2020 Vision: And You Thought the Last Decade Was Challenging!

1/3/20

As this new year also brings in a new decade, we thought we would begin our outlook with a few trends and predictions that, if not true this year, we expect to come to fruition by 2030—regardless of who controls Congress or the White House.

PREDICTIONS FOR THE COMING DECADE:

  • Significant new federal employment laws will be promulgated.  First up is likely to be a new data privacy law.  We are involved in the early deliberations to ensure employment-related data is not considered consumer data.  Next up are paid leave, gender pay equity, scheduling rights, and other issues that could be addressed either through legislation, executive fiat, or regulations.

  • Employees will continue to exert increased collective pressure as social media evolves—but it won’t be your (grand)father’s union.  And employee concerns are already moving beyond the traditional “terms and conditions of employment.”  By the way, unions are also struggling with this new world, as employees increasingly seek their own voice.

  • Regardless of how it impacts HR data, Congress’s efforts to forge a federal data privacy law will only be the opening salvo in a new era of regulation in the digital space.  The digitalization of the workplace has great potential to benefit companies and employees, but alleged abuses may give rise to claims of “digital sweatshops” that demand a whole new layer of regulation.

  • The picture may become clearer by 2030 as to whether the displacement of American workers by AI is as severe as many have predicted, but new developments in technology will perpetuate the debate.  Some historians contend the Industrial Revolution took 70 years to produce a net increase in jobs—but then again, things move much faster these days.  What is certain is that business will be expected to invest much more in retraining and upskilling.

  • CHROs and their companies will continue to prioritize diversity and inclusion, but the legal challenges before a more conservative judiciary could become an impediment.  The challenge is already underway in academia regarding student admissions, with the U.S. Supreme Court likely to weigh in eventually.  The standards in employment are somewhat different and have generally permitted diversity and inclusion efforts, but given that the case law is several decades old, how it will be interpreted by the courts is uncertain.

  • Economic turbulence could spur a host of new executive compensation regulatory and disclosure initiatives.  After a decade of strong economic growth and stock market highs, which saw executive compensation shift to a mainstream point of rhetoric when discussing global economic issues (and mainly income inequality), any economic turbulence could relaunch a hyper-focus on executive pay by governments and regulators not seen since the 2008 financial crisis.

  • CHROs will play a pivotal role in identifying and explaining key ESG and CSR initiatives, but with regard to disclosure, the “what” and “how” will become more defined.  It is unclear whether this will evolve through market practice, regulatory fiat, or both.  Regardless, companies will be more focused on a broader lens of corporate purpose, and there will be more pressure from investors generally to disclose information currently considered confidential, including diversity and turnover data.

  • As the UK turns right after Brexit, will the remainder of Europe turn left?  How much leeway the UK will have on employment, the environment, banking and data protection will depend on the trade agreement they hope to hash out with the EU.  Further down the road, if Brexit looks like a surprising success, could it generate similar pressures in other EU member countries?

  • While the Affordable Care Act is here to stay, the depletion of Medicare’s hospital trust fund in 2026 means Congress faces tough tax and benefit choices in the not-so-distant future.  Medicare needs a 0.9% payroll tax rate increase or an immediate 19% cut in benefits for the trust fund to remain solvent.  Affordability will remain the primary concern for employers, households, and the government as costly new therapies and technology become available.  This will ensure the debate over a public option or Medicare for All is featured in future election cycles.

  • Regarding immigration, the story of the last decade has been gridlock.  Will the '20s be any different?  The war for talent will continue to be a global phenomenon.  Unfortunately, that doesn’t mean U.S. policymakers will respond to labor force disruption, whether by AI or simply continued globalization, with less restrictive immigration policies.  That said, growing factions on both the left and the right will tout immigration policies that are more employment-focused.

Ok, save those for an entertaining read in 2030 to see how many we got right; now here’s the more predictable outlook for the coming year.


OUTLOOK FOR THE YEAR AHEAD:

YOUR ASSOCIATION:  We’ll begin at the top with Tim Bartl moving into the HR Policy CEO position at the March meeting and Ani Huang becoming CEO of our Center On Executive Compensation.  The next generation of leadership is already moving the Association into a new era, with changes spearheaded by our COO Henry Eickelberg, who is introducing a new user-friendly association management system and a new website to be unveiled later in the year.

