Legal experts expect some of the biggest labor issues—the redefinition of joint employer, proposed overtime changes and the possibility of a minimum-wage increase—to take a turn more favorable to the business community under the administration of President-elect Donald Trump.
REPORT FROM THE U.S.—A new presidential administration likely means a drastic tide reversal when it comes to the most pressing labor issues facing the hotel industry, sources said, with President-elect Donald Trump expected to make significant policy changes.
Sources identified three issues as the biggest labor challenges facing the hotel industry: the 2015 National Labor Relations Board ruling redefining joint-employer status, a proposed change in the overtime-exemption threshold and relative support, or lack thereof, for significantly increasing the federal minimum wage.
On each of those issues, Trump’s administration is expected to differ almost completely from the tact taken by the outgoing administration of President Barack Obama. The clearest sign thus far of Trump’s intentions after inauguration might be his selection of Hardee’s and Carl’s Jr. executive Andrew Puzder as secretary of labor.
Trump “still needs to take office and make various appointments, but the (possible) new secretary of labor gives an indication of where things will go,” said Dana Kravetz, managing partner at Michelman & Robinson.
Here’s how some experts think those issues are going to fare with the incoming administration.
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Sources said it could take some time for Trump to shift the balance of the NLRB, which is made up of presidential appointees tasked with resolving labor disputes. But, within the next two years, the board is expected to take a more business-friendly tone.
Ryan Funk, associate at Faegre Baker Daniels, described the NLRB as a “notorious pendulum,” noting that a shift in party control of the White House usually results in a shift in the board. He said it could be some time before the dust is settled, though.
“It takes time to get appointments in place, and that’s for members and general counsel,” he said. “But as soon as they’re in place, they will try to change the precedent and change regulations as quickly as possible.”
This could have an immense impact on those in the franchising business, which was dealt a seismic shock by the 2015 Browning-Ferris case that opened the possibility of employees of a franchisee also being viewed as a franchisor. Many in various franchising businesses, including hotels, are worried about the long-term implications of that change.
“They will have to prioritize a bit because you can’t change everything, but joint employer is arguably the biggest issue in a number of years,” Funk said. “So, it’s probably the biggest priority.”
Funk noted that the liability issues that arise from the Browning-Ferris ruling could be particularly impactful to the hotel industry, but that could change depending on how the administration handles the ongoing McDonald’s case.
“This issue is if franchisors are liable for the acts of franchisees,” Funk said. “With an individual hotelier running a hotel for a big name brand, is that big name liable for the acts of that local guy? That’s something that, even if the NLRB doesn’t change the language of the new joint-employer standard, the NLRB can reinterpret that same language through the McDonald’s case or other cases put before them.”
Kravetz said Puzder’s business history only makes his personal opposition to the joint-employer change more likely.
“We’re talking about someone who has made a good living on a franchising model,” he said. “Running a restaurant chain would suggest not being in favor of things that sound even remotely like joint employment.”
Kravetz noted a change in the makeup of the NLRB would likely change how aggressive that board is in pursuing labor issues for both union and nonunion workforces. That’s a net positive for the business community, he said.
“I think all the appointments would be favorable for hotels as an employer,” Kravetz said.
Kravetz also wondered how Trump’s own long history of dealing with unions could affect his approach to the NLRB and labor-related issues.
“There’s probably no love lost between Trump and Unite Here,” he said. “But he’s worked well with construction-based unions.”
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Travis Gemoets, a partner with Jeffer Mangels Butler & Mitchell, said one of the most pressing issues nearing the end of 2016 was the planned increased in the salary threshold for employees to qualify as overtime-exempt. He noted the threshold was set to more than double to $47,000, which would affect employees at many hotels.
That increase is facing a challenge in U.S. Federal Court in Texas, and implementation has been delayed after a judge granted an injunction. Gemoets said a theoretical Hillary Clinton administration likely would have fought for the new regulations in court, while a Trump administration is more likely to let it die on the vine.
“With Trump in charge, the government probably devotes very little resources into fighting this,” he said. “More than likely, the (regulatory change) will go away.”
Sylvia St. Clair, associate at Faegre Baker Daniels, agreed and said that the Trump administration is unlikely to mount much of a defense of the regulations.
“The regulations right now are kind of in a coma,” she said. “What we do know is, under a Trump administration, the Department of Labor will have a different initiative and plans moving forward. With that, it doesn’t seem likely that the regulations will be implemented in their current form.”
Gemoets noted that even in the case the federal government ultimately lost the court battle for an increase, a Democratic administration likely would have pursued a more modest jump. That likely isn’t the case with a Trump administration.
“I think that’s the bigger issue,” he said. “Not only does the current rule (change) go away and the current administration not seek to fight that, but there is no effort to come to a middle ground,” he said. “They can just do nothing for four years.”
And if the administration decides to pursue other changes to the overtime threshold, that could trigger a new round of administrative review.
“It would have to go through the rule-making process all over again,” St. Clair said. “And the last regulations took two years.”
St. Clair said the up-in-the-air nature of the new regulations has been particularly vexing to businesses that were proactive in making sure they were in compliance before the changes were scheduled to take effect in early December. She said any hotelier would be well-served to seek counsel before setting out a plan of action.
“Frustration is definitely there all across the board,” St. Clair said.
Gemoets noted that there is nothing more emblematic about Trump’s attitude on possible federal minimum-wage increases than the selection of Puzder as labor secretary.
Puzder has been an outspoken critic of wage increases and, at times, has been against minimum wages in general.
“He has made statements that indicate he’s a foe of minimum-wage increases and has looked at ways to modernize his industry with more automation,” Gemoets said. “Assuming he’s confirmed, I think we can see that reflected in his agency’s handling of the issue. He won’t be pushing for nationwide (wage) increases.”
St. Clair said the shift in administration has thrown cold water on any plans or hopes for a significant increase in the federal minimum wage.
“It’s likely under a Trump administration what we’ll see is the issue is left to the states,” she said. “That’s the way the tea leaves are reading at this point.”
Kravetz agreed that states and municipalities could become a more powerful voice when discussing possible wage increases now that the federal government will likely be on the sidelines for the issue.
“There has been a lot of action at the local level that is powerful, and that is not changing,” he said.