Policy Matters Newsletter - February 17, 2023

Groundhog Day: Second Proposed Wage and Hour Boss Stuck By Senate HELP. After the Senate voted down a cloture motion to advance the nomination of Dr. David Weil to return as U.S. DOL Wage and Hour Division (“WHD”) Administrator back in March 2022, reported by Seyfarth here, and podcasted here, efforts have unexpectedly stalled to advance Jessica Looman as the next presidential pick to run the WHD. On February 15, the Senate Committee on Health, Education, Labor and Pensions (“HELP”) voted in favor of advancing Looman for the WHD administrator, but due to a procedural hiccup regarding voting by proxy, Senator Bob Casey Jr.’s tie-breaking vote could not, in fact, break the 10-to-10 tie to advance Looman. This yet again leaves WHD without a politically-appointed leader for the foreseeable future. This appears to be merely a procedural hiccup, and we imagine Looman’s nomination will see a vote by the full Senate soon. At the same time, though, it may portend a broader legislative problem as moderate Republicans Susan Collins and Lisa Murkowski, who voted to advance Looman’s nomination last fall, changed gears this time around. Seyfarth counsel Scott Hecker and Scott Mallery discuss this issue in a recent podcast that can be found here.

Sole Republican FTC Commissioner Resigns, Quite Publicly. Christine Wilson, the sole Republican commissioner currently (now, formerly) serving on the Federal Trade Commission has officially resigned. Seyfarth blogged about the resignation here. Ms. Wilson’s departure will not change the balance of power on the Commission, but it does highlight some larger problems percolating in federal government structures. Commissioners, and other high-level staff at federal agencies resign all the time. But such resignations are never as public, and typically not in the midst of a herculean initiative.

First, Ms. Wilson announced her resignation via a scathing op-ped published by the Wall Street Journal, essentially placing the blame for her resignation on Chairperson Lina Kahn, alleging that Ms. Kahn has “disregard[ed] the rule of law and due process.” Ms. Wilson’s resignation also comes in the midst of a broad, multi-faceted FTC campaign to vigorously re-up enforcement of various antitrust laws and regulations. As part of that effort, the FTC — as we explained here and podcasted here — published a proposed rule which would ban all non-compete agreements between employers and “workers” (broadly defined to include employees, independent contractors, interns, and others). We spoke to the frightening breadth of this proposed rule in the podcast, and we surmise that this proposed rule might have been one of the straws that broke Commissioner Wilson’s back leading to resignation.

A Big Sigh: 9^thCircuit Affirms Preemption of AB 51 in California. As Seyfarth summarized here, a divided Ninth Circuit Court of Appeals panel held recently that the Federal Arbitration Act (“FAA”) preempts AB 51, a California law prohibiting employers from requiring job applicants or workers to sign arbitration pacts (Seyfarth’s summary of AB 51 is worth the read for those uninitiated). The panel further concluded that the FAA preempts AB 51’s criminal penalties.  

This finality comes after quite the turning road wherein the Ninth Circuit initially upheld the District Court’s preliminary injunction of AB 51, subsequently withdrew that same opinion, and has now officially affirmed the preliminary injunction against enforcement of AB 51. At least in the Ninth, there is now definitive case law supporting that that the FAA preempts AB 51, and any legislation like it. As such, statehouses across the Country should take heed—if preempted in the Ninth, federal courts in other states are likely to rule similarly.

Not only does the decision reinforce the strong federal policy favoring arbitration, the decision suggests that California will ultimately be required to respect the right of private enterprises to require employees to waive their right to go to court over disputes arising out of employment (free of the threat of penalties). While this is a positive decision for employers, they should bear in mind that the matter will now return to the District Court for a determination on the merits of the Chamber of Commerce’s claims. Alternatively, California may seek en banc review of the decision, or request review by the U.S. Supreme Court. Stay tuned.

Walsh Out at The DOL; Is Su In? Speaking of federal agencies, some big news has also recently come out of the DOL. Labor Secretary Marty Walsh and company have been instrumental in executing the President’s campaign promise to be the most Union-friendly executive in history. Indeed, 2022 saw a dramatic reversal of a decades-long trend of falling unionization numbers, along with an expected rise from 764 wins in NLRB representation elections in 2021 to 1,196 wins in 2022, the largest one-year increase on record. Despite the gains, we learned recently that the Secretary has accepted a position with the National Hockey League Player Association (NHLPA), and will be departing the agency by March.

How will Walsh’s exit change the top-down at the DOL? While this is not a space for prognosticating, and commentators have identified a variety of potential replacements, the smart money remains on Julie Su, current Deputy Secretary of Labor, and former California Labor Commissioner. We had occasion to discuss Ms. Su in this space, where we noted that “Su was in charge of the state agency tasked with enforcing California’s controversial AB 5, which makes it exceedingly difficult for employers to classify workers as independent contractors.” Should Su be the nominee, employers should brace for somewhat of a transition from Walsh’s emphasis on labor-related matters to those more squarely within Su’s spheres of interest — enforcement of wage and hour laws and regulations, which makes the WHD appointment discussed above even more critical. Members of the Asian Pacific American Caucus will be pushing hard for her appointment, particularly in light of the Caucus’ concerns about a lack of representation in the top ranks of the Biden administration.

In addition to Su, other names floated for the post include Rep. Donald Norcross, former Rep. Andy Levin, Rep. Linda Sánchez, former Rep. Sean Patrick Maloney, Clinton Labor Secretary Robert Reich, Obama Deputy Secretary Chris Lu, and Obama Acting Secretary and Deputy Secretary Seth Harris (who also served as Biden’s top labor policy adviser). Regardless of who becomes the nominee, secretarial transition could shift or slow – at least to some degree – DOL’s ambitious regulatory agenda, which includes planned rulemakings concerning overtime pay/exemptions, independent contractors, prevailing wages, and COVID-19 protections in healthcare.

