Puzder Ethics Plan Permits a Pro-Restaurant Labor Department

From labor disputes cases to labor and employment publications, for your research, you’ll find solutions on Bloomberg Law®. Protect your clients by developing strategies based on Litigation...

By Ben Penn

Andrew Puzder cleared his first ethics hurdle, but perceived conflicts about the Labor Department’s potentially cozy relationship with the restaurant industry are still intact.

The labor secretary nominee remains chief executive officer of CKE Restaurants Inc.—parent company of the Hardee’s and Carl’s Jr. brands—until confirmed to President Donald Trump’s Cabinet. The Office of Government Ethics released a report Feb. 8 in which Puzder details how he will seek to avoid potential conflicts of interest, including by recusing himself from any matter in which his company is a party (see related story).

The OGE isn’t requiring Puzder to untangle himself from DOL investigations at his conglomerate’s some 2,500 franchise-owned stores, according to Bloomberg BNA’s review of the documents. If confirmed, he’d also be able to push policies and regulations that benefit restaurants, provided there’s no unique effect on CKE.

“The question is how beholden is he going to be to fast-food businesses,” Richard Painter, who was President George W. Bush’s chief ethics attorney, told Bloomberg BNA today Feb. 9. “This is a conflict that is to be addressed not through the legal system but through the political system.”

Puzder is likely to face a barrage of questions from lawmakers about how the fast-food industry might gain from his confirmation. This could include inquiries as to how he would direct the agency to regulate and enforce overtime and minimum wage laws. The Senate Health, Education, Labor and Pensions Committee is set to consider Puzder’s nomination in a Feb. 16 hearing.

Among low-wage industries, fast-food restaurants received perhaps the most DOL scrutiny of all over the past eight years. The department’s Wage and Hour Division conducted nearly 4,000 investigations at the 20 largest fast-food brands combined, leading to discovery of more than 68,000 Fair Labor Standards Act violations and some $14 million in back wages recovered for about 57,000 employees. Hardee’s and Carl’s Jr. stores accounted for only about 60 of those cases, and the only violations were at franchised units, according to a Bloomberg BNA analysis of the data.

“Optics are important and Andy could always voluntarily agree to recuse himself from any matter before the DOL in which a franchisee is a party,” George Thompson, a Puzder spokesman, told Bloomberg BNA in a Feb. 8 e-mail.

Deputy Secretary Could Take Reins

Under Puzder’s plan, CKE would purchase his ownership stake in CKE, valued at between $10 million and $50 million. He also agreed to recuse himself from any government involvement in CKE or any other business that owns at least 50 percent or greater interest in CKE, for his entire time in office.

During his tenure at the DOL, the agency could receive Hardee’s and Carl’s Jr. employee complaints of alleged minimum wage or occupational safety violations. The DOL’s career ethics officials, solicitor’s office lawyers and the secretary’s aides can develop a process to ensure he meets the OGE’s recusal obligations.

“Any matters that would otherwise come to the Secretary that he is recused from will be handled by a different Labor official such as the Deputy Secretary,” Leslie Kiernan, a deputy White House counsel who handled nominee ethics issues for President Barack Obama, told Bloomberg BNA via e-mail Feb. 9.

“I assume that the Department of Labor ethics officials in consultation with OGE determined that these recusals were workable, likely because the matters don’t typically reach the Secretary or because the duties could reasonably be performed by others at Labor,” Kiernan said. She now represents individuals who face Senate and House ethics committee investigations as a partner with Akin Gump Strauss Hauer & Feld LLP in Washington.

What’s in Investment Funds?

As the ethics paperwork circulates through Washington, questions are being raised about the unidentified underlying assets in Puzder’s investment funds. The ethics office is allowing Puzder up to 180 days after confirmation to divest assets in those funds. The letter states that a pre-existing confidentiality agreement prevents Puzder from naming the underlying assets.

“During my initial ethics briefing ... I will work with you to develop an effective recusal mechanism for particular matters affecting any of these investment funds or any underlying asset,” Puzder wrote in his letter to a DOL ethics official.

“If any of those private equity funds are loaded up with fast-food company stocks,” then Puzder could be exposed to criminal action, Painter, the ex-Bush attorney, said.

Painter, a University of Minnesota law professor, recently sued the president, alleging Trump’s plan to avoid conflicts of interest is unconstitutional.

Until it’s clear who at the DOL will have access to the underlying assets information, Puzder may find himself in violation of the statute governing executive branch financial conflicts of interest, said Kathleen Clark, a government ethics professor at Washington University Law School in St. Louis.

“Who will have access to that confidential information? Will the people who are controlling his workflow and the flow of paper that crosses his desk and his screen?” Clark told Bloomberg BNA Feb. 9. “Will they know that we can’t send this his way because he has to recuse? I can’t tell from this letter.”

Thompson said Puzder will comply with a legal recusal method.

“Keep in mind that determining when to recuse is entirely the ethics officer’s call and not up to Andy, but it is Andy’s obligation to raise even perceived conflicts to the ethics officer for a ruling,” Thompson said. “Andy is committed to ensuring that he fully satisfies the legal standard.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editors responsible for this story: Peggy Aulino at maulino@bna.com; Terence Hyland at thyland@bna.com; Christopher Opfer at copfer@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Labor & Employment on Bloomberg Law