Sorting Out the Facts: How the Trump Administration’s Policy Shifts Affect Employers
Labor & Employment Alert 02/14/17 Gary R. Clark, Otto W. Immel, Stephanie J. Quincy, Grant Sovern, Susan M. Zoeller
During the few first weeks of President Donald Trump’s term, his administration has introduced a dizzying array of initiatives that represent a significant shift from the prior administration’s policy agenda. President Trump appears to be following through on his campaign promises by issuing executive orders – on the repeal of the Affordable Care Act, on reducing federal regulation, and about patrolling our borders, to name a few. But what impact do these early policy initiatives actually have on the laws and regulations they address? What is the fate of the DOL’s overtime regulations? Has the Affordable Care Act been repealed?
Despite the flurry of speculation and analysis surrounding President Trump’s executive orders, the administration’s swift actions have little practical effect on federal employment law and policy – for now. As a result, employers should stay tuned for more concrete changes to federal employment policy.
Let’s separate fact from fiction and identify the actual impact, if any, President Trump’s executive orders may have on employers and their businesses.
Labor and Employment
Reining in Federal Regulations: Just one day after Donald Trump’s inauguration, his administration issued a memorandum to all executive departments and agencies directing them to temporarily freeze all unpublished regulations and mandating a 60-day freeze on published regulations that have yet to take effect. Several days later, President Trump signed an executive order, titled “Reducing Regulation and Controlling Regulatory Costs” which requires any executive department or federal agency that proposes a new regulation to identify at least two regulations to be repealed (commonly referred to as the “one in, two out” rule). Under the Administrative Procedures Act, the repeal of old regulations requires the same notice and comment process as the adoption of new regulations. We expect that several recent labor regulations may be affected, including the DOL’s overtime rule, the DOL’s persuader rule, the EEOC’s pay transparency rule, among others. At this time, however, this executive action poses no immediate effect for employers.
Overtime Rules under the Fair Labor Standards Act (FLSA): In May 2016, the Obama Administration announced an overhaul of the overtime rules under the FLSA by nearly doubling the minimum salary requirement for exempt employees from $23,660 to $47,476 per year. Under the new rule, employees who earn less than $47,476 would no longer meet the overtime exemption under the FLSA, and would be entitled to overtime compensation for all hours worked over 40 in a week. As we discussed in a previous alert, however, a federal district court judge issued a preliminary injunction thus suspending the regulation just before it was to go into effect.
Persuader Activities in Union-organizing Campaigns: Another recent shift in labor relations policy concerns the nature of reportable persuader activity in union-organizing campaigns. As we identified in a previous alert, the DOL issued expansive regulations in March 2016 which substantially increased employers’ reporting obligations by broadening the definition of “persuader activities” to encompass both direct and indirect means of persuasion and narrowed the “advice exemption” upon which consultants and lawyers have relied to provide effective and meaningful advice to their employer clients without having to report their activity to the DOL. Just before the new rule was to take effect in early July 2016, however, a federal court entered a permanent injunction with nationwide effect thus preventing the DOL from enforcing the new persuader rule going forward. The permanent injunction decision is currently on appeal to the Court of Appeals for the Fifth Circuit.
Disclosure Requirements under the Fair Pay and Safe Workplaces Executive Order: In August 2016, the DOL published a final rule implementing President Obama’s Fair Pay and Safe Workplaces executive order, which requires prospective federal contractors and subcontractors to disclose workplace law violations that occurred during the previous three years and to give wage statements detailing pay and hours to employees and independent contractors. Litigation to enjoin the final rule is pending as noted in a previous alert. Moreover, on January 30, 2017, Republican lawmakers introduced a joint resolution of disapproval, which would permanently block implementation of the final rule, under the Congressional Review Act. The Congressional Review Act allows Congress to repeal new rules on an expedited basis through a resolution of disapproval, rather than the through the usually-required notice and comment rulemaking process, so long as the regulations were issued within 60 legislative days of the new Congress.
Introduction of National Right-To-Work Legislation: On February 1, 2017, the House of Representatives introduced a national right-to-work bill that could have far-reaching implications for the labor movement and if enacted, would continue a trend that has swept through state legislatures. The National Right-To-Work Act, co-sponsored by Reps. Steve King (R-IA) and Joe Wilson (R-SC), would amend the National Labor Relations Act (NLRA) and Railway Labor Act to prohibit unions nationwide from requiring membership or mandating that non-members pay dues as a condition of employment. Currently, union workers are required to pay dues by default under national labor laws; however, the Taft-Hartley Act gives states the right to bar mandatory dues and 27 states have taken advantage of the exception in the past few years, passing their own right-to-work laws. With Republican majorities in both houses of Congress, and President Trump’s public support of the initiative, there is a strong possibility the bill becomes law.
Dismantling the ACA? On his first day in office, President Trump issued his first executive order setting the stage on repealing the Affordable Care Act. The Executive Order, “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal” outlines the administration’s policy to seek the prompt repeal of the Affordable Care Act (ACA) to “minimize the unwarranted economic and regulatory burdens of the Act and to prepare to afford States more flexibility and control to create a more free and open healthcare market.”
Until Congress votes to repeal and replace the ACA, the Order gives heads of agencies with responsibilities under the ACA the authority to waive, defer, grant exemptions from, or delay implementation of any provision of the ACA that would impose a fiscal burden on the States or a cost, fee, tax, or penalty on individuals, families, healthcare providers, insurers, and others affected by the ACA. However, the Order does not immediately affect the operation of the insurance marketplace or employer-sponsored plans, although it sends a clear message as to the new administration’s intentions to overhaul the nation’s healthcare insurance system. As for timing, last week President Trump indicated that we may not see repeal until 2018, so until we hear otherwise, employers should continue their ACA reporting and to operate their health plans in an ACA-compliant manner. For a more in-depth analysis of President Trump’s Executive Order on the ACA, our employee benefits team addressed its potential effects in a recent client alert.
