Sep 16, 2016 - 4:30pm

A Few Labor Regulations Mean Big Costs for Employers


Senior Editor, Digital Content

At the U.S. Chamber’s annual Labor Day briefing earlier this month, Randel Johnson, senior vice president of Labor, Immigration, and Employee Benefits, talked about how the Labor Department is dropping billions of dollars in regulatory costs on employers.

To put this in context, since 2009 when President Barack Obama took office, 20,303 pages of rules—a 13% increase—have been added. At the end of 2015 the Code of Federal Regulations (CFR) totaled 178,277 pages of rules. According to the Competitive Enterprise Institute, the total cost of regulations has risen from $1.2 trillion per year in 2008 to $1.9 trillion in 2015.

As with EPA’s regulatory work, a few DOL rules make up a big share of the total regulatory costs it generates. Here are the top ten of the Labor Department’s costliest recent regulations using the government’s own estimates:

  1. Investment Advice to Retirement Plan Participants. Employee Benefits Saving Administration (EBSA) (2011): $3.7 billion/year.
  2. Fiduciary Conflict of Interest. EBSA (2016): $1.9 billion/year.
  3. Respirable Silica PEL. Occupational Safety and Health Administration (OSHA) (2015): $1.0 billion/year.
  4. Wages for H2B Foreign Temporary Workers. Employment and Training Administration (ETA) (2011): $847 million/year.
  5. Fair Labor Standards Act Overtime Exemptions. Wage and Hour Division (WHD) (2016): $677.9 million initial year + $241.5 million/year subsequently.
  6. Fiduciary Disclosure Requirements. EBSA (2010): $287.7 million/year.
  7. Affirmative Action & Non-Discrimination–Persons with Disability. Office of Federal Contract Compliance Programs (OFCCP) (2013): $272.0 million/year.
  8. Hazard Communication Standard. OSHA (2012): $201.0 million/year.
  9. Affirmative Action & Non-Discrimination – Veterans. OFCCP (2013): $199.9 million/year.
  10. Cranes and Derricks Standard. OSHA (2010): $154.1 million/year.

Regulators often underestimate costs and exaggerate benefits to justify their preconceived ideas, but for many labor rules with acknowledged costs no monetary benefits were estimated

Take the “persuader rule” that requires employers to report who it hires to advise on labor issues. The Labor Department says it will cost $3.6 million annually because only 3,000 employers, consultants, and lawyers will be affected. However, U.S. Chamber analysis finds nearly 238,000 employers and professionals will be affected, ballooning the regulation’s cost to $285.9 million. This led a federal judge to temporarily block the rule, calling it “defective to its core.”

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Randy Johnson and J.D. Foster


Then there’s the overtime rule. The Labor Department estimates that compliance costs will be $677.9 million in the first year and $241.5 million every year after that. But a U.S. Chamber analysis puts the actual number at $6 billion in the first year and $4.1 billion annually after that.

If questionable cost estimates aren’t the problem it’s the Labor Department not even showing what regulations’ benefits will be. Since 2009, DOL issued 40 final rules costing $1.9 billion that had no measured benefits, Johnson noted.

 

And this doesn’t take into account regulatory actions that fall outside the traditional regulatory process.

For instance, agencies use “guidance” and “policy interpretations” that circumvent the rulemaking process but have regulatory effect. Also, there are National Labor Relations Board case law decisions like Browning-Ferris that have upended decades of joint-employer law and changed the rules of the game that franchise businesses have lived under.

Americans end up on the short end of it when these rules are applied outside the rarified world of federal regulatory agencies. Money going to cover regulations (of questionable benefit) can’t be used to build a new factory or store, buy better tools and equipment (to make workers more productive, thus boosting their wages), or hire more workers. The low-productivity growth/slow-growth economy we see is a result.

We live in an imperfect world, so regulations are necessary. However, they should be evaluated and crafted such that their benefits outweigh their costs. The Labor Department has not been doing this, with employers and their workers bearing the brunt of their inaction.

Watch the full Labor Day briefing with Johnson and U.S. Chamber vice president and chief economist J.D. Foster.

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About the Author

About the Author

Sean Hackbarth
Senior Editor, Digital Content

Sean writes about public policies affecting businesses including energy, health care, and regulations. When not battling those making it harder for free enterprise to succeed, he raves about all things Wisconsin (his home state) and religiously follows the Green Bay Packers.