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Mitchell Langbert

Winds of Change in the Post-Obama Workplace

President Obama ran on a platform of change, and Congress has already initiated two important changes to workplace law. Will you gain or lose from the proposals?

February 19, 2009
by Mitchell Langbert, PhD

On December 29, 2008 then President-elect Obama announced his choice of Hilda Solis as Secretary of Labor. On January 6, the first session of the 111th Congress convened. Wasting little time, three days later the House of Representatives passed the Ledbetter Fair Pay Act (FPA) and the Paycheck Fairness Act (PFA), two important changes to workplace regulation. Because of the economy’s parlous condition, there had been speculation during the campaign as to the priority President Obama would give to these and other labor-supported proposals. The House has hastened to pass them, perhaps to test the President’s mettle.

Besides the FPA and the PFA, some of the workplace-related bills discussed during last year’s campaign were changes to labor law under the Employee Free Choice Act; increases and indexing of the minimum wage; the Healthy Family Act; and extensions to the Family and Medical Leave Act. The list is controversial, and the changes will affect accounting industry firms and employees.

The question facing the Obama administration is whether increased regulation will raise labor costs sufficiently to dampen the economy and employment at a time when employees fear lay offs and employers fear declining demand.

Recently Passed Bills

Under the Lily Ledbetter Fair Pay Act, employees who file a case about gender discrimination under the Equal Pay Act will have 180 days after the date of their last paycheck rather than after the date that their pay was determined to bring suit. This would make it easier to sue and so increase the number of law suits. The bill is named after a woman who sued Goodyear Tire & Rubber Company but lost in the U.S. Supreme Court because of the statute of limitations. During last year’s presidential campaign, then-Senator Obama announced his support for it.

The Paycheck Fairness Act, which also passed in the House, increases damages and changes the burden of proof in discrimination cases under the Equal Pay Act. Under current law, employees have to provide evidence of pay discrimination. Employers must then defend themselves by proving that what looks like discrimination actually occurred because of a factor other than sex. The PFA ups the defense requirement from a factor other than sex to a bona fide factor due to business necessity. If passed, this would suggest the need for greater emphasis on job-relatedness in defending against pay discrimination claims and may serve to increase the attention that employers must pay to job evaluation. Job evaluation is a method by which employers identify factors that drive pay in their firms and then relate pay to the factors, typically by assigning points for each factor to each job. The jobs are ranked according to the points and human resource analysts must verify that the rank of the pay for each job conforms to its rank in points.

The PFA bill also creates punitive damages where discrimination is nonintentional. The Heritage Foundation claims that PFA will increase law suits and interfere with business practices, raising costs to employers. The AFL-CIO quotes Representative Rosa DeLauro in arguing that it “protects workers from retaliation.” The fate of these two bills may augur the fate in 2009 of even more far reaching workplace-related proposals, the most controversial of which is the Employee Free Choice Act, which would amend current union election practices of the National Labor Relations Board.

Employee Free Choice Act (EFCA)

Under current law, if 30 percent of employees sign an authorization card requesting a union certification election, then there must be one. Either the signed authorization cards or a secret ballot can be used for the certification election itself. Moreover, if the employees vote for a union, the firm and the union are required to bargain in good faith, but there is no requirement that an agreement ever be reached.

Under the EFCA, which is a bill that has not passed, the card check alone could serve to certify the union without a secret ballot, so that the secret ballot could be eliminated. If the union and employer cannot reach an agreement within 90 days, either side can demand federal mediation, which in turn can lead to binding arbitration. Thus, under the EFCA, an arbitrator could impose a contract on the parties even if neither side agrees with the arbitrator’s decision. Also, the bill would increase liability for employer- but not union-unfair labor practices.

The Heritage Foundation argues that private ballots eliminate threat of retribution and that the real goal of the proposal is to improve union finances. In contrast, the AFL-CIO argues that “corporate greed” is behind opposition to the EFCA and that the “corporate search for cheap labor” is behind the current credit crunch so that the EFCA would not only improve workers’ job conditions but also resolve the current economic crisis. Prior to his election, then-Senator Obama supported the EFCA. However, small business owners strongly oppose it.

Healthy Families Act

The HFA would require seven days of paid sick leave for workers of firms with 15 or more employees who work over 30 hours, with a prorated share for part-timers. Then-Senator Obama co-sponsored the HFA bill last year, so it would seem a likely candidate for quick passage.

As well, President Obama has supported increasing the number of firms that the Family and Medical Leave Act (FMLA) covers from firms with 50 or more to firms with 25 or more employees. Also, according the Obama campaign’s website, President Obama would increase the purposes for leave under the FMLA to allow for elder care, attendance of school plays and other academic activities and leave to address domestic violence.

Minimum Wage

According to the Obama campaign’s Web site, then-Senator Obama supported raising the minimum wage from the current $6.55 to $9.50 per hour — a 45 percent increase — and indexing it to inflation. Historically, workers’ wages have lagged inflation so indexation might escalate the increase relative to above-minimum wage workers’ wages. The AFL-CIO supports this proposal. But elementary economic theory predicts that minimum wages will reduce employment levels of low-wage workers. The relatively low American minimum wage has enabled the nation to enjoy lower unemployment rates than in Europe. A 45-percent raise would in a single year exceed the three-year, 40.8 percent increase from $5.15 to $7.25 that was passed in 2007. This could result in intensifying unemployment among the most vulnerable categories of employees and, for example, exacerbate inner city youth unemployment.

Conclusion

The workplace changes being discussed in Congress are more far reaching than any that have been discussed since the Clinton health reform proposal of 1993 and 1994. Complicating the President’s agenda is a faltering economy that might be stalled by additional workplace regulation that raises labor costs inadvertently. It remains to be seen how far the President will go on following through on his earlier proposals. Nevertheless, it would seem that the winds of change will blow.

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Mitchell Langbert, PhD, is an Associate Professor, Brooklyn College. Widely published on the subject of human resource management, Langbert has consulted and served as an expert witness.