The Trump Effect on the Workplace: What Hawai`i Employers Should Know

By Scott Prange[i]

President Trump is on an ostensible quest to “Make America Great Again!” And, as President Trump’s chief strategist declared recently, part of the strategy to do so is to “deconstruct the administrative state” to free our nation’s businesses from “burdensome regulations.”

President Trump’s hackneyed slogan might as well be “Make American Workplaces Great Again!” As President Trump proclaimed when he nominated the new Secretary of the Department of Labor, we will “save businesses from the crushing burdens of unnecessary regulations that are stunting job growth and suppressing wages.”

So, what has President Trump accomplished so far, and what can be expected going forward? Here is what Hawai‘i employers need to know for strategic compliance.

U.S. Supreme Court

President Trump’s most conspicuous success has been appointing Justice Neil Gorsuch to the Supreme Court to shape a conservative majority. However, Justice Gorsuch’s workplace views are not well-known.

A newly aligned Supreme Court will decide several hotly-contested cases:

  • The Supreme Court may be positioned to hear a challenge to the NLRB’s ruling in Browning-Ferris Industries of California, Inc. Browning-Ferris adopted a broad standard for joint employment, which applies to all employers, whether or not unionized. Under Browning-Ferris, an entity could be considered a joint employer where the entity directly or indirectly controls a worker’s essential terms and conditions of employment, even if it never actually exercises the control. Unless overturned, NLRB’s Browning-Ferris ruling significantly impacts Hawai‘i businesses such as franchisees or staffing agencies, requiring them to re-think the amount of control to wield over franchisees or workers hired out to other companies. The NLRB’s decision is currently on appeal in the United States Court of Appeals for the District of Columbia which heard arguments in March, after the Ninth Circuit was strategically bypassed on appeal.
  • The Supreme Court is set to hear National Labor Relations Board v. Murphy Oil USAErnst & Young LLP v. Morris and Epic Systems v. Lewis. The Supreme Court will resolve a conflict between the Circuits as to the validity of the National Labor Relations Board’s (“NLRB’s”) ruling in DR Horton, that all employers, regardless if they are unionized, are prohibited from being required to sign arbitration agreements barring participation in collective actions. Last November, the Ninth Circuit ruled in Ernst & Young LLP v. Morris to uphold DR Horton, restricting all Hawai‘i employers from entering into such arbitration agreements.
  • The Supreme Court may also be requested to hear Kimberley Hively v. Ivy Tech Community College, Christiansen v. Omnicom Group Inc. Under Title VII, many appellate courts have long held that an employee’s sexual orientation is not a class protected from discrimination. But the Seventh Circuit held in Ivy Tech earlier this month that Title VII does indeed protect sexual orientation, creating a split across Circuits to be resolved. For Hawai‘i businesses operating solely within the state, state law already prohibits discrimination based on sexual orientation. But, Hawai‘i businesses also operating in other states should pay attention to developments in the Kimberley and Christiansen
  • The Supreme Court may take up Oregon Restaurant and Lodging v. Thomas Perez, Joseph Cesarz v. Wynn Las Vegas. The Court may settle a split across Circuits whether the Department of Labor (“DOL”) has rule-making authority, and whether the DOL’s final rule blocking employers from requiring wait staff to share tips with non-wait staff is valid. In Oregon, the Ninth Circuit upheld the DOL’s rule in September 2016, disallowing Hawai‘i employers from using such tip-sharing arrangements.

Agencies and Administrative Practices

President Trump has advocated for the Separation of Powers Restoration Act 2017 (H.R.76), which is pending in Congress and would allow federal courts to review federal agency decisions de novo, without giving deference to the agency’s rules, guidelines, interpretations or decisions. The Act would overturn two landmark Supreme Court decisions – Chevron U.S.A. v. NRDC, 467 U.S. 837 (1984) and Auer v. Robbins, 519 U.S. 452 (1997), which required federal courts to defer to federal agencies. Justice Gorsuch has said he disfavors the so-called Chevron doctrine.

