Over the weekend, Senate Democrats defied midterm election historical trends and maintained control of their narrow majority in the Senate. In Nevada, Democratic Senator Catherine Cortez Masto narrowly defeated Republican challenger Adam Laxalt, officially giving Democrats 50 seats in the Senate. Democratic Senator Mark Kelly also held on to his seat in Arizona. This means that the state of Georgia where Democratic Senator Raphael Warnock and Republican Herschel Walker will meet in a runoff on December 6 will not decide Senate control. But the December 6 runoff election is still important because a win would give Democrats an increased majority to 51 seats, rather than the power-sharing agreement currently in place with Vice President Kamala Harris serving as a tie-breaker in the 50-50 chamber.

In the House, Republicans are still favored to win control but will have a slim majority. As the House Republican Majority begins to flex its political will next year, a divided government will take hold and make it more difficult, if not impossible, for the Biden administration to move its legislative agenda forward. The administration will be subject to increased scrutiny that includes a flurry of subpoenas and investigations, as well as aggressive oversight of the administration’s regulatory activities by House Republicans who will hold committee gavels and craft appropriations bills and policy riders.

Below is a forecast of what employers can expect from the 118^th Congress and the administration regarding labor and employment policy.

Aggressive Congressional Oversight and Legislative Agenda by the House Education and Labor Committee

The House Education and Labor Committee is expected to pursue an aggressive oversight and legislative agenda through hearings and committee deliberations. Most notably, we expect the Committee will rely less on virtual hearings, instead holding in-person hearings, which encourage full participation of all committee members and top agency officials, who will be called on to testify on the administration’s budget request and policy considerations. We also suspect the Committee may consider, as part of its oversight jurisdiction, utilization of its subpoena power to compel witness testimony and information it is seeking from the federal agencies.

If Republicans reclaim the majority, it is widely speculated that Representative Virginia Foxx (R-NC) may become chair of the House Education and Labor Committee given broad support from her Republican colleagues. Representative Foxx, who currently serves at the ranking member of the Committee, is running unopposed for the top spot but needs a waiver from leadership to secure the gavel due to party rules on term limits for committee chairs and ranking members. Over the years, Representative Foxx has been a strong voice and advocate for small business and the larger employer community.  

Oversight Jurisdiction

Governmental balance benefits from genuine oversight of presidential administrations that opens the regulatory process to public scrutiny and prevents federal overreach. Given that our nation has thrived with its system of checks and balances, congressional oversight by the Committee will be important.

A major focus of the Committee may involve examining conflict-of-interest issues surrounding National Labor Relations Board (NLRB) members Prouty and Wilcox’s participation in Board deliberations, decision-making and rulemaking given their previous positions with the Service Employees International Union (SEIU) and advocacy efforts on issues pending before the Board. The business community has previously raised concerns remain regarding their ability to remain impartial when dealing with related cases and policies.  

Additionally, Republican Committee staff have expressed interest in holding hearings to discuss the fairness and need for secret ballot union elections. We expect the Committee will leverage its jurisdiction to conduct oversight and hold hearings into matters NLRB General Counsel Jennifer Abruzzo has advocated in recent legal memos, including revival of the “Joy Silk” doctrine (abandoned by the Board in 1969), which would shortcut the union campaign process by forcing employers to recognize unions without a secret-ballot election if a majority has expressed interest in unionizing by signing union authorization cards.

Among other topics Republicans have already criticized, the Committee will likely be interested in examining the chilling impacts of Abruzzo’s April 2022 memo in which she argued that employer-led “free speech” meetings with employees are unlawful.

Congressional Review Act

House Republicans may decide to utilize Congressional Review Act resolutions to eliminate regulations they deem overreaching and/or detrimental to the regulated community as finalized by the current Administration. (More on the administration’s pending regulatory matters below.)

Advancement of Pro-employer Legislation

In addition to greater levels of oversight, we expect that a Republican House majority will make labor, employment, and workforce development policy issues a key focus of its domestic policy agenda. Some of these legislative priorities will include:

• Employee Rights Act (H.R. 7194, S. 3889). This bill is the antithesis of the PRO Act. Among other things, it would add increased protection for secret ballot elections and extend such protections to workers deciding whether a union will go on strike; require union recertification elections when union membership drops below 50%; protect employee privacy; provide protection from political spending by requiring workers to “opt in” to have any portion of their paycheck used by unions to support political candidates or parties, and codify the traditional joint employer “direct, immediate control” standard.

