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Punching In: Racing the Clock to Get DOL Contractor Status Rule

July 6, 2020, 10:00 AM

Monday morning musings for workplace watchers

‘08 Haunts Trump WHD | Job Corps Woes | Hoosier State Blueprint?

Ben Penn: The Labor Department managed to raise some eyebrows around town when it slipped news of an upcoming regulation on independent contractor status into last week’s regulatory agenda.

Some attorneys dismissed the plan on the premise that such a weighty undertaking was surely intended to tee up a second-term Trump action, and couldn’t possibly be finished before January 2021.

But as we reported Thursday, DOL is fast-tracking the project with the intention of proposing and finalizing in under six months what could be among the most consequential employment regulations in recent history. If that happens, the Wage and Hour regulators crafting this rule—many of whom are fresh off round-the-clock work to draft an emergency virus paid leave rule—will always remember 2020 as the year of zero sleep.

Here’s what several sources said about the employee classification rule: The department wouldn’t publish a proposed rule this year if they weren’t confident it’ll get finalized this term. That doesn’t necessarily mean they’re reading the polls and assuming a Trump loss in November. But the possibility that they won’t get another four years to finish up the project is certainly influencing the need for speed.

Federal agencies have that election year hustle every four years, with political leaders conscious that a new administration can easily end any incomplete items. But this pressure point hits particularly close to home at the Wage and Hour Division. In July 2008, the WHD issued a proposed cleanup rule to update multiple Fair Labor Standards Act regulations. That proposal went through public notice and comment, but the agency wound up missing its chance to issue a midnight final rule before Obama took office.

The Obama DOL seized control of the project and moved it in a decidedly less business-friendly direction. In a 2011 final rule that backtracked on several of its predecessors’ interpretations, the WHD restricted tip-pooling, banned the inclusion of bonuses in fluctuating workweek calculations, and affirmed that service advisers and other related workers aren’t exempt from overtime pay. All of those issues have since flip-flopped again under Trump. But imagine all the hours of legal and policy policy that could’ve been saved had the Bush WHD finished what it started.

There’s still a scenario in which the WHD opts to shelve the independent contractor initiative if the proposed rule release date keeps getting delayed. A draft proposal hasn’t even been sent to the White House regulatory review shop for clearance, and the comment period and final rule drafting would all need to get finished in a short window.

It’s unclear how much influence a final rule would have on private courts and in blue states that define “employee” broadly. But I would advise against counting out DOL’s ability to turn the rule around this year. Unpredictability and unconventionality have been defining features of this administration. There’s no reason for that to change in the final months of the term.

In other DOL news, the agency will be seeking public input as soon as this week on two pivotal topics: paid leave and unpaid leave under the Family and Medical Leave Act. The White House’s Office of Management and Budget concluded review on the pair of requests for information late last week, clearing them for release. The two items are drawing intrigue due to how little the agency has signaled about its plans for the initiatives and because they’re dropping at a moment when leave benefits are under the spotlight from the pandemic.

Ian Kullgren: It’s been a rough few days for the DOL’s vocational job-training program. Last week, we reported that the Government Accountability Office and the DOL Inspector General opened separate investigations of Job Corps response to the Covid-19 pandemic, spurred in part by a request from two Republican lawmakers.

Now, it appears the agency will lack permanent leadership for the foreseeable future. On June 30, the same day GAO notified DOL of its inquiry and the IG publicly posted a letter about its investigation, acting Jobs Corps National Director Debra Carr took herself out of the running for filling the slot permanently, according to an internal email reviewed by Bloomberg Law.

“It has been great working with each of you as the acting national director, however, for various reasons, I’ve decided not to pursue the position permanently,” Carr wrote to her colleagues. “I anticipate that at some point this week the position will be advertised and the search for a permanent national director will begin.”

Carr didn’t respond to a request for comment while a DOL spokeswoman said in an emailed statement, “Debra’s role with Job Corps has nothing to do with the GAO investigation.”

The GAO report came at the behest of two North Carolina Republicans, Rep. Virginia Foxx and Sen. Richard Burr. The pair asked the agency to review program operations in October; GAO and the requesters changed the scope of the investigation to account for the Covid-19 pandemic.

Meanwhile, the IG said it will “review the pandemic’s impact on Job Corps Center (JCC) operations and the guidance ETA provided to JCC staff for preventing workforce and student exposures to COVID-19.”

Chris Marr: Indiana is doubling the amount employers can be reimbursed under an employee training program—one way states are using federal CARES Act money to boost workforce development to spur economic recovery.

Indiana began a new round of employer reimbursements under its NextLevel Jobs program on July 1, setting the maximum available to each employer at $100,000, up from its usual cap of $50,000, for training related to “high-wage, high-demand jobs.” The expansion of employer training grants is a piece of a larger plan by Gov. Eric Holcomb (R) to spend $50 million of the state’s CARES Act funds on workforce training and development.

The department increased the grant limits “to address the need for more accelerated training and development as we continue to work our way through the Covid-19 pandemic,” said Fred Payne, the state’s workforce development commissioner, in announcing the expansion last month.

The federal CARES Act provided $150 billion in relief funds to states, local governments, and U.S. territories to be used before year’s end on expenses related to the public health emergency. Each state’s share varied based on population; Indiana received $2.6 billion. The largest haul went to California, where state and local governments got $15.3 billion.

Like Holcomb, Mississippi Gov. Tate Reeves (R) has suggested using a portion of his state’s CARES Act money on workforce development, proposing a $130 million plan to expand job-training facilities and programs.

Separate from the direct relief funds, states also are taking advantage of a $345 million pool of federal money that the CARES Act allocated for Dislocated Worker Grants. Thus far, the federal DOL has issued $238.9 million of these grants to a few dozen states and territories to expand workforce training and job-search services.

In some cases, as with Florida’s $12 million grant plan, states are creating disaster-relief jobs available to workers who have been laid off due to the pandemic.

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.

To contact the reporters on this story: Ben Penn in Washington at bpenn@bloomberglaw.com; Ian Kullgren in Washington at ikullgren@bloombergindustry.com; and Chris Marr in Atlanta at cmarr@bloomberglaw.com

To contact the editor responsible for this story: Martha Mueller Neff at mmuellerneff@bloomberglaw.com