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President Trump had an eventful first year in the labor and employment arena. With his first year in office now wrapping up, this is a perfect time to look back at how the Trump Administration's policies have shaped labor and employment law issues at both the federal and state level, and where we expect to go in 2018.
True to President Trump's pro-business outlook, this year was marked by a rollback of Obama-era employment initiatives such as a ban on transgender discrimination in the workplace and the threshold increase to the white-collar minimum salary requirements. In reaction to this, many state and local governments took the opposite approach, and strengthened their own employment laws. This included increasing the minimum wage, passing predictive work-week legislation, and increasing the threshold for their own white-collar exemptions. Given that the federal Administration will continue with its largely deregulatory agenda for the foreseeable future, we expect these state and local trends to similarly continue. However, we expect this will vary dramatically across the country.
Labor Secretary Finally Approved
The President's year had a rough start when his initial nominee to head the Department of Labor (DOL), Andrew Puzder, withdrew from consideration. Mr. Puzder's nomination was toppled by multiple scandals. In his place, President Trump nominated former United States Attorney and National Labor Relations Board (NLRB) Member Alexander Acosta. Mr. Acosta was viewed as a less controversial and more moderate choice than Mr. Puzder, a fast-food CEO who held polarizing positions on employment issues such as automation and the minimum wage.
Federal Court Stays White-Collar Salary Exemption Threshold
Once Mr. Acosta was confirmed, President Trump was able to implement a number of his employment-related objectives. One of these, while not a result of direct Executive Branch action, was perhaps the most significant — the defeat of the Obama-era increase to the salary exemption threshold for white-collar employees. Under federal law, for an employee to be exempt from the requirement to receive overtime for hours worked over 40, the employee must meet a duties requirement and must earn more than a certain minimum salary. The threshold currently sits at $23,660 per year ($455 per week). It has only been updated once since the 1970s.
In 2014, President Obama directed the DOL to evaluate whether the threshold should be increased. The DOL ultimately decided to increase the threshold to $47,476 annually ($913 per week). Nevada and 20 other states sued to stop the rule before it even went into effect. Judge Amos Mazzant of the Eastern District of Texas preliminarily enjoined implementation of much of the rule, eventually finding the entire rule invalid and permanently enjoining it. The Trump Administration had challenged the preliminary injunction only with respect to the issue of whether the DOL had the power to set a salary threshold at all. Once the permanent injunction was issued, the DOL dismissed this appeal. However, it did recently appeal the permanent injunction. We believe this is again being done only to contest the issue of whether the DOL has the authority to set a salary threshold. We do not expect the DOL will fight to maintain the $47,476 threshold set by the Obama-era DOL.
This does not mean that the white-collar exemption issue has entirely gone away. The DOL has instituted new rule-making to determine whether an increase of the exemption threshold to a lower figure is proper. Secretary Acosta has indicated his support for a threshold increase to the low-to-mid $30,000 range. We believe the threshold will ultimately increase, but it may be considerably lower than what was sought by the Obama Administration.
DOJ Repeals Ban on Transgender Discrimination in the Workplace
In another example of the rollback of Obama-era employment protections, the Department of Justice (DOJ) recently issued a memorandum indicating that Title VII did not protect gender identity per se “as a matter of law, not policy.” In 2014, President Obama's Attorney General had stated, “Title VII's prohibition of sex discrimination … encompasses discrimination based on gender identity, including transgender status.”
President Trump's DOJ took a different position. While acknowledging that federal law, including Title VII, “provides various protections to transgender individuals,” it stated that the term “sex discrimination” did not include gender identity. It explained this was because “'sex' is ordinarily defined to mean biologically male or female.”
The DOJ took pains to stress that it “must and will continue to affirm the dignity of all people, including transgender individuals,” and that its memorandum “should not be construed to condone mistreatment on the basis of gender identity … .” It remains to be seen what effect this change will have on transgender employees in the workplace and the challenges they bring in court.
Pro-Business Voices Added to the NLRB
The President had a number of vacancies to fill on the NLRB. Traditionally, a President appoints three Members from his party and two from the other party. So far, his choices all have a pro-business background. We expect this will result in a vastly different trajectory for the agency relative to the Obama era.
President Trump named two new Board members. One, William Emanuel, is a management-side lawyer who has practiced at corporate firms including Littler Mendelson, Jones Day and Morgan Lewis. The other appointee, Marvin Kaplan, has worked for the federal government nearly his entire career. He has described himself as at one time leading “efforts to fight DOL overtime rules and 2012 unconstitutional NLRB recess appointments.” He has also “conducted oversight of and investigated allegations of waste, fraud, and abuse” by the DOL and NLRB.
The new appointees and Philip Miscimarra, a current Board Member who was named Chairman by President Trump earlier this year, give the NLRB a 3-2 Republican majority for the first time in many years. We expect this new majority to roll back some controversial Obama-era NLRB initiatives. One prime target could be the Board's 2015 memorandum addressing lawful and unlawful rules in Employee Handbooks. In issuing this memorandum, the Obama Board took more control over union-free employers than it had in many years. It took an expansive view of what language was unlawful under the NLRA, reasoning that overbroad restrictions on employee behavior could chill the Section 7 right of employees to discuss unionization. We believe the new Board could soon roll back some or all of this guidance. This would drastically change how union-free employers deal with their employees.
