Now that Donald Trump has been elected President, what HR-related changes are in store for employers? The short answer is that a lot of uncertainty still exists. While the President-elect’s priorities and polices will assuredly be more “employer friendly” than those of the Obama administration, it is too soon to predict exactly what that will look like in practice. However, there are some changes that seem certain to affect employers and HR Professionals, one way or another, under a Trump administration.
A. Federal Contractors and the OFCCP
The Trump administration’s priorities for the Office of Federal Contract Compliance Programs (OFCCP) will be markedly different from those of the Obama administration. For example, the Obama administration’s OFCCP has been highly focused on aggressive enforcement activities against federal contractors, including new rules designed to enforce Executive Orders restricting arbitration agreements, providing for a “blacklisting” process based on federal and state labor violations, raising the contractor minimum wage, and creating new paid sick leave requirements. However, given Trump’s pro-business stance, the OFCCP’s budget may be significantly curtailed and some of Obama’s Executive Orders are likely to be repealed. In addition, the OFCCP is likely to undertake far fewer enforcement investigations and play a far less active role in the life of federal contractors in the coming years.
B. Worker Eligibility
While Trump’s position on building a wall at the border of the United States and Mexico is common knowledge, his stance on workforce enforcement of immigration laws is less well-known. Trump has indicated that he supports nationwide mandated use of the employment eligibility verification system known as E-Verify by all employers, not just federal contractors. More than 600,000 employers now use E-Verify, according to the U.S. Citizenship and Immigration Services website. Trump also has called for an increase in the prevailing wage for H-1B visas—visas for positions requiring specialized knowledge. In addition, he has stated his preference for a requirement to hire American workers first, before making visas available.
C. Tax Reform
U.S. tax policy could be nearing a dramatic shift. Not only has Trump proposed an overhaul of the U.S. tax code, but he’ll be backed by a Republican-controlled Congress. Trump has also suggested eliminating the Alternative Minimum Tax, estate tax, and gift tax, which would in theory provide tax savings to a wide swath of Americans. On paper, it would seem to make financial sense to put more money into the pockets of consumers since the U.S. is a consumption-driven economy. If consumers have more money, they’ll be more likely to spend it.
Trump also supports reforming the corporate income tax structure. With the exception of Puerto Rico and the United Arab Emirates, the U.S. has the highest marginal corporate income tax rate in the world. Trump’s belief is that restrictive corporate taxes are inhibiting hiring and business reinvestment. By lowering the tax rate from 35% to his proposed15%, the goal would be to allow U.S. corporations to be more competitive globally, pumping up the U.S. growth rate in the process.
According to Trump, if the full scope of his tax plan were implemented along with other proposals that include $1 trillion in infrastructure spending over 10 years, America could grow its GDP by as much as 4% per year. His critics point out that Trump’s tax plan could also have numerous flaws such as Increased income inequality, increased national debt, and that certain small business’ may receive little financial help from the government. Unfortunately, only time will tell.
D. The New Overtime Rules
In late November, a Texas federal judge temporarily enjoined the Department of Labor’s new overtime rules from going into effect on December 1st, which would have increased the salary exempt threshold to $47, 476 per year. This was a huge win for employers, and signals that one of President Obama’s signature labor accomplishments may ultimately be disallowed by the federal courts. But even if the court ultimately allows the rule changes to take effect, it remains unclear whether the new standards would continue under a Trump administration. Given his pro-business stance on most issues, it seems unlikely the Trump administration would let this rule go into effect as it currently exists. The President could instruct the DOL to repeal the rule or could water down its effects by exempting small businesses or doing away with the automatic triennial increases in the salary threshold.
E. The Affordable Care Act
Trump has promised that on day one of his administration he will ask Congress to deliver a full repeal of the ACA, including the individual mandate. In place of the ACA, Trump has called for the usage of Health Savings Accounts (HSAs), and working with Congress to create a patient-centered health care system that promotes choice, quality, and affordability. Trump has also indicated he would work with states to establish high-risk pools to ensure access to coverage for individuals who have not maintained continuous coverage, and allow people to purchase insurance across state lines, in all 50 states, creating a dynamic market with more competition and lower prices.
F. Employee Leave and Childcare
Before the election, the Trump team unveiled a plan to enhance unemployment insurance (UI) to include six weeks of paid maternity leave. This would provide a temporary unemployment benefit through the UI system and “would cost $2.5 billion annually at an average benefit of $300 per week. This cost could be offset through changes in the existing UI system, such as by reducing the $5.6 billion per year in improper payments,” according to a Trump campaign fact sheet. This plan does not appear to include new fathers, and it would not extend to other forms of leave covered by the Family and Medical Leave Act (FMLA).
Trump also is calling for increased incentives for employers to provide child care at work. In 2001, a law was enacted that gives licensed onsite child care centers a tax credit of up to 25 percent of facility expenditures, plus 10 percent of resource and referral costs, up to a limit of $150,000 per calendar year. Trump wants to raise that cap. In addition, “Families will be able to fully deduct the average cost of child care from their taxes, including stay-at-home parents,” Trump told the New York Economic Club. “Parents will also be able to enroll in tax-free dependent care savings accounts for their children or elderly relatives. Low-income households will benefit from both an Expanded Earned Income Tax Credit—in the form of a child care rebate—and a matching $500 contribution for their savings accounts.”
G. Employer Takeaway
Despite all the HR-related changes that seem likely to occur under the Trump administration, nothing has happened yet and questions remain about what promises from the campaign trail will actually result in legislative or regulatory changes. Therefore, unless and until official action is taken, employers should abide by all their current HR obligations – but with a keen eye for the HR changes that seem destined to occur.
C2 provides strategic HR outsourcing to clients who want to develop optimal workforce strategies and solutions to allow them to be more competitive and profitable. C2 blog posts are intended for educational and informational purposes only.
