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On Wednesday, the Senate confirmed Trump’s nominee, David Zatezalo, for a key employment-related position: Assistant Secretary of Labor for Mine Safety and Health Administration (MSHA). Mr. Zatezalo is the former Chief Executive Officer of the coal mining company, Rhino Resources.

Democratic Senators, including Joe Manchin from mining-heavy West Virginia, have publicly opposed Mr. Zatezalo’s confirmation, citing Rhino Resources’ MSHA violations under his leadership. Despite opposition, Mr. Zatezalo was confirmed to the position by a 52-46 vote along party lines, with all 52 Republican Senators voting to confirm Mr. Zatezalo. Mr. Zatezalo was approved by the Senate Committee on Health, Education, Labor and Pensions in October, also on party lines (12-11).

As the Assistant Secretary of Labor for Mine Safety and Health, Mr. Zatezalo will manage the MSHA, which regulates safety and health in all types of mines in the US. For more information on Mr. Zatezalo’s background and other key nominees refer to our previous post on his nomination.

Ten months after his election, President Trump has sent nominations to the Senate for a number of key positions, including four with significant importance in the employment area. David Zatezalo, the former Chief Executive Officer of coal mining company, Rhino Resources, is the nominee for the position of Assistant Secretary of Labor for Mine Safety and Health. In that role, he will manage the Mine Safety and Health Administration, which regulates safety and health in all types of mines in the US. He has extensive background as an underground coal miner and a coal executive, but no previous government experience. Mr. Zatezalo has criticized the Obama Administration’s approach to mine safety as being disconnected from working America. Since Rhino Resources had been cited by MSHA for violations, that history will likely be raised in Mr. Zatezelo’s confirmation hearings. Not surprisingly, the mining industry was supportive of the pick, expecting that it will herald an era of more cooperative and effective safety regulation, as contrasted with the punitive approach of the most recent administration, while labor interests have a more skeptical attitude. For more information, click here.

President Trump nominated Cheryl Stanton as Wage and Hour Administrator. If confirmed, she will head the Department of Labor’s Wage & Hour Division. This part of the DOL has responsibility for, among other things, overtime and minimum wage enforcement. A significant portion of this relates to the issue of whether workers are employees or independent contractors. Ms. Stanton is the Executive Director of the South Carolina Department of Employment and Workforce, and had worked in the George W. Bush White House as its liaison to the DOL, NLRB and EEOC. She practiced law with a management-side law firm before working for South Carolina.

A third DOL nominee is Katherine McGuire to serve as the DOL’s Assistant Secretary of Labor for Congressional and Intergovernmental Affairs. She is a veteran congressional aide, having worked for Sen. Mike Enzi and most recently for Rep. Randy Holtgren, and also spent several years in government relations with the Business Software Alliance. In her new role, she will support Secretary of Labor Acosta’s agenda in Congress and with state and local governments.

The fourth nomination may set a new tone for the federal government’s employment policy. The President has nominated the current Chief Human Resources and Strategy Officer at the Society for Human Resource Management (SHRM) to head the Office of Personnel Management. Jeff Tien Han Pon has experience with Booz Allen Hamilton as a consultant and has worked in the Federal Government as the Department of Energy’s Chief Human Capital Officer. Federal employment practices have come under increasing scrutiny as being outmoded, overly costly and impervious to improvements, so Mr. Pon’s position has the potential to be extremely important. He is the second nominee for the position. The first withdrew from consideration after the Senate received a letter of opposition from a coalition of federal employee unions. The new nominee is unlikely to be deterred by opposition from the unions that are benefitting from the current system.

While not in the employment field, the latest attack on arbitration as a sensible, fair and comparatively inexpensive and fast dispute resolution mechanism comes from the federal government. Until now, the federal level has been a primary supporter of arbitration, through the Federal Arbitration Act, which protects arbitration clauses in contracts affecting commerce from interference by states and local governments, and policies of agencies. Now, the Consumer Finance Protection Bureau has taken a provocative step hostile to the institution of arbitration. On Monday, July 10, it issued a Final Rule prohibiting banks and other financial institutions under the jurisdiction of the CFPB from using contracts that require individuals with disputes to arbitrate those disputes individually.

