Su DOL Nomination Faces Business Lobby, Senate Absence Hurdles

Business groups are lining up in opposition to Julie Su’s nomination to lead the US Labor Department, putting some vulnerable Democrats and Independents in the hot seat over whether they’ll support the former California regulator.

Trade associations have criticized Su’s record running the Golden State’s labor agency in statements following President Joe Biden’s announcement last week that he has tapped her to run the DOL once current Labor Secretary Marty Walsh departs later this month.

The confirmation vote math is tricky given the number of senators up for reelection in 2024. Democrats need at least 50 votes to confirm Su if all senators are present, meaning lobbyists only need to chip off two senators who caucus with Democrats for the nomination to fail.

The International Franchise Association, which led a lobbying drive to sink prior Biden DOL nominee David Weil, already has Su in its crosshairs.

“Deputy Secretary Su has been consistently hostile to small businesses throughout her career, and she mismanaged California’s unemployment insurance program as head of the California Labor and Workforce Development Agency,” said Michael Layman, IFA’s senior vice president of government relations and public affairs. “Just as the US Senate rejected David Weil because he was anti-small business and willing to make new law rather than enforcing existing law, senators should reject Julie Su.”

Adding fuel to the fire will be a new TV ad running in the D.C. media market from the California Business and Industrial Alliance, which also opposed Su’s nomination to the deputy secretary position at the DOL. The group warns that Su “could import California’s failed policies to Washington, D.C.”

But even if Su’s nomination was successfully blocked, the Federal Vacancies Act would permit her to remain as acting head of the agency for 210 days. After that, if Biden hasn’t selected another nominee, the agency could delegate the authority of the labor secretary position to Su, making her leader of the agency, just under a different title.

Centered On California

In their opposition to Su, business groups cite her past work in California where she was in charge of enforcing the state’s labor laws, which are often significantly stricter than those at the federal level.

Seven House GOP members of California’s delegation wrote a letter to Biden that Su’s past work should rule her out for this new position. “To say that Su failed in her previous role as Labor Secretary in California’s labor department is an extreme understatement,” Rep. Kevin Kiley (R-Calif.), chair of the House Subcommittee on Workforce Protections, said in a statement alongside the letter. “The amount of suffering Su’s Labor Department inflicted on my constituents and millions of Californians should entirely disqualify Su from consideration.”

At issue is Su’s leadership enforcing the state’s worker classification law known as A.B. 5, which presumes workers are employees under the law, making it harder for them to be classified as independent contractors. Large tech companies and business and independent worker groups opposed the law, saying it would destroy business and force legitimate contractors into unnecessary employment relationships.

But proponents of the law said it provided protections like workers’ compensation and unemployment insurance to employees who were wrongfully being misclassified as independent contractors by companies looking to cut costs and reduce their legal liabilities.

Su’s critics have also zeroed in on the failures of California’s unemployment insurance system under her leadership, pointing to more than $10 billion in jobless benefits lost to fraud during the pandemic after the state’s workforce agency failed to apply recommended updates to the system—issues she was grilled on during her confirmation process for deputy labor secretary.

While Su blamed the Golden State’s fraud troubles on outdated technology and an overwhelming surge of new unemployment claims, the issue could resurface during her confirmation hearings amid a new GOP and White House push to address pandemic-related identity theft and fraud. The DOL’s Employment and Training Administration oversees the federal-state unemployment system, and the Biden administration also created an office of unemployment insurance modernization within the Office of the Labor Secretary in 2021.

Tech Chill

California-based tech companies that enjoyed frequent contact with the DOL under Marty Walsh’s leadership have also changed their tone toward some of the department’s regulatory efforts following the news of Su’s nomination.

The shift comes as the Biden DOL is in the process of finalizing a regulation that would make it easier to classify workers as employees rather than independent contractors under the Fair Labor Standards Act. When the rule was initially proposed, Uber praised the move calling it a “measured approach.”

But after reports of Walsh’s exit and the announcement of Su’s nomination, Flex, a trade association representing Uber, Lyft, and other app-based platforms, called on the Biden administration to hold off on the rule until a replacement is confirmed by the Senate.

“We expect the Senate confirmation process will include a meticulous review of her record and its potential impact on worker independence and consumer choice,” Flex CEO Kristin Sharp said in a statement. “Meanwhile, we continue to urge the Department to delay the finalization of its proposed Independent Contractor rule until a permanent Secretary is confirmed.”

Counting Votes

Moderate senators up for reelection in 2024 will likely be the targets of anti-Su lobbying efforts. Democratic Sens. Joe Manchin (W.Va.) and Jon Tester (Mont.) are up for reelection next year in red states, while Independents Kyrsten Sinema (Ariz.) and Angus King (Maine) also have terms ending in 2024, and may be more cautious in their vote.

Sen. Mark Kelly (D-Ariz.), who was just reelected last year, has signaled he will give Su renewed consideration, even though he voted to confirm her for the deputy role. Kelly is one of only two Democrats who hasn’t co-sponsored the PRO Act reintroduction this year, and along with Sinema and Manchin voted against Weil.

“I already voted to confirm her to be the deputy secretary of labor,” Kelly told Bloomberg Law March 1. “But this is obviously a different job and I’m taking a look at it.”

Manchin gave even less of an indication on whether he would vote to confirm.

“Julie who?” he responded when asked about his thoughts on Su. “I haven’t thought about that.”

Beyond controlling possible defections, Democratic leadership in the Senate must also remain attentive to its caucus attendance. John Fetterman (Pa.) is undergoing in-patient treatment for depression, while Dianne Feinstein (Calif.) is being treated for a case of shingles in San Francisco. Those two absences put the Democratic caucus at 49, tied with Republicans.

While Su faced complete Republican objection in her deputy secretary confirmation, she could hope for some moderate Republicans to change their minds when voting on this new role. Sen. Susan Collins (R-Maine), who often crosses the aisle in confirmation votes, said she would give Su new consideration but did have some reservations.

“I haven’t looked at it yet. I worked well with Secretary Walsh, I’ve had no contact with her,” Collins told Bloomberg Law after Su was nominated. “I remember being concerned about the way that she administered the unemployment compensation program in California.”