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Congress: Do the Economy a Favor, Defund Harmful Labor Regulations

Research from the National Association of Manufacturers estimates that the aggregate costs of labor regulations imposed just this year by the Obama administration’s Department of Labor (DOL), National Labor Relations Board (NLRB) and Equal Employment Opportunity Commission (EEOC) will cost $80 billion and result in over 400 million paperwork hours in order for businesses to achieve compliance.

Instead of focusing on producing goods and services, costly regulations force employers to spend time and resources on complying with government dictates—many of which do not serve a public interest. This harms productivity and makes hiring workers more expensive.

As my colleague John Berlau and I discuss in a recent report, Congress has an opportunity to lessen the burden of costly regulations via the appropriations process. Since appropriation bills are considered “must-pass” legislation, they provide Congress the best prospect of relieving the economy of devastating regulations.

In the report, we highlight four particularly misguided regulations coming out of federal labor agencies that Congress should defund:

  1. The Department of Labor fiduciary rule;
  2. The Department of Labor overtime rule;
  3. The National Labor Relations Board joint employer decision;
  4. The National Labor Relations Board ambush election rule.

Here are the some of the highlights from the report:

DOL fiduciary rule:

Stretching the limited role Congress granted to the Department over “fiduciaries” of traditional pension plans in the 1974 Employee Retirement Income Security Act, the DOL redefined “fiduciary” to give the Labor Department power over a broad swath of financial service professionals who service not just defined-benefit pensions, but 401(k)s and individual retirement accounts as well.

The rule will also carries a hefty price tag. According to DOL’s own conservative estimate, it will cost $31.5 billion over 10 years. That makes it the most expensive rule—proposed or final—of 2016, according to the American Action Forum.

DOL Overtime Rule:

In May 2016, the Department of Labor significantly altered its definition of which employees are eligible for overtime. It greatly increased the number of salaried workers who qualify for overtime pay, raising the salary threshold from $23,660 to $47,476. That amount will rise every three years to match the 40th percentile of salaried employees in the lowest income region of the country, normally the Southeast.

Though touted as a mechanism to increase wages, employers have a number of options to keep labor costs relatively constant. However, these options may result in negative consequences for workers. Wage cuts will make up for 80 percent of overtime costs, according to U.S. Bureau of Labor Statistics economist Anthony Barkume. Employers could choose to demote many salaried workers on a management track to hourly status, which could mean a loss of benefits like paid leave and flexible schedules. Employers could even prohibit overtime and hire more part-time workers.

NLRB joint employer decision:

In the 2015 case, Browning-Ferris v NLRB, the National Labor Relations Board overturned decades-old precedent that held a joint employer relationship existed only when one company exercised direct and immediate control over another company’s workforce.

The NLRB’s new rule instituted an extremely broad and vague definition under which companies may be held liable for labor violations committed by other employers with whom they contract, even if they only exercise indirect control or have the potential to control another firm’s workers, but do not exercise that power.

An analysis from FRANdata, a data provider to the franchise industry, projected that at least 40,000 small businesses in over 75,000 locations would be put at risk from the NLRB’s new joint employer rule.

Businesses and workers have already seen negative consequences from the vague and broad joint employer standard. It has forced the hand of employers when it comes to how they assist franchisees or other employers with whom they contract. As recently reported, the NLRB’s Browning-Ferris decision has driven several franchisors to alter relationships with franchisees by pulling back on assistance and delaying expansion plans. For example, a printing business in Washington State has put expansion on hold, over concerns that its franchisor could be declared a joint employer. “I could lose my ability to control my business,” Chuck Stempler, owner of seven printing stores that operate under the AlphaGraphics brand franchise, told The Wall Street Journal last August.

NLRB ambush election rule:

The National Labor Relations Board, in April 2015, finalized a rule that alters the way union representation elections are conducted. The regulation, known as the “ambush election” rule, threatens workers’ ability to thoughtfully contemplate a decision that impacts their privacy and nearly every aspect of their work lives.

            …

Forcing the release of employees’ personal information is also likely to expose workers to much higher risk of identity theft. Even the NLRB General Counsel’s guidance memo on the ambush election rule acknowledges that worker privacy is threatened and that the information could be sold to telemarketers or given to political campaigns, while the lists could also be used to “harass, coerce, or rob employees.”