November 13, 2016
Employment Law Alert
President-elect Trump and congressional Republicans are likely to push for significant changes in Labor and Employment law. This alert discusses what employers should anticipate.
Donald Trump’s victory in the presidential election was viewed by many as a stunning upset. What will now follow may be even more stunning. Trump and congressional Republicans are now likely to embark on an effort to make significant changes in labor and employment law. Trump’s policy positions on many issues affecting employers differ vastly from the policies that President Obama has put in place over the last eight years. His campaign platform included a number of proposals with significant potential impact on employers and employees, including immigration reform, repeal and replacement of Obamacare, restrictions on outsourcing jobs, childcare and parental programs, and abolishment of labor and employment regulations. President-elect Trump also will have the opportunity to shape the United States Supreme Court and a number of administrative agencies.
With continued lack of action from the Senate on President Obama’s judicial nominee, President-elect Trump will be poised to select a conservative Supreme Court justice to replace the late Justice Antonin Scalia. That replacement’s decisions will have far-reaching ramifications on employers.
Trump’s campaign policy platform called for “eliminating” every wasteful and unnecessary regulation across all departments, a temporary moratorium on new agency regulation, and ending “radical regulation.” This is all much easier to say than to accomplish, and what it means in actual practice is not clear. However, we certainly expect to see many policies of the Obama administration curtailed or eliminated, and efforts made to roll back Obama-era legislation and regulation.
The repeal and replacement of the Affordable Care Act (ACA) has been a centerpiece of the Trump campaign since day one. Moreover, congressional Republicans have already voted numerous times to repeal part or all of the ACA. The ACA imposes both employer obligations to offer health insurance coverage, and obligations on individuals to purchase health insurance either through their employers or through healthcare exchanges. Both the employer and the individual obligations are likely to be repealed, perhaps early in the new administration. Other aspects of the ACA that primarily affect insurers, such as the requirements to allow children to remain covered through age 26, and limitations on pre-existing condition exclusions and waiting periods, are less likely to be jettisoned. The details on any “replacement” provisions, such as proposals to expand health savings accounts, are not yet clear.
Trump has proposed a massive public works/infrastructure program for airports, highways, and, of course, the oft-mentioned Wall. (He said frequently that he wanted to double Clinton’s $250 billion proposal.) He has also shown hostility toward prevailing wages for this work. Presuming he can get a large public works project through the deficit scolds in the House (where a non-prevailing wage provisions would help sell it), and a filibuster from the Democrats in the Senate over the loss of the prevailing wage provision, we would for the first time in many years face federal construction projects without Davis-Bacon’s requirements. Even if those stay in place, many of the “government contractor” portions of recent (and perhaps longtime) executive orders certainly seem likely to meet their demise. However, where state funds are involved, the state “baby” Davis-Bacon acts will still control. We also anticipate that large general contractors will create double-breasted operations (union and non-union operations) in a way that they haven’t for years.
Change in Executive Orders will hit all government contractors, not just those in the construction industry. We expect that the OFCCP’s import will diminish significantly, meaning that affirmative action obligations will go with it, as this is seemingly an expectation of Trump’s base.
Presuming that Trump’s Made in America statements prove true, there will be considerable in-bound and domestic investment in manufacturing. This may mean that companies that have moved production facilities to Mexico will relocate back to the U.S., most likely to the southeastern United States and border states. Despite Trump’s promises to the rustbelt states, it will take considerable change to get manufacturers to invest in rustbelt manufacturing again. Although Trump has not provided specifics on how he plans to bring jobs back to the United States, we predict that it will most likely entail significant tax breaks; state government legislative changes; and the creation of “economic zones” with potential exemptions from certain federal and state labor requirements, including environmental, health, and safety provisions.
As certain states and municipalities are passing legislation that raises minimum wage, provides paid parental and sick leave, and institutionalizes equal pay for equal work, among other measures, a lack of federal action will lead to an ever-increasing gap between the rights and benefits of employees working in different states. This will create an increasingly difficult legal landscape to navigate for employers who have national workforces.
We expect that President-elect Trump will seize the opportunity to transform the pro-labor National Labor Relations Board (NLRB) into a more employer-friendly body. By filling two current vacancies, President-elect Trump should be able to create a pro-employer majority. The expiration of the term of labor-ally Board member Mark Gaston Pearce in 2018 will create another opportunity to reconstitute the Board. The influential general counsel position will certainly be given to someone other than the current GC Richard Griffin, who previously served on the Board and as general counsel of the Operating Engineers Union.
Once the Board balance of power shifts, President Obama-era Board decisions may be undone as new cases come up through the regions. Potential areas of pro-employer change include, among others, joint employment, duty to bargain, identifying statutory supervisors, and delineation of bargaining units. The Obama Board’s strictest rulings on employer policies may also be pared back.
On the rulemaking front, the remade Trump Board will feel pressure, but may be less likely, to rush to undo the new quickie election rules, given the lack of data showing a higher union success rate under the new regime.
Under the Obama NLRB, the Board has made clear that it considers employment class actions to be a form of protected concerted activity protected by Section 7 of the National Labor Relations Act (NLRA). As such, according to the Board, arbitration agreements mandating the arbitration of employment class actions interfere with, restrain, or coerce employees in the exercise of their rights, constituting an unfair labor practice in violation of Section 8 of the NLRA.
