Plan to Eliminate a Regulator Draws Criticism from Business Group--Update

A proposal in President Donald Trump's budget to eliminate a regulator and cut government spending is drawing criticism from an unexpected source: Washington's business lobby.

Labor Secretary Alexander Acosta is expected to outline the administration's plans for reducing spending at the agency at a budget hearing Wednesday. One proposal put forth is to merge the department's body that oversees government contractors into the Equal Employment Opportunity Commission, an independent agency that enforces antidiscrimination laws among all employers including those with no government ties.

Some conservatives groups, including the Heritage Foundation, see the department's Office of Federal Contract Compliance Programs and the commission as redundant. Both agencies enforce labor rules, overlap in jurisdiction and have coordinated on gathering of information in the past.

The contract office received $105 million in funding for the current fiscal year. The president's budget proposes cutting that to $88 million for the next fiscal year, before combining the two agencies in the 2019 fiscal year. The commission's funding for the next fiscal year was left unchanged.

The proposed merger is consistent with the president's direction for agencies to develop plans to reorganize and would benefit workers and employers by consolidating the oversight of federal employment rules, an official at the White House's Office of Management and Budget said Monday.

But pro-business organizations, including the Chamber of Commerce, are skeptical of the administration's plan.

"There is a fear in the business community that this newly formed grouping might result in the worst of all worlds from both agencies," said Randel Johnson, the chamber's senior vice president for labor, immigration and employee benefits. The two agencies are in need of reform, he said, and that should be the focus, not a merger.

The two agencies differ in a few important ways.

The federal-contract office enforces stricter regulations set for firms that provide the government with goods and services, including affirmative-action rules. In that role, the office conducts audits of thousands of contractors annually, but those investigations are limited to specific locations.

The commission, which oversees all employers, only acts upon complaints. But once it receives a complaint, it can expand an investigation nationally.

The commission can seek damages and levy punitive fines. The office is limited to collecting only damages, but also can bar a firm from receiving federal contracts.

Some businesses see the potential for an agency that combines auditing power with national reach and stronger tools.

"This could create a super-enforcement agency," said Mickey Silberman, a Jackson Lewis labor attorney who represents businesses. "It could be very powerful combination, potentially, of much broader enforcement authority and the ability to seek much greater remedy from employers."

Congress would need to approve stripping the office from the Labor Department and moving it to the commission. Top Republicans have yet to endorse the plan.

Republicans on the House Education and the Workforce committee are open to discussing opportunities "to streamline the federal government," but protecting workers and ensuring the nation's nondiscrimination laws are properly enforced are top priorities, said a spokeswoman for the committee led by Virginia Foxx (R., N.C.).

A spokeswoman for Republicans on House Appropriations Committee, which will hear from Mr. Acosta this week, said the proposal is under review.

Leading Democrats, concerned combining the agencies and reducing funding could weaken civil-rights protections, reject the proposal.

"We should be doing much more, not less, to help make sure all workers get paid fairly and treated fairly on the job," said Sen. Patty Murray of Washington, the ranking Democrat on the Senate labor committee.

Liberal-leaning organizations say the proposal is a cover to reduce enforcement of antidiscrimination laws.

"Separate agencies allow for a higher set of standards for companies that receive taxpayers' dollars," said Ariane Hegewisch, program director at the Institute for Women's Policy Research. The proposal would reduce enforcement of policies "that play an important rose in improving women's access to good jobs," she said.

Shortly after president's budget was released last month, a Labor Department official said the two agencies would be "right-sized" by combining primarily on the management level. The department sees the merger as consistent with effort to reorganize agencies and promote efficiency.

A commission spokeswoman said if Congress approves the merger, "We are committed to a smooth transfer and transition."

Write to Eric Morath at eric.morath@wsj.com

A proposal in President Donald Trump's budget to eliminate a regulator and cut government spending is drawing criticism from an unexpected source: Washington's business lobby.

Labor Secretary Alexander Acosta is expected to outline the administration's plans for reducing spending at the agency at a budget hearing Wednesday. One proposal put forth is to merge the department's body that oversees government contractors into the Equal Employment Opportunity Commission, an independent agency that enforces antidiscrimination laws among all employers including those with no government ties.

Some conservatives groups, including the Heritage Foundation, see the department's Office of Federal Contract Compliance Programs and the commission as redundant. Both agencies enforce labor rules, overlap in jurisdiction and have coordinated on gathering of information in the past.

The contract office received $105 million in funding for the current fiscal year. The president's budget proposes cutting that to $88 million for the next fiscal year, before combining the two agencies in the 2019 fiscal year. The commission's funding for the next fiscal year was left unchanged.

The proposed merger is consistent with the president's direction for agencies to develop plans to reorganize and would benefit workers and employers by consolidating the oversight of federal employment rules, an official at the White House's Office of Management and Budget said Monday.

But pro-business organizations, including the Chamber of Commerce, are skeptical of the administration's plan.

"There is a fear in the business community that this newly formed grouping might result in the worst of all worlds from both agencies," said Randel Johnson, the chamber's senior vice president for labor, immigration and employee benefits. The two agencies are in need of reform, he said, and that should be the focus, not a merger.

The two agencies differ in a few important ways.

The federal-contract office enforces stricter regulations set for firms that provide the government with goods and services, including affirmative-action rules. In that role, the office conducts audits of thousands of contractors annually, but those investigations are limited to specific locations.

The commission, which oversees all employers, only acts upon complaints. But once it receives a complaint, it can expand an investigation nationally.

The commission can seek damages and levy punitive fines. The office is limited to collecting only damages, but also can bar a firm from receiving federal contracts.

Some businesses see the potential for an agency that combines auditing power with national reach and stronger tools.

"This could create a super-enforcement agency," said Mickey Silberman, a Jackson Lewis labor attorney who represents businesses. "It could be very powerful combination, potentially, of much broader enforcement authority and the ability to seek much greater remedy from employers."

Congress would need to approve stripping the office from the Labor Department and moving it to the commission. Top Republicans have yet to endorse the plan.

Republicans on the House Education and the Workforce committee are open to discussing opportunities "to streamline the federal government," but protecting workers and ensuring the nation's nondiscrimination laws are properly enforced are top priorities, said a spokeswoman for the committee led by Virginia Foxx (R., N.C.).

A spokeswoman for Republicans on House Appropriations Committee, which will hear from Mr. Acosta this week, said the proposal is under review.

Leading Democrats, concerned combining the agencies and reducing funding could weaken civil-rights protections, reject the proposal.

"We should be doing much more, not less, to help make sure all workers get paid fairly and treated fairly on the job," said Sen. Patty Murray of Washington, the ranking Democrat on the Senate labor committee.

Civil-rights organizations say the proposal would reduce enforcement of antidiscrimination laws.

"The merger would limit resources that are sorely needed by both agencies to enforce the law," said Claudia Withers, chief operating officer at the National Association for the Advancement of Colored People. "The only thing of which we can be really certain from such a merger is that effective federal civil rights enforcement in the workplace would become a dead letter."

Shortly after president's budget was released last month, a Labor Department official said the two agencies would be "right-sized" by combining primarily on the management level. The department sees the merger as consistent with effort to reorganize agencies and promote efficiency.

A commission spokeswoman said if Congress approves the merger, "We are committed to a smooth transfer and transition."

Write to Eric Morath at eric.morath@wsj.com

(END) Dow Jones Newswires

June 06, 2017 16:44 ET (20:44 GMT)