Coyote Blog

I usually don't quote other blog posts in their entirety, but this is so classic that I feel the need to.  This is from Holden Law Group, an excellent resource we use to try desperately to remain in compliance with California Labor law when such law can sometimes change many times in a single year, sometimes retroactively.  California has very onerous rules on businesses for COVID occupational health compliance.  This is an update on those rules:

[[ORIGINAL POST]] Cal/OSHA continued its burlesque impersonation of a 6-year-old child at an ice cream shop this past week.  Originally, on May 7th, the state bureaucracy unveiled proposed changes to the COVID-19 Prevention Emergency Temporary Standards (“ETS”).  However, shortly thereafter, Cal/OSHA announced that it was tabling its final vote on the revisions; and instead, was scheduling an “emergency” meeting for June 3^rd because the proposed changes were not in-line with the guidelines of the California Department of Public Health and federal Centers for Disease Control and Prevention (“CDC”). Then, last week at this “emergency” meeting, Cal/OSHA initially indicated that it would indeed reject the proposed ETS changes because they were not consistent with the CDC guidance. However, by the end of the meeting, Cal/OSHA unanimously voted in favor of adopting those very same revisions.  Vanilla.  Chocolate. Yes, Chocolate…. Well…. actually Vanilla.  Definitely, Vanilla. Click here to read on – blog posted June 8, 2021….

[[UPDATE]] After this blog was originally posted, Cal/OSHA had yet another “emergency” meeting on June 9, 2021, this time unanimously voting NOT to adopt the proposed new revisions to its regulations.  Mind you, this is the same Cal/OSHA who unanimously voted TO adopt the revisions just a few days ago – and no new guidance from the CDC or public health officials has occurred in the interim – just a letter from the State Health Officer to Cal/OSHA reminding them that their proposed revisions were inconsistent with federal guidance and that the rest of the State would be following that federal guidance starting June 15th.

So where does that leave us, you ask. By voting not to adopt the proposed revisions, the same old Cal/OSHA regulations which have been in effect since the height of the COVID-19 pandemic will remain in effect for the foreseeable future – regulations which are even MORE inconsistent with federal guidance than were the proposed revisions.  So, for now, Cal/OSHA is back to Chocolate ice cream – stale, well past its expiration date, Chocolate ice cream.

This is an excerpt from an email from one of my suppliers.  This is happening everywhere:

We are not a company that makes excuses as to quality or service. When things are beyond our control, we will not point fingers and say it's not our fault. However, the climate to conduct business is becoming more difficult daily.

...Employees were allowed to file for financial relief thus finding they could make more money sitting at home than working. The snowball effect started and is getting bigger.

Orders that were placed back in the fall are being filled at this time, 6 months later. Because of the shortage of materials some prices have almost doubled. I cannot tell my customers sorry I know we have an agreement for that however I now have to charge you this. We have honored our prices, we have not been able to honor our time of production to shipping because of circumstances beyond our control.

The list is endless of the domino effect in just about every industry in the country.

It is no accident that today we had a really week payroll report -- we have high unemployment, huge demand for labor, but no one wants to work as long as the government is writing checks to stay home and play Nintendo.  We're experiencing 1970's Swedish socialism, something that turned out to be such a mess that Sweden today is probably more free market in many ways than the US.

Regulation can be sortof kindof tolerable in stable, predictable, and unchanging markets.  But what markets act like that?  In the labor regulation world, for example, regulatory authorities are doing everything they can to kill a wave of innovation in labor markets.  As I tell everyone I discuss this with -- regulators picture workers as punching a time clock in a Pittsburg mill with their supervisor right there and present every moment, with an on-site HR department, and a cafeteria with huge walls for posting acres of labor posters.  Try to have any other relationship with your employees, and it will be like pounding a round peg into a square regulatory hole.  Even something as staggeringly beneficial to worker agency like letting remote workers schedule themselves tends to run afoul of the shift scheduling laws that are sweeping through progressive jurisdictions.

Here is a great example of the cost of regulation to consumers that our company is experiencing in the insurance market.  Last year after all the fires in California, the property insurance market was left in disarray.  My landlord, in many cases the US government, requires that I insured the assets I am leasing from them against wildfire (leave aside the question of why the Federal government which is supposed to be self-insured is paying for such insurance in the form of lower rents from me).

Suddenly, wildfire insurance on wilderness assets like the ones we operate became unobtainable.  After a LOT of education, we convinced the US Forest Service to allow a temporary moratorium on the wildfire insurance requirement in our agreements.  Good news, right?   Now we can just go out and get a property insurance policy that covers all damage but excludes wildfire.

Not so fast!  It turns out every single microscopic variation in insurance rates in California have to be approved by the state insurance commissioner in a time-consuming process that begins long before the policy year.  Well, it turns out most insurance companies don't actually have an approved rate that excludes wildfire coverage.  They won't sell us a policy with the coverage (too risky) and they can't sell the policy without the coverage (not approved).

Regulation can always be costly but can be particularly so when markets need to react quickly to changing conditions.

I sit on a lot of boards of trade groups and business roundtables of various sorts.  And the #1 exclusive topic -- seriously, we talk about nothing else right now -- is the inability to hire people because the government is still paying millions or people to not work.  In restaurants, campgrounds, stores, manufacturers and scores of other industries, companies are ready right now to put more people to work but cannot because the government is paying people too much money to stay home and they can't get the workers they need.  Bounties, higher salaries, and incentives are all futile when candidate after candidate says that they won't look for work until the government payments stop.

So of course, the Biden Administration is proposing to pay more people not to work:

According to a White House fact sheet, the AFP would create a national comprehensive paid family and medical leave program, funded through tax increases, and paying workers up to $4,000 a month. Under that cap, it would replace a minimum of two-thirds of average weekly wages, rising to 80 percent for the lowest-wage workers.

The proposal does not define "lowest-wage workers," however, and left out details about whether eligibility would differ from current FMLA. Those specifics will be addressed when Congress drafts an actual bill.

Biden proposed that the program be phased in over a 10-year period, guaranteeing 12 weeks of paid parental, family illness, personal illness or safety-related leave by year 10. Workers would receive three days of bereavement leave per year starting in year one.

This is one of those bait and switch programs that are sold on the most extreme forms of eligibility -- ie they talk about leave to help a dying child but in the FMLA there are so many random and poorly defined leave rules that pretty much everyone qualifies.  We had a woman in California who worked for us that liked the job but hated the busy summer season and so scheduled elective surgery every year around Memorial Day to get out of working the summer -- and that was when it was unpaid!  I can't even imagine the abuse of a leave program paying up to $48,000 a year for not working.

