HR Intel: What the ‘Federal Vacuum’ Means for HR

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Much of the employment-related commentary and guidance around what to expect from the Trump Administration can be summed up as follows: wait and see. I’ve been guilty of it myself with HR Intel, harping on the uncertainty that this transition presents to employers in the absence of specifics.

However, now that President Trump’s cabinet is taking shape, we can start to make some educated guesses as to how the next four years might take shape for HR. And if you look at each cabinet appointee whose job affects HR, workers or business owners in a direct way, a theme emerges: breaking down the federal government. This might take the form of scaling back regulations or limiting enforcement of existing regulations, but make no mistake about it. Where there was previously a lot of effort by the federal government to police employment practices, the next four years will be more like a vacuum. And in the absence of regulation (focused on areas of the country where state law wasn’t already more formidable than federal law), there is room for both business growth and chaos.

Tom Price – Health and Human Services

If President Trump’s first Executive Order wasn’t enough notice, cabinet appointee Tom Price is almost certainly to lead the “repeal and replace” movement to address the Affordable Care Act. Price himself has authored several versions of ACA replacement legislation in the past, so if his views influence the ACA’s successor, we are likely to see the following included as part of the overhaul:

  • Tax credits for individuals who purchase insurance on the individual market (polar opposite of the “individual mandate,” essentially);
  • More incentives to use Health Savings Accounts (HSAs);
  • A cap on the tax exclusion employers can take for providing plans at $20,000 per family; and
  • Health insurance allowed to be sold across state lines

The latter would be the most significant disruption of the ACA as it would favor the health insurance conglomerates of the world like AIG and Kaiser Permanente. It could also lead to insurers flocking to states where regulations are most lenient (similar to how businesses are incorporated in Delaware), which may inevitably lead to fewer protections for consumers of health plans if/when things go awry.

Jeff Sessions – Attorney General

Jeff Sessions is an unabashed opponent of “comprehensive immigration reform,” meaning the federal legal system is likely to take a decidedly different tone on the legality of immigrant labor. That means industries relying on transient or seasonal workers – services, retail, agriculture, etc. – will have a harder time finding people to fill jobs. Sessions might also have an impact on the H1-B visa program by making it more difficult for foreign applicants to qualify. In fact, Sessions has in the past floated the idea of eliminating the program altogether. That could go in a number of directions, including:

  • An economic downturn for industries that rely on H1-B applicants;
  • Higher wages for American workers who qualify for high-skill positions; and even
  • Automation at a faster pace to account for the lack of man/woman power.

Andrew Puzder – Department of Labor

Of the appointees mentioned here, Puzder has the best chance of not being confirmed based on various reasons like civil rights suits against companies run by him. However, if his confirmation goes through, the Department of Labor is expected to do an about-face on things like minimum wage, overtime eligibility and the enforcement of wage and hour violations to go with a slew of other changes.

Puzder himself has sued the DOL in the past numerous times, is a staunch opponent of a $15 per hour federal minimum wage and the now-defunct “final” rule on overtime, which would have doubled the minimum salary for exempt employees.

Last but certainly not least, Puzder is expected to have a huge impact on how the DOL views “joint employment,” which would take the form of rescinding various Administrator’s Interpretations (AIs) that are issued by the Wage and Hour Division of the DOL. A new position on joint employment would be a boon to major franchises like McDonald’s and (hey whattya know?) Hardee’s/Carl’s Jr., of which Puzder is the CEO.

Mick Mulvaney – Office of Management and Budget (OMB)

This is one of those appointments that has slipped under the HR radar for the time being, but presents arguably one of the more significant disruptions. Mulvaney is considered a “fierce fiscal conservative,” and he would almost certainly focus on balancing the federal budget as his primary objective. Given the deficit, however, nothing short of radical actions would accomplish that. For example, Mulvaney has questioned the need for federal funds supporting scientific research.

