August 28, 2019
Hang on to your hats and nail down your furniture, folks. If you believe the 2016 presidential election was the political equivalent of an earthquake, it is very easy to continue the analogy through the events that followed as a series of both minor and major aftershocks. The next question then is whether the reverberations will simply continue—or whether there could be an even larger quake in 2020. As the campaign kicks into full gear this fall, the answer will start to gain some clarity, but the next 14 months will likely be filled with more seismic events as the tectonic changes in our political landscape continue.
We have learned over the past few years how political volatility can impact our issues and our members’ businesses. Well, we are now entering a period of uncertainty that could make the past few years seem relatively tame. The kickoff of the 2020 presidential campaign, which started with the Democratic debates this summer, has already thrown the formerly docile health care policy issues back into the forefront of domestic policy matters. Couple that with the China situation (including Hong Kong, where many of our members have their Asia-Pacific headquarters), a bungee-like stock market, and the most vitriolic public discourse in recent American history, and you have an outlook for this fall that could be a mere prequel to our own version of Game of Thrones.
Another interesting dynamic to watch will be the increased involvement of employees in policy issues confronting the companies for which they work. We’ve already seen employees weigh in to persuade companies to take public stands on political issues, from immigration to facial recognition to supplying migrant camps. Is the next step going to be pressure on employers to come out in favor of specific people or parties?
POLITICS: Although the presidential jockeying will dominate the airwaves, don’t ignore the congressional battles that will also shape the outlook for the next decade. Everyone expects the Democrats to keep the House, which tends to be the starting point for most significant legislation.
Far more significance could be attached to the Senate outcome if the Democrats, who need to flip four seats (or only three if the next Vice President is a Democrat), take control there. Watch out for the races for Republican-held seats in Maine and Colorado, where President Trump lost in 2016, and North Carolina and Arizona, where he won very narrowly. And keep an eye on Alabama, and open seats in Tennessee and Kansas, where “establishment” Republicans are hoping their more “electable” candidates prevail in the primaries. Republicans have been sanguine about their ability to hold the Senate because, at least for now, there are far more Democratic seats in play. There is already speculation that a Democratic takeover could result in the elimination of the filibuster, which would reduce the votes needed for any controversial measure from 60 to a mere majority. In highly partisan areas like labor policy, this could result in a future of dizzying pendulum swings after virtually every change of party control.
Meanwhile, in the House there will continue to be tension between the highly-visible progressives and those from more moderate districts. Recognizing those seats are in play, Republicans are eyeing 17 districts where Trump won or lost by a point or two. These Democratic representatives won in 2018 and returned the gavel to Speaker Pelosi. They are a more powerful voting block than the super-progressive “squad.” They just get less attention. Some of these members are staying in the middle of the road to attract moderate voters. Yet others went back on promises to vote against Pelosi as speaker and have sponsored some liberal-leaning bills—actions Republican challengers will exploit.
With this political background, what follows is our take on how the next few months will shape the various issues on which the Association is engaging.
HEALTH CARE: Over the next 14 months, health care will be a dominant issue in the presidential campaigns, with virtually all Democratic candidates pressing for a stronger federal role. Medicare for All has been serving as a rallying point for the more liberal candidates, though many are starting to shy away from its “single payer” approach. In addition to significant budgetary considerations, the proposal would ban the employment-based coverage that about half of all Americans receive. These concerns have revived calls for a so-called “public option” for those not otherwise covered, which could include a Medicare-like program being offered on the Affordable Care Act exchanges. This approach was rejected during the ACA debates but is now viewed as the moderate alternative to a single payer proposal. It is rapidly becoming the defining issue for determining which wing of the Democratic Party a candidate represents.
Meanwhile, this fall, Congress will try to enact a bipartisan approach to addressing “surprise” medical billing. Anything enacted to address the problem is likely to increase employer costs but the amount will be heavily impacted by the approach taken. The Senate may also take up the House-passed (419 to 6) bill repealing the ACA’s Cadillac tax.
EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE: Corporate governance issues, with calls for increased regulation of public corporations, will be a major theme in the Democratic debates. When the Association first became involved in executive compensation issues 17 years ago—resulting in the formation of our Center On Executive Compensation—we focused exclusively on the complexities of executive pay. For a variety of reasons, the line between pay and governance issues has become more and more blurred. Thus, through the Center, we have become more engaged in some of the burning governance issues pressing both government policy makers and corporate boardrooms.