• Ensuring Workers Get PAID Act (H.R. 5743). This bill reestablishes the Payroll Audit Independent Determination program, which is administered by the Department of Labor and allows employers to self-report federal minimum wage and overtime violations as an alternative to litigation. Employers may apply to the program by submitting information from a self-audit that includes calculations of any unpaid minimum or overtime wages. Labor must verify the calculations and, if the application is approved, supervise a settlement with affected employees that provides payment of any unpaid wages. Employees who accept a settlement under the program waive their private right of action to recover the unpaid wages provided under the settlement.

• The Working Families Flexibility Act (H.R. 1980). This bill allows private sector employers to offer their employees comp time. Specifically, the bill authorizes private employers to provide compensatory time off to employees at a rate of one and one-half hours for each hour of employment for which overtime compensation otherwise is required; employees may accrue a maximum of 160 hours of compensatory time. Employers would be prohibited from interfering with an employee's right to request or decline compensatory time off in lieu of payment of overtime compensation, or from requiring an employee to use such compensatory time. Employers would also be obliged to give 30 days’ notice before discontinuing a compensatory time policy. Employers would be liable to employees for damages from violations of these requirements.

• The Workflex in the 21^st Century Act (H.R. 4248). This bill creates a new type of benefit plan under the Employee Retirement Income Security Act (ERISA) that provides a safe harbor from conflicting state local paid leave laws if an employer offers a minimum amount of paid leave. More specifically, the bill establishes a voluntary option under which employers that provide flexible workplace arrangement plans that include a combination of paid leave and flexible work options would be exempt from certain state and local laws regarding employee benefits. A flexible workplace arrangement plan must provide all employees with a minimum amount of paid leave per year that ranges from 12 to 20 days, depending on the size of the employer and the tenure of the employee. The plan must also provide employees that meet certain service requirements with at least one of the following flexible work options: a biweekly work program, a compressed work schedule, a remote work program, a job-sharing program, flexible scheduling, or predictable scheduling. The bill also specifies various requirements for paid leave and the flexible work options.

• Reauthorization of Workforce Innovation and Opportunity Act (WIOA). The country is still facing a record labor shortage and many employers are struggling to fill positions, particularly those in the service sector. The new U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover (JOLTS) survey revealed a record 10.72 million job openings. According to the report, there are about two job openings for every available worker. We expect the Committee will prioritize education and job training and make a bipartisan effort at reauthorization and modernization of WIOA as the main vehicle for modernizing the nation’s workforce.

• Healthcare and Workplace Safety. No leading proposal has yet emerged for legislation on healthcare and workplace safety, but we are informed that those topics are actively being discussed.  

Coordination with Appropriations Committee

We expect the Committee will coordinate with the House Appropriations Committee via the Subcommittee on Labor and Health to restrict federal agency funding and resources and/or insert relevant policy riders to curtail overreaching labor and employment regulatory actions. In divided government, the appropriations process is often used as a weapon to block administration spending requests or to threaten government shutdowns as both sides seek to gain leverage in year-end spending measures.

Democratic-controlled Senate

Democrats still control the Senate, albeit narrowly. In a split Congress with Republicans in control of the House, Senate Democrats will prioritize and continue to approve President Biden’s federal judicial nominees in an effort to fill vacancies in the federal courts across the nation.

Senate Committee on Health, Education, Labor and Pensions

There will be a change in leadership at the Senate Committee on Health, Education, Labor and Pensions (HELP). Current Chair Patty Murray (D-WA) is anticipated to take the helm of Appropriations following the retirement of current Chair Pat Leahy (D-VT). Senator Bernie Sanders (I-VT) is next in line for HELP Democrats. For Republicans, HELP Ranking Member Richard Burr (R-NC) is retiring at the end of this session, and we are advised that Senator Rand Paul (R-KY) or Senator Bill Cassidy (R-LA) is likely to take the top post for Republicans.

