Veterans of Obama’s Labor Department Look Ahead in Anguish

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The Frances Perkins Building headquarters of the U.S. Department of Labor in Washington, D.C. 

The Department of Labor during President Obama’s second term was the epicenter of a domestic policy agenda aimed at helping working families. Shepherding that agenda in the face of entrenched opposition from congressional Republicans and well-funded business groups was Labor Secretary Tom Perez. With muscular wonkery, he and his top labor lieutenants successfully implemented an impressive array of rules and regulations that have come, in part, to define Obama’s legacy.

They implemented executive orders that, by leveraging the federal government’s contracting power, required federal contractors to pay a minimum wage of $10.10 an hour, provide paid sick leave, and disclose past labor law violations. They promulgated a new overtime rule that doubled the salary threshold for eligibility—a powerful tool aimed at lifting pay for millions of moderate-income workers. They created a new standard that required retirement advisors to act in their clients’ best interest and they pushed through workplace safety standards that had languished for decades. Finally, they built out an innovative enforcement strategy that did more with less.

These rules weren’t enacted on a whim by overzealous bureaucrats gunning to douse industry with red tape, as many Republicans would have you believe. Rather, they were the result of many years of study and careful consideration, with input from hundreds of meetings with advocates and business groups.

Not surprisingly, Obama’s top labor alums express pride in the many worker protections they were able to put in place over the past several years. In interviews, however, a number of them expressed deep concern that many of them could be undone by the Trump Administration’s and congressional Republicans’ blitzkrieg against federal regulations and workers’ interests.

For starters, there’s the federal hiring freeze the new president has imposed, and Trump’s executive order directing that for every new rule, federal agencies must identify two rules to eliminate.

“A hiring freeze is a pretty ham-handed way to decide which [government] functions should exist,” Obama’s Deputy Labor Secretary Chris Lu, who is now a senior fellow at the University of Virginia’s Miller Center, told the Prospect in an interview. “There’s an irony here in that these are folks that want to run government like a business, and you would never run business with a hiring freeze. It’s a nice sound bite, but it doesn’t actually do anything.”

In fact, it could impede the department’s ability to carry out its investigatory duties. Right now—before the freeze has taken its toll—a couple thousand Labor Department investigators are charged with enforcing the laws on wages, pensions and workplace safety on behalf of more than 100 million workers. At the current level of staffing, Lu says, the frequency with which an OSHA investigator is likely to show up at your workplace is probably once every 100 years. “It compromises the safety of workers, compromises workers getting wages,” Lu says. “That’s what I’m concerned about.”

The future of workplace safety looms large in the Obama alums’ concerns. “When OSHA issues a regulation, there’s always controversy and employers who say, ‘we can’t do this.’ And then inevitably they look at the regulation and say, ‘we can do this,’” says Obama’s OSHA director David Michaels. “When OSHA was in process of rulemaking protecting workers in hospitals from blood-borne pathogens, dentists told us that they wouldn’t be able to practice dentistry if they had to wear gloves. How many dentists work without gloves now? Americans have forgotten that the reason there are sharps containers in every doctor office is because OSHA requires it. We would never want to go back to that earlier period.”

 

THE LABOR DEPARTMENT'S conflict-of-interest rule, which sought to require retirement advisors to act as a fiduciary, putting clients’ interests ahead of their own, was first introduced back in 2010, but was ultimately tabled for reconsideration in the face of unprecedented industry backlash and an unfavorable political terrain. Its implementation was reenergized when Perez took over the department in 2012 and began aggressively advocating for the rule in the White House and lobbying for support on the Hill. Phyllis Borzi, the fiery head of the department’s Employee Benefits and Security Administration, got to work finalizing the rule’s details, which involved dozens of meetings with stakeholders. In April 2016, Perez, flanked by congressional allies like Senator Elizabeth Warren, unveiled the conflict-of-interest rule, which could protect retirement savers from as much as $17 billion a year that comes from advice that does not primarily serve their interests.

As part of his plan to deregulate the finance sector, Trump called last week for a review—and potential delay or repeal—of the rule, which companies are required to abide by starting in April. Borzi is worried. “On the morning after election, what I said is: ‘the simplest way to [kill the rule] is delay and dilute,” Borzi said in an interview a few days before Trump singled out the fiduciary rule. “There are a whole lot of people out there that have been paid a lot of money to come up with all these strategies [to undermine the rule].”

Yet, wholesale repeal through the executive branch could be just as difficult as it was to implement the rule, since the administration would have to do an economic analysis that justifies why it should be eliminated. Meanwhile, Borzi is at least somewhat optimistic. “One thing we know is that companies like certainty, and uncertainty and chaos is not what they seek, particularly from government,” she says. “For many people there’s no turning back. The marketplace has spoken; consumers are now demanding that advisors act as fiduciaries.”

David Weil, a leading expert on what he’s dubbed the “fissured workplace” to describe the blurring of traditional employer-employee relationships through subcontracting and misclassification, was confirmed as Obama’s DOL Wage & Hour Division administrator in 2014. Dramatically understaffed and underfunded, the agency only had about 1,000 investigators who were responsible for 7.3 million workplaces. It was “a hell of a regulatory resource problem,” Weil told the Prospect.  

