During his campaign, US president-elect Donald Trump made frequent pledges to undo many of the regulations President Barack Obama introduced through executive orders or federal agency rules. While Trump won’t be able to do away with Obama’s entire regulatory legacy on the first day of his presidency, there are some rules he can reverse immediately, while others can be rescinded by the president but will require more time and effort to do so.
In general, administrative rules enacted by federal agencies that have been published in the Federal Register and taken effect cannot be immediately removed or modified; changes to these policies are subject to a notice and comment period, and blanket repeals of major policies may be subject to court challenges. Policies enacted by executive order, on the other hand, do not require notice and comment, and Trump can in theory reverse these orders on day one.
Here’s a brief run-down of Obama-era regulations that concern employers and what might happen to them under a Trump administration:
In May, the Labor Department announced a change in rules that would raise the salary threshold at which white-collar employees are exempt from overtime pay from $23,660 to $47,476, effective December 1. Numerous states and business groups have sued to block or delay implementation of the new rule, but despite a federal judge’s decision last month to merge the two separate lawsuits in order to speed the process up, they may not be decided by the time the rule comes into effect. The judge heard arguments on Wednesday on whether to block the rule, and hopes to issue a ruling on Tuesday, November 22.
If the judge does not issue an injunction, the rule will go into effect, and will have been effective for nearly two months by the time Trump takes office in late January. A Trump administration could in theory reverse the rule change, but this would require a lengthy notice-and-comment period, and would also require the administration and employers to explain to newly nonexempt workers that they would not be earning overtime pay after all. Trump may not even be interested in reversing this rule at all, as it may benefit some of his voters. (To read more on the new overtime rule’s post-election chances, head here.)
Equal Pay Reporting
In January, President Obama proposed a new rule requiring organizations with more than 100 employees to submit summary pay data to the Equal Employment Opportunity Commission each year showing what employees of each gender, race, and ethnicity earn. The EEOC unveiled the final version of the rule in early October and announced that it would go into effect in March 2018. While Trump has said he supports the notion of equal pay for equal work, vice president-elect Mike Pence has voiced opposition to mandatory pay disclosures.
As president, Trump will have the authority to designate a new chairperson for the EEOC, and the commission will likely have a Republican majority at some point in 2017. Once that happens, Bloomberg BNA reports, the commission will likely amend the EEO-1 reporting form to remove these requirements. This is in keeping with expectations that the EEOC’s enforcement agenda will be much less ambitious under the Trump administration.
CEO–Median Employee Pay Ratio Reporting
A rule adopted by the Securities and Exchange Commission last year requires public companies in the US to disclose the ratio between the compensation of their CEO and the median annual compensation of every other employee in their proxy statements, starting in the 2017 fiscal year. This requirement was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which Obama signed into law in 2010. As such, Trump cannot reverse this rule by executive action alone.
However, as Cydney Posner of Cooley explains at Lexology, the Financial CHOICE Act, introduced in Congress by Texas representative Jeb Hensarling in September, would unravel many of the provisions of Dodd-Frank, including the pay ratio disclosure rule. With Republicans in control of the White House and both houses of Congress as of January, that bill now looks more likely to become law. In the meantime, Korn Ferry Hay Group’s David Wise tells the Washington Post, since companies have not had to start reporting yet, a Republican-controlled SEC can push back the reporting deadline until Congress acts.
The Fiduciary Rule
A Labor Department rule finalized this April and scheduled to become applicable next April would require anyone who provides retirement investment advice to plans, plan fiduciaries and IRAs to abide by a fiduciary standard, meaning that they must put their clients’ financial interests ahead of their own profits. The intention of the rule was to mitigate conflicts of interest among financial advisors, but critics said it would make it more expensive to enlist these advisors, putting them out of reach for many small businesses.
Because it will not become effective until several months into Trump’s presidency, experts tell the Wall Street Journal that this leaves the rule in limbo; it will probably not come into effect as scheduled and may not be realized at all, but as Andrew Welsch puts it at Financial Planning, the rule “could die one of two deaths”: Congressional Republicans may pass legislation rescinding it, or the Trump administration could simply delay it indefinitely while the Labor Department writes an alternative rule to replace it. A legal challenge to any such delay is possible but unlikely to succeed.