If passed, federal courts would be empowered to review in full federal agencies’ edicts on a wide array of workplace concerns, likely resulting in more appeals of employment-related charges from federal agency decisions.

U.S. Department of Labor

President Trump’s appointee as Secretary of the U.S. Department of Labor will directly affect workplace regulation. The DOL administers more than 180 federal workplace-related laws and thousands of federal regulations.

President Trump has nominated Alex Acosta for the Secretary position. Acosta once served as Supreme Court Justice Samuel Alito’s clerk, before former-President George W. Bush appointed him to serve as the Assistant Attorney General for the Civil Rights Division for the Department of Justice, and before serving as a member of the NLRB. Secretary Acosta’s workplace views are thought to be less conservative than President Trump’s.

President Trump has directed the DOL to anticipate budget cuts and to reduce its imprint by freezing hiring. This contrasts with President Obama’s mandates requiring the DOL, under its Strategic Enforcement Plan for 2017-2021, to increase strategic enforcement by targeting specific industries for investigation and by increasing its staff of investigators to do so. This change may have an impact on many Hawai‘i businesses which the DOL had taken aim at, such as those in the hospitality and food services industries.

Additionally, President Trump has directed the DOL to freeze all President Obama’s pending regulations, including the so-called Persuader Rule (which required businesses to disclose any consultant, including lawyers, used to persuade workers not to unionize) and the Overtime Exemption Rule (which raised the minimum salary requirements in order for employees to be exempt from overtime compensation (both discussed in more detail below). This freeze would impact most Hawai‘i businesses’ pay practices and lower the salary requirement for exempting employees from overtime compensation.

Equal Employment Opportunity Commission

President Trump has named EEOC Commissioner Victoria A. Lipnic as Acting Chair. Having joined the EEOC in 2010, Commissioner Lipnic’s workplace views are thought to tend toward the conservative.

President Trump will also have the opportunity to replace all current EEOC Commissioners, as their terms expire in 2017, 2018 and 2019 respectively, to appoint another Commissioner for a vacant seat, and appoint a new General Counsel.

With such dramatic changes in the EEOC’s leadership, its strategic approach may shift over time to one that is relatively more conciliatory towards employers.

National Labor Relations Board

President Trump has named current NLRB member, Philip A. Miscimarra, as Acting Chair. President Trump will be able to replace two NLRB members whose terms expire in 2018 and 2019, respectively, and to nominate two members for vacant seats. He can appoint a new General Counsel at the end of this year.

Given these leadership changes, the agency’s strategic enforcement priorities may change. In recent years, the NLRB assumed an activist role, expanding the agency’s reach to touch all employers, unionized or not, including changing the basic groundwork of long-standing union election rules, challenging employer handbook rules, vigorously pursuing protected concerted activity claims against non-union employers, and expanding its jurisdictional reach over traditional independent contractor relationships through its new joint employer standard. Under the new administration, that approach could be reversed or at least modified. However, given the timing of term expirations, such changes could take some time to be designed and implemented.

On April 5th, Congressional Republicans moved to block the NLRB from enforcing the Browning-Ferris joint employment decision by leveraging the power of the purse. A group of 57 Congressional Republicans sent a letter to the Chair of the Labor Subcommittee asking for a “rider” to Fiscal Year 2018 spending legislation which would prohibit the NLRB from using any appropriations to enforce the decision.

Occupational Safety and Health Administration

President Trump has directed OSHA to limit its scope, prepare for budget cuts and to freeze hiring.

President Trump also directed OSHA to freeze all of President Obama’s pending regulations. This means (1) the withdrawal of OSHA’s new whistleblower standards, which apply to 22 whistleblower statutes the agency enforces, lowering a claimant’s burden of proof for retaliation and (2) OSHA’s new record-keeping rule requiring covered employers to electronically file workplace injury and illness information to be posted online.

