February 14, 2017

President Trump’s First 100 Days: A Compliance Perspective

What should employers expect on HR-related compliance issues during the first 100 days of the Trump Administration, specifically the period between January 20 and April 29?

If the president’s executive orders on the Affordable Care Act and immigration are any guide, employers can expect big changes in the scope, complexity and cost of federal government compliance requirements.

Working with a Republican-controlled Congress, Trump Administration policy initiatives, which will encompass legislation, regulations and executive orders, can be expected not only to break new policy ground but reverse Obama Administration positions on several key compliance issues.

One thing seems clear: all new and existing policies affecting employer compliance will be viewed through a prism of deregulation and jobs. The new administration believes federal government regulations can be an obstacle to job creation and economic growth. 

Affordable Care Act (ACA)

With his executive order directing HHS, IRS and others to waive, defer, grant exemptions or delay ACA requirements that impose taxes or penalties, President Trump signaled that he intends to deregulate, or relax enforcement of, certain ACA mandates where the executive branch has interpretative discretion.

Meanwhile, the U.S. Congress took the first step toward a dismantling of the 2010 law by voting for a budget resolution that contemplates eventual repeal and replacement.

While employers should not expect the ACA or its mandates to disappear within the first 100 days, they can look for government agencies like IRS to scale back penalties and be more lenient in the granting of exemptions and waivers related both to the individual mandate to enroll in coverage and the employer mandate to offer affordable, minimum value coverage to full-time employees.

Employers should not be surprised, for example, if IRS announced another extension of due dates for Forms 1094 and 1095 health coverage information reporting. Or even some kind of special enforcement exemption for employers finding it difficult to decipher the complex requirements. Smaller employers especially appear to be having problems complying with the elaborate reporting regime.

To be sure, employers cannot assume change. For now, they must prepare to comply with the mandates as they exist, including to file Forms 1094 and 1095 with the IRS no later than March 31 (for employers filing electronically) and to furnish statements to employees by March 2.

Fair Labor Standards Act Overtime Rules

If the Trump Administration sees the Affordable Care Act as the #1 candidate for aggressive deregulation, the Obama Administration’s rewrite of the FLSA overtime rules probably ranks #2.

The May 2016 rules, scheduled to take effect on December 1, would have doubled the salary threshold for an employee to qualify for time-and-a-half overtime pay from $23,660 per year (or $455 a week) to $47,476 (or $913 a week). The rules were estimated to make 4 million additional workers eligible for overtime pay.

Ten days before the rules were to have taken effect, however, a federal judge issued a preliminary injunction stopping the Department of Labor from implementing the final rule. Judge Mazzant said the government had exceeded its authority by substituting a doubling of the minimum salary threshold for the duties test, thereby inventing a “de facto salary-only test.”

It’s important to note that if Judge Mazzant had upheld the final rule, the Trump Administration would have had to embark on an entirely new rulemaking process to make changes, extending into 2018. By that time employers would have been in compliance with the 2016 final rule standard for almost two years, preempting any rollback.

Nevertheless, the last-minute injunction has put thousands of employers who have raised salaries or reclassified workers based on the original rule in compliance limbo. One has to wonder what these employers will do if the Trump Administration promulgates a new overtime rule with different standards.

What can employers expect in the first 100 days on overtime rules? First, assuming the U.S. District Court has not ruled on the Obama Administration’s appeal of the injunction, the new Secretary of Labor l is likely to discontinue the appeal during the first 100 days. Dropping the appeal would leave the injunction in place and basically kill the rule—but leave employers very much up in the air.

At that point the Trump Administration would most likely begin a new fast-track rulemaking process to update FLSA overtime standard, last changed in 2004 and now qualifying less than ten percent of the full-time workforce for overtime pay. While the Labor Department won’t have time to develop a new rule before April 29, the labor secretary could outline a do-over plan to take into account Judge Mazzant’s reasoning in issuing the injunction and at the same time provide much-needed compliance guidance to employers.

Mandatory Paid Leave

During the presidential campaign candidate Trump called for a national policy of paid maternity leave, far more limited than Mrs. Clinton’s position to require employers to offer most employees up to 12 weeks of paid leave, essentially creating paid FMLA. 

And on Capitol Hill many congressional Democrats have co-sponsored legislation that would establish a national paid leave employer mandate—for sick, parental or family leave, at a minimum of seven paid leave days per year.

