2019 Outlook: What Will Be Different?

January 04, 2019

As we embark on another year of a highly unpredictable and vitriolic era in American politics, the question of how this season will differ from those that went before it will turn largely upon how the House Democrats handle their new position of power.  Traditional political leadership is being challenged on a global scale with economic uncertainty at a heightened level.  2019 will prove a testing ground for whether either of our two major political parties can find a voice that is both relevant and resonant.  Health care is already being teed up as a bellwether issue, with Democrats split over whether to move toward some form of a single payer system or fine-tune the Affordable Care Act.  On the workplace regulation front, the first order of business for the House will be a minimum wage increase, but that and many other measures likely to follow will face a high—if not insurmountable—hurdle in the Senate.

A move to the center?  Pundit Josh Rogin pointed out in a recent Washington Post op-ed that 64% of the seats that switched to a Democrat in the 2018 election will be held by moderates, notwithstanding the extensive media coverage of far-left progressives.  Rogin notes, “Democrats must decide whether they want to assuage their angriest elements or govern from the middle and keep their power.”  In a letter to the Democratic leadership, 46 freshmen urged that legislating be given priority over highly partisan oversight of the President and the administration.  The letter noted that “whatever the differences we may have with our Republican colleagues, it is our solemn responsibility to debate and pass legislation that improves the lives of those who elected us.”  This tension within the Democratic Party occurs at a time when modern capitalism is being challenged, especially by younger voters.  A recent Gallup poll found, “Americans aged 18 to 29 are as positive about socialism (51%) as they are about capitalism (45%).  This represents a 12-point decline in young adults' positive views of capitalism in just the past two years and a marked shift since 2010, when 68% viewed it positively.”

Whither employment policy?  Over the years, so many HR policy issues have become mired in partisan differences, with legislators on both sides afraid to burn bridges with their core supporters.  This stalemate has precluded any new broad-brush employment laws since the 1993 Family and Medical Leave Act.  While congressional gridlock is often bemoaned, it has generally been a welcome development for businesses wary of over-regulation.  However, gridlock has also had its downside in at least two respects.  First, it has left in place an employment law regime affixed to 20th century workplace assumptions.  Second, it has led to a proliferation of new laws at the state and local levels that create administrative labyrinths for multi-state employers, who often also have to worry about myriad overseas regulations that complicate their ability to provide uniform policies among their vast workforces.

In a perfect world:  Ideally, both parties would recognize the need for compromise in the current partisan environment, and therefore seek areas of agreement to begin to address the needs of the 21st century workplace.  In fact, there may be some areas, such as e-privacy and gig worker benefits, that will prove amenable, since they are not already heavily encrusted with outdated requirements.  But what about labor law, wage and hour law, and other areas where the same unresolved issues continue to play out perennially?  A good example is the ambiguity in determining whether a company is a “joint employer” of another company’s employees, with the Republican National Labor Relations Board trying to return to the more cogent traditional standard (with our support), while organized labor and the plaintiffs’ bar press for ill-defined broader liability.  Similar issues plague “independent contractor” determinations.

With all of that as a backdrop, here are our projections for each of our priority issues for the year to come:

HEALTH CARE:  After a relatively quiet year, a federal district court in Texas has revived the debate over the Affordable Care Act’s survival by striking down the law in its entirety.  The immediate impact on employer health care plans is nil because the ruling’s effect was stayed pending appeal.  Absent expedited consideration, a ruling by the U.S. Supreme Court is probably at least a year away.  The Democratic House will likely move quickly to protect the ACA’s requirement of guaranteed issue for pre-existing conditions and other insurance market reforms, but further action will stall in the Senate.  All of this is setting up a 2020 presidential election year likely dominated once again by health care.  Yet, both parties will be challenged—Democrats by internal divisions over the scope of the government’s role in health care, and Republicans by the lack of a coherent strategy, since they can no longer rely on a “repeal and replace” mantra.  If a measure is enacted, it will likely focus on further delaying the ACA’s tax and affordability issues, such as so-called “surprise” medical bills and drug pricing.  Our American Health Policy Institute will spend 2019 educating CHROs on the implications of the various proposals while engaging the membership with listening sessions around the country to gauge where employers stand on the future of employment-based health care.

