The election of Donald Trump, to serve as the 45th President of the United States (as well as Republican majorities in both the Senate and the House) is likely to substantially shift federal workplace law, regulation, and enforcement priorities. At this point, it is impossible to predict exactly how particular laws will be changed. The rhetoric during the campaign was often vague and subject to substantial change and there is no guarantee that President-elect Trump will be able to enact any particular legislative priority without substantial change or that his goals may not change. This article will explore some of the principle areas in federal law and regulations impacting the workplace likely to experience important changes under the Trump administration and trends that recruiting and HR professionals in the U.S. should be on the lookout for once President-elect Trump takes office and the new Congress convenes.
Upon taking office, President-elect Trump will be responsible for appointing new leadership for an alphabet soup of federal agencies. Executive branch agencies such as the U.S. Department of Labor and Department of Justice will be headed by Trump cabinet appointees. Independent agencies such as the National Labor Relations Board, Securities and Exchange Commission, and the Equal Employment Opportunity Commission will likely have Republican majorities and chairpersons. Without effecting any change in the law, these new appointees will be able to change federal law enforcement priorities and to engage in rulemaking and adopt new interpretations of existing laws and regulations.
In addition to nominating candidates for positions at federal agencies requiring Senate confirmation and making appointments for other positions, President-elect Trump will also send the Senate his nominee to fill the vacancy on the United States Supreme Court that has existed since the death of Justice Anton Scalia earlier this year. A key employment law issue likely to be considered by the Supreme Court this term is whether employers can include class-action waivers in employment agreements. In any case, the impact of a new Supreme Court justice is likely to be long lasting and exceed the outcome of any individual case.
The most immediate effect President-elect Trump is likely to have on wage and hour law is appointing new leadership to head the Department of Labor’s Wage and Hour Division. The Obama Wage and Hour Division issued Administrator Interpretations (statements of government policy which are not legally binding on the courts) which sought to greatly expand when businesses can be held liable as joint employers and narrow the circumstances in which workers can be could be treated as independent contractors exempt from federal minimum wage and overtime protections and other federal laws protecting employees. A Trump Wage and Hour Division could walk both of these interpretations back with minimal interference.
Implementation of the U.S. Department of Labor’s new overtime exempt rule increasing the minimum salary threshold for the executive, administrative, and professional exemptions from $455 a week ($23,660 annually) up to $913 a week ($47,476 annually), with indexing every three years, was expected to take effect on December 1, 2016. However, on November 22, 2016, a federal judge in the Eastern District of Texas issued a nationwide preliminary injunction blocking implementation of the final rule. The injunction will likely leave employers uncertain as to how to best approach classification of its currently exempt workforce as injunctions often do not resolve cases and, instead, lead to lengthy appeals. While normally the DOL would be expected to appeal this decision, it may ultimately decide to forego any such effort in light of the impending Trump Administration which could spell at least short-term impotency of the DOL’s enforcement activities.
During the campaign, candidate Trump proposed sweeping changes to the tax code which would present new challenges and opportunities to employers and recruiting professionals. President-elect Trump’s proposal currently is to reduce the corporate tax rate from 35 percent to 15 percent and eliminate many business deductions (while allowing for immediate deductions of costs of asset acquisitions). Further, independent contractors and persons who receive partnership income or income from S corporations would also benefit from the proposed lower tax rates as the proposal for the reduced corporate tax rate would apply to income earned by individuals from S corporations, partnerships, and sole-proprietorships.
As a result, more workers may be incentivized to provide services as independent workers or consultants earning their income through their own S corporations, partnerships, or sole-proprietorships at the reduced 15 percent tax rate. Such a change, if it comes to fruition, could likewise incentivize businesses and recruiters to fashion non-employee positions for roles previously performed by employees so as to permit independent workers to claim a lower tax rate.
During the campaign, President-elect Trump vowed to repeal the Affordable Care Act and replace it with an as yet undefined alternative health care law. This would impact employers and employees in a number of ways depending on precisely what portions of the Affordable Care Act are repealed and how the replacement laws function. For example, will the employer mandate, the tax, or penalty paid by those who do not purchase health insurance and the Cadillac tax be repealed as the President-elect promised during his campaign? What design changes will employers make as a result? Will the use of Health Savings Accounts expand? Will requirements to cover certain services change?
Due to the number of moving parts, stay in compliance with current law, keep abreast of new developments, and maintain the flexibility to promptly react to changes in the law.
President-elect Trump made tougher enforcement of immigration laws and restrictions on allowing foreigners to enter the United States on H-1 B and other employment visas a centerpiece of his campaign. Although much of the rhetoric focused on undocumented immigrants with criminal backgrounds, President-elect Trump may attempt to impact immigration law on a broader level to protect the American workforce.
For example, President-elect Trump has promised to revoke President Obama’s executive orders that permitted millions of “dreamers” to stay and work, and try to make it even more difficult for employers to recruit highly skilled and/or highly educated foreign nationals to work in the United States. At the same time, he could reinstitute the Bush-era worksite enforcement raids of employers suspected of using undocumented workers. Alternatively, tougher enforcement could be combined with measures that facilitate legal immigration, including the ability to more easily recruit foreign nationals with advanced degrees.
The Obama NLRB has sought to aggressively exert its influence in non-union workplaces and, with its adoption of so-called “quickie” or “ambush” election rules and other procedural and substantive changes, to make it easier for unions to organize and gain bargaining rights. For example, it has struck down employer policies regarding protecting confidential employer information and requiring civil discourse in the workplace. It has also taken the position that employment agreements which prohibit employees from bringing or participating in class actions against their employers violate federally protected employee rights.
The Obama NLRB has also held that misclassifying a worker, i.e. calling a worker who the NLRB considers to be an employee an independent contractor is itself an unfair labor practice. The Trump NLRB is likely to take a more hands-off approach to non-union workplaces. The Obama NLRB also issued decisions expanding the scope of joint employer liability for unfair labor practices and to collectively bargain with another employer’s employees. The Trump NLRB is likely to scale back the scope of joint employer liability under new legal standards adopted by the Obama NLRB.
The Obama administration has worked to expand workplace protections for LGBT workers on multiple fronts. For example, the Obama administration’s EEOC has taken the position that discrimination against LGBT employees and applicants is a form of unlawful gender based discrimination. The administration has also worked to permit transgender employees to choose to use the bathroom which conforms to their gender identities. It is not clear whether these issues will be as high of a priority for the Trump administration.
President-elect Trump has yet to be inaugurated and if the 2016 presidential campaign is any indication, he is likely to continue to surprise us once in office. As of now, Barack Obama is still President and it would be foolish to violate current law in anticipation of future changes. However, HR and recruiting professionals would be well served to keep abreast of updates in workplace law, both to ensure continued compliance and to exploit any opportunities changes in the law may present.
Epstein Becker Green attorneys Michelle Capezza, Robert S. Groban, Jeffrey H. Ruzal, and Susan Gross Sholinsky also contributed to this article.