As we discussed last week at Mintz Levin’s Third Annual Employment Law Summit, big changes are likely in the offing as all three branches of our federal government begin to deal with labor and employment issues following President Trump’s election. President Trump’s first 100 days has already included action on a number of employment and labor law issues we’re following here at Mintz Levin. The Administration has enacted or signaled changes – some potentially significant – in executive orders and through pronouncements of regulatory and enforcement priorities that promise to impact the field of labor and employment law. Additionally, the expected confirmation this week of Judge Neil Gorsuch means all hands on deck at the United States Supreme Court, and congressional action so far suggests a potentially employer-friendly climate on Capitol Hill.
Below, we highlight changes in the leadership, regulation, and likely course forward for each of the branches of the federal government, and offer our predictions for 2017 and beyond under the current Administration.
United States Department of Labor
A New Captain
The confirmation process of Labor Secretary nominee Alex Acosta, a conservative and well-regarded former United States Attorney and Bush Administration official, was advanced last week by the Senate Health, Education, Labor and Pensions Committee along a party-line vote. Acosta formerly served on the National Labor Relations Board and has significant experience in labor relations. During his confirmation hearing, Acosta promised to follow the executive actions of President Trump, who he described as his “boss,” with respect to Obama-era labor regulations that have been pending since President Trump signed a memorandum on January 20 indefinitely preventing those regulations from taking effect.
The Regulatory Winds are Changing
The DOL’s new Overtime Rule – – already stymied by a federal judge in Texas – – was frozen by a White House memo issued on January 20, 2017. The Department of Labor’s appeal (filed while Obama was still in office) of the court’s ruling may withdraw its appeal to the U.S. Court of Appeals for the Fifth Circuit before the court rules on the currently enjoined Overtime Rule’s enforceability, which could moot the case. Additionally, the Department could eliminate or revise the rule altogether. Either way, it is unlikely the new Overtime Rule will take effect in anything like its current form in the foreseeable future. Keep in mind, however, that many states have their own robust set of overtime pay requirements, and those will need to be adhered to regardless of federal inaction. For example, New York has adopted minimum salary thresholds that are substantially higher than the current $455 per week threshold under the federal regulations.
President Trump signed a bill repealing the Blacklisting Rule on March 27, 2017 under power accorded to Congress under the Congressional Review Act. The Act permits Congress to overrule new regulations within 60 legislative days of their issuance.. The Blacklisting Rule previously required federal contractors to disclose labor violations and was intended to prevent the federal government from contracting with businesses responsible for wage theft or workplace safety violations within the last three years.
In November 2016, a federal judge in Texas permanently enjoined changes to the Persuader Rule, which required employers and their labor relations consultants to file public reports detailing their efforts to persuade employees about organizing and collective bargaining. The Department of Labor is unlikely under this Administration to appeal that ruling to the Fifth Circuit of that injunction. It is also unlikely it will amend the Rule or promulgate a replacement that would be anything like the rule that recently went into effect. Keep in mind, though, that labor relations consultants and employers still have reporting requirements under the existing rules
Next, the Obama-era Fiduciary Rule also appears to be effectively dead. The Rule was released in April 2016 and mandated financial professionals who service individual retirement accounts to serve the “best interest” of savers and to disclose conflicts of interest. Under President Trump’s direction, the Department has indefinitely delayed the Rule’s April 10, 2017 effective date. A February 3, 2017 memorandum signed by the President directs the Department to review the Rule to determine whether it may “adversely affect” the ability of Americans to gain access to retirement information and financial advice, and if so, to withdraw or amend the Rule.
Finally, efforts to advance the Department’s Misclassification Initiative may be relaxed or stalled. The Initiative provided additional funds for state enforcement action against the misclassification of employees as independent contractors.
Overall, we anticipate that Secretary Acosta and the DOL generally will be less aggressive in litigation, choosing instead a “collaborative model” of enforcement that employs a combination of alternative resolution methods, voluntary compliance programs, and sub-regulatory guidance in order to drive employer compliance. Mr. Acosta has expressed a preference for clear rulemaking over case decisions to establish federal labor policy and that regulations should be used to clarify legal interpretations of labor law.
Equal Employment Opportunity Commission
A New Captain
President Trump named Commissioner Victoria Lipnic, the current sole Republican Commissioner, as the EEOC’s Acting Chairperson. She has served the Commission for seven years and previously served as Assistant Secretary of Labor for Employment Standards in the Bush Administration from 2002 to 2009.
President Trump has the opportunity to designate a new EEOC Chair during his term.
Steadying the Course
The EEOC’s five-year Strategic Enforcement Plan (“SEP”) covers the years from 2017 to 2021 and prioritizes equal pay and promises to address disparities on the basis of sex, race, ethnicity, and disability. Other priorities include “issues related to complex employment relationships and structures in the 21st century workplace, focusing specifically on temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.”
While it is possible that the President and Congress could scale back the SEP, Ms. Lipnic in February shared her belief that the Commission will not shift the agency’s priorities as set out in the SEP. Commissioner Feldblum, a Democrat, separately echoed that belief.