The Obama Board has, therefore, repeatedly invalidated class waivers in employment arbitration agreements, finding that the Federal Arbitration Act, which authorizes arbitration for individual employment complaints, yields to the NLRA for class arbitration waivers. The United States Circuit Courts of Appeal, however, are split on the issue.
As of the date of the election, the three most-recent circuit court cases on this issue are pending Supreme Court review for writ of certiorari. The issue is, thus, prime for review, and seems likely to be taken up by the court soon.
An NLRB with Trump appointees seems highly unlikely to follow in the path of the Obama NLRB. Because the issue has now made its way through the courts and is ripe for review, though, it may be decided by the Supreme Court before Trump’s appointments to the NLRB will have an opportunity to have an impact.
In light of the vacant seat on the Supreme Court and Trump’s promise to promote more conservative-leaning justices, a Trump-nominated justice is likely to be pro-arbitration, as was Justice Scalia. Nevertheless, the outcome on this issue may depend on which case the current court decides to take up for review and how the court ultimately frames the issue.
It is a real possibility that soon after taking office, President-elect Trump may attempt to reverse the increase to the minimum salary for exempt employees under the Department of Labor (DOL) White Collar Exemptions scheduled to take effect on December 1, 2016. Currently, the salary requirement is at $455/week (or approximately $23,660 annually), but it is scheduled to rise to $913/week (or approximately $47,476 annually) effective December 1. Of course, President-elect Trump would have to repeal the increase through the usual regulatory review process, but with a new head of the DOL appointed by Trump, we could see this issue fast-tracked.
During his campaign, Trump proposed a paid maternity leave plan with six weeks of paid maternity leave for new mothers. Trump’s plan would fund the paid maternity leave through an employer’s unemployment insurance contributions. Trump also proposed to “incentivize employers to provide childcare at the workplace” by expanding an existing tax credit that allows companies to deduct part of the cost of providing an onsite childcare facility.
Trump’s proposals were significantly less generous to employees than those proposed by Hillary Clinton. How strongly Trump will push for such legislation is an open question, but his daughter Ivanka Trump has certainly expressed support for such action. It will be interesting to see what the “Ivanka Effect” will be on the new administration, especially on issues of particular importance to women in the workplace.
We expect a Trump OSHA to greatly reduce emphasis on new rulemaking, focus instead on examining regulations that it believes can be eliminated, and perhaps engage in more limited and targeted enforcement. Based on experience under previous Republican administrations, efforts to limit OSHA by refusing to fund it, or more likely reducing its funding, also seem likely.
Employers engaged in current rulemaking processes can expect a review by a Trump OSHA on whether those rulemakings should proceed and, if so, whether they should proceed in a more-limited fashion.
OSHA’s new electronic recordkeeping rule, with its preamble containing additional prohibitions on certain safety incentive programs, seems likely to be revisited by a Trump OSHA.
We also anticipate that a Trump OSHA will review and scale back OSHA’s policies on joint employer enforcement (which results in citation of multiple employers for the same violation).
President Obama’s Executive Order on Fair Pay and Safe Workplaces, which requires federal contractors to disclose not just safety and other labor law violations but even allegations of such violations, seems a likely target for immediate repeal by Trump.
Current OSHA Chief David Michaels had announced his intention to step down even before the election, and Trump’s replacement will undoubtedly have a very different view of OSHA’s mandate and priorities. Changes in field enforcement personnel will take much longer, but the three-person Occupational Safety and Health Review Commission (OSHRC), which hears employer appeals of citations, has a current vacancy and Trump could immediately fill that seat with a Republican, resulting in an OSHRC with two out of three votes being Republican. This is likely to have a major impact on how cases are decided.
The DOL has issued extensive new regulations that affect the provision of advice, education, and recommendations regarding the investment of retirement plan and Individual Retirement Account assets. These new regulations are currently scheduled to be effective beginning in April 2017. These regulations primarily affect brokers and retirement plan recordkeepers, but can also indirectly affect employers that sponsor retirement plans.
Although there has been no specific statements on this DOL fiduciary regulation from the Trump campaign, and President-elect Trump has at times stated he knows how to end “Wall Street abuses,” congressional Republicans have already tried legislation to overturn the regulation. In general, the Trump administration is expected to cut back on business regulation. A withdrawal or repeal of the DOL fiduciary regulations before they become effective is a distinct possibility.
In the wake of the election, considerable uncertainty remains regarding President-elect Trump’s immigration policies. However, based on Trump’s statements throughout the campaign, we expect he is likely to take a tough position on unlawful immigration; call for increased employer compliance mechanisms, such as a mandatory E-Verify program; and attempt to place restrictions on an employer’s ability to hire skilled foreign national workers. While some of his policies may be enacted via unilateral executive action, many will have to be made in compliance with the Administrative Procedures Act or would require legislative approval. For a complete report on the potential impacts on immigration, see our alert, “Donald Trump's immigration policies and impacts on U.S. employers: Separating campaign rhetoric from reality.”
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.