DC Download - April/May 2024

June 4 2024

Government, Legislative Affairs, TAUC News

DOL Announces Final Rule on Employee Classification — The U.S. Department of Labor (DOL) issued a final rule to determine whether a worker is an employee or a contractor under the Fair Labor Standards Act (FLSA). The rule, which DOL proposed more than a year ago, replaces a Trump-era standard issued in 2021 for classifying workers that made it easier for employers to misclassify workers as independent contractors. TAUC and the Construction Employers of America (CEA) advocated for the Administration to rescind the 2021 ABC-supported rule and reinstate the multifactor test.

The final rule establishes a new standard that provides guidance for worker classification to combat employee misclassification, which is rampant in the construction industry and provides

employers who misclassify an unfair advantage over law-abiding businesses.

The final rule makes the following changes:

• Restores the multifactor, totality-of-the-circumstance analysis to determine whether a worker is an employee or an independent contractor.
• Ensures all factors are analyzed without certain factors getting assigned a predetermined weight.
• Employs the longstanding interpretation of economic reality factors, including opportunity for loss and profit, the length of the relationship between employer and worker, the extent to which a worker exerts control over their work, how important a workers’ duties are to the employer’s business, and more.

The rule became effective March 11, 2024.

Challenges to the Rule:

• Four freelance writers and editors have filed a federal lawsuit in Georgia to invalidate the rule. The U.S. Chamber of Commerce and other trade associations are also expected to file lawsuits against the final rule.
• Senate Health, Education, Labor, and Pensions (HELP) Committee Ranking Member Bill Cassidy (R-LA) and House Education and the Workforce Subcommittee on Workforce Protections Chair Kevin Kiley (R-CA) introduced a Congressional Review Act (CRA) resolutions to nullify the Department of Labor’s final independent contractor rule. The CRA is an oversight tool that provides Congress with a tool to overturn final rules issued by federal agencies.

The House Education and the Workforce Committee voted 21-13 along party lines to advance the CRA resolution nullifying the final rule. The timing of floor consideration is not clear at this point. Senate consideration of the resolution is very unlikely, which would be vetoed by President Biden if it were to pass both chambers.

TAUC and the Construction Employers of America have sent letters to members of Congress urging them to reject the resolution and have been actively lobbying against the resolution.

DOL Proposes New Rule to Strengthen Apprenticeships — DOL issued a notice of proposed rulemaking (NPRM) to bolster the National Apprenticeship System. The new regulations will be the first updates to the National Apprenticeship System since 2008. DOL states that the goal of the rule is to enhance worker protections, improve the quality of registered apprenticeships, revise State governance provisions, and establish clearer pipelines to registered apprenticeship programs.

The proposed rule would:

• Strengthen labor standards, quality, and worker protections by making occupational skills and training more portable, enhancing alignment with postsecondary education and providing better performance data.
• Better define roles for State Apprenticeship Agencies and other stakeholders within the National Apprenticeship System.
• Codify the Office of Apprenticeship’s role for national leadership, promotion, and standards.
• Promote apprenticeship pathways, including pre-apprenticeship and apprenticeship readiness programs, by expanding performance and data requirements to improve accountability, transparency, and program outcomes.
• Creating a student-centric model of Registered Apprenticeship, called Registered Career and Technical Education Apprenticeship, designed to make them more seamless for full-time high school and community college students to enroll in a Registered Apprenticeship.

Challenges to the Davis-Bacon Rule – The Administration’s final Davis Bacon Rule, which took effect in October of 2023, is facing both legislative and legal challenges.

• Representative Lloyd Smucker (R-PA) has introduced a Congressional Review Act (CRA) resolution to overturn the final Davis-Bacon Modernization rule. TAUC and the Construction Employers of America have sent letters to members of Congress urging them to reject the resolution and have been actively lobbying against the resolution.

• Lawsuits Filed – Currently, there have been two lawsuits filed to block the final rule.
  • The Associated General Contractors of America (AGC) has filed its lawsuit in the U.S. District Court for the Northern District of Texas to block the final rule. AGC argues that DOL lacks the legal authority to expand coverage to areas specifically excluded in the law such as expanding prevailing wage cover to off-site and transportation activities related to the project. AGC is also  challenging the rule’s efforts to retroactively impose requirements on qualifying contracts that omitted the inclusion of the prevailing wage requirements.
  • The Associated Builders and Contractors (ABC) filed a lawsuit in the U.S. District Court for the Eastern District of Texas arguing that the rule violates the Davis-Bacon Act by allowing wage rates to be set at a higher level than actual prevailing wages. ABC also claims that the rule is unconstitutional because it was adopted under Acting Secretary of Labor Julie Su, who they argue is serving this is role in violation of the Vacancies Reform Act.