The Center’s efforts over the past few years to add more integrity and transparency to the proxy advisory process are starting to bear fruit. This summer, a divided Securities and Exchange Commission voted 3-2, along party lines, to issue two guidance documents that, among other things, detail the implications of the fiduciary duties of institutions that use proxy advisory firm services while also reaffirming that proxy advisory firm voting recommendations are subject to federal proxy solicitation rules. The recommendations to demonstrate that the fiduciary duty is upheld include:
Republican Commissioner Elad Roisman has predicted the SEC will act on the exemption to the proxy solicitation rules relied on by proxy advisory firms as well as shareholder resubmission thresholds “in the near future.”
Pressure on companies to diversify their Boards will continue, as legislation moves in Congress to require public companies, at a minimum, to disclose the makeup of their Boards, even though most companies are already making this a priority. The House Financial Services Committee passed two bipartisan bills which would require public companies to include proxy statement disclosures on the diversity characteristics of the members of the Board as well as nominees. One bill would also require companies to disclose veteran status and expand the disclosure to Section 16 officers. The bills received strong support from Republicans and some employer groups, including the U.S. Chamber of Commerce, and are likely to pass the House with significant bipartisan support. Whether the bills will even be discussed in the Senate is unknown. Regardless of Senate success, the issue of improving diversity at the nation’s top employers will remain a pillar of the Democrats' strategy, with the potential for more requirements down the road.
HUMAN CAPITAL METRICS: The SEC has also proposed that public companies disclose “any human capital measures or objectives that management focuses on in managing the business” as part of the description of their business. Although the disclosure is only required to the extent such disclosures would be material to an understanding of the registrant’s business as a whole, the proposal is sure to accelerate a debate around whether such disclosures are necessary and why—or why not—certain metrics should be disclosed. Already, the two Democratic SEC members have issued a statement seeking input on metrics the Commission should consider. The Association and the Center will be filing joint comments on the proposal.
DATA PRIVACY: Momentum for a bipartisan data privacy measure will continue, with concerns that consumer data protections could be expansive enough to include HR data. Yet, HR data has many uses and serves many needs that are markedly different from those of consumer data, posing a risk that over-regulation could threaten legitimate HR practices. A number of California legislators have recognized this error after passing their comprehensive data privacy law last year. The state senate is now considering a measure to exempt some or all HR data from the new law before it takes effect January 1. HR Policy Association is leading an informal coalition of business groups to ensure that Congress does not fall into the same trap as California. Meanwhile, businesses will continue to insist that any new federal data privacy law be preemptive in order to avoid the patchwork of state and local laws that afflict so many other areas of the law.
IMMIGRATION: Rulemaking and enforcement will remain the most significant arena for employment-related immigration developments. The Trump administration will continue to squeeze the H-1B high-skilled visa program, where denial rates have quadrupled since 2015 and requests for evidence (beyond what is typically required in applications) have almost doubled in that same time period. H-1B data from the first two quarters of 2019 show no letup in this area. In addition, the administration recently published a final rule more stringently defining who is inadmissible as a “public charge,” which will affect primarily low-skilled workers seeking green card visas. The new rule goes into effect October 15. Congress, meanwhile, will remain logjammed on immigration issues. The House-passed Fairness for High-Skilled Immigrants Act, which would eliminate the 7% cap on employment-based immigrant visas, has the best chance—but the Senate remains an obstacle. Switching to the judicial system, the Supreme Court will hear arguments on DACA in November, with a decision as soon as February of 2020.
LGBTQ+ RIGHTS: In one of its most closely watched cases, the U.S. Supreme Court will take up the issue of whether Title VII protection against gender discrimination covers sexual orientation and gender identity. There is a split in the circuit courts and within the Trump administration as well. The Justice Department has filed a brief arguing against LGBTQ+ coverage. However, the EEOC continues to insist coverage exists, a position it adopted during the Obama administration. Earlier this year, the House passed the Equality Act generally along party lines, but there is virtually no chance it will be taken up in the Senate. Given the conservative majority on the Court, many are predicting it will reject Title VII coverage of LGBTQ+ status but there have been surprises on other issues considered strictly partisan.
