United States: Executive Order Creating Steps For Regulatory Review And Reform Could Target Burdensome Employment Rules

On Friday, President Trump issued an executive order, Enforcing the Regulatory Reform Agenda ("the Order"), which calls for each federal agency to develop a regulatory reform task force to identify burdensome regulations for possible repeal, replacement, or modification. Within 90 days of the February 24, 2017 Order, these tasks forces, headed by a regulatory reform officer, are to evaluate existing regulations and issue recommendations about their fate. Due to its broad language, the Order potentially encompasses all federal agencies, including independent agencies such as the National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC), and covers sub-regulatory actions that were not subject to notice-and-comment rulemaking before adoption.

The Order's Language

The regulatory reform task forces' job, according to the Order, is to "attempt to identify regulations that:

  1. eliminate jobs, or inhibit job creation;
  2. are outdated, unnecessary, or ineffective;
  3. impose costs that exceed benefits;
  4. create a serious inconsistency or otherwise interfere with regulatory reform initiatives and policies;
  5. are inconsistent with the requirements of section 515 of the Treasury and General Government Appropriations Act, 2001 (44 U.S.C. 3516 note), or the guidance issued pursuant to that provision, in particular those regulations that rely in whole or in part on data, information, or methods that are not publicly available or that are insufficiently transparent to meet the standard for reproducibility; or
  6. derive from or implement Executive Orders or other Presidential directives that have been subsequently rescinded or substantially modified."

The tasks forces are to seek input from a variety of sources, including businesses, in making their recommendations.

As seen from the above list, a number of existing regulations could meet these criteria. Many in the employer community have criticized regulations finalized during the Obama administration as ineffective, over-expansive, and unduly burdensome. A number of these rules have been or are currently the subject of litigation. Rules the business community would likely be happy to have the new administration review include the NLRB rule governing representation case procedures (the so-called "expedited election" rule); the Department of Labor (DOL) rule defining and delimiting the exemptions for executive, administrative, professional, outside sales and computer employees (a/k/a, the "white-collar overtime" rule); the DOL rule relating to conflicts of interest rule over retirement investment advice (the "fiduciary" rule); the Occupational Safety and Health Administration (OSHA) rule governing occupational exposure to respirable crystalline silica, and the OSHA rule designed to improve tracking of workplace injuries and illnesses.

If certain orders and directives issued by former President Obama are rescinded, the implementing regulations would be subject to this review as well. These would include the rules establishing a minimum wage for contractors (implementing Executive Order 13,658); the fair pay and safe workplaces Federal Acquisition Regulation (implementing Executive Order 13,673 – the "blacklisting" order); and establishing paid sick leave for federal contractors (implementing Executive Order 13,706).

One potential roadblock regarding implementation, however, is the fact that there is only an acting secretary of labor (Edward Hugler) in place at the DOL. Although President Trump has nominated Alex Acosta to be the new labor secretary, the timing of his hearing and confirmation remains uncertain. This process can take some time, and the Order directs the head of each agency to appoint a regulatory reform officer within 60 days. So, while the Order creates a review timeline and process in theory, who will be in charge of this review process and how it will unfold, remains to be seen in practice.

Sub-Regulatory Guidance

Moreover, the Order uses the broad definition of "regulations" articulated in section 4 of Executive Order 13771, which President Trump signed on January 30, 2017 and requires agencies to eliminate two rules for every new one issued. Section 4 of that order reads:

For purposes of this order the term "regulation" or "rule" means an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy or to describe the procedure or practice requirements of an agency, but does not include:

  1. regulations issued with respect to a military, national security, or foreign affairs function of the United States;
  2. regulations related to agency organization, management, or personnel; or
  3. any other category of regulations exempted by the Director.

(emphasis added)

The highlighted language is extremely broad and could, in some cases, therefore cover not just rules that were subject to notice-and-comment procedures and published in the Federal Register, but also enforcement guidance, Administrator's Interpretations (AI), and data reporting requirements that were implemented without formal rulemaking.

For example, two controversial AIs the DOL's Wage and Hour Division (WHD) issued in recent years could be subject to additional scrutiny. On January 20, 2016, the WHD issued an AI establishing new standards for determining joint employment under the federal Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).1 Among other changes, the AI differentiates between "horizontal" joint employment and "vertical" joint employment, and effectively expands the scope of entities that could be liable for wage and hour violations under the joint employer theory.

On July 15, 2015, the WHD issued a separate AI: The Application of the Fair Labor Standards Act's "Suffer or Permit" Standard in the Identification of Employees Who Are Misclassified as Independent Contractors. Dr. David Weil, the former Administrator of the WHD, was a strong proponent of the "fissured" workforce theory, and therefore focused a lot of the agency's attention on potential worker misclassification.

While neither AIs are binding law, they are often used by the agency to justify enforcement actions. Employers, however, have found fault with these interpretations, and might welcome their additional review.

Other agency initiatives could also be subject to this regulatory review process. It is unclear, for example, whether the EEOC's recent revisions to its EEO-1 report fall under the Order's scope. On September 29, 2016, the EEOC announced that starting in March 2018, it will collect summary employee pay data from certain employers on revised EEO-1 Reports. Employers have expressed concern over the cost of complying with the new data-reporting requirements, and many experts have indicated that the new data is unlikely to be of any value to employers or practical use to the federal agencies in their efforts to enforce the laws against pay discrimination. These concerns will likely be re-aired during the review process

One potential challenge in reviewing burdensome regulations implemented by the EEOC or NLRB, however, is that members of these independent federal agencies are appointed for a set number of years, and will remain in office for some time. Currently, there is one vacancy at the five-member EEOC. The Commission is led by Acting Chair Victoria Lipnic (R), whose term expires on July 1, 2020. Former Chair Jenny Yang's (D) term will expire on July 1, 2017. The two other remaining members of the Commission are Democrats as well, so it is unclear which rules and regulations, if any, the EEOC's regulatory reform task force would recommend be revised or eliminated, and whether and to what extent the current EEOC would act upon those recommendations.

The NLRB is also short members. The Board currently comprises Acting Chairman Philip Miscimarra (R) (term expires on December 16, 2017); Mark Gaston Pearce (D) (term expires on August 27, 2018); and Lauren McFerran (D) (term expires on December 16, 2019). It is expected that President Trump will nominate two Republicans to fill the vacant seats, but when is uncertain.

Under the Order, the head of each agency – for the NLRB, Miscimarra – is to designate an agency official as its regulatory reform officer, who in turn will lead the regulatory reform task force. Although Acting Chair Miscimarra has been a consistent critic of the Board's expedited election rule, it is unknown whether a task force would recommend amendments, and how the Board would respond.

What Does this Mean for Employer?

The Order's establishment of a process and procedure for identifying burdensome rules and regulations does not create clear mandates. It will be up to the agencies to evaluate the suggestions and implement any next steps, whether they be revoking existing guidance, rescinding rules through formal notice-and-comment, or proposing revised rules. The Order does require the task forces to seek input in reviewing existing rules and regulations, so employers might get a second chance to weigh in on rules with which they disagree.

Footnote

1 See Tammy D. McCutchen and Michael J. Lotito, DOL Issues Guidance on Joint Employment under FLSA, Littler Insight (Jan. 20, 2016).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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