HR Implications of a Perez Confirmation

While the battle over the appointment of Thomas Perez as the next Secretary of Labor may be shaping up along traditional political lines, experts agree the civil-rights lawyer's confirmation may have a significant impact on HR.

Wednesday, April 10, 2013
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When President Obama introduced Thomas Perez as his nomination for labor secretary on March 18, 2013, it sent a ripple of concern through the employer community. Already dealing with increased regulation and scrutiny under Hilda Solis' tenure, employers are concerned about what additional regulations and oversight might be introduced under the potential leadership of Perez.

Michael Lotito, an attorney and co-chair of San Francisco-based Littler's Workplace Policy Institute, says there are two fundamental philosophies that an administration embraces when it comes to labor. "One is 'we're going to do everything we can to help employers comply' which means putting resources indo education, coaching and giving people resources to know what it is they're supposed to do," he says. The other is enforcement, which takes the approach that the way to get employers to pay attention is through aggressive enforcement of the statutes with equally aggressive judgments.

"This administration has really always embraced the enforcement philosophy as opposed to the compliance philosophy," he says, adding that the appointment of Perez is supportive of that philosophy.

"I think that, if Mr. Perez is ultimately confirmed, HR professionals should expect that there's going to be a continued focus on compliance enforcement efforts by the department," says Lotito. "I don't think there's going to be any moderating of what we've seen over the last several years."

While labor groups are applauding the appointment, groups more firmly on the side of the employer -- such as the U.S. Chamber of Commerce and the National Federation of Independent Businesses -- are taking a decidedly different stance, and Republicans are expected to aggressively oppose the appointment.

Despite the polarization, John Meyers, a partner with Barnes & Thornburg LLP in Atlanta, says he "can't imagine there's a way to really derail his appointment, because it's a presidential appointment." But, he adds, it's "too early" to tell. And certainly, the backlash in response to the appointment has already begun, with opponents pointing to Perez' background as an advocate and activist for immigrants and his involvement in a controversial St. Paul housing discrimination case. 

Whatever the outcome, says Meyers, "It's going to be interesting."

The expectation is that, under Perez, the ramped-up enforcement of regulations seen under Hilda Solis' leadership is likely to become even more aggressive, including Occupational Safety and Health Administration's injury and illness-prevention program, the DOL's "Persuader" rules, the Right to Know rules under the Fair Labor Standards Act, and new regulations related to immigration, just to name a few.

"There are some significant changes ahead at the DOL and our fear is that he's the right guy to try to push them through," he says. "The Secretary of Labor has so much potential impact on the workplace."   

Wage-and-hour issues represent another area of focus likely to impact HR professionals under Perez' leadership, says Keith Gutstein, a labor and employment partner at Kaufman Dolowich Voluck & Gonzo LLP in Woodbury, N.Y. This is, he says, "really the heart of how the DOL touches companies on a daily basis." Under Solis, he says, the scope of investigations and audits on overtime and minimum wage grew tremendously. "I believe that if Mr. Perez becomes the new Secretary of Labor those efforts are going to be continued, if not strengthened.

"Any hope that the new secretary would focus more on outreach and less on enforcement should be dwindling."

Not only are regulations likely to become more stringent, adds Meyers, but so are the related penalties. This means increased risk for organizations to ensure they are in compliance, or risk penalties that may rise into the five- or six-figures range.

Gutstein agrees, saying: "Essentially it's a revenue machine for the DOL -- not just for helping employees who may be owed money, get money, but in recent years the DOL has started to insist on CMPs -- civil money penalties -- and that money goes to the government. I believe with Secretary Perez,that is going to continue."

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HR professionals have a significant opportunity to step up to the plate here in terms of educating management and taking steps to help protect their organizations by ensuring they are both aware of, and compliant with, the regulations.

"I would make sure that your record-keeping requirements and timekeeping procedures are crisp and refined enough to withstand any type of DOL audit," says Gutstein. This relates both to the payment of overtime and to the classification -- or misclassification -- of independent contractors.

This, of course, is not a simple task and, with rules and regulations changing regularly and varying by state and jurisdictions, thereby significantly impacting employers operating in multiple locations, the administrative burden can be onerous.

Not all HR professionals will be up to the challenge and, as Lotito points out not all organizations have HR professionals on staff, particularly smaller organizations. "We think it's going to have much more impact on a smaller employer," he says.

"Any effort in any of these areas will be a headache for companies," says Meyers, but "the legal and HR consultant community will be prepared to help." HR professionals can also turn to advocacy groups like SHRM, he adds.

"If these rules come to pass, [HR professionals] need to figure out who, in the consulting and legal community, they can partner with," he says, "so that their organizations are ahead of the curve, understand what is required and be prepared to take steps to comply with these rules so that they're not caught unaware, fined, sued and become front-page PR disaster news."

Lotito recommends all HR professionals take steps to reach out to their representatives -- and trade organizations -- to make sure they're well educated on the implications of these regulations.

For now, adds Meyers, the employer community should be "pushing Perez on where he sees things going and where he's heading."

"The HR professional is always saying 'I want a seat at the table'," says Lotito. "Here's an opportunity for the HR professional to barge in on the meeting, sit down at the table and tell the other people that are there things that they've never even heard of in order to demonstrate the underlying value of HR as a profit center, and not a cost center."

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