In 2022, Will Congress Pass an Agenda that Hurts Small Businesses and Their Workers?

Last year was a particularly harsh one for small businesses across our country. With sky-high inflation, staffing shortages, supply chain issues, and the continued prevalence of the COVID-19 pandemic, many businesses struggled to get by, let alone thrive. According to a survey conducted by the Chamber of Commerce, less than a third of businesses rate the current economy as “good,” while also noting “small businesses are still skeptical about the health of the economy.” This is a red flashing light to policymakers to change course and put our nation’s job creators first so they can prosper and succeed. Unfortunately, if Washington Democrats pass their agenda, 2022 might not yield the relief so many businesses desperately need.

Congressional Democrats have a full plate when it comes to radically overhauling our nation’s labor laws. Whether it be confirming certain bureaucrats to high-level positions in President Biden’s administration or passing harmful legislation, there are a lot of concerning options lawmakers on Capitol Hill have to hurt our economy. Given the fragile state of our economy, it would be a mistake for Congress to take any action that would slow economic growth, stifle job creation, or hurt the ability of workers to work under their own terms.

As Congress enters the second session of the 117th Congress, here are some of the most pressing issues that could affect businesses or their workers on Capitol Hill in 2022:

A Senate Confirmation Vote on David Weil to the Department of Labor. The most significant immediate threat to small businesses is the president's nominee, David Weil, to be Administrator of the U.S. Department of Labor’s Wage and Hour Division (WHD). In this role, the Administrator has broad enforcement power and rulemaking authority to enforce federal workplace laws, such as minimum wage, overtime pay, family leave, and other labor laws. Weil previously served in this same position during the Obama administration and displayed a disturbing track record of supporting labor policy that was neither in the best interests of small businesses nor their workers. From 2014 to 2017, Weil hindered business with a slew of new, burdensome regulations that imposed crushing operational and legal costs on small companies and their workers. As Administrator, he was the chief architect of many of the defining anti-jobs regulations implemented by the DOL that resulted in one of the weakest periods of economic growth in modern history. 

Weil promulgated a regulation that more than doubled the salary threshold for determining whether an employee is exempt from overtime. As a result, millions of employees who had enjoyed flexible hours and professional status were converted to non-exempt status and put on the clock. He also issued an Administrator’s Interpretation that dramatically expanded the definition of “joint employment,” a type of labor model where employees are actually under the control of a parent company and not a franchise. Weil’s regulatory expansion meant that the franchisee and franchisor were joint employers of the franchisee’s employees. The American Action Forum estimates this rule could have reduced private sector employment by 1.7 million jobs, with 500,000 of those losses concentrated in the leisure and hospitality industry. He also supports the abolition of independent contractors, like Uber and Lyft drivers, freelance workers, and app-based delivery drivers.

Weil was approved out of a Senate Committee in January on a partisan vote and is awaiting full Senate approval. National Taxpayers Union has expressed our opposition to his nomination.

President Biden’s Signature Legislation, the Build Back Better Act. President Biden and Congressional Democrats have been working for nearly six months to build support among the moderate and progressive factions within the Democratic caucus. This comprehensive package touches nearly all aspects of the federal government - from taxation to financial services to energy, and of course labor policy (among many, many more policy areas). While supporters of BBB believe it would help build up families and lower-income Americans, in reality it will build up a federal bureaucracy that would hurt businesses with more regulations and financial burdens. Worse, it includes a watered-down version of the disastrous Protecting the Right to Organize (PRO) Act - legislation that would put the interests of big unions over businesses and workers.

Under the Build Back Better Act, federal agencies are given a windfall of taxpayer dollars to increase oversight and enforcement against employers, and to increase penalties under the Fair Labor Standards Act and the Occupational Safety and Health Act by at least ten times the current levels. Additionally, the most precarious provision in this section is the substantial increase in fines levied on employers for violations of the National Labor Relations Act. Straight out of the PRO Act, the legislative proposal would give the National Labor Relations Board the authority to levy fines of as much as $50,000 per labor violation, and $100,000 if the violation resulted in an employee getting fired. It’s clear that House Democrats want to make the potential consequences for some activities so steep that businesses would simply choose to let big labor unions have more leverage, rather than be subject to large fines and lawsuits. Additionally, the BBB includes a $250 above-the-line tax deduction for union dues payments made by union members, which would cost an estimated $1.8 billion.