On the other hand, new approaches and technologies are on the horizon to disrupt the market for employee financial advising, so within the next few years, employers could be dealing with a landscape that regulators have yet to imagine.
The Persuader Rule
In March, the Labor Department issued a rule revision mandating that employers disclose any relationship with consultants hired to discourage employees from forming or supporting unions (also known as “persuaders”). Proponents of the rule argue that employees have a right to know who is trying to influence their decisions when it comes to union organizing, but employment lawyers expressed concern that it would hinder their ability to advise their clients confidentially and critics said it undermined free speech.
A federal judge in Texas issued a preliminary injunction in June blocking the rule from coming into effect, and on November 16, made that injunction permanent. The Labor Department is preparing to appeal that ruling, but the appeal will not be decided before Trump takes office, meaning the Trump administration could scuttle this rule simply by declining to pursue the appeal.
The Fair Pay and Safe Workplaces Rule (“Blacklisting Rule”)
The Fair Pay and Safe Workplaces executive order, issued in 2014 and finalized into a rule this August, compels companies bidding for contracts with the federal government to disclose any recent violations of employment laws, so that the federal government can take them into account in deciding whether to award contracts. The rule faced stiff opposition from contractors, who called it the “blacklisting rule” and said it unfairly conflated unproven allegations of wrongdoing with actual violations of labor law.
Another federal judge in Texas enjoined this order from coming into effect late last month. As with the persuader rule, the Trump administration can simply allow this rule to die on the vine by not defending it in court.
Sick Leave for Federal Contractors
A rule the Labor Department issued in September requires all federal contractors to let employees accrue up to seven days of paid sick leave a year, beginning on January 1. Alexander Passantino, a partner at Seyfarth Shaw and former acting administrator of the Labor Department’s Wage and Hour Division, tells Bloomberg BNA that this rule is “an easy fix” for Trump and will likely be overturned.
LGBT Discrimination Protections for Federal Contractors
In 2014, Obama issued an executive order prohibiting federal contractors and subcontractors from discriminating in employment on the basis of sexual orientation and gender identity. LGBT rights organizations expect Trump to rescind this order, along with several other advances in LGBT rights that advocates fear his administration will roll back. The likely outcome remains unclear, however, as Trump is much more friendly to LGBT rights than many of his fellow Republicans. Pence, on the other hand, has a record of opposing marriage equality and as governor of Indiana signed a law making it legal for businesses to refuse service to LGBT people on religious grounds.
A change the Labor Department made to its regulations for tipped employees in 2011 bars all employers from maintaining invalid tip pools, not only those who take a tip credit toward their minimum wage obligation for tipped employees. Invalid tip pools are those in which tips are shared with back-of-house staff who do not ordinarily receive tips themselves, so for example, the rule as it stands prohibits a restaurant that pays its waitstaff the full minimum wage from requiring servers and bartenders to share tips with the kitchen and other back-of-house employees.
Angelo Amador, senior vice president and regulatory counsel at the National Restaurant Association, tells Bloomberg BNA that now that the empty ninth seat on the US Supreme Court will be filled by a Republican president, the association is more likely to file a case challenging the legality of the rule before the high court, as they expect a more favorable outcome in a court with a Trump appointee.
In August, the Labor Department finalized a rule to encourage states to establish automatic-enrollment, payroll-deducting IRA programs by exempting them, under certain conditions, from the standards set by the Employee Retirement Income Security Act of 1974 (ERISA). These “auto-IRA” programs require private employers who don’t offer workplace retirement plans to automatically enroll employees in an IRA plan from which they have the option of opting out later—in Illinois, which became the first state to enact auto-IRA legislation last year, employees have 3 percent of their paychecks automatically deducted and contributed to the IRA. Oregon, Connecticut, Maryland, and California have also set up auto-IRA programs. These programs generally do not impose costs of employers beyond that of adding auto-enrollment to their payroll systems.
According to Greg Iacurci at InvestmentNews, Trump apparently favors auto-IRAs, as does President Obama, but the president-elect’s position on this issue is not fully clear and may be subject to change. Iacurci explains that finance groups oppose the auto-IRA approach and have been lobbying Congressional Republicans to use their powers under the Congressional Review Act to get stop the rule, which went into effect on October 31. President Obama would likely veto any such effort, but president-elect Trump may be more accommodating.
This post has been updated to include the tip-pooling rule and auto-IRAs.