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Puzder nomination for DOL Secretary serves up concerns, signals new direction

By Pamela Wolf, J.D.

President-elect Donald Trump has picked Andrew Puzder for the job of Department of Labor Secretary, according to numerous media reports. As the comments have been steadily rolling in, there is a conspicuous absence of forecasts that would include anything less than a near about-face in policy should the CEO of CKE Restaurants, which operates Hardee’s and Carl’s Jr., be confirmed to head the DOL. More than one commenter likened the nomination to a powerful punch—in the nose or the gut. On the other hand, Puzder does come with business experience that may portend a more pragmatic, realistic approach, according to some.

A Puzder “punch.” “For those who expected the President-Elect to show some degree of balance and restraint with respect to federal labor policy, the appointment of Mr. Puzder to head the DOL is a knockout punch in the nose,” said labor and employment attorney John Alan Doran, a partner at the law firm Sherman & Howard. “Mr. Puzder, himself an attorney, has been an outspoken voice against raising the minimum wage, the Affordable Care Act, and the DOL’s currently-enjoined overtime regulations. He is a strong critic of government regulation, preferring market solutions to government intervention.”

“By federal statute, the purpose of the Labor Department is ‘to foster, promote, and develop the welfare of the wage earners of the United States, to improve their working conditions, and to advance their opportunities for profitable employment,’ observed Christine Owens, Executive Director, National Employment Law Project (NELP). “The person holding the position of labor secretary has tremendous responsibility to improve the lives of America’s workers, requiring its occupant to push for and implement policies that will continue to turn the tide against decades of declining wages and rising income inequality. In light of that mission, Owens said the nomination of Puzder “is a sucker-punch in the gut to all the men and women of good faith who believe in the mission of the U.S. Labor Department.”

“Reduce the regulatory burdens.” Jackson Lewis management-side wage and hour lawyer Paul DeCamp disagreed with Owen’s characterization of the DOL’s mission, though, saying that NELP is wrong in its assertion that the DOL has any legitimate role in reducing income inequality. “The Department’s charter is to enforce a portfolio of federal laws, and nothing in Andy Puzder’s background suggests that he will do otherwise,” DeCamp said. “There is a saying at the Department that the true minimum wage is zero, as a worker is worse off, not better off, if his or her job is sent overseas, replaced by automation, or simply lost to business closure. A big part of securing better outcomes, and incomes, for workers includes reducing the regulatory burdens on businesses so that they can deploy more resources to growing operations, increasing employment, and raising wages. Mr. Puzder has been responsible for substantial job creation in the private sector, and he will continue his service on behalf of the American workforce as Secretary of Labor.”

Worker protections. Many have expressed concerns about Puzder’s views on the minimum wage and other worker protections. Congressman Bobby Scott (D-Va.), Ranking Member on the House Committee on Education and the Workforce warned: “President-elect Trump’s nomination of Andrew Puzder for Labor Secretary should signal concern for workers and employers who support fair pay, worker protections, and equal opportunity on the job. As the CEO of CKE Restaurants, Mr. Puzder has opposed raising the minimum wage or strengthening overtime protections. Mr. Puzder’s record indicates that he will not support proposals that strengthen worker health and safety protections.”

“The labor secretary serves as the chief advocate and protector of our nation’s workforce,” observed NELP’s Owens. “But based on Mr. Puzder’s own comments, it’s hard to think of anyone less suited for the job of lifting up America’s forgotten workers—as Trump had campaigned on—than Puzder: He opposes raising the minimum wage, threatens to replace restaurant workers with machines, has consistently opposed long-standing rules that protect workers and law-abiding employers, and demonstrated that he prizes corporate welfare and profits over workers’ well-being.

Kiss overtime regulations goodbye? Perhaps the largest looming question with the upcoming transition at the White House has been whether the Labor Department’s new overtime regulation will survive. Many predict they will not, citing Puzder’s position on wages. “This is a guy who trashed President Obama’s action lifting the overtime pay threshold for millions of hard-working Americans, including fast-food chain managers, whose salaries fall just above the overtime threshold but were still expected to put in 60 plus hours per week without any added pay,” said Americans United for Change President Brad Woodhouse. “To those underpaid and overworked salaried managers, Puzder said they should instead feel ‘an increased sense of ownership.’”

More about Puzder’s comments … NELP has tweeted some of Puzder’s comments that seem to be at cross-purposes with those of the Department of Labor:

  • “Restaurants will need to reduce labor costs by eliminating positions, reducing employee hours, accelerating automation, and slowing expansion.”
  • “Machines are always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall, or an age, sex, or race discrimination case.”

These statements, however, may reflect more broadly on issues that businesses confront in the current climate. “These tweets are obviously in reference to the pressures that businesses are under due to calls for higher and higher minimum wages, as well as the numerous other regulatory initiatives that various federal agencies have undertaken during the past eight years,” DeCamp observed. “At some point, the legal burdens associated with employment make it more cost-effective for businesses to pursue alternatives to human workers. That is an undeniable reality, and an issue for which advocates for low-skilled workers have no particularly good or realistic answer.”

“Simply telling employers to pay their workers more and to accept that cost in the form of diminished or negative profits is not a recipe for sound public policy in the long run,” DeCamp continued. “Clearly, neither those advocates nor Mr. Puzder would want to see human workers replaced by robots or computers. His comments reflect frustration by the business community about being driven by misguided labor policies in a direction that forces them to consider those types of options. It is a call to change the direction of the law in order to make continuing to employ people a viable business option, not to stop employing people.”