While the legislation is still being negotiated, it is likely any final package will include some of the aforementioned provisions. The multi-trillion dollar BBB passed the House of Representatives in December 2021 and is awaiting Senate action. The National Taxpayers Union opposes the aforementioned labor provisions and the entirety of the BBB.

Legislation to Crush Businesses by Doubling the Minimum Wage. The federal minimum wage of $7.25 per hour has remained unchanged since it was last raised more than a decade ago. Rather than leave the decision of raising wage floors up to state or local governments, the vast majority of Democrats believe the federal government should more than double the current level. Such a move would be detrimental to the fragile state of the economy and businesses as greatly increasing the marginal cost of labor typically causes employers to reduce the size of their lower-skilled workforce. With fewer entry-level job opportunities available, first-time workers could face a more difficult time obtaining their jobs and the invaluable skills from that experience. For millions of people, first time jobs are the first rung on the ladder to success and a path to the middle class. However, a higher minimum wage could raise barriers to the middle class, and according to the Congressional Budget Office, “low-wage workers might face long-lasting reductions in family income if a minimum wage increase keeps them from developing skills.” 

Of particular concern is a partisan proposal titled “Raise the Wage Act,” which would gradually increase the federal minimum wage up to $15 per hour by 2025 and thereafter index the wage to inflation. The proposal would also phase out subminimum wage rates for certain classifications of workers. Currently employers are able to pay youth and individuals with disabilities below minimum wage under the justification that these lower rates of pay better reflect productivity or ability. Tipped workers’ hourly pay is below minimum wage (often called the tipped minimum wage) and is supplemented by the tips they receive to reach the federal minimum wage. All of these subgroups would then be subject to a minimum wage of $15. It’s obvious doubling the wage rate could have significant impacts on the American market, and businesses. This thinking is confirmed in a CBO report last year, which found “Employment would be reduced by 1.4 million workers, or 0.9 percent; and the number of people in poverty would be reduced by 0.9 million.” 

Rather than raising the minimum wage to an arbitrarily determined $15 per hour, Congress should focus on policies that boost job growth to put upward pressure on wages in a sustainable manner. This legislation has not yet passed either the House Education and Labor Committee or the Senate Health, Education Labor and Pensions Committee, which have jurisdiction on labor matters. The National Taxpayers Union opposed a similar piece of legislation when it passed the House in 2019. 

Enactment of the Protecting the Right to Organize (PRO) Act. House Democrats have often tried to use their majority to enact an agenda that benefits the bottom line of big labor unions. The most troublesome legislation that is on the table is the PRO Act - a harmful proposal that would radically change U.S. labor laws to juice the muscle of big labor unions at the expense of workers and job creators. The PRO Act is a hodgepodge of bad policies that would increase the coercive power of big labor unions under the guise of being pro-worker. Representative Virginia Foxx, Ranking Member of the Education and Labor Committee summarized the PRO Act perfectly: this legislation “redraws the playing field to favor union bosses sends a clear message: House Democrats’ allegiance is with Big Labor, not workers or small businesses.”

Of the many disastrous provisions in the PRO Act, perhaps the most economically damaging would be repealing right-to-work laws, which provide workers the freedom to choose whether or not to join a union in the workplace. Additionally, this legislation changes the definition of what is considered an “employee” in the gig economy, thereby ending the independent contractor model that has proven a success. If enacted, app-based drivers, freelancers, and other independent workers would lose out on the many benefits this employment model provides, like having a flexible work schedule. 

The PRO Act would also effectively end privacy in union elections by bringing back “card check,” a dangerous policy that ends the secret ballot. That, coupled with a requirement that workers’ personal home and work contact information be shared with a union, could lead to the intimidation and harassment of workers. Finally, this bill would increase the likelihood of coercion, boycotts and picketing by legalizing secondary boycotts against any employer and banning employers from hiring temporary workers during a strike

Without exaggeration, the PRO Act is one of the most overreaching labor bills ever considered by Congress. To the detriment of taxpayers, workers, and businesses, the PRO Act has already passed the House of Representatives in 2021. Nearly all Senate Democrats have cosponsored the Senate companion of the PRO Act.

The Congress has a menu of options that would negatively impact the labor market and the general economy. NTU is committed to working to ensure neither David Weil receives Senate confirmation, nor the trio of bills become law. American taxpayers, workers, and businesses would be better off for it.