January 24, 2017

President Trump's Regulatory Freeze May Impact Recently Enacted Labor and Employment Rules

On January 20, 2017, White House Chief of Staff Reince Priebus issued a memorandum addressed to the heads of executive departments and agencies, including the Department of Labor (DOL), instructing them to freeze new or pending regulations to provide the new administration time to review them. Such a freeze is not unusual for a new administration. It serves to stop the implementation of any new regulations promulgated by the executive departments and agencies under the prior administration and not yet finalized by the Office of Federal Registry (OFR). It is unclear how this directive may impact a number of DOL-issued regulations with past effective dates, but with stayed implementation as a result of injunctions issued in ongoing federal litigation.

The memo directs that all regulations not yet published in the Federal Register are to be immediately withdrawn consistent with OFR procedures, and that all regulations which have been published in the Federal Register but have not yet taken effect are to be temporarily postponed for at least 60 days for review. Where the effective date of a regulation “has been delayed in order to review questions of fact, law, or policy,” departments and agencies are advised to consider “proposing further notice-and-comment rulemaking.” Potentially at issue are the following three Obama administration workplace initiatives enacted through executive orders and agency actions without congressional approval, and targeted for roll-back by the Trump administration and the Republican-led Congress:

  • Fair Pay and Safe Workplaces Rule — The Federal Acquisition Regulatory (FAR) Council issued its final Fair Pay and Safe Workplaces Rule, along with accompanying guidelines from the DOL, on August 25, 2016. It was scheduled to be phased in over time beginning on October 25, 2017. This controversial rule would impose burdensome reporting and disclosure obligations on companies bidding for future federal contracts. On October 24, 2016, a federal judge in the Eastern District of Texas issued a nationwide preliminary injunction prohibiting implementation of much of the FAR Fair Pay and Safe Workplaces Rule and DOL Guidance, with the exception of certain paycheck transparency requirements. On December 22, 2016, the government appealed the district court’s decision to the Fifth Circuit Court of Appeals for review.
  • Persuader Rule — On March 23, 2016, the DOL issued its final “persuader” rule, which was scheduled to take effect April 25, 2016, and is applicable to covered agreements and payments made on or after July 1, 2016. The revised rule was to expand the information which must be disclosed by employers and their consultants related to activities intended to persuade employees about their rights to union representation and collective bargaining. On November 16, 2016, a federal judge in the Northern District of Texas issued a nationwide permanent injunction on behalf of the National Federation of Independent Business and other challengers, holding that the rule is unlawful and should not become law. On January 12, 2017, the DOL appealed the district court’s decision to the Fifth Circuit Court of Appeals for review.
  • Overtime Rule — The DOL’s new minimum salary rule for the “white collar” exemptions was published on May 23, 2016, and scheduled to take effect on December 1, 2016. The rule would increase the minimum salary level for exempt executive, administrative and professional employees from $455 per week ($23,660 annually) to $913 per week ($47,476 annually) and also would increase the minimum salary amount for the highly compensated employee exemption from $100,000 to $134,004 (including at least $913 per week paid on a salary basis). On November 22, 2016, a federal judge in the Eastern District of Texas issued a preliminary injunction barring the DOL from enforcing the rule. On December 1, 2016, the DOL appealed the district court’s decision to the Fifth Circuit Court of Appeals for review, which granted the DOL’s opposed motion to expedite the appeal and ordered a briefing schedule that will conclude on or before January 31, 2017. In the interim, the district court denied the DOL’s request to stay the district court proceedings pending appeal.

Revising or revoking an existing rule is not simple and will require a lengthy notice-and-comment process and final review by Congress and the Government Accountability Office. Moreover, the White House’s Office of Information and Regulatory Affairs (OIRA) must analyze draft proposed rules when they are “significant” due to economic effects or because they raise important policy issues. For “significant” rules, the agency must also estimate the cost and benefits of the rule and consider alternate solutions.

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