By Jessica Loeding
Small-business owners going to the polls in November will be focused on those candidates they see helping to fight the influx of labor regulations being introduced at the local, state and federal level.
In the first half of 2016, California and New York adopted measures to push minimum wage to $15, and the final rule was issued by the U.S. Department of Labor (DOL) on overtime regulations.
Although all eyes are on the race for the White House, a bigger battle is brewing on Capitol Hill. This year, 469 seats in the U.S. Congress are up for election – 34 in the Senate and all 435 House seats.
The question becomes whether Democrats can take back the Senate. To do so, the party needs to gain five seats. Democrats hold 10 of the positions open in 2016, while 24 belong to Republicans.
With battles over minimum wage, paid sick leave and predictive scheduling heating up, the 2016 election outcome could impact small businesses for years to come.
Minimum Wage
It’s the battle on the minds of franchisees across the country – the Fight for $15.
With protestors staging rallies nationwide, many small-business owners are concerned about the repercussions of more than doubling the federal $7.25 per hour minimum wage.
California and New York followed in Seattle’s footsteps earlier this year, raising their minimum to $15. California’s will take effect by 2022, while New York City’s begins in 2018 and the remainder of the state phases in the increase.
The U.S. Supreme Court in May declined to hear a case challenging Seattle’s decision. Beginning in 2018, businesses with more than 500 employees must pay the $15 rate, but smaller businesses have until 2021 to raise their wages.
At the beginning of 2015, 29 states and the District of Columbia paid above the national minimum wage. At least 16 states are expected to raise their minimum wage in 2016.
Overtime
On May 18, the U.S. Department of Labor unveiled its final rule to update the overtime regulations. The move comes after President Barack Obama directed the Secretary of Labor in 2014 to update the guidelines.
The final rule more than doubles the salary threshold for eligibility from $455 per week to $913, or $47,476 per year. Included in the overhaul is an automatic update to the salary threshold every three years, which will be based on wage growth. The first update is set for January 2020.
The department, however, did not make changes to the duties test for executive, administrative and professional employees.
Employers say the changes will force them to pay costly overtime or move managers to hourly positions, placing a higher burden on businesses that depend on those supervisors to work longer hours in exchange for other benefits and flexibility. Those changes are expected to hit low- and mid-level employees hardest. By eliminating salaried, managerial positions, employees see little opportunity for growth within a business, sending employee morale spiraling.
Taking effect Dec. 1, 2016, employers have about six months to prepare, but solutions are limited. An employer may choose to pay time and a half for any overtime worked; raise employees’ salaries to meet the new threshold; or limit a worker’s hours to 40 per week.
Expected to extend overtime pay protections to more than 4 million employees in the first year, the DOL estimated in its 508-page final rule that “average annualized direct employer costs will total $295.1 million per year.”
Joint Employer
In 2015, the National Labor Relations Board (NLRB) tilted the Joint Employer Standard in its ruling in the Browning-Ferris case. That ruling found a waste management company to be a joint employer of its subcontractor’s employees.
Prior to Browning-Ferris, the NLRB applied an economic realities test, which hinged on whether the joint employer had a hand in the key aspects of employment. Now, the board utilizes a totality of circumstances rule, under which numerous elements must be examined to determine when a joint employer maintains “sufficient influence over the working conditions of the entities’ employees.”
While no specific guidelines have been put forth by the NLRB, it is clear the net has been cast to include franchisors.
In March, a case began in a New York court to determine whether McDonald’s is a joint employer of franchisees’ employees. The case arose from the NLRB general counsel’s decision to consolidate complaints in July 2014 against multiple McDonald’s franchisees and McDonald’s USA as joint employers.
“The thrust of the NLRB’s argument in the McDonald’s case is that the franchisor controls the working conditions of franchise employees – setting out details ranging from restaurant cleaning procedures, to questions to be asked in the hiring of franchise employees, to minutiae of the food order-taking process – to such a minute degree that, in the words of the NLRB’s counsel, ‘it is responsible for what happens to workers subject to those conditions,’” said Brent Arnold and Allen Craig, partners at law firm Gowling WLG, in an article from Lexology.
Oklahoma, Georgia, Indiana, Louisiana, Michigan, Tennessee, Texas, Utah and Wisconsin have enacted legislation declaring that franchisors are not considered joint employers.
Paid Sick Leave
While there are no federal paid sick or family leave laws, several states and municipalities have enacted such regulations.
New York, California, New Jersey and Rhode Island have programs funded through payroll deduction that covers a portion of the employee’s wages for 4 to 12 weeks. San Francisco will require businesses with 20 or more employees to cover the balance for full paid leave in 2017. Maryland and the District of Columbia both have pending proposals for paid leave changes.
Some states require businesses to give employees at least one hour paid leave, depending on business size and hours worked. Although the employee begins accruing leave on the first date of employment, they may be prohibited from using the time within the 90-day hire period. The leave must be carried over from year to year, but unpaid leave does not have to be paid out at termination or resignation.
Some of the uses for paid leave include physical or mental illness, injury or medical condition of the employee; obtaining professional medical diagnosis or preventive care; care for a child, parent, spouse, domestic partner, or any other family member who has medical conditions or needs for diagnosis or care; and obtaining medical or legal services for or participation in a proceeding related to domestic violence, sexual assault or stalking.
Scheduling
Beginning in 2015 in San Francisco and New York, scheduling has become the latest target for U.S. labor activists.
Supporters are pushing for regulations regarding predictive scheduling, which restricts the use of on-call scheduling. On-call scheduling, they say, upends the lives of employees who expect to work but find out last minute they are not needed.
A long-standing practice in the retail and service sectors, flexible scheduling allowed businesses to make staffing adjustments based on customer flow. Those groups oppose predictive scheduling as it burdens businesses by removing the flexibility needed to operate and the scheduling many workers desire. It also increases costs, opponents argue, by requiring employees be paid for canceled shifts.
Predictable scheduling legislation has been introduced in both chambers of Congress within the past year. Oregon, Illinois, Connecticut, Minnesota, Maryland, California, Massachusetts, Indiana and Michigan also brought forth legislation related to scheduling.
In addition, U.S. Department of Labor, Wage and Hour Division Administrator David Weil said in an interview earlier this year that his agency is investigating whether workers should be legally entitled to predictable scheduling under the Fair Labor Standards Act.
Time invested in researching a candidate’s business platform can pay off at the polls. Regardless of whether it’s a local, state or national race, choose the person who represents you and your business.