Top Issues for an Acosta Labor Department: Overtime, Gig Workers and the Fiduciary Rule

While at the DOJ, Acosta prioritized collaboration over litigation in policing civil rights cases, focusing on working with police departments to help them develop operating procedures during ongoing investigations. This is good news for the employer community, as management-side attorneys criticized the department under former President Barack Obama for what they called heavy-handed enforcement tactics. Acosta isn't expected to give employers a free pass, however. He is widely regarded as someone who respects — and can enforce — the rule of law.

When it comes to the issues, perhaps the most prominent agenda item for Acosta's Labor Department is the fate of the Obama administration's overtime rule. Currently blocked in the courts, the rule would make some 4 million workers newly eligible for overtime pay — time and a half — by doubling the salary threshold for automatic eligibility to $47,500. The rule was met with great alarm by the business community, but euphoria by worker advocates. Will the DOL repeal, replace, rewrite, reconsider? Acosta's testimony at his confirmation hearing before the Senate Committee on Health, Education, Labor and Pensions suggests he has his eye on that salary threshold. The new chief said during his hearing that a cost-of-living update would likely raise the threshold to about $33,000, but also indicated that there are other factors to consider.

Gig Workers

Changes also may be in store for gig workers. Uber and Lyft drivers, as well as other gig workers, are often classified as independent contractors. However, many observers think they operate in a legal gray zone between employees and independent contractors. Acosta has indicated that the DOL needs to update its policies to reflect the new reality, and that the time might be right for states and localities to jump into the fray to provide workplace protections for these on-demand workers.

Among the other issues likely to see early action is the Obama administration's fiduciary rule, aimed at reducing allegedly conflicted investment advice given to retirement savers. Trump ordered a re-evaluation of the rule, which had been scheduled to take effect April 10. The DOL in turn promised not to enforce the fiduciary rule in the course of the re-evaluation. Perhaps tipping his hand, Acosta told the Senate labor committee that the rule goes “far beyond” addressing the standard of conduct for financial advisers.

Overtime Rule: Multiple Moving Parts

The overtime regulation, a high-profile piece of Obama's middle-class agenda, would have taken effect last December. But it was blocked by a federal judge in Texas (Nevada v. DOL, E.D. Tex., No. 4:16-CV-00731, motion granted 11/22/16).

The Fair Labor Standards Act (FLSA) generally requires employers to pay workers time-and-a-half wages for all hours worked beyond 40 per week. The law also delegates to the labor secretary the power to determine which workers should be removed from overtime requirements under the law's white-collar exemption for those in executive, administrative or professional positions.

The overtime standards created in 2004 by President George W. Bush's administration allow employers to exempt workers who make more than $23,500 annually and perform certain managerial duties. When the DOL rolled out the new rule in 2015, then-Labor Secretary Thomas Perez said doubling the threshold was the easiest way to put more money in workers' pockets and avoid some of the uncertainty that comes with the “duties test” for determining whether the white-collar exemption applies.

But Acosta may have a different take. Although the rule sparked a debate over where to set the salary threshold, Acosta pointed out that in the Texas case, Judge Amos Mazzant of the Eastern District of Texas raised questions about whether the DOL should instead focus on the actual duties workers perform.

“One of the questions that's in litigation is does a dollar threshold supersede the duties test and, as a result, is it not in accordance with the law,” Acosta told the Senate panel during his March 22 confirmation hearing. “I mention that because I think the authority of the secretary to address this is a separate question from what the correct amount is.”

Acosta did suggest, however, that he would be open to increasing the salary threshold somewhat, to account for cost-of-living increases since the amount was raised in 2004.

The comments came as the DOL was still deciding whether to continue to litigate the case in Texas. The agency is expected to eventually issue a new overtime rule, possibly with a smaller salary threshold increase … unless the judge throws a wrench in the plan by ruling increases in the salary threshold inappropriate.

Solution to Enforcement for Gig Economy Could Be Close to Home

Inspired by the promise of controlling their own hours and cash flow, many workers are jumping headfirst into the gig economy, which has fed conversations on how and whether the federal government should adjust employment laws and worker benefits to support them. Gig workers are often treated as independent contractors, usually aren't offered benefits, and aren't entitled to minimum wage, overtime and workers' compensation protections.

Perhaps the best way to handle this is to empower state and local governments to provide protections, according to Acosta. The gig economy has shed light on some outdated rules that “aren't designed [for] and haven't caught up to the gig economy, since they've been assuming a more traditional workplace,” he told the Senate panel during the confirmation hearing.

“It's something that we are going to have to talk about and address, but it has to be at the local level,” he said.

Acosta's comments foreshadowed a bill set to be introduced this month by Sen. Mark Warner (D-VA). The legislation would help the Labor Department encourage states, localities and nonprofits to tinker with portable benefits.

It would initiate a program of grants to encourage experimentation with benefits. That could mean health insurance, unemployment insurance and retirement benefits for Uber and Lyft drivers and other gig workers, as they move from job to job.