Fiduciary Rules under the Employment Retirement Income Security Act (ERISA): The DOL’s new fiduciary rule, which is scheduled to be phased in starting April 10, 2017, through January 1, 2018, expands the definition of “investment advice fiduciary” under ERISA to include persons who provide investment advice or recommendations for a fee or other compensation with respect to retirement accounts. The practical impact of this regulation for employers is that it generally turns most retirement plan recordkeepers into ERISA fiduciaries (because they accept IRA rollovers from ERISA plans or otherwise provide investment advice).
President Trump recently issued a memorandum directing the DOL to review the fiduciary rule and in response, the DOL requested that the rule’s applicability date be delayed 180 days to allow time to review, and possibly change, aspects of the fiduciary rule. We expect that the delay will be approved by mid-March, which would delay the rule’s implementation until mid-September. As a result, we expect that retirement plan recordkeepers and other ERISA plan service providers will suspend their compliance efforts until we have further direction from the DOL. Employers that have already entered into contract amendments with service providers to reflect the fiduciary rule need not take any action to rescind those amendments as the fiduciary rule is generally favorable to employers and plan participants.
Dodd Frank and the CEO Pay Ratio
Under the Dodd-Frank Act, generally starting in 2017, publicly traded companies are required to calculate and disclose a "pay ratio" that compares the Chief Executive Officer's pay to the median pay of other employees. However, President Trump recently issued an executive order directing a sweeping review of the Dodd-Frank Act, which, in addition to the pay ration disclosure imposed various rules on compensation programs that public companies offer to their executives. In response to that order, the Securities and Exchange Commission (SEC), which is tasked with enforcement of the Dodd-Frank Act, indicated that it is reconsidering the pay ration rule's implementation. Employers can comfortably suspend their compliance efforts as postponement and revision of this rule seem likely. It remains to be seen whether the SEC also delays or modifies another proposed rule under the Dodd-Frank Act, which would require public companies to adopt compensation clawback policies.
Travel Ban Turmoil: The Trump administration promised sweeping changes to U.S. immigration policy. In the coming months, we can expect a slew of changes to existing immigration law, including a re-examination of business and employment-related visa programs, termination of parole regulations such as Deferred Action for Childhood Arrivals (DACA), and implementation of incentives for employers to use the E-Verify employment verification program, among others.
For now, however, we are following the progress of President Trump’s executive order imposing a ban on immigrants from select countries from entering the United States. As addressed more thoroughly in our recent immigration alert, the administration’s January 27, 2017 Executive Order instituted a 90-day travel ban on individuals from Iraq, Iran, Libya, Syria, Somalia, Sudan, and Yemen. It also suspended the U.S. refugee resettlement program for 120 days, and suspended acceptance of Syrian refugees indefinitely. Initially, lawful permanent residents of the United States from the affected areas were also subject to the travel ban, but executive branch officials have stated that the ban will not be enforced against such individuals.
Since its release, at least five federal courts have issued emergency stays on enforcement of the executive order. One of these courts, the U.S. District Court for the Western District of Washington, issued an emergency stay halting enforcement of the executive order across the nation.
On February 9, 2017, the Ninth Circuit Court of Appeals upheld the Western District of Washington’s emergency stay, declining to reinstate President Trump’s executive order pending a decision on the merits of the case. Therefore, the executive order will not be enforced unless and until another court overturns the Ninth Circuit’s ruling or determines that the executive order, as written, is valid.
Until the legal challenges to the travel ban are resolved, employers should advise employees from the affected countries to refrain from traveling outside of the United States until further notice. Employees from affected countries with lawful permanent resident status should expect additional screening upon return from international travel. If you have any questions about how the travel ban will affect you or your employees, please contact your local Quarles & Brady immigration attorney.
In addition to the significant shifts in policy noted above, President Trump has appointed nominees to head the following federal agencies:
- Equal Employment Opportunity Commission (EEOC): On January 25, 2017, President Trump appointed EEOC Commissioner Victoria A. Lipnic as acting chair to take over the leadership role from Chair Jenny R. Yang. President Trump also will have the opportunity to nominate the EEOC’s new general counsel to replace David Lopez, who left in December 2016.
- National Labor Relations Board (NLRB): On January 26, 2017, President Trump appointed Philip A. Mischimarra, the sole Republican member of the NLRB, as acting chairman, taking over for Democrat Mark Gaston Pearce. The NLRB currently has two vacant seats, both of which President Trump is likely to fill with Republican members. In addition, the term of NLRB General Counsel Richard F. Griffin, Jr. will expire in November 2017.
- Department of Labor (DOL): The confirmation hearing date for President Trump’s choice to head the DOL, Andrew Puzder, has been postponed for the third time to February 16, 2017.
We will continue to monitor the status of these changes and will provide further updates as they develop. For more information or assistance complying with these changes or other labor and employment obligations, please contact Gary Clark at (312) 715-5040/[email protected], Otto Immel at (239) 659-5041/[email protected], Stephanie J. Quincy at (602) 229-5407/[email protected], Grant Sovern at (608) 283-2668/[email protected], Susan M. Zoeller (317) 399-2865/susan.z[email protected], or your Quarles & Brady attorney.