Breaking Down the “Buy American and Hire American” Executive Order

By Alexa E. Miller

On April 18, 2017, President Trump signed an Executive Order stating that “it shall be the policy of the executive branch to buy American and hire American.” Here’s what you need know:

Buy American:  In an effort to promote American manufacturing and domestic purchasing, federal agencies are tasked with improving enforcement of what the Executive Order collectively refers to as “Buy American Laws.” This assortment of laws consists of all existing statutes, regulations, rules and executive orders relating to federal procurement or federal grants that require or provide a preference for goods, products or materials produced in the United States, including iron, steel, and manufactured goods.

Under the Executive Order, federal agencies are directed to:

  • Assess the use of waivers based on type and impact on domestic jobs and manufacturing;
  • Develop policies for federally funded projects to maximize the use of U.S.-manufactured products, including components of manufactured products, and materials such as steel, iron, aluminum, and cement;
  • Review all U.S. free trade agreements, including the World Trade Organization Agreement on Government Procurement, and their impact on Buy American Laws; and
  • Re-examine the bidding process for government procurement contracts by ensuring that the relevant agency considers whether a significant portion of the cost advantage of a foreign-sourced product is the result of injuriously dumped steel, iron or manufactured goods, including those made from unfairly traded steel, before a public interest waiver is granted.

This Executive Order requires the Secretary of Commerce to provide a report to the President with recommendations on how to strengthen implementation of the “Buy American” laws by mid-November 2017.

Hire American: In an effort to prevent fraud and abuse of the U.S. immigration system, the Executive Order calls for federal agencies (Department of Labor, Department of Justice and Department of Homeland Security) to review the visa system regarding the H-1B and lottery programs, and “rigorously enforce” the laws governing entry into the United States of workers from abroad.

Specifically, federal agencies are directed to review and reform the rules that award H-1B temporary visas to highly skilled foreign workers to protect US workers from lower-cost foreign labor. The H-1B visa program allows companies to bring skilled foreign workers to work in the U.S. for a few years.  Under the current program, visas are awarded under a random lottery system.  Agencies are now directed to consider ways to allocate H-1B visas based on merit to “ensure that H-1B visas are awarded to the most-skilled or highest-paid petition beneficiaries” and propose reforms to address any problems.

Takeaway: Importantly, the Executive Order does not create any new requirements for employers or immediately change existing laws.  Nevertheless, the Executive Order signals that further regulations and significant changes may be forthcoming.  With the government’s emphasis on “Buy American,” we anticipate that there will be heightened enforcement on domestic source restrictions, as well as the potential renegotiation (or revocation) of a number of trade treaties.  With respect to the “Hire American” priority, we expect to see major reforms to the H-1B visa program, which may include dismantling the lottery system and awarding visas to the highest-paid positions and/or positions with master’s degrees or other higher qualifications thereby limiting the ability of companies to petition for temporary work authorization visas for highly skilled workers.  Employers stay tuned!

Trump’s Supreme Court Nominee Will Likely Be Key Vote in Class Action Waiver Dispute

By Thomas J. Barton

The United States Supreme Court finally agreed earlier this year to resolve whether the National Labor Relations Act (NLRA) prohibits class action waivers in employee arbitration agreements. This ruling will have an immediate and far ranging impact on employers. The Trump presidency will likely play a crucial role in the outcome of what will be the first of many challenges to the expansive federal agency policies under the former Obama administration.

Employers have increasingly required employees to sign agreements to have their employment disputes resolved through private arbitration rather than through a lawsuit in state or federal court. The most critical aspect of these agreements has been the provisions by which the employee agrees to resolve his or her dispute on an individual basis rather than by means of a class action. When enforced, class action waivers are a potent weapon to stem the tide of wage and hour and employment discrimination class actions, which otherwise can result in claims involving thousands of workers and multimillion dollar settlements.

During the past five years, the federal appellate courts have disagreed on the validity of class action waivers causing confusion for national companies. Under President Obama, the NLRB took the position that workers have a right to engage in “concerted, protected activity” and therefore cannot waive their rights to engage in collective and class action proceedings to enforce these collective rights. In doing so, the NLRB, as it often did under the former administration, reached outside of its traditional role of resolving disputes between management and unionized workforces, to strike down arbitration provisions applicable to non-unionized workers.

In 2013, the Fifth Circuit in D.R. Horton v. National Labor Relations Board rejected the NLRB’s position and upheld the use of class action waivers. Undeterred, the activist NLRB continued to challenge class action waivers without success in the Second and Eighth Circuits in Sutherland v. Ernst & Young and Murphy Oil USA v. NLRB, respectively.

Last year, the NLRB finally received support for its position. The Seventh and Ninth Circuits found that “concerted activities” under the NLRA included participation in class and collective remedies. In other words, these courts struck down class action waivers because they prevented employees from joining together in a class action to assert their common rights. The Seventh and Ninth Circuits bolstered their rulings by declaring that the NLRB was entitled to “judicial deference” in its interpretation of the NLRA. Thus, a split occurred among the circuits that the Supreme Court will resolve. To add further to the confusion, there is another decision pending before the Third Circuit, which may be decided this spring.

Trump recently nominated Judge Neil Gorsuch to the Supreme Court to fill Justice Scalia’s seat. Judge Gorsuch currently sits on the Federal Court of Appeals for the Tenth Circuit. If nominated, many experts believe that Judge Gorsuch will be the deciding vote in what is currently viewed as a four-to-four tie among the justices.

As expected, Trump’s appointment is a conservative jurist whose decisions, on the whole, are pro employer. Not surprisingly then, Judge Gorsuch has a history of reigning in federal agency authority. Of particular note is his opinion in NLRB v. Community Health Services, where he rejected the policy of deference to the NLRB and felt that the NLRB had taken a position beyond its statutory mandate. Gorsuch’s appointment does not bode well for the NLRB’s recent aggressive positions including, its position on class action waivers.

Further tipping the predictive scales in favor of employers, Judge Gorsuch’s past rulings have favored upholding arbitration agreements. In Ragab v. Howard, Judge Gorsuch filed a dissent in a case where the majority refused to enforce an arbitration agreement, because, as he wrote, the “parties clearly intended to arbitrate their claims.” By extrapolation, Judge Gorsuch may be inclined to enforce the parties’ agreement to arbitrate their claims on an individual basis rather than through the means of a class action mechanism. While no one can predict the outcome in this case, the odds are that Judge Gorsuch will vote to uphold the validity of class action waivers.

In terms of timing, the Supreme Court will not likely issue a decision until October or November of this year. In the meantime, employers are left with conflicting precedents. Given the predicted outcome, employers probably should not alter their practices or policies of requiring arbitration agreements with class action waiver provisions. Nor should employers shy away from adopting arbitration policies that include class action waivers. Depending on the jurisdiction where a putative class action is filed, employers should continue to attempt to enforce class action waivers and seek a stay of the litigation, if appropriate, now that the Supreme Court has agreed to hear the case.

If you have any questions or concerns about this alert, please do not hesitate to contact the author or your usual Drinker Biddle contact.