World

Trump’s Labor Secretary Is a Wrecking Ball Aimed at Workers

David Weil, who ran the Wage and Hour Division of the Department of Labor during Obama’s Presidency, told me that other recent rule changes similarly harm low-wage workers. Scalia’s Labor Department has lowered the salary threshold for exempting employees from overtime pay (meaning that fewer workers receive it). Another altered rule gives restaurant owners more discretion over tips, making it easier to shortchange waitstaff.

In July, word leaked that the Labor Department was rushing to enact a new rule that would more broadly define the term “independent contractor.” Such workers can be denied a minimum wage, overtime pay, and other benefits. Shannon Liss-Riordan, a lawyer who has filed numerous lawsuits on behalf of Uber drivers and other “gig workers” classified as independent contractors, described Scalia’s proposed change as a “gift to corporations.” The effort also raises ethical questions, since several companies that particularly stand to benefit—including Uber, Grubhub, and DoorDash—are Gibson Dunn clients. In the cases that Liss-Riordan has litigated, Gibson Dunn has “been the primary firm I’ve been up against,” she said. “It should raise some serious eyebrows that the head of the Department of Labor is pushing a fast-track attempt to limit protections for gig workers, given that his law firm has been actively working through the court system to try to reduce the protections for these employees.”

The Labor Department is granting the public only thirty days to comment on the rule—typically, the comment period is sixty days. This is especially striking in light of a 2012 op-ed about the Dodd-Frank Act that Scalia published in the Wall Street Journal, in which he lambasted federal agencies for failing to “listen carefully to what the public says” before imposing a regulation. In May, when the Labor Department issued a rule exempting certain retail workers who are paid by commission from receiving overtime pay, it acknowledged that the change was being implemented “without notice or comment.”

A senior official in the Labor Department told me that its own experts and field officers have been sidelined by political appointees. In the past, the official said, field officers played an integral role in drafting new rules. Today, many of them learn about rule changes only after the fact, from agency press releases. Career officials have taken to calling the shadowy operatives now in charge the Ghost Squad.

Although some of Scalia’s rules may be overturned under future Administrations, the reversal process can take years, particularly if industry mounts court challenges. As Liss-Riordan noted, “Once something is done, it’s always harder to undo it.”

In August, Janet Herold, the Labor Department’s solicitor for the Western region, filed a complaint with the U.S. Office of Special Counsel, alleging that Scalia had abused his authority by intervening to settle a 2017 Labor Department lawsuit. The suit accused the tech company Oracle of underpaying women and people of color; lawyers with the department’s Office of Federal Contract Compliance Programs had determined that Oracle owed these workers between three hundred million and eight hundred million dollars in back pay. Oracle denied any wrongdoing. In recent years, the company has developed close ties to the White House. Safra Catz, the company’s C.E.O., served on the President’s transition team; in February, Larry Ellison, Oracle’s founder and chairman, hosted a fund-raiser for Trump. In the fall of 2019, shortly before the discrimination case went to trial, Herold learned that Scalia intended to settle it for between seventeen and thirty-eight million dollars—a sum that she considered far too low. She wrote a memo objecting to this intervention.

“If I buy this sweater, we’ll also have to buy a rustic little place upstate.”
Cartoon by Kendra Allenby

In Herold’s complaint to the Office of Special Counsel, she alleges that Scalia removed her from the case in retaliation. On August 28th, she learned that he intended to reassign her to fill a vacant position at OSHA. Herold had almost no experience with the agency.

In response to Herold’s allegations, which were first reported by Bloomberg Law, a Labor Department spokeswoman told the Times that Scalia “never had any communications with Oracle or its attorneys concerning the department’s litigation against the company.” This is misleading. A senior Labor Department official and two individuals with knowledge of the case informed me that Scalia appears to have communicated with Oracle through a former legal partner, who served as a go-between. Another official with intimate knowledge of the case said that the former partner had called Scalia at home to discuss Oracle’s interest in a settlement—thus insuring that the exchange wouldn’t appear in government logs.

Herold’s complaint suggests that Scalia removed her from the case not only to benefit Oracle but also for ideological reasons. Patricia Smith, the Labor Department solicitor under Obama, told me that Herold had been notably “aggressive and successful in obtaining liquidated damages” from companies that violated labor laws. Herold also had vocally objected to some of Scalia’s new rules.

The news of Herold’s transfer prompted Representative Rosa DeLauro and Senator Patty Murray to send a letter to the Labor Department’s acting inspector general, Larry Turner, requesting an investigation. They wrote, “The Secretary’s efforts to involuntarily transfer Ms. Herold appear to be retaliation against an employee simply doing her job to enforce the law.” (The Labor Department spokesperson claimed that neither “Scalia nor anyone in department leadership was aware” of Herold’s 2019 memo “prior to her reassignment, so there could not have been retaliation.”)

In mid-September, the Office of Special Counsel requested that Herold’s reassignment be delayed for ninety days, having determined that there were “reasonable grounds” to believe that the Department of Labor had committed a “prohibited personnel practice.” On September 22nd, an administrative-law judge in San Francisco ruled that, despite evidence of significant disparities in pay at Oracle, the company had not engaged in intentional discrimination against women and people of color. The Labor Department must now consider whether to appeal the ruling.

In July, Scalia visited Columbus, Ohio, to take part in a panel discussion highlighting the benefits of the new U.S.-Mexico-Canada trade agreement. A photograph of the event was subsequently posted on the Department of Labor Web site, showing him at a long table surrounded by members of JobsOhio, an economic-development agency. Everyone at the table was in business attire. All but one of the attendees—Scalia—had a mask on. Scalia also went maskless at a recent White House event supporting the Supreme Court nomination of Amy Coney Barrett. So far, he has tested negative for COVID-19; his wife, who was present as well, tested positive.

Unlike Trump, who also recently contracted COVID-19, after months of mocking the value of masks, Scalia probably does not doubt that politicians should defer to scientific experts about the nature of the virus and how to prevent its spread. Yet he has allowed himself to be used as a prop in Trump’s anti-scientific crusade. Several former colleagues of Scalia’s told me that he must be mortified by Trump’s stewardship of the pandemic—and by the President’s lack of sympathy for the more than two hundred thousand victims.

Then again, it’s not evident how much sympathy Scalia has for Americans imperilled by the pandemic. One of the reasons the U.S. labor force has been particularly vulnerable to COVID-19 is that the U.S. is the only advanced Western country without universal paid sick leave. In March, Congress partially remedied this by passing the Families First Coronavirus Response Act, which guaranteed paid sick and medical leave to private-sector employees in companies with fewer than five hundred workers. Several weeks later, the Department of Labor issued a rule narrowing eligibility for these benefits. Under Scalia’s rule, employees can be denied paid sick leave if their employers determine that they do not need them to work; no documentation is required to justify an employer’s decision. Seizing on the fact that Congress’s law excluded “health-care providers and emergency responders,” Scalia’s rule also expanded the definition of “health-care providers” to include everything from companies that contract with hospitals to institutions where health-care instruction is offered.

As a lawyer, Scalia often accused federal agencies of overstepping their authority. On April 14th, New York’s attorney general, Letitia James, sued the Department of Labor on similar ground, alleging that it had acted to deny workers crucial benefits that Congress had clearly intended to grant. This contention was affirmed by a recent audit of the Department of Labor, conducted by the Office of Inspector General, which found that the department had “significantly broadened the definition of health-care providers” in ways that were inconsistent with existing federal statutes.

On August 3rd, a U.S. District Court judge, J. Paul Oetken, struck down Scalia’s restrictions. “This extraordinary crisis . . . calls for renewed attention to the guardrails of our government,” Oetken wrote. “DOL jumped the rail.”

A month later, another judge struck down a Scalia regulation, issued in March, that narrowed the circumstances in which businesses such as Amazon and McDonald’s could be held liable when their subcontractors violated workers’ rights. A coalition of seventeen states and the District of Columbia had sued the Labor Department, claiming that restricting the liability of “joint employers” would leave workers “more vulnerable to underpayment and wage theft.” Judge Gregory H. Woods, of the Southern District of New York, concluded—with a rhetorical swipe at Scalia—that the rule was “arbitrary and capricious.” The dispute showed that Scalia does not oppose all government regulations—just the ones that conflict with his pro-business ideology. He’s fine with new rules that impose costs on workers.