So a $15 national minimum wage will almost certainly be on the table in Congress this year, and if past such legislative efforts are any guide the Republicans will probably eventually go along in exchange for reducing the $15 to a lower number and slowing the rollout.

I have talked a lot about the negative effects of higher minimum wages on low-skill workers.  Two good example background posts are here and here.  I covered how a broad range of labor regulation hurts unskilled workers in a cover story for Regulation magazine a few years back.  Unfortunately, in a country where the average American buys about $1000 in lottery tickets each year, the willingness to believe we can get something for nothing is strong.

But I want to talk specifically about a Federal minimum wage increase, where one other problem emerges.  The best way to state this is -- how can one possibly set the same minimum wage for San Francisco at the same rate as one does for rural Mississippi?  Here is one source for comparative state cost of living.  Doing this by county would make the curve even wider.

Cost of living in Hawaii is more than 2x that of Mississippi.  CA and NY are not far behind.  A minimum wage that might comfortably be accommodated in San Francisco (and note even there the rise to $15 was ending service jobs in that city long before COVID), would be an economic disaster for rural Alabama.  I don't tend to think primarily along racial lines as seems to be the case on the Left today, but basically this is a policy driven by rich white tech guys in San Francisco that is going to devastate the employment prospects of rural blacks.

Whatever one's misgivings about minimum wages, it is certainly true that allowing states to take the lead on setting minimum wages (counties would make even more sense) makes a lot more sense that trying to take action at the national level.  Even with state action there are disparities.  Look at this unemployment map of the rural counties in CA vs. the tech. enclaves in the Bay Area (the chart below is January 2020, I wanted to dial back pre-COVID).  Those rural counties are being slaughtered by the $15 minimum wage.  Just think about rural areas in states less costly than CA.

So a state by state approach is WAY better. There are three reasons, in increasing order of cynicism, why Democrats in Congress will still insist on a higher national minimum wage.

1. Democrats in Congress believe they are carrying salvation to the powerless masses in Alabama who are held in slavery by state Republicans.  Democracy and the "will of the people as expressed at the ballot box" are only sacred when it's our team in charge.
2. Folks in Congress did not spend a career fighting to win a seat in that body only to find that there is something that would be best done by state legislators.  They didn't work to get promoted to have LESS power (though that is exactly how the country was originally designed).  This is the enemy of all Federalist notions
3. The fact that a $15 minimum wage will devastate many rural areas, mostly Republican bastions, may be a feature and not a bug for some.  Think of the $15 minimum wage as Democratic revenge at the heart of red states for the Trump reductions of SALT deductions in the tax code (which were a dagger at the blue state model).

Years ago I was arguing with my mother-in-law about Executive power and the Presidency.  She, like many Obama supporters, was arguing that gridlock in Congress over legislation she considered critical was sufficient justification for President Obama to wield new executive powers and go around Congress.  I told her this was a terrible precedent, and asked if she would be just as happy to have President Lindsey Graham wielding such power (this being the prime Republican bogeyman for her, neither of us even imagining Trump).

So now, Obama (and Bush) precedents firm in hand, Trump is reacting to deadlock in Congress over further stimulus by picking up his pen and firing off some executive orders.  I want to discuss one of these, which is to allow at least temporary non-collection of the employee share of social security and Medicare taxes (a bit over 7.6% of wages).

Leave aside as to whether this is really appropriate stimulus for the current economic problems.  A tax break to people who still have jobs might help in certain recession scenarios, but the current situation of having large numbers of people unemployed because their workplaces have been forcibly closed by the action of various governors probably will not be helped a lot if the employed have more money in their pockets -- the problem is that local government officials are not allowing them to spend it. (I will note that no one ever suggests reducing the employer share of these taxes, which might actually increase employment by reducing total employment costs in a way that changing the employee share does not).

The problem I want to discuss is the terrible situation this potentially creates for businesses like mine.  All Trump can do is defer collection of the tax -- he cannot actually set it to zero or forgive it, which must be done by Congress.  This means that if our business does not withhold these taxes from employees, they accrue and build up as a debt still owed to the government by the employee.  Six months from now, when a new administration takes over and ends the deferral, our employees (who are paid twice a month) might get a deduction in their next paycheck not for 7.6% of wages but 91.2% of a paycheck (12 missed paychecks times 7.6%).

But here is why our company is really screwed:  We have 400 employees today, but since we are a summer seasonal business we will have fewer than 100 in January.  If there is a catch-up repayment in January (meaning Congress chooses not to forgive the taxes altogether), most of my employees who would need to repay the tax will be gone.  Do you think the government is just going to say, "oh well, I guess we lost that money"?  Hah!  You don't know how the government works with tax liens.  My guess is that for every employee no longer on the payroll for whom back employment taxes need to be collected, the government is going to say our company is responsible for those payments instead.  We could be out hundreds of thousands of extra dollars.  President Biden will just say, "well I guess you should not have participated in a Trump program."

So this is the vise we are in:  Either we participate in the program, and risk paying a fortune in extra taxes at some future date, or we don't participate, and have every employee screaming at us for deducting payroll taxes when President Trump told them they did not have to pay it anymore.  And what happens if Congress does come along later and forgive the taxes, what kind of jerk am I for not allowing my employees to benefit from the tax break?

Essentially I am forced to guess what legislation might be in the future.  Sort of the opposite of ex post facto law.  Pre facto law?

Update:  LOL, I r stupid, had "vice" instead of "vise"

Inspired perhaps by back episodes of the Sopranos or his experience with payoffs required in New York to get any real estate development project going, Donald Trump is attempting to establish a regulatory regime right out of any kleptocracy

President Trump confirmed Monday he is open to a deal in which Microsoft Corp.  or another U.S. company buys the video-sharing app TikTok, but said the government should receive payment for clearing a purchase.

“I did say that ‘If you buy it…a very substantial portion of that price is going to have to come into the Treasury of the United States, because we’re making it possible for this deal to happen.’ Right now, they don’t have any rights unless we give it to them.”

Mr. Trump, a former real-estate developer, compared his demand for a piece of the purchase price to the “key money” a tenant who wants a lease pays a landlord.

“It’s a great asset,” Mr. Trump said of TikTok. “But it’s not a great asset in the United States unless they have the approval of the United States,” he said, reiterating that the Treasury should get “a lot of money.”

