Implications For Labor Policies And Workforce Dynamics

This series examines Project 2025’s potential effects on corporate governance, finance, and human capital. In this installment, we explore how Project 2025 may impact workers’ rights and financial security. Future columns will discuss workforce-related immigration challenges, the backlash against diversity, equity, and inclusion initiatives, and the implications of federal workforce reductions on the broader economy. Understanding these potential changes is crucial for preparing and safeguarding the workforce of tomorrow.

As we approach a critical juncture in workplace regulation, the Heritage Foundation’s Project 2025 presents a vision that could fundamentally alter the American labor landscape. According to the Bureau of Labor Statistics (BLS), these changes would affect approximately 168.7 million American workers in the current labor force (BLS Employment Situation Summary, December 2023).

The Deregulation Paradox

Project 2025’s most striking proposals target core worker protections through the Department of Labor (DOL), the National Labor Relations Board (NLRB), and Equal Employment Opportunity Commission (EEOC). While these proposals may empower employers to prioritize profits, they overlook a critical paradox: in a service-driven economy, a company’s success is intrinsically linked to its workforce. Eroding employee protections could inadvertently undermine the very foundation of business profitability.

According to the Government Accountability Office, weakened worker protections typically lead to increased workplace safety incidents, higher rates of wage and hour violations, and a greater likelihood of discrimination claims.

DOL: Proposed DOL changes include altering overtime eligibility thresholds, potentially reducing the number of workers qualifying for overtime pay. The Center for American Progress notes that such adjustments could make overtime eligibility more confusing for workers and easier for employers to exploit. Project 2025 suggests allowing employers to calculate overtime over extended periods, which could result in employees working 60- to 70-hour weeks without additional compensation. This approach may enable employers to deny the use of accrued paid time off, effectively eliminating overtime pay. In addition, giving employers this opportunity would mean that, according to Jenn Round of Rutgers University, employers could “never allow workers to use their banked PTO, effectively eliminating overtime pay.” This is why it was easy for Trump to promise “no tax on overtime”, because he intended to make it nearly impossible for workers to earn overtime wages.

• Perceived unfair treatment can lead to decreased motivation, increased disengagement, higher attrition rates, loss of talent, reduced efficiency, absenteeism, elevated stress levels, and distrust in leadership. Such cultural challenges not only harm organizational reputation but may also result in customer backlash, as consumers increasingly avoid companies with poor labor practices. These factors collectively impose tangible costs on businesses. In addition to the reputational damage for organizations, there could also be a backlash from customers that won’t patronize organizations with poor labor treatment reputations. These all have real costs to the organization.

NLRB: Proposed changes include leadership appointments aimed at shifting the agency’s direction and reducing its enforcement capabilities. Eliminating ‘card check’ methods for union recognition and the ‘contract bar rule’ would make union formation more challenging and facilitate easier decertification. Relaxed disclosure and communication rules could allow management to unduly influence negotiations. Beyond the private sector, Project 2025 could transform federal civil service employment into at-will positions, subjecting tens of thousands of federal employees to potential dismissal at the President’s discretion. This overlooks the stability that unions provide; despite slightly higher wages, unionized organizations often benefit from lower attrition rates, reducing recruitment and training costs. A 10% attrition rate can cost a company up to 20%-30% of total wages.

• Diminished workforce stability may result in elevated turnover rates, leading to increased recruitment and training expenses, loss of institutional knowledge, and decreased innovation. Higher attrition often correlates with reduced productivity and a rise in workplace accidents. Weakening unions and employee representation can further erode morale, increase absenteeism, diminish loyalty, damage organizational reputation, and ultimately reduce sustainable profits.

EEOC: Announced changes to the EEOC include the elimination of all federal government DE&I programs, potentially exposing non-white male demographic segments to increased risk. In addition, it is anticipated reductions in the EEOC’s enforcement capabilities pose significant risks to businesses, employees, and the broader economy. Related to private sector organizations, it is anticipated that the Department of Justice will be asked to prosecute private sector organizations that continue to have DE&I policies as being discriminatory. This will have an immediate and chilling impact on all diversity initiatives at all companies, again having a deleterious impact on the broader economy. The administration may also seek to narrow protections under the Pregnant Workers Fairness Act (PWFA), which requires employers to provide reasonable accommodations for pregnancy-related conditions unless it imposes undue hardship. Additionally, there may be efforts to rescind recently enacted protections for LGBTQ+ workers, including expanded definitions of sex-based discrimination in workplace harassment guidelines. Such rollbacks could leave many employees with limited recourse against actual discriminatory practices.

• Potential outcomes of these changes include an increase in private litigation as employees seek justice for workplace discrimination and harassment outside the EEOC framework, leading to higher legal costs and potential class-action suits. A decline in workforce diversity may erode competitive advantage, as research indicates that diversity enhances innovation and decision-making quality. Difficulty in attracting and retaining diverse talent, particularly among younger generations, could result. Consumer purchasing decisions are increasingly influenced by corporate diversity, potentially impacting revenues. Rolling back PWFA protections may create unsafe working conditions for pregnant employees, elevating the risk of workplace injuries and legal claims. While reducing federal oversight might seem to alleviate regulatory burdens, the long-term consequences for businesses are significant: undermined diversity, increased legal risks, reputational damage, and workforce destabilization.

The Hidden Costs of Regulatory Rollback

Rolling back worker protections can significantly impact the economy. The Small Business Administration indicates that companies with strong worker protection programs experience lower failure rates. OSHA reports that every dollar invested in safety programs yields $4 to $6 in cost reductions. Unions, instrumental in building the mid-20th-century middle class, continue to benefit society, with one in nine U.S. workers unionized. OSHA also notes that workplaces with effective safety and health management systems reduce injury and illness costs by 20% to 40%, alongside improvements in product quality and employee morale.

The Path Forward

The evidence is clear: weakening worker protections jeopardizes not only employees but also business sustainability and economic growth. OSHA reports that every dollar invested in safety programs yields a $4 to $6 return in reduced costs. Additionally, companies with robust worker protection programs experience significantly lower failure rates. Maintaining strong labor standards is sound business practice. As organizations face potential regulatory shifts, those upholding comprehensive worker protections—beyond mere compliance—are poised to gain competitive advantages through enhanced productivity, reduced turnover costs, minimized legal risks, and bolstered brand reputation. Pursuing short-term gains by exploiting deