Business Groups Thwart Senate Confirmation of David Weil to Key Labor Department Post

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

Last week business lobbyists, led by the International Franchise Association (IFA), succeeded in in thwarting confirmation of David Weil to head the Labor Department’s Wage and Hour Division.

Weil’s transgression: his previous performance when he held the same position from 2014 and 2017. Per the Hill, Business lobby defeats Biden labor nominee in Senate:

Weil, who previously held the wage division post in the Obama administration from 2014 to 2017, issued rules to reclassify independent contractors as employees and attempted to hold corporations accountable for their franchisees’ labor practices during his previous tenure.

“IFA thanks [Democratic] Senators [Kyrsten] Sinema, [Joe] Manchin, and[Mark]  Kelly and all 50 Republicans who stood up for local franchise businesses and workers across the country by voting against the nomination of David Weil tonight,” IFA President and CEO Matthew Haller said in a statement.

This Senate floor rejection was the first yet of any potential Biden nominee and represents a serious setback for expanded labor rights, handed down the very same week that Amazon workers succeeded in forming a union for the first time.

I had to laugh at Politico’s description of this gang of three as ‘moderate’ Democrats, Moderate Dems hand Biden his first nomination vote defeat:

A trio of moderate Senate Democrats dealt a fatal blow to David Weil’s bid to head the Labor Department’s Wage and Hour Division Wednesday night by unexpectedly voting against moving forward on his nomination and, in the process, undermining President Joe Biden’s labor agenda.

The IFA and other business interest, including the National Restaurant Association and National Association of Wholesaler-Distributors,  focused their lobbying on this gang of three, according to The Hill. In particular:

Business groups were particularly concerned about measures to hold franchises such as McDonald’s and 7-Eleven responsible for actions taken by franchisees, and provisions to reclassify independent contractors as employees so that they can form a union.

Weil, who is currently dean of the Heller School for Social Policy and Management at Brandeis University, has long complained that the franchise model allows corporate giants to dodge accountability and is a fierce critic of gig companies such as Uber and Lyft.

The WSJ fleshed out Weil’s record in White House Labor Nominee David Weil Blocked in Senate::

During his time at the Labor Department, Mr. Weil issued guidance stating that employees whose employers were contractors or franchisees of other, larger businesses, could claim to be employed by both their direct employer and the larger company. That meant that companies such as fast-food chains could be held responsible for labor violations committed by the franchise operators of individual restaurants. That caused an uptick in lawsuits against franchise operators, Mr. Haller said.

Mr. Weil also issued guidelines stating that many gig workers should be considered employees rather than independent contractors, giving them access to minimum-wage protections, workers’ compensation, unemployment insurance and other benefits.

Both guidelines were eventually rescinded by the Republican Trump administration.

Under Mr. Weil, the Labor Department also issued a rule expanding the number of workers eligible for overtime pay. That rule was struck down in court in 2017.

Unsurprisingly, labor interests blasted last week’s vote. Per the Journal:

Bill Samuel, government affairs director for the AFL-CIO, called Mr. Weil “eminently qualified” and attributed opposition to his nomination to his “strong record on doing the exact job he was nominated for.” He added: “Enforcing fair labor practices does not make David Weil antibusiness, it makes him pro-worker.”

Yet as the Journal notes, these issues aren’t going away. Only now the Biden Administration has to find someone else to head up the Labor Department’s Wage and Hour Division. It looks unlikely that confirmation of another nominee can be achieved before the outcome of November’s mid-terms further complicates the situation.  The Journal notes:

Those issues are likely to come up again in the Biden administration, however, even without Mr. Weil at the helm of the Wage and Hour Division.

The department is working on a new rule expanding overtime protection, which is expected to be released next month. Last year, it also struck down the Trump administration’s “joint employer” rule, which made it harder for employees to argue they were employed both by a contractor and the firm hiring the contractor.

Other Key Biden Initiatives

On other key economic issues  however, including antitrust and securities law, backed by congressional support, the Biden  administration has stepped up its game (on antitrust, see my two recent posts: WSJ: House Judiciary Bigwigs Ask Justice Department to Probe Amazon for Possible Criminal Obstruction of Congress and Federal Judge Denies Facebook’s Motion to Dismiss, Allowing FTC Antitrust Lawsuit to Proceed and Discovery to Commence). In the securities law arena see these two recent posts by Yves: SEC Investigating Possible Block Trading Abuses at Morgan Stanley, Goldman, Other Big Players; and SEC Set to Lower Massive Boom on Private Equity Industry).

Although alas so far this tendency hasn’t extended to the broader agenda of the Department of Justice (DoJ) under Attorney General Merrick Garland, whose approach thus far has been disappointing (see AG Merrick Garland Outlines Corporate Crime Prosecution Priorities),

Nonetheless, the somewhat more aggressive Biden line on antitrust and securities law issues contrasts markedly with that pursued the last time a Democrat was in office, when the norm was to announce an intention to get tough and then not follow through (as I wrote in these posts at the time, see The Obamamometer’s Toxic Legacy: The Rule of Lawlessness; The SEC Fiddles While the System Burns: Insider Trading Enforcement As Securities Law Theater). Lawyears openly mocked the Department of Jokes. So far, it seems Garland is taking a page out of that old playbook and talking a good game but not following through with especially aggressive execution.

The Bottom Line

Time does seem to be running out for the Biden administration to achieve any major economic policy reforms. Especially, as I fear with fuel prices increasing and the prospect of shortages of food and other essential items looming – not to mention the ongoing pandemic and the Ukraine crisis – Democrats are going to get slaughtered in the upcoming midterms. They’ll at minimum  lose their slim House and Senate, majorities – probably decisively so. Meaning political gridlock will ensue, with Democrats holding onto the White House  and Republicans once again in charge of both houses of Congress.

The legal enforcement agenda will thus become only more important, because it will be one arena in which Democrats will still set the agenda and might still achieve meaningful results. Of course, those may be stymied or overturned by business-friendly judges. I have confidence in the Federal Trade Commission under chair Lina Khan and the Securities and Exchange Commission under chair Gary Gensler. FTC, DoJ, and SEC nominees have already been confirmed and a new Congress wouldn’t be able to shape those appointments – absent resignations.

But the jury’s still out on what Garland’s DoJ intends to do on any broadened enforcement agenda..