In addition, the Rule would require financial institutions to provide broad information about the number of arbitration cases filed, and the outcomes.

Characterizing arbitration provisions as “Contract Gotcha’s”, the CFPB relied upon a controversial study completed in 2015. The study reviewed available records of class actions, small claims actions and arbitration cases in 2010—2012, plus a survey. Many cases covered in the survey’s time period were not completed by the cut-off date, so their results were not included. There are substantial disagreements over the validity of the study and the “lessons” from the data it assembled. The CFPB, however, believes the study supports its conclusion that individual arbitration is unfair and abusive to consumers.

The CFPB’s effort to prevent financial institutions from prohibiting court-based class actions by consumers instead of arbitration is likely to draw a response from Congress. Employer and business groups have already urged Congress to begin the process of using the Congressional Review Act to overturn the Rule. The CRA process, if successful, would not only void this rule, but would also prevent the agency from issuing a similar rule in the future without authorization. In addition, the CFPB is currently subject to scrutiny from Congress and the Trump Administration due to its possibly unconstitutional independence from Congressional or Presidential oversight. See the Trump Administration’s Brief asserting unconstitutionality here. This new rulemaking effort may well result in a response from the Administration consisting of an attempt to remove the head of the CFPB, Richard Cordray (who is rumored to be considering a run for the office of Governor of Ohio in 2018 as a Democrat).

The new Rule from the CFPB may represent the first of many efforts to roll back the ability of businesses to manage their dispute resolution processes through arbitration, among other tools. It could, on the other hand, represent a last gasp of those who prefer the current system of class action litigation, where businesses and lawyers resolve cases with consumers receiving little or no real relief. https://cei.org/issues/class-action-fairness

After revisions in format and technology, we are proud to announce that the Labor & Employment Law Navigator Blog is back. The Navigator, written by experienced attorneys at Frantz Ward LLP, provides succinct information on new developments in the L&E space, cautionary tales for HR professionals, and helpful hints for navigating the increasingly hazardous shoals of the L&E world. Upcoming topics include overtime changes, medical marijuana, and OSHA reporting changes.

We have incorporated a more robust comment capacity to facilitate interactivity, so we look forward to hearing from you!

–Keith Ashmus

Ashmus-Keith-web

wellness-crop-600x338On May 16, 2016, the Equal Employment Opportunity Commission (“EEOC”) issued final regulations regarding employers’ use of wellness programs. Such programs seek to promote healthy behavior by employees, often through financial incentives such as reduced healthcare benefits premiums or reduced gym membership costs. The EEOC rules amend existing regulations under the Genetic Information Nondiscrimination Act of 2008 (“GINA”) and create new regulations under the Americans with Disabilities Act (“ADA”).

Click here to read this Client Alert.

Based upon information received from a number of sources, it now appears that the Department of Labor’s controversial changes to the rules governing the white collar exemptions under the Fair Labor Standards Act will be finalized and published in the coming weeks – potentially as early as next week. Once published, it is expected that employers will have only 60 days before the new rules take effect.

Click here to read this Client Alert.

In a ruling on a motion to dismiss, U.S. District Judge Arthur Spiegel found that the Cincinnati Public Schools Could be forced to ignore a state law (H.B. 190, passed in 2007) that prohibited employment by schools of convicted felons and others convicted of drug offenses, no matter how long ago the offenses occurred. Cincinnati Board of Education Case 04-24-2013.pdf . One of the plaintiffs had been convicted of felonious assault and the other of acting as a go-between for the sale of a small amount of marijuana. Both were good employees, according to the school system, and would have been retained except for the state law.  There was no claim of intentional discrimination.  The district had to terminate ten employees under H.B. 190, and nine of them were African-American.

In these circumstances, Judge Spiegel ruled that the Board had no duty to follow H.B. 190, since “Title VII trumps state law.” He rejected the Board’s argument that state laws may only be disregarded if they “purport” to discriminate, as well as the contention that adverse impact had to be based on statewide statistics, not just on what had happened in one city. (In part, the reason for the statistical disparity in Cincinnati was that Cincinnati, unlike many other school districts, had been willing to hire minorities with criminal records.)

