Predicting U.S. Labor & Employment Changes From New Administration

As with previous shifts between administrations, the upcoming transfer of power from the Biden administration to the return of the Trump administration promises to bring with it a myriad of changes, with labor and employment being among the more drastically affected landscapes. While we can only speculate as to the changes based on the Trump administration’s first term, we are likely to see changes that are directly related to Biden-era rules and regulations regarding topics such as immigration and non-compete agreements, as well as the direction of the National Labor Relations Board (“NLRB”) leadership. In this article, we highlight a recent decision issued by a federal court judge — previously appointed by Republican President-elect Donald Trump — permanently enjoining a rule issued by the Biden administration that aimed to designate approximately four million additional salaried workers in the U.S. as eligible for overtime pay (the “Rule”). We also discuss how similar decisions and legislative changes may be on the horizon and how employers can be prepared to embrace the same.

Biden Overtime Pay Rule

In a decision released last week, U.S. District Judge Sean Jordan struck down a rule implemented by the Biden administration which aimed to expand overtime eligibility for salaried workers by making approximately four million additional employees eligible for overtime pay. In the decision, the court sided with the state and relevant business organizations, agreeing that the Department of Labor had exceeded its authority by improperly basing overtime eligibility on a worker’s wages as opposed to more appropriately considering their job duties. While federal law requires that the majority of hourly workers are entitled to overtime pay for work performed in excess of 40 hours per week, many salaried workers do not receive the same increase in pay, unless their yearly salary is less than the pre-determined threshold. In striking down the Rule, the court noted that the Rule had effectively — and improperly — eliminated the required consideration of a worker’s job duties, thereby rendering a salary-only test which disregarded whether the employee performs “bona fide executive, administrative, or professional capacity” duties. Those fighting against the increase argued that the Rule would lead to issues such as employers hiring fewer employees, which could inevitably harm the U.S. economy as a result.

While the previous threshold for those salaried workers eligible for overtime was approximately $35,500 per year, the Rule sought to increase the threshold to approximately $58,600, while temporarily raising it to $44,000 on July 1. The attempted increase would have been the largest to occur in decades, and the pushback to the same is similar to that received in response to a 2016 effort by the Obama administration to similarly expand overtime pay eligibility. However, the Trump administration did provide an increase to the cap during his first term, and while this next term may bring additional increases, it will have to be less than originally proposed to survive judicial scrutiny.

The Federal Trade Commission and the Non-Compete Ban

As highlighted in a previous Insight, the Federal Trade Commission (“FTC”) made waves in 2023 when it proposed rules which effectively did away with — and acted as a complete ban on — almost all non-compete agreements in the U.S. When the FTC issued final regulations in order to effectuate the ban, they were quickly struck down by the U.S. District Court for the Northern District of Texas, which found that the FTC had exceeded its authority in its attempt. While the FTC ultimately initiated appellate efforts, a Republican-controlled FTC will likely withdraw the pending appeal and allow the states to resume their own regulation of non-competition agreements. In addition, employers should be prepared for Trump to appoint a new General Counsel for the NLRB, who will likely work to negate much of the policy (and guidance memorandums) the current General Counsel, Jennifer Abruzzo, championed, which includes a similar ban on non-competes.

Immigration and the Workforce

As was the case with President Trump’s first term, his return will undoubtedly focus heavily on immigration reform, with a direct impact on U.S. employers. Such effects may materialize in a variety of ways, including increased regulation of the H-1B visa program and the issuance of employment-based green cards, and heightened penalties for employers who fail to comply with the same. In addition, the Trump administration has expressed an intent to end numerous immigration programs with certain countries, including the Deferred Action for Childhood Arrivals and Temporary Protected Status programs, which will impact workforce levels.

To be prepared, employers should plan to monitor reforms that will dictate relevant employment practices, including those regarding your company’s employment eligibility verification process and the use of H-1B labor.

Conclusion

Although election results always bring about a level of uncertainty, it is certain that upcoming changes in 2025 will directly affect U.S. employers and employees alike. As always, DarrowEverett continues to monitor these changes on both a state and federal level and is readily available to assist our clients in properly navigating the same.

——————————————————————–

This DarrowEverett Insight should not be construed as legal advice or a legal opinion on any specific facts or circumstances. This Insight is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. The contents are intended for general informational purposes only, and you are urged to consult your attorney concerning any particular situation and any specific legal question you may have. We are working diligently to remain well informed and up to date on information and advisements as they become available. As such, please reach out to us if you need help addressing any of the issues discussed in this Insight, or any other issues or concerns you may have relating to your business. We are ready to help guide you through these challenging times.

Unless expressly provided, this Insight does not constitute written tax advice as described in 31 C.F.R. §10, et seq. and is not intended or written by us to be used and/or relied on as written tax advice for any purpose including, without limitation, the marketing of any transaction addressed herein. Any U.S. federal tax advice rendered by DarrowEverett LLP shall be conspicuously labeled as such, shall include a discussion of all relevant facts and circumstances, as well as of any representations, statements, findings, or agreements (including projections, financial forecasts, or appraisals) upon which we rely, applicable to transactions discussed therein in compliance with 31 C.F.R. §10.37, shall relate the applicable law and authorities to the facts, and shall set forth any applicable limits on the use of such advice.