Labor Regulation Critics Focus on Compliance Costs

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By Chris Opfer

Oct. 4 — Opponents of the Obama administration’s labor regulations are focusing on what they say are the new rules’ exorbitant economic costs in a last-minute push to slow the rules down before the end of the year.

Regulations, including the new overtime rule, beefed up workplace safety obligations and expanded disclosure requirements for federal contractors, but they will cost the economy $80 billion and 150,000 jobs over the next 10 years, the National Association of Manufacturers said in a recent report. The organization said higher compliance costs will force employers to trim jobs and hours and increase the prices of goods and services.

“Those dollars spent on compliance are not being spent on hiring new employees or making capital investments that businesses could be making,” Amanda Wood, NAM’s director of labor and employment policy, told Bloomberg BNA Oct. 4.

NAM, along with other business groups and Republican lawmakers are looking for ways to stop or slow down a wide range of regulations President Barack Obama has issued in his last year in the White House.

The House recently passed a bill to delay the overtime rule by six months, and NAM is part of a variety of groups challenging the new regulation in a federal lawsuit.

Critics in Congress and the business community say the Labor Department and other agencies are underestimating the costs of the new obligations. “The facts we’re getting from the private sector are wholly at odds with what the Labor Department made up,” Rep. Bradley Byrne (R-Ala.) said Sept. 27 during a Rules Committee hearing on the measure to delay the new overtime requirements.

NAM estimates are based on figures from the Labor Department, the White House’s Acquisition Regulatory Council, the U.S. Chamber of Commerce and the National Federation of Independent Businesses, among other sources. The Chamber and the NFIB are among the groups also suing to block the overtime rule.

Overtime Paperwork

The overtime rule (RIN:1235-AA11) is expected to make some 4 million workers newly eligible for time-and-a-half pay for all hours worked beyond 40 per week when it takes effect Dec. 1. The rule more than doubles the salary threshold—up to about $47,500—under which workers are automatically entitled to overtime pay.

Just about the only figure that the Labor Department and NAM agree on is how much more money employers will have to pay covered workers as a result of the rule. The DOL said when it rolled out a final version of the rule in May that the new requirements would put an extra $1.2 billion in workers’ pockets.

Ross Eisenbrey, vice president of the Economic Policy Institute, told Bloomberg BNA Oct. 4 that bigger paychecks mean more money for workers to pump back into the economy. “We have society that is being hurt by inequality and this is a small step of remedying that,” Eisenbrey said.

The EPI, which receives about a quarter of its funding from labor unions, is a think tank that says it is committed to including low-and middle-income workers’ needs in policy discussions.

Where NAM and the Labor Department disagree is on other costs related to complying with the rule, including how much paperwork employers will have to do to keep up with the new requirements and what it will cost them.

The DOL said employers can expect to spend a total of about $300 million a year in expenses incurred as they familiarize themselves with the rules, determine whether workers satisfy exemptions to the rule and more closely monitor employee hours. NAM, on the other hand, says the department is overlooking anywhere from $952 million and $2.4 billion in additional paperwork costs.

Fair Pay Means More Tracking

NAM also is among a number of business groups that are concerned about the cost of complying with the Fair Pay and Safe Workplaces executive order (E.O. 13,673) slated to take effect in part in this month. The directive, which is being implemented by the Labor Department and the FAR Council, requires certain contractors to disclose violations of 14 federal labor and employment laws and state-law counterparts to compete for government projects.

Critics say the new obligations give government agencies the power to “blacklist” contractors based on unproved allegations and subjective interpretations of settlements and non-final administrative rulings. NAM predicted that contractors will also have to create expensive systems to track their compliance with all of the covered laws and risk increased litigation costs because they will no longer be able to rely on mandatory arbitration for settling worker disputes.

The organization anticipates total compliance costs in the neighborhood of $3.2 billion over the next decade.

“I think it’s not just a reporting requirement that we're talking about,” Wood told Bloomberg BNA. “Especially with some of our larger members whose contracting business units don’t track what’s going on with other business units with the companies.”

Eisenbrey told Bloomberg BNA that those arguments should be “troubling” to anyone who cares about workers’ rights.

“They’re saying this is going to be costly because we have to keep track of all our violations and we won’t be able to hide behind forced arbitration provisions,” Eisenbrey said. “My answer is to stop violating the law.”

A conference committee is working on ironing out differences between separate National Defense Authorization Act bills ( H.R. 4909, S. 2943) passed in the House and Senate that would exempt defense contractors from the order. The Defense Department awards the majority of government contracts each year.

Employer groups are also expected to consider challenging the rule in court.

To contact the reporter on this story: Chris Opfer in Washington at copfer@bna.com

To contact the editor responsible for this story: Peggy Aulino at maulino@bna.com

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