GLOBAL HR: This fall, the Association will be further expanding its global footprint with the formation of “HR Policy in India,” following a very well-attended conference call this summer. To provide this service to new subscribers and APERG members, our Director of Global Affairs, Alan Wild, will be teaming up with former IBM Vice President of HR for India and MEA operations D.P. Singh, Senior Executive Vice President at Chandigarh University, one of India’s most prestigious business schools. Implementation of the new Mexican labor law continues to test our members with operations south of the border, and, working with our global ally LAMERG, we have assisted over 110 of our member companies through briefings, conference calls and one-on-one assistance. Meanwhile, global challenges for our member companies continue to proliferate, with new UK leadership pressing forward on Brexit, turmoil in Hong Kong (where many of our member companies have their Asia-Pacific headquarters), and a trade war with China with no end in sight, among numerous other matters.
LABOR POLICY: Organized labor and its congressional supporters are laying the groundwork for the next epic labor policy battle depending on the 2020 election results. In the coming months, the House Education and Labor Committee will likely pass the Protecting the Right to Organize Act of 2019 (“PRO Act”; H.R. 2474). If enacted in its current form, it would be the most dramatic rewrite of our labor laws since 1947. A recent hearing, at which our Senior Labor and Employment Counsel Roger King testified against the bill, made it clear a major priority is to repeal the 72-year-old ban on so-called “secondary activity.” This ban protects an employer from having its workers called out on strike because of a union’s dispute with a customer or supplier of the employer. Because of this provision, the American economy has been protected against the kinds of labor actions seen in other countries that can have an economy-wide impact. The House will likely consider the bill later this year or early 2020. There is a concern that many House Democrats will view this as a “free vote” on a measure that will die in the Senate. However, if the bill is later revived in a Democratic regime, it will be very difficult for those members to reverse themselves.
The Trump NLRB and Department of Labor will continue to move forward with policies intended to achieve more clarity on when two employers become “joint employers” for labor law purposes. The NLRB is expected to roll back the Obama-era Browning-Ferris decision with a rule that joint employer liability will only exist where employers “possess and actually exercise substantial direct and immediate control” over the essential terms and conditions of another company’s employees “in a manner that is not limited and routine.” In addition, for the first time in 60 years, DOL is expected to update its rules in a similar manner under the Fair Labor Standards Act, including allowing employers to extend their CSR standards to their contractor's employees without triggering joint employer status. Both agencies are expected to publish final rules this fall or early next year.
PAID LEAVE: Bipartisan efforts to ensure paid leave options for American workers will continue but any new federal solution is still at least one election away. As with the issue of data privacy discussed above, there is clear intent on both sides of the aisle, but a spirit of true bipartisanship will be needed to get through the devilish details. Large corporations, who already generally provide the most generous benefits, are concerned that any solutions provide the least disruption to what they already offer. What would be even better would be the minimization of disruptions already occurring through myriad conflicting and inconsistent state and local requirements that will continue to proliferate. Many expect the House to pass the FAMILY Act—a federal paid leave insurance program—early next year, which will raise the profile of the issue in the presidential debates.
STATE/LOCAL ACTIVITY: The most consequential activity at the state level this fall is likely to be whether (and how) the California state legislature passes a bill providing exceptions to an expansive new test for determining independent contractor relationships (the so-called “ABC test”). The test was established in the California Supreme Court’s Dynamex decision, which presumes workers are employees unless an employer can show that the workers work outside the employer's usual course of business, among other factors. In codifying the test, the legislature is considering a measure to enact exemptions for specific occupations (e.g., hairdressers) while creating a new test for professionals generally. The bill has drawn the attention of gig economy companies seeking a completely different set of rules for Uber/Lyft drivers et al. How California resolves the issue could establish a pattern for other states or even federal legislation. Meanwhile, the states will continue to consider new measures governing drug usage/testing, paid leave, gender pay equity and other areas receiving little federal action.
ASSOCIATION ACTIVITIES HR Policy will be busy this fall with, among other things, our Washington Policy Conference next week, and the Center On Executive Compensation’s annual meeting on November 14. In addition, we will be holding our annual Fall Labor and Employment Conference on October 24 in partnership with New York University School of Law’s Center for Labor and Employment Law, with a focus on the impact of technology on the workplace (register here).
We hope everyone is very well rested from their summer vacations and ready for another busy fall in HR policy!