Last month, President Biden formally nominated David Weil to lead the Department of Labor’s Wage & Hour Division (WHD), which is an office tasked with enforcing federal labor laws. It is expected that Weil will appear before the Senate Health, Education, Labor and Pensions (HELP) Committee to answer questions on Thursday, July 15th. Given Weil’s disappointing three-year tenure as WHD Administrator during the Obama administration, there will be no shortage of subject matter for Senators to ask about. Once Weil is up for approval by the Committee, Senators should reject this radical, anti-worker and anti-business nominee.
With job creation and the general economy on the rebound following the downturn caused by the COVID-19 pandemic, our federal government must do everything in its power to keep regulatory and tax burdens at a minimum. Yet with the nomination of Weil to once again lead WHD, it is clear that the Biden administration is not interested in keeping such regulatory burdens as low as possible. Should Weil again be put back in charge of the WHD (a position he held from 2014-2017), it would signal a return to the overly burdensome bureaucracy that led to economic malaise and slow wage growth that defined the Obama presidency.
Weil had a disturbing track record of supporting labor policy that was not in the best interests of small businesses nor their workers. As WHD Administrator, he was the chief architect of many of the defining anti-jobs regulations implemented by the DOL, such as the rules on joint employer and overtime. Additionally, he strongly supports the anti-worker PRO Act, a job-killing $15 minimum wage, and the abolishment of the independent contractor model that employs millions of Americans. The labor philosophy Weil subscribes to will result in fewer jobs, not more.
Let’s take a quick look at some of the rules and regulations that were created by Weil:
A big reason why taxpayers should be concerned with this nomination: Weil was the creator of the Obama administration’s unreasonable overtime rule. In May 2016, the DOL finalized a sweeping and unwarranted expansion of the Fair Labor Standards Act’s overtime regulations; more than doubling the threshold for time-and-a-half overtime pay from $23,660 to $47,467, with automatic increases every three years thereafter. Described as a way to protect U.S. employees, the DOL paid little regard to the painful real-world ramifications of this new statute.
For many employees, this rule was a step backwards - knocking salaried workers back to hourly wage earners. Many of these employees worked hard to achieve the status and benefits of exempt employment, like employer-provided health insurance or retirement accounts. In essence, those working to gain new skills in order to advance up the corporate ladder would suddenly find they need to scale even more rungs. The rule is not compatible with the modern workforce. Today’s workers, such as those at a start-up or nonprofit organization, value flexibility and often eagerly work irregular hours on behalf of a vision. Workplace innovations such as telecommuting would be more difficult to implement due to strict tracking and reporting requirements.
With few exceptions (for certain teaching and academic roles), the overtime rule is an overly broad, “one-size-fits-all” policy that didn’t reflect the dynamic and increasingly diverse roles in today’s economy. Businesses hard-pressed to implement the rule could be forced to re-classify employees, reduce base wages, and transition roles to part-time - forcing many employees into second jobs. For some businesses it may make more sense to ramp up automation and eliminate jobs altogether. Thankfully, the previous administration implemented an overtime rule that was more tailored to protecting workers and small businesses.
Weil is also a strong supporter of “fissured employment,” a type of labor model where employees are actually under the control of a parent company and not a franchise. The economic reality of the relationship, according to Weil, meant that the franchisee and franchisor were joint employers of the franchisee’s employees. Being deemed a joint employer would make the employer liable for overtime pay, minimum wage, and other requirements for a subcontractor’s or franchisee’s employees. The DOL put Weil’s views into practice and applied an expanded definition of joint employment to labor statutes. The “joint employer” rule was implemented by the National Labor Relations Board and threatened the existence of the American restaurant industry.
Our friends at the American Action Forum estimate this rule could result in 1.7 million fewer jobs in the private sector if implemented today, with 500,000 of those losses directly in the leisure and hospitality industry. Such drastic job loss would further strain taxpayer funds by necessitating greater expenditures on programs like unemployment insurance, Medicaid, and housing assistance. Thankfully, the Trump administration greatly blunted the impact of this rule through updated rulemaking in 2020 that is still being litigated in the judicial system.
New Potential Regulatory Burdens
Weil supports raising the minimum wage to $15 per hour, which would be a crushing burden on small businesses nationwide. Faced with rising labor costs in states where this minimum wage has already been implemented, employers were forced to cut hours and seek out alternatives, such as automation to compensate for the increased wages. Numerous studies confirm the trend of negative economic consequences associated with minimum wage increases, including the Congressional Budget Office, which predicts 1.4 million fewer jobs. Additionally, Weil would be responsible for implementing President Biden’s executive order to raise the minimum wage to $15 for federal contractors, and we suspect he would implement this order as broadly as possible.
As Weil works his way through the confirmation process, the Protecting the Right to Organize Act is also sitting in the Senate awaiting a vote. This fundamentally flawed legislation would radically overhaul U.S. labor laws to entrench the interests of big unions at the expense of workers. Under the PRO Act, a contractor would be considered an employee unless the service they are performing is “outside the usual course of the business of the employer.” It would also end state “right-to-work” laws, which give workers the ability to choose to join a union or not. As a result, countless freelancers would be reclassified as employees and become too costly for newspapers and media companies to continue to work with. Analysis provided by the American Action Forum calculates the PRO Act would add tens of billions of dollars in annual compliance costs onto employers and reduce economic growth. Of course, Weil would be charged with implementing this disastrous legislation
It’s clear that Weil is on the opposite side of sound economic theory on virtually every issue, making him uniquely unfit to again serve as WHD chief. Employers and workers alike need certainty from the federal government, but if confirmed, Weil would stack the deck against small businesses by making it much more difficult for them to survive and thrive. We strongly urge Senators to stand with taxpayers, businesses, and workers by rejecting the nomination of Weil to the Wage and Hour Division.