Great.  Already there are too many regulatory hurdles to doing about anything, and Trump wants agencies to use regulatory approvals to hold up corporations for payments.   And you can be sure this is a precedent the Democrats will be only too happy to latch onto -- want a pipeline built, where's our vig?  Who wants to be that this is the first Trump decision AOC comes out in support of?  The Republican Party sure has come a long way in my lifetime.

Waaaay back in April of 2015, I prophesied that California's efforts to turn Uber drivers into employees would kill Uber, though it would take some years to bleed out.  California has since embodied that court ruling into law (a law which Uber is currently ignoring).  Now, New Jersey is going after Uber:

Two months after Uber decided to ignore new ignore new California legislation requiring companies to reclassify contract workers as employees - a measure which would affect up to one million residents who work as contractors and drastically impact Uber's bottom line - more states are lining up to demand a pound of flesh from the world's formerly most valuable startup (and subsequently one of the year's worst IPOs).

On Thursday, New Jersey picked up where California left off and found that Uber owes the state about $650 million in unemployment and disability insurance taxes because the rideshare company has been misclassifying drivers as independent contractors, the state’s labor department said.

As Bloomberg reports, Uber and its subsidiary Rasier LLC were assessed $523 million in past-due taxes over the last four years, the state Department of Labor and Workforce Development said in a pair of letters to the companies. The rideshare businesses also are on the hook for as much as $119 million in interest and penalties on the unpaid amounts, according to other internal department documents.

The New Jersey labor department has been after Uber for unpaid employment taxes for at least four years, according to the documents, which Bloomberg Law obtained through an open public records request. The legal battle goes back to 2015, when New Jersey first informed Uber that it had obtained a court judgment ordering the company to pay about $54 million in overdue unemployment and temporary disability insurance contributions. It’s not clear whether the company ever paid any of that bill.

The tax issue in my mind is not the biggest problem.  I still think that the worker "protections" states are starting to insist Uber adopt (e.g. minimum wage, shift lengths, shift scheduling, etc) are death for their whole labor model, and in fact will hurt most of their workers by killing what attracted drivers to Uber in the first place.  To summarize that article, there is a huge irony in that for decades labor advocates have been decrying the loss of agency by hourly workers in a capitalist economy.  Uber has given its drivers agency they don't have in almost any other hourly job, and labor advocates are doing all they can to kill it.

Many politicians seem to be jumping on the "ban vaping" bandwagon due to a series of respiratory illnesses potentially associated with vaping that are still being investigated.  Politicians absolutely love to ban sh*t during public panics like this irrespective of logic and unintended consequences, especially in an election cycle.

I think most thinking human beings understand that banning vaping could hurt those trying to give up cigarette smoking (which is at least an order of magnitude more dangerous than vaping) even if they don't think this outweighs the risk of vaping.  OK, all except this knucklehead.

But here is another unintended consequence.  Start with this:

Media outlets, following the lead of the U.S. Centers for Disease Control and Prevention (CDC), continue to blame recent cases of severe respiratory illnesses among vapers on "vaping" and "e-cigarettes" in general, falsely implying a link to legal nicotine products. This misinformation is fostering public confusion that may lead to more disease and death, both from smoking and from the black-market products that have been implicated in the lung disease cases.

Based on the available information, the overwhelming majority of patients with respiratory illnesses had used black-market cannabis products. While a small percentage of patients say they vaped only nicotine, they may be reluctant to admit illegal drug use, and they may not know what they actually vaped if they purchased cartridges on the black market. If nicotine products are involved in any of these cases, it is almost certainly because of additives or contaminants in counterfeit cartridges or e-fluid, since legal e-cigarettes have been in wide use for years without reports like these.

So if vaping is banned (or at least flavored vaping is banned), won't that take these dangerous street black market products from a tiny percentage of the market to 100%?  If you want to vape in the future under these bans, the only product available to you will be exactly the dangerous street products that led to the ban in the first place.  Effectively the ban will cover all safe products and effectively exempt all unsafe products.

Apparently California is close to a new law mandating that Uber drivers (and other "gig" economy workers) be treated as employees rather than independent contractors.  Progressives are cheering this as a victory for the drivers:

Billionaires who say they can’t pay minimum wages to their workers say they will spend tens of millions to avoid labor laws. Just pay your damn workers! https://t.co/PtyP4JZ7W0

— Lorena (@LorenaSGonzalez) August 29, 2019

I have explained before why this will likely kill Uber (e.g. here) but let me summarize quickly the argument of why this is bad for most drivers (self-plagiarized from a Twitter thread).  The key issues are driver productivity and driver agency.

Let's define worker productivity as far as Uber is concerned as the amount of customer revenue a driver brings in per paid hour. In the current model, this is not a real concern for Uber as they are only paying Uber drivers when they are actually driving customers.  Essentially, Uber drivers and Uber have a revenue share agreement to split customer revenue. Uber has set the share low enough to maximize its revenue (of course) but high enough to still attract drivers. It tweaks this formula fairly frequently.  Uber driver productivity as we have defined it is essentially locked in by the formulas in this revenue share agreement.

Given this arrangement, note what Uber does NOT have to worry about. It does not have to worry that drivers are working hard enough or are positioning themselves in productive locations and productive times of day.  Uber drivers can drive anywhere they want at any time they want.  An Uber driver currently can turn on the app at 4am in the suburbs of Peoria and Uber does not care, even if this positioning is unlikely to get many rides. Why? Because Uber only pays if there is a ride.  It doesn't care if the driver is sitting around unproductively, because it is not paying the driver for that time.

So today, it is left up to the driver to make trade-offs between the most productive time & positioning and the demands of their own personal schedule & life choices. This sort of flexibility has real value to many drivers. It is agency that many hourly workers don't have, and that has attracted many people to become Uber drivers.  My neighbor, for example, sits in his living room all day with the app on and runs out to the car whenever he accepts a ride (and then turns the app off so he can come back home).  He gets few rides in our area but he is happy with the lifestyle and the little bit of extra money he makes from Uber.

But this all changes if drivers must be Uber employees and subject to wage and hour laws.  The key difference under such wage and hour laws is that Uber would have to pay drivers whether they have a passenger or not, as long as the app is turned on.  Suddenly, forced to pay for labor whether the labor is working or not, Uber is going to get real interested in driver productivity.

