Obama’s Nanny State for Employers

Obama’s employment law agenda consists of laying siege to employers’ management rights.

In a prior post, I summarized the one-sided rulings of the National Labor Relations Board under President Obama, which are seemingly designed to bolster the declining ranks of organized labor in the private sector. Obama’s aggressive anti-employer agenda extends to other agencies having jurisdiction over the employment relationship: the Department of Labor, the Equal Employment Opportunity Commission, and the Occupational Safety and Health Administration. Unlike the NLRB’s pro-union orientation, however, some of the notable policy initiatives of these other agencies are calculated solely to impose unreasonable restrictions on employers—command and control for its own sake.

In a free society, the government limits businesses’ inherent “management rights” only to the extent necessary to remedy a real problem, and federal regulation is reserved for national problems within the limited jurisdiction of the federal government.  Obama’s goal, in contrast, appears to be to micromanage employers just to satisfy progressives’ meddlesome urge to wield the levers of power. Hiring, firing, and supervising employees are core prerogatives of businesses, typically regulated, if at all, at the state level.  Under Obama, bureaucrats in Washington, D.C. have claimed dominion over aspects of the employment relationship that were previously considered to be outside the purview of federal regulation. That the power grab by Obama’s administrative agencies extends to such routine aspects of the employment relationship makes the bureaucratic overreach all the more objectionable.

Take workplace drug testing as an example. It is in the interest of both employers and employees to maintain a drug-free workplace, to reduce the risk of accidents and injuries caused by an impaired worker. One employee under the influence of drugs or alcohol can jeopardize the safety of numerous co-workers, and the public. Moreover, employers have the right to ensure that employees are fit for duty while “on the clock.”  Accordingly, many employers require pre-employment drug testing of applicants, as well as random or “reasonable suspicion” testing of current employees to ensure a drug-free workplace. Regulation of drug testing was generally a matter of state law. Prior to the Obama administration, it was common practice for employers to drug test employees involved in work-related accidents causing property damage (such as a forklift collision) or personal injury requiring medical treatment.

In recently-issued regulations nominally addressing the reporting of occupational injuries and illnesses (29 CFR Part 1904), Obama’s OSHA has called this longstanding practice into question.  Section 1904.35(b)(1)(iv) of OSHA’s new regulations characterizes mandatory drug testing triggered by a workplace accident as an “adverse employment action” and suggests that an employer engaging in once-routine blanket post-accident testing would be guilty of actionable “retaliation.” The “preamble” to OSHA’s final rule states that “To strike the appropriate balance here, drug testing policies should limit post-incident testing to situations in which employee drug use is likely to have contributed to the incident, and for which the drug test can accurately identify impairment caused by drug use.” (Emphasis added.)

The whole point of mandatory post-accident drug testing is that—absent testing—it is often impossible to determine the “cause” of a workplace accident. In a warehouse, for example, there will seldom be a third-party eyewitness to an accident, and the account of the employee involved in the accident is obviously self-serving.  To require that the employer have “proof” supporting a “likelihood” (more than a reasonable suspicion?) that the employee was impaired in order to order post-accident testing is tantamount to banning such testing altogether in many cases. This is a radical, and unjustified, change in the law, unnecessarily restricting the right of private-sector employers to operate their businesses in a prudent and efficient manner.

Another way that employers can protect the safety of employees and customers—and recruit the most qualified candidates—is to hire only applicants without a criminal record.  Screening applicants in this manner has long been considered a human resources “best practice,” and most employment applications require applicants to disclose prior criminal convictions. Checking applicants’ background to avoid inadvertently hiring convicted criminals protects employers from “negligent hiring” claims in the unfortunate event that an employee with a criminal record harmed a customer or co-worker.

Under Obama, however, the EEOC has been on a crusade to prohibit employers from inquiring into applicants’ criminal records. And, unlike OSHA’s overreaching opposition to post-accident drug testing, which at least was the subject of formal rulemaking, the EEOC has conducted its crusade through informal “enforcement guidances” and other administrative shortcuts. Having a criminal record does not entitle one to a “protected class” status under Title VII of the Civil Rights Act of 1964. As a matter of federal law, employers have always had the right to refuse to hire job applicants due to a prior criminal conviction.

Under an extravagant application of the “disparate impact” theory recognized in the questionable case Griggs v. Duke Power Co. (1971), however, Obama’s EEOC contends that employers who require disclosure of criminal convictions on employment applications, or who conduct criminal background checks as part of pre-employment screening, may violate the law because African-Americans and Hispanics are arrested, convicted, and incarcerated at a higher rate than their representation in the general population. According to the EEOC, refusing to hire convicted criminals can have a “disparate impact” on blacks and Hispanics, and violate Title VII even in the absence of discriminatory intent by the employer.

