What to Expect from the Department of Labor under Secretary Alex Acosta05.22.17
On April 27, and just days before the 100-day mark for the Trump administration, President Trump secured the confirmation of his final Cabinet secretary when the Senate confirmed Alex Acosta to be the administration's Secretary of Labor. Sworn in the following day, Secretary Acosta was not President Trump's original choice. Trump's first pick, Andrew Puzder, withdrew in February. Acosta, most recently the dean of the Florida International University College of Law, has held government positions before, serving as a member of the National Labor Relations Board and as the head of the Justice Department's Civil Rights Division under President George W. Bush.
Secretary Acosta takes over the Department of Labor (DOL) under an administration that has proposed a substantial cut to the department's budget. In March, the administration's 2018 budget proposal published in March proposes a $2.5 billion cut to the DOL's annual budget, a 21 percent reduction. And while the administration has flagged some specific job training programs for cuts (such as the Job Corps and Senior Community Service Employment Program), the Department will no doubt feel the pinch in its core policy-making and enforcement efforts as well.
So what are likely to be the DOL's policy and enforcement priorities under Secretary Acosta? Time will tell, however, Secretary Acosta's statements during the confirmation process and comments in the first few weeks at the Department provide some clues.
The most substantial, and certainly the most publicized, issue Secretary Acosta will have to weigh in on in some fashion is the DOL's new overtime rule, which was set to double the salary threshold for white collar exemptions on December 1, 2016 until it was enjoined by a federal district court. The Department of Labor appealed that injunction to the Fifth Circuit Court of Appeals prior to President Trump's election. Briefing on the appeal was not yet complete when President Trump took office, and the DOL is now on its third extension of time to file its final brief in support of its appeal - if it is going to continue to advocate for the implementation of the new overtime rule. That deadline is currently set for June 30.
During his confirmation hearings, Secretary Acosta expressed concern over the DOL's authority to raise the salary threshold as drastically as it tried to do, and cited the negative impact such a substantial and drastic increase would have in certain industries and the nonprofit community. Secretary Acosta also, however, noted that the salary threshold has not been updated since 2004. Many commentators interpret Secretary Acosta's remarks to suggest that the DOL is likely to withdraw its appeal and further pursuit of the Obama administration's new overtime rule, but to instead propose a more incremental increase to the salary threshold.
Given the Trump administration's stated policy goal of rolling back government regulation generally, other rollbacks to Obama policies can be anticipated as well. In July 2015, the DOL issued a guidance on employee/independent contractor classifications. The 2015 guidance downplayed the importance of the "control test" and focused on a worker's "economic dependence" on the company paying his wage, which most interpreted as a purposeful narrowing of the definition of independent contractor to push more workers into employment status. If the new administration holds true to its approach reducing government intervention in business, then it is reasonable to assume this guidance may be up for reconsideration as the DOL develops its labor policy.
The DOL under the Obama administration also issued guidance in 2016 on joint employer status, taking a more expansive view of the entities liable under federal wage and hour laws for workers employed by one entity to perform work for another (i.e., workers employed through a staffing agency). This is another policy position that may change under Secretary Acosta.
The early indications of the extent to which the DOL will "unwind" Obama administration initiatives may come as early as June 9, the current date on which the DOL's "fiduciary rule" is set to be implemented. The fiduciary rule is a 2016 regulatory change that primarily impacts investment advisors, but with a direct tie-in to the regulation of employer-sponsored retirement plans. The new rule would impose new fiduciary responsibilities on brokers and financial advisors who promote and provide advice about investments, including employee retirement investments. Regulators have promoted the fiduciary rule as needed to protect investors, while the financial industry has generally resisted it as unnecessary regulation which they assert will increase compliance costs and lead to reductions in the advice available to smaller investors, such as workers looking to roll over their 401(k) accounts. Republican lawmakers wasted no time in urging the newly sworn in Secretary to roll back, or at least delay, this regulation before its June 9 implementation, and Secretary Acosta has indicated this issue is a priority for him and the Department.
Secretary Acosta has held his new cabinet position for just a few weeks and has not had an opportunity to formally implement new federal labor policy. But with the June 9 fiduciary rule implementation date and a June 30 deadline to maintain the DOL's position on the overtime rule - or abandon it - we are likely to get a sense of the DOL's core approach to labor policy sooner rather than later.