As the Trump administration focuses its priorities, employers need to be aware of several new, proposed and potential changes to workplace laws, regulations and federal agency enforcement initiatives. Here is a preview of some of the likely changes.
Independent contractor classification/joint employer rule. After the first Trump administration, the Biden administration reverted to a more traditional approach to worker classifications.For example, both the U.S. Department of Labor (USDOL) and the National Labor Relations Board (NLRB), through administrative rule and board rulings, made it harder 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. That was effectively a reinstatement of the pre-Trump standard. The new administration will likely change the rule again. In addition, in March 2024 the U.S. District Court for the Eastern District of Texas indirectly benefitted employers regarding independent contractor classification by preserving a more limited standard when determining joint employer liability. Likewise, a case pending before the 5th Circuit Court of Appeals has challenged the USDOL rule on misclassifications, meaning that the classification standards are still evolving.
It is likely the Trump administration will reinstate its previous rules simplifying the independent contractor classification standards.
For example, independent contractors do not receive the same protection or benefits as employees (such as wage and hour law protections and workers’ compensation, etc.), and therefore, if an individual is misclassified as an independent contractor — when they were actually an employee — that individual may be entitled to those benefits.
Overtime exemption heartburn. Perhaps nothing has been more frustrating for human resources professionals than the revolving door of changes to the salary threshold for federal overtime exemptions. Like in 2016, the USDOL proposed an increase to the minimum salary that an employee must earn in order to be exempt from overtime under the Fair Labor Standards Act.
The frustration stems from last-minute court decisions that have halted the enforcement of the proposed changes that are being decided after employers have already adjusted salaries accordingly and made overtime exemption decisions.
Recently, the Eastern District of Texas not only halted the Jan. 1, 2025 salary threshold increase, but it also rolled back the July 1, 2024 increase.
Noncompetition and related restrictive covenants. In a surprising move last year, the Federal Trade Commission (FTC) issued a nationwide ban on noncompetition and related agreements. The ban sent shockwaves through the business community, and legal challenges followed. However, again, a federal court in the Northern District of Texas issued a decision in August 2024 blocking that rule. With the president-elect already announcing a new FTC chair, the new administration likely will not seek to resurrect the FTC’s ban.
The NLRB also weighed in on noncompetition agreements. The board’s general counsel issued a memorandum in October 2024 suggesting that restrictive covenants and similar “stay-or-pay agreements” (e.g., signon bonuse and relocation advances, etc.) should be unenforceable.
Like with the potential change at the FTC, Donald Trump will likely replace the NLRB general counsel shortly after taking office. With that, the board could abandon its aggressive position on these agreements.
Severance agreements and standard nondisparagement and confidentiality provisions. In February 2023, the NLRB ruled that employers cannot offer severance agreements requiring employees to broadly waive their rights, specifically regarding non-disparagement and confidentiality provisions.
The board concluded that such provisions can interfere with an employee’s right to comment on the terms and conditions of their employment, and therefore, should be unenforceable.
Additionally, the board’s general counsel provided a follow-up memo discussing the retroactive effect of the ruling, meaning that previously-entered-into agreements could not be enforced. However, if the general counsel is replaced as expected, the new one will likely rescind that memo.
What could be on the horizon? Issues like “no tax on tips” may get some traction in Congress; there may be agreement on H-1B visas for skilled workers; and funding from the Biden administration for things like more IRS and OSHA inspectors may be cut. The administration will likely not prioritize items such as federal paid family leave, EEO-1 pay data requirements as proposed by the Biden administration, and increases to the federal minimum wage.
Attorney Jim Reidy is a shareholder at the Sheehan Phinney law firm where he is the co-chair of the firm’s labor and employment law practice group. Attorney Autumn Klick is an associate with the firm, practicing commercial litigation and labor and employment law.
