What can we expect from President Trump and his Cabinet? – Part 2

What can we expect from President Trump and his Cabinet? – Part 2

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Written by: Joseph Camilli

Date published: December 22, 2016

Reading time: 7 Minutes


There is much uncertainty over some major employment issues that will likely continue for the next several months. After some discussions with Infinity clients, I think it’s important to share some of the discussions people are having around the Affordable Care Act (ACA), the Department of Labor’s (DOL) proposed overtime changes to the Fair Labor Standards Act (FLSA), the state of the Fiduciary Rule changes, and new OSHA Anti-Retaliation Rules. In today’s blog I will attempt to focus on some of the DOL regulations that have either been recently passed or are in flux, with attention given to how Andrew Puzder likely direct the Department of  Labor in the years to come.[1]

Mr. Puzder, as most by now know, is the former CEO of the CKE Restaurant Holdings Inc., the parent company of fast food chains Hardee’s and Carl’s Jr., among others.[2] Mr. Puzder has long been an opponent of labor regulations, favoring instead market mechanisms to reward employees and regulate employers. His staunch stance suggests that he will steer the Department of Labor away from the Obama Administration’s efforts to protect employees through regulations by rolling back those rules or scrapping them altogether. Doing so would certainly be welcomed by business owners and Wall Street. Two of the most prominent regulations at issue include the Fair Labor Standard Act’s (FLSA) Overtime Rule update and the Fiduciary Rule governing retirement plan advisors that is set to take effect in April.

The Overtime Rule

Mr. Puzder’s stance on overtime regulations is well known but the question to be answered is “what will the practical implications be for the enacted-but-delayed Overtime Rule.” First, it must be reminded that the update to the Overtime Rule went through the rigorous administrative process of notice and comment. This means that the DOL took more than two full years of drafting, congressional review, public and industry feedback, and procedural due process and ultimately was able to legally implement the updated overtime thresholds.

These new thresholds would have taken effect on December 1, 2016, had not a federal circuit court in Texas, in the proverbial 11th hour, issued an injunction against its implementation.[3] The Department of Labor has appealed this ruling and has asked for an expedited appeal, though whether an expedited appeal would be heard before President-Elect Trump’s inauguration is doubtful. The appeal would be heard by the United States 5th Circuit Court of Appeals, which is known to be fairly conservative court. Regardless of the 5th Circuit’s ruling, one of the parties could then appeal to the United States Supreme Court, which would likely be heard at some point in mid-to-late 2017.

My reading of the Texas Court’s ruling is that the 5th Circuit would likely uphold the lower court’s decision and that the Supreme Court, even as it exists today as an 8 person Court, would reverse and lift the injunction. But again, that’s just my opinion based on my reading of the court’s logic and administrative law.

All that said, given that the update has been enjoined, it is now up to the Department of Labor to fight to overturn the injunction. Should the incoming head of the DOL give the marching orders to not fight the injunction and instead retract the proposed update or allow Congress to craft an update of its own (and there are numerous proposals waiting for Congress to act), then all of the legal wrangling will be a moot point.

Given Mr. Puzder’s policy stance, the incoming Administration’s position on relying on market forces to adequately protect and reward workers, and the Administration’s anti-regulatory attitude, it seems quite clear that the proposed Overtime Rule will not go into effect any time soon and the issue of FLSA updating could be shelved completely.

The Fiduciary Rule

In the wake of growing concern regarding the hidden costs, exorbitant fees, and questionable practices of financial advisors and brokerage institutions, the DOL was tasked with protecting employees and consumers from such predatory practices. One of the DOL’s solutions was an expansion of the obligations imposed on those who provide retirement plan consulting services. As the Wall Street Journal identified, “[t]he fiduciary rule holds brokers and advisers who work with tax-advantaged retirement savings to a ‘fiduciary’ standard, meaning they must work in the best interest of their clients and generally avoid conflicts, which can come about with commission-based compensation. Previously, they were required to offer only ‘suitable’ guidance, a less-rigorous standard.”[4]

Mr. Puzder has offered little public comment on this rule, has not addressed it in his personal blog[5], and his personal track record offers scant evidence as to his opinion regarding retirement plan consulting. That said, there are likely three possibilities regarding his approach to the fiduciary rule: (1) do nothing, (2) attack it as part of the Administration’s sweeping de-regulation agenda, or (3) make its repeal or replacement an issue for further down the road. The third approach is a complete unknown, but the first two possibilities bear further analysis.

The argument for not acting against the fiduciary is based on the idea that the rule is set to take effect in April of 2017 and companies have already taken major steps towards complying with its mandates. The rule went through the rigorous administrative process in reaching approval and passage, it will likely take similar steps in undoing the law. Therefore, because there are other higher priorities in the Trump administration there will simply not be enough political will, capital, or time to spend in the first 100 days of the new administration to do anything about its implementation.[6]

The argument for taking swift action is based, essentially, on anecdotal evidence from other individuals in the Trump Administration, as well as the Administration’s more generalized regulatory statements.[7] For example, Trump advisor and investment service executive Anthony Scaramucci has pledged to repeal the rule, Republican members of Congress have vowed to repeal it, and lawsuits from Administration supporting organizations like the Chamber of Commerce are suing to kill the rule. According to analysts at Reuters, Mr. Puzder could move quickly to impede the rule by stating that his department would decline to enforce the rule. Similarly, he could ask his department and the Securities and Exchange Commission for complete review.

My personal opinion is that Mr. Puzder will leave the fiduciary rule alone. If I were advising the President Elect, I would argue that battles should be fought judiciously. From Mr. Puzder’s perspective, he is a known opponent of the Overtime Rule, and I imagine that that will be his primary target for revocation. Could he oppose both in the hopes of eliminating one? Certainly, and I would argue that the one he truly wants to kill is the Overtime Rule because such action has much broader support.


Hopefully this review provides some insight into the issues at play with the Department of Labor, but unfortunately much is still unknown. As always, if you have questions or would like to discuss any of this further, please do not hesitate to reach out to either myself or your trusted Infinity Benefit Solutions advisor at 414-271-2887 or info@infinitybenefitsolutions.biz.

[1] http://www.bbc.com/news/world-us-canada-38258714

[2] http://www.wsj.com/articles/trump-expected-to-name-fast-food-executive-andy-puzder-as-labor-secretary-1481210445

[3] http://www.forbes.com/sites/danielfisher/2016/11/22/texas-judge-issues-nationwide-injunction-against-obamas-overtime-rule/#238b3589747f Embedded in this article is the actual full text of the court’s opinion.

[4] http://www.wsj.com/articles/donald-trumps-labor-pick-spells-potential-trouble-for-retirement-rule-1481242910

[5] http://andy.puzder.com/

[6] http://www.marketwatch.com/story/the-fiduciary-rule-wont-change-under-a-president-trump-2016-11-09

[7] http://fortune.com/2016/12/09/donald-trump-andy-puzder-labor-401k/


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