As the country prepares for a new presidential administration, employers and employees alike face questions about the future of wage and hour law. While there is potential for change in various wage and hour issues during the next presidential term, much is still in flux. President-elect Donald Trump has proposed several reforms, including eliminating taxes on tips and overtime pay, but the details of those proposals are still unclear. As we saw with the Biden administration, it is possible that the incoming Trump administration will take action to undo certain rulemaking efforts made by the previous administration over the last four years.
In this article, we highlight wage and hour issues at the federal level that are likely to be top of mind during the early days of the Trump administration. In addition to these potential changes in the federal landscape, employers should continue to monitor state and local wage and hour laws to ensure compliance.
Independent Contractors
During the next administration, we are likely to see a shift back to earlier Trump-era rules surrounding classification of workers. Under these rules, it will be easier for businesses to classify their workers as independent contractors, thus exempting more workers from the protections of the Fair Labor Standards Act (FLSA). This could ease wage and hour compliance for many employers, especially those that operate in the gig economy.
In 2021, Trump's Department of Labor (DOL) proposed a business-friendly test for determining independent contractor status. This five-factor test turned heavily on two "core" factors: the nature and degree of the principal's control over the work, and a worker's opportunity for profit or loss. In 2024, the Biden DOL published a final rule formally rescinding the Trump DOL test and returning to a six-factor test that evaluates the "economic reality" between a potential employer and a worker. As we explained when the final rule was passed, it was designed to offer greater protection to workers and is considered more employee-friendly than the 2021 test. The new Trump DOL is likely to revert to this more employer-friendly classification standard.
Minimum Wage
During his first administration, Trump did not make any efforts to raise the federal minimum wage. During his 2020 campaign, Trump expressed a willingness to raise the federal minimum wage from $7.25 an hour to $15 an hour as long as it did not negatively impact small businesses. He did not address the issue during the 2024 campaign, though he did leverage a more pro-worker platform. In a December 2024 interview, Trump said he "would consider" raising the federal minimum wage, but didn't commit to any number.
Whether Trump will support an increase to the federal minimum wage, or oppose it on the basis of encouraging economic growth and protecting small businesses is an open question. He also may take a more traditional Republican stance and decide any changes to the minimum wage should be addressed by the states. Today, 34 states, territories, and districts (including New York, California, Colorado, Illinois, and Washington, D.C.) have minimum wage laws that raise the federal floor.
In its final weeks, the Biden administration is making efforts to push through reform on another minimum wage issue. The Biden DOL recently proposed a rule that would end an employer's ability to pay workers with disabilities a sub-minimum wage. The proposed rule, which reforms Section 14(c) of the Fair Labor Standards Act (FLSA), is set to go into a notice and comment period in early 2025. It will therefore be up to the Trump administration to finalize the rule if it chooses to. As with minimum wage rates, states have been active on this issue in recent years—more than a dozen states have implemented bans on paying sub-minimum wage to disabled workers.
Minimum Salary Rule and Overtime Pay
In April of this year, the Biden DOL issued a final rule increasing the salary threshold for the FLSA's "white collar" overtime exemption. The rule—which was set to go into effect on January 1, 2025—would have raised the threshold from $35,000 to close to $59,000, extending overtime coverage to about four million workers. However, on November 15, 2024, a federal court in Texas found that the DOL exceeded its authority and struck down the rule in its entirety. While the Biden DOL has appealed this ruling, the Trump administration may choose not to pursue the appeal. It remains to be seen whether Trump will support any increase to the salary threshold.
In addition, during his campaign, Trump proposed eliminating taxes on overtime pay. Like his proposal to eliminate tax on tips, discussed in more detail below, the details of this plan are not yet clear.
Tax on Tips
During his campaign, Trump proposed eliminating federal income tax on tips, which requires the support of Congress. This is one of the few issues on which Trump and Vice President Kamala Harris agreed on during their presidential campaigns. However, the proposed legislation put forth by their respective parties still differs in some respects.
The Republican-sponsored No Tax on Tips Act proposes to exempt cash tips from federal income tax by creating an above-the-line deduction for any tips made with cash, cards, or checks. Republicans sponsored similar bills in the House of Representatives. Democratic lawmakers subsequently proposed their own version of a no-tax-on-tips bill, which goes further and would eliminate the federal minimum wage tip credit.
At this stage, it's not clear whether any bill has sufficient support to pass, though Trump is more likely to sign a Republican version should it come across his desk.
Paid Leave
Though there is no federal law that guarantees access to paid family and medical leave for private sector employees, states and localities have been increasingly active in recent years enacting their own paid leave laws. Trump did not extensively address the issue during his campaign, but he did extend 12-week paid family leave to employees of federal agencies and contractors during his first administration. It is possible that this means federal paid leave is not completely off the table for private employers. But for now, this issue remains with the states, and like many of the other issues addressed in this article, this could be another area that Trump chooses to leave with the states. In other words, it's difficult to predict what will happen at the federal level and employers must continue to monitor state and local laws.
Overall, there is still significant uncertainty around how the next presidential administration will impact wage and hour law. Venable will continue to monitor developments as we head into 2025.
