If you’re an owner or manager, it’s no surprise to you that there is a government regulation for nearly every employment decision you make. The reality is that you can’t hire, promote, discipline, transfer, pay, or terminate an employee without considering local, county, state, and federal employment regulations. Depending on where your business is located and how many employees you have, you may have to comply with regulations that dictate everything from the precise questions you can ask during an interview to what you can legally deduct from the final paycheck of an employee who owes you thousands of dollars (zippo, in many cases!).
The cost of compliance is staggering. For the 28 million small businesses in the U.S., regulatory compliance costs over $10,000 per employee — 36 percent higher than the cost for a larger business. It’s no wonder some business owners consider regulatory costs to be a hidden tax on businesses. And it doesn’t seem to quit. Over the last 20 years, the federal government has added more than 80,000 regulations - typically between 3,500 and 4,500 annually.
With burdens like these, small businesses are understandably pleased about a new pro-business philosophy in Washington that began to take life when President Donald Trump announced a regulatory freeze. While we anticipate a business climate with fewer employment regulations under this administration, the president’s agenda likely includes tighter enforcement of one regulation in particular that has many employers concerned: the Immigration and Nationality Act. For labor-strapped employers that rely on the immigrant population to fill unskilled positions, the benefits of fewer employment regulations may not outweigh the losses associated with the labor shortages that would result if millions of illegal immigrants were deported.
Despite the uncertainty surrounding immigration enforcement, with an otherwise pro-business administration at the helm, changes in the employment arena are likely to ensue — including, ironically, some new regulations. All bets are off when it comes to predicting the future with this particular president calling the shots, but many HR prognosticators agree on some widely anticipated changes in the employment arena. These include:
- Federal minimum wage increase. Currently stalled at $7.25 per hour for the past eight years, employers should prepare for a federal minimum wage increase, most likely to $9.00 and possibly phased in over time. Of course, a higher federal minimum wage rate is moot if your business is covered by a local or state minimum wage law with a higher rate.
- Death of the Overtime Rule. President Trump opposes the 2016 salary increases to the Fair Labor Standards Act and has already taken steps toward permanently killing the rule. We expect the new Secretary of Labor to forego the appeal filed by the Obama administration, which would result in the current injunction standing and the end of the Overtime Rule.
- Paid family leave. President Trump originally called for six weeks of paid maternity leave for women, but expanded this to “paid family leave” in his speech to the joint session of Congress on Feb. 28. This benefit will likely be funded through the unemployment compensation system and is expected to include changes to the current system to curb unemployment fraud in order to generate the additional funds necessary to support paid family leave benefits.
- Employer incentives for employees with families. In keeping with efforts to support working families, we expect tax deductions for families with childcare or eldercare costs and new or greater IRS incentives for employers that provide childcare to their employees.
- Government agency philosophical and investigatory shifts. With pro-business leaders heading federal employment agencies like OSHA, the Equal Employment Opportunity Commission (EEOC), the Office of Federal Contract Compliance Programs (OFCCP), Wage and Hour Division, and the National Labor Relations Board (NLRB), we expect a more common-sense, practical approach to enforcement practices, fewer investigations, more flexibility when resolving issues during audits, and smaller settlements for violations of regulations.
- Affordable Care Act (ACA) reforms. It remains to be seen if ACA reforms will fulfill employers’ wish lists for lower costs and more plan options, portable policies, the option to purchase health insurance through trade associations, tax deductions for premiums, and a 40-hour full-time definition.
- Rollback of DOL guidance documents pertaining to independent contractors and joint employment. It’s tough to ignore the shift toward outsourcing (some 20 million workers are now contractors) and a new pro-business Secretary of Labor is expected to promote changes to labor laws that make it easier for companies to hire contractors.
- More apprenticeship programs. With significant future labor shortages in the trades, the new Secretary of Labor is expected to boost funding for apprenticeship programs.
- Greater enforcement of federal marijuana laws. The new administration has signaled its disagreement with the former administration’s lenient enforcement of federal laws related to recreational marijuana use. Expect the Department of Justice to clamp down on the eight states that have legalized recreational use of the drug.
- Increased enforcement of immigration laws. As noted above, employers should prepare for increased immigration enforcement and Immigration and Customs Enforcement (ICE) audits. In addition, as part of President Trump’s efforts to “put America first,” employers should expect mandatory E-Verify for all employees and changes to legal immigration programs and visa categories.
With a new administration in Washington, it is indeed a new day for employers. But this new day is unlike any other, so strap on your seat belt and get ready for the wild ride down Pennsylvania Avenue.