Grab Your Paddle. More Regulatory Ping-Pong Is Coming.
“In a range of large industries — technology, energy, resources, financial services, transportation, trade — the regulatory situation is volatile and prone to significant change,” senior leaders from PricewaterhouseCoopers recently declared. Leave it to accountants to make what could be an understatement of the year. Over the past several decades, the federal government has grown to an unprecedented size, with Americans and U.S. businesses now contending with a $2 trillion regulatory burden each year, equal to 12 percent of overall domestic spending. Adding to that burden is ongoing regulatory uncertainty whose economic repercussions are bad for American families and businesses, holding up key business deals and even restricting Americans’ access to credit.
Indeed, well before the pandemic hit, regulatory fights had intensified, with many rules remaining unsettled and continuously litigated between administrations based on the policy preferences and political expectations from their supporters and allies. In response, each administration’s opponents turn to the judicial system and court public pressure to delay or throw out new rules or changes they don’t like. The result, as a National Association of Manufacturers’ study of business leaders found, is regulatory instability that hurts U.S. competitiveness internationally and economic growth at home.
While forward-thinking public affairs professionals are gearing up for the “mad dash” of the transition period following the November election, they must also prepare for the next match of regulatory ping pong on key labor and healthcare rules in the coming administration. Here’s what you need to know to get ready:
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State of Play: With more financial backing and an expanded ability to activate supporters than ever before, an ever-broadening range of advocacy and interest groups can relentlessly litigate rules and regulations – shifting seamlessly from influencing a sympathetic administration to doing battle against the next if it’s hostile to their views. As the PwC leaders wrote, “Many organizations have found that these shifts impact their industry, the specific markets in which they operate, and the general environment for business.” Unfortunately for these businesses caught amid never-settled rules, “hiding under a rock is not a suitable option.”
Labor Loops: Labor standards are among the most ostensible ways that the federal government affects the day-to-day life of working Americans, and as such, are often a top priority for presidential administrations. After just 10 days in office, President Barack Obama rolled back three significant Bush era labor regulations to make it easier for unions, who had strongly backed his presidential bid, to organize. When President Trump took office eight years later, he began an overhaul of these and other major rules enacted by the Obama Administration, none of which remain fully settled if outside interests have their way next year. These include:
- Among the more contentious of these reversals were the Trump Administration’s actions on the “Persuader Rule,” created by the Obama White House to force businesses to disclose to the federal government any firms they hired to help in negotiations with organized labor. The National Federal of Independent Business fought the rule in court, arguing that it compromised businesses’ ability to confidentially interact with their legal counsel. When a federal court judge in Texas blocked the regulation from taking effect in 2016, the Trump Administration formally rescinded it in June 2017, calling it a win for the “rights of Americans to ask a question of their attorney without mandated disclosure to the government,” while the leftwing Economic Policy Institute condemned it as a “huge blow to workers’ abilities to negotiate for better treatment on the job,” reaffirming that the two political parties couldn’t be farther apart on the issue.
- Meanwhile, overtime regulations continue to be caught in the back-and-forth of presidential transitions. According to the Department of Labor, businesses are exempt from paying overtime if their workers are considered “white collar” and make above a certain pay threshold. The Obama Administration more than doubled this cap and enacted a rule that included an automatic update provision increasing it every three years. The business community largely opposed this regulation, as it would have been costly to deem between 2.8 million and 4.2 million more workers eligible for overtime. A coalition of states and business groups opposed the measure, filing suit in district court asking for a preliminary injunction to halt the implementation of the rules. A judge agreed, deciding the Obama Administration overstepped its authority in its rulemaking. With an appeal pending, the Trump Administration updated the regulations in a way that would expand benefits but scale back the number of qualified workers to just 1.3 million. While business leaders heralded it as a major achievement, union conglomerates, like the AFL-CIO, called it a “pay cut for working people” that would compound over time.
- The National Labor Relations Board, which adjudicates major labor disputes on behalf of the federal government, typically changes control of its five-person board when a president appoints a new representative to fill a five-year term. Currently, there’s a 3-2 majority for the GOP, which recently ruled against “micro-unions,” a multitude of smaller labor groups within the same company that many corporations say make it impossible for them to negotiate unified terms among their employees. Democrats and their progressive allies are strong proponents of micro-unions, as they help expand labor union control in workplaces. If party control shifts, the panel could greenlight micro-unions again, costing industries billions of dollars in new administrative costs.
- The Joint Employer Rule remains one of the most controversial in labor policy, as it affects upwards of 14 million American workers. In February 2020, the Trump Administration reinstated the decades-old joint employer standard under the National Labor Relations Act that “an entity can only be a joint employer if it actually exercises control over the essential terms and conditions of another employer’s employees.” This rule overturned one created by the Obama Administration that many believed unfairly targeted franchise businesses or those who outsource services, like cleaning and maintenance. The International Franchise Association (IFA), for example, argued that the Obama rule would cost upwards of $33 billion in annual compliance costs and remove 376,000 job opportunities. Labor activists have fought hard against the Trump reversal alongside important allies, including blue state attorneys general like New York’s Attorney General Letitia James. James demanded the Trump Administration stop the implementation of the new rule, while the IFA and other business coalitions joined forces to oppose these efforts. In early September, a Manhattan-based federal judge agreed with the demands of the state AGs, halting the implementation of the Department of Labor’s new test. The Trump Administration has vowed to continue fighting for it, though a Biden Administration would likely return to the Obama era standard that drew the ire of a range of business advocates, who would certainly once again fight a standard they view as unfair and burdensome.
The Fight That Will Never End. Perhaps one of the greatest regulatory uncertainties for businesses’ labor practices is the disjointed implementation of Obamacare. Much of President Obama’s landmark legislation is applied via regulation, which makes key provisions easily reversible once a new administration takes office. The Trump Administration has undone many foundational components of the law, such as the contraceptive mandate, which forced all employers to provide birth control and abortion coverage in their employees’ health care plans, and the individual mandate, which required all eligible Americans to carry health insurance policies. They also reduced the open enrollment period from 90 days to 45, while ending cost-sharing reduction payments and enacting new Medicaid work requirements. Whether via executive action, legislative overhauls with Republican Congressional leaders, or defending their positions in court, the Trump Administration has sought to dismantle sizable portions of Obamacare piece-by-piece, leaving businesses constantly adapting to an ever-changing regulatory environment in health care policy. Even a decade later, many of these fights have only just begun, with activists are vowing to reinstate provisions the Trump Administration has removed, while the presidential campaigns are making it a centerpiece of their electoral efforts – and courts at every level will continue to hear cases about different aspects of the law.
Competitive Intelligence Is Your Spin Move: On each of the aforementioned issues, public affairs professionals must face not only their ideological opponents on key matters but also activists mobilized to stand in their way. No longer can industries wait to find out who is going to be in office in a few months. Instead, they must lay the groundwork among policymakers, interest groups, and aligned industry organizations, understanding that a regulation they support or oppose could end up in the crossfire of other political fighting or draw unprecedented attention from those who wish to thwart their aims. To navigate this uncertainty, competitive intelligence is key. It is not enough to have a few ideas about what an organization wants to see in an administration’s regulatory policy, or even to be closely allied with the decisionmaker. Public affairs professionals need to know far more if they want to prevail: who is on which teams, what their motivations may be, what their tactics are, and how they connect and collaborate with policymakers and other stakeholders. Delve can give you the intelligence advantage to prepare for tomorrow’s matches today – and win.