Efforts to Block Project Labor Agreement Rule – Rep. Clay Higgins (R-LA) introduced H.J. Res. 132, a CRA Resolution of Disapproval to rescind the Federal Acquisition Regulatory Council’s Final PLA Rule. This is the final rule implemented President Biden’s February 4, 2022 PLA Executive Order and took effect in January. 

TAUC and the CEA filed comments in support of the rule, which would require PLAs for all federal construction projects that are valued at or above $35 million and are actively working to defeat the resolution.

The Associated General Contractors of America and its Louisiana AGC chapter have also filed a lawsuit in the U.S. District Court for Western Louisiana to block the Administration’s final regulation.

Bipartisan Tax Package — House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR) introduced the “Tax Relief for American Families and Workers Act of 2024.” The tax package combines an extension of business tax provisions and the child tax credit, and includes the following business tax provisions:

• Research and Experimental Expenses — Allows U.S. businesses to immediately deduct their U.S.-based research and experimentation expenditures.
• Bonus Depreciation — 100% bonus depreciation is extended through 2025, allowing businesses to fully expense qualified property.
• Increased Section 179 Deduction — Restore full and immediate expensing for investments in machines, equipment, and vehicles.
• Interest Deductibility – Allows for the deduction of interest expenses.

The bill also includes provisions to address fraud related to the Employee Retention Tax Credit (ERTC) by increasing penalties on fraudulent promoters of ERTC claims and accelerating the termination period for making new claims for the ERTC. The ERTC is a refundable tax credit for eligible businesses and tax-exempt organizations that had employees and were affected during the COVID-19 pandemic. The IRS has found widespread efforts marketing to businesses to “apply” for ERTC when they may not qualify. Businesses found to have incorrectly claimed the credit are required to pay back the amount of the tax credit with penalties and interest.

While the bill passed with bipartisan support in the House, it has stalled in the Senate. Senate Finance Committee Ranking Member Mike Crapo (R-ID) has expressed concerns over lookback provisions in the child tax credit, which would allow households to claim their previous year’s annual income on their tax return. Crapo is hoping to potentially postpone the legislation to 2025, when Republicans might gain control of the Senate.

OSHA Walkaround Rule — The Occupational Safety and Health Administration (OSHA) issued a final rule regarding the “Worker Walkaround Representative Designation Process,” which clarifies the rights of employees to authorize a “walk around” representative to accompany an OSHA inspector during an inspection of their workplace. The Occupational Safety and Health Act gives the employer and employees the right to authorize a representative to accompany OSHA officials during a workplace inspection.

The final rule clarifies that employees may authorize another employee to serve as their representative or select a non-employee. For a non-employee representative to accompany the compliance officer in a workplace, they must be “reasonably necessary” to conduct an effective and thorough inspection as determined by the OSHA compliance officer. The rule clarifies that a while the non-employee representative does not have to have formal credentials, but must have skills, knowledge, or experience, including experience knowledge or experience with hazards or conditions in the workplace or similar workplaces, or language or communication skills. The determination of who is an appropriate non-employee representative is left to the sole discretion of the OSHA Compliance Officer if they determine that they will make a positive contribution to a complete and effective inspection.

The rule does not provide employers with a formal process to object if they disagree with the employee-designated representative. If an employer objects to the representative, the OSHA Compliance Officer has the authority to resolve the objection by inquiring about the representative’s knowledge, skills, and experience with the hazard/conditions, including familiarity with equipment, machinery, work processes, and any specialized safety and health knowledge and expertise.

This rule is effective on May 31st, 2024.

Overtime Rule Finalized – The DOL announced a final rule increasing the salary thresholds required to exempt a salaried bona fide executive, administrative or professional employee from federal overtime payment rules. Starting July 1st, 2024, the salary threshold will increase to $43,888 and increase to $58,656 on January 1st, 2025. The current salary threshold is $35,568. The final rule also raises the annual salary threshold workers must be paid above before they can be treated as “highly compensated employees” and deemed as exempt executive, administrative, professional, or outside sales employees from $107,432 to $132,964 on July 1, 2024 and from $132,964 to $151,164 on January 1, 2025. On July 1st, 2027, salary thresholds will begin to update every three years by applying up-to-date wage data to determine new salary levels.

Su Renominated  — President Joe Biden has renominated Julie Su to lead the U.S. Department of Labor (DOL). Su, who has served as the acting secretary of labor since Marty Walsh left the role in February 2023, has been unable to win enough support in the Senate to be formally confirmed. In recent months, some industry trade groups have used Su’s acting designation to try and thwart Biden Administration rulemakings arguing that Su does not have the authority to sign off on DOL regulations. These trade groups and congressional Republicans believe that Su is in violation of the Federal Vacancies Reform Act by serving as acting labor secretary in perpetuity. However, the Government Accountability Office (GAO), an independent federal watchdog, has issued a decision that Su can stay in the role in perpetuity because of the line of succession rules determined in the law.