If Uber pays by the hour, my neighbor's preferred way to drive is a dead loser for the company. In fact, if I am a driver and paid by the hour, I could go find a library in an out of the way place at an odd time of day and sit and read and collect hourly paychecks -- All without having to drive much. Now, instead of productivity choices being in the driver's hands because it's the driver that makes more or less money with greater or lesser productivity, these choices now land in Uber's lap. Uber can no longer allow so much driver agency.

If making Uber drivers hourly workers does not kill Uber altogether, then Uber is going to be forced to monitor driver productivity and do one or both of two things:

1. Establish productivity rules, such as driving time windows and allowed geographic ranges and/or
2. Set a minimum productivity threshold below which Uber will have to let those drivers go

Interestingly, like a lot of labor regulation, this one will benefit the middle while hurting the lower-paid drivers.

1. Top drivers will be unaffected, because they already make the minimum
2. Middle drivers may get a small boost
3. Lower-earning drivers will lose their driving jobs entirely

A better way to characterize this law is that it will greatly reduce the flexibility many Uber drivers love, while causing the lowest paid drivers not to make more, but to lose their driving gig altogether.

I wrote a great deal more about how much of labor regulation actually hurts the lowest rungs of unskilled workers in an article here for Regulation Magazine.

When I saw the headline of this post by Kevin Drum -- Our Personal Data Is Worth a Lot. Facebook Should Pay For It -- I was just going to use it as the starting point for a quick post saying that if we should be paid by Facebook for our personal data, the government should pay my company for all the data (Census, DOL, etc) that we are asked to provide.

However, when I actually read the post, I was simply amazed at the way Leftists think about solutions to this.  To me, the least intrusive solution is say that Facebook needs to be transparent about the data it gathers so users can decide intelligently if they want to be on the platform.  Or, if we decide that Facebook is not a near-monopoly common carrier, the second least intrusive solution is to require Facebook to allow users to opt out of having their private data used for things beyond providing core services of the platform.  If Facebook can't make that business model work, they might charge users $10 a month but waive the charge if you opt in to their using the data for a defined set of other purposes.  Because we already are being paid for our data in the form of free usage of a (to some) valuable platform.  Its just a very non-transparent transaction where both the costs and benefits are hard to evaluate.  The best role for the government is to make it easier for us as individuals to better understand this cost-benefit tradeoff.

But here are the default solutions from two folks on the Left:

Shapiro thinks we all deserve a cut of that since this personal data is, after all, ours. He suggests a complicated mechanism where the government collects the money and then cuts everyone a check. But why not just levy a tax and be done with it? That would be simpler. Put all the money in a special fund designed to . . . I dunno, fight income inequality or buy everyone computers. I’ll bet Elizabeth Warren could come up with a plan for it.

Ugh, really?  If I did not read his blog all the time I would almost think Drum's personal solution is parody.   Does he really think giving my money to Elizabeth Warren to spend is a way for me to recover any value?

Conservatives rightly criticised the Obama Administration for rewriting rules so frequently and seemingly arbitrarily that businesses were reluctant to make long term investments.  As the WSJ editorialized in 2016:

Pfizer CEO Ian Read defends the company’s planned merger in an op-ed nearby, and his larger point about capricious political power helps explain the economic malaise of the last seven years. “If the rules can be changed arbitrarily and applied retroactively, how can any U.S. company engage in the long-term investment planning necessary to compete,” Mr. Read writes. “The new ‘rules’ show that there are no set rules. Political dogma is the only rule.”

He’s right, as every CEO we know will admit privately. This politicization has spread across most of the economy during the Obama years, as regulators rewrite longstanding interpretations of longstanding laws in order to achieve the policy goals they can’t or won’t negotiate with Congress. Telecoms, consumer finance, for-profit education, carbon energy, auto lending, auto-fuel economy, truck emissions, home mortgages, health care and so much more.

Capital investment in this recovery has been disappointingly low, and one major reason is political intrusion into every corner of business decision-making. To adapt Mr. Read, the only rule is that the rules are whatever the Obama Administration wants them to be. The results have been slow growth, small wage gains, and a growing sense that there is no legal restraint on the political class.

I am willing to believe this is true. On my own smaller scale, our company has disinvested in California because we simply cannot keep up with the changing rules there.

But all this forces me to ask, why doesn't this same Conservative criticism apply to Trump's trade policy?  The rules are changing literally by the day -- Consumers of goods from Mexico are going to be hit by new tariffs, Mexican goods are not going to be hit by new tariffs, China is hit by new tariffs, a China deal is near, a China deal is not near, Company A got a special tariff exemption, Company B did not get a special exemption, etc. How can any company with a global supply chain, which is most any US manufacturer nowadays, plan for new products or investments in this environment when they have no ability to make long-term plans for their supply chain?

I got this in the mail from the US EEOC:

EEO-1 filers should begin preparing to submit Component 2 data for calendar year 2017, in addition to data for calendar year 2018, by September 30, 2019, in light of the court's recent decision in National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (D.D.C.).  The EEOC expects to begin collecting EEO-1 Component 2 data for calendar years 2017 and 2018 in mid-July, 2019, and will notify filers of the precise date the survey will open as soon as it is available.

As a reminder, the schedule 2 data is an order of magnitude increase in the amount of information the government wants on our employee's skin color and reproductive plumbing.  Instead of just asking for counts of employees by race and gender (a distasteful exercise every time I have to do it) but they want a hugely expanded amount of salary data for every race-gender combination.  As I wrote before:

Forget for a moment that the whole purpose of this rule is to provide litigation attorneys a database they can mine to legally harass businesses.  The reporting requirements here are incredibly onerous.  It takes the current EEO-1 (the annual exercise where we strive for a post-racial society by racially categorizing all of our employees) and makes it something like 15-20 times longer.  In addition, rather than simply "count" an employee as being on staff in a certain race-gender category, we now have to report their income and hours worked.  Either I will have to hire staff just to do this stupid report, or I will again (like with Obamacare) have to pay a third party thousands of dollars a year to satisfy yet another government reporting requirement.  This is utter madness.

Get this -- the report has 3600 individual cells that must be filled in.  And this is in addition to the current EEO-1 form, which also still has to be filled out.  The draft rule assumes 6-7 hours per company per year for this reporting.  They must be joking.

Making this worse, the email implies that they are going to demand retroactive data for 2017 and 2018, which is simply insane.  We pay an extra couple thousand dollars every year for extra payroll program functionality to be able to accommodate this madness, but certainly did not have it in place back in 2017.