Weil’s solution to that problem was to  deemphasize the agency’s complaint-driven enforcement strategy in favor of a strategy of targeted investigations in high-violation industries—those where officials knew there were problems and had higher percentages of low-wage workers, particularly those unlikely to exercise their right to complain, like in the fast-food, agriculture, and garment manufacturing sectors. “We wanted to focus those resources on places where we could have the most impact,” Weil says. Before he came aboard, 75 percent of the agency’s investigations were spurred by complaints; by the end of the administration, Weil says it was 50-50.

Weil also activated parts of the agency’s statutory power that were previously unused, such as requiring employers who had stolen workers’ wages to not only pay back wages, but also interest and opportunity costS, which Weil says essentially doubles what workers are owed. He also utilized the “hot goods” provision, which can prohibit certain contractors and food growers from shipping their goods until they remedy their wage and hour problems. Perhaps most notably, he issued groundbreaking guidelines specifying when workers at franchises or working for subcontractors or as “independent contractors” are really employees of the parent company, detailing who is a joint employer and how employers should comply with labor law to avoid worker misclassification.

Trump’s labor secretary nominee, fast-food executive Andy Puzder, has made a name for himself as a frequent conservative critic of Obama’s regulatory agenda. He also hails from an industry with one of the highest concentrations of wage and hour violations in the U.S. economy. Weil, among many others, is concerned about what his confirmation would mean for the department’s enforcement strategy.

“With Puzder’s nomination, I obviously was more concerned because of the fact of his own ties to CKE [the parent company of the Carls’ Jr. and Hardee’s fast-food chains], and that he has grown up in industry that is a very problematic industry—any responsible person has got to worry about the eating and drinking business, because it’s a huge industry. There’s lots of noncompliance that hits workers hard because they’re low paid,” Weil says. “We had an approach that was starting to move the dial. I worry about someone walking away from those kinds of industries.”

“I could see them going toward saying, ‘Well, most employers are complaint and we’ll just focus on education and guidance’ and focus enforcement on just the worst of the worst violators. That has happened in past Republican administrations. That’s the ebb and flow of regulation,” Weil says. “What I hope they would not do is to not go after anyone and not use tools afforded by statute.”

Weil is concerned that Puzder’s past statements underscore a hostility toward government intervention that does not bode well for the department’s—or American workers’—future. “He spends so much time talking about the downsides of regulations and doesn’t talk a lot about the horizon—about what could be and what is needed,” Weil says. “It’s not sufficient to say he created a lot of jobs as an employer—[that indicates] a fundamental misunderstanding about what the DOL is about.”

Tom Perez, the former labor secretary who is currently in the midst of a heated campaign to lead the Democratic National Committee, has also gone after Puzder, criticizing him for his opposition to the new overtime rule and to substantially raising the minimum wage. “We can’t turn back the clock on labor rights and the Labor Department,” Perez implored.

 

FURTHERMORE, rumors are swirling about whether parts of the department might just be abolished altogether. A policy proposal from the Heritage Foundation, which has close ties to White House officials, calls for repealing the overtime and conflict-of-interest rules, rolling back Weil’s efforts to root out misclassification, cutting funding for workforce training programs, and completely abolishing the department’s Women’s Bureau, and Office of Federal Contract Compliance Programs. “The [women’s] bureau was created to examine the challenges that uniquely faced women when they entered the workforce,” the report states. “Today, women make up half of the workforce. The challenges facing female employees are now the challenges facing the workforce as a whole.” (It fails to mention that gender pay and hiring gaps persist across nearly every sector of the economy).

The OFCCP is charged with enforcing racial discrimination laws for federal contractors and ensuring that they meet federal Affirmative Action standards. Under Obama, the agency expanded protections to LGBTQ workers, implemented federal contractor hiring goals for disabled workers, and updated gender discrimination rules. The basic principle of the agency is that federal taxpayer dollars must never be used to discriminate, says former Obama OFCCP director Patricia Shiu. “I am concerned about what approach the Trump administration will take to ensure that people across this country not only have jobs, but good jobs. Jobs that are inclusive and reach out to all stripes and colors,” Shiu says. The Heritage paper claims that because the Equal Employment Opportunity Commission enforces discrimination laws for all employers, the OFCCP is redundant.

In Congress, Republicans are working to repeal Obama’s Fair Pay, Safe Workplaces order that requires federal contractors to disclose past labor law violations, and labor advocates fear that additional orders that required federal contractors to pay workers at least $10.10 an hour and provide paid sick leave could be on the chopping block, too. Despite reports detailing how Jared Kushner and Ivanka Trump helped save Obama’s executive order prohibiting LGBTQ discrimination from federal contractors, there’s no such reassurance for the minimum wage or paid sick leave orders The future of the overtime rule, which a federal judge blocked just days before it was supposed to go into effect, is also very much in question. It remains to be seen whether the administration defends the rule in the courts or hangs it out to dry.

Still, Obama’s labor team holds on to hope that Trump can be pressured to stay true to his campaign message of lifting up working Americans. “If Donald Trump is serious about helping the working-class Americans that apparently supported him, he would be well served to take a look at the policies that we have put forward,” former Deputy Labor Secretary Lu says. “There’s nothing partisan about paying people overtime wages or protecting retirement security. No one goes to polling booth saying ‘I want to vote for unsafe workplaces.’”

“I would hope Trump and Puzder would take a look at those regulations and see that they make sense for American workers,” Lu says. Whether the Trump administration so much as considers protecting any of Obama’s labor rules remains uncertain, however. Optimistically, Lu says, “I think that’s an open question.” 

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