Trump Administration: 5 Critical Policy Shifts That Could Reshape HR

5 Things to Watch in the Trump Administration

The reelection of Donald Trump as President resolves one major uncertainty heading into the 2024 election, but many questions remain on his stance on issues important to CHROs.

We expect President-elect Trump to focus on reducing regulations and reversing the aggressive pro-labor approach adopted by the Biden administration.

• Trump’s strategy on human capital issues will be reinforced by a Republican Senate and likely Republican House, and tempered by narrow margins in both bodies.
  
  
• Yet, the Trump agenda should not be assumed to be exclusively pro-business. The narrow margins will make regulatory initiatives important, despite a higher hurdle set by the Supreme Court, and a continue the shift of policymaking to the states.

The following 5 things provide our assessment of how President-elect Trump will govern on issues important to CHROs and what it means for legislative, regulatory, and state related public policy.

1. The End of the Administrative State as We Know It?

Much ink has been spilled about how a second Trump administration might dismantle federal agency structure and power.

• While a dramatic shake-up of most federal agencies is unlikely, expect the Trump administration to significantly reduce regulations and follow the trend against agency authority (the Supreme Court’s ending Chevron deference, constitutional challenges to the SEC, NLRB, and others).
  
  
• Agency funding and staffing will likely be scaled back significantly (with a requirement that agency staff return to office) resulting in reduced regulation and enforcement actions.

Another wrinkle to consider: Following the precedent set by President Biden, President-elect Trump will almost certainly seek the resignation (or potentially) terminate the Chairs and General Counsels of certain independent agencies (like the NLRB, FTC, and EEOC), to accelerate a Republican majority in support of his agenda.

• Absent termination of the Chairs, the President would appoint Republicans to Chair both agencies. However, both would have Democratic majorities (EEOC through mid-2026; NLRB through mid-2025), limiting the reversal of Biden-era changes, at least right away.

Less regulation, more uncertainty: A Trump administration will undoubtedly be more business-friendly than a Harris administration would have been.

• However, if a second Trump administration, paired with the dozens of pending lawsuits seeking to further erode federal agency power, means the end of agency authority as we know it, what fills the void?
  
  
• Companies may find themselves looking at even more patchwork state legislation and private lawsuits as a result – without the usual (if cumbersome) legal guardrails provided by federal agencies.

The bottom line: Expect a significant scale-back of agency authority and workplace regulations. While welcome, the result may be increased uncertainty for companies and more time spent in court rather than before an administrative agency tribunal.

2. Potential for Unified GOP Congress vs. House-Senate Split

Congressional roadblocks: The extent to which President-elect Trump can reshape the government depends on the results of House and Senate races. As of press time, the House majority is still undecided, but with Republicans taking control of the Senate, President-elect Trump’s key agency and judicial nominations and certain legislative priorities face a smoother path.

Republicans signaled they may revisit the CHIPs Act and the Inflation Reduction Act. Both Biden era laws are still being implemented and a conservative congress is likely to attempt to claw back unspent funds.

With slim majorities in both chambers of Congress, expect continued deadlock, as Senate Republicans are unlikely to get enough Democratic votes on most bills to reach the 60 votes needed to pass legislation.

Yes, but: Despite thin congressional majorities making legislating difficult, there is existing bipartisan support on some issues that may result in legislative movement:

• Labor – The ongoing Republican populist shift towards organized labor, punctuated by Senator Hawley’s (R-MO) tacit endorsement of the extremely pro-union PRO Act, means that Democrats could potentially garner enough Republican allies to move narrowly tailored labor reform legislation.
  
  
• Non-Competes – Both Republicans and Democrats have expressed support for legislation curbing the use of non-compete agreements. The expected new Chair of the Senate HELP committee, Senator Cassidy (R-LA), will likely introduce his own non-compete legislation in the upcoming Congress, and employers should expect significant movement on this issue.
  
  
• AI – Both sides have expressed interested in reining in the use and impact of AI and multiple bipartisan legislative proposals are in the works. This is expected to be a legislative priority.
  