WORKPLACE REGULATION:  Starting with a minimum wage increase, the House will push an aggressive agenda that will likely fall short in the Senate but push forward two political objectives.  First and foremost, the Democrats will seek to set the stage for potential success if the 2020 election achieves a Democratic takeover of both Congress and the presidency.  The other aim will be to use hearings and debates to highlight alleged employer abuses and/or indifference to the needs of employees—and, in the process, often target specific companies.  As part of this effort, the NLRB and Department of Labor will be under heightened scrutiny over any attempts at a balanced approach.  Rep. Bobby Scott (D-VA), whose goals were signaled in the previous Congress by several bills, will assume the Chair of the renamed House Education and Labor Committee.   His first order of business will be a minimum wage increase that could go to $15 per hour over seven years.  Since increases in the past have often occurred during Republican administrations, success of an increase to some amount is not out of the question.  Beyond this, his agenda includes more contentious issues, such as expanding joint employer liability, facilitating union election victories, and reviving the Obama administration’s government contractor “blacklisting” policy.  Notwithstanding Mr. Scott et al.’s efforts, new workplace regulations will chiefly continue to be promulgated where they have been for the past several years—at the state and local level.

GENDER EQUITY:  A less predictable component of the workplace regulation agenda will be proposals involving workplace harassment, paid leave, gender pay disparities, and diversity on corporate boards.  Most political observers see Republicans as being on defense on these issues based on the results of the last election.  House Democrats will likely jump on this and make these high priority issues.  Historically, support for these issues has fallen largely along partisan lines, but it remains to be seen whether gridlock will continue given the current environment.  Look for bills to be introduced early in the session, with any resistance by House Republicans being closely observed.  Legislation ensuring LGBTQ rights in the workplace and elsewhere—specifically, The Equality Act—will find new life, with House passage likely but with a slim chance in the Senate.  As many companies supporting the bill, the measure will receive little or no resistance from the large employer community, whose nondiscrimination policies generally already surpass what the bill would ensure.  Moreover, federal contractors are already subjected to nondiscrimination restrictions under an Obama executive order that has survived during the Trump administration.  Meanwhile, the federal courts are split on whether Title VII already covers LGBTQ nondiscrimination—the current position of the Equal Employment Opportunity Commission—and the U.S. Supreme Court has declined review of the issue so far.  Finally, it remains to be seen how both parties will respond to new attacks on affirmative action.  These are beginning in the education arena with lawsuits against Harvard and other major universities.  The attack could eventually spread to employment, with the addition of Justice Brett Kavanaugh to the U.S. Supreme Court creating some uncertainty as to how it will be resolved.

EXECUTIVE COMPENSATION:  House Democrats will draw executive pay issues further into the broader arena of corporate governance.  From a political perspective, specific executive pay packages will draw scrutiny any time a company makes an unpopular move, such as massive layoffs or a relocation of work.  The more liberal Democrats will likely pursue corporate governance reforms that could include worker representation on corporate boards, requiring companies to act “for the general public benefit,” mandating greater disclosure of pay ratio information, limits on corporate buybacks, and other proposals setting the stage for a 2020 presidential candidate from that wing of the party.  Incoming House Financial Services Committee Chair Maxine Waters (D-CA) is contemplating a subcommittee on diversity in the financial services industry and the Committee is expected to pursue legislation mandating companies disclose the gender composition of their boards.  On the other hand, limitations on proxy advisory firms will continue to gain traction, with bipartisan support for a measure in the Senate and continued attention by the SEC to proxy process reforms generally.  Our Center On Executive Compensation will continue to pursue an active agenda that will include advocating for proxy advisory firm reform at the SEC and on Capitol Hill and educating policymakers on leading practices that address key criticisms.

GLOBAL CONCERNS:  Not since the end of the Cold War have companies been so entangled in global politics, whether it is the fraying of the European Union, a trade war in Asia, or arm sales in the Middle East.  Closer to home, a revamping of laws in Mexico is challenging the labor strategies of numerous companies with operations across the border.  Newly elected President Andrés Manuel López Obrador (popularly known as AMLO) and Labor Minister Alcalde are moving ahead with an aggressive agenda, as shown by recently announced increases in the minimum wage, as well as lesser-known guidance about expectations concerning collective bargaining agreements.  To assist members’ understanding of these developments, the Association will be offering a briefing session in Miami on February 26, 2019 (for more details you can email Alan Wild here).  The continuing turmoil in Europe will come to a head on March 29, as Brexit becomes official, with dim prospects of approval of any agreement by the British Parliament.  For employers, this will mean uncertainty regarding work visas, data protection, and European Works Council laws—and of course the broader trading relationship between the UK and the EU.  Trade tensions between the U.S. and China will intensify as the Asia-Pacific region continues to evolve in its workplace laws and practices.  There is no question that China will view making life tougher for U.S. employers in the country as a legitimate response to trade sanctions.  Finally, as the new government takes over power in Brazil, we all need to watch this unpredictable space closely.

