A measured approach: employment and labor law during the George W. Bush years.

• Author: Kilberg, William J.

On the whole, the Bush Administration took a thoughtful and measured approach to labor and employment law issues. Two principal themes emerged from the Administration's approach: first, that government should provide clarity in the law to the greatest extent possible, and, second, that enforcement and other discretionary efforts should channel limited resources toward the most pressing problems. This Essay will consider examples of these themes from four labor and employment statutes that featured prominently in debates during the Bush years: the Fair Labor Standards Act (FLSA), the Sarbanes-Oxley Act's (SOX) whistleblower provisions, the Employee Retirement Income Security Act (ERISA), and the National Labor Relations Act (NLRA).

The Essay will also briefly address a response to the Administration's approach by its critics, who increasingly sought to expand the law through state and local government initiatives. Although such efforts achieved some modest successes, attempts at more sweeping change faced significant federal preemption obstacles and largely failed. Looking forward, with Democratic majorities in both houses of Congress and a sympathetic ear in the White House, efforts in the States may wane with the promise of more sweeping--and perhaps less measured--action at the federal level.

1. FAIR LABOR STANDARDS ACT

   In 2004, the Bush Labor Department revised the fifty-year-old regulations that define "white collar" employees exempt from the overtime requirements of the FLSA, a task that previous administrations had promised to do but failed to achieve. (1) Although the revisions were long overdue and did not dramatically shift the law, they faced a groundswell of opposition from entrenched interest groups. In the end, however, the revisions greatly increased the clarity and administrability of the law and facilitated future enforcement efforts targeted to assist those most in need of the FLSA's protections.

   The FLSA was enacted in 1938 to provide protection "to help those who toil in factory and on farm" to obtain "'a fair day's pay for a fair day's work." (2) To "raise the wages of the most poorly paid workers and to reduce the hours of those most overworked," (3) it set a nationwide minimum wage (4) and required the payment of time-and-a-half for hours worked beyond forty per week. (5) Consistent with the view that many workers, but not all, lack sufficient bargaining power to fend for themselves, the Act exempts from its overtime-pay requirements various categories of employees, including those "employed in a bona fide executive, administrative, or professional capacity." (6) The Act does not define these so-called white collar exemptions, instead leaving that task to the Secretary of Labor. (7)

   The regulations defining the white collar exemptions had not been substantially revised since 1954. (8) The relevance of the older version has waned over the last fifty years largely because the American economy had shifted predominantly from manufacturing to services, (9) and because inflation had diminished the value of the threshold wage amounts used in the regulations. The old regulations, for example, established a $250-per-week threshold for "high salaried" white collar employees eligible for a less rigorous analysis of their job duties in determining exempt status. (10) Raises in the federal minimum wage for a forty-hour work week, however, made this level increasingly meaningless. (11) Moreover, references to such positions as "leg man" (12) and "strawbosses" (13) in the illustrations provided by the old regulations were anachronistic and had become mostly useless to both employers and employees. As Secretary of Labor Elaine Chao recognized, the old rules

   reflected the structure of the workplace, the type[s] of jobs, the education level of the workforce, and the workplace dynamics of an industrial economy that has long since changed. With each passing decade of inattention, the overtime regulations became increasingly out of step with the realities of the workplace and provided less and less guidance to workers and employers. (14) For these reasons, there was widespread recognition that the old regulations needed to be reworked. The United States General Accounting Office had recommended to the Clinton Administration "that the Secretary of Labor comprehensively review current regulations and restructure white-collar exemptions to better accommodate today's work place and to anticipate future work place trends." (15) Such a seemingly simple prescription for change was easier said than done given the widely divergent opinions concerning the form such changes should take.

   The tension over the form of any revisions is reflected in the decades of delay and inaction that preceded the Bush Administration's efforts. In 1981, the Labor Department "stayed indefinitely" its previous proposal to readjust the FLSA's salary thresholds in response to public comments urging a more comprehensive review, (16) and, in 1985, it sought public comment on "all aspects of the regulations." (17) From 1985 until the Bush Labor Department published its proposal in March 2003, the Department published statements of regulatory priority twice per year emphasizing reform of the regulations. (18) Notwithstanding this professed emphasis from both Republican and Democratic administrations, little progress was made.

   In addition to the infirmities occasioned by the age of the regulations, the old rules had been increasingly exploited over time by plaintiffs eager to collect outsized judgments premised on employers' technical non-compliance with the regulations. In Reich v. Malcolm Pirnie, Inc., (19) for example, the Department of Labor obtained a more than half-million dollar judgment on behalf of four hundred otherwise-exempt employees because twenty-four of them had been subject to a total of just $3,269 in technically improper pay deductions (which had been reimbursed to employees) on the ground that all of the exempt employees were theoretically "subject to" the improper deductions. (20) In a California state law case, involving the exempt status of insurance adjusters (who had for many years been understood to be exempt), and purportedly, but improperly, applying federal regulatory concepts, a jury awarded more than $90 million in damages plus prejudgment interest to plaintiffs who were held to have been misclassified. (21) The rise of such "gotcha" litigation, confusion in the case law, and the staggering judgments which often resulted, created motivated stakeholder classes with employers (by and large) on one side, and the plaintiff's bar and labor unions on the other. Any changes that threatened to alter the status quo with respect to exempt and non-exempt workers sparked instant controversy.

   After meeting with more than forty of these stakeholder groups, representing both employers and employees, the Bush Labor Department finally published a proposed rule in the Federal Register on March 31, 2003. (22) The Department of Labor received an astounding 75,280 comments during the ninety-day regulatory comment period. Although only 600 of the comments were substantive (the rest were form letters), the comments reflected the intense public debate that was raging simultaneously in the media and in Congress. The AFL-CIO accused the Administration of robbing workers of overtime pay. (23) The Economic Policy Institute, which is funded by organized labor, issued a widely cited study contradicting the Labor Department's estimate that 644,000 employees would lose overtime with its own estimate of 8 million employees. (24) An author of that study wrote a Labor Day editorial arguing that "[t]he 8-hour day and 40-hour week that our great-grandparents fought for during a 50-year struggle and finally won in the New Deal will be nothing but a memory if the administration and its big business allies succeed in their stealth attack on this key labor protection." (25)

   Unfortunately, despite the rhetoric, the substance of the revised regulations received little attention. An examination of that substance reveals the sensible nature of the changes and their important public purpose: to protect the lowest paid workers and to provide clarity to employees and employers, thereby reducing litigation.

   As an initial matter, the revised regulations make clear that the exemptions do not apply to those for whom the FLSA's protections were designed, stating that non-management "carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the Fair Labor Standards Act, and are not exempt under the...