Change Agenda Means Host of Daunting New HR Challenges

Employee Free Choice Act Heads Up List That Includes Executive Compensation, Health Care, Workplace Leave Entitlements, Discrimination Litigation, Retirement Security

The significant change in the political composition of the Senate virtually guarantees major battles over dramatic and pervasive change in HR policy during the Obama administration.  In an article in today's Wall Street Journal about the impending fight over the Employee Free Choice Act, for example, a union consultant describes it as becoming "political World War III" between organized labor and the business community.  At this point, we expect President-elect Obama and the new Congress to respond to the economic climate with an aggressive “first hundred days” approach.  A major component of this may be the bundling of several bills of concern to our member companies into a “middle class economic relief” package—led by the Employee Free Choice Act (EFCA)—that Congress enacts en masse. 

Regardless of how it is done, we believe that, over the next four years, virtually every area on the Association agenda will be heavily impacted.

• Union organizing – As this is being written, it is still not clear what the final Senate numbers will be, but it is likely to be somewhere between 56 and 60 Democrats.  Because 60 votes will be needed to shut off a filibuster, defeat of the legislation is achievable.  However, since organized labor also sees this barrier, it is even more likely that the highly controversial card check provision will be dropped.  Thus, it is incumbent upon us to make it clear that the bill involves considerably more. This would include requiring an arbitration panel, whose members are likely to have little to no understanding of the employer's business, to set the terms of the first labor contract. Meanwhile, the card check process not only denies a private ballot to the workers free of coercion, but it also deprives them of a full airing of both sides of the unionization question, as usually occurs in the typical six-week election campaign.  HR Policy will be working very closely with the rest of the business community and our members to aggressively oppose the measure, while educating the public that EFCA involves far more than card checks.  To help our members engage in the coming battle, we are launching a new EFCA page on our website at www.HRPolicy.org/EFCA.
  

• Health Care Reform – President-elect Barack Obama and key Senate leaders are making health care reform a top priority. Employers share the view that our health care system needs to be fixed, but are watching carefully to see how the Senator will achieve and pay for reform. The key tenets of Obama’s plan are an employer “pay or play” mandate, requiring all children to be covered by public or private health insurance, creation of a new national health plan for workers without access to employer-provided coverage, and creation of a private health insurance “exchange” for workers in small firms, similar to that established in Massachusetts two years ago. The proposal also includes several features that employers support – including national standards, underwriting reform, expansion of health information technology and transparency.  But both the White House and Congress will have a difficult time finding money in the federal budget to finance health reform. The Senator’s campaign claims that much of his reform proposal will be financed by reducing current health care costs by $2,500 per family per year, although some are skeptical about how costs would be reduced.  Therefore, it is critical that employers fully engage in talks not only to push for changing what we pay for in our health care system, but also to ensure that employers do not become the primary financing source for expanded entitlements in an underfunded program. 

• Executive Compensation – The outrage over Wall Street's executive compensation practices that surfaced during the debate over the financial services bailout legislation has continued to heat up and will fuel legislative activity in 2009.  So-called “say on pay” legislation is expected to be a priority in the House early next year, and could be part of the first 100 days’ package.  If successful, all publicly held companies would be required to hold an annual shareholder vote on pay, despite significant opposition by the largest shareholders and the fact that it would result in less company-specific pay arrangements.  Other likely issues receiving attention will be stronger clawback requirements applicable to a broader range of executives, new limitations on nonqualified deferred compensation, and excise tax penalties for large severance agreements.  Some of these could be implemented incrementally, with mandates initially falling, for example, on companies with federal contracts.  Legislative and regulatory oversight investigations will increase, highlighting so-called bad actors, and often using confidential internal documents.

• Discrimination Litigation – During the campaign, Lilly Ledbetter became a national cause célèbre in a successful public relations effort aimed at convincing the public that there are no protections against unequal pay for women (despite Title VII and the Equal Pay Act).  Though court documents make it clear that she knew the facts in her case years before her lawsuit was brought, her case is being used to justify suspending the normal statute of limitations rules and triggering a new period with each pay or benefit check.  The Ledbetter Fair Pay Act is expected to be voted on during the first 100 days of the new Congress and will set the stage for later bills creating other advantages for plaintiffs in discrimination suits.

• Workplace Leave Entitlements – Sixteen years after the enactment of the FMLA, employers are still struggling with its complicated administrative requirements.  Nevertheless, the Democratic Congress will seek to establish its “family-friendly” credentials with new leave requirements that may compound these burdens.  The long-term goal is to ensure paid FMLA leave but, more immediately, an effort will be launched to guarantee employees seven days of paid sick leave under the Healthy Families Act, which will also lock into place forever current leave benefit programs that provide more.  In a fragile economy, this will pose a test for the new administration and Congress as to how far it is willing to go in imposing new costs on employers, including those who already have generous paid sick leave benefits.

• Retirement Security – The impact of deteriorating financial markets on 401(k) balances has already created calls in Congress for a new retirement security system that is guaranteed by the federal government, with minimal reliance on those markets.  The potential impact of such a proposal on Wall Street has yet to be assessed but it is clear that regardless, dramatic changes will be pursued.  Meanwhile, the market situation is having a similar impact on the funding status of many employers’ defined benefit plans, threatening their ability to comply with minimum funding requirements established two years ago by the Pension Protection Act.  HR Policy has already joined the American Benefits Council and others in the business community in seeking relief from these requirements, hopefully in the upcoming lame duck session of the 110th Congress.

• In the Wings: Debarment, Ergonomics, WARN, New Executive Orders and Changes in Regulatory Programs – Because President-Elect Obama’s campaign was conducted with broad strokes, the agenda we have just described does not include the inevitable regulatory items that his administration and the people he will place in key regulatory posts may pursue.  For starters, there was considerable unfinished business from the Clinton administration that labor would likely still push for, including those mentioned in the headline.  However, others may also soon emerge, including potential executive orders imposing new requirements and restrictions on federal contractors—a tool often used by President Bush to pursue his own agenda.  Some of these may emerge in the opening weeks and months of the administration, but are more likely to come after the initial flurry of legislative activity has commenced.

Thus, it is clear that HR executives and their teams will face a different HR policy world that is likely to have a more direct—and potentially disruptive—impact on their operations than they have ever seen in their careers. As an association, it is imperative that we work very closely with our member companies and the rest of the Washington business community in ensuring the early adaptation to this new world. We ask that you and those within your company pledge to work with us in dealing with these new pressures.