In the aftermath of the two Boeing 737MAX crashes:

For years, the FAA has allowed plane manufacturers to self-certify parts of the oversight process for new planes, called Organization Designation Authorization. This process, in which the aircraft manufacturer’s employees perform some of the safety tests and inspections with FAA oversight, reportedly saved the government body time and money.

That practice was examined at Wednesday’s Senate hearing.

Department of Transportation Inspector General Calvin Scovel III, who testified at the hearing, said the FAA will significantly change the oversight process for new aircraft by July. Speaking in vague terms, Scovel said that the changes would include new ways for the FAA to evaluate the self-certifying process.

Sen. Richard Blumenthal said that putting manufacturers in charge of their own safety audits was like putting “the fox in charge of the henhouse.” Saying he would introduce regulations to ban the practice of companies self-certifying, Blumenthal stated that “the fact is that the FAA decided to do safety on the cheap, which is neither safe nor cheap.”

A few reactions:

1. The fox in the henhouse analogy is not apt.  The fox wants to eat the chickens, whereas Boeing does not want to have airplane failures.  In fact Boeing is going to be paying out on a bunch of really big lawsuits, not only to families of the folks that died and the airlines that lost their planes but also to airlines that have had to change their flight schedules due to these issues.  Airbus sales people will use this story in their pitches until the end of time.  Regulation is not the only, or the most important, check on Boeing's behaviors.
2. That being said, aircraft regulation is a dumb hill for libertarians to die on.  This is just not that big of a deal.  Regulation and capital intensity has pretty much reduced choice in large aircraft to two companies and that will not likely change no matter what extra regulatory hoops are added.  Aircraft are a bit more expensive and spare parts are way more expensive due to our regulatory regime, but I don't think there is a public constituency for making a different trade-off.
3. Whatever the regulatory environment, it is unlikely to actually catch more failures of this sort in the future.  Regulators are notoriously bad at this sort of thing (see: US financial system).
4. I did engineering failure analysis early in my working career and my experience is that this sort of multiple stacked failure -- lack of pilot training for a bad software response based on a failed piece of instrumentation that was not reported as needing maintenance -- is hard to predict.  What will happen now in addition to some software fixes will be more mandatory training on this particular subsystem and likely a requirement that the specific piece of instrumentation involved needs to have redundancy.  At best we should hope they will also do a review of other instrumentation failures that might lead to a flight control issue and consider redundancy or software changes.  But there's always the problem of failure of imagination, the best dramatization of which is in the fabulous From the Earth to the Moon episode on Apollo 1.

A perfectly reasonable way to read this chart is to note the high correlation between state taxation and regulatory intensity and states that are gaining or losing population

Unfortunately, my experience in Arizona (one of the "inbound" states above) has been that people have zero ability to correlate specific elements of public policy with particular outcomes.  In particular, people who flee California because it is too expensive and dysfunctional come to Arizona and immediately begin voting for exactly the same policies that made California expensive and dysfunctional.  Therefore, I tend to read being in an "inbound" state with dread, knowing that folks are moving in right now to make us the next Illinois or California.

Readers of this blog know that I have always been skeptical of the value of net neutrality rules.   I see the Internet just like any other vertical value chain with multiple players, which we might oversimplify as content providers who hand off to bandwidth providers to get in front of the customer.  Nearly every industry has these vertical value chains with multiple players -- think Coke and Pepsi fighting for floor space and margins through Wal-Mart.  What is amazing to me is how the large content streamers, particularly Google, Netflix and Facebook, have somehow convinced the public that the whole future of the Internet depends on the government hamstringing the bandwidth providers in their relationship with the content producers.

When Youtube wants to stream at 4K rather than 1080p, the majority of the instractructure hit is on the bandwidth provides, and Google/Youtube wants that bandwidth to be there but does not want to have to pay for any of it.  That is why these companies are the main supporters of net neutrality, but they are smart enough not to say this, but to instead flog some mythology that bandwidth providers might block or discriminate against certain providers.  Even supporters of this meme are forced to agree that it is wholly hypothetical, that no one can really point to any good examples of it happening (I have always suspected that general public hatred for Comcast in particular has created more support for net neutrality than anything else).

This argument for net neutrality is even odder as clear discrimination and deplatforming is happening on the Internet apparently everywhere BUT with the bandwidth providers.  Or as I wrote on Twitter:

I might be unable to get a domain registered. I might not get hosted. I might not get anyone to handle my payments. I might not be able to syndicate on any social media. Google might not show me in searches. But by God Comcast is going to give equal treatment to my traffic!

— Coyoteblog (@Coyoteblog) November 29, 2018

This is my usual long-winded lead in for a very good article I read a while back and forgot to link.  It's from Drew Clark at Cato and is titled "Seeking Intervention Backfired on Silicon Valley".  I recommend the whole thing but here is a small piece:

The companies that drove the engine of America’s information technology machine essentially argued as follows: We provide the good stuff that you — the American consumer — want. You go to Google to get your searches answered. You want Facebook to keep up on posts from friends, families, and trusted content providers. Access to the content in the Apple iTunes store or to Amazon Prime streaming video subscriptions doesn’t need to be regulated because we tech giants compete vigorously among ourselves. But Washington does need to step in and regulate the telecom market because of a lack of competition among ISPs. And the FCC agreed in 2015 with what was officially dubbed the Open Internet Order. ...

Major content companies like Google, Facebook, and Netflix feared that ISPs would seek to throttle their services as a way of extracting payment for prioritization. Particularly for data-intensive video- streaming services like Netflix and Google’s YouTube, this concern had a certain economic logic, even as it remained hypothetical. Having long courted Silicon Valley as a key constituency and facing a highly visible public demand with enthusiastic grassroots support on the left, Obama complied....

Silicon Valley’s regulations-for-thee-but-not-for-me attitude has come back to bite them. They want the strictest form of regulation for telecommunications providers but no scrutiny of themselves, and now the tables have been turned.

Pai has not hesitated to point out the hypocrisy as he has moved to undo the net neutrality rules. In a November 29 speech in the lead-up to his net neutrality rollback, he said that the tech giants are “part of the problem” of viewpoint discrimination. “Indeed, despite all the talk about the fear that broadband providers could decide what internet content consumers can see, recent experience shows that so-called edge providers are in fact deciding what content they see. These providers routinely block or discriminate against content they don’t like.”

