The primary culprits in making it harder for Americans to earn a living or start a business are the National Labor Relations Board (NLRB) and the Department of Labor (DOL). Regulators at these agencies have restricted flexible work arrangements and common business-to-business relationships in addition to tilting labor law in favor of unions over employers and workers.
Much of the job of the next Congress will be undoing the harm done by the Obama administration’s mandates, but it also has a golden opportunity to implement forward looking changes to U.S. labor law.
As I’ve noted repeatedly, the DOL’s overtime rule is extremely misguided and will not result in mass increases in workers’ wages. The wage and hour changes from the rule will force many businesses into making tough decisions over limiting hours or shifting salaried employees to hourly status in order to rein in labor costs. Not to mention that the rule adds 2.5 million paperwork hours on businesses and will cost hundreds of millions of dollars to in compliance.
It is not just the private sector that is harmed by the overtime rule. Local governments and universities also must comply. Many have reported on the massive costs the rule would impose on them. For example, the University of Kansas has 354 employees set to become non-exempt, at a cost to the school of either $2.3 million in increased overtime, or $2.9 million to raise their salaries above the exemption threshold. Iowa estimates the overtime rule will increase costs on the state government and public universities by approximately $19.1 million in just the first year.
Another policy that Congress needs to address quickly is the NLRB’s Browning-Ferris decision, which radically redefined what constitutes a “joint employer” under the National Labor Relations Act (NLRA). Under the new definition, which overturned 30 years of precedent, a company may be held liable for labor violations by other employers they contract with, merely by exercising indirect control or possessing unexercised potential control over work conditions like hiring, supervision, and wages. Previously, a company had to directly control another employer’s workforce to become a joint employer.
The new standard is vague and creates immense uncertainty, which the NLRB has failed to clear up in more than a year since it issued the Browning-Ferris decision. The Wall Street Journal reported that the new, fuzzy standard has forced employers’ hands in how they deal with contractors or franchisees by cutting back on certain services in order to avoid becoming entangled in a joint employer relationship.
In addition, the greater liability will likely make large companies less inclined to contract with small businesses, which is bad news. Since 1990 big businesses have eliminated 4 million jobs while small businesses have added 8 million, according to the Small Business Administration.
In more forward thinking improvements to labor relations, Congress should take a hard look at the 80 plus year old NLRA, which is the primary federal statute that governs private-sector labor relations. It also created the NLRB, an independent agency made up of five members, in charge of enforcing the Act and overseeing union elections.
It is time that Congress considers getting rid of the Board. It has been proven over the years that the Board members are no longer impartial government members who represent the public interest in labor disputes, as originally set out. The Obama administration’s Board members may have been the most partisan yet in favoring labor unions. According to recent research from Littler’s Workplace Policy Institute, the Obama NLRB overturned a combined 4,559 years of Board precedent.
As the NLRB has proven over time, Board precedent simply flip-flops depending on which party holds the presidency. This creates immense uncertainty and makes it difficult for employers, workers, and unions to comply with the law.
As I wrote previously:
The NLRB and its members are an arbitrary interference to expedient due process and the rule of law. Simply abolish the board then allow the 40 NLRB administrative law judges to continue hearing administrative cases and have the appropriate district court take appeals. These judges have some semblance of impartiality, serve long terms and are not as likely to seek future private-sector employment. Removing the redundant, partisan NLRB members will bring back some certainty to labor-management relations.
The next Congress will have its hands full in overturning the handiwork of the overzealous regulators at the NLRB and DOL, but the above stated reforms would be a good start.
Check out the full version of CEI’s Agenda for Congress here.