Record of violations? Among other concerns, NELP has pointed to the record of wage-hour violations at the restaurants headed up by Puzder. According to NELP, the Labor Department has conducted 4,000 investigations into the 20 largest fast-food brands, finding that more than half of Carl’s Jr. and Hardee’s restaurants had at least one wage-and-hour violation. NELP also referenced a spate of collective overtime actions filed by managerial employees.

100% compliance unrealistic. DeCamp responded to NELP’s concerns. “I have been practicing in this area for a long time, and I have come to the conclusion that it is literally impossible for a business of any size to be 100 percent compliant with every aspect of wage and hour law to the point where no worker can even plausibly allege a violation,” he said. “There are so many gray areas, and so many opportunities for ‘he said, she said’ disputes of fact, that some measure of legal risk inheres in any working relationship.”

“The restaurant industry has a history of significant levels of wage and hour violations, as do many other industries,” DeCamp continued. “Very few of those violations, however, are willful. Most restaurants are relatively small businesses that do not have sophisticated in-house legal and human resources departments. Businesses operating in that space have virtually no shot at achieving full compliance with these laws.”

Putting it all into context, DeCamp pointed out that the DOL itself has repeatedly been on the receiving end of adverse wage and hour findings. “In the 1970s, the Office of Personnel Management determined that the Wage and Hour Division had misclassified as exempt all of the agency’s wage and hour investigators, misapplying the administrative exemption for decades,” the Jackson Lewis attorney noted. “And just a few months ago, the Department agreed to pay out approximately $7 million for misclassifying a large group of employees in and around the Department’s headquarters. If even the federal agency tasked with interpreting and enforcing these laws cannot find a way to comply, suffering repeated violations, what chance do mom-and-pop businesses have of being perfect?”

“Parasitic litigation?” The way DeCamp sees it, “NELP’s critique is unfair, and it is obviously driven not by a concern that Mr. Puzder will pare back substantive rights for workers, but rather by a fear that he will bring clarity to the law, which in turn will increase compliance, reduce violations, and eliminate the need for much of the parasitic litigation through which the lawyers who make up NELP’s membership make their living.” DeCamp observed that historically, “the people who consistently benefit the most from the FLSA and the other laws the Department enforces are the lawyers who bring and defend lawsuits under those laws. Whenever a bunch of lawyers complain about anything, people’s first reaction should be skepticism. The same is true here. Clarity in the law reduces litigation, and NELP’s members are worried that Mr. Puzder will hurt not their clients, but their bottom line.”

Good news for employers. “This appointment is great news for employers, and not-so-great for the lawyers who represent them,” according to Sherman & Howard’s Doran. “While the Obama Administration pushed a decidedly pro-labor agenda, we can expect Mr. Puzder to roll back as much of that agenda as feasible. Employers will find themselves in a much friendlier environment, while management-side labor lawyers will have to retool,” Doran says.

“One need look no further than Mr. Puzder’s blog to see that President-Elect Trump will have yet another supporter for his trade and immigration reform plans. Mr. Puzder regularly blogs about the current administration’s trade and immigration policies, criticizing those policies from pretty much every angle imaginable.

“Whatever game employers, employees, and unions have been playing for the last eight years, the rules just changed. TOTALLY. We can expect Mr. Puzder to do all in his power to recalibrate the employer/employee dynamic in pro-business paradigm that will make heads spin. In light of the appointment of this very vocal opponent of pro-employee movements such as the $15 an hour campaign, I can’t begin to imagine who the President-Elect will select to fill the two vacancies on the National Labor Relations Board when he takes office after this appointment.”

More about the upside … Talking more about the potential upside of Puzder’s nomination DeCamp said that if confirmed, the nominee can bring to the DOL a “deep understanding of how businesses operate, especially small businesses. He appreciates how regulatory burdens and agency interference can stifle ingenuity, suppress job creation, and make workers worse off than they would have been without government involvement. He knows how businesses respond to regulation and is unlikely to be caught by surprise with unintended consequences such as the Affordable Care Act leading to reduced working hours as employers try to bring workers below the coverage threshold, or businesses shifting to automation as increasing minimum wage and other employment law pressures make it more cost-effective for companies to replace low-skilled workers with computers.”

“Working together for their mutual benefit.” Puzder also sees that businesses and their employees “are not inevitably in a state of permanent opposition to each other, but rather that they should be working together for their mutual benefit,” according to DeCamp. “He knows that most of all, businesses want clear standards for what they need to do in order to comply with the law, and they want a level playing field so that nobody can obtain an unfair competitive advantage by skirting the rules. Clear rules lead to higher levels of compliance, ease of identifying and addressing instances of non-compliance, and better protection for the rights of workers.”

“For the first time in eight years, businesses will be treated as important stakeholders with respect to federal labor and employment issues, and not merely as law-breakers to be punished when they stumble in trying to comply with thousands of pages of vague, arcane, ambiguous, and confusing Department of Labor regulations,” DeCamp continued. “At the same time, with his legal background, Mr. Puzder understands that complying with the law is not optional and that the system works only if employers obey the law. He will work to realign regulations and enforcement policy in a way that is faithful to the laws Congress has enacted, without embarking on exotic quests to unfissure workplaces or to make every business the employer of every worker it encounters in any capacity, directly or indirectly.”

What’s in store? “We will likely see a return to a more traditional and common-sense understanding of the scope and intent of the various laws the Department enforces, one that does not seek to remake society or to alter long-standing relationships,” according to DeCamp. “This includes the scope of the overtime exemptions for executive, administrative, and professional employees, which the current administration has sought to all but nullify by regulatory fiat. A federal court in Texas has concluded that the new regulations are unlawful, and those regulations will likely be reversed in the new administration.”