Stop Gap Measure Passed to Avoid Government Shutdown
Before returning to their constituencies for recess, Congress passed a stopgap funding bill to avoid a government shutdown. The continuing resolution will extend government funding through December 16, 2022. The resolution only passed after Senator Joe Manchin (D-WV) dropped his energy permitting reform venture. Heading into the last few months of the year, remaining priorities for Congress include the National Defense Authorization Act. Here is an exclusive update from TAUC on the policy and regulatory issues of vital interest to contractors and the union construction and maintenance industry in Washington, DC.
US Department of Labor Releases Proposed Rule on Classifying Employees, Independent Contractors; Seeks to Return to Longstanding Interpretation
The U.S. Department of Labor published a Notice of Proposed Rulemaking (NPRM) to rescind the Trump-era rule that made it easier for employers to misclassify workers as independent contractors. The NPRM would propose a new standard for determining whether a worker is an employee or independent contractor under the Fair Labor Standards Act. Under the FLSA, employers are required to provide benefits such as minimum wage and overtime to employees, but not to independent contractors.
The framework is more consistent with longstanding judicial precedent on which employers have relied to classify workers as employees or independent contractors under the FLSA. The goal of the proposed rule is to provide guidance on 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.
Among other things, the proposed rule would:
The Department’s Wage and Hour Division will be accepting stakeholder comments on the NPRM through November 28th, 2022. More information on the announcement can be found here.
Biden Administration Ends Industry-Recognized Apprenticeship Program (IRAPs)
On Wednesday, September 26, 2022, the U.S. Department of Labor published a final rule to rescind the Trump Administration’s regulations establishing Industry-Recognized Apprenticeship Programs (IRAPs). DOL issued this final rule after reviewing the IRAPs as required by President Biden’s February 2021 Executive Order 14016 (E.O.).
The 2020 rule established a process under which the DOL was authorized to grant Standards Recognition Entities (SREs) the ability to evaluate and recognize IRAPs. IRAPs were created to work outside of the existing registered apprenticeship system by allowing employers to design and certify their own federally assisted training programs with minimal government oversight. The lack of standards and regulation surrounding IRAPs raised concerns with the potential to establish lower quality training programs that compete with and undermine registered apprenticeship programs.
During the review required under the Biden E.O., the department determined that the IRAP program created a redundant, lower-quality system. The final rule is effective November 25, 2022, at which time, the authority for SREs and the IRAPs they have recognized will be eliminated. The DOL will work to provide apprentices currently participating in IRAPs with the resources needed to connect to Registered Apprenticeship programs.
TAUC and its partners in the Construction Employers of America have long opposed and advocated against the creation of IRAPs, which would have undermined existing privately funded Registered Apprenticeship Programs.
Comments on Proposal to Amendment Federal Acquisition Regulations to Implement PLA Executive Order
Both TAUC and the CEA submitted comments to the proposed rule issued by the Federal Acquisition Regulatory Council (FAR Council) to amend the Federal Acquisition Regulations to implement President Biden’s Executive Order requiring project labor agreements (PLAs) on federal construction projects with contract values of $35 million or more last month. Under the proposed rule, “Construction” is defined to include “construction, reconstruction, rehabilitation, modernization, alteration, conversion, extension, repair, or improvement of buildings, structures, highways, or other real property.” The NPRM also sets out a flow-down requirement, requiring subcontractors working on a large-scale project to be familiar with and comply with the terms of the PLA negotiated by a prime contractor.
IRS Seeks Public Comments on the Implementation of Tax Provisions of the Inflation Reduction Act
The Internal Revenue Service (IRS) has released notices requesting public comment on the implementation of tax benefits in the Inflation Reduction Act (IRA). Among the notices issued by the IRS is proposed guidance focused on the implementation of provisions of the IRA providing increased or bonus incentive amounts for energy tax credits based on the compliance with prevailing wage and apprenticeship utilization requirements.
The IRA included provisions requiring contractors on all projects supported by the Federal tax incentives authorized in the law to (1) pay prevailing wages; and (2) have at least 15 percent of total hours on these projects performed by apprentices. These requirements will not fully take effect until after the IRS finalizes this guidance.
The IRS is requesting feedback on these requests for comments no later than November 4, 2022.
PBGC Releases Proposed Rule on Actuarial Assumptions for Determining an Employer’s Withdrawal Liability
The Pension Benefit Guaranty Corporation (PBGC) issued a Notice of Proposed Rulemaking (NPRM) to provide a range of interest rate assumptions that a plan actuary may choose from in determining a withdrawing employer’s liability to a multiemployer pension plan. published a proposed rule governing employer withdrawal liability.
Under the Employee Retirement Income Security Act of 1974 (ERISA), an employer that withdraws from an underfunded multiemployer pension plan may owe withdrawal liability to the plan based on the withdrawn employer’s share of the amount by which the present value of the plan’s nonforfeitable benefits exceed the value of the plan’s assets. The plan actuary determines the present value of the plan’s nonforfeitable benefits using actuarial assumptions and methods. The NPRM, while not specifying assumptions plans must use to determine an employer’s withdrawal liability, clarifies that plan actuaries may base the interest assumption used to calculate withdrawal liability on the market price of purchasing annuities from private insurers.
According to the PBGC, the proposed rule could increase employer withdrawal liability obligations by between $804 million and $2.98 billion over the next 20 years.
The comments on the NPRM may be submitted by November 14, 2022.