Meanwhile, we are expanding our global footprint by launching HR Policy in India and reengineering and expanding our U.S. labor and international learning capabilities.

Finally, look for some exciting new health care initiatives from the Association, following the relaunches late last year of our American Health Policy Institute and our highly successful Retiree Health Access program.


CORPORATE GOVERNANCE/EXECUTIVE COMPENSATION:  While we are unlikely to see Congress passing any new laws, we expect to see the SEC finalize new requirements for proxy advisory firms, a long-term Center objective.

Executive pay, often linked to inequality, will doubtless be a foil in the presidential campaigns, as will buybacks and other corporate actions and policies.  Meanwhile, broader governance reforms pushed by Sen. Elizabeth Warren (D-MA) and others will likely number among many litmus tests for Democratic candidates balancing their appeal to the base with centrists and independents.

Shareholders will continue to increase attention on executive pay, with “activist” investors focusing on ESG issues (including pay equity), and others, such as the Council of Institutional Investors, looking at the complexity and transparency of pay programs vis-à-vis their effectiveness in aligning executives with shareholder value.

Pressure on companies to add women and minorities to their Boards will intensify, with a new Equilar report showing a long way to go despite some progress.


HEALTH CARE:  As the battles in court over the constitutionality of the Affordable Care Act continue along a seemingly unending journey, the future of the Act remains very much in play in the presidential election.  Despite his unsuccessful efforts to repeal the law, President Trump has proven that health care policy can also be shaped through regulation with major initiatives involving transparency, exchange plans, health reimbursement arrangements, and drug prices.

The ACA is not going to be repealed this year, but the repeal of the Cadillac tax and other ACA taxes in the year-end government-funding bill, as AHPI and the Association have long advocated, show legislators can chip away at gridlock.  Next up could be a solution to surprise medical billing, though there are strong divisions in Congress reflecting a split in the business community between carriers/employers and health care providers.  Everyone wants to solve the issue, but there is a contentious dispute over how to determine the eventual amount that gets paid.  Increasing price and quality transparency could also be part of any compromise solution.

Meanwhile, as the presidential campaigns proceed, Democrats will seek to resolve their differences over whether to embrace a single payer system—i.e., Medicare for All—or opt instead for a public option, which is seen by many as an initial step towards single payer.  In contrast, President Trump will focus on protecting people with preexisting conditions and highlight his regulatory accomplishments.  With health care among the top concerns of voters, the resolution of this debate will likely drive health care reform for the next four years.


CORPORATE SOCIAL RESPONSIBILITY:  This year could be a pivotal one in the continuing debate over whether companies have a larger responsibility beyond their shareholders.  The political impact of the Business Roundtable’s “Statement on the Purpose of a Corporation” remains uncertain, as Senator Warren and others demand “tangible action.”  Even those companies who did not sign on to the Statement are being pressed by certain shareholder groups to disclose information historically considered confidential.

How any progress will be quantified is an important question.  Congress or the SEC may be compelled to prescribe certain metrics in the future.  For now, several groups are calling on regulators to use standards or metrics developed by third parties such as the Sustainability Accounting Standards Board or the Global Reporting Initiative.  Given that the push is intensifying, CHROs will need to step up their discussions with investors and other parties.  The Association will continue to provide information and facilitate external engagement.


GLOBAL CONCERNS:  With social and political turmoil in virtually every corner of the world, the challenges of doing business in various global hotspots continues to grow.  The protests in Hong Kong have brought to the forefront the issue of how a company can allow its employees free expression outside the workplace without damaging relations with the host country.  Is China unique in this regard or could it pose a problem in other countries with authoritarian leaders cracking down on dissent?  In a broader sense, U.S.-China relations will continue to be a pressing issue.  As U.S. companies see “China production for Chinese consumption” as a strategy, will Chinese companies turn to production in the U.S. for international consumption?  Maybe some jobs will come back—but likely backed by foreign investment and management.

Closer to home, the new Mexican labor laws hold the potential to disrupt long-standing union relationships, particularly as the new trade agreement (USMCA) strengthens the hand of American unions seeking to bolster labor protections south of the border.  HR Policy will host a meeting in Miami on March 11 to discuss how companies are dealing with this challenge.  Our Latin American ally LAMERG will have a broader review of the turmoil throughout the continent when it holds its spring meeting in May.

