The Changing Landscape of Labor and Employment Law under the Trump Administration

by Cohen & Grigsby, P.C

Cohen & Grigsby, P.C

Abolishing the Federal Contractor “Blacklisting” Rule

In March 2017, President Trump issued an Executive Order revoking, and signed a resolution disapproving, President Obama’s Fair Play and Safe Workplaces Executive Order.  President Obama’s Executive Order required that federal contractors disclose labor and employment law violations, disqualified contractors from obtaining bids due to such violations, prohibited most mandatory arbitration agreements, and required paystubs contain certain information (the “blacklisting” rule). The blacklisting rule aimed to prevent companies with serious labor and employment law violations from receiving desirable federal contracts and subcontracts and the final rule and guidance began taking effect in October 2016.  However, the revocation of the blacklisting rule means federal contractors no longer have to report labor and employment law violations when bidding for contracts or comply with the pay information requirements, and may enter into mandatory arbitration agreements regarding labor and employment law claims.

Rejecting Obama Administration Guidance on Independent Contractor and Joint Employer Status

On June 7, 2017, U.S. Secretary of Labor Alexander Acosta announced the withdrawal of the Department of Labor (“DOL”) Administrator’s Interpretations (“AIs”) on independent contractor and joint employment status.

During the Obama administration, the DOL placed an increased emphasis on potential misclassification of employees as independent contractors, taking the position that most workers are employees, and issued an AI to that effect in July 2015.  The AI rejected the courts’ historical emphasis on the amount of “control” an entity had over an individual, instead focusing on whether the worker was economically dependent on the employer or truly in business for him or herself.  The DOL’s withdrawal of the AI indicates it may reject this more expansive analysis and return to emphasizing the “control” factor. 

The withdrawal of the AI on joint employment similarly signals the DOL may reject the Obama administration’s aggressive interpretation in determining employer status.  The January 2016 AI explained joint employment could exist in horizontal joint employment, in which a worker has a relationship with two or more related or commonly owned business entities, and in vertical joint employment, in which an individual works for one entity but is also economically dependent on another entity, such as a staffing agency.  The AI focused on the worker’s economic dependence on each entity, with the purpose of increasing the number of entities deemed employers under the Fair Labor Standards Act (“FLSA”) and potentially liable for wage and hour violations.  The DOL’s withdrawal of the AI indicates it may instead rely on the less expansive existing regulations, which generally and more narrowly allow for joint employment when employers share an employee’s services, one employer is acting directly or indirectly in the interest of another employer in relation to an employee, or employers under common control share direct or indirect control of the employee. 

Businesses should note that despite this presumptive shift in favor of employers, the laws and regulations remain the same.  Regardless of the DOL’s focus, employers’ legal responsibilities remain the same and misclassification litigation will likely continue to increase.

Taking a Step Back from the Salary Level Test

As many employers are aware, in May 2016 the DOL issued a final rule addressing the FLSA “white collar” exemptions.  Perhaps the most controversial change in guidance was the increase to the minimum salary level threshold required for an employee to remain exempt from the FLSA’s overtime provisions.   The final rule more than doubled the salary level threshold, increasing it from $23,660 to $47,476 per year, with a mechanism for automatically updating the salary level every three years.  The final rule was to take effect December 1, 2016, making an estimated additional 4.2 million employees eligible for overtime.  However, in November 2016 a Texas federal district judge held the DOL lacked the power to set a salary threshold and enjoined the rule on a nationwide basis.  The DOL filed an appeal to the Fifth Circuit seeking a lift of the injunction.

On June 30, 2017, the DOL took another step viewed by many as favorable to employers, filing a brief stating it will not defend the $47,476 salary level.  It did maintain its position as to its authority to set a salary level and requested the Fifth Circuit overturn the district court’s holding that the DOL lacks such authority.  It also expressed intentions to undertake further rulemaking to raise the salary level threshold above the previous $23,660 level.  However, comments by Secretary Acosta indicate the increase will be significantly less drastic in amount.

Rescinding the “Persuader” Rule

Also in June 2017, the Trump administration again took what appears to be a more employer friendly stance by suggesting it will completely rescind the highly controversial “persuader” rule.  By way of background, in March 2016, during the Obama administration, DOL published a final rule requiring that companies report any actions, conduct or communications (including with consultants and attorneys) pursued to affect an employee’s decision regarding his or her representation or collective bargaining rights, commonly known as the “persuader rule.”  This imposed significantly more onerous obligations on employers, as they previously had to report communications on such topics only if the consultants actually and directly contacted employees.  A primary concern was whether and how the persuader rule would affect information traditionally protected by the attorney-client privilege.  However, before the persuader rule could take effect, a Texas district court issued a nationwide permanent injunction on the basis that the rule exceeded the DOL’s authority under applicable law.  And now, under the Trump administration, the rule is unlikely to ever take effect.  On June 12, 2017, the DOL published a Notice of Proposed Rulemaking stating its intention to rescind the persuader rule and inviting public comment on completely rescinding the rule.  It cited concerns such as the burden and impact on employers wishing to seek legal advice, the concerns raised by reviewing courts, and the DOL’s resource constraints.

Class Action Waivers

The Supreme Court granted certiorari in three consolidated cases to resolve a circuit split regarding the enforceability of arbitration agreements with class and collective waivers.  On September 9, 2016, the deputy solicitor general represented the National Labor Relations Board (“NLRB”) in the matter, defending the NLRB’s position that such waivers are not enforceable under the National Labor Relations Act (“NLRA”).  However, on June 16, 2017, the acting solicitor general filed an amicus brief stating the Department of Justice (“DOJ”) reconsidered its position and reached the opposite conclusion, finding the waivers enforceable under the NLRA, a position favored by many employers.  The Supreme Court will make the final determination as to the legal enforceability of the waivers, but the DOJ’s dramatic change in course again demonstrates the Executive branch shifting to a more employer friendly stance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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