"Brown signed more than 1,000 bills this year. The governor Tweeted that he decided on nearly 20,000 bills in his 16 years." (source)

This is 100% the reason we have been exiting most of our business in CA and will not accept any new business there. All of our training time with managers there goes to compliance with a myriad of new interventions from the legislature.  There is no time left to improve the business, serve customers better, or get more efficient.  California has hit, at least for us, the regulation singularity where new regulations are written faster than we can manage compliance to them.

Now all these veterans of California regulation madness are fanning out into national government.  Beware.

From the recently released study, "The Unintended Consequences of 'Ban the Box': Statistical Discrimination and Employment Outcomes When Criminal Histories Are Hidden"

Jurisdictions across the United States have adopted “ban the box” (BTB) policies preventing employers from asking about job applicants’ criminal records until late in the hiring process. Their goal is to improve employment outcomes for those with criminal records, with a secondary goal of reducing racial disparities in employment. However, removing criminal history information could increase statistical discrimination against demographic groups that include more ex-offenders. We use variation in the timing of BTB policies to test BTB’s effects on employment. We find that BTB policies decrease the probability of employment by 3.4 percentage points (5.1%) for young, low-skilled black men.

This is a pretty predictable outcome, and one that was discussed in my recent paper "How Labor Regulation Harms Unskilled Workers."  The effects of these regulations are synergistic.  Taken alone, one might expect this outcome from ban-the-box.  But combine it with minimum wage laws, rules that increase the monetary risk to employers for hiring unsuitable employees, and the increased regulatory difficulty in terminating employees (particularly minorities) and the effect is likely greater.  I explain this all in depth in the paper but here is a taste:

It used to be that the worst human resource risk a company faced was hiring employees who simply did not justify their salary. However, given the current body of regulation, any poorly selected employee is a potential ticking bomb who, through bad behavior with customers or other employees, could tie up the company for years in expensive litigation or regulatory actions. But as a firm’s liability for the negative activity of a poorly chosen
employee rises, regulations are making it harder to get good information to make better hiring choices,while simultaneously making it harder to terminate employees who were poorly chosen and present threats to the workplace or customers. When employers begin to look at their employees not as valuable assets but as potential liabilities, fewer people are going to be hired.

One potential way employers can manage this risk is to shift their hiring from unskilled employees to college graduates. Consider the risk of an employee making a racist or sexist statement to a customer or coworker (and in the process creating a large potential liability for the company). Almost any college graduate will have been steeped in racial and gender sensitivity messages for four years, while an employer might have an hour or two of training on these topics for unskilled workers. Similarly, because good information on prospective employees—credit checks, background checks,reference checks, discussions of past employment and salary—all have new legal limitations, employers who hire college graduates benefit from the substantial due diligence universities perform in their admissions process.

I made a vow a while back to try to get better at appealing to progressives using their assumptions, not mine.  So here is my shot at it here.  Prejudice exists among some employers that hold a stereotype of African-Americans as disproportionately criminal.  The best way to fight prejudice is through information and education.  But ban-the-box laws and other restrictions on background checks do just the opposite -- they restrict information.  Employers who see full criminal record information, say for African-American applicants, will be struck by how few have criminal records.  "Hey, these guys are OK," I can imagine someone saying.  Without this information, all that the employer has to work with are his pre-existing prejudices and misinformation, and in that context he might avoid African-Americans thinking "they are probably all criminals."

Want to know who the largest financial supporters of "net neutrality" regulations are?  Find them here: (source)

Think about the billions of dollars your ISP has spent to upgrade the bandwidth and speed of their network.  15% of that investment went to supporting Netflix's business, often without any compensation.  Net neutrality supporters always pitch their fears as concern that little guys might get shut out or have to pay to play.  But Comcast et. al. don't give a flip about the little guys.  They are concerned about the amount of their network infrastructure used by, sometimes choked by, Netflix, Google/Youtube and Amazon.  I have run projects to put internet access into large communities (in this case campgrounds with long-term campers).  There is just an astronomical difference between the cost of a system that serves the majority of internet traffic but no video streaming and one that allows video streaming.

Let's use an analogy.  Let's say that the highways in our state are getting torn up and we want to charge users for their use so we can repair and upgrade the roads.  We propose to charge much more per semi-trailer than per car because semi-trailers with their up to 80,000 pound weight really tear up highways more than does your Prius.  But the trucking companies object!  They want road neutrality, and propose that the roads should not treat any traffic differently and all vehicles should be charged the same amount regardless of size.  In fact, they go further -- all entities should be charged the same amount so that UPS with its 1000's of trucks on the road should pay the same flat fee (or no fee) as you pay with your one Prius.  Fair?

This sort of supply chain / value chain negotiation goes on in every industry.  It is also not unusual for participants in this negotiation to run to the government to try to get rules that tilt the playing field in their direction.  This is the context in which I see the net neutrality discussion, an attempt by large content providers to hamstring bandwidth providers in this negotiation.

Via the WSJ today

Amazon.com on Tuesday said it was raising the minimum wage it pays all U.S. workers to $15 an hour, a move that comes as the company faced increased criticism about pay and benefits for its warehouse workers.

The new minimum wage will kick in Nov. 1, covering more than 250,000 current employees and 100,000 seasonal holiday employees. The company said it also will start lobbying Congress for an increase in the federal minimum wage, which was set nearly a decade ago and is currently $7.25 an hour.

“We listened to our critics, thought hard about what we wanted to do, and decided we want to lead,” said Jeff Bezos, Amazon’s chief executive, in a statement. “We’re excited about this change and encourage our competitors and other large employers to join us.”

Here is the cynical view of this:  Amazon likely is being pressured by the tightening labor market to raise wages anyway.  But its call for a general $15 minimum wage is strategically brilliant.  The largest employers of labor below $15 are Amazon's retail competitors.  If Amazon is successful in getting a $15 minimum wage passed, all retailers will see their costs rise but Amazon's competition will be hit much harder.

(Source)

The reason is that due to its internet sales model, Amazon's revenue per employee is MUCH higher than for most retailers -- you can see this in the chart above in a comparison to Sears.  If we had data on revenues per employee in small retail, the numbers would be even lower.  So a minimum wage increase raises costs to Amazon's competitors by a much larger percentage of revenue than it does for Amazon.  In short, Amazon's cost advantage over bricks and mortar retailers would be enhanced by a $15 minimum wage.

