News + Events
More Gridlock? Some Very Partisan Proposals Flood the Congressional Docket
Originally published in Employment in the Law - Fall 2011
November 2, 2011
Rebecca E. Ivey
This year’s spectacular show of partisan gridlock over raising the debt ceiling left the American public less than satisfied. This gridlock shows no signs of abating. The makeup of Congress has once again changed, as Republican Bob Turner won the special election to replace Democrat Anthony Weiner. The return of Gabrielle Giffords marked a rare high point, as she traveled to Washington, D.C., to take part in the debt ceiling vote.
Consistent with this theme of stalemate, the employment bills introduced (and working their way through the process) exhibit the same polarized nature as the houses of Congress themselves. With a Congress this divided, what legislation really stands a chance?
THE ARBITRATION FAIRNESS ACT (H.R. 1873, S. 987)
Current status of law: The Federal Arbitration Act, passed in 1925, applied to disputes between commercial entities of generally similar sophistication and bargaining power. Since its passage, courts have interpreted the Act broadly, so that it covers agreements between employers and employees, and between businesses and consumers, with the result that employment and consumer disputes are now routinely subject to arbitration. Arbitration clauses have become extremely prevalent. In fact, it is almost impossible to find any standard customer agreement that does not include an arbitration clause, and many employment contracts also contain arbitration clauses. Such arbitration agreements typically require disputes to be submitted to binding arbitration and prevent a potential plaintiff from pursuing a lawsuit in court. Arbitration of disputes confers many benefits on a business or employer, including lower expense, predictability, confidentiality of the proceedings and the outcome of the dispute, and limited court review of an arbitrator’s decision.
What would change: This legislation would impose a rule that mandatory pre-dispute arbitration clauses in employment, consumer, and civil rights cases are not enforceable. Employees and consumers would be able to bring their disputes in court if they so chose, and could make that choice at any time.
Why you care: The Act would dramatically change the effect of existing and future employment contracts and relationships, as well as consumer contracts. If you routinely include arbitration clauses in employment (or consumer) contracts, you will need to plan for a very different enforcement scheme regardless of whether you revise your contracts accordingly.
Likelihood of becoming law: This bill has not garnered any G.O.P. support, which is not a real surprise. However, its Democratic support is strong. In the context of this very partisan Congress, however, this bill will likely fail.
THE PROTECTING JOBS FROM GOVERNMENT INTERFERENCE ACT (H.R. 2587, S. 1523)
Current status of law: Currently, the National Labor Relations Board (NLRB) adjudicates alleged violations of the National Labor Relations Act (NLRA), which protects workers’ rights to organize and can punish employers for inhibiting these rights or retaliating against employees for exercising these rights. In our last Legislative Update we discussed how the NLRB filed a complaint against The Boeing Company alleging that Boeing’s decision to locate its second assembly plant for the production of its 787 Dreamliner commercial jet in South Carolina, a right-to-work state, rather than Washington, represented illegal retaliation against union employees.
What would change: This legislation would explicitly prohibit the NLRB from ordering any employer to close, relocate, or transfer employment under any circumstance.
Why you care: For those employers with an organized workforce, the specter of a Boeing-type dispute is a terrifying prospect. This legislation would nip that possibility in the bud.
Likelihood of becoming law: This bill passed the House on September 15, 2011 after a party-line vote, with eight Democrats (all from right-to-work states) crossing the aisle to support it, but seven Republicans doing the same in opposition. The Senate reception is expected to be cold, and it is unlikely that President Obama will sign this bill even if it passes both houses.
AMERICAN JOBS ACT OF 2011 (S. 1549, S. 1660)
Current status of law: Employers currently must comply with a complicated scheme of payroll taxation. They also need to withhold taxes on behalf of employees in accordance with the Internal Revenue Code, in addition to paying taxes on earnings, sales tax, and more.
What would change: The payroll tax provisions of the bills would cut payroll taxes for employers in half for the first $5 million in payroll, eliminate payroll taxes for firms that hire new workers or increase wages (capped at $50 million in payroll increases), provide tax credits for hiring unemployed workers (and greater tax credits for hiring unemployed veterans), and cut payroll taxes for workers in half. Both also contain anti-discrimination provisions prohibiting discrimination against the unemployed. In addition, the bills contain provisions regarding unemployment compensation and infrastructure projects. The only difference between the two bills is how the cost of the provisions are offse—S. 1549 includes specific offsets, S. 1660 introduces an income surtax on the extremely wealthy.
