In the evolving legal and economic landscape, business leaders must stay well informed on changing laws, workplace regulations and employee rights. Our expert panelists share what they’re seeing as key challenges and critical shifts in labor policies and what companies should do as they navigate legal compliance while fostering a stable workforce.
Panelists:
- Mark T. Broth, Attorney, Managing Shareholder, Drummond Woodsum, com
- Jacob A. Cronin, Associate, Employment Litigation Practice Group, Jackson Lewis P.C., com
- Christopher E. Ratté, Attorney, Business Law and Real Estate, Shaheen & Gordon, P.A. com
Mark T. Broth, Attorney, Managing Shareholder, Drummond Woodsum
What has been the impact of the Trump Administration on the U.S. Department of Labor?
The U.S. Department of Labor (DOL) enforces numerous federal laws, including the federal minimum wage, overtime and child labor laws. The Wage and Hour Division is currently reported to have only 650 investigators nationwide, the lowest number since 2007. This staffing level has made it difficult for the DOL to be responsive to employee complaints and impossible to conduct random or program inspections. Under the Fair Labor Standards Act, employees have a private right of action. If the DOL is unresponsive to employee complaints, employers are likely to see an increase in private lawsuits, including class-action claims, to pursue claims for unpaid wages. Additionally, employees may seek recourse through the New Hampshire Department of Labor, which conducts investigations and wage-claim hearings to determine if an employee is entitled to unpaid wages.
How has the National Labor Relations Board (NLRB) been affected?
The National Labor Relations Board (NLRB) is the federal entity responsible for protecting the rights of employees to form unions and engage in collective bargaining. It also ensures that employers and employee representatives act in good faith during the negotiation process. Established as a five-member board, the NLRB requires a quorum of three members to issue decisions. Upon taking office, President Trump removed one of the sitting members, leaving the board unable to issue decisions, which created uncertainty about how the law would be interpreted and enforced. Traditionally, the NLRB has been composed of both Republicans and Democrats, with the majority reflecting the party holding the presidency. However, the Trump Administration has suggested it may not be constrained by this tradition and could appoint Republicans to all vacant positions. The Administration also removed the NLRB’s Biden-appointed General Counsel (GC), who issues legal opinions and policy memos that direct how the law is enforced. Almost all of the Biden-era GC memos were withdrawn, contributing to further uncertainty. Additionally, the NLRB has faced staffing reductions, which may lead to delays in conducting investigations, union elections and administrative hearings.
What changes has the Trump Administration made to the Equal Employment Opportunity Commission (EEOC)?
The EEOC is primarily responsible for enforcing Title VII of the Civil Rights Act of 1964, as amended, which prohibits workplace discrimination based on race, color, religion, sex (including sexual orientation and gender identity), national origin, age, disability, pregnancy and genetic information. The agency investigates complaints from employees and job applicants to determine if there is “probable cause” that discrimination has occurred. If probable cause is found, the EEOC attempts to help the employer and employee settle through conciliation. If conciliation fails, or if an investigation has not been completed within 180 days of filing, an employee may receive authorization to pursue their claim in court.
The Trump Administration has replaced several EEOC commissioners, including the chair, with individuals holding more conservative views. One consequence of these changes is a shift in focus from protecting the rights of minorities to protecting the majority from “discriminatory” DEI (diversity, equity and inclusion) policies, which are alleged to limit opportunities for the majority. With staffing levels already low, more cases will likely qualify to move to court. Furthermore, plaintiffs’ attorneys may encourage clients to avoid the EEOC and file their claims with the New Hampshire Commission for Human Rights, which holds more moderate views on enforcing state anti-discrimination laws. However, the New Hampshire Commission is currently facing staffing shortages and case backlogs, leading to a greater number of claims being pushed into the court system.
Jacob A. Cronin, Associate, Employment Litigation Practice Group, Jackson Lewis P.C.
As New Hampshire business leaders are well aware, the legal landscape surrounding employment law is complex and continuously evolving. Many statutes remain undefined, necessitating judicial interpretation to provide clarity. This naturally results in compliance challenges for employers of all sizes.
One particularly challenging area for employers is the accommodation process for qualified individuals with disabilities. Carefully navigating the requirements for reasonable accommodations, engaging in the interactive process, and establishing clear policies regarding accommodation requests are essential tasks for businesses today.
Why should employers devote particular attention to their accommodation management?
Over the years, legislation and court decisions have expanded protections for qualified individuals with disabilities. The Americans with Disabilities Act (ADA) of 1990 provided comprehensive protections, and in 2008, Congress enacted the ADA Amendments Act (ADAAA), further broadening the protective scope. Courts have continued to expand coverage, now recognizing certain temporary impairments as disabilities and necessitating the individualized consideration of accommodation requests, including those for medical marijuana usage. Most recently, the Sixth Circuit decided that impairments related to miscarriage can qualify as a disability.
