Client Bulletin #601

1.20.17

Today is Inauguration Day, and it is safe to assume that significant policy and enforcement changes will be made during the presidency of Donald J. Trump.

Those changes will include new judges on the federal courts, new leaders of the federal employment agencies, overhaul of various employment regulations, and rescission of some or all of President Obama’s employment-related Executive Orders. There is no doubt about the first two categories:  there is an empty seat on the Supreme Court bench, and vacancies in the lower courts and at the Equal Employment Opportunity Commission, Department of Labor, National Labor Relations Board, and Occupational Safety and Health Administration. Nor is there doubt about the second two categories: President-Elect Trump has said that he intends to “[i]ssue a moratorium on new agency regulations,” “[e]liminate our most intrusive regulations,” and “[c]ancel immediately all illegal and overreaching executive orders.”

What follows is a discussion of these changes.

The Courts

President-Elect Trump’s greatest impact is likely to be on the Supreme Court. Mr. Trump has pledged to fill the vacant seat on the Court with a justice “very much in the mold of Justice [Antonin] Scalia.” At a press conference on January 11, Mr. Trump said that he would announce his nominee within two weeks of his inauguration. Filling Justice Scalia’s seat with a conservative would mean a restoration of the status quo:  four liberals (Justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor), four conservatives (Chief Justice John Roberts and Justices Samuel Alito, Clarence Thomas, and Mr. Trump’s appointee), and one moderate (Justice Anthony Kennedy) as the swing vote. But Mr. Trump may not have to stop there. With Justice Ginsburg at 83 years old, Justice Kennedy at 80 years old, and Justice Breyer at 78 years old, Mr. Trump may have the opportunity during his presidency to add more than one conservative to the Court and thus create a conservative majority.

“Please visit our blog, Employment & Labor Insider, for an analysis by Jill Stricklin of President Obama’s labor and employment legacy.

Mr. Trump’s Supreme Court pick (or picks) will affect several employment issues slated for the high Court’s review including, among others, whether de novo review should apply to district court decisions to quash or enforce EEOC subpoenas; whether class action waivers in arbitration agreements violate the National Labor Relations Act; and whether discrimination on the basis of sexual orientation is prohibited by Title VII.

The sexual orientation discrimination issue is currently before the U.S. Court of Appeals for the Seventh Circuit in Hively v. Ivy Tech Community College. It is anticipated that the Seventh Circuit will rule that Title VII prohibits sexual orientation discrimination. The U.S. Courts of Appeal for the Second and Eleventh circuits are also considering the issue.  Those cases are Christiansen v. Omnicom Group (Second Circuit) and Evans v. Georgia Regional Hospital (Eleventh Circuit).

Mr. Trump is also expected to appoint conservatives to open positions in the federal district and circuit courts. Although the immediate impact may be negligible, employers may see a long-term impact in the form of favorable summary judgment rulings and other employer-friendly decisions.

The EEOC

Leadership

EEOC General Counsel David Lopez stepped down in December 2016. The term of EEOC Chair Jenny Yang will expire in July. President-Elect Trump’s replacements for these positions could alter the EEOC’s organizational structure and priorities. For example, under Mr. Lopez, the EEOC gave significant discretion to its regional offices in terms of litigation strategies and enforcement efforts. His successor may consolidate power back to Washington and exercise more control over the type and number of cases that are filed by the agency. The EEOC’s new leadership may also focus more on compliance assistance rather than aggressive investigations and lawsuits.

Enforcement Priorities

The EEOC’s Strategic Enforcement Plan for fiscal years 2017 to 2021 targets the following areas:  inflexible leave policies; disability discrimination; lack of accommodations for pregnancy-related limitations; sexual orientation discrimination; pay equity; and systemic discrimination, or discrimination that “has a broad impact on an industry, profession, company or geographic area.” The Plan also prioritizes EEOC mediation to resolve discrimination charges.

Employers can expect the new Plan to change in some ways but not others. For example, the EEOC may take a less aggressive approach to fighting sexual orientation discrimination in the courts.  Currently, the EEOC is filing amicus (friend of the court) briefs and its own lawsuits in order to create precedent that Title VII’s prohibition on “sex” discrimination includes discrimination on the basis of sexual orientation. The EEOC under the Trump Administration may take a step back from that approach and allow the issue to be handled by private plaintiffs (through litigation) and states (through legislation). In addition, and as discussed below, the EEOC may withdraw or modify its new EEO-1 Reporting Rule, which would require employers with 100 or more employees to annually provide detailed compensation data, broken down by race, ethnicity, and sex, and by EEO-1 category and “pay band.”