Why you care: These pieces of legislation combine initiatives that employers will love and hate in one big package. The payroll tax provisions are extremely helpful, particularly for small businesses, and the hiring tax credits certainly don’t hurt. However, the anti-discrimination provision is a tough pill to swallow.
Likelihood of becoming law: Even with the publicity these bills have received recently, Congress does not appear very excited about them. Under the sponsorship of Senate Majority Leader Harry Reid (D-NV) both were reported out of committee and sent to the Senate floor. S. 1660 failed a cloture motion, and will not be considered by the full Senate. S. 1549 awaits its fate next. If it passes the Senate, which is not definite, it will have a difficult time in the House, even though the payroll tax provisions are not controversial. Absent significant changes, this bill is unlikely to become law.
AMERICAN JOBS ACT OF 2011 (H.R. 2911)
Current status of law: The Internal Revenue Code sets up a double taxation system for corporations whereby the corporation and the individual stockholders are both taxed on earnings.
What would change: This bill would, believe it or not, reduce the federal income tax on corporations to zero (including the alternative minimum tax).
Why you care: As you can see, this is NOT the same bill as the Senate bill above with the very same name. The word on the street is that House Democrats were so slow in introducing President Obama’s jobs bill that Representative Louis Gohmert (R-TX) snatched the name for his very different bill instead. For those businesses that have set up operations as a corporation, this bill would dramatically reduce income taxes.
Likelihood of becoming law: Do you have any doubt about this? It’s a nonstarter that won’t get out of committee.
THE LEGAL WORKFORCE ACT (H.R. 2885)
Current status of law: The Illegal Immigration Reform and Immigrant Responsibility Act of 1996 (IIRIRA) established a voluntary Internet-based pilot program known as E-Verify, through which employers verify the work authorization of new hires. Certain states require employers to use E-Verify, but as of yet, there has been no federal mandate to use the program.
What would change: This legislation would require employers to begin to use E-Verify on a graduated schedule based on the size of the employer’s workforce.
Why you care: You would be required to use E-Verify within the next few years.
Likelihood of becoming law: It is likely that some strengthening of the E-Verify system will be enacted this Congressional cycle. Will it be this bill? It has surged into the forefront by reporting out of committee favorably. Keep an eye on the legislation―it’s more likely than most to become law.
MILITARY FAMILY LEAVE ACT OF 2011 (S. 1112)
Current status of law: The Family and Medical Leave Act (FMLA) was recently amended to include various provisions applicable to military families, including up to 26 weeks of unpaid leave for an employee who provides care for a service-member, and up to 12 weeks of unpaid leave for certain “qualified exigencies,” or enumerated circumstances, associated with deployment, service, and return.
What would change: This legislation would specifically provide two weeks of unpaid leave for a spouse, child, or parent of a service-member, but unlike the FMLA, it does not specifically enumerate the circumstances in which leave may be taken.
Why you care: The FMLA leave requirements are complicated enough. Adding another, similar leave entitlement to the mix won’t make them any simpler for your human resources department.
Likelihood of becoming law: This bill hasn’t garnered significant support. It looks likely to languish in committee.
EMPLOYMENT IMPACT ACT OF 2011 (H.R. 2204, S. 1219)
Current status of law: There is no law that requires federal agencies to consider the impact of regulations on employment statistics.
What would change: This legislation would require federal agencies to release a detailed impact report for any major proposed regulation on jobs gained, lost, or sent overseas before their implementation.
Why you care: This bill would not affect employers directly. However, by imposing an extra duty on federal agencies, the bill’s supporters believe it will effectively reduce regulation. While this may seem like a good idea on its face, there will certainly be costs associated with the creation of such reports. So, even though this bill attempts to minimize regulation on business, the costs of its implementation would come out of taxpayers’ (i.e., businesses’) pockets.
Likelihood of becoming law: While Republicans generally support this measure, it probably doesn’t have the bipartisan support to make it through both houses, even if it is reported out of committee. However, making the federal government consider employment issues before it regulates is an idea with significant appeal. It may be too early to call this one.