Many State and Local Governments Are Toughening Their Labor and Employment Laws
Numerous states and cities are seeking to counteract this federal trend by strengthening and increasing enforcement of their own labor and employment laws. Even during the Obama Administration, state and local governments sought to take action in light of federal paralysis. For example, President Obama was unable to achieve his stated goal of increasing the federal minimum wage during his time in office due to opposition from Congressional Republicans. In response, states and cities took their own action.
Jurisdictions as diverse as New York, Connecticut, California, Washington, DC, Los Angeles, Chicago, St. Louis, and Kansas City raised their minimum wage, in some cases significantly. New York, California, and Washington, DC's minimum wages are set to gradually increase all the way to $15 per hour. In all, at least 29 states currently have a minimum wage above the federal minimum and we expect this number to grow. A related trend is tying future minimum wage increases to some version of the Consumer Price Index. In codifying this, jurisdictions ensure the minimum wage will keep up with inflation without the need for additional legislative action.
One key trend to watch will be intra-state political turmoil, which could affect the ability of certain jurisdictions to implement stronger employment laws. Missouri is a good example. Kansas City and St. Louis both passed minimum wage increases to $10 per hour. St. Louis's was set to increase again to $11 per hour this month. Kansas City's would have increased to $15 per hour by 2022. However, the Republican-controlled Missouri state legislature prevented these increases from taking effect by passing a law prohibiting localities from having a minimum wage that exceeds the state minimum. This was a highly contentious move — in fact, St. Louis's increase had been tied up in the courts for almost two years before the Missouri Supreme Court allowed the law to stand. Other Republican-controlled states could now follow Missouri's model and impose a uniform minimum wage to avoid this issue. Of course, if this happens, fierce court battles are likely to ensue.
In another example of tougher employment laws at the state and local level, numerous jurisdictions have recently passed or at least considered so-called “Fair Workweek” laws aimed at low wage industries such as quick service and retail. These laws seek to add predictability to hourly employees' work schedules.
Fair Workweek laws are typically passed as a package of related laws. Last spring, New York City became the first jurisdiction to pass such a set of laws. Part of New York's package only affected quick service employees, and part only affected retail employees. The laws' requirements include the following:
“Predictive Scheduling”: Requires employers to give quick-service employees notice before scheduling them for a shift or changing their schedules. It also mandates written permission from the employee before additional hours can be scheduled. Beyond obtaining written authorization to add or change hours on an employee's schedule, the employer has to pay a “premium (penalty) for any such additions or changes.
“Clopenings”: This refers to instances where a quick-service employee works the closing shift one day and the opening shift the next day. Employers may not require employees to work two shifts with less than 11 hours between the end of the first shift and the start of the second shift if the first shift ends the previous calendar day or spans two days. Employers must pay employees $100 each time an employee work such a sequence of shifts.
Available Shifts: Quick service employers considering hiring new employees or transferring employees from other locations to fill shifts must in certain cases first offer such shifts to current employees of the location in question.
Non Profit Deductions: Quick-service employers are required to allow employees to make voluntary contributions directly to nonprofit organizations through payroll deductions.
On-Call Scheduling: Employers cannot schedule retail employees for on-call shifts, and must provide at least 72 hours' notice prior to scheduling or cancelling a shift. Employees also cannot be required to contact employers less than 72 hours prior to the start of a regular shift to confirm whether they should report to work for that shift.
Oregon followed New York's lead and passed its own version, becoming the first state to do so. Other jurisdictions are following suit or considering doing so. The affected industries vary by jurisdiction. This may be the next big employment trend that sweeps the nation.
Some States Are Increasing Their Own White-Collar Salary Exemption Threshold
Other states may follow suit. While the controversy surrounding the federal white-collar exemption salary threshold increase got most of the attention last year, New York successfully increased its white-collar salary exemption threshold for executive and administrative employees without much fanfare. These increases will be phased in over time. The first set of increases took effect on Dec. 31, 2016, with the threshold varying from $727.50 to $825.00. The exact amount of the increase depended on an employer's size and location. In December 2017, the threshold increased to between $780.00 and $975.00. New York City and downstate New York will reach $1,125.00 by the end of 2021 (in some cases considerably sooner), though upstate New York will cap out at $937.50. Considering that the threshold previously stood at $675, these are significant increases!
It has been a common occurrence over the last few years for New York to be a leader in strengthening labor and employment laws at the state level. With the federal white-collar exemption increase currently in doubt, we expect other states to follow New York's lead. As we discussed in this article, state action will likely vary throughout the country based on political considerations. Therefore, companies could find themselves facing drastically different circumstances depending on where in the country they do business.
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Robert G. Brody is the founding member of Brody and Associates, LLC, a Labor and Employment Law firm that represents management. Alexander Friedman is an associate with the firm. The views expressed in this article are those of the authors and not necessarily those of their clients or other attorneys at the firm.
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