At the same time, some 7 states, including California, Connecticut, Massachusetts and Oregon and over 10 localities, have approved variations of mandatory paid leave. The District of Columbia Council has approved a remarkable “8/6/2” bill that would require employers to provide employees up to 8 weeks of paid parental leave, up to 6 weeks of paid family leave and up to 2 weeks of paid sick leave.

Should employers expect the Trump Administration to endorse a national paid leave employer mandate during the first 100 days? The short answer is, no.

To the extent President Trump remains focused on his twin themes of deregulation and jobs, it’s doubtful the new administration would support a paid leave mandate beyond the “maternity leave” idea candidate Trump endorsed. Philosophically, congressional Republicans may be comfortable allowing states and municipalities to tailor paid leave policy to regional and local economic conditions. And congressional Democrats are unlikely to support the idea of confining a national paid leave policy to maternity leave alone.

One option that could emerge would be a voluntary paid leave arrangement that would allow employers to opt-in as a substitute for trying to comply with the hodgepodge of often-conflicting state and local employer mandates. This approach could benefit employers as well as workers, though enacting a de facto federal preemption might encounter resistance from some labor unions and nonprofit family advocacy groups.

In any event employers should not expect anything to happen on national paid leave policy during the first 100 days.

Immigration Enforcement Policy

Perhaps no single issue catapulted the presidential campaign of Donald Trump more than the issue of immigration—with concerns expressed about both undocumented immigrants and the terrorist threat.

Nevertheless, employers were surprised when President Trump on January 27 issued an executive order, “Protecting the Nation from Foreign Terrorist Entry into the U.S.,” temporarily suspending entry into the United States from seven designated nations. For a period of 90 days nearly all travelers from Iraq, Syria, Sudan, Libya, Iran, Somalia and Yemen would be prohibited from entry. The executive order also suspended the Refugee Admissions Program for 120 days.

The abrupt ban on travel to the U.S. had an immediate impact, according to a federal appeals court, with thousands of visas canceled and “hundreds of travelers prevented from boarding airplanes bound for the U.S. or denied entry on arrival.” The state of Washington, later joined by the state of Minnesota, filed suit to stop the government from enforcing the order, alleging that the visa ban “illegally stranded residents abroad and damaged the state’s economy and public universities.”

The Ninth Circuit U.S. Court of Appeals on February 9 agreed with the states mainly on due process grounds and affirmed a lower court’s Temporary Restraining Order, thereby blocking enforcement of the president’s executive order nationwide. The court did not address the more fundamental question of the president’s authority to impose the travel ban.

For employers this means that that the immediate immigration crisis the executive order sparked is on hold for now while the White House decides whether to appeal the Ninth Circuit ruling or issue a new executive order—or both. Employees with valid visas once again can travel to and from the seven designated countries and employers can manage travel for foreign nationals as usual.

Employers of course will monitor the legal developments around the executive order and reconsider work-related travel plans for employees to and from these seven nations.

But shock waves from the now-suspended travel ban will continue to reverberate. Employers understand that President Trump’s executive order is only the first step in a more restrictive U.S. immigration policy generally and in the work eligibility of immigrants specifically.

Employment-based visa programs are sure to be targeted for change. The H-1B visa program, for example, which annually allows 65,000 high-skilled workers and another 20,000 people with advanced degrees to work in the U.S., is under scrutiny as part of a broad review of work-related visas over possible job displacement effects. High-tech employers have expressed concerns about impending restrictions on these visas.

And the government’s now-voluntary E-Verify program, an Internet-based system that enables employers to verify job applicants’ I-9 form data and confirm their work eligibility, could be another area of focus for the Trump Administration.

In short, the president’s executive order banning travel from certain countries is just the beginning; it heralds a new approach to immigration and most importantly to work eligibility and jobs.

To recap, the Affordable Care Act, FLSA overtime rules, mandatory paid leave, immigration policy and other compliance-related issues are high on the Trump Administration’s “First 100 Days” agenda. Employers need to be ready to adapt quickly to changing government requirements but in general, and with some notable exceptions, they should expect the driving principles to be de-regulation—and jobs.

Jim O'Connell

With more than 30 years of experience in federal legislative and regulatory affairs, Jim O’Connell focuses on HR and PAYROLL POLICY ISSUES, keeping customers informed about fast-changing and complex compliance regulations and workforce trends. Follow him on Twitter JOCWashDC

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