OSHA’s revised whistleblower guidance, issued in January 2016, increased employers’ exposure to liability for retaliation against employees who reported violations to OSHA by no longer requiring employees to produce sufficient evidence of retaliation (a prima facie case). Instead, investigators were directed to apply a lower standard: whether “OSHA has reasonable cause to believe a violation occurred.” The new guidance allowed investigators to determine liability based on their subjective belief, after reviewing all the evidence, that a reasonable judge could rule in the employee’s favor, instead of requiring them to find that retaliation likely occurred.

Under the Congressional Review Act, President Trump signed a repeal of the so-called Volks Rule on April 4th, after Congress passed it. President Obama originally issued the Volks Rule in the administration’s waning days to mandate that employers keep safety/health records for five years (instead of the six-month statute of limitations period set by statute) and for those records to be made public.

These changes could lower Hawai‘i employers’ exposure to retaliation claims by workers who report health and safety violations and significantly shorten the length of reporting requirements for workplace injuries and illnesses.

Office of Federal Contract Compliance Programs

The OFCCP sets rules for employers doing business with the federal government, including most federal contractors and subcontractors.

The OFFCP has been enforcing numerous executive orders by President Obama. Chief among these, President Obama’s Fair Pay and Safe Workplaces, widely known as the “blacklisting” executive order, required, in part, prospective federal contractors and subcontractors to disclose violations of 14 federal labor laws, including those pertaining to workplace safety, wages and discrimination, and required contracting officers to consider such disclosures as mitigating factors in considering awards. This also included President Obama-issued executive orders requiring federal contractors and subcontractors to pay employees performing work on covered federal contracts a minimum wage of $10.20, to provide paid sick leave to employees, to meet enhanced requirements for affirmative action, to ensure non-discrimination against employees based on sexual orientation and to ensure that workplace facilities are segregated and employees can use bathrooms which align with their gender identity.

Applying the Congressional Review Act, President Trump and Congress moved in tangent on March 27th to repeal President Obama’s Fair Pay and Safe Workplaces, which was already on hold pending action in federal court. President Trump also clearly indicated that other President Obama executive orders are next, although President Trump has indicated he will preserve requirements not to discriminate against employees based on sexual orientation.

While repeal of these executive orders may ease the compliance burden for Hawai`i businesses contracting with the federal government, the new landscape is still unfolding.

Immigration

As part of his goal to preserve American jobs, President Trump issued an executive order on April 18th purporting to reform our nation’s H-1B program. The program was designed to give employers access to highly-skilled, college-educated foreign workers to fill specialized jobs, typically in information technology (IT), healthcare and media. President Trump contends that too many of our nation’s businesses are either abusing the H-1B program or using it fraudulently to bring in less-skilled foreign workers, thereby displacing American workers. Early analysts are skeptical, contending that the executive order does not present many specifics on possible reforms and targets a work visa program that accounts for a small portion of the economy.

Hawai‘i businesses with employees under work visas, including those using less-skilled foreign workers, such as in manufacturing, hospitality or farming, may come under increased scrutiny. Such employers should ensure compliance by auditing their immigration practices and ensuring proper documentation.

Unions

As mentioned above, President Trump appointed a new NLRB Acting Chair and is positioned to replace all NLRB members and the General Counsel in the next one to two years. His appointments are anticipated to shape the agency’s strategic enforcement efforts and/or lead to changes to newly-mandated frameworks, including union election rules, employer handbook rules and joint employer standards.

President Trump also directed the DOL to freeze President Obama’s Persuader Rule, which required businesses to disclose any consultant, including legal counsel, used to persuade workers not to unionize, and which a federal court had already stayed nationwide in late 2016.