Other parts of the Plan will remain the same. Employers should assume, for example, that the EEOC will continue to pursue disability discrimination claims. Employers should also expect the EEOC to continue to emphasize its mediation program to settle discrimination claims, especially because it was the largest source of money obtained by the EEOC for charging parties.

Systemic Litigation

While employment law experts agree that EEOC systemic litigation will continue, they disagree on whether the volume will decrease under the Trump EEOC. Some experts say that there will be a decrease because (1) Mr. Trump will reduce the EEOC’s budget, and (2) the EEOC will prioritize clearing the backlog of administrative charges in the face of criticism from the Republican-controlled Congress and White House. But other experts flip reason no. 1 on its head and argue that because the EEOC’s budget will be reduced, the EEOC will not be able to file as many individual cases and therefore will file more systemic cases in order to achieve its policy goals.

Given this uncertainty, employers should be conservative and take preventive measures to avoid systemic discrimination claims. For example, employers should respond to discrimination charges with the mindset that the information provided to the EEOC may cause the agency to expand its investigation to determine whether systemic discrimination is taking place.

EEO-1 Reporting Rule

As already noted, the EEOC has issued a rule requiring employers with 100 or more employees to submit annual pay data by gender, race, and ethnicity, by EEO-1 category, and by “pay band” on their EEO-1s. The first reporting deadline is March 31, 2018, for the calendar year 2017.  The EEOC says the rule is intended to root out pay equity issues in particular industries or geographic areas.

It is unclear whether the Trump EEOC will rescind or revise the EEO-1 Reporting Rule. On one hand, Mr. Trump is generally committed to deregulation and employer-friendly policies, and Vice President-Elect Mike Pence has publicly opposed new equal pay legislation, such as the Lilly Ledbetter Fair Pay Act (which passed) and the Paycheck Fairness Act of 2009 (which failed), although he says that he favors equal pay. On the other hand, pay equity was a key issue on the campaign trail, and Mr. Trump stated in an interview with MSNBC that he supports the concept of “equal pay for equal work.”

Employers should gear up to comply with the EEO-1 Reporting Rule but closely monitor the Rule’s status to see whether the EEOC limits its scope or repeals it altogether.

The DOL

DOL Leadership

President-Elect Trump has nominated Andrew Puzder to head the DOL. Since 2000, Mr. Puzder has been CEO of the parent company of two fast-food chains, Hardee’s and Carl’s Jr.  Mr. Puzder is a vocal critic of lifting the federal minimum wage to $15 per hour, mandating employer-paid sick leave, and raising the salary threshold for exempt employees under the DOL’s new overtime rule. More generally, he has criticized what he sees as excessive government regulation. According to Mr. Trump, Mr. Puzder “will save businesses from the crushing burdens of unnecessary regulations that are stunting job growth and suppressing wages.”

Assuming Mr. Puzder is confirmed as labor secretary, employers should anticipate a political shift in the DOL with the agency becoming more employer-friendly and overturning some regulations.

Overtime Rule

The DOL’s overtime rule is likely to be on President-Elect Trump’s chopping block. That rule substantially increases the salary threshold for white-collar employees to be exempt from overtime (from $23,660 per year to $47,476 per year). The rule was to take effect December 1, 2016, but a federal district judge in Texas held that the DOL did not have statutory authority to raise the salary threshold and issued a preliminary nationwide injunction. The DOL has appealed that injunction order to the U.S. Court of Appeals for the Fifth Circuit, which set an expedited briefing schedule and scheduled oral argument to take place after Inauguration Day.

The President-Elect favors a small-business exemption to the overtime rule. Mr. Puzder’s position is that the rule is bad for business—converting entry-level management jobs into hourly ones and leading employers to eliminate jobs, reduce hours, and accelerate automation. Under Mr. Puzder’s leadership, the DOL is expected to withdraw its appeal before the Fifth Circuit hears oral argument. That means the district court’s preliminary injunction decision would stand until the district court has the opportunity to make a final ruling. Assuming the district court grants a permanent injunction, the overtime rule would not take effect.

What happens from there is unclear. The Puzder-led DOL could open a new administrative rulemaking proceeding and opt for a more moderate increase to the salary threshold, phased in over a two- to four-year period. Alternatively, the Trump Administration could work with Congress to enact legislation amending the FLSA to eliminate the DOL’s regulatory authority to raise the salary threshold or define the exemption criteria in the statute.

In short, employers should not expect the overtime rule to be enforced in its current form. But more employer-friendly state laws, of course, would remain in effect.

