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Looking Back at Obama's Term in Employment Law

By Philip M. Berkowitz

GC New York

November 8, 2012

What impact did President Barack Obama's positions on employment and labor law have on his reelection? The short answer is: a lot. In fact, the president may owe his reelection to his ability to claim that he saved the American auto industry, and along with it thousands of union jobs in Ohio and elsewhere in the upper Midwest. Governor Mitt Romney may have succeeded in highlighting this issue with his highly criticized series of television advertisements seeking to debunk this claim.

Of course, the president was elected, in 2008, with the broad support of organized labor, and he was determined to help unions regain some of the ground they lost during the Bush (I and II) and Reagan years. And he certainly owes that contingent no less substantial a debt following the results on Tuesday.

Nevertheless, some might argue that, despite a Democratic-controlled Congress during his first two years in office, the president didn't have much success advancing a pro-labor agenda—remember the short-lived, and hotly debated Employee Free Choice Act, or EFCA?—and that his plans were upended by the recession and, starting in 2010, a Republican Congress.

But in fact, the president has had a significant impact on employment and labor law—perhaps most notably in the areas of women's civil rights, whistleblower law, and executive compensation. Further, a National Labor Relations Board populated with Obama appointees has moved aggressively to adopt new rules that make it easier for unions to organize and win elections, and to issue rulings that have wide impact on typical employment policies in the non-union, as well as union, workplace.

As we've heard over and over during this campaign, the first bill Obama signed into law was the Lilly Ledbetter Act—which reversed a Supreme Court decision imposing a restrictive interpretation on the limitations period for challenging claims of alleged salary discrimination.

The president also successfully pushed through the Dodd-Frank Act, which, among other things, awards bounties to whistleblowers and imposes major limitations on executive compensation. At the height of the financial crisis, one might have said that executive compensation was an area where Democrats and Republicans could agree. With the Securities and Exchange Commission under attack and the Bernard Madoff scandal a recent memory, few would have admitted to favoring a Wall Street compensation system that rewarded excessive risk.

And of course, Obamacare was a huge victory for organized labor.

What about immigration? The "DREAM Act" has gone nowhere, but the president's Deferred Action for Childhood Arrivals (DACA) program has arguably increased opportunities for children of undocumented individuals.

Finally, under Obama, the NLRB and the U.S. Department of Labor have issued rulings that limit employers' rights to require mandatory arbitration of class and collective actions, and greatly expanded and reversed prior interpretations of the Sarbanes-Oxley Act (SOX) that had limited whistleblower rights.

A Reluctant Congress

It may be helpful to review a bit of history. In 2008, Congress was controlled by the Democratic Party, and we had a newly elected president with grand plans to reform employment and labor and to reward the unions that had supported his election.

No labor law initiative received more attention than EFCA, the Employee Free Choice Act. Rivers of ink and countless seminars described this proposed law, which would have required the NLRB to certify a union, without an election, as the exclusive representative of employees if a majority of the employees in an appropriate unit has signed valid authorizations.

The bill's champions argued that increased unionization would bolster the economy. But business fought the law vigorously. (The U.S. Chamber of Commerce described its potential passage as "Armageddon.") On top of that, the near collapse of the U.S. automobile industry in 2008 and 2009 was being directly tied to the unions' hold on that industry. Thus, rather than being viewed as a solution to the economic crisis, many people were concerned that imposing unionization on employers would endanger jobs.

At the end of the day, even a Democratic Congress wasn't eager to pick a fight with business in the middle of the biggest economic collapse since the Great Depression, and the bill died a hard death.

Obama's failure with EFCA, and his highly contentious fight with a Republican Congress over Obamacare, may have persuaded him to use other executive powers, such as his power of appointments, as well as the bully pulpit, to accomplish his employment and labor law agenda even without the cooperation of a hostile Congress.

We can provide a short list of other bills that died an early death. Nevertheless, despite the legislative failings, the causes they reflect have advanced. For example, the Arbitration Fairness Act (AFA) would have prohibited pre-dispute arbitration agreements requiring arbitration of employment, consumer, or franchise disputes. Some of its key principles found life in Dodd-Frank, which, while providing new private rights of action to protect whistleblowers, also prohibits pre-dispute agreements to arbitrate those disputes.

The Obama administration's active hostility to mandatory arbitration of employee rights was also advanced in a controversial decision of the NLRB, D.R. Horton Inc.1 There, the board held that an arbitration agreement requiring employees to waive "as a condition of employment" their right to bring a joint, class or collective action violates the National Labor Relations Act's protection of the rights of employees to engage in concerted, protected activity. While most courts have declined to follow D.R. Horton, the decision has nevertheless succeeded in throwing a monkey wrench into the viability of these pre-dispute agreements.

Similarly, the Employment Non-Discrimination Act (ENDA) would have prohibited employment discrimination on the basis of both sexual orientation and gender identity. While it never passed, rejection of discrimination against homosexuals is winning favor on a state-by-state basis, and is far less divisive an issue than it was even four years ago.

Protection of workers improperly classified as independent contractors was the focus of the Independent Contractor Proper Classification Act. Again, while the law never went anywhere, this issue has received robust attention from state and federal departments of labor.

Whistleblower Protection

Dodd-Frank significantly strengthened SOX's prohibition of retaliation against whistleblowers, and provides new "bounty awards" for whistleblowers. Indeed, Congress seems to have gotten into the spirit of the matter—as recently as September 2012, Congress moved to strengthen whistleblower protection for federal employees, passing the Whistleblower Protection Enhancement Act. This new law would provide additional whistleblower protection to federal employees who complain about government fraud, waste and abuse.

Even more dramatically, under Obama, the U.S. Department of Labor has dramatically strengthened whistleblower protection available under SOX and Dodd-Frank, reversing many years of prior rulings that limited those rights. The Labor Department's Administrative Review Board (ARB) has been ruling in favor of SOX whistleblowers and interpreting that law in a manner that is far more claimant-oriented in the decade since SOX became law.

With a full complement of Democratic appointees, the ARB is committed to expanding SOX coverage, broadening the concept of protected activity, restricting employer defenses, and generally making the Labor Department a friendlier place for whistleblowers.

Interpretations of critical aspects of SOX will likely be in flux for a time as the solidly Democratic ARB moves to broaden both the scope of SOX and the remedies available to a complainant. While the ARB may meet some resistance from the largely Republican federal judiciary, which may view SOX primarily as a remedy for shareholder fraud, resolution of the differences in approach will depend on whether the courts defer to the ARB's expertise.

Obama can be expected to further strengthen the hand of the NLRB, to move forward a pro-whistleblower agenda, and to look for other ways to counter the resistance of business, whether in the financial services industry or elsewhere, to unreasonable government regulation of their employment practices. While he may not be able to accomplish this directly through legislation, the president has demonstrated the Executive Branch's power to influence labor and employment law by other means.


Philip M. Berkowitz is a partner and U.S. cochair of Littler Mendelson's international law practice; he is based in the New York office.

Endnotes:

1. 357 NLRB No. 184 (Jan. 3, 2012).