In 2016, the federal government shelled out a cool $70 billion for research and development alone. That money went to fund research into things like the Zika virus, advanced manufacturing, clean energy technology and STEM education. Those things seem kind of important? Nevertheless, Mulvaney might slash the budget on things like R&D, leaving private industry to make up the difference. That would tremendously heighten the need for employees skilled in STEM education, something the American workforce is already lacking.

The broader impact of this federal vacuum on HR and labor relations is perhaps a shift toward a compartmentalized country. Instead of having one or two HR “problem children” like California and New York, the next four years could give us a dozen or so. The absence of federal regulations is likely to make the blue states bluer and the red states red-der. If you’re a single state employer, that could be good or bad depending on your economic status and your persuasion. But if you’re a multi-state employer, navigating the approaching chaos of regulatory changes is not how you were hoping to spend your 2017.

Enforcement Swan Song

Thanks to the Federal Civil Penalties Inflation Adjustment Act, penalties for various employment-related violations are going up as of January 18, 2017. Violations of the OSH Act, FMLA, ERISA and FLSA all will carry higher penalties going forward, at least until Congress can pass countervailing legislation.

Uber will pay a fine of $20 million to the Federal Trade Commission (FTC) over misleading job applicants regarding their potential earnings if they became Uber drivers. While we’re on the subject, the FTC is another agency that might do a 180 on policy development and enforcement. Practically, that may mean data security standards could be relaxed and that the FTC could scale back enforcement of privacy violations and/or data security breaches.

Barons of Banking

Consulting firm Quinlan & Associates reviewed turnover in the 12 largest global financial institutions over the past 10 years and found that the average tenure for an employee who quit during that time was only 17 months. That contrasts with a 26-month average in 2005. Additionally, up to about one-third of all workers surveyed were planning to leave their current role in the next two years. Most of the talent is flowing westward to tech companies, proving that “manifest destiny” is still alive and well.

Speaking of mega banks, both Morgan Stanley and Citibank are poised to move jobs out of the United Kingdom if and when “Brexit” is finalized by Parliament. The process is likely to take some time, but the economic consequences of a final split from the EU are sure to be palpable in the UK.

HR Quick Hitters

HR needs to lead the charge in preparing for a “ransomware” attack by hackers. Ransomware is “malware” or other forms of computer viruses which hold hostage huge sets of data until the hackers receive huge sums of money. It goes without saying, if vital data isn’t backed up, you’re asking for trouble, either in the form of catastrophic data loss or the aforementioned hostage situation. So if you value that tremendous work you’ve been doing on people and data analytics, make sure it’s backed up to a secure location.

A study by the authors of “Crucial Conversations” indicates that each “conversation failure” by employers costs $7,500. This might include:

  • An employee voicing his or her concerns but not getting a satisfactory response;
  • Unreported complaints due to lack of faith in management; and
  • HR’s failure to follow up on issues on a timely basis.

These failures might manifest in things like higher turnover, lower morale and ultimately low productivity.

How is this song related to HR?

In the last edition of HR Intel, we asked you how “Manic Monday” by The Bangles is related to HR.

As you probably know from the lyrics and title, this song describes a woman who is dreading going to work on Monday, and who – surprise surprise – would much rather stay home and relax just like she does on Sundays, her “I don’t have to run day.” But interestingly, this song wasn’t written by The Bangles. It was written by Prince and then offered to Susanna Hoffs – rhythm guitarist for The Bangles – in an attempt to woo her romantically. Whether Prince was successful we may never know, but the song certainly was, becoming The Bangles’ most recognizable pop song.

For HR, you always need to have your guard up, both for the “Monday blues” and for relationships in the workplace that might make things uncomfortable. To be clear, Prince’s overture wasn’t sexual harassment, but favors in exchange for sex in the workplace are obviously problematic. Employers can get ahead of this activity with policies on workplace romance and “love contracts,” among other (completely legal) methods.

We leave you with “Same Love” by Macklemore & Ryan Lewis.

Tell us how you think this song is related to HR in the comment section below.

 

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