This summer I had the cover story in Regulation Magazine with my article "How Labor Regulation Harms Unskilled Workers:  As government expands regulation of employers, they will increasingly turn to fewer, higher-skilled workers and automation."  (pdf here).  The article was not an academic project, but based on my own experience as a business owner who employs hundreds of workers in unskilled positions.  The premise is that many labor regulations -- not just the minimum wage -- have the perverse effect of making it harder to employ unskilled labor while simultaneously providing incentives to shift hiring from unskilled labor to folks with college degrees, even for unskilled positions.

Because it was not an academic research project, I did not spend a lot of time researching labor statistics, but I can't resist posting this analysis which appeared on Seeking Alpha:

As the economy has grown, employment numbers for unskilled labor have flatlined, never recovering from the last recession.  As I observed:

Fifteen years ago I started my current service business. I love my company and my employees. But if I had it all to do over again, I would never start a business based on employing unskilled labor.  The government makes it too difficult, in far too many ways, to try to make a living employing unskilled workers. Given a new start, I would find a business with a few high-skill employees creating a lot of value.

And I don’t think I’m alone. In the 1950s, 1960s, and 1970s, there was a wave of successful large businesses built on unskilled labor (e.g., ServiceMaster, Walmart, McDonalds). Today, investment capital and innovation attention is all going to companies that create large revenues per employee with workers who have college educations and advanced skills. Only 4% of the employees at Apple, for example, have less than a college degree.
Even in large service-sector companies that employ unskilled labor, much of their investment today is in finding ways to reduce their reliance on that labor. I remember a number of years ago when the Chili’s restaurant chain started putting little electronic displays on their tables. At first the displays just showed advertising and I thought they were an annoying waste of space. But over time the chain began using the devices first to accept payment for one’s food and more recently to take food orders. They are progressively eliminating the need for most of their wait-staff. Every major restaurant chain is doing the same thing: investing in technology to eliminate unskilled workers. Why bother trying to figure out how to serve a rapidly evolving customer demand with workers who are limited by government in a hundred different ways in how and when they can labor? A website or iPad never sleeps, never sues, never needs a lunch break (let alone documentation of that break), never has to have overtime, and doesn’t have its labor taxed.

In San Francisco, you have to pay your employees $14 an hour, you have to schedule their shifts at least 7 days in advance, you have to provide them with a meal break, but God forbid that you give them a free meal:

Two San Francisco supervisors want to do away with employer-provided free lunches, a perk enjoyed by thousands of people who work in the City. That’s because restaurant owners say they can’t compete.

It’s lunchtime at Perennial in SOMA but you wouldn’t know it. The seats are empty. Anthony Myint is the restaurant’s owner and says it’s extremely challenging owning a restaurant so close to big companies that have their own onsite free employee cafeterias.

“I think it’s never been harder to run a restaurant in the city then right now,” he said.

Other restaurant owners in the area agree.

“We see it in our business,” says Ryan Corridor, owner of Corridor. “We see thousands of employees in a block radius that don’t go out to lunch and don’t go out in support of restaurants every day — it’s because they don’t have to”

I really do not understand the business mindset that companies are somehow owed a minimum amount of revenue, but the same "logic" driving this law is also driving the Trump tariffs.  You asked for bipartisanship, and here it is -- Trump and San Francisco progressives are united in their belief that the job of government is to force consumers to shift their business, even at high personal cost**, to crony favored suppliers.

Thanks to several readers who sent me this story.

** Note that the cost is not just in dollars but also in extra time travelling from the office to an offsite restaurant.

As a reminder, I have the cover story in Regulation magazine's Summer 2018 issue.  You can find links to the article and the issue, as well as a growing FAQ, here.

I have written the cover story for the Summer 2018 issue of Regulation magazine, titled "How Labor Regulation Harms Unskilled Workers."  The link to the Summer 2018 issue is here and the article can be downloaded as a pdf here.  I meant to be a bit more prepared for this but it was originally slated for the Spring issue and it (rightly) got kicked to the later issue to add a more timely article on tariffs and trade.  The summer publication date sort of snuck up on me until I saw that Walter Olson linked it.

FAQ  (I will keep adding to this as I get questions)

How did a random non-academic dude get published in a magazine for policy wonks? This piece started well over  a year ago, back when my friend Brink Lindsey was still at Cato (he has since moved to the Niskanen Center).   I had told him once that I was spending so much of my personal time responding to regulatory changes affecting my company that I had little time to actually focus on improving my business.  I joked that we were approaching the regulatory singularity when regulations were added faster than I could comply with them.

Brink asked that I write something on small business and regulation.  After about 10 minutes staring at a blank document in Word, I realized that was way too broad a topic.  I decided that the one area I knew well, at least in terms of compliance costs, was labor regulation.  After some work, I eventually narrowed that to the final topic, the effect (from a business owner's perspective who had to manage compliance) of labor regulation on unskilled labor.

Once I finished, I was ready to just give up and publish the piece on my blog.  I sent it to Brink but told him I thought it was way too rough for publication.  He told me that he had seen many good published pieces that looked far worse in their early drafts, so I buckled down and cleaned it up.  My editor at Regulation took on the heroic task of getting the original monstrosity tightened down to something about half the length.  As with most good editing processes, the piece was much better with half the words gone.

The real turning point for me was advice I got from Walter Olson of Cato.  I "know" Walter purely from blogging but I love his work and had been a substitute blogger at Overlawyered in its early years.  At one point, I was really struggling with this article because I kept feeling the need to address the broader viability of the minimum wage and the academic literature that surrounds it.  But I am not an academic, and I have not done the research and I was not even familiar with the full body of literature on the subject.  Walter's advice boiled down to the age-old adage of "write what you know."  He encouraged me to focus narrowly on how a business has to respond to labor regulation, and how these responses might effect the employment and advancement prospects of unskilled workers.  As such, then, the paper evolved away from a comprehensive evaluation of minimum wages as a policy choice (a topic I have opinions about but I don't have the skills to publish on) into a (useful, I think) review of one aspect of minimum wage policy, a contribution to the discussion, so to speak.

Update:  Eek, I forgot since I started this so long ago.  I also owe a debt of gratitude to about 8 of our blog readers who own businesses and volunteered to be interviewed for this article so I could make sure I was being comprehensive.

