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Leland Frost

Texas Court Halts Blacklisting Rule

By | Shopfloor Legal, Shopfloor Main | No Comments

Yesterday, Judge Marcia A. Crone of the Eastern District of Texas granted a nationwide injunction for the majority of the Fair Pay and Safe Workplaces regulation, otherwise known as “blacklisting.” The order states that business groups “properly demonstrated immediate and ongoing injury to their members if the rule is allowed to take effect,” adding that based on the National Association of Manufacturers conflict minerals disclosure lawsuit against the Securities and Exchange Commission, the Blacklisting Order was also likely a “compelled public reporting requirement violating the First Amendment.”

The regulation, finalized in August, places extensive and burdensome new reporting requirements on federal contractors in an attempt to achieve broad and sweeping labor law reforms, and it would have gone into effect today if the judge had not ruled. The only area where the preliminary injunction was not granted is the January 1, 2017, Paycheck Transparency provision, which, upon implementation, would require contractors and subcontractors to provide employees with documentation of regular and overtime hours worked, pay and additions to or deductions from pay that are not currently included in employee paychecks. The decision strongly affirms the arguments related to the First Amendment, due process, constitutional, arbitrary and capricious concerns and others raised in the complaint.

This regulation arises out of the executive branch’s attempt to parlay the federal government’s limited proprietary authority over the procurement of government contracts into a regulatory tool designed to achieve broad and sweeping labor-law reforms. Implementation for prime contractors was set to begin on October 25, 2016, for contracts of $50 million or more and requires reporting of one prior year of labor law violations. The threshold for contract size drops to $500,000 on April 25, 2017. The reporting period extends to the three prior years of labor law violations starting on October 25, 2018. Covered disclosures of labor law violations include civil judgments, administrative merits determinations and arbitral awards, including those that are not final or still subject to court review. The number and severity of the alleged and proven violations will be a factor in the awarding of contracts, affecting thousands of manufacturers.

The judge ruled that the First Amendment claim will likely be successful on the merits based on the courts logic in NAM v. SEC (D.C. Cir. 2014). Specifically, the court stated, “The Executive Order, FAR Rule and DOL Guidance share the same constitutional defect as the conflict minerals rule in NAM, only more so. The Order, Rule and Guidance compel government contractors to ‘publicly condemn’ themselves by stating that they have violated one or more labor or employment laws. The reports must be filed with regard to merely alleged violations, which the contractor may be vigorously contesting or has instead chosen to settle without an admission of guilt, and, therefore, without a hearing or final adjudication.” The appeals court in NAM “further took issue with the government’s attempt to force companies to ‘stigmatize’ themselves by filing the required reports, stating, ‘Requiring a company to publicly condemn itself is undoubtedly a more ‘effective’ way for the government to stigmatize and shape behavior than for the government to have to convey its views itself, but that makes the requirement more constitutionally offensive, not less so.

Manufacturers are pleased that Judge Crone enjoined the implementation of this regulation that would have far-reaching negative impacts on companies with federal contracts. The NAM will continue fighting for manufacturers in the courts to turn back the growing wave of federal regulations that hamper growth.

NAM Challenges the DOL’s New Overtime Rule

By | Manufacturers’ Center for Legal Action, Shopfloor Legal, Shopfloor Main | No Comments

The Manufacturers’ Center for Legal Action filed a complaint with a coalition of other associations on September 20 to challenge the Department of Labor’s (DOL) new overtime rule, asserting the new rule exceeds the authority of the DOL under the Fair Labor Standards Act (FLSA). Unless a court stops it, this unprecedented rule will impair employers’ ability to classify as exempt from overtime executive, administrative, professional and computer employees. The new rule will go into effect on December 1, 2016, causing economic harm to both employers and the employees who will be subject to the new overtime requirements.