Labor Nominees

The Committee is likely to try to move forward labor nominees who are still languishing in the Senate. These include the Department of Labor’s Wage and Hour nominee Jessica Looman, who still awaits a vote, along with Karla Gilbride, who would serve as the Equal Employment Opportunity Commission’s (EEOC) general counsel. Also stalled is Kalpana Kotogal, who was nominated to serve on the EEOC, but whose nomination was deadlocked in Committee with a party-line vote in May. The EEOC currently has a 3-2 Republican majority, but Republican Commissioner Janet Dhillon, whose term expired in July but is still in office on holdover status, announced she will step down on November 18. If confirmed, Kotogal would give the EEOC a Democratic majority.

Also of note is the expiring term of current National Labor Relations Board (NLRB) Republican Member John Ring on December 16, 2022. The NLRB currently has 3-2 Democratic majority. We would expect the administration to leave Ring’s seat open, which would allow the majority to expedite its caseload and rulemaking agenda.

Potential Oversight

The Committee is likely to use its oversight jurisdiction to consider ways to make the U.S. more prepared for the next pandemic. Specifically, we expect there will be a renewed focus on the administration’s COVID-19 response and preparedness and biomedical research projects to contain the spread of the virus. The Committee may also explore rising health care costs.

Legislative Agenda

Current Chair Murray and Ranking Member Burr worked in a bipartisan manner to sponsor the PREVENT Pandemics Act, S.3799, which would strengthen the nation’s public health and medical preparedness and response systems in the event of another pandemic. If the bill does not pass in the lame duck session, it could be reconsidered in the next Congress. The Committee may also address the number of suicides and drug overdose deaths in the United States in recent years, given that concerns have been raised by members of both parties.

Biden Administration Will Accelerate its Regulatory Agenda

Given the likelihood of a legislative impasse, the administration will continue to turn its attention from Congress to the federal agencies to achieve its labor and employment agenda in the two years it has left in office. Much of this focus has already begun through recent rulemakings promulgated by the Department of Labor’s Wage and Hour Division and the NLRB. Employers should expect to see a flurry of activity in the next two years by the agencies, coupled with continued focus on enforcement actions. For historical perspective, you will recall that during the Obama administration, Democrats lost control of the House in 2010 and the Senate in 2014, at which time the administration pursued much of its labor policy agenda through the federal agencies. We predict the same will happen under the Biden administration.

Below is a quick status update on the most consequential pending rulemakings underway and others that are expected soon pursuant to the administration’s 2022 Spring Regulatory Agenda.

National Labor Relations Board

• Joint Employer. On September 6, 2022, the NLRB issued a proposal to revise yet again its standard for determining joint-employer status under the National Labor Relations Act. The proposal would largely reestablish the broad Obama-era standard of joint employment, under which one company may be deemed the joint employer of a second company’s employees not only where it directly or immediately exercises control over the second company’s workforce, but even where the first company’s putative control is indirect, or simply reserved but never actually exercised. NLRB Chair Lauren McFerran (D) and Board Members David Prouty (D) and Gwynne Wilcox (D), approved the proposal; Republican Members John Ring and Marvin Kaplan dissented from and voted against the proposed regulation.¹ The public comment period ends on December 7, 2022. We expect the Board may issue a final rule by the second quarter of next year.

• Election Protection Rule. On November 3, the NLRB requested comments on a Notice of Proposed Rulemaking on “Representation-case Procedures: Election Bars; Proof of majority support in construction industry collective-bargaining relationships.” The proposed rule would rescind the Trump-era changes to union representation elections that made it easier for workers to secure elections to remove their unions. Chair Lauren McFerran said, “The Board believes, subject to comments, that these proposed changes will better protect workers’ ability to make a free choice regarding union representation, promote stability in labor relations, and more effectively encourage collective bargaining.” McFerran was joined by Board Members Wilcox and Prouty in proposing the rule. Board Members John Ring and Marvin Kaplan dissented. The public comment period ends on January 17, 2023. 