As states have begun reopening their economies, employees have feared returning to workplaces that don’t appear to be safe. In May, Bailey Yeager, a director at a human-resources company called SHRM, was asked for feedback about a proposal that she return to her office. Like most white-collar employees, she’d spent much of the spring working from her home, in Alexandria, Virginia, where SHRM is based. Yeager, concerned about infecting her two daughters, requested that she be allowed to continue working remotely “until returning to work is both more widespread regionally and there is a decline in the metrics regarding cases/hospitalizations.” She also asked to see SHRM’s plans for reopening safely, while adding that she was “flexible” about returning to the office. Two weeks later, Yeager, who in recent years had received glowing performance reviews and several promotions, was fired. Three other employees who’d expressed similar worries, including two with preëxisting medical conditions, were also terminated.

Insuring that employees are not subjected to retaliation for engaging in certain protected activities is a key responsibility of the Department of Labor—in particular, of OSHA, which enforces the whistle-blower provisions of more than twenty laws. During the Obama Administration, David Michaels established a federal advisory committee to strengthen OSHA’s whistle-blower program. After Trump was elected, the committee was disbanded, and since then the whistle-blower-protection office has had no leader, despite many reports of workers facing reprisals for complaining about unsafe conditions during the pandemic. A survey conducted in May by the National Employment Law Project revealed that one in eight workers “has perceived possible retaliatory actions by employers against workers in their company who have raised health and safety concerns.” The survey found that Black workers were more than twice as likely as white workers to have witnessed such retaliation.

After Yeager was fired, she contacted Bernabei & Kabat, a law firm that represents whistle-blowers, which filed a complaint on her behalf with OSHA, alleging that SHRM had terminated her unfairly. (The company denies any impropriety.) The complaint describes a conference call in which Johnny Taylor, the company’s C.E.O., outlined plans to “outsource” functions in departments where workers were resisting coming back to the office. Taylor also mentioned that he’d spoken recently with a friend of his, “the Secretary of Labor”—who had been slated to be the keynote speaker at a SHRM event in March, before the pandemic struck. In July, Yeager told me, an OSHA representative called her and pressured her to withdraw her complaint. When she declined, the representative said threateningly, “Are you sure you don’t want to withdraw it?”

In May, Loren Sweatt, OSHA’s principal deputy assistant secretary, appeared before the House Committee on Workforce Protections and declared, “You could not get a better spokesperson for whistle-blower protection than the Secretary of Labor.” Three months later, an audit by the inspector general revealed that this was false: even as whistle-blower complaints have surged during the pandemic, the agency has left five whistle-blower-investigator positions vacant, inhibiting OSHA’s ability to handle the caseload.

It appears that Scalia at least cares about how his tenure as Labor Secretary is perceived in Washington. Several people I interviewed speculated that he nurtures larger ambitions, hoping to be appointed a federal judge and, eventually, a Justice of the Supreme Court. At the same time, Scalia has gone to great lengths to please the clients he used to serve as a corporate lawyer. Left out of Scalia’s cost-benefit calculations is the public good.

Nothing illustrates this more than his involvement in a tussle over a Department of Labor rule that required financial advisers to give clients advice about their retirement assets that was in their best interests. Adopted in 2016, after an exhaustive six-year process, the rule was designed to eliminate conflicts of interest that gave brokers incentives to push high-risk investments on elderly retirees, potentially costing them billions of dollars a year. Scalia, then at Gibson Dunn, assailed the rule as a “regulatory Godzilla,” and he and others repeatedly challenged it in court, on behalf of the U.S. Chamber of Commerce. Courts rejected those challenges four times, but Scalia finally won before the conservative Fifth Circuit Court of Appeals.

Given Scalia’s role in overturning the rule, some assumed that he would recuse himself from the matter while serving as Labor Secretary. He did not. In June, the Department of Labor proposed a new rule, which is riddled with loopholes that, among other things, would enable financial advisers to resume recommending products that yield high commissions for them while exposing retirees to risk. This outcome doesn’t surprise Barbara Roper, the director of investor protection at the Consumer Federation of America. The Secretary of Labor, she suggested, has, in effect, become the Secretary of Employers. She observed, “Secretary Scalia’s former clients should be very happy with him.” ♦



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