Labor Department in Time Crunch to Finish Big-Ticket Regulations

The US Labor Department is running out of time to finish some of its highest-profile labor policy changes, putting several regulations at risk of being sidelined or completely undone.

With roughly a year and a half left in the Biden administration’s term, at least three major DOL rules haven’t yet been finalized: one updating prevailing wage rates paid to workers on federally funded projects, one outlining independent contractor status under federal wage laws, and another that sets when salaried workers are due overtime pay.

Those policy changes not only take time to complete the regulatory process, but are expected to face legal challenges that could put them on hold.

“The regulatory process itself is a slow one. And then because everything these days ends up in the court, that also tends to make the process go much slower because you have to be absolutely sure that it’s not going to be challenged on one grounds or another,” said David Weil, who headed the DOL’s Wage and Hour Division under President Barack Obama.

“When you’re running against the clock in terms of the election cycle, that makes it all the more challenging,” said Weil, who is now a professor at Brandeis University. “There’s a lot in process and the clock is ticking and it will be a challenge to complete all the regulations that the administration hopes to in the labor area.”

Julie Su’s pending nomination for Labor Secretary is adding to the pressure, as the agency is likely waiting for a Senate vote before finalizing any major regulatory changes that could create friction during the confirmation process.

During her nomination hearing, Su said the DOL wouldn’t issue a rule to address joint employer status under federal wage and hour laws, a standard labor unions and Democrats have pushed for the administration to strengthen.

Congressional Action

Any rules that are completed by early next year could fall prey to the Congressional Review Act, depending on how President Joe Biden and Democratic lawmakers perform in the 2024 election.

The law gives Congress 60 days after a regulation is finalized to pass, by simple majority in both chambers, measures blocking them from going into effect.

“There is a packed regulatory agenda, and there are things we need the DOL to do and finalize, probably by, you know, early May of 2024 to avoid any Congressional Review Act issues should President Biden not be reelected,” said Judy Conti, government affairs director for the National Employment Law Project.

The CRA typically only comes into play if there is a change in administration or a party secures a veto-proof majority, because any resolution to invalidate an agency rule still must be signed by the president.

Aside from the CRA, a new administration can invalidate rules finalized late in a president’s term by simply delaying them from going into effect.

The Biden administration took that approach, attempting to delay and invalidate both the Trump administration’s 2020 joint employer rule and 2021 independent contractor rule.

The latter effort was blocked in court in 2022, forcing the Biden DOL to start the rulemaking process again on an independent contractor regulation.

Rules at Risk

The DOL’s wage division is in varying stages of the process for releasing three high-profile rules.

One final regulation that would increase how much workers are paid on federally funded construction projects, like those created by the infrastructure bill, has been under review at the White House budget office since mid-December, the final step before it’s published.

Another final rule that would make it harder for workers to be classified as independent contractors rather than employees under federal wage laws is scheduled to be released in May, according to the latest regulatory agenda.

And the agency is due to issue a proposal this month to expand the Fair Labor Standards Act’s overtime pay protections to more workers, a potentially contentious policy change because it’s expected to expand payroll costs for employers.

That proposal must go through a public comment period—likely at least 60 days—before it can be finalized, which would likely require DOL staff to review a voluminous amount of input.

The rulemaking process should only span a year or two in order to give the government enough time to defend a rule in court, said Timothy Taylor, who served as a deputy solicitor of labor during the Trump administration.

“If you think of the lifecycle of a regulation from chrysalis to butterfly, actually publishing a final rule isn’t really the end of it,” said Taylor, now an employment and litigation attorney at Holland & Knight LLP. “And so if you can get your rule done within a year or two, that gives you a good long time in court to defend the rule, all the way up to the Supreme Court if necessary.”

Business groups have already suggested they would challenge the rules if the administration expands them too far.

A similar attempt at the end of the Obama administration to update rules governing when workers should be owed time-and-a-half overtime pay was blocked in court before it could go into effect in 2016.

The Trump administration would later reissue the rule, but in a weaker form.

Taylor said he believes the Biden administration still has enough time to finalize whatever rules it wants to.

“But again, they’re going to be limited in their ability to defend those if there’s a change of administration, so that’s really the limiting factor here,” he cautioned.