Finally, now that Brexit is a virtual certainty, Association members will look to guidance from our global ally BEERG as to how it will impact the UK’s workplace policies.  Meanwhile, getting the UK out of the “no” lobby may bring back some of the parked labor rights items regarding wages and worker representation, which other EU members have been more receptive to.


DATA PRIVACY:  Keep an eye on California and Capitol Hill next year as policymakers continue to grapple with the rapid expansion of digitalization in our world.

At the federal level, although a new law still seems unlikely in an election year, bipartisan interest in passing a comprehensive data privacy law virtually ensures major progress toward that goal.  HR Policy will continue to lead a coalition of companies and business groups to ensure that policymakers recognize the distinction between HR and consumer data.  Bills introduced at the end of last year show we are making considerable progress, raising hopes that bipartisan agreement on HR data is achievable.  Yet, agreement will be much more difficult on two broader issues of strong concern to the business community: 1) pre-emption of state data privacy laws and; 2) whether private lawsuits can be filed against alleged violators of the law.

In California, application of data privacy laws to the workplace will move to the forefront.  The sweeping new California Consumer Privacy Act (CCPA), which took effect on January 1, was amended last summer to exempt HR data.  However, that exemption expires on January 1, 2021.  It will likely only be further extended if new HR data requirements are adopted by California’s legislature.  These new regulations could go well beyond the CCPA, adding requirements regarding the use of artificial intelligence in recruiting, monitoring workplace performance, and predictive analytics.  This could further serve as a model for federal protections.


WORKPLACE REGULATION:  Regulations have replaced legislation as the primary vehicle for new workplace rules.  So who the president is and how she or he uses the pen and phone will have a decisive impact, no matter which party controls Congress.

Regardless of the 2020 election outcome, the likelihood of a new federal paid family leave mandate for the private sector increased significantly with the enactment in December of a 12-week benefit for federal employees.  The new federal benefit will put competitive pressure on private sector employers to match it for their workers, which many large companies already do.  Beyond that, there is a growing consensus that there should be a national paid family leave policy.  The Association continues to push for federal preemption of state and local laws.  Many other questions remain, such as whether to impose the costs directly on employers or establish an insurance system funded by employers and employees, the approach taken by the leading Democratic bills.

Similarly, gender pay equity is an area where large companies and policymakers share the same goals.  But how that equity is achieved entails many different—and often conflicting—approaches.  A pay discrimination case that will be closely watched challenges the constitutionality of the administrative process the Office of Federal Contract Compliance Programs (OFCCP) uses to prosecute allegations of workplace discrimination.  Should the case make its way to the U.S. Supreme Court, it could significantly impact federal affirmative action and discrimination enforcement regarding federal contractors.  Meanwhile, in a very closely watched case, the Court will rule later this year on whether LGBTQ status is protected under Title VII.

In contrast, seemingly irreconcilable differences over labor policy are likely to remain unresolved.  While congressional Democrats press for a sweeping rewrite of our nation’s labor laws (supported by every major Democratic presidential candidate), the administration is adding needed clarity and correction to a number of flawed policies of its predecessor, with the NLRB and Secretary Gene Scalia’s Department of Labor leading the way.

At the end of the year, the Department issued final regulations providing sorely-needed clarity on how overtime premiums are to be computed, a major component of the Association’s long-standing FLSA reform efforts.

Finally, the issue of “who’s the boss” when it comes to workplace rules and regulations continues to perplex large companies at both the federal and state levels.  The administration is moving toward a restoration of traditional principles clarifying the status of “joint employer” liability and independent contractors, where protections for workers have always been very strong.  A change in administration could alter this, but the bigger battleground this year will be at the state level.  California’s so-called “ABC law” (A.B. 5), which took effect January 1, significantly narrows independent contractor status.  Moreover, a case pending in the California courts could also broaden joint employer liability in that state along similar lines.  Reactions from the public and affected workers—many of whom prefer independent status—could eventually determine whether federal policies follow suit.


A personal note:  This email marks the last “Outlook” and one of the last newsletters you will receive from me before Tim takes over in March.  I am exceedingly optimistic about the future of the Association under its new leadership.  The past four years as your Association’s CEO have been spent in a Washington setting unlike any in the 32 years I’ve been with the organization.  Fortunately, there is one thing that has remained constant—the enormous rewards of working with you, the membership, on both a professional and personal level.  That will be what I will remember most from those four (and 32) years, long after memories of bitter partisan warfare have faded.