It is unclear if Su can gather enough support to get confirmed as Labor Secretary in an election year. All Senate republicans and Senator Joe Manchin (D-WV) have previously rejected her nomination.

CRA Blocking NLRB Joint Employer Rulemaking — The U.S. House of Representatives voted 206 to 177 to approve a Congressional Review Act (CRA) resolution to nullify a National Labor Relations Board rule that rescinded the Trump Administration’s joint employer rule and implemented a new standard for determining joint employer status under the National Labor Relations Act. TAUC and other union contractor associations have supported the new rule to help reduce employee misclassification in the construction industry. Following the House vote, the Senate  voted 50-48 to pass the resolution to nullify the joint employer rule.

On Friday, May 3rd, President Biden vetoed the resolution. Despite the veto, U.S. District Judge J. Campbell Barker of the Eastern District of Texas vacated the NLRB’s rulemaking and recission of the 2020 joint-employer rule. In the ruling, Barker determined that the two-step test is flawed, arguing that the rulemaking would treat nearly every entity that contracts for labor as a joint employer. NLRB is currently reviewing the next steps.

EPA Announces New Particulate Matter Regulations — The Environmental Protection Agency (EPA) announced it was decreasing the amount of allowable particulate matter, or PM 2.5, permitted in the ambient air from 12 to 9 micrograms per cubic meter daily. This is the first change in the limits since 2012. EPA claims that the strengthened standard will prevent up to 4,500 avoidable, premature deaths and save billions of dollars. In a statement, EPA argued that the current PM_2.5 standard of 12.0 µg/m3 is insufficient to comply with the safety requirements of the Clean Air Act.

To comply with the new standard, states in non-attainment of National Ambient Air Quality Standards will need to adjust their air quality State Implementation Plans to account for the lower threshold. Compliance will force states to limit development, impacting the kinds of facilities that are granted air permits to operate. This will threaten to negatively impact permits for manufacturing and energy projects.

The announcement drew backlash from trade organizations, including the National Association of Manufacturers, who claimed the new rule would result in a loss of up to $200 billion in economic and activity and nearly 1 million jobs.

EPA Issues Rules to Reduce Pollution from Fossil Fuel-Fired Power Plants – The U.S. Environmental Protection Agency (EPA) announced a series of final rules to reduce pollution from fossil fuel-fired power plants. These rules were finalized under separate authorities of the Clean Air Act, Clean Water Act, and Resource Conservation and Recovery Act.

The final rules would:

• Require existing coal-fired and new natural gas-fired power plants control 90 percent of their carbon pollution. The EPA believes these stringent reductions can be achieved through the installation of carbon capture and sequestration (CCS) technology.
• Strengthen and update the Mercury and Air Toxics Standards (MATS) for coal-fired power plants, tightening the emissions standard for toxic metals by 67 percent and finalizing a 70 percent reduction in the emissions standard for mercury from existing lignite-fired sources.
• Reduce pollutants discharged through wastewater from coal-fired power plants by more than 660 million pounds per year, ensuring cleaner water for affected communities, including communities with environmental justice concerns that are disproportionately impacted.
• Require the safe management of coal ash that is placed in areas that were unregulated at the federal level until now, including at previously used disposal areas that may leak and contaminate groundwater.

The new carbon emissions regulation is expected to face legal challenges. The U.S. Supreme Court struck down a previous power plant emissions rule developed during the Obama administration. CRA nullification resolutions are also expected to be introduced for each of these new rules.

DOE Announces Clean Energy Tax Credits – The U.S. Department of Energy (DOE), the U.S Department of Treasury, and the Internal Revenue Service (IRS) announced $4 billion in tax credits for over 100 projects in 35 states that will boost domestic clean energy manufacturing and reduce greenhouse gas emissions. Projects will receive a tax credit under the Qualifying Advanced Energy Project Tax Credit (48C), which is funded from the Inflation Reduction Act (IRA). To receive the 48C credit, local governments and businesses must meet prevailing wage and apprenticeship utilization requirements.

Biden Pauses New LNG Export Permits — The Biden Administration announced a temporary pause on pending decisions on exports of Liquefied Natural Gas (LNG) until the Department of Energy (DOE) can update the underlying analyses for authorizations. The United States is currently the number one exporter of LNG in the world. Under the announcement, the U.S. will continue to export LNG to its allies around the world in at least the short and medium term.

The decision will have wide-ranging effects on the energy industry. Under the pause, delays are expected on the creation of new LNG plants. The DOE review will take months, which will be followed by a comment period. The soonest LNG exports would resume is potentially after the November 5^th presidential election.