The EEOC maintains that a facially-neutral policy, applied uniformly to all job applicants, concerning a subject that is not protected by federal law, can subject an employer to liability solely because of statistical disparities within the criminal justice system. Furthermore, in the EEOC’s view, employers must have a “business necessity”—a justification for the practice sufficient to persuade the EEOC or a federal court—to justify hiring practices that were unchallenged prior to the Obama administration. This is an absurd interpretation of Title VII, and a gross overreaching by a federal agency, used to bully employers to refrain from screening out convicted criminals. (Other agencies in Obama’s administration have similarly used the dubious “disparate impact” theory to micromanage the discipline of public school students and even to hector local law enforcement over traffic stops.)

Under Obama, the DOL (like the NLRB) has embarked on a campaign to regulate “independent contractors” as if they were employees subject to various federal laws, including the Fair Labor Standards Act, which requires the payment of overtime if workers exceed 40 hours a week.  Using an informal guidance denominated an “Administrator’s Interpretation,” rather than formal rulemaking, the DOL under Secretary Thomas Perez has adopted what some critics have called “the most expansive definition of ‘employee’ possible.” The DOL’s guidance makes it harder to classify workers as independent contractors, and increases the risk for businesses in industries (such as construction, janitorial services, and truck driving) where the use of independent contractors is common.

Businesses and workers use different relationships—contract worker; independent contractor; full-time, part-time, and casual employee—for a variety of reasons having to do with time commitments, exclusivity (and the lack thereof), skill, autonomy, industry customs, and the preferences of the parties. The legal standards for determining “employee” status have historically been inscrutable and frequently difficult to apply. Absent gross misclassification, regulators should usually defer to the parties’ mutual agreement.  Intruding into arrangements satisfactory to the parties involved amounts to a needless and high-handed power grab by federal bureaucrats.

The DOL is also (again, like the NLRB) using an informal “guidance” to alter the legal standard for “joint employer” liability under the FLSA—in effect disregarding the corporate form to hold one company responsible for the acts of another.  In an complex economy, businesses will often have close working relationships with one another, such as between hotel owners and management companies, staffing agencies and customers, construction companies and subcontractors, growers and farm labor contractors, and so forth. Nevertheless, it is a fundamental principle of corporate law that separately-owned businesses be treated as distinct legal entities unless the “corporate veil” is disregarded—an appropriately difficult evidentiary hurdle. The DOL’s “joint employer” guidance seeks to short-cut the legal differences between businesses having a close working relationship, allowing FLSA and other claims to be pursued against the deepest pocket, regardless who was the actual employer.

My final example is the DOL’s pending overtime regulations under the FLSA. Unlike the initiatives discussed above, enforcing the FLSA—a New Deal-era statute—is a legitimate and longstanding responsibility of the DOL. And, to be fair, the DOL has made the changes via formal rulemaking, rather than taking the administrative shortcut of issuing an informal “guidance.” What makes the new regulations noteworthy, however, is that they significantly depart from a comprehensive, well-received overhaul undertaken in 2004 under President George W. Bush.  Controversially, the DOL’s new regulations more than double the earnings threshold for “exempt” status (with automatic future increases every three years tied to cost-of-living indices). The “exempt” earnings threshold is important because employees deemed to be “exempt” may be paid a fixed salary instead of an hourly rate, do not receive overtime if they work more than 40 hours a week, and are permitted to enjoy a more flexible work schedule because they are not limited to a structured 9-to-5 work day.

Under the current guidelines, many “exempt” employees cherish the ability to juggle their work schedule to accommodate child-rearing duties, run personal errands, and deal with family emergencies.  The DOL’s regulations, if they go into effect on December 1 as planned, will greatly reduce the number of employees who qualify as “exempt,” stripping them of a flexible work schedule while simultaneously imposing substantial compliance costs on employers. The DOL’s overtime regulations are so controversial that opponents in Congress are attempting to delay implementation by six months, and several lawsuits are pending.  Once again, Obama’s DOL is seeking to disrupt established personnel practices by needlessly modifying existing rules to satisfy Progressives’ eternal quest for more centralized control.

The Obama administration has attempted to expand the “nanny state” into every nook and cranny in the American economy, including the workplace. It is no accident that Obama’s Secretary of Labor, Thomas Perez, is a liberal activist admiringly described by the Leftwing publication Mother Jones as “one of the administration’s most stalwart progressives.” His conservative critics call him “the Obama administration’s most radical and relentless ideologue” and “possibly the most dangerous person in the administration right now.” In an administration that scholars have rated as one of the most lawless in U.S. history, that’s truly a damning indictment.