Federal Court Temporarily Halts Overtime Rule

Source: AGC of America

On November 22, a federal judge issued a nationwide injunction against the U.S. Department of Labor’s (DOL) overtime rule, which was scheduled to take effect on December 1, 2016. As a result of this court order, implementation of the rule is effectively halted. However, the injunction is a temporary measure that suspends the regulation until litigation comes to a close. DOL has said that it is currently “considering all of [its] legal options.” At this time, it is unclear if or when the rule will take effect.

The most significant change under rule is a doubling of the standard salary threshold for exempt employees – from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). Many AGC contractors had already taken steps to implement this rule, such as by reducing employee hours or notifying employees of salary increases. Given the uncertain path ahead, those contractors may want to re-evaluate the overall impact of the changes made and either roll-back or keep those implementation efforts in place, considering both the impact on the company’s bottom line as well as employee morale.

It is not clear how President Trump will proceed as this is a rule that pits Trump, the populist, against Trump, the businessman.  On the campaign trail, he did not clearly oppose or support the rule. Nevertheless, AGC has and will continue to support legislation and regulatory changes to lower the overtime threshold and gradually phase in the requirement over several years.

For more AGC information on this rule, click here. For more AGC information on the regulatory road between now and Inauguration Day, click here.

AGC CEO Steve Sandherr Memo: Aftermath of the 2016 Elections

Source: AGC of America

November 18, 2016



After a proper burial of conventional wisdom following last week’s election, we found ourselves optimistically adapting to the prospects of a Republican President and a Republican Congress.  On balance, we have reason to be pleased with the outcome as it presents us the opportunity to move from defense to offense on a number of our priority issues.  Of particular importance is the fact that the continuation of the regulatory onslaught that we expected in a Clinton Administration has been derailed.  Having said that, there are a lot of unknowns of how the new Administration will position itself on many issues and what conflicts may arise with the GOP majority in Congress.

It is, however, apparent that there are some “knowns” that bolster our optimism.  They are a call for infrastructure investment from a Republican President and we will have a President who can, perhaps like Reagan, communicate directly and successfully to the public.

One reason for our uncertainty about where the new Administration will go is that, unlike recent (last 20 years) Presidential campaigns, there was virtually no outreach from the Trump campaign to the Washington trade association community.  In prior elections, the GOP campaign had a liaison to the trade association community that encouraged fundraising, served as a conduit to accept policy recommendations, and provided immediate entrée to the new Administration if the nominee were successful.  Obviously, this method only worked in its entirety in the 2000 and 2004 George W. Bush campaigns.  Following both of those elections, AGC had influence on policy development as well as some Presidential appointments.  We were poised to be in the same position in the 2008 and 2012 elections had the GOP candidate won.

In the current environment, we are seeing some receptivity, despite the lack of contact and relationship building during the campaign, to our input.  We know some folks who are involved in the transition team and they are collecting our policy recommendations, particularly on the infrastructure agenda.  We have made, for now, one recommendation for a Presidential appointment: the attorney who wrote our Davis Bacon handbook to be Wage and Hour Administrator at the Department of Labor.  We will be looking for additional opportunities to send letters of support for qualified candidates for other Administration positions.

One note of caution as the new Administration takes shape.  Trump did not run as a conservative, he ran as a populist.  He positioned himself as the champion of the working man and working woman.  You may recall that he advocated for six weeks of paid maternity leave.  He also favored an increase in the minimum wage to $10 an hour.  These positions suggest that he may not seek any modifications to the new overtime rules that are effective December 1 or the paid sick leave requirements for federal contractors.  He may also look favorably at additional “worker friendly” rules or legislation that will add costs to business.

It was heartening to hear the President-elect mention infrastructure investment as his first policy objective in his acceptance speech.  Prior to the election, AGC led a coalition to bring focus to both Presidential campaigns on offering our assistance in bringing both of their ambitious infrastructure proposals to a successful outcome. We have been communicating with one of the principals on his transition team who was a senior appointee in the Bush Department of Transportation.  Our message is that the proposed ten year horizon for infrastructure improvements not only demonstrates a major effort to reduce the infrastructure deficit but it also provides a higher degree of certainty for agencies to plan, construction firms to predict the market and for construction recruits and workers to have more confidence that there will still be a job when the project they are working is completed.

While there has generally been positive reaction to the concept of increased infrastructure investment from GOP Congressional leaders, we remain less than sanguine that conservative Republicans will be prepared to finance a larger program with borrowed money and they will remain consistent in their opposition to user fee increases.  We continue to make our funding recommendations available and we are counseling the Trump team that this cannot look like Obama’s stimulus plan or it will be dead on arrival.

On the regulatory front, we are blessed with multiple options to attempt to scale back or discard a number of agency rules and executive actions.  The Congressional Review Act permits Congress to effectively veto federal regulations that were finalized in the last months of an Administration.  We have already sent a letter to Congressional leaders reminding them of this authority and suggesting that they act quickly in January to repeal the OSHA e-reporting rule, the “Fair Pay and Safe Workplaces” (blacklisting) rule, the paid sick leave for federal contractors rule, and the requirement that employers provide additional pay information as it relates to race and gender in the EEO-1 form.  Additionally, we will be petitioning the new Administration to reopen other new regulations including the OSHA silica rule and EPA’s “waters of the U.S.” rule.