Minnesota Joins Growing List of States to Ban Race-Based Hair Discrimination. We have had numerous occasions to discuss various statehouses across the Country passing so-called CROWN Act legislation — “Creating a Respectful and Open World for Natural Hair” — which generally prohibits employment discrimination on the basis of hair textures and hairstyles. On January 31, 2023, Minnesota Governor Tim Walz signed that State’s version of the CROWN Act, making Minnesota the 20^thstate to ban race-based hair discrimination. Sponsored by Representative Esther Agbaje, House File 37 passed the state House by a vote of 111 to 19 on January 11, 2023 and passed the state Senate by a vote of 45 to 19 on January 26, 2023.

SPEAK OUT Act. As we noted here, in late 2022, somewhat under the radar, and certainly not to the same (deserved) fanfare as the passage of the Respect for Marriage Act, President Biden signed the “SPEAK Out Act,” which renders unenforceable any “predispute” non-disclosure and non-disparagement clauses (“NDA”) related to allegations of sexual assault and/or sexual harassment. We recently hosted a podcast to discuss the contours of the measure (HINT: It is not as all-encompassing as thought at first blush). Seyfarth attorney Scott Mallery also penned an article on the same topic for the International Employment Lawyer. They are worth a read and listen.

If You Want CHIPS Act Money, Mind Your Labor P’s and Q’s. The CHIPS Act, signed into law by President Biden in late summer 2022, invests more than $200 billion over the next five years into semiconductor chip manufacturing. According to the White House, among other appropriations “[t]he CHIPS and Science Act provides $52.7 billion for American semiconductor research, development, manufacturing, and workforce development.” Importantly, the measure provides for a 25% investment tax credit for capital expenses for manufacturing semiconductors and related equipment.

But there is a catch: Receipt of the tax credit is conditioned on recipients demonstrating significant worker and community investments. In other words, actually obtaining the tax credit is more complicated than just manufacturing semiconductors. The Democratic caucus seems poised to make obtaining that tax credit more complicated and more conditional. Specifically, more than 180 members of the caucus have signed onto a letter urging the Secretary of Commerce to require “binding and enforceable agreements based on high road labor practices and establish worker protection benchmarks to ensure the creation of good jobs.” This is in line with the President’s EO issued concurrently with the Act, directing the Commerce Department to “generate well-paying, high-skilled union jobs.” As an example, the legislators ask the commerce department to prioritize applicants for construction contracts of semiconductor fabrication plants that operate under a project labor agreement.

NJ Stays in the LE Policy News. New Jersey has recently made some big legislative splashes in the labor and employment space. The Garden State is not slowing down with the recent passage of a novel, first-of-its-kind temporary worker bill into law. Seyfarth’s excellent summary of the measure notes that the “[l]aw gives temporary workers the right to certain information in their native language, including where they will be working, the kind of work to be performed, sick time allocation, the pay rate, and schedule.” The law provides that any temporary worker must be paid the same average rate of pay and equivalent benefits if the temporary worker performs the same or substantially similar work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions.

Months of Work Between the DOL and Arizona Saves the State’s OSHA Waiver. On Tuesday, February 14, the Department of Labor announced that the Occupational Safety and Health Administration (“OSHA”) is stepping away from its prior bid to strip the state of Arizona of its ability to police workplace safety requirements. As Seyfarth reported last year, the DOL had been reviewing Arizona’s state occupational safety and health standards after it found that Arizona had failed to adopt and enforce standards that were at least as strict as fed/OSHA.

This week, the DOL reported that Arizona had made progress towards addressing the agency’s concerns. Specifically, in its published withdrawal, the DOL reported that Arizona addressed OSHA’s concerns by completing the following actions: “[it] adopted three outstanding final rules (Standards Improvement Project Phase-IV (“SIP-IV”), Beryllium in Construction and Shipyards, and Cranes and Derricks in Construction: Railroad Roadway Work); adopted an increase to its minimum penalties for serious and non-serious violations to match OSHA minimum penalty levels; passed a state law to ensure that Arizona's future maximum and minimum penalty levels will track OSHA's annual penalty level adjustments; passed a state law to authorize adoption of an ETS when either the ICA or OSHA deems the grave danger criteria met; and adopted the recordkeeping and COVID-19 log requirements in OSHA's COVID-19 Healthcare ETS as a permanent standard.”

Legislation Eases Path to Employment In Financial Services Industry. While the last iteration of Congress was more busy in the legislative space than any in quite some time, that does not mean that smaller legislative victories can’t be highlighted. As Seyfarth summarized here, tucked into the broader Defense Authorization Act for Fiscal Year 2023 is an amendment to Section 19 of the FDIC Act to reduce hiring barriers across the financial services sector. Specifically, the measure eases the requirement that a financial institution receive written permission to hire a person with a certain criminal record. While the changes in the Final Rule were not major, the “Fair Hiring in Banking” provisions significantly narrow the scope of crimes for which an application is required from the FDIC.

DOL Guidance Suggests De Minimis WFH Breaks Are Compensable Under the FLSA. It is just guidance, and some courts may disregard, but it is not great news for employers. As Seyfarth wage and hour experts explained here, the DOL has released “Guidance” setting forth the DOL’s view that any break taken by a teleworking employee that is 20 minutes or less must be treated as compensable time, no matter its location or its true purpose. The legal theory undergirding this view is the so-called “continuous workday rule,” in which all time in an employee’s workday, from when they commence their first principal activity until they cease their last principal activity, is presumptively compensable. Whether courts adopt this guidance is to be seen. Stay tuned.