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Logistics Carries Weight of Washington on its Shoulders

Jan. 15, 2016
Brace yourself for another year of political posturing and regulatory activism.

Later this year we will go to the polls after experiencing what has proven to be a tumultuous presidential primary season.

At the time this was written the presumptive Democrat nominee was Hillary Clinton and the Republican nominee will be… someone wearing a red tie or red dress.

What we can be assured of is that both sides won't rest in posturing on either domestic policy or foreign policy.

You also can expect that federal agencies under the Obama Administration will continue to press their agenda to render secure the union support Democrats rely on. At the state and local levels policymakers and regulators in the Blue and Red States will harden their positions on both the left and the right.

It is unlikely Congress will pass major legislation. Yes, Democrats in the House and Senate will introduce sweeping bills favoring labor unions, immigrants and other minorities seen as crucial partners in their political coalition. And you can count on Republican legislators passing some bills strongly opposed by unions and Democrats, knowing full well they will be vetoed by President Obama.

Although the flurry of major bills like the multi-year highway measure were passed in the waning year, historically no major legislation is enacted in an election year and we have no reason to believe this year will be any different.

However, the President and state and local governments aren't waiting on Congress. Throughout the country, cities and states are enacting laws to "ban the box"—making credit and criminal background checks of job applicants illegal—while boosting the minimum wage and mandating benefits like unpaid sick leave.

A relatively new trend that will continue into this year are jurisdictions requiring employers provide their workers with paid sick leave, which the President has ordered be provided to federal workers and contractors. Laws mandating private sector employer-provided sick leave have gone into effect in California, Connecticut, Massachusetts and Oregon, and is spreading to cities both large and small around the country.

Several states, notably California and New York, also are waging war on the independent contractor and franchise business models. Last October California enacted a law written by the Teamsters that threatens port drayage carriers with costly fines and penalties if they don't convert their owner-operators to company employees by the end of this year (see The Regulated Workplace: New Fronts Open in the War against Independent Contractors).

In December New York's Gov. Cuomo went so far as to veto bipartisan legislation strongly supported by state legislators from his own party that was designed to preserve independent contractor status for newspaper carriers.

No Let Up from the Feds

The President has jumped onto this bandwagon by issuing a slew of executive orders directed at federal contractors and subcontractors imposing requirements similar to the new laws enacted by liberal states and cities.

Handed down piecemeal and spread out over the past two years, these orders cover everything from forbidding discrimination against gays and transgenders to setting a minimum wage for contractors' workers—all initiatives promoted in legislation Democrats can't get through a Republican Congress to impose on all employers.

Because federal contractors must overhaul their human resources policies and systems each time one of these directives takes effect, it is estimated that the cascade of executive orders has driven up administrative costs by as much as 30% for these companies.

If that seems a bit high, consider this single example. A new "blacklisting" regulation scheduled to be issued in April will require federal contractors and subcontractors for goods and services of at least $500,000 annually to report all violations for the previous three years under 14 federal laws and all state labor and employment laws.

Reportable violations include reporting of all complaints issued by the NLRB and other federal agencies even before they are adjudicated. These reports, along with information supplied by outside sources, including unions, would then be considered when determining eligibility for federal contracts, suspension and debarment.

The rule also would bar contractors with federal contracts of $1 million where the contractor's employment agreements require arbitration of civil rights and related tort claims. It also requires disclosure and justifications of employment classifications to employees.

And that is just one rulemaking resulting from a single presidential executive order.

Major Change on the Agenda

Let's take a quick glance at what the other Obama Administration agencies have in store for logistics and other employers in 2016, starting with actions at the federal level intended to favor the administration's union allies.

Taking the lead here is the National Labor Relations Board (NLRB). Originally intended by Congress to be a neutral arbiter or umpire between employers and organized labor, Obama's appointees have turned it into a full-time pro-union advocate and enforcer.

Last July employers felt the full impact of the NLRB's "quickie" or "ambush" union recognition voting rules, along with its decision allowing unions to organize micro units within a single facility, like a retail store or plant.

The ambush rules require that a vote be held in such a short period of time that the employer has no real opportunity to mount a campaign in opposition to the union's propaganda. As reported by the NLRB in late November, during the first six months the rule was in effect, the average time from petition to election has decreased to only 23 days, a drop of 40% from the average 38 days under the old rules.

To make things even easier for unions the NLRB general counsel last year announced that the board would accept electronic signatures of workers gathered by unions to demonstrate a necessary showing of interest for filing the petition for a representation election.

The micro unit change turned out to have a much smaller effect on union organizing—at least in the immediate term. Initially only a handful of micro units were recognized in retail department stores. But late last year the NLRB allowed a vote to proceed among only the maintenance workers at Volkswagen's plant in Chattanooga, Tenn. Although they make up only 12% of the factory's 1,400 production and maintenance workers, these employees then voted 108-44 to recognize the United Auto Workers, which had lost a plant-wide vote in early 2014.

Perhaps the most far-reaching decision to come out of the NLRB last year that will continue to have profound implications for employers is its declaration that all companies using temporary staffing firms are considered joint employers. Previously the board held that this only existed if the temp firm customer exerted control over essential aspects of those employees' work.

However, under the NLRB's new standard, companies will be considered joint employers if at some undetermined point in the future they could possibly decide to exert control over the temp firm employees. Let that sink in for a moment.

