The Election's Impact on Employers

It is unlikely that labor unions will fare any better with their major initiatives during the next four years Top priorities of most business leaders are to rewrite the corporate tax system and reduce regulatory requirements Expect a short honeymoon between President Obama and business leaders until the initial compromise is made on the looming debt crisis, with great concern that the debt ceiling will be reached before a deal can be made Increased regulations across industries will cut bottom-line profits

As the election dust settles, it appears that the results will be a mixed bag for both industry and organized labor. While the labor unions delivered the winning votes in key states for President Obama, they were also rebuffed in Michigan in an attempt to put collective bargaining in the state constitution and also failed to establish collective bargaining for home health-care workers.

Election-weary voters in Wisconsin handed control of the state Senate back to Republicans, which gives Gov. Scott Walker the capacity to hold the line against the unions. Washington and Georgia adopted initiatives opposed by the unions to allow establishment of charter schools. The NEA poured millions of dollars into an initiative in Idaho to overturn a state law limiting collective-bargaining by sweetening the deal with some pay-for-performance measures and won.

Referring to Ohio, Wisconsin and Nevada, Richard Trumka, president of the AFL-CIO, said, "Without organized labor, none of those would have been in the president's column." Mary Kay Henry, president of the SEIU, claims 100,000 of its members donated time to the campaign and knocked on 5 million doors. Undoubtedly, SEIU and other unions will be looking for a payback, but that may prove difficult for the president.

It is conventional wisdom that U.S. presidents attempt to drive their ideological agenda in their second term. However, it is unlikely that labor unions will fare any better with their major initiatives during the next four years. What Obama will be focused on is how to get business to start spending some of their massive accumulations of corporate cash. That would be the best way to finally pull the country out of recession and obtain significant growth in jobs. Former Republican Michigan Gov. John Engler, president of the Business Roundtable, has waved the business cooperation flag, suggesting that the Republican-controlled House needs to seek compromise to avoid the pending fiscal cliff of mandatory spending cuts and tax increases.

The top priorities of most business leaders are to rewrite the corporate tax system and reduce regulatory requirements. Any distractions that would alienate business leaders, such as an attempt to implement the Employee Free Choice Act, a bipartisan effort to assure that workers can exercise their right to organize known as “card check,” will not have serious backing. Do not expect any serious move to increase the minimum wage unless the economy comes roaring back.  The president will appease labor with appointments to the NLRB, EEOC and vigorous enforcement of Fair Labor Standards Act and other labor laws through the Department of Labor. The current speculation is that U.S. Labor Secretary Hilda Solis, a friend of organized labor, will remain in place at least for the early part of the second term.

Business leaders can be comforted that the Republican-controlled House will be a check against major reforms wanted by labor issues. However, this administration’s proven focus on imposing their agenda through regulation will provide the unions their venues to address worker issues. Business can expect to see ramped up enforcement of health and safety laws from OSHA. It is likely that OSHA will finalize its Injury and Illness Prevention Program, which was under development for much of the first term. You can also expect to see stricter and more time-condensed injury reporting obligations.

Other Areas to Watch Include Increased Organizing Opportunities:

Increased organizing opportunities: With the Affordable Care Act now moving full steam toward implementation, watch for the unions to seek increasing membership within the health care industry. As teacher pay-for-performance and the charter school movement threaten their status quo, the NEA will push for more members. And, with nearly one out of four Americans working for a federal government contractor or subcontractor, there will be continued focus on promoting union organizing in the realm of federal contractors.

Addressing unfunded pension liabilities: Unfunded pension benefits are the dominant source of debt for state governments, with an estimated $2.8 trillion of the $4.2 trillion of state debt as reported Sept. 26, 2012, in a Senate and House Joint Economic Committee report. (This figure does not include the unfunded local and municipal pension funds or the shortfalls in private pensions). Any of the 30 Republican governors who might be thinking about the White House in 2016 will be seeking creative solutions to dealing with this portion of their state debt.

Changes in criteria relating to the definition of independent contractors: Employers can expect to see a continued crackdown on those companies that seek to avoid payroll taxes simply by calling people independent contractors. Tightening the standards of who is a legitimate independent contractor would automatically increase the collection of payroll taxes without increasing the tax rates. California recently criminalized such misclassifications. This is an area that can be addressed through regulation, increased enforcement and may be one of the few areas where Democrats and Republicans can find common ground.

Funding of public infrastructure: Hurricane Sandy created an urgency to replacing the country’s aging infrastructure. The president has advocated a national infrastructure bank to use public and private capital to fund projects,which might be considered if it becomes the new opportunity for Congressmen to deliver “earmarks” to benefit their constituents. The challenge will be to appease deficit-focused House members.

State and local efforts to eliminate project labor agreements on publicly funded projects: Independent construction contractors will be seeking to “even the playing field” for winning public construction contracts by driving initiatives or legislative changes to eliminate project labor agreements on publicly funded projects. Eliminating the mandates for paying prevailing wage cuts overall project costs 10% to 15%, and over 80% of construction workers are non-union.  The unions were defeated on these initiatives in southern California in the last few years. Legislative or administrative actions have been taken to eliminate project labor agreements in Arizona, Idaho, Iowa, Missouri, Arkansas, Louisiana, Michigan, Tennessee and Utah.

Summary

Expect a short honeymoon between President Obama and business leaders until the initial compromise is made on the looming debt crisis, with great concern that the debt ceiling will be reached before a deal can be made. This “cooperation” will continue as the broad objectives for tax reform are reached and then will begin to splinter as business sectors start to fight for the winners and losers. But have no doubt that there will be increased regulations across industries that will cut bottom-line profits.

Ladonna Y. Lee, a strategic communications consultant, is based in the Washington, D.C., office of Foley & Lardner LLP, where she serves as vice chair of the Government & Public Policy Practice. Mark J. Neuberger is counsel with Foley & Lardner’s Miami office, where he represents employer’s in all aspects of labor relations and employment-related litigation.

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