How 2012 election results will affect HR in 2013, part 1

by David S. Fortney

President Barack Obama will be sworn in for his second term Monday. The 113th Congress met for the first time on January 3 with its slightly revised composition. With those players in place, the main question for employers and HR professionals is, how will the 2012 election results affect the federal workplace agencies? In addition, what compliance changes and challenges will occur in the future?

Employers and HR professionals can expect the 2012 election results to affect federal workplace agencies in 2013 and beyond in significant ways, including:

• A continued emphasis on aggressive expanded audits and enforcement, particularly on alleged systemic or corporatewide violations;

• The issuance of delayed expansive regulations, particularly new regulations affecting federal contractors to be issued by the Office of Federal Contract Compliance Programs (OFCCP); and

• Limited legislative changes, although immigration reform may result from the 113th Congress.

Federal agencies: new rules, regs, and initiatives
The changes implemented by federal workplace agencies during Obama’s first term occurred through Executive Orders, new or amended regulations, amicus (friend-of-the-court) filings, and informal guidance. Additionally, there were operational changes such as the expanded Web-based posting of enforcement data. The top policy leaders of the key labor and employment agencies and the initiatives we expect them to pursue are set out below.

Department of Labor

On January 9, U.S. Department of Labor (DOL) Secretary  Hilda Solis  resigned. The former member of Congress was a key player in the president’s successful outreach to the Hispanic community. There is no word yet on her replacement.

The DOL’s two key enforcement agencies, the OFCCP and the Wage and Hour Division (WHD), present a mixed picture. In the short run, Patricia A. Shiu is expected to remain as the OFCCP’s director. On the other hand, the WHD never had a confirmed director during Obama’s first term, but Deputy Administrator Nancy Leppink is expected to continue heading opera­tions until a nominee to lead the agency is confirmed.

Both the WHD and the OFCCP will be busy in 2013, and employers should plan accordingly.

Wage and Hour Division
The WHD will con­tinue its enforcement focus. In particular, it will focus on misclassification issues—i.e., determining whether workers should be classified as employees or indepen­dent contractors. Additionally, stepped-up enforcement in coordination with the IRS and state agencies is ex­pected. We also anticipate a growing number of Fair Labor Standards Act (FLSA) audits, with the WHD fo­cusing on whether employees are exempt from over­time, whether interns are properly paid or unpaid, and whether compensable work has been performed and compensated.

Also, there will be no DOL-supervised voluntary self-audits. When settling audits, the DOL now rou­tinely requires liquidated damages—i.e., double back-pay amounts. Vigorous enforcement of federal contrac­tors’ prevailing wage and benefits obligations under the Davis-Bacon Act (DBA) and the Service Contract Act (SCA) will continue, and we expect guidance on how the Affordable Care Act (ACA) will affect prevailing benefits obligations under the prevailing wage laws. Finally, we anticipate significant new regulations, including FLSA regulations implementing the right-to-know rules on employee or independent contractor status and related information and revised final Family and Medical Leave Act (FMLA) regulations.

Office of Federal Contract Compliance Programs
The OFCCP’s stepped-up enforcement of federal con­tractors’ equal employment opportunity (EEO) and af­firmative action obligations will continue at an acceler­ated pace, including new rounds of corporate scheduling announcement letters. The focus on compensation and federal contractors’ obligations to veterans and people with disabilities (Section 503 of the Rehabilitation Act) will continue and expand. The recent introduction and application of a new back-pay calculator tool that leads to higher damages will be expanded. Moreover, the re­cent unannounced rescission of the press guidelines cre­ates uncertainty in how settlements will be addressed in DOL press releases.

Some of the most significant OFCCP developments will include new regulations and regulatory changes, such as revised regulations to implement Section 503. As proposed, the new 503 regulations effectively will cre­ate a seven percent goal, or quota, for every job and im­pose new record-keeping burdens. Additionally, there will be new regulations applicable to veterans, which, as proposed, will significantly expand federal contractors’ obligations. There also will be a new scheduling letter for OFCCP audits that will significantly expand federal contractors’ obligations and burdens in responding to desk audits, particularly with compensation data.

Compensation will be a major focus for the OFCCP, and the agency will rescind its current compensation standards. To date, the OFCCP has stated that it will not issue any guidance at all, allowing the agency maximum flexibility (and federal contractors the least bit of predict­ability) in assessing compensation during compliance audits. The promised changes in compensation enforce­ment are significant and, in all likelihood, will become the signature development for the OFCCP, surpassing its far-reaching regulations significantly expanding federal contractors’ obligations to people with disabilities and veterans.

David S. Fortney is a partner with Fortney & Scott, LLC in Washington, D.C. Before co-founding the firm, Fortney served as the chief legal officer of the U.S. Department of Labor in Washington, D.C., during the first Bush Administration. As Acting Solicitor of Labor, he was responsible for enforcing over 140 laws regulating the nation’s workplaces and managing an agency with 800 attorneys and support staff. He may be contacted at dfortney@fortneyscott.com.