While the agency’s budget could be impacted by a federal budget that many believe will make major cuts to many federal agencies, the budget proposal released by the President in March did not mention proposed cuts in funding to the EEOC.
In commentary welcomed by many employers, Acting Chairperson Lipnic has also signaled her openness to re-evaluating the EEO-1 reporting requirements that are set to take effect in March 2018. Unless revised, those reporting requirements mandate annual reporting of data about employees’ gender, race, and ethnicity across 10 job groupings and require employers to provide compensation information and number of hours worked for employees across 12 pay bands. Currently the demographic data is required, the new requirement requires that employers also compile and report the compensation data. The reports are generally required of employers with100 or more employees, or with 50 or more employees and who is a prime or first tier subcontractor on a federal government contract of $50,000 or more.
While we do not currently foresee sea changes at the EEOC, the agency may be forced to make budgetary choices that impact its ability to actively pursue all of its enforcement priorities. The Commission may also revisit current regulations to ease employer burdens.
We also anticipate less focus on systemic discrimination cases and heightened Congressional scrutiny over the agency’s litigation agenda and enforcement priorities. Consistent with some recent case law, we may see a push for more “bona fide” conciliation efforts.
Because of Vice President Pence’s public opposition to new pay equity legislation, expect also to see pressure on the EEOC to shift away from robust enforcement in this area; however, be aware that a number of states are enacting and enforcing pay equity measures of their own.
The agency’s positions that sexual orientation and gender identity discrimination constitute sex discrimination under Title VII will continue to be tested in court. Two recent federal courts of appeal have very recently affirmed their circuit’s precedent that sexual orientation status-based discrimination is not actionable under Title VII while at the same time allowing the plaintiffs’ sex discrimination claims to proceed under a gender stereotyping theory. While the EEOC may not formally change its position that sexual orientation discrimination as per se sex discrimination, it may be less proactive in pursuing the issue. Ultimately, the federal courts will likely make the final decisions regarding this hot-button topic in Title VII interpretation.
National Labor Relations Board
A New Captain
In January 2017, President Trump appointed Republican Philip Miscimarra as Acting Chairperson of the National Labor Relations Board (“NLRB”). Miscimarra, the sole Republican on the NLRB, is serving out a four-year term to which President Obama nominated him in 2013. He takes over from a Democratic chairperson. There are two Democrats and two vacant seats expected to be filled by Republican nominees, which will shift the Board to a Republican majority. Additionally, President Trump will have the opportunity to appoint a replacement for the outgoing General Counsel of the NLRB, a position of great influence that issues guidance memoranda and directs enforcement priorities among the NLRB’s field offices.
Charting a New Course
A newly composed NLRB is expected to shift its position on class action waivers, which is currently that agreements restricting employees from joining class actions violate the National Labor Relations Act (“NLRA”). In any event, the Supreme Court will decide this issue in the October 2017 term, by which time it will likely have a full complement of nine justices. Acting Chair Miscimarra has criticized one of the NLRB’s ruling in this area, the D.R. Horton case, which found that employment agreements requiring waiver of collective action rights are unlawful.
A Trump Administration NLRB may also be more reluctant to hold that social media, confidentiality, non-solicitation and other restrictive handbook policies infringe on employees’ rights to engage in concerted activity under Section 7 of the NLRA.
The joint employer standard adopted by the NLRB in its Browning-Ferris Industries decision has also caused employers heartburn. That decision, currently on appeal to the D.C. Circuit, affects franchisors and employers who utilize staffing firms and permits a joint employment finding against a company that exercises indirect control over another company’s workers. This issue could reach the Supreme Court next term.
Acting Chair Miscimarra strongly opposed the Browning-Ferris Industries ruling, opining that the joint employer test it established would “subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity.”
Finally, a newly constituted NLRB may also change course on temporary workers in bargaining units, “quickie” union elections, and micro unit organizing. In DPI Secuprint, Inc., decided in 2015, the NLRB determined that a union can organize a group of workers while excluding some of the targeted group’s co-workers who are part of a single, functionally-integrated production process. As a result, employees may be disenfranchised from participating in a collective bargaining process that could potentially result in changes to their terms and conditions of employment or even a labor disruption that could effectively put them out of work.
The White House
On March 27, 2017, President Trump revoked some of President Obama’s previous executive orders concerning federal contracting. Specifically, Trump’s Executive Order on the Revocation of Federal Contracting Executive Orders dispenses with the former Fair Pay and Safe Workplaces Executive Order, which required companies seeking federal contracts to demonstrate that they had not violated the 14 federal employment and labor laws listed within the previous three years. Critics of Trump’s order say that it took the teeth out of enforcement against discriminating employers and removed a key incentive to comply with federal non-discrimination laws. However, the underlying non-discrimination requirements placed on federal contractors by federal laws such as Title VII and other executive orders remain in effect.
The Supreme Court
All Hands on Deck – a Ninth Justice
The confirmation of Judge Neil Gorsuch to the ninth seat on the United States Supreme Court means that the Court will have all hands on deck for the waning remainder of its 2016-2017 term and the commencement of its 2017-2018 term. Judge Gorsuch graduated from Harvard Law School, clerked for Justices White and Kennedy, served as a high-ranking official in the Bush Justice Department, and has since been a judge on the United States Court of Appeals for the 10th Circuit, based in Denver.