I may be alone in this respect but I believe Trump’s victory may provide an opportunity for favorable immigration reform. Trump’s “build the wall” campaign rhetoric provides him with significant credibility with immigration hardliners.  Unlike past immigration proposals supported by AGC in the past two Administrations that, among other things, called for border security, hardliners were skeptical that enhanced border security would actually occur while millions of illegal aliens would be provided amnesty.  Now we have a President who will require border security to be the primary objective of immigration reform.  Proposals that focus only on the “wall” while ignoring the significant question of what we do with the millions that are working and obeying the law may be considered incomplete.  This presents the business community with an opportunity to push for legal status in the form of temporary but renewable work permits for illegals who have a job, pay taxes, who have no criminal record and pay a fine for falsifying documents.

As a final note, we should expect the unexpected.  The victorious nontraditional Republican candidate my very well have voted for the first time for a Republican for President.  He threw out the playbook on modern campaign strategy by raising relatively little money, not investing in campaign staff or field operations, and offering an extremely thin and vague policy agenda.  He won his way.  What does that suggest for how he will attempt to govern?

Prior to your January meeting, we will be compiling our list of policy priorities for the 115th Congress.  You will be getting a briefing on those issues as well as our ongoing activities with regard to the new Administration.  Please contact me if I can provide additional information.

Beyond the Data – The November 2016 Elections and the Potential Impact on Construction

Source: Dodge Data & Analytics

Insights from Dodge Economists

Authors: Robert Murray, Chief Economist; Kim Kennedy, Manager of Forecasting; and Richard Branch, Senior Economist

With the November 2016 elections now concluded, what are the early thoughts on how the construction industry will be affected? At the federal level, Donald Trump is the new President-elect, and the extent to which his campaign proposals get translated into actual programs will have an impact on the economy and construction activity. Both houses of Congress remained under Republican control, which along with a Republican President may ease some of the gridlock of recent years. At the same time, any Trump proposals will still need the approval of the more fiscally conservative members of Congress, who will be reluctant to agree to programs that increase the federal budget deficit. In addition, the slim Republican control of the Senate (expected to be 51 to 49) means that Senate Democrats can still hold up legislation through the use of the filibuster. At the state and local levels of government, the potential for a positive impact on construction is clearer, given the passage of several major construction-related measures.

During the campaign, Trump offered a wide range of proposals which were put forth in broad terms with the specifics still to come. These included the following – the repeal and replacement of the Affordable Care Act (Obamacare), greater funding for infrastructure, easing of federal regulations, lower taxes for business, a more protectionist trade stance including the renegotiation of NAFTA, and the deportation of undocumented immigrants. The uncertainty as to how the proposals would be implemented initially caused a sell-off in the stock futures markets when it became clear Trump would win the election early on November 9. The conciliatory tone of Trump’s post-election speech that followed seemed to calm the financial markets, leading to a stock market rally later that day.

Of the various proposals, there are three which are relatively safe to say will have some near-term impact on construction. First, the repeal and replacement of the Affordable Care Act will be brought up quickly in the new Congress, although reaching agreement on the details will require time and face opposition by Senate Democrats. One issue, of course, is how the repeal will affect the 22 million newly insured individuals who received healthcare coverage under Obamacare. The uncertainty created as new healthcare legislation is being crafted will likely have a negative impact on healthcare-related construction, at least during 2017. Since Obamacare was enacted back in 2010, the uncertainty created by several challenges contributed to healthcare construction starts hovering in the subdued range of 65 to 75 million square feet per year, down from the most recent peak of 110 million square feet in 2006. The overhaul of healthcare legislation in 2017 means that healthcare-related construction will stay in this subdued range, if not slip further.

Second, the broad proposal for increased federal funding for infrastructure work should offer some support for the public works sector, either directly or indirectly by keeping attention focused on the need to upgrade infrastructure. During the campaign, Hillary Clinton said that she would spend $250 billion over five years for infrastructure projects, and would also provide $25 billion for a national infrastructure bank. In August Trump indicated that he would “at least double” the amount in Clinton’s proposal and then in late October called for $1 trillion over a 10-year period for infrastructure work. The new plan would “leverage public-private partnerships,” encourage private investment through tax incentives, and be “revenue neutral.” More recently, the website “greatagain.gov” states that the Trump Administration would seek to invest $550 billion for infrastructure, presumably over a five-year period. While there’s some question about whether the Trump infrastructure plan will be a top priority for the next Congress, the plan does emphasize the necessity for greater infrastructure support. This should encourage Congressional action on two existing legislative items – the Water Resources Development Act (with separate House and Senate versions already approved), and federal appropriations for fiscal 2017 which includes funding for transportation projects.

Third, the easing of federal regulations will have a wide impact on a variety of project types. The plan for Trump’s initial days in office calls for lifting “Obama-Clinton roadblocks and allow vital energy infrastructure projects, like the Keystone Pipeline, to move forward.”  The Trump Administration will also “lift the restrictions on the production of $50 trillion dollars’ worth of job-producing American energy reserves, including shale, oil, natural gas and clean coal.”  How this may affect construction of new coal-fired power plants remains to be seen, given the current low prices for natural gas and the growing surplus of electric power generating capacity. At the very least, though, such construction is more likely to occur under the Trump Administration, along with upgrades to coal-fired power plants.  Solar and wind power plant projects may receive reduced emphasis.

The easing of federal regulations also involves the financial services sector. The greatagain.gov website states that a major reason for the tepid economic recovery are the rules regulating the financial services industry under the Dodd-Frank Act. Accordingly, the website states, the Financial Services Policy Implementation team of the Trump Administration “will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.” What remains unclear is how willing Congress would be to substantially modify Dodd-Frank. Dialing back regulatory oversight may well contribute to banks taking on riskier loans for commercial real estate projects, which would boost commercial building projects in the near term. It also sets the stage for a steeper downturn for commercial building when a cyclical decline eventually occurs. The impact of this potential regulatory shift will become more apparent when further details on its implementation become available.

As for tax reform, during the campaign Trump called for lowering the top income tax bracket from 39.6% to 35%, and lowering the corporate income tax rate from 35% to 15%. These proposals will be presented to Congress, which will consider them within the framework of how they will affect the federal budget deficit. Some tax reduction will get passed, but perhaps not to the degree as proposed by Trump, and its impact on the economy and construction activity will likely be felt more in 2018 as opposed to 2017.

With regard to trade, Trump has called for the renegotiation of NAFTA, including the possible withdrawal from the agreement, and it’s virtually certain the Trans-Pacific Partnership agreement won’t be approved. He has also indicated that he will confront China about currency manipulation, and consider imposing tariffs of as much as 35% on certain foreign nations. This stance should help the U.S. manufacturing sector, which would lead to an improved level of manufacturing plant construction. It may also lead to rising inflation, which would be accompanied by rising interest rates during 2017 and into 2018. As for immigration reform, there is concern that if deportation of undocumented immigrants takes place too quickly, the reduction in the available labor force would lead to an economic slowdown, and possibly recession. And, with regard to the proposed wall across the southern border of the U.S., this will be addressed by Congress. When questioned on November 9 about the wall, Senate Majority Leader Mitch McConnell said that he wanted to “achieve border security in a way that is most effective.”

As for the broad impact on construction activity, an examination of the construction start statistics shows that for a President’s first year in office there’s typically only a modest impact on construction activity, but by the second year the impact becomes more discernible since new programs are then in place. The assessment of how the Trump proposals will affect construction will receive greater clarity as more details come forth, including how these proposals make their way through Congress. For the moment, it’s still believed that total construction starts in 2017 will increase in the 4% to 5% range, with some dampening for healthcare-related projects accompanied by some improvement for public works construction.

The passage of several major bond measures in the November 2016 elections should provide support to construction activity in 2017 and beyond. For education-related projects, California voters approved Proposition 51 which will allow the state to sell $9 billion in general obligation bonds for new construction and upgrades to educational facilities. This involves $7 billion for K-12 public schools and $2 billion for community colleges. Other noteworthy school construction bond measures that achieved passage were in El Paso TX ($669 million), Denver CO ($628 million), Pearland TX ($220 million), and Corpus Christi TX ($194 million).

For transportation projects, voters in Los Angeles county approved the $120 billion Measure M, financed by a half-cent increase in the sales tax, which will fund a rail tunnel through the Sepulveda Pass and a subway extension to Santa Monica, among other projects. Voters in the San Francisco Bay area approved a $3.5 billion measure to upgrade the region’s BART mass transit infrastructure. Wake County NC voters approved a half-cent sales tax increase to provide $2.3 billion over ten years for commuter rail and bus transit systems. And, Austin TX voters approved the issuance of $720 million in transportation bonds to help alleviate the city’s traffic congestion.


Trump’s Call for Infrastructure Investment

Source: AGC of America Highway Facts Bulletin

President-elect Donald Trump highlighted investment in transportation and other infrastructure as a top priority in his victory speech on election night, renewing one of his consistent campaign themes. Trump said, “We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it.” During the campaign, Trump called for infrastructure investments in the range of $1 trillion over 10 year and released a plan that calls for tax credits to spur private investment to finance the imitative. Congressional action will be needed to implement any infrastructure plan proposed by the new Administration.

Several weeks ago AGC, along with other leading business, labor, transportation and travel organizations, sent a letter to the Trump campaign asking them to address the long-term solvency of the Highway Trust Fund as a part of any new infrastructure proposal.  The letter was signed by 34 organizations that included many transportation and construction groups, along with the U.S. Chamber of Commerce, National Association of Manufacturers, National Retail Federation, U.S Travel and the Retail Industry Leaders of North America. The support of the broader business community is integral in building support for a Highway Trust Fund fix.

AGC has provided information and suggestions for infrastructure investment to the Trump transition team and plans future meetings to discuss ideas.