Wage and Hour Division

• Independent Contactor Status. On October 11, 2022, the WHD issued a proposed rule to update the test for determining whether a worker is an employee under the Fair Labor Standards Act (FLSA) or an independent contractor. FLSA requirements relating to minimum wage, overtime, and recordkeeping apply to employees, but do not apply to independent contractors, making the proper classification of a worker under the law critical and consequential. The proposal would rescind the regulation adopted by the previous administration, which clarified and simplified the test by stressing two core factors: 1) a worker’s control over their work, and 2) their opportunity for profit or loss. The proposed rule would instead restore a “totality-of-the circumstances” analysis of the “economic reality test” historically applied by courts (albeit often in inconsistent and unclear fashion), and largely mirroring the approach taken by the Department in an Administrator’s Interpretation issued during the Obama administration and subsequently withdrawn by the Trump administration. Shortly after the shift in administrations, the Department of Labor delayed the effective date of the January 2021 regulation, and later withdrew it entirely. This delay and withdrawal were subject to legal challenge, and in March 2022, the U.S. District Court for the Eastern District of Texas found that DOL’s actions violated the Administrative Procedure Act. The court vacated the delay and withdrawal and specifically held that the rule became effective on March 8, 2021. It thus remains in effect today, but would be withdrawn by the new proposed rule. The public comment period ends on November 28, 2022. While the scope of any final rule remains to be seen, we confidently predict it will dramatically limit the circumstances under which a worker may be properly classified as an independent contractor and is almost surely to be subject again to legal challenge.

• Overtime Rule / White Collar Exemptions. The WHD is currently reviewing the overtime regulations that implement the exemption of bona fide executive, administrative, and professional employees from the FLSA’s minimum wage and overtime requirements. The Department of Labor provided notice of its intent to consider changes to the overtime regulations in last fall’s regulatory agenda, but has not yet specified what changes it is considering. Earlier this year, the DOL held several industry stakeholder calls to gather information and has conducted regional listening sessions around the country. The Department initially noticed its intent to issue a Notice of Proposed Rulemaking for October 2022. That has evidently been delayed, but it is our understanding that the Department is continuing to work on proposal.

• Davis-Bacon Act. On March 18, 2022, the Department of Labor published a Notice of Proposed Rulemaking indicating its intent to undo most of the 1982 modifications made by the Reagan administration, while at the same time making more than 50 significant changes to Davis-Bacon Act (DBA) enforcement. The Department indicates that its DBA regulations affect work totaling more than $200 billion annually involving more than 1.2 million construction workers. Public comments on the proposed rule were due on May 17, 2022. Many government construction contractors and industry groups filed comments expressing concern that the Department’s proposed return to policies of the 1970s will result in inflated wage rates that are inconsistent with the DBA and will exacerbate the current inflation in the U.S. economy. According to the administration’s regulatory agenda, the Department plans to issue a final rule in December 2022.  

• Inflation Recovery Act requirements of prevailing wage and government registered apprenticeship. The August 2022 signing of the IRA codified the first-ever private mandates of Davis-Bacon prevailing wages for construction of clean energy projects, as well as government registered apprenticeship, as a condition of awarding tax credits. The Treasury Department and IRS were tasked with issuing guidance on how these new requirements will be implemented on private construction projects and what role the Department of Labor will play. Public comments were filed on November 4, 2022, indicating divergent views on a number of issues, which the agencies will need to resolve in order for the clean energy construction projects to proceed under the new requirements.

Occupational Safety and Health Administration

• Workplace Violence in Health Care and Social Assistance. OSHA published a Request for Information (RFI) in December 2016, soliciting information primarily from health care employers, workers and other subject-matter experts on impacts of violence, prevention strategies, and other information useful to the agency. A broad coalition of labor unions and the National Nurses United petitioned OSHA for a standard preventing workplace violence in health care. In January 2017, OSHA granted the petitions. The status of developing a workplace standard is unknown, but it is our understanding that it is still under consideration.

• Heat Illness Prevention in Outdoor and Indoor Work Settings. OSHA published an advance notice of proposed rulemaking (ANPRM) on October 27, 2021, to explore rulemaking on a heat stress standard. To date, California, Washington, Minnesota, and the U.S. military have issued heat protections. In recent years, Public Citizen, a non-profit consumer advocacy organization, has petitioned OSHA to issue a heat stress standard. The agency is still considering these petitions. OSHA was scheduled to analyze the comments from the ANPRM beginning June 2022.

• Infectious Disease. OSHA is looking at regulatory alternatives for control measures to protect employees from infectious disease exposure. Affected workplaces could include health care, correctional facilities, laboratories, and homeless shelters, among others. An NPRM is scheduled for May 2023.

• Tracking Workplace Injuries and Illnesses. OSHA is reviewing comments on its proposed rule for tracking workplace injuries and illnesses. The rule would require establishments with 100 or more employees in designated industries to submit information electronically once a year on certain OSHA forms. The rule would update the classifications system to determine the industries covered by this submission requirement and require the company name to be included. A final rule is scheduled for December 2022.

• Lock-Out/Tag-Out Update. New computer-based controls of hazardous energy conflict with current OSHA standards on lock-out/tag-out. In May 2019, OSHA issued a Request for Information to better understand new technology in this space. An NPRM is scheduled for March 2023.

Federal Inaction Will Further Increase State and Local Legislative and Regulatory Activity

Federal legislative gridlock and inactivity always gives rise to an increased proliferation of state and local activity. Below are some of the labor and employment policies that we may expect from more progressive regions of the country over the next two years leading up to the 2024 presidential election.

• California AB-257 Contagion. On Labor Day September 5, 2022, California Governor Gavin Newsom signed AB-257, the Fast-Food Accountability and Standards Act (FAST Act), into law just one week after it was sent to his desk. This radical new law establishes a state 10-member Fast Food Council within the Department of Industrial Relations. The Council will be empowered to impose sector-wide minimum standards on wages, working hours, and other conditions related to the health, safety, and welfare of fast-food restaurants whose brands have more than 100 locations nationwide.

A proposed referendum seeking to overturn the FAST Act law was filed on September 6 with the California Attorney General’s office. If enough signatures are collected, the law would be suspended until the ballot initiative is voted on in 2024.

Labor leaders have said they hope California’s FAST Act will serve as a model that other states will adopt. It is possible that the Service Employees International Union (SEIU) will start pushing similar legislation (and perhaps more extensive versions to other industries/sectors) in the other single-party controlled states and progressive cities. Those other Democratic-led states include: Washington, Oregon, Nevada, Colorado, New Mexico, Illinois, New York, Maine, Rhone Island, Connecticut, New Jersey, Delaware, and Hawaii. Also likely to be targeted are progressive cities including New York City, Seattle, Chicago, Austin, and Washington D.C.,  

• Pay transparency. Earlier this month, New York City’s pay transparency law went into effect, requiring most employers in New York City to post salary ranges in job advertisements, including disclosures of internal positions. This law is part of a growing trend in other jurisdictions across the nation to foster pay equity and alleviate pay disparities.

• “Just Cause.” In 2020, the New York City Council passed a new law that limits when a fast food employer can discharge an employee. The provision states that a “fast food employer shall not discharge a fast food employee who has completed such employer’s probation period (not to exceed 30 days) except for just cause or for a bona fide economic reason.” Although the law is being challenged by the restaurant industry, the seed has been planted and the SEIU, the UCLA Labor Law Center and others are encouraging states adopt their own state “just cause” law to “protect workers from unfair and arbitrary firings.”

• Minimum wage and Subminimum wage. Nearly half the states have increased their minimum wage rates since the beginning of the year, with many others set to increase their wage rates next year. Given Congress’ inability to pass the administration’s proposed “Raise the Wage Act,” which would create a $15 per hour minimum wage rate, the states are passing their own rate increases as a tool for recruitment and retention to remain competitive in the tight labor market and labor shortage. Additionally, the subminimum wage aspect of the “tip credit” system, which allows restaurants to credit a portion of a worker’s tips toward the obligation to pay minimum wage, continues to be under attack. D.C. voters just overwhelmingly approved Ballot Initiative 82, which eliminates the tip credit, forcing restaurants to pay tipped workers the full minimum wage. It is likely other states will follow. The “Raise the Wage Act” contained a provision that would have eliminated the tip credit, but as referenced above, the legislation has stalled. Advocates argue, however, that elimination of the tip credit in the nation’s capital provides needed momentum for states to act.  

• Workforce development. The labor shortage continues to impact almost every industry and sector. The recent report from the Bureau of Labor Statistics reveals that there are 10.7 million job openings and less than half that number of people actively looking for jobs. These workforce challenges are contributing to decreased production, supply chain constraints, and higher prices. Because the states are on the front line of these challenges, they will continue to develop strategic workforce planning and training initiatives to grow their communities and put people back to work.

Conclusion

The results of the 2022 midterm elections are likely to block most labor and employment legislation. However, employers should recognize that the administration’s labor and employment policy agenda will not change, but rather move to the federal agencies. Thus, while it is not likely that any groundbreaking legislation that negatively impacts employers will be enacted during the next session of Congress, federal agency rulemaking and enforcement actions will proceed with renewed force and energy.