Authored by Alex Passantino
In the wake of last week’s re-election of President Obama and a Republican House majority, Americans are left with many questions: What is this “fiscal cliff” I keep hearing about? What are my responsibilities under Obamacare? Is there really a possibility of comprehensive immigration reform? We know, however, that regular readers of this blog have a single, burning question: What do the election results mean for the Department of Labor’s Wage & Hour Division (WHD)?
Most immediately, the re-election of President Obama means that there will not be a flurry of “midnight” regulatory activity that often takes place with a Presidential transition. Beyond the next 60 days, however, we will need to see what WHD identifies as its regulatory priorities. In the meantime, we can anticipate that WHD will continue forward with its aggressive enforcement and regulatory agenda.
Regulatory and Subregulatory Activity
Companionship Services Exemption
It seems all but certain that WHD will finalize its regulatory effort to eliminate the companionship services exemption for third parties. The comment period for that rulemaking closed on March 21, 2012, and WHD has been considering those comments and preparing a final rule. Expect WHD to publish a final rule that largely reflects its initial proposal.
Family and Medical Leave Act
Similarly, earlier this year, WHD published a proposed rule described principally as implementing certain statutory changes related to military caregivers and airplane flight crews. The rulemaking, however, also contained proposals to effectively eliminate the physical impossibility exception, significantly limit an employer’s ability to require an employee to take leave in specified increments, and remove the FMLA forms from the regulations (which would allow WHD to change the forms without public notice and comment). Comments to this proposal closed on April 30, 2012. WHD has been considering the comments and preparing a final rule, which likely will be published with little deviation from the proposed rule.
Nondisplacement of Qualified Workers Under the Service Contracts
On January 30, 2009, President Obama issued an Executive Order requiring, with limited exception, successor contractors on federal service contracts to hire the employees of the predecessor contractor. The requirements become effective once the FAR Council (in connection with WHD) has issued a final rule implementing the Executive Order. On August 29, 2011, WHD issued a final rule. On May 3, 2012, the FAR Council proposed a rule to implement the Executive Order. The comment period has closed and the FAR Council will certainly move forward with a final rule implementing the Executive Order.
Perhaps the most controversial regulatory initiative proposed by WHD was what has been called the “Right-to-Know” rule. Earlier this year, however, WHD announced that it would not be completed by January 20, 2013. Now that the Obama Administration has been extended, it would seem likely to resurface, as it repeatedly has been identified by senior officials at DOL as one of the agency’s priorities.
Although no formal proposal has ever been issued, DOL states that it “proposes to update the recordkeeping regulations under the Fair Labor Standards Act in order to enhance the transparency and disclosure to workers of their status as the employer’s employee or some other status, such as an independent contractor, and if an employee, how their pay is computed.” When originally proposed, this rulemaking immediately drew the concern of employer community when it was reported that it would require employers to, among other things, prepare a written analysis of an employee’s exempt status under the FLSA, provide a copy of that analysis to the employee, and maintain a copy of that analysis for review by a WHD investigator.
In February of this year, the Solicitor of Labor told an ABA subcommittee that WHD would be issuing several Administrator Interpretations (AIs) over the next year or so. Thus far, WHD has not issued any AIs in 2012, and only three since the inception of that program in 2010. Presumably, this means that we can expect a number of them to be issued in the near future. It is difficult to say with any certainty which issues will be addressed in the AIs, but it has long been rumored that WHD might be “doing something” with respect to its position on the use of a half-time calculation in misclassification cases, making that issue a likely candidate.
The Supreme Court’s rejection this summer in Christopher v. SmithKline of deference to a DOL amicus brief seems not to have deterred the DOL amicus program, with the Solicitor of Labor filing at least six amicus briefs on FLSA-type issues since the Supreme Court’s decision. Given the priority that the Solicitor has personally given to this program, DOL will undoubtedly continue to actively pursue opportunities in which it can influence pending litigation through the filing of amicus briefs.
Employers can be sure that WHD will continue with its aggressive enforcement agenda, including:
- A focus on “fissured” industries, including construction, hotels, and restaurants.
- Additional comprehensive (i.e., project-wide or site-wide) investigations under the Service Contract Act and the Davis-Bacon and related Acts.
- More investigations coordinated out of the national office of WHD, presumably to ensure consistency with national priorities.
- A shift of resources from complaint cases to targeted cases, allowing WHD to focus its investigations.
- The assessment of liquidated (double) damages is becoming the norm across the country.
- A decreased use of receipts (WH-58s) as part of the resolution of the investigative process, making it more difficult for employers to defend against subsequent litigation.
- An increased threat of litigation, including requirements to enter into consent decrees to resolve particular issues.
- An increased use of penalty assessments, debarment, “hot goods” designations, and criminal prosecutions.
On the regulatory front, pay close attention to what’s going on with new and proposed regulations. When a new regulation is proposed, employers should participate in the notice-and-comment process to make their views known.
On the enforcement side, as we’ve been preaching for the past four years, now is the time to get your wage-hour house in order. Ensuring that your practices are compliant before the investigation starts is critical to increasing the chance of a successful resolution