Workplace Regulation: FLSA Expansion, Pay Data, Blacklisting Executive Order and LGBT Affirmative Action Tee Up Obama Administration Finale

August 26, 2014

A summer of intense activity by the Obama administration regarding workplace regulation lay the groundwork for a number of critical regulatory developments this fall and the remaining two years of the administration.

HR Policy Presses DOL on FLSA Modernization  Sometime before the end of the year, the Department of Labor will propose regulations in response to President Obama's directive to "update and modernize" the Fair Labor Standards Act overtime rules.  This month, HR Policy sent a letter to Secretary Perez urging him to address the disconnect between the 1938 law and the 21st century digital workplace by undertaking a "thorough re-examination of every aspect of those regulations, drawing upon the experience of the broad range of stakeholders affected by them."  We pressed him not to view the directive as simply expanding the coverage of the overtime requirements, which would only exacerbate the problems employers and their employees have in complying with the law's complicated and vague strictures and would not necessarily benefit affected employees.  Moreover, it would simply add more fuel to the litigation explosion that has increased the number of FLSA lawsuits by 514 percent since 1992.  Without providing an exhaustive list, we directed him to certain specific areas that need to be addressed, including:

  • Making it easier for employers to provide flexible scheduling and telecommuting by clarifying "hours worked" when digital communications devices are used away from the workplace;

  • Providing greater clarity in the duties tests used to determine whether administrative and professional employees are exempt, recognizing the dramatic changes in occupations and workplace responsibilities that have taken place since those duties were established in the 1950s; and

  • Enabling employers to correct potential misclassifications of employees' FLSA exempt/nonexempt status without triggering class action lawsuits.
Shaping of Blacklisting Executive Order to Begin Promptly  This fall, the Department of Labor, the Federal Acquisition Regulatory Council and the various regulatory agencies will begin to shape the Fair Pay and Safe Workplaces (a.k.a. "Blacklisting") executive order (EO 13673), fashioning regulations that will define how the order is implemented.  The Department of Labor will play the dominant role in a number of areas, defining the role of the "Labor Compliance Advisors" in each federal agency, including how they will work with federal contracting officers in determining whether reported violations will impact a particular company's ability to obtain contracts.  The Department will also write regulations establishing standards for whether reported violations are "serious, repeated, willful or pervasive."  The Department will hold listening sessions with stakeholders this fall, and proposed regulations are likely to be issued early next year if the administration is to meet its goal of implementing the executive order with regard to new contracts in 2016.

OFCCP Equal Pay Report  Earlier this year, congressional inaction on the Paycheck Fairness Act led President Obama on Equal Pay Day to direct the Department of Labor to require federal contractors to report compensation data.  DOL published its proposed rule in August, requiring federal contractors to file an annual Equal Pay Report, with comments due November 6th.  The new report will collect from each contractor establishment and headquarters location the total number of employees, total W-2 earnings; and total hours worked for each EEO-1 job category by race, gender and ethnicity.  The OFCCP will then use the data to direct its enforcement efforts and establish industry standards against which companies' data will be compared.  On Equal Pay Day, the President also signed Executive Order 13665, which prohibits contractors from retaliating against employees who discuss or disclose their compensation to one another, something that is already prohibited by the National Labor Relations Act with regard to most employees.  DOL has until September 8th to propose regulations, with comments likely due in December.

LGBT Executive Order Requires Affirmative Action  In view of the failure of Congress to enact the Employment Non-Discrimination Act (ENDA), it came as no surprise when President Obama this summer signed Executive Order 13672, banning employment discrimination by federal contractors on the basis of sexual orientation and gender identity, which most large companies have already prohibited.  However, it was a surprise that the executive order also requires affirmative action, since ENDA specifically excludes data collection, preferential treatment and quotas.  The Department of Labor is required to propose regulations by the end of October which will establish how federal contractors will implement the affirmative action requirements and whether it will include inquiries of applicants and employees, collection of data and the establishment of goals.

Attack on Arbitration  Executive Order 13673 also prohibits employers with federal contracts of $1 million or more from requiring employees working on those contracts to enter into pre-dispute arbitration agreements for Title VII complaints or torts related to sexual assault or harassment.  While the prohibition does not apply to employees who are covered by a separate collective bargaining agreement or to contracts for commercial items or commercially available "off-the-shelf" items, it will likely direct scores of employees to the plaintiffs' bar to litigate covered claims in potentially large class action cases.