  
• Paid Leave – There is currently a bipartisan working group solely dedicated to making a federal paid leave law a reality next year. Although a federal mandate that preempts state laws is still unlikely, it is plausible that an approach meant to serve as a uniform “model” for state laws could pass.
  
  
• Health Care – Congress will likely continue discussion on PBM reform and will need to grant timely extensions for several health care issues, including pre-deductible coverage for telehealth services. House Republicans have recently discussed revisiting the ACA again, although likely not in the form of repeal. Expect continued debates between Republicans who aim to reduce the budget for ACA administration and subsidies and Democrats, aiming to expand access through expanded funding for exchanges.

3. DEI Scrutiny and Immigration Limits Will Impact Talent Strategies

An about-face on DEI: To the extent possible, the Trump administration will significantly curtail pro-DEI policies in the federal government. In addition, expect the administration to attempt to restrict private employer DEI practices, like the Executive Order issued by Trump during his first term that tried to ban diversity training for federal contractors (the EO was later knocked down in court).

• Changes could include rescinding OFCCP affirmative action plan requirements for federal contractors that have been in place since 1965.
  
  
• A Trump EEOC is likely to prioritize enforcement that targets certain employer DEI practices, such as quantitative goals or tying compensation to DEI outcomes. Current Republican Commissioner Andrea Lucas, who could potentially become Chair of the EEOC, has been outspoken against these kinds of practices.

Immigration restrictions: Similar to his first term, President-elect Trump is likely to use all levers of authority to curb immigration, including restrictions on H-1B visas, meaning employers may lose access to needed talent. Resurrection of bipartisan border reform is possible.

4. Free Market Approach to Health Care & Reduced ACA Subsidies

Likely reversals on ACA subsidies: The Trump administration will likely move to reverse many of the Biden-era policies, including the expanded subsidies for ACA enrollment.

Uncertain approach to drug pricing: While President-elect Trump’s approach to PBM reform will likely favor market approaches over regulation, he has been vocal about intervening in price negotiations if prices continue to rise. What this may look like is not clear at the moment.

Potential cap on health care tax exclusions: Recent proposals from conservative think tanks and the Republican Study Committee suggest a Trump administration might cap the tax-free amount for health care expenses for both employers and employees. Currently, employer-sponsored health coverage is tax-exempt for employees. With a cap, employees' take-home pay would effectively decrease and employers would face higher employment taxes.

The bottom line: Expect a free market approach to bipartisan issues like transparency and PBM reform and cuts to funding for ACA administration and subsidies.

• These cuts could increase the number of employees on employer-sponsored health care plans as individuals search for the most affordable option.
  
  
• However, proposals to cap the tax-free amount of employer coverage may gain ground as a method to reduce the growing deficit.

5. Tax Cuts, Tariffs & Growing Deficit Create Uncertain Economic Outlook

A Trump administration is expected to expand the 2017 Tax Cuts and Jobs Acts provisions and seek to make all expiring provisions permanent.

• President Trump has also campaigned on cutting the corporate tax rate to 15% for businesses that produce goods in the United States.
  
  
• However, Trump has also discussed imposing large tariffs on imported goods, increasing the risk of trade wars, if he follows through.

The federal deficit continues to grow at an exponential pace due to mandatory spending accounts that have ballooned each year, with debt service costs also increasing. Expect difficult budget discussions in 2025, even if Republicans control both houses of Congress.

Final Thoughts: What to Watch in the Agencies and Lame Duck Congress

The Biden administration will make a major push to finalize priority regulations and seek Congressional approval of agency nominees to reinforce a Democratic majority (e.g., on the NLRB) before he leaves office in January. Regulations finalized in this period will be subject to challenge under the Congressional Review Act next year.

Congress is facing a December 20 deadline on fiscal 2025 spending. The election results increase the likelihood that Congress will approve another extension, with the new Congress and Administration putting their mark on the budget — and the policy issues that go along with them — next year.