Because the ruling is on a motion to dismiss, it does not conclusively establish that the Public Schools discriminated, or that the plaintiffs are entitled to relief.  They still need to establish valid statistical evidence of a disparate impact and a lack of business necessity.  The outcome of those issues is fairly clearly foretold in Judge Spiegel’s order.  Employers in states where the legislators have passed laws limiting employment opportinities as collateral sanctions for criminal conduct will now have to worry whether they will be caught between state law and Title VII.  Whatever the outcome of a dispute over this issue, the employer will lose a great deal of time and money getting to any definite outcome.

According to this article from Politico, the cost of operating the health insurance exchanges, including the costs of providing subsidies to lower-income purchasers of coverage, will increase dramatically over prior estimates.  In part, this is because of the failure of some states to embrace the expansion of Medicaid.  The cost of Medicaid coverage is $3000 less than the cost of providing subsidies for private insurance on the exchanges, according to current estimates. If insurers then raise premium rates beyond current projections, the difference will grow, and the cost of running exchanges will accelerate. By 2021, the subsidies are now estimated to consume $606 Billion.

Each of the serious immigration reform proposals now being discussed in Washington relies to a great extent on the federal E-Verify system.  The notion is that employers will be required to go onto the system, enter personal information about prospective hires and find out from the system whether the employee is entitled to work in the U.S. or not.  Employers who do not use the system and hire an individual who is not legally entitled to U.S. employment would face fines and jail time. The employer penalties would reduce the incentive for employers to employ illegals, thereby reducing the incentive for illegal immigration. That all sounds simple and logical, but there are problems.

One problem is that E-Verify is not reliable enough to place prospective employees’ livelihoods at stake or to jeopardize the very existence of small businesses.  While the “official” error rate is 0.7%, in a recent informal test, twenty U.S. citizens checked themselves on the system and two came up as not eligible (the response is called a “Temporary Non-Confirmation” or TNC).  That is a 10% Type 1 error rate.  (A Type 1 error is where a person in the “good” category is erroneously categorized as in the “bad” category.  A Type 2 error is where a person in the “bad” category is treated as being in the “good” category.) There would be additional errors of Type 2.  While a 10% error rate may not sound like much, that equates to a million people out of every ten million perfectly legal job applicants who would be excluded from further consideration for a job, or would be placed in limbo while the E-Verify system performs further checks.  Even the 0.7% error rate would exclude over half a million legal job applicants a year.  This is simply unacceptable.

That brings up the second big issue–correcting errors.  It now takes an average of 100 days to resolve database problems, which often result from marriage-related name changes or misspellings on federal forms.  If E-Verify becomes mandatory, the task of resolving millions of problems is likely to drastically increase the time needed to correct system errors.  Employers and employees alike will be effectively left in limbo during this period.  Even 100 days (more than three full months) is too long.

Third, these problems with E-Verify, coupled with the draconian fines and penalties contained in some of the proposals (Title X of the White House proposal has fines of up to $75,000 and TEN YEARS in prison!) will discourage employers from hiring in the U.S. except as a last resort.  Robots do not require employment verifications, and off shore operations do not need E-Verify checks. 

These problems are not insoluble.  Phased implementation of E-Verify requirements, based upon independent performance metrics of the system’s accuracy and time to resolve discrepancies, would be one measure.  Adequate “safe-harbor” provisions for employers who use E-Verify would help.  Resonable allowances for employers and employees to be productive while E-Verify TNC’s are resolved would avoid unnecessary hardship. The essential requirement for any of these measures to be adopted, though, is for Congress and the White House to recognize the reality of the current shortcomings of E-Verify.  Assuming, as they are apparently doing, that it is some magic formula for solving all the issues of employee identity is folly and will lead to serious economic consequences.

Individuals can click here to access the E-Verify system in order to perform a self-check.

Much attention has been given to the looming “Fiscal Cliff” and the perils of across the board sequestration.  Most commentators feel that the fiscal cliff will be avoided in some way.  The possibility of new regulations from the second-term Obama Administration that will impact small business success, profitability and growth has not been sufficiently covered.  I wrote an opinion piece for the Washington Post that was published earlier today on that issue.