Minimum Wage

Donald Trump said on the campaign trail that he supported raising the federal minimum wage to $10 per hour and that states should be permitted to set a higher rate. Mr. Puzder appears to agree with Mr. Trump on both of those points, reasoning that a $9 or $10 federal minimum wage is reasonable but that a higher minimum wage will hurt job growth and that states are in a better position to set wages than the federal government. Thus, it appears that any increase in the federal minimum wage (if it occurs) will be moderate. More-generous state minimum wages will remain in effect.

Paid Maternity Leave

Maternity leave is one of the only areas in employment law where President-Elect Trump favors regulation. He states on his website that he supports a law providing six weeks of paid leave to new mothers to be funded through the existing unemployment insurance system. This law would not extend to new fathers or to other types of leave that would qualify under the Family and Medical Leave Act.

There are many questions about this program. Will changes to the UI system be sufficient to finance the program? Will adoptive mothers be covered? And will the law survive an equal protection challenge since it does not cover new fathers? The answers to those questions are unclear.

Persuader Rule

In November 2016, a Texas federal district court permanently enjoined the DOL’s so-called “persuader rule.” The rule would have required employers and their labor counsel and consultants to disclose in filings with the DOL expenditures and activities related to labor relations matters that, under longstanding administrative interpretation of the Labor-Management Reporting and Disclosure Act, previously would have been exempt from disclosure requirements. Although the current DOL has appealed the permanent injunction decision, employers should expect Mr. Puzder’s new DOL to withdraw that appeal and allow the injunction to stand.

Changes to OSHA

Donald Trump is expected to appoint a more employer-friendly individual to head the Occupational Safety and Health Administration; scale back President Obama’s aggressive OSHA enforcement and litigation efforts in favor of compliance assistance, outreach, and training; refocus the agency on high-hazard enforcement, accident and fatality inspections, and safety outreach consultations; and limit the scope of OSHA’s whistleblower enforcement capabilities (currently, OSHA enforces 22 whistleblower statutes). President-Elect Trump is also likely to do the following: (1) reduce or eliminate the use of the "severe violators" program to shame employers into compliance; (2) revoke or modify the limitation on mandatory post-accident drug testing and accompanying requirement that employers implement a “reasonable procedure” to report workplace injuries; and (3) revoke or modify the requirement that large employers (250 or more employees) publicly report workplace injuries and illnesses.

Employers should wait until the changes are actually implemented before they modify their existing OSHA practices and procedures.

Changes to Executive Orders

President Obama has issued Executive Orders imposing employment-related prohibitions and requirements on federal contractors. Many of these Executive Orders may be on the chopping block as President-Elect Trump has promised to “cancel immediately all illegal and overreaching executive orders.” For example, the Fair Pay and Safe Workplaces Executive Order requires federal contractors to report labor law violations when bidding on government contracts. A federal district judge in Texas has enjoined this Executive Order. Mr. Trump may decide to withdraw any appeal of that injunction or limit its scope to reduce the impact on federal contractors. Mr. Trump may also decide to undo Obama Executive Order 13658, which raises the minimum wage to $10.10 for all workers on federal construction and service contracts.

But some employment-related Executive Orders may be here to stay. President Obama’s Executive Order prohibiting federal contractors from retaliating against employees who discuss their wages with each other is consistent with existing law and not controversial. Although the same is not true for Obama’s Executive Order barring federal contractors from discriminating on the basis of sexual orientation or gender identity, President-Elect Trump may elect to keep this Executive Order.

Employers with federal contracts should wait and see which (if any) of President Obama’s employment-related Executive Orders are rescinded or modified by his successor. Employers without federal contracts generally do not need to worry about these potential changes.

The NLRB

The five-seat National Labor Relations Board currently has a Democratic majority with two Democratic members, one Republican member, and two vacant seats. President-Elect Trump is expected to fill those two vacant seats with Republicans, thus creating a majority of Republican board members. In addition, NLRB General Counsel Richard Griffin will step down in November 2017.  Trump is expected to replace Mr. Griffin—who previously served as General Counsel for the International Union of Operating Engineers and held leadership positions with other unions—with a pro-business Republican. These three Republican additions (two Republican NLRB members and one Republican General Counsel) means that the NLRB is likely to become more employer-friendly and to take pro-business actions, including, for example, making it more difficult for employers to be considered joint employers or finding that class action waivers in arbitration agreements do not violate the National Labor Relations Act.

That said, employers must wait patiently for business-friendly NLRB decisions. The Board cannot automatically overturn eight years of pro-employee precedent created during President Obama’s term. Rather, the NLRB must rule on a case-by-case basis and only after labor issues have been appealed to it.

State and Municipal Law

Any action or inaction by the Trump Administration on federal employment issues may encourage more-liberal states and municipalities to enact their own employment laws. Employers should closely monitor changes to applicable state and municipal employment laws to ensure compliance.

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