The new overtime rule drastically alters the DOL’s minimum salary requirements—increasing the minimum by 100 percent, from $23,660 to $47,476 annually—so as to impose new overtime payment requirements on businesses of all sizes. This directly effects those individuals who have historically been considered exempt from overtime pay. Due to the drastic rise in the salary threshold, employees will have to be reclassified and will inevitably lose many of the benefits and flexibilities that go along with being an exempt employee, such as flexible work schedules that permit employees to sometimes work outside of the normal business hours due to personal obligations.

In addition, the DOL’s new rule permits employers for the first time to count nondiscretionary bonuses, incentives and commissions toward up to 10 percent of the minimum salary level for exemption; however, this provision is so restricted by the DOL as to be meaningless. It also establishes an unprecedented automatic “escalator” provision that will dramatically increase the minimum salary every three years without a rulemaking. Congress has provided for automatic increases in other areas, such as the cost of living for Social Security benefits, but Congress has never provided for automatic increases of the minimum wage. The escalator provision exacerbates the detrimental impact on businesses, both large and small, by automatically updating the minimum salary requirements to even higher levels every three years.

The DOL has failed to recognize the infeasibility, costs and real-world impacts of the new overtime rule. As noted in our press release, manufacturers of all sizes will bear the burden of this costly regulation that will force many employers to cut critical programming, staffing and services to the public. Many of these employers will lose the ability to effectively manage their workforces and provide flexibility to valued employees on the pathway to the middle class. This new rule will injure employers and employees across many industries, job categories and geographic areas by denying them opportunities for advancement and hindering performance of their jobs. We are hopeful that the court will understand the importance of this issue and overturn the DOL’s new overtime rule.

NAM Files Lawsuit to Protect Workplace Safety

By | Human Resources, Manufacturers’ Center for Legal Action, Shopfloor Legal, Shopfloor Policy | No Comments

The Manufacturers’ Center for Legal Action filed a lawsuit on Friday, July 8, 2016, to challenge the Labor Department’s Occupational Safety and Health Administration (OSHA) workplace injury and illness New Rule. The New Rule places unreasonable restrictions on employer programs to increase workplace safety. As noted in our press release, not only does OSHA lack statutory authority to enforce this rule, but the agency has also failed to recognize the infeasibility, costs and real-world impacts of what it preposterously suggests is just a mere tweak to a major regulation.

The NAM’s complaint challenges the New Rule’s prohibitions and limits on employer safety incentive programs and drug testing programs. Incident-based safety incentive programs and post-accident drug testing programs help employers promote workplace safety, which is supposed to be OSHA’s primary mission. Instead, out of a misguided zeal to improve accuracy of reporting on workplace injuries, OSHA has lost sight of the importance of reducing the number and severity of injuries themselves. Properly designed incident-based employer safety incentive programs are the most effective tool to get employees and supervisors immediately invested in workplace safety. Through these programs, employees are continuously motivated to improve their environment and to look out for their safety and the safety of others and to eliminate unsafe behaviors. The result is a dramatic decrease in accident frequency and severity.

By encouraging all employees, including supervisors, to improve workplace safety, incident-based safety incentive programs jump-start a change in culture that results in a prompt and sustained decrease in accident frequency and severity. Without these incident-based safety incentive programs, instituting a culture of safety in the workplace is much more slow and difficult and seldom leads to the same dramatic reductions in serious accidents. The New Rule is unlawful and must be vacated because it exceeds OSHA’s statutory authority; was adopted without observance of the procedures required by law; and because the challenged provisions, and their underlying findings and conclusions, are arbitrary, capricious, an abuse of discretion and otherwise not in accordance with law.