Judge Gorsuch is reliably conservative and describes himself as a successor to former Justice Antonin Scalia in terms of his judicial style and substantive approach. He has criticized courts for handing too much power to federal agencies that enforce labor and employment laws. At his confirmation hearing in the Senate Judiciary Committee, Democratic senators criticized Gorsuch for his dissent from the panel opinion in the “frozen trucker” case, painting Gorsuch as harshly and callously employer-friendly.
Here are some cases at the Court that employers should watch over the coming year:
In Ernst & Young LLP v. Morris, the Court will address whether employers can require employees to give up their rights to pursue work-related claims collectively through arbitration agreements. The Ninth and Seventh circuits have held that waivers in employment contracts or policies that prohibit collective actions violate the NLRA. The Second, Fifth and Eighth circuits have held such waivers are lawful at least when done as part of an arbitration provision, finding that the Federal Arbitration Act makes such provisions enforceable. The Supreme Court pushed oral argument in these consolidated cases to October 2017 term, presumably so that a ninth justice can take part in argument and decision.
In McLane Co. Inc. v. EEOC, the Court considered a case involving the EEOC’s subpoena authority and decided that the Ninth Circuit should have accorded deference to the district court when reviewing the lower court’s ruling that refused to enforce parts of the the EEOC’s subpoena . The Court heard oral argument in this matter in February 2017 issued its opinion on April 3, 2017. The decision in this case may help employers looking to quash or limit broad EEOC subpoenas.
Keeping the Ship Afloat and Charting a New Course
Congress may play a role in some key issues facing employers, chiefly, wage and hour laws, right to work laws, and paid family leave laws. However, the Congressional landscape so far in 2017 leaves a small crack in the window of opportunity for Republicans in Congress to move employment-related legislation.
In addition to one bill already signed by the President overruling the Blacklisting Rule, Congress has approved several other bills under the Congressional Review Act that are now waiting on the President’s signature. They include nullification of the Department of Labor’s rules regarding drug testing for unemployment benefits and of the rule regarding employers’ ongoing obligation to make and maintain records of work-related injuries and illnesses.
Congress will soon take up President Trump’s budget proposal which reduces the Department of Labor’s budget to $9.2 billion, a 21% overall reduction from FY 2016 levels. The proposal cuts $434 million by eliminating the Senior Community Service Employment Program, cuts $60 million from Bureau of International Labor Affairs grants, and cuts $11 million in OSHA training grants. However, Trump proposed no cuts to the National Labor Relations Board or EEOC.
It is possible that Congress may find some room for bipartisanship with respect to paid family leave. Senator Gillibrand (D-NY) and Rep. DeLauro (D-CT) reintroduced the FAMILY Act (S. 337, H.R. 947) in this Congress, which would entitle every worker to a family and medical leave insurance benefit payment. While Ivanka Trump has featured prominently on working women’s issues, we do not yet know whether she will support or exert influence for the passage of such legislation.
Three other pieces of major workplace and benefits legislation are pending: the Right to Work Act (H.R. 785, S. 545) and the National Minimum Wage Increase (S. 1150, H.R. 2150). Introduced by Republican members of Congress, the Right to Work Act would prevent labor unions from requiring union dues as a condition of employment. Republicans heavily support this measure. Democratic members introduced the National Minimum Wage Increase, which has broad support within the Democratic Party and would raise the minimum wage incrementally over several years. Finally, H.R. 1101, the Small Business Health Fairness Act of 2017, would amend ERISA to allow small businesses to pool together through associations to offer self-insured insurance produces across state lines. The bill passed out the House on March 22, 2017 on a party-line vote with no Democratic support and has been referred to Senate committee. Its future in the Senate is, as of yet, uncertain.
The Administration has been busy. New developments each week keep Mintz Levin’s attorneys busy analyzing the impact of the Trump Administration’s actions on its clients. Employers can trust that Mintz Levin will continue to monitor key developments and advise its clients accordingly.
Changes are afoot at the federal level, and many of those changes may reduce burdens on employers, as previously adopted or proposed regulations are abandoned. It would be easy for employers to breathe a sigh of relief if these changes occur. But, before you do, be mindful of state and local laws. In an environment in which federal regulations are eased and less vigorously enforced, state and local laws become more important. So, for example:
New York state employers cannot rely on the federal salary basis threshold for exempt employees, but must instead adhere to the state’s new thresholds. These range from $727.50 ($37,830 annually) for employers outside the New York metro area to $825 per week ($42,900) annually for large employers in New York City, and are schedule to rise each year through 2020.
Many states, including most in the Mid-Atlantic, Northeast and on the West Coast, have robust discrimination laws that protect employees from sexual orientation and other forms of discrimination that the EEOC may take a step back on.
Various states, including California and Massachusetts, and locals (including New York City) have adopted their own equal pay laws and – especially if the federal government backs off its equal pay initiatives – many other states are likely to follow suit.