The announcement was met with bipartisan pushback from members of Congress, with the House passing H.R. 7176, Unlocking our Domestic LNG Potential Act. Under the bill, the Federal Energy Regulatory Commission would have the exclusive authority to approve LNG projects. The bill passed 224-200. It is unclear if the bill could move forward in the Democratic-led Senate.

FTC Votes to Ban Non-Compete Agreements — The Federal Trade Commission (FTC) voted 3-2 to ban noncompete agreements. As part of the ruling, noncompete agreements would be banned for all workers, and employers would need to notify past and current employees that non-competes are no longer enforceable. While companies will need to throw out noncompete agreements for most employees, agreements may remain in place for senior-level executives.

The final rule is set to become effective on September 4th, 2024.

DOL Announces Availability of $200 Million in Grants to Expand Registered Apprenticeships — The DOL announced the availability of $200 million in grants to support public-private partnerships to expand, diversify and strengthen Registered Apprenticeship. The Employment and Training Administration will use these funds to for projects that expand access to Registered Apprenticeships in high-demand sectors, including in the clean energy and supply chain sectors.

Congressional Hearings of Interest to TAUC:

Congress Holds Hearing on Wage and Hour Division — The House Education and Workforce Committee held a hearing titled “Examining the Policies and Priorities of the Wage and Hour Division.” During the hearing, Members of Congress questioned Jessica Looman, Administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD), regarding proposed changes to overtime regulations, Davis-Bacon, and employee classification.

In her testimony, Looman noted that the most common wage and hour violation is the failure of companies to pay their workers earned overtime pay. Nearly 84% of wages recovered for workers last year were for overtime violations. Looman also mentioned WHD’s role in ensuring that workers are not improperly classified as independent contractors across a wide range of industries including healthcare, construction, restaurants, and building services. Citing these examples, Looman explained the importance of the new standard for worker classifications that will go into effect on March 11^th, 2024. This new rule will prevent businesses who misclassify workers from getting a competitive advantage in the market and increase wages. Looman also discussed other rulemaking that will protect workers and increase wages including changes to the Davis-Bacon Act and the more than 70 Davis Related Acts, which will ensure workers are paid the prevailing wage.

TAUC joined with its allies in the CEA in sending a letter to the Subcommittee in support of Administrator Looman’s work to support and strengthen the construction industry. The letter highlighted WHD’s regulatory changes to the Davis-Bacon and Related Acts and restoring the independent contractor rule to its longstanding 70-year precedent; expanding employer assistance to increase compliance, transparency, and accountability with Labor Department programs and initiatives; and efforts to address employers who misclassify their workers as independent contractors.

Senate Committee Holds Hearing on Apprenticeships — The Senate Health, Education, Labor and Pensions Committee held a hearing titled “Youth Apprenticeships: Building Partnerships, Strengthening Career Paths.” During his opening statement, Senator John Hickenlooper (D-CO) talked about the value of youth apprenticeships. Hickenlooper stressed the importance of strengthening partnerships between unions and youth apprenticeship programs, specifically pushing the Youth Apprenticeship Advancement Act. The bipartisan bill would create a federal grant program to support training programs for apprentices ages 16 to 22. Senator Mike Braun (R-IN) also advocated for the Youth Apprenticeship Advancement Act, which he applauded for not discriminating between industry recognized apprenticeship programs and registered apprenticeship programs. Braun also mentioned how the bill does not give labor unions preferential treatment, and how the bill has a pay for, making it fiscally responsible.

Education and Workforce Committee Holds Hearing on PBGC — The House Education and the Workforce Committee held a hearing titled: Examining the Policies and Priorities of the Pension Benefit Guaranty Corporation. During the hearing, Health, Employment, Labor and Pensions Subcommittee Chair Bob Good (R-VA) criticized the Pension Benefit Guaranty Corporation (PBGC) for their telework policies and their implementation and oversight of the Special Financing Program (SFP) which ensures the solvency of multiemployer pension plans enacted as part of the American Rescue Plan. Good specifically questioned the agency over an Inspector General report the found that some multiemployer pension plans receiving SFP assistance provided benefits to participants who were deceased.

Ranking Member Mark DeSaulnier (D-CA) pushed back against these claims. DeSaulnier noted that without SFP funding, the PBGC would have been insolvent by 2026. DeSaulnier also pointed out that the SFP had bipartisan support from both the AFL-CIO and Chamber of Commerce and will allow the PBGC’s multiemployer program to remain solvent through at least 2051. DeSaulnier also pushed back on claims that PBGC sent money to deceased people. Central States received $127 million from PBGC based on outdated data. That $127 million will be returned and the problem that caused the mistake has been corrected.