The US Way

INTERNATIONAL COMPLIANCE 2 - The US regulatory environment for staffing firms is explored by Edward A. Lenz, Senior Counsel and Stephen C. Dwyer, General Counsel, American Staffing Association.

The unexpected election of Donald Trump as president of the United States, and the Republican party’s retention of majorities in both houses of Congress, has transformed the political landscape at the national level. While it is too early to forecast specific changes, President Trump’s executive branch appointments to date provide strong clues as to what staffing firms generally can expect from the new Congress and administration.

In this article, we offer our assessment of the likely changes in policy direction at the federal departments and agencies whose missions have the greatest regulatory impact on staffing firms; we also look at the role of Congress in advancing its own and the new administration’s goals, including repeal and replacement of the Affordable Care Act. Finally, we examine expected regulatory challenges at state and local levels. 

The National Level – Department of Labor

The mission of the US Department of Labor is to “foster, promote, and develop the welfare of the wage earners, job seekers, and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.” Every secretary of labor, regardless of political party, is bound by this explicit worker-centric mission, but we expect that a new secretary will give more consideration than his predecessor to the impact labor and employment regulations have on employers.

Overtime and joint employment

Last year, the Department of Labor planned to implement changes to the Fair Labor Standards Act overtime rules that would allow an estimated five million more employees to qualify for overtime. The proposed rules would significantly increase the ‘white collar’ overtime exemptions’ annual salary level – from $23,660 to $50,440.

On Nov. 22, a federal district court in Texas issued a nationwide injunction blocking the rules, which were scheduled to go into effect December 1st, and most legal experts believe the injunction will be upheld on appeal. If the injunction is not upheld, DOL is likely to withdraw the rules, meaning that staffing firms will not face an overtime salary level increase to $50,440.

With respect to joint employment, in January 2015 David Weil, then administrator of DOL’s wage and hour division, authored an interpretive letter addressing the extent to which staffing clients, franchisees, and others in third-party work arrangements will be classified as joint employers under the Fair Labor Standards Act. According to Weil, joint employment must be applied expansively under the law, and thus most third party arrangements will implicate joint employment. In our view, although joint employment may be a new phenomenon for other industries, it is not new for staffing – for decades, courts and DOL have held clients to be joint employers of temporary workers, with little adverse staffing industry impact.

Occupational Safety and Health Administration

OSHA was created by the Occupational Safety and Health Act of 1970 to ensure safe and healthful working conditions for workers. OSHA sets and enforces standards and provides training, outreach, and education. Worker health and safety is a top priority of the association. ASA worked closely with OSHA leadership in the Obama administration, including personally with the administrator, to address issues of concern. ASA signed a formal alliance with the agency in 2014 and launched a new safety standard of excellence program with the National Safety Council in 2016. ASA recently signed a five-year extension of its alliance with OSHA and will continue to work closely with the agency under the Trump administration.

The new OSHA administrator had not been named as of this writing, and it remains to be seen to what extent the agency will continue the temporary worker initiative started under the Obama administration. ASA supported the initiative, which featured stepped up enforcement and education, including a series of safety bulletins specific to the staffing industry (see Staffing firms have used the bulletins to help educate their internal staffs and clients regarding workplace safety.

National Labor Relations Board

Established in 1933 under the National Labor Relations Act, the NLRB’s mission is to safeguard employees’ right to organise and determine whether unions can represent them in collective bargaining. The agency also has authority to prevent and remedy unfair labor practices committed by private-sector employers and unions. By tradition, the board is made up of two Democrats, two Republicans, and a fifth member who belongs to the president’s party. 

Creature of politics

The board has quasi-judicial functions but, unlike the courts, often has little regard for precedent with board rulings being made and unmade based on which party is in the White House. A prime example is the board’s 2000 ruling in the M.B. Sturgis case, handed down in the waning days of the Clinton administration, that allowed temporary workers to be included in clients’ bargaining units without the staffing firm’s or client’s consent. The decision was reversed during the administration of George W. Bush, only to be reinstated by the board under then-President Obama in the recent Miller & Anderson case. If an appropriate case presents itself, the Trump board could change course again—although the Sturgis and Miller & Anderson cases have had no discernible impact on the staffing industry given the small percentage of temporary employees assigned to clients with collective bargaining arrangements, the ongoing decline of private-sector union membership (currently about 6.7 per cent), and the generally low interest of temporary workers in joining unions.     

Joint employment

More consequential was the board’s 2015 decision in the Browning-Ferris case that expanded the definition of joint employment. For more than 30 years, the board had held that joint employer status could be found only when each employer directly affected matters relating to the employment relationship, such as hiring, firing, discipline, supervision, and direction. But in Browning-Ferris, the board ruled that clients could be held jointly liable even if their control over such matters was only indirect.

The NLRB under Trump

At this writing, President Trump had not yet announced his nominees to the NLRB, which will give Republicans a 3-2 majority. In addition to the possibility of reversing Browning-Ferris and Miller & Anderson, a Trump board is expected to take a more even-handed approach in balancing the interests of workers and employers. A Trump board, for example, is more likely to approve employers’ use of employee arbitration agreements, which could substantially mitigate the cost of resolving labor disputes.

Affordable Care Act

Almost seven years after Congress passed the Affordable Care Act, we are at the threshold of a new and uncertain phase in the decades-long debate over the future of the nation’s health care system and the government’s role. President Trump and House and Senate Republicans have made repeal and replace a top priority and, on March 6, the House introduced a bill to make good on that promise.

The bill would retain two major features of the ACA – allowing children to stay on their parents’ health plans until age 26 and prohibiting insurers from denying coverage to those with preexisting medical conditions – but do away with the law’s individual mandate, thus no longer imposing financial penalties upon those who fail to maintain coverage. However, the bills would allow insurers to impose a 30 per cent surcharge on those who let their coverage lapse and then seek to reinstate or obtain new coverage. The bill also repeals the employer mandate the requirement that employers offer health coverage or pay penalties.

The bill also would allow for federal subsidies to individuals who purchase insurance (these subsidies would vary depending upon earnings and age), and over time would restrict Medicaid funding to states. These two provisions have led critics to claim that the bill would afford less funding for insurance, thus leaving millions uninsured. Democrats have uniformly denounced the proposal, and several Senate Republicans also have voiced their concerns, making passage anything but certain and prolonged debate likely.

The State Level

While the staffing industry is largely unregulated at the state and local levels, it faces myriad legislative challenges that pose unique compliance issues for staffing companies. Some of the most common include mandated employee benefits such as paid sick and parental leave; so-called ‘right to know’ rules requiring notice of pay rates and other job information at the time of hire and, in some cases, each time the job duties change; ‘predictive scheduling’ rules requiring employees to be notified, sometimes weeks in advance, of changes in their hours; ‘right of first refusal’ laws requiring employers to give existing employees the option to work extra hours before bringing in temporary help; rules barring employers from asking about prior salary history; and ‘ban-the-box’ laws barring employers from asking candidates criminal background questions until a job offer is made. Other issues uniquely affecting staffing include sales taxes on staffing services, and efforts to repeal state rules requiring employees whose assignments end to call in for new assignments as a condition of unemployment insurance eligibility. 

Given the roadblocks pro-labor advocates will face in getting their agenda through at the national level, expect that they will redouble their efforts to promote the kinds of regulations described above at the state and local level – particularly in California, Illinois, Massachusetts, New Jersey, New York, Oregon, Rhode Island, and Washington – thus rendering the advocacy efforts of ASA and its member firms essential in coming years.