United States: From Swimsuits To Grass Fed Beef: A New Direction For Labor?

The United States Senate is slated to consider Andrew (Andy) Puzder, CEO of CKE Restaurants, as the next Secretary of Labor ("DOL"). Although his confirmation hearing which was set for February 7, 2017 has been delayed reportedly to give Mr. Puzder additional time to complete government ethics disclosures, Mr. Puzder has stated that he is fully committed to becoming Secretary of Labor and says that he is "looking forward to [his] hearing."1

CKE Restaurants operates "fast food" restaurants known as Carl's Jr. west of the Rockies and Hardee's in the east. The restaurants, perhaps better-known for their commercials featuring women models in skimpy swimsuits, began a new advertising campaign last fall focusing on its employees talking about the quality of the food offerings — burgers made with grass fed beef, hand-breaded chicken tenders, hand-scooped ice cream, and scratch made biscuits.  If confirmed, Mr. Puzder in all likelihood, would also steer the DOL in a new direction with a decidedly more business-friendly approach than his predecessor, Tom Perez.  We consider what would a Puzder DOL would likely focus on.

Minimum Wage:  Although Mr. Puzder has stated that he is not directly opposed to a minimum wage higher than today's federal $7.25 per hour, he believes that efforts in some states and cities to raise the minimum wage to $15 per hour (even over time) is likely to cost many workers their jobs.  Mr. Puzder, in an interview with the Los Angeles Times (March 30, 2016), noted that he would not be against a minimum wage indexed to inflation or rational increases in minimum wage, but opposes "abrupt jumps" that occur when lawmakers try to "make up" for years of wage erosion.  He relayed his concern for high minimum wages:  "Are people going to want to hire entry-level employees for these very high minimums, which come with Obamacare, which come with mandatory sick leave, or other benefits which the government imposes on business for these individuals?"  Mr. Puzder noted that CKE's average wage is just above $10 per hour.  Given his views, Mr. Puzder would appear to be open to gradually increasing the minimum wage.

The DOL Overtime Rule:  Mr. Puzder is on the record as opposing the overtime rule. In a guest post written by Mr. Puzder in Forbes.com, May 18, 2016, Mr. Puzder stated:  "The real world is far different than the Labor Department's Excel spreadsheet.  This new rule will simply add to the extensive regulatory maze the Obama Administration has imposed on employers, forcing many to offset increased labor expense by cutting costs elsewhere.  In practice, this means reduced opportunities, bonuses, benefits, perks and promotions." Further, given Mr. Puzder's above views on abrupt changes with regard to the minimum wage, it is almost certain that he will not stand behind the rule in its present format as it nearly doubles the current overtime salary test.  As we noted in our February 1, 2017 blog post, it remains to be seen what political mechanism will be used to address the previous administration's overtime rule.  While Congressional action would be the most efficient mechanism to scuttle the rule, member of congress recognize that the increase in overtime is popular with hourly workers.  That leaves it to Mr. Puzder to take action by either requesting that the Department of Justice drop its defense of the rule or-mimicking a "repeal and replace" mantra- promising a more workable overtime provision.

Joint Employment:  Mr. Puzder also made known his distaste of the National Labor Relations Board's ("NLRB") Browning-Ferris Industries ("BFI") decision, which reversed more than three decades of established labor policy defining what it means to be a "joint employer," in an article he authored that was published in the Orange County Register (December 3, 2015):  "While the NLRB's illogical redefinition applies to businesses that contract for staffing, security or janitorial services (among others), it is particularly harsh on franchising – a business model that accounts for 9 million American jobs and has lifted more people from the working class to the middle class than any other business model.  The new NLRB standard completely disrupts the franchisor/franchisee relationship by making franchisors liable for their franchisees' employment practices, despite the fact that franchisors have no control over such practices."  Indeed, franchisees account for approximately 92% of CKE restaurants.  Although the DOL does not have control of the NLRB, Mr. Puzder's views on joint employment will no doubt find a friendly ear with Philip Miscimarra, current Acting Chairman of the NLRB, who, along with Harry Johnson, issued a 28-page dissent excoriating the majority's opinion in BFI.  Mr. Puzder, however, would need to look no further than the DOL's Wage and Hour Division to make his mark on rolling back the expansive view of joint employment.  Under David Weil's fissured workplace rubric, DOL's Wage and Hour Division took an expansive view of joint employment, under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, in its January 20, 2016 Administrator's Interpretation ("AI").  As the AI is subregulatory guidance, Mr. Puzder could kill it with a stroke of a pen on his first day at DOL.

The Fiduciary Rule: Mr. Puzder has not offered any previous views on the Fiduciary Rule.  The White House's February 3, 2017 Presidential Memorandum calling for a new economic and legal analysis of the so-called "conflict of interest" rule would give Mr. Puzder political cover to not have to take a stand.  However, he will have to navigate a very tricky landscape.  Many financial firms and employers have implemented the provisions based on its coming implementation in April 2017.  To the extent that his Labor Department issues any further guidance or analysis, it would have to walk a tightrope between those following the new obligations and those who have not already come into compliance.

We will be closely monitoring the events surrounding Mr. Puzder's nomination and provide additional updates as more information becomes available.


1 Revelations came to light Monday evening of Mr. Puzder having employed an undocumented immigrant as a housekeeper for a few years.  Mr. Puzder acknowledged this and said that once he learned of her status, he offered her legal assistance and voluntarily took steps to correct issues with the IRS and the State of California.  Although the hiring of undocumented workers have sunk nominees in the past and will certainly add to Mr. Puzder's vulnerabilities during the confirmation process, White House deputy press secretary Lindsay Walters said Monday night that "Andy Puzder has no intention of withdrawing [and h]e's looking forward to a successful hearing and being the next secretary of labor."

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