In addition, on July 12, 2016, the NAM filed a memorandum and emergency motion for a preliminary injunction seeking to prohibit OSHA from implementing the New Rule, which will otherwise take effect on August 10, 2016, causing irreparable harm to many thousands of employers across the country. The New Rule irreparably harms employers and employees by making their workplaces less safe and increasing the likelihood of workplace injuries and fatalities. If OSHA’s rule is not struck down, manufacturers will have to make a “Hobson’s choice” between eliminating or drastically restricting highly effective incident-based safety programs and/or drug testing programs, thereby increasing the number of employee injuries and even fatalities in the workplace; or else risking exposure to increased OSHA citations, inspections and penalties if the safety programs are not removed. OSHA’s main goal is to eliminate or minimize the frequency and severity of workplace injuries, illnesses and deaths—this misguided New Rule does not accomplish that goal.

New NAM Effort to Help Manufacturers with International Compliance

By | Shopfloor Legal, Shopfloor Policy | No Comments

The NAM launched a new direct legal service for our members—MCI Global—through our Manufacturers’ Compliance Institute (MCI) to provide international compliance assistance at no cost. The MCI, launched last year, has provided direct legal assistance on a variety of labor and employment questions to more than 400 NAM member companies and 550 individuals. With MCI Global, we expanded the MCI’s services to include international compliance guidance, specifically for inquiries on export controls, sanctions, customs and other market-entry fundamentals.

Working with the global law firm Squire Patton Boggs, MCI Global addresses manufacturers’ potential compliance risks that arise from evolving rules, both in the United States and abroad. Whether you are a multinational company or a small-sized exporter, MCI Global offers solutions for many of the complex operational and legal issues associated with exporting your products. Members have remarked that MCI Global is an excellent resource and works “flawlessly” to help quickly address their questions. Read More

Challenging Expansion of Waters of the United States Regulation

By | Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

The National Association of Manufacturers’ (NAM) Manufacturers’ Center for Legal Action (MCLA) is suing the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers to challenge a new rule that expands jurisdiction over “Waters of the United States.” The EPA’s jurisdiction is limited to “navigable waters,” meaning waters of the United States including the territorial seas, but the EPA has attempted to expand jurisdiction over a staggering range of dry land and water features: large and small; permanent, intermittent or ephemeral; flowing or stagnant; natural or manmade; and interstate or intrastate. The rule exceeds constitutional authority and violates protected individual rights.

The rule will require permits for any unauthorized “discharges” somewhere that qualifies as a water of the United States. The definitions are complex and vague and often require case-by-case determinations by the agencies. Manufacturers that own property that might constitute covered U.S. waters will have to try to determine whether any activities they want to conduct could be subject to the rule, as criminal penalties for negligent violations are up to $25,000 per day and up to a year in prison per violation. The EPA may also impose civil penalties of up to $37,500 per discharge, per day, per offense. These punitive provisions discourage the reasonable and productive use of improvements to land and water features. Read More

MCLA Crosses the Ocean to Defend Manufacturers in the European Court of Justice

By | Manufacturers’ Center for Legal Action, Shopfloor Legal | No Comments

Today, the NAM crossed the ocean to represent U.S. manufacturers before the European Court of Justice (ECJ) and fight against the public disclosure of confidential business information. In 2015, the ECJ granted the NAM intervener status in European Commission v. Stitching Greenpeace. This is significant because intervener status is more difficult to obtain in the European system since it grants the intervener the ability to argue before the court and have its issues addressed on the merits. Furthermore, by allowing our intervention, the court recognized the interest of U.S. industry in this case. It is very unusual that U.S. trade associations appear before the EU courts, and it was far from certain that we would succeed in being admitted.

As way of background, the plaintiffs requested the public disclosure of a massive amount of confidential business information relating to certain pesticides used both in the United States and Europe, including how products were manufactured and their final composition, in order to assess potential environmental impacts. This case has broad implications, not only for the crop protection industry, but also for many, if not all, U.S. chemical manufacturers operating both in the United States and in Europe. The lower court’s ruling leaves two options for companies selling goods in the European Union. Either they accept that their trade secrets will be made public, meaning that their data can be used and abused anywhere in the world by competitors, or they decide not to market their products in the European Union altogether, with obvious adverse consequences for the company and the European Union as a whole. Read More

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