FUTURE OF WORK:  Policy issues concerning the rapidly evolving workplace will continue to crystallize, led by privacy issues surrounding expansive technology collecting human data.  Europe is in the forefront with its General Data Protection Regulation (GDPR) that finally took effect in 2018, with California following suit last year with its own similar restrictions.  Although most policymaker attention has been directed at consumer data, the GDPR includes employee data, as is likely the case with the untested new California law.  Companies dealing with extensive consumer data are already starting to press for uniform rules in this area with preemption of state and local laws, a priority for any new employment laws as well.  Employment relationships will continue to be tested with continuing growth of the gig economy and the increasing sophistication of artificial intelligence.  Despite the current low unemployment rate, long term fears of displacement of workers in many existing occupations will generate proposals aimed at strengthening the economic safety net.  Proposals from the left, including government-guaranteed jobs and/or income, could enter the 2020 presidential debates.  Social media technology is also giving rise to new forms of employee voice, as shown by recent actions taken against Google and the continuing impact of the #MeToo movement.  Contingent workers are also starting to use this leverage on a global scale.  Whether this eventually becomes a dominant new form of unionism remains to be seen.  How employers are dealing with the digitization of the workplace and the various products and services intended to assist them will be a continuing focus of the Association throughout 2019 and beyond.  Our West Coast Regional Meeting on the Future of Work (CHROs only) in Palo Alto, CA, on February 4-5 will bring together technology vendors and practitioners to highlight the latest innovations in HR, such as artificial intelligence, predictive analytics and machine learning.  Our Recruiting Software Initiative will continue to evaluate these new product offerings, with scrutiny as to whether they deliver on their promises of improving talent acquisition efficiencies and eliminating unconscious bias.

IMMIGRATION:  The high-profile nature of immigration battles in Congress belies the importance of low-profile moves by the Trump administration against work visas.  With the government shutdown, President Trump and Speaker Pelosi have their first opportunity to work out a legislative agreement.  Unfortunately, that opportunity centers on the most contentious aspect—the wall—of arguably the most contentious policy area—immigration.  Hanging in the balance as leverage is a potential fix for the Deferred Action for Childhood Arrivals (DACA) program.  Short of an unlikely legislative compromise agreed to by both chambers of Congress and the President, DACA’s survival will be decided in the courts, possibly by the U.S. Supreme Court this spring.  Meanwhile, under-the-radar attacks by the Trump administration against work visas will have no less of an impact on the operations of large employers.  In the past year the administration’s subtle yet impactful policy tweaks to how work visas are processed, who is eligible for them, and how compliance is enforced have created considerable uncertainty and increased costs for employers.  With the Department of Homeland Security having recently published the first in a series of long-promised regulatory proposals on H-1B visas, expect these developments to continue and possibly escalate in 2019.  First up will likely be a proposed regulation rescinding work permits for certain spouses of H-1B workers, spurred by the recent reopening of a lawsuit to end the program.  We may additionally see hearings in the House on many of these topics as Democrats oppose the Trump administration’s anti-immigration agenda.  HR Policy will continue to work with the business community to pursue regulatory and legislative immigration policy outcomes that take into account the importance of visa workers and DACA participants to our members’ operations and U.S. global competitiveness.

Any or all of these projections could fly out the window at any time by a dramatic turn of events.  If House Democrats decide to pursue impeachment of President Trump, it would draw substantial attention away from all other issues.  Meanwhile, turmoil in virtually every region of the world, with shifting alliances and the rise of new autocratic forms of leadership, will test any global company’s ability to remain above the fray (if not below the radar).  Finally, 2018 ended on a very somber economic note, with the stock market in its most volatile period in recent memory.  How all of these uncertainties will impact the war for talent—and employment relationships generally—will prove a daunting challenge for any chief human resource officer.