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Warren Labor Proposal Targets ERISA Preemption, Fiduciary Rulemaking

Government Affairs

Sen. Elizabeth Warren (D-MA) has put forward a comprehensive labor proposal that seeks to scale back the broad protections offered by ERISA preemption and resurrect the DOL’s fiduciary rule. 

The presidential candidate released a 14-page proposal on Oct. 3, “Empowering American Workers and Raising Wages,” that essentially calls for restoring worker protections and labor union rights by “returning power to working people.” The proposal singles out the Department of Labor’s conflict-of-interest rule that was vacated last year by the 5th U.S. Circuit Court of Appeals.

“I will restore the Labor Department’s fiduciary rule that the Trump administration delayed and failed to defend in court, so that brokers can’t cheat workers out of their retirement savings,” Warren says. 

Overall the proposal includes a catalog of reforms centered around five key themes: 

  • extending labor rights to all workers;
  • strengthening organizing, collective bargaining and the right to strike;
  • raising wages and protecting pensions;
  • increasing worker choice and control; and
  • expanding worker protections, combating discrimination and improving enforcement. 

ERISA Preemption

In the workplace retirement plan realm, Warren seeks to expand the ability of states to enact stronger worker protections laws by limiting the scope of federal preemption in certain areas. “My administration will examine reforms to statutes like ERISA and the NLRA so that they do not preempt positive experimentation by states and municipalities around issues of economic security and worker benefits,” Warren says. “Strategic revisions to these federal statutes could promote the ability of states and cities to improve conditions for workers without weakening substantive worker protections.”

The proposal does not specify which policy areas she is referring to, but one likely area is the efforts by various states and cities (including New York City) to require private sector employers that do not offer retirement plan coverage to participate in a state or city-run auto-IRA or similar program for their workers. While other candidates have put forward various labor-related proposals, Warren’s appears to be the first among the leading Democratic presidential candidates to address ERISA preemption and it adds a new salvo in the ongoing debate over whether such plans are preempted. 

On Sept. 13, the U.S. Department of Justice entered the fray, backing plaintiffs in an ongoing lawsuit challenging California’s auto-IRA program for private sector workers. In their filing, the DOJ argues that because the California Secure Choice Retirement Savings Trust Act effectively requires employers to maintain such plans, “… it is preempted by ERISA’s broad, express preemption provision that disallows any state laws that relate to any employee benefit plan.”

The DOJ further echoes concerns that have been raised by others amid the emergence of state and municipal programs across the nation, noting that a decision to allow the Secure Choice Act to survive would allow for the creation of a patchwork of different state laws. 

This suit was originally filed in June 2018 (Howard Jarvis Taxpayers Assoc. v. Cal. Secure Choice Retirement Savings Program) and was recently resurrected after the district court judge in the case gave plaintiffs one final leave to amend. 

Arbitration Clauses

Warren also states that she will work to prohibit forced arbitration agreements and class action waivers in employment contracts, noting that many employers require workers to sign employment contracts that “force them into arbitration over any employment-related dispute and prevent them from banding together in class action lawsuits against their employers.”

This proposal appears to piggyback on legislation approved Sept. 20 by the U.S. House of Representatives to restrict the use of pre-dispute arbitration agreements – potentially including their use in workplace retirement plans. The Forced Arbitration Injustice Repeal Act (H.R. 1423) would prohibit pre-dispute arbitration agreements from being valid or enforceable if they require arbitration of an employment, consumer, antitrust or civil rights dispute. 

The proposal also follows an August 2019 ruling by a three-judge panel of the 9th U.S. Circuit Court of Appeals reversing a lower court decision (Dorman v. Charles Schwab Corp.) that had prevented the Schwab Retirement Savings and Investment Plan from enforcing an arbitration clause compelling individual arbitration in an ERISA action filed by a former participant in the plan. 

Pensions and Other Proposals

Warren also says that she will address DB and multi-employer plan issues. “My administration will recognize the value of defined-benefit pensions, and on multi-employer pensions, I will push to pass the Butch Lewis Act to create a loan program for the most financially distressed pension plans in the country,” she states. 

The presidential candidate further explains that she will work with industry stakeholders – including labor leaders, policy experts, fund counsel, actuaries and benefits specialists – to improve the pension system and to devise a policy for financially challenged plans that are not in immediate distress. 

Other broad areas of interest in the proposal include an effort to end worker “misclassification as independent contractors.” Warren notes that she backed a recent law in California to end so-called worker misclassification and will push to enact a similar law at the federal level.