Wage & Hour, Overtime Compensation

President Trump indicated he does not support the DOL’s Final Rule, seeking to modernize the Fair Labor Standards Act (“FLSA”). It would make nearly five million currently “exempt” employees “non-exempt” and eligible for overtime. Amongst other things, the Final Rule doubles the threshold for the so-called white-collar exemption, at which executive, professional and administrative employees are “exempt” from overtime, from $455/week or $23,660/annually to $913/week or $47,476/annually; permits employers to satisfy up to 10% of the white-collar exemption with nondiscretionary bonuses and incentive payments (e.g. commissions) in some situations; and raises the threshold at which highly compensated employees are “exempt” from overtime pay from $100,000 to $134,004, subject to a minimal duties test.

The United States District Court for the Fifth Circuit is considering an appeal brought under President Obama’s Department of Justice (“DOJ”), after a District Court in Texas issued a nationwide-injunction blocking the Final Rule on November 22nd, just a week before it was to go into effect. President Trump’s DOJ filed for a delay until May 1st, after filing two extensions totally 90 days, and may withdraw the appeal.

President Trump is likely exploring two options to change the rule: either repealing it and replacing it with a lower threshold for the white-collar exemption, or simply repealing it. Still, President Trump could pursue other options; in February, Congressional Republicans introduced legislation called the Working Families Flexibility Act of 2017, which has the support of SHRM, and would amend FLSA to allow employers to provide “comp time” to employees in lieu of overtime pay.

It is unclear if President Trump will challenge DOL Guidance under FLSA, which adopts a broader joint employment standard, expanding joint employer responsibility for wage and hour compliance.

Hawai‘i businesses should pay close attention to developments, as a comprehensive strategic plan may be required to manage effectively the impact of the changes on job categories and duties, compensation and company finances.

Gender Equality

As mentioned, President Trump issued an executive order on March 27th, repealing President Obama’s previous executive order on Fair Pay and Safe Workplaces. Fair Pay and Safe Workplaces required federal contractors and subcontractors, among other things, to submit annual wage statements broken down by gender with the goal of equal pay in mind, and not to use arbitration agreements requiring sexual assault claims be submitted to alternative dispute resolution.

Additionally, President Trump voiced concerns about the EEOC’s final changes to the EEO-1, slated to begin in March 2018, which requires all employers submit annual reports of aggregate compensation data for employees in part by gender. President Trump was formally asked by Senator Lamar Alexander, head of the Senate’s Education, Labor and Pensions Committee, to revoke the changes on April 12th.

These changes would ease federal contractor and subcontractor annual reporting requirements and remove a restriction on use of employee arbitration agreements.

LGBTQ

There is no indication yet whether President Trump supports the EEOC’s position that Title VII forbids employers from discriminating based on sexual orientation. As mentioned, the Supreme Court may take up the issue in Kimberley Hively v. Ivy Tech Community College, Christiansen v. Omnicom Group Inc.

On January 31st, President Trump indicated he supports a President Obama-issued executive order requiring federal contractors and subcontractors to ensure non-discrimination based on sexual orientation, and that workplace facilities are segregated and that employees can use bathrooms which align with their gender identity. But, President Trump left open the possibility of amending President Obama’s executive order to “carve out” exceptions based on “sincerely-held religious beliefs.”

Family Medical Leave Act

President Trump has not indicated whether he will challenge DOL Guidance under FMLA, adopting a broader joint employment standard, which expands joint employer responsibility for FMLA compliance.

However, President Trump indicated support for the Sarah Grace-Farley-Kluger Act, which has been introduced in Congress and has wide bipartisan support. It would add “because of the death of a son or daughter” to the list of FMLA entitlements, permitting parents to take up to twelve (12) weeks of leave to mourn the death of a child.

Hawai`i employers with 50 or more employees for 20 or more months are subject to FMLA and should track developments in this area in order to comply with a changing landscape of employment laws and regulations.

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[i] Scott Prange is an associate in Alston Hunt Floyd & Ing’s Employment-Government Contracting practice group.