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Punching In: New Probe Into Labor Board’s Unspent Funding

Jan. 27, 2020, 11:00 AM

Monday morning musings for workplace watchers

Labor Board’s Leftover Coin| Franchise Wage Pacts Coming? | Paid Leave in the House

Chris Opfer: The National Labor Relations Board is again facing questions about whether it is being too cheap. This time, two influential Democrats want to know whether the board’s tight fist is making it harder for the agency to police federal labor law violations.

The Government Accountability Office is looking into the board’s underspending of money appropriated by Congress—the second such probe in as many years. The board reported in November it had $5.7 million left in the bank at the end of the last fiscal year. That’s about 2 percent of the agency’s annual appropriation and nearly double the NLRB’s $3 million budget surplus from the previous fiscal year.

If you’re like me, examining budget numbers and appropriations documents causes your eyes to glaze over as you slip into the look of utter disinterest and temporary befuddlement perhaps best worn by former New York Giants quarterback Eli Manning. Or you may simply be thinking, “Isn’t saving taxpayer money a good thing?”

Rep. Rosa DeLauro (D-Conn.) and Sen. Patty Murray (D-Wash.), who requested the GAO review, are concerned the board may be deliberately spending less than it’s been allotted by Congress as a way of scaling back operations. The Trump White House has called for significant funding cuts for the NLRB, but Congress has rejected those proposals in each of the last three years.

GAO started looking into underspending at the board last year, following a Bloomberg Law report that the White House Office of Management and Budget instructed the NLRB to freeze some of its cash. That probe was dropped after the board took unspecified action in response to GAO questions.

DeLauro and Murray, the top Democrats on the appropriations committees that oversee the labor board, told GAO the underspending comes as the board’s staff has declined by 17 percent over the last three years. They also pointed out that NLRB General Counsel Peter Robb has instructed board investigators to speed up case processing.

“While the NLRB is prioritizing greater case processing efficiency, it is less clear that the board is maintaining its commitment to quality comprehensive casework,” the lawmakers said.

The board, meanwhile, says the latest surplus was the result of certain contracts coming in under budget and others being contested.

“Our senior political and career staff are constantly accessing case loads to ensure proper application of our resources and personnel,” spokesman Edwin Egee told me.

Ben Penn: The joint employer rule the Labor Department released earlier this month produced a healthy portion of leftovers to explore. As we like to say in the news business, this one’s got legs.

The regulation, which makes it harder to hold multiple businesses liable for wage-hour violations involving the same group of workers, takes effect March 16. Franchise businesses are already having conversations about how to take advantage of their newfound regulatory flexibility. The rule allows them to exert influence over franchisee operations without as much risk of being held liable if a franchisee is accused of shortchanging its workers.

Suzanne Beall, the International Franchise Association’s vice president of government relations and public policy, recently told me that franchisors now have an opportunity to do more training and advising for their franchisees. That may include implementing sexual harassment guidelines, Beall said, or giving hotel chains to the ability to work with employees at franchised hotels to identify potential human trafficking victims.

The new leeway for franchisors could also create an opportunity for the Labor Department’s Wage and Hour Division. Surprisingly, it involves a renewal of an Obama-era WHD initiative.

Back in August 2016, the agency reached a voluntary agreement with the Subway sandwich chain to meet regularly, share enforcement data, and help the corporation train its then-27,000 franchised stores on complying with the Fair Labor Standards Act. The agency believed the accord could promote widespread compliance without exhausting its limited resources, considering Subway’s size and status as a recurring wage violator that’s regularly the subject of WHD investigations.

The WHD chief at the time, David Weil, said the department had talks with other brands to try to repeat the Subway blueprint. But more than three years later, only drive-in restaurant chain Sonic has agreed to a similar partnership.

Major franchise brands were intrigued by the chance to support franchisee operators that had far less legal firepower, sources told me at the time. But they ultimately walked away from the table because the WHD wouldn’t include language that guaranteed the deal wouldn’t expose them to joint employment liability under all statutes.

Now that DOL’s rule has significantly narrowed joint employment risk, and the NLRB and EEOC are on the cusp of taking a whack at joint employment as well, don’t be surprised if WHD resumes those negotiations and announces more Subway-like agreements in coming months.

Jaclyn Diaz: The House Ways and Means Committee on Tuesday will hold a hearing on paid family and medical leave.

The Democratic-backed FAMILY Act (H.R.1185), which creates a federal paid family and medical leave social insurance program funded through a payroll tax, is sure to be part of the conversation. Republican proposals to give new parents paid leave through a child tax credit or early access to Social Security benefits in exchange for delayed or reduced retirement benefits will also get some attention.

Rep. DeLauro, the FAMILY Act’s lead sponsor, is scheduled to testify, along with Republican Reps. Ann Wagner (Mo.) and Elise Stefanik (N.Y.). Also on the witness list are Vicki Shabo, senior fellow for paid leave policy and strategy at New America and former Good Morning America host Joan Lunden.

Much of the debate about paid leave has been on how to pay for it. Expect more of that.

On the worker classification front, a recent House vote on the Protecting Older Workers Against Discrimination Act (H.R. 1230)offered insight into lingering concerns some Democrats have about the Protecting the Right to Organize Act (H.R. 2474), the sweeping labor reform bill that lawmakers will take up in the coming weeks.

Seven Democrats joined Republicans in backing a failed motion to recommit that would have amended POWADA to make clear that nothing in this legislation should be construed to alter the status of a truck driver classified as an independent contractor if the driver is considered a contractor currently under the law. In California, the trucking industry recently won a temporary reprieve from the state’s worker classification law while their lawsuit seeking a permanent carveout proceeds.

The seven Democrats who voted for the motion are Reps. Anthony Brindisi (N.Y.), Joe Cunningham (S.C.), Kendra Horn (Okla.), Ben McAdams (Utah), Stephanie Murphy (Fla.), Collin Peterson (Minn.), and Kurt Schrader (Ore.). It remains to be seen whether they raise the issue again when the House votes on the PRO Act, which would make it much harder for businesses to treat workers as contractors, among a number of other changes. Peterson and Brindisi are among the bill’s 218 cosponsors.

Classification questions alone won’t likely be enough to stop the House from passing the PRO Act. But the motion was another example of a sliver of the Democratic caucus that isn’t always on the same page with leadership when it comes to labor issues. All but Murphy of this group of seven also bucked the party in voting against the Raise the Wage Act (H.R. 582), the bill that would eventually raise the federal minimum to $15 an hour.

Meanwhile, Democrat-turned-Republican (and pinstripe suit aficionado) Rep. Jeff Van Drew (N.J.), the new member of the Education and Labor Committee is still listed as a PRO Act cosponsor.

We’re punching out. Daily Labor Report subscribers can check in during the week for updates. In the meantime, feel free to reach out to us.

See you back here next Monday.

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To contact the reporters on this story: Chris Opfer in New York at copfer@bloomberglaw.com; Ben Penn in Washington at bpenn@bloomberglaw.com; Jaclyn Diaz in Washington at jdiaz@bloomberglaw.com

To contact the editor responsible for this story: John Lauinger at jlauinger@bloomberglaw.com

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