Labor Issues Loom Large

More money allocated toward enforcing labor laws -- including those regulating employee classification, safety and payment of unemployment insurance -- could force companies to clean up their acts. Or would it be more likely to hinder today's No. 1 economic issue: job creation? President Obama's proposed budget also addresses retirement issues and workforce-readiness training.

Friday, February 19, 2010
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With an increased emphasis on thwarting unemployment-insurance fraud and cracking down on companies that improperly classify workers as independent contractors, President Barack Obama's 2011 budget has plenty of items that should get the attention of any HR executive.

Introduced to Congress earlier this month, the budget includes a proposed $14 billion for the Department of Labor, with increases targeted to a number of agencies including the Occupational Safety and Health Administration, the Wage and Hour Division and the Employee Benefits Administration.

For OSHA specifically, the budget asks for $573 million -- $14 million more than in the 2010 budget -- and 25 more inspectors. (The Obama administration has already provided it with 100 more inspectors.)

"It appears that a lot more of the resources are going to be allocated toward enforcement, meaning inspections and citations as opposed to what was considered to, before, be more of a consultative role [for OSHA]," says Mark Lies, a labor and employment attorney at Seyfarth Shaw in Chicago.

Lies expects the number of OSHA inspections -- which last year numbered around 42,000 -- to increase by around 7,000.

The budget also proposes funds to combat unemployment-insurance fraud. The budget states that "over $11.4 billion in U.I. benefits were erroneously paid in 2009 -- an overpayment rate of almost 10 percent."

The administration is hoping to tackle this problem by boosting funding for U.I. integrity and combining that with legislation. That plan would "reduce improper payments by over $4 billion and employer tax evasion by $300 million over 10 years."

The budget also aims to stop companies from misclassifying employees as independent contractors. The plan "eliminates incentives in law for employers to misclassify their employees; enhances the ability of both agencies [the DOL and Treasury Department] to penalize employers who misclassify; and restores protections to employees who have been denied them because of their improper classification."

Jason M. Zuckerman, an attorney and principal with the Employment Law Group in Washington, says that such a stipulation could earn the government more tax money from companies, while at the same time, giving rightful employees the healthcare coverage they deserve.

"It really harms the public interest because those employers aren't paying unemployment taxes and they're not paying healthcare insurance -- thereby creating a large population of uninsured individuals who are really employees at the end of the day," says Zuckerman.

Will Job Creation be Hurt?

While all this enforcement -- especially on the health-and-safety side -- could help crack down on companies that mistreat workers, is such action likely to hurt job creation -- which many see as the most important economic issue facing the country?

Lies says that now just isn't the best time to be cracking down on employers who may have already been forced to conduct layoffs or slow down production lines.

"To go out there right now and pick them apart for extension cords or pick them apart because a forklift truck tire's got a few more chunks of rubber out of them or somebody fumbles their question during an OSHA interview and [fine] them $7,000, $7,000, $7,000, I'm not sure that's in their best interest," says Lies.

But Zuckerman disagrees. He believe increased enforcement will help with job creation.

"For example, it's in the economic interest of employers to maintain a diverse workforce," says Zuckerman. "An employer who discriminates against employees on the basis of race or gender loses the competitive advantage of having diverse perspectives in its workforce."

He also says that employment law in the United States is rather lax compared to laws in the rest of the world.

"Especially in comparison to employment law in Europe, I don't think it's very burdensome or onerous for employers to comply with U.S. employment laws," he says.

Zuckerman -- who specializes in whistleblower cases -- says he hopes the increased funding for OSHA allows the agency to better investigate whistleblower claims.

"It has been my experience that OSHA performs inadequate investigations of whistleblower complaints, and indeed often rubber-stamps an employer's pre-textual justification for a retaliatory employment action" he says. "I'm hopeful that with more financial resources, OSHA will comply with the statutory mandate to enforce whistleblower-protection laws.


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With the budget reporting that half the workforce, 78 million Americans, lack an employer-based retirement option, the administration is proposing that employers that don't offer retirement options must automatically enroll employees in an IRA account. (Very small firms will be exempt, and employees are allowed to opt out.)

Dallas Salisbury, president and CEO of Employee Benefit Research Institute in Washington, says that, if enacted, it should only affect smaller firms, not HR departments at large companies, since almost all have retirement-savings plans in place already.

Saver's Credit

For families that earn less than $85,000 per year, the budget proposes a modification to the existing Saver's Credit to provide a 50-percent match on the retirement savings, up to $1,000.

"Studies indicate that automatic enrollment combined with a savings match significantly increases the savings-participation rate for low and middle-income workers," the budget states. "This proposal is expected to increase significantly both the number of Americans who save for retirement and the overall amount of amount of retirement wealth they accumulate."

Preparing the Future Workforce

The 2011 budget will also set aside $261 million to establish two "innovation funds" that will enhance workforce-readiness training for young people who are preparing to enter the workforce. Leveraged from the Workforce Investment Act, the funds "will support and test promising approaches to training, breaking down program silos, building evidence about effective practices and investing in what works," according to the budget.

That means an investment in summer and year-round work experiences for youngsters, as well as "learn and earn" programs such as internships and on-the-job training.

Donna Klein, executive chair and founder of Washington-based Corporate Voices for Working Families, says preparing younger workers is paramount in today's economy.

"Addressing these workforce-readiness gaps will be critical for our nation's long-term economic recovery," she says.

Expanding Paid Family Leave

In the ever-continuing struggle to help families find work/life balance, the budget sets aside money to allow more states to offer paid family leave. The Family and Medical Leave Act already allows workers to take unpaid time off to attend to family issues such as having a baby or caring for an ill family member -- but there are plenty of employees who can't afford to take it.

The budget establishes a $50 million State Paid Leave Fund that will provide competitive grants to help states cover the start-up costs associated with a paid-leave initiative.

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