Nevertheless, the full landscape of circumstances regarding disabilities has not been fully explored, and statutory gaps remain unaddressed by the courts. As a result, these gaps create potential pitfalls of liability for those who inadvertently encounter them.
What’s more, a failure to accommodate claim often involves fact-intensive inquiries, and once in litigation, courts must conduct a thorough examination of the specific circumstances of each case. This scrutiny allows plaintiffs to more easily evade the legal barriers designed to quickly dismiss claims without merit.
The number of individuals identifying as having a disability has also grown. The Rehabilitation Research and Training Center on Disability Statistics and Demographics, funded by the U.S. Department of Health and Human Services and part of the Institute on Disability at the University of New Hampshire, conducts an annual study on this topic. According to its most recent findings, an estimated 13.9% of the U.S. population had a disability in 2022, reflecting a steadily rising trend.
How can businesses ensure compliance with their accommodation process and mitigate liability?
Given the ambiguity surrounding what constitutes a disability and the individualized nature of accommodation requests, determining an employer’s obligation to accommodate can be a challenge, and a misstep could result in costly litigation.
Employers must ensure that they promptly engage in the interactive process with an employee as soon as they become aware of the employee’s disability. This requirement can be particularly challenging, as the request for accommodation need not be explicit nor reference the ADA’s specific language. Additionally, establishing clear policies regarding accommodation requests and effectively communicating these policies to employees can streamline the accommodation process and help mitigate related challenges.
Employers are also encouraged to thoroughly consider accommodation requests and recognize the broad protections afforded under the ADA to avoid legal pitfalls. Nevertheless, numerous accommodation requests may be unfounded or impose an undue hardship on the employer. In such instances, employers are not required to accommodate these requests. This delicate balancing act means that employers managing accommodation requests need to stay informed of emerging legal considerations.
How can an attorney help businesses better navigate this process?
Effective accommodation management is essential for maintaining compliance and avoiding liability. Having a trusted legal professional available for advice and counsel, interpreting new laws, and training human resource personnel and managers can help an employer stay informed and compliant with the accommodation process. By staying informed, utilizing resources and seeking legal guidance, businesses in New Hampshire can successfully navigate this complex and ever-evolving area.
Christopher E. Ratté, Attorney, Business Law and Real Estate, Shaheen & Gordon, P.A.
What major challenges are small businesses facing today?
The biggest complaint I hear from small business clients is the constant struggle to find and keep good employees. This is a common complaint across almost every industry in New Hampshire.
Once they do find a good employee, the small business owner must then continuously induce the key employees to stay long term. This is particularly true with senior managers or top-performing salespeople.
How are businesses addressing that challenge?
The solution that many small business owners come up with is to give a key employee ownership equity in the business. Equity could be stock in a corporation, membership in an LLC, or partnership in a general or limited partnership. Giving the key employee equity may seem like a good idea, and it might be in certain cases, but it is fraught with potential danger. For example, what happens if you must terminate that employee or if the employee quits? If the employee equity was not structured properly, then you may end up paying to get the equity back from the former employee whom you gave the equity to for free.
Another choice might be stock options. This works for larger businesses, but stock option plans may be too complicated and too expensive to set up for a small business owner with only a handful of employees.
What is a Phantom Stock Agreement, and how is it an alternative solution?
A lesser-known option is a “phantom stock” agreement. A phantom stock agreement is a contractual arrangement between the business and its key employee, usually a senior manager. The agreement allows the employee to receive equivalent benefits of equity ownership without actually owning the equity. This provides financial benefits to the employee equivalent to being an owner, but without the business giving up any actual ownership or control.
Although it is commonly referred to as phantom stock or shadow stock, it does not need to be based on actual stock. The agreement could be based on membership in an LLC or equity ownership in any other kind of business. Also, because it is contractual in nature, it may include any benefits or restrictions that the business and the employee agree to. Grantors of shadow or phantom stock rarely, if ever, grant the recipient the full benefits of true ownership, especially concerning voting rights.
As an example of benefits, the phantom stock agreement may provide that the employee receives a bonus equivalent to the annual dividends or profits the employee would have received if they owned the same amount of real stock. Similarly, in the event of a buyout event, the phantom stock agreement may also provide that the employee receives the same amount of proceeds from the buyout as an equivalent stockholder of real stock. The value of the phantom stock tracks the value of a corresponding amount of real stock in the business.
The phantom stock agreement may also include certain restrictions on how and when the employee receives such payments. If the employee is terminated for any reason, the phantom stock agreement is also terminated along with all rights and benefits that go along with it. There is no need to redeem or repurchase the phantom stock, because there is no stock.
What should a business do if considering Phantom Stock Agreements?
Phantom stock agreements are not appropriate for all businesses, nor are they appropriate for all employees within a business. For some small businesses with key senior employees, however, it might be the perfect solution to a sticky problem. If you’re considering giving an employee equity in your business through phantom stocks or any other arrangement, consult with an experienced business law attorney, such as those at Shaheen & Gordon, to ensure your business’s interests are protected in the long term.