There are many positive (or negative) aspects of labor regulation you have excluded!  Yes, as discussed above this paper is aimed narrowly at one aspect of labor regulations -- understanding how businesses that employ unskilled workers respond to these regulations and how those responses affect workers and their employment and advancement prospects

Everyone knows employer monopsony power means there are no employment or price effects to minimum wage increases.  Some studies claim to have proved this, others dispute this.  I would say that this statement has always seemed insane from my perspective as a small business owner.  It sure doesn't feel like I have a power imbalance in my favor with my workers.   I address this with a real example in the article but also address it in much more depth here.  The short answer is that for minimum wages to have no employment or price effects, a company has to have both monopsony power in the labor market AND monopoly power in its customer markets.  Without the latter, all gains from "underpaying" a worker due to monopsony power get competed away and benefit consumers (in the form of lower prices) rather than increase a company's profit.

The costs of these regulations are supposed to come out of your bloated profits.  Perhaps that is what happens at Google, where compliance costs are a tiny percentage of what their highly-compensated employees earn and where the company enjoys monopoly profits in its core businesses.  For those of us in highly-competitive businesses that employ unskilled workers, our profit margins are really thin (as explained in more depth here).  When profits are close to the minimum that supports further investment and participation in the business, then labor regulatory costs are going to get paid by consumers and workers.

Then maybe the best thing for workers is to create monopolies.  Funny enough, this idea was actually one of the centerpieces of Mussolini's corporatist economic model, a model that was copied approvingly by FDR in the centerpiece New Deal legislation the National Industrial Recovery Act (NRA).  The NRA sought to create cartels in major industries that would fix prices, wages, and working conditions, among other things.   The Supreme Court struck the legislation down, a good thing since it would have been a disaster for consumers and for innovation and probably for most workers too.  As a bit of trivia, this year's Superbowl winner the Philadelphia Eagles was named in honor of this law.  More here.

So do you think minimum wages are a good policy overall or not?  Hmm, mostly not.  For a variety of reasons, minimum wages are a very inefficient way to tackle poverty (and also here), and tend to have cronyist effects that help one class of worker at the expense of other classes (this latter should be unsurprising since many original supporters of the first federal minimum wages were explicitly hoping to disadvantage black workers competing with whites).

Why are you opposed to all these worker protections?  Or, more directly, why do you hate workers?  This is silly -- I am not and I don't.  However, this sort of critique, which you can find in the comments below, is typical of how public policy discussion is broken nowadays.  When I grew up, public policy discussion meant projecting the benefits of a policy and balancing them against the costs and unintended consequences.  In this context, I am merely attempting to air some of the costs of these regulations for unskilled workers that are not often discussed.  Nowadays, however, public policy is judged solely on its intentions.  If a law is intended to help workers (whether or not it will every reasonably achieve its objectives), then it is good, and anyone who opposed this law has bad intentions.  This is what you see in public policy debates all the time -- not arguments about the logic of a law itself but arguments that the opposition are bad people with bad intentions.  For example, just look in the comments of this and other posts I have linked -- because Coyote points out underappreciated costs to laws that are intended to help workers, his intentions must be to harm workers.  It is grossly illogical but characteristic of our post-modernistic age.

I will retell a story about Obamacare or the PPACA.  Most of my employees are over 60 and qualify for Medicare.  As such, no private insurer will write a policy for them -- why should they?  Well, along comes Obamacare, and it says that my business has to pay a $2000-$3000 penalty for every employee who is not offered health insurance, and Medicare does not count!  I was in a position of paying nearly a million dollars in fines (many times my annual profits) for not providing insurance coverage to my over-60 employees that was impossible to obtain -- we were facing bankruptcy and the loss of everything I own.  The only way out we had was that this penalty only applied to full-time workers, so we were forced to reduce everyone's hours to make them all part-time.  It is a real flaw in the PPACA that caused real harm to our workers.  Do I hate workers and hope they all get sick and die just because I point out this flaw with the PPACA and its unintended consequence?

I've heard that raising the minimum wage increases worker productivity so much that businesses are better off.    I know there is academic literature on this and I am frankly just not that familiar with it.  I can say that I have never, ever seen workers suddenly and sustainably work harder after getting a wage increase.  What I see instead is employers doing things like cutting back employee hours and demanding the same amount of work gets done.  This could result in more productivity if there was fat in the system beforehand but it also can result in things like lower service levels (e.g. the bathrooms get cleaned less frequently).   Without careful measurement, these changes could appear to an outsider to be productivity gains.  In addition, as discussed in the article, with higher minimum wages employers can substitute more skilled for less skilled workers, which can result in productivity gains but leave unskilled workers without a job.

Workers are human beings.  It is wrong to think of them as "costs" or "resources".  The most surprised I think I have ever been on my blog is when I got so much negative feedback for writing that the best thing that could happen to unskilled workers is for someone to figure out how to make a fortune hiring them.  I thought this was absolutely obvious, but the statement was criticized as being heartless and exploitative.  My workers are my friends and are sometimes like family.  I hire hundreds of people over 60 years of age, people that the rest of society casts aside as no longer useful.  They take pride in their ability to continue to be productive.   You don't have to tell me they are human beings.  Just this week I have helped modify an employee's job responsibilities to help them manage their newly diagnosed MS, found temporary coverage for a manager who needs to get to a relative's funeral, found a replacement for a manager that wants to take a sabbatical, and loaned two different employees money to help them through some tough financial times.  From a self-interested point of view, I need my employees to be happy and satisfied in their work or they will provide bad, grumpy service.  But at the end of the day I can only keep these people employed if customers are willing to pay more for the services they provide than the employees cost me.  If the cost of employing people goes up, then either customers have to pay more or I can hire fewer employees.

You probably support child labor too.   Child labor laws are an entirely reasonable zone of government regulation.  The reason this is true stems from the definition of a child -- a child is someone considered under the law to lack agency or the ability to make adult decisions due to their age.   We generally give parents, rightly, a lot of the responsibility for protecting their children from bad decisions, but I am fine with the government backstopping this with modest regulations.  In other words, I have no problem with the law treating children like children.  Instead, I have a problem with the law treating adults like children.

Aren't you just begging to get audited?  Hah!  That's what my wife says.  To me, the logical response of a regulator should be, "wow, this guy knows the law way better than most of the business folks we deal with, so he probably is not a compliance risk" -- but you never know.  Actually, we have been audited many times on many of these laws.  So much so that practically the first series of posts I did on this blog, way back in the blog pleistocene era of 2004, was 3 part series on surviving a Department of Labor audit.  Looking back on the series, everything in it (which included experience from a number of different audits) still seems valid and timely.