Some members of Congress did think about it and introduced legislation to overturn this NLRB holding. Although similar bills to upend recent NLRB decisions have failed because they only passed with Republican support and faced a presidential veto threat, this bill has already attracted support from Democrat legislators.

The Wages of Sin Are...

Perhaps the NLRB's closest ally in the federal government is the Department of Labor, which also has embraced an agenda promoting unions. Last year Labor Secretary Thomas Perez authored a widely-debunked blog post asserting that workers represented by unions earn $200 more weekly than non-union workers.

In March the department expects to unveil its long-planned "persuader" rule. Under current federal law, employers must report to the DOL each time they engage a consultant to persuade employees directly or indirectly about their rights to organize or bargain collectively. Failure to comply can result in a one-year prison term and a $10,000 fine.

Up until now an "advice exception" has excluded labor lawyers who assist employers with organizing campaigns, as long as those lawyers have no direct contact with employees. The proposed rule would significantly shrink that "advice exception." If adopted as proposed, employers have to file publicly available reports with DOL detailing all the labor work performed by their attorneys for them, even if it's not considered persuader activity.

When the final rule is issued in March we will learn how DOL has dealt with strenuous objections raised by the American Bar Association, several state attorneys general and many business groups over this prospective violation of privileged communications between attorneys and their clients.

Some of DOL's most important actions originated with its Wage & Hour Division, which has said it will finalize new overtime pay regulations in July. This proposal also will define which employees are considered exempt and which are not.

Under the current standard, an exempt employee must be paid at least a minimum salary of $455 per week or $23,660 per year. The proposed rule would raise the minimum salary level for an exempt employee to $970 per week or $50,440 per year, and it would be indexed to match the rate of inflation.

The Wage & Hour Division is headed by former radical college professor David Weil, who made his own unique contribution to the assault on independent contractors by declaring last year that they don't exist—all of them are simply employees who have been misclassified by their employers.

A written statement he produced laid out this view in extensive detail, including many helpful examples which Weil hopes will be followed by employers and DOL enforcement personnel. Of course attentive tort lawyers also will be able to cite the Wage & Hour Division chief's words in support of lawsuits they file against companies that use owner-operators.

Make no mistake about it, wage and hour litigation is a growth industry. Last year by Sept. 30, about 9,000 new federal wage and hour lawsuits had been filed, along with several thousand more that were filed in state courts. The federal filings have jumped about 450% over the last 15 years, according to the Seyfarth Shaw law firm, and that growth trend is expected to continue for the foreseeable future.

When it comes to OSHA, the electronic reporting rulemaking proposal will have the greatest potential impact for employers. Although the final rule was slated to be made public before the end of last year, the agency's new publication target is now March of this year.

Under the proposed rule, employers with 250 or more employees—including full-time, part-time, temporary and seasonal workers—would be required to submit quarterly workplace injury and illness reports online to OSHA. The agency would then publicize these injury and illness reports on its website, where they can be viewed by the public—including tort lawyers and union organizers.

In early 2016, OSHA intends to issue a new directive concerning the training of its inspectors about how they should evaluate employers' workplace violence prevention efforts when they visit any worksite.

Although there are no specific OSHA regulations spelling out what employers should do, expect an increase in violence-related citations under the Occupational Safety and Health Act's General Duty Clause, which requires employers to maintain a safe and healthy work environment. As of now, only a very few citations have been issued for workplace violence-related violations, but increased training of OSHA inspectors assures greater enforcement.

Lift trucks also are on OSHA's agenda. The agency plans to unveil a Request for Information in October, soliciting public comment about changing its slightly out-of-date powered industrial truck standard. OSHA says a new standard is needed "to account for the substantial revisions to American National Standards Institute standards on powered industrial trucks over the last 45 years." It also noted although there are now 19 classifications of lift trucks, the current standard only covers 11. The update is supported by the Industrial Truck Association.

When it comes to the Equal Employment Opportunity Commission agenda, it remains focused on an already highly aggressive campaign of litigation against employers over such issues as criminal and credit background checks, as well as alleged discrimination based on religious garb and practices, and gay and transgender rights.

EEOC expects to issue final rules in February governing the legality of employer wellness programs under the Americans with Disabilities Act, including limits on the amounts of incentive payments employers can offer, and how the Genetic Information Non-Discrimination Act applies to employee spouse information.

As you can see, just because President Obama will step down in a year, don't expect the Administration to slow down or pull back from pushing its aggressive domestic agenda before then.  

David Sparkman is founding editor of ACWI Advance (www.acwi.org), the newsletter of the American Chain of Warehouses Inc., as well as a member of the MH&L Editorial Advisory Board.
About the Author

David Sparkman | founding editor

David Sparkman is founding editor of ACWI Advance (www.acwi.org), the newsletter of the American Chain of Warehouses Inc. He also heads David Sparkman Consulting, a Washington D.C. area public relations and communications firm. Prior to these he was director of industry relations for the International Warehouse Logistics Association.  Sparkman has also been a freelance writer, specializing in logistics and freight transportation. He has served as vice president of communications for the American Moving and Storage Association, director of communications for the National Private Truck Council, and for two decades with American Trucking Associations on its weekly newspaper, Transport Topics.

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