Republican budget be implemented instead, the agency would have to make many cuts, including the elimination of many of the nearly 300 new wage and hour investigators it hired within the past two years. Rep. George Miller (D-CA) also noted that the Republican’s budget would reduce OSHA’s staffing to a level last seen in 1974. Also with respect to OSHA, Solis claimed that the DOL would continue to fund the Voluntary Protection Program (VPP).

The House is currently debating a continuing resolution to provide federal funding for the remainder of fiscal year 2011.

Solis stated that $1.7 billion in discretionary funds and 10,957 full-time equivalent employees would be devoted to worker protection activities, including an employee misclassification initiative. This initiative would use $25 million to create a multi-agency program to strengthen and coordinate federal and state efforts to enforce statutory prohibitions on misclassification, and identify and deter instances of employee misclassification as independent contractors. The DOL’s Wage and Hour Division (WHD) would receive $12 million and 90 new investigators to expand these enforcement efforts. In addition, the misclassification initiative would support new, targeted efforts to recoup unpaid payroll taxes through state audits of problem industries supported by federal audits, and by means of a $10.9 million pilot program that would reward the states that are the most successful or improved at detecting and prosecuting employers that fail to pay the appropriate taxes due to worker misclassification. The budget would also allocate $1.6 million to the Office of the Solicitor to hire 10 full-time equivalent employees and enhance enforcement strategies; provide $150 thousand to the Occupational Safety and Health Administration (OSHA) to train inspectors on worker misclassification issues; and promote legislative changes that would require employers to properly classify their workers, impose penalties for noncompliance, and provide employee protections in the event employees are wrongly categorized as independent contractors.

In addition to the worker misclassification initiative, Solis explained that the budget request of $244.2 million for the WHD would support targeted investigations, compliance assistance, and the reduction of repeat violations of minimum wage, overtime, and workplace safety laws. The Office of Federal Contract Compliance Programs (OFCCP) would receive $113.4 million and 788 full-time equivalent employees, which would, according to Solis, “allow OFCCP to broaden its enforcement efforts and focus on identifying and resolving both individual and systemic discrimination.” Pursuant to the OFCCP’s enforcement of Executive Order 11246, Equal Employment Opportunity, the agency plans to renew its focus on conducting reviews of the construction industry.

With respect to workplace safety, Solis said her request of $573.1 million and 2,360 full-time equivalent employees for OSHA would redirect 35 such employees from compliance assistance to enforcement. In addition, the budget includes an additional request of $4 million to expand OSHA’s regulatory program, $1 million for consultation programs focused on small businesses, and $1.5 million for state plans.

The Secretary’s testimony reflects the shift in focus and resources towards enforcement activity by the DOL. With an enhanced emphasis on enforcement, employers can expect greater scrutiny of their practices by the Department.