The first year of a new Presidential administration always brings about change, but this is no ordinary transition with famous businessman Donald J. Trump as the new leader of our nation. So, what does this mean for law?
“For businesses with longstanding regulatory concerns and objectives, the opportunity to engage with Washington is now,” said Angela Styles, chair of Crowell & Moring and former administrator for federal procurement policy within the Office of Management and Budget at the White House.
Crowell & Moring’s has recently released its third annual regulatory outlook focusing on regulatory issues under President Trump, called “Regulatory Forecast 2017: What Trump Means for Business.” The report provides analysis on how the new administration, Congress, and the federal courts are changing the regulatory landscape and what it means for business in the months ahead.
Inside Counsel sat down with Thomas A. Lorenzen, partner in Crowell & Moring’s Washington, D.C. office and a member of the Environment & Natural Resources and Government Affairs groups; Thomas P. Gies, partner at Crowell & Moring partner; and Kris Meade, chair of Labor & Employment at Comwell & Moring, to discuss the key findings that came out of the report and what to expect in the future.
Today, practitioners are looking at how aggressively EPA rolls back previous regulations. Will EPA, for instance, replace the Clean Power Plan with a narrower rule that fits more readily within the authority given to EPA by Congress, or will it attempt to roll back the rule without replacing it at all? On water issues, eyes are on whatever EPA will offer as a replacement for the U.S. waters rule, which attempts to define the bounds between federal and state regulation of our waterways and wetlands.
A deregulatory program requires rulemaking, which is a long and complex process. Trump’s deregulatory actions are likely going to be challenged by someone, according to Lorenzen. “For lawyers involved in the regulatory process, that means helping clients determining whether they are best served by regulation or no regulation, working to shape the resulting rules through engagement with the administration and through the notice-and-comment process, and then representing our clients in the federal courts when those rules become subject to judicial review,” he explained.
Since Inauguration Day, the law hasn’t necessarily changed, per Lorenzen, but the elevation of Neil Gorsuch to the Supreme Court could mean it will change in the future. For example, Justice Gorsuch is no fan of Chevrondeference - so he is expected to voice his skepticism on this critical issue. Lorenzen is seeing some interim developments connected to the administration’s attempts to roll back prior rules and stay pending litigation regarding those rules while the administration reconsiders them.
“I expect federal enforcement activity will focus on EPA’s traditional missions: clean air, clean water, and clean land. Some of the more aggressive enforcement activities of the Obama administration may fall by the wayside,” he explained. “Typically, when this happens, there is an uptick in citizens’ suits brought by states, environmental groups, and others. I expect we’ll see the same here.”
Most of the Obama administration’s most significant environmental regulations remain on the books, and in force and effect. Exceptions are the Clean Power Plan and the Waters of the U.S. rule, both of which were stayed – the first in an extraordinary Supreme Court order, and the second by the Sixth Circuit – pending judicial review. He said, “Undoing any of these rules on a more permanent basis will require either court decisions invalidating the rules – unlikely where the administration is reconsidering them and the court’s opinion is thus likely to be advisory – or final rules rescinding or replacing them.”
A district court judge in Texas set aside a rule issued last year by the Obama administration that doubled the minimum salary necessary for employers to classify many white-collar employees as exempt from the overtime requirements of the Fair Labor Standards Act. The DOL would have increased the minimum salary to just over $47,000 per year in a regulation that would have affected more than four million U.S. workers. A few weeks ago, the court granted summary judgment in a lawsuit brought by business groups and 21 state governments, contending that the rule was beyond the scope of DOL’s authority.
“Opponents of the rule contend that Congress did not authorize the DOL to regulate the minimum salary at all, relying on statutory language and regulatory history to argue that DOL should be limited to providing guidance to employers on the nature of the work performed by employees to be classified as exempt from the overtime requirements, through the traditional job duties test,” explained Gies. “Several questions remain after the ruling. Business groups will argue that last week’s decision moots the appeal of the earlier decision enjoining enforcement of the rule.”
The most interesting questions involve the position to be taken by the DOL, per Gies. In June, DOL filed its brief in the Fifth Circuit, arguing that it would abandon the position taken by the Obama administration and would not try to reinstate the new minimum salary rule. That brief did not explicitly argue that the DOL lacks authority to make any increase in the minimum salary requirement. In July, Labor Secretary Alex Acosta’s office issued a public request for information seeking additional information as to whether DOL should reconsider the rule. It was sent to the Office of Management and Budget’s Office of Information and Regulatory Review for approval, and the request asked for comment on the question of what criteria should be used by DOL in raising the minimum salary.
“This hedged on the fundamental question of whether DOL has authority to increase the minimum salary,” he said. “DOL has raised the minimum salary on several occasions over the years, but only by relatively modest amounts. Both steps seem to acknowledge DOL’s historical, institutional view that it does indeed have authority to issue regulations increasing the minimum salary requirement.”
The business community widely opposed the DOL rule as unnecessary, ill-considered and counterproductive, arguing, among other things, that it would increase unemployment. Democrats have begun to argue in recent days that a decision by President Trump to abandon the rule would be inconsistent with his claims during the last presidential campaign that he would be a supporter of the working class, according to Gies.
“The steps taken by the DOL suggest that the department probably will go back to the proverbial drawing board and initiate a new rulemaking proceeding,” he explained. While the outcome of such proceeding is impossible to predict, one could expect a new regulation that is more closely modeled on the 2004 rule, in which DOL would articulate a new methodology for determining the amount of what would be a comparatively modest increase in the minimum salary.”
As for pay equity, the most significant development since the onset of the Trump administration is the recent decision issued on August 29th by the Office of Information and Regulatory Affairs to stay indefinitely the Obama administration’s proposed changes to the EEO-1 report that must be filed by most employers. The revised report would have required private employers with 100 or more employees to report W-2 compensation data and hours worked data by sex, race, and ethnicity within 12 specified pay bands. It was touted by the Obama administration as a new tool that would permit the EEOC and the Office of Federal Compliance Programs (OFCCP) to address the so-called pay gap between women and men and minorities and non-minorities, per Meade.
Employer reaction to the revised EEO-1 report was uniformly negative. The revised report, in the view of employers, would be difficult and costly to complete, would require changes to human resource information systems (HRIS), and would yield data that would not permit the EEOC or the OFCCP to better identify employers where systemic discrimination in pay may exist. In fact, the Chamber of Commerce submitted a report completed by a labor economist that concluded that the EEOC and OFCCP would be just as likely to identify systemic pay issues if it chose employers randomly for investigation.
“The August decision by OIRA to stay indefinitely the revisions to the EEO-1 Report is welcome news for employers. The big question, though, is what’s next, both for the EEO-1 Report and pay equity more generally,” explained Meade. “Victoria Lipnic, the Chair of the EEOC, has confirmed that the change in the deadline for submission of the EEO-1 report – from September 30 to March 31 – remains in place, so employers must submit their next report by March 31, 2018. Whether the EEOC and OFCCP will attempt to revive the revisions to the EEO-1 Report during the Trump administration is unknown, but seems unlikely.”
However, both the EEOC and the OFCCP likely will continue to focus on pay equity matters, both in response to charges of discrimination and in OFCCP audits, at least until additional senior-level personnel are installed by the Trump administration. The OFCCP director position remains open with no candidate yet identified, and Obama administration appointees remain in key regional director positions across the country.
He said, “For the foreseeable future, pay equity remains a live issue, both at the federal and state level, and one to which employers are wise to attend, irrespective of the change in administrations.”