As the Trump Administration focuses its priorities, employers need to be aware of several new, proposed, and potential changes to federal workplace laws, regulations, and enforcement initiatives. Here's a preview of some of the likely changes.
Independent Contractor/Joint Employer Classification. After the first Trump administration, the Biden administration returned to a more traditional approach to worker classification. For example, through administrative regulations and board decisions, both the United States Department of Labor (USDOL) and the National Labor Relations Board (NLRB) have made it more difficult for employers to classify individuals as independent contractors, as opposed to employees.
In 2019 and again in 2023, the NLRB announced and refined its independent contractor rule. This was effectively a restoration to pre-Trump standards. The new government is likely to change the rule again. Additionally, in March 2024, the U.S. District Court for the Eastern District of Texas indirectly benefited employers in independent contractor classification by maintaining a more limited standard in determining employer joint liability. Likewise, a case before the 5th Circuit Court of Appeals has challenged the USDOL misclassification rule, meaning classification standards are still evolving.
It is likely that the Trump administration will reinstate its previous rules simplifying classification standards for independent contractors.
For example, independent contractors do not receive the same protections or benefits as employees (e.g., wage and hour protections, workers' compensation, etc.). Therefore, if a person is misclassified as an independent contractor when in fact they were an independent employee – that person may be entitled to these benefits.
Overtime exemption for heartburn. Perhaps nothing has been more frustrating for HR professionals than the revolving door of changing the salary threshold for federal overtime exemptions. As in 2016, the USDOL proposed an increase in the minimum salary an employee must earn to be exempt from overtime under the Fair Labor Standards Act.
The reason for the frustration is last-minute court decisions that have halted enforcement of the proposed changes, which are currently being decided, after employers had already adjusted salaries accordingly and made overtime exemption decisions.
Recently, the Eastern District of Texas not only stopped the salary threshold increase effective January 1, 2025, but also reversed the increase effective July 1, 2024.
Non-Compete Agreements and Related Restrictive Agreements. In a surprising move, the Federal Trade Commission (FTC) issued a nationwide ban on non-compete agreements and related agreements last year. The ban caused widespread outrage in the business community and legal action followed. However, in August 2024, a federal court in the Northern District of Texas again issued a ruling blocking this rule. With the president-elect already announcing a new FTC chair, the new administration is unlikely to attempt to revive the FTC's ban.
The NLRB also commented on non-compete agreements. The Board's General Counsel issued a memorandum in October 2024 proposing that restrictive covenants and similar “stay-or-pay agreements” (e.g., sign-on bonuses and relocation advances, etc.) should not be enforceable.
As with the potential change at the FTC, Donald Trump will likely replace the NLRB's general counsel shortly after taking office. This would allow the board to abandon its aggressive stance on these agreements.
Separation agreements and standard non-disparagement and confidentiality provisions. In February 2023, the NLRB ruled that employers may not offer severance agreements that require employees to largely waive their rights, particularly regarding nondisparagement and confidentiality provisions.
The Board concluded that such provisions may affect an employee's right to express themselves about the terms of their employment and therefore should not be enforceable.
In addition, the panel's general counsel issued a follow-up memo discussing the retroactive effect of the ruling, meaning that previously agreed agreements could not be enforced. However, if the general counsel is replaced as expected, the new attorney will likely rescind this memo.
What could be on the horizon? Issues like “no tax on tips” could gain traction in Congress; there may be an agreement on H-1B visas for skilled workers; and the Biden administration's funding for things like more IRS and OSHA inspectors could be cut. The administration is unlikely to prioritize issues such as federal paid family leave, the Biden administration's proposed EEO-1 payroll data requirements and increasing the federal minimum wage.
Attorney Jim Reidy is a shareholder at the law firm of Sheehan Phinney, where he is co-chair of the firm's Labor and Employment Practice Group. Attorney Autumn Klick is an employee of the firm and practices commercial disputes and employment law.