The near-future legal environment for the staffing industry depends largely, but not entirely, on the work of the Trump administration and the slight Republican majorities in Congress. President Trump expects to engage with Congress and with his own executive branch in the hope of producing pro-business changes beyond what the current politically divisive environment might predict. Even so, blue state, municipal and judicial authorities may take actions in policy directions opposite from those of the administration. Here are some key areas to keep an eye on.

Healthcare Reform

According to Prussian statesman Otto von Bismarck, “Laws are like sausages; it is better not to see them being made.” That was surely true of the struggle over the recently proposed American Health Care Act, the abortive attempt of House Republicans to “repeal and replace” the Affordable Care Act.

There are two main post-AHCA narratives. Trump and Congressional Republicans say that, without remedies that they favor, ACA coverage will completely collapse, with highly undesirable results for Americans. Democrats say that the ACA works well for Americans but may need some tweaking. Regardless, radical changes to the ACA are not likely anytime soon.

The ACA feature of greatest concern to staffing firms and their customers is the “employer mandate,” which makes large employers choose between offering coverage to full-time employees and paying penalties.

Until ACA’s ultimate fate is determined, the effects of the employer mandate will depend on how willing, aggressive and successful the Trump administration is at defanging the mandate by waivers, postponements, benign enforcement neglect, interpretation and fiat. President Obama used all of these methods to soften ACA’s burdens and unworkable features.

Trump’s first executive order confirmed his hostility toward mandates, so employers can reasonably anticipate specific ACA relief. However, they should not assume that they have been liberated from any aspect of the ACA until the government or their trusted advisers confirm it.

If the employer mandate is lifted or modified, staffing firms should revisit commitments they may have made in contract amendments demanded by customers. These commitments often include promises to offer affordable, minimum value coverage to all assigned employees, to perform ACA reporting on them, to practice “differential billing” by charging extra for assigned employees enrolled in coverage, and to indemnify customers for ACA penalties.

Relief from the mandate may inspire customers to challenge the rate hikes or surcharges imposed by many staffing firms to cover ACA costs.

Also, forms of health insurance outlawed by the ACA may be resurrected as coverage options for staffing firms.


Most staffing firms are law-abiding and try to avoid employing workers not authorized to work in the US, so they should not be greatly affected by the promised crackdown on illegal immigration and employment. They may still be affected indirectly, though, by the impact that such measures may have on wage levels and the demand for labor. And there may be an opportunity for the staffing industry to become the manager of a formal guest worker program.

Other potential restrictions, such as stricter limits on H-2A and H-2B visas, could make recruiting for certain types of positions more difficult.


The prospect of tax cuts is encouraging for staffing firms and their owners. Tax cuts, along with soaring financial markets, may also inspire a growth-inducing and demand-enhancing “wealth effect” on staffing customers.

If tax reform takes the form of consumption taxes, tax-compliant staffing firms, like all other faithful taxpayers, would benefit by the way consumption taxes flush taxes out of segments of the underground economy that previously neglected to pay them. More actual taxpayers should mean lower taxes for each taxpayer.

The unemployment tax crisis stemming from the Great Recession seems to have abated somewhat, with active unemployment trending down and with people dropping out of the workforce after exhausting their benefits.

Social Security and Medicare require financial and actuarial reform, as politically uncomfortable as that would be. The quickest reforms would adjust major features like retirement ages, taxable wage bases, and payroll tax contribution rates. Employers match 100% of the Social Security and basic Medicare taxes that employees pay, so increases in those taxes would increase staffing firms’ burdens, usually without automatically raising their customer bill rates. Advance notice of payroll tax increases should allow staffing firms time to adjust bill rates or to renegotiate rate guarantees extending beyond the effective date of the tax increases.

Wage and Hour and Independent Contractors

In late 2016, the Obama administration issued regulations drastically reducing the availability of “white collar” exemptions from the overtime rules of the Fair Labor Standards Act. Those regulations were enjoined by a federal court — but not before many employers had increased the guaranteed compensation of their employees to match the new requirements. The court’s injunction (currently on appeal) and the pro-business orientation of the Trump administration are likely to table these regulations indefinitely.

Independent contractor issues are likely to be as troublesome as ever. When you use individual independent contractors, everyone is your potential adversary — the contractors, state and federal government tax authorities, unions, workers’ compensation insurers, and injured members of the public. The new administration needs tax revenue to finance its initiatives, so it may not be sympathetic to independent contractor misclassification, which is perceived as unfair evasion of legitimate taxes.

Thoughtful clarification of the rules for FLSA exemptions and independent contractor classification are needed but are not likely to enjoy high priority from the Trump administration.

Joint Employment

The allegation that assigned workers are jointly employed by staffing firms and their customers has been driven by several federal agencies — including the National Labor Relations Board, the Equal Employment Opportunity Commission, Occupational Safety and Health Administration, and the Internal Revenue Service (in its ACA enforcement role).

Staffing industry experts concede that contingent employment has always involved joint employment/ co-employment. However, in practical ways, the federal government has implicitly recognized the common-law employer status of non-PEO staffing firms by allowing them to fulfill the sole or principal responsibility for most employer duties. The recent surge of joint employment theory is a strategy to replace division of responsibilities between co-employers with complete and redundant sharing of all of those responsibilities and their accompanying liability.

There is a lot of pointless hand-wringing about this issue. You can’t “commit” joint employment or be sued for it. It is just a theory that government agencies and plaintiff’s lawyers use to pull additional defendants into disputes about other, fundamental employment law issues. The way to deal with joint employment is not to deny it or to try to eradicate it (you can’t) but to understand it and to manage it by dealing properly with the underlying employment issues.

To manage joint employment, staffing firms should ensure that their staffs are aware of the relevant issues, educate customers about them, structure their operational practices to be consistent with co-employment principles, and document the co-employment relationship in specific detail in their customer contracts.

One example of such management is the issue of whether assigned workers can be combined with a customer’s direct employees into a single union collective bargaining unit against the wishes of the two employers. The NLRB has reversed its position on this issue three times in 17 years. Its current position is that assigned workers can be combined into the customer’s bargaining unit if they are jointly employed and have a “community of interest” with the customer’s direct employees.

We may see a fourth reversal of this rule after Trump makes his NLRB appointments, but the way to manage this risk in the meantime is to maximize staffing firm control over assigned employees and to purposely create and maintain differences in the elements of “community of interest” between the two workforces. The NLRB listed some of these elements (pay, hours, benefits, supervision, job qualifications, job functions, worksite location, interaction with the other workforce and its functions, and bargaining history) in its 1962 Kalamazoo Paper Box Corporation decision.