Fiduciary Rule Under the Microscope at the DOL

As for the fiduciary rule, Acosta's comment that it goes too far could mean the fate of the embattled regulation is sealed. And if the rule is to be deep-sixed, it will likely be by the agency. The courts don't seem to want to throw the Obama-era regulation overboard.

Multiple industry groups and companies have filed lawsuits challenging the rule from a variety of angles. Every federal judge to have ruled on these cases has upheld the rule in its entirety, handing losses to the U.S. Chamber of Commerce and ACLI, Market Synergy Group and the National Association for Fixed Annuities. At press time, another case was pending before a federal judge in Minnesota.

But the pressure is on from the top, as President Trump has specifically ordered the agency to take a closer look at the rule. The Trump administration delayed the April 10 applicability date to June 9, giving the agency a chance to comply with the presidential directive. The Trump memo listed three factors for the DOL to consider: 1) whether the rule would eliminate consumers' choice of products; 2) whether it would cause disruption in the retirement market to the detriment of consumers; and 3) whether it would increase litigation. A positive finding on any one of those factors would be cause for a proposal to rescind or revise the rule, the memo said.

Collaboration over Litigation

As the agency addresses these and other issues, Acosta's history of employing a collaborative approach to enforcement is encouraging to those who chafed under the Perez reign. The vast majority of employers want to play by the rules, they argue, but many don't have the resources to keep up with changing interpretations and to decipher gray areas.

Advocates for workers, for their part, tell us that they do expect Acosta to take a more measured approach than the Obama administration when it comes to enforcement. That doesn't mean they expect Acosta to completely abandon lawsuits, the threat of which is an important tool in protecting employee rights, advocates say.

If a good predictor of future performance is past performance, then I think we can look to this comment from one of Acosta's colleagues on the National Labor Relations Board, to help us understand how the expected labor chief may approach his new job enforcing the laws that affect us all.

“Alex is really more of an intellectual, who takes a scholarly approach to the law,” Obama-appointed NLRB Chair Wilma Liebman (D), who served with Acosta on the Bush board, told my colleagues back in February. “He has a respect for the law and is interested in the law, and I think he's interested in the lives of regular people.”

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Victoria Roberts is the vice president and general manager of Bloomberg Law's Labor and Employment, Benefits and Human Resources business unit.

Secretary of Labor Alexander Acosta, who was confirmed by the Senate late last month, is a veteran government official who is set to hit the ground the running. What direction can labor and employment attorneys expect him to take the agency charged with enforcing many of the nation's workplace laws, and what are issues to watch in the early days? My colleagues and I at Bloomberg Law have been following the nomination, and here's what we know.

'Street Cred'

Clues to Acosta's enforcement approach can perhaps be found by looking back, as he comes to the position with some serious D.C. street cred. He served in three Senate-confirmed jobs during the George W. Bush administration: National Labor Relations Board (NLRB) member, Department of Justice (DOJ) assistant attorney general for civil rights, and U.S. attorney in the Southern District of Florida. When nominated by President Donald Trump in February, Acosta was the law school dean at Florida International University.

While at the DOJ, Acosta prioritized collaboration over litigation in policing civil rights cases, focusing on working with police departments to help them develop operating procedures during ongoing investigations. This is good news for the employer community, as management-side attorneys criticized the department under former President Barack Obama for what they called heavy-handed enforcement tactics. Acosta isn't expected to give employers a free pass, however. He is widely regarded as someone who respects — and can enforce — the rule of law.

When it comes to the issues, perhaps the most prominent agenda item for Acosta's Labor Department is the fate of the Obama administration's overtime rule. Currently blocked in the courts, the rule would make some 4 million workers newly eligible for overtime pay — time and a half — by doubling the salary threshold for automatic eligibility to $47,500. The rule was met with great alarm by the business community, but euphoria by worker advocates. Will the DOL repeal, replace, rewrite, reconsider? Acosta's testimony at his confirmation hearing before the Senate Committee on Health, Education, Labor and Pensions suggests he has his eye on that salary threshold. The new chief said during his hearing that a cost-of-living update would likely raise the threshold to about $33,000, but also indicated that there are other factors to consider.

Gig Workers

Changes also may be in store for gig workers. Uber and Lyft drivers, as well as other gig workers, are often classified as independent contractors. However, many observers think they operate in a legal gray zone between employees and independent contractors. Acosta has indicated that the DOL needs to update its policies to reflect the new reality, and that the time might be right for states and localities to jump into the fray to provide workplace protections for these on-demand workers.

Among the other issues likely to see early action is the Obama administration's fiduciary rule, aimed at reducing allegedly conflicted investment advice given to retirement savers. Trump ordered a re-evaluation of the rule, which had been scheduled to take effect April 10. The DOL in turn promised not to enforce the fiduciary rule in the course of the re-evaluation. Perhaps tipping his hand, Acosta told the Senate labor committee that the rule goes “far beyond” addressing the standard of conduct for financial advisers.

Overtime Rule: Multiple Moving Parts

The overtime regulation, a high-profile piece of Obama's middle-class agenda, would have taken effect last December. But it was blocked by a federal judge in Texas (Nevada v. DOL, E.D. Tex., No. 4:16-CV-00731, motion granted 11/22/16).

The Fair Labor Standards Act (FLSA) generally requires employers to pay workers time-and-a-half wages for all hours worked beyond 40 per week. The law also delegates to the labor secretary the power to determine which workers should be removed from overtime requirements under the law's white-collar exemption for those in executive, administrative or professional positions.

The overtime standards created in 2004 by President George W. Bush's administration allow employers to exempt workers who make more than $23,500 annually and perform certain managerial duties. When the DOL rolled out the new rule in 2015, then-Labor Secretary Thomas Perez said doubling the threshold was the easiest way to put more money in workers' pockets and avoid some of the uncertainty that comes with the “duties test” for determining whether the white-collar exemption applies.

But Acosta may have a different take. Although the rule sparked a debate over where to set the salary threshold, Acosta pointed out that in the Texas case, Judge Amos Mazzant of the Eastern District of Texas raised questions about whether the DOL should instead focus on the actual duties workers perform.

“One of the questions that's in litigation is does a dollar threshold supersede the duties test and, as a result, is it not in accordance with the law,” Acosta told the Senate panel during his March 22 confirmation hearing. “I mention that because I think the authority of the secretary to address this is a separate question from what the correct amount is.”

Acosta did suggest, however, that he would be open to increasing the salary threshold somewhat, to account for cost-of-living increases since the amount was raised in 2004.

The comments came as the DOL was still deciding whether to continue to litigate the case in Texas. The agency is expected to eventually issue a new overtime rule, possibly with a smaller salary threshold increase … unless the judge throws a wrench in the plan by ruling increases in the salary threshold inappropriate.

Solution to Enforcement for Gig Economy Could Be Close to Home

Inspired by the promise of controlling their own hours and cash flow, many workers are jumping headfirst into the gig economy, which has fed conversations on how and whether the federal government should adjust employment laws and worker benefits to support them. Gig workers are often treated as independent contractors, usually aren't offered benefits, and aren't entitled to minimum wage, overtime and workers' compensation protections.

Perhaps the best way to handle this is to empower state and local governments to provide protections, according to Acosta. The gig economy has shed light on some outdated rules that “aren't designed [for] and haven't caught up to the gig economy, since they've been assuming a more traditional workplace,” he told the Senate panel during the confirmation hearing.

“It's something that we are going to have to talk about and address, but it has to be at the local level,” he said.

Acosta's comments foreshadowed a bill set to be introduced this month by Sen. Mark Warner (D-VA). The legislation would help the Labor Department encourage states, localities and nonprofits to tinker with portable benefits.

It would initiate a program of grants to encourage experimentation with benefits. That could mean health insurance, unemployment insurance and retirement benefits for Uber and Lyft drivers and other gig workers, as they move from job to job.

Fiduciary Rule Under the Microscope at the DOL

As for the fiduciary rule, Acosta's comment that it goes too far could mean the fate of the embattled regulation is sealed. And if the rule is to be deep-sixed, it will likely be by the agency. The courts don't seem to want to throw the Obama-era regulation overboard.

Multiple industry groups and companies have filed lawsuits challenging the rule from a variety of angles. Every federal judge to have ruled on these cases has upheld the rule in its entirety, handing losses to the U.S. Chamber of Commerce and ACLI, Market Synergy Group and the National Association for Fixed Annuities. At press time, another case was pending before a federal judge in Minnesota.

But the pressure is on from the top, as President Trump has specifically ordered the agency to take a closer look at the rule. The Trump administration delayed the April 10 applicability date to June 9, giving the agency a chance to comply with the presidential directive. The Trump memo listed three factors for the DOL to consider: 1) whether the rule would eliminate consumers' choice of products; 2) whether it would cause disruption in the retirement market to the detriment of consumers; and 3) whether it would increase litigation. A positive finding on any one of those factors would be cause for a proposal to rescind or revise the rule, the memo said.

Collaboration over Litigation

As the agency addresses these and other issues, Acosta's history of employing a collaborative approach to enforcement is encouraging to those who chafed under the Perez reign. The vast majority of employers want to play by the rules, they argue, but many don't have the resources to keep up with changing interpretations and to decipher gray areas.

Advocates for workers, for their part, tell us that they do expect Acosta to take a more measured approach than the Obama administration when it comes to enforcement. That doesn't mean they expect Acosta to completely abandon lawsuits, the threat of which is an important tool in protecting employee rights, advocates say.

If a good predictor of future performance is past performance, then I think we can look to this comment from one of Acosta's colleagues on the National Labor Relations Board, to help us understand how the expected labor chief may approach his new job enforcing the laws that affect us all.

“Alex is really more of an intellectual, who takes a scholarly approach to the law,” Obama-appointed NLRB Chair Wilma Liebman (D), who served with Acosta on the Bush board, told my colleagues back in February. “He has a respect for the law and is interested in the law, and I think he's interested in the lives of regular people.”

*****
Victoria Roberts is the vice president and general manager of Bloomberg Law's Labor and Employment, Benefits and Human Resources business unit.