New Administration, A New Day for Business
by Jean Seawright
If you're an owner or manager, it's no surprise to you that there is a government regulation for nearly every employment decision you make. The reality is that you can't hire, promote, discipline, transfer, pay, or terminate an employee without considering local, county, state, and federal employment regulations. Depending on where your business is located and how many employees you have, you may have to comply with regulations that dictate everything from the precise questions you can ask during an interview to what you can legally deduct from the final paycheck of an employee who owes you thousands of dollars (zippo, in many cases!).
The cost of compliance is staggering. For the 28 million small businesses in the U.S., regulatory compliance costs over $10,000 per employee; 36% higher than the cost for a larger business. It's no wonder some business owners consider regulatory costs to be a hidden tax on businesses. And it doesn't seem to quit. Over the last 20 years, the federal government has added more than 80,000 regulations---typically between 3,500 and 4,500 annually.
With burdens like these, small businesses are understandably pleased about a new pro-business philosophy in Washington that began to take life when President Trump announced a regulatory freeze. While we anticipate a business climate with fewer employment regulations under this administration, the President's agenda includes tighter enforcement of one regulation in particular that has many employers concerned---the Immigration and Nationality Act. For labor-strapped employers who rely on immigrant populations to fill positions, the benefits of fewer employment regulations may not outweigh the losses associated with the labor shortages that would result if millions of illegal immigrants were deported.
Despite the increased focus surrounding immigration enforcement, with an otherwise pro-business administration at the helm, changes in the employment arena are certain, including, ironically, new regulations. All bets are off when it comes to predicting the future with this particular president calling the shots, but many HR prognosticators agree on some widely anticipated changes in the employment arena. These include:
-
Federal Minimum Wage Increase. Currently stalled at $7.25 per hour for the past eight years, employers should prepare for a federal minimum wage increase, most likely to $9.00 or $10.00, phased in over time. Of course, a higher federal minimum wage rate is moot if your business is covered by a local or state minimum wage law with a higher rate.
-
Death of the Overtime Rule. President Trump opposes the 2016 salary increases to the Fair Labor Standards Act and has already taken steps toward permanently killing the rule. Once confirmed, we expect the new Secretary of Labor (presumably Alexander Acosta) to either forego the appeal filed by the Obama administration (which would result in the current injunction standing and would end the Overtime Rule) or to significantly revise the rule. During his confirmation hearing, Acosta suggested that he was open to increasing the salary threshold to account for cost-of-living increases since the last time the guaranteed salary level was increased. Adjusted for inflation, this would be around $33,000 per year.
-
Paid Family Leave. President Trump originally called for six weeks of paid maternity leave for women, but expanded this to paid family leave in his speech to the joint session of Congress on February 28, indicating a desire to expand use of the leave to fathers.
-
Paid Sick Leave for Federal Contractors. All signs indicate that President Trump intends to leave in place President Obama's mandated paid sick leave requirement for private employers with federal government contracts. Employees who work for covered contractors and subcontractors accrue 1 hour of paid sick leave for every 30 hours worked on or in connection with a covered contract, up to 56 hours each year. The regulations include carryover provisions, employee notification requirements, rehire obligations, and limitations on requiring certifications from healthcare providers. We expect the Department of Labor to issue training materials and additional compliance guidance for the sick leave regulation sometime this summer.
-
Compensatory Time Off. Despite multiple failed Congressional efforts over the years to pass legislation that would permit private sector employers to offer employees paid time off in lieu of receiving overtime ("comp time"), Republican lawmakers have not given up. On February 16, H.R. 1180, the Working Families Flexibility Act of 2017, was reintroduced in the House and has already been the subject of hearings held by the Subcommittee on Workforce Protections. If passed, this legislation would amend the Fair Labor Standard Act to permit employees at private companies to receive in lieu of monetary overtime compensation, compensatory time off at a rate not less than one and one-half hours for each hour of overtime worked. The bill also permits employees to accrue up to 160 hours of comp time. Unused comp time would have to paid out to employees who separate employment and to employees who do not use it within an employer-designated 12-month period. Public entities are permitted to offer comp and many employers believe the need for it in the private sector is long overdue. Since greater workplace flexibility is a coveted benefit of Millennials, there is renewed momentum to pass legislation. If H.R. 1180 fails to pass yet again, a new Secretary of Labor could promulgate regulations that permit private-sector comp time.
-
Employer Incentives for Employees With Families. In keeping with efforts to support working families, we expect tax deductions for families with childcare or eldercare costs and new or greater IRS incentives for employers to provide childcare benefits to their employees.
-
Government Agency Philosophical and Investigatory Shifts. With pro-business leaders heading federal employment agencies like OSHA, EEOC, OFCCP, DOL, and the NLRB, we anticipate a more common-sense, practical approach to enforcement practices, fewer investigations, greater flexibility when resolving issues during audits, and smaller settlements for violations of regulations.
-
Affordable Care Act (ACA) Reforms. With the death of the Republican's first bill to repeal the ACA, it remains to be seen if lawmakers will attempt to pass a second bill in the near future. If Congress fails to pass legislation to repeal and replace the ACA, look for regulatory adjustments, especially for individual and small group plans. Any regulatory modifications would, however, be limited and not likely to fulfill employers' wish lists for lower costs, more plan options, portable policies, the option to purchase health insurance through trade associations, tax deductions for premiums, and a 40-hour full-time definition.
-
Rollback of DOL Guidance Documents Pertaining to Independent Contractors and Joint Employment. In light of the significant shift toward outsourcing (some 20 million workers are now contractors), the new Secretary of Labor is expected to promote changes to labor laws that make it easier for companies to hire and classify workers as independent contractors without the constant threat of litigation or violation of a government regulation.
-
Job Training and Apprenticeship Programs. With significant future labor shortages in the trades and a need to narrow the skills gap, the new Secretary of Labor is expected to focus efforts on job training and apprenticeship programs. In his confirmation hearing, Nominee Acosta touted the benefits of Job Corp Centers (even though they have been identified for budget cuts) and the Workforce Innovation and Opportunity Act, a bipartisan law that funds state and local workforce programs.
-
Greater Enforcement of Federal Marijuana Laws. The new administration has signaled its disagreement with the former administration's lenient enforcement of federal laws related to recreational marijuana use. Expect the Department of Justice to reaffirm support for the Controlled Substance Act and clamp down on states that have legalized recreational use of the drug.
-
Increased Enforcement of Immigration Laws and Mandatory E-Verify. As noted above, employers should prepare for increased immigration enforcement and Immigration and Customs Enforcement (ICE) audits. In addition, as part of President Trump's efforts to "put America first," employers should expect the E-Verify program to become mandatory for all employeesand changes to current legal immigration programs and visa categories.
With a new administration in Washington, it is indeed a new day for employers! But this new day is unlike any other, so strap on your seat belt and get ready for the wild ride down Pennsylvania Avenue . . . or to Mar-a-Lago . . . or Trump Tower . . . or Trump Plaza . . . or, well, you get the picture.
As always, if you have questions about these or other HR matters, let us know!
Jean Seawright, CMC
In addition, Seawright & Associates offers Group clients a unique one-on-one service arrangement to help meet additional human resource needs and challenges, most of which is INCLUDED IN YOUR GROUP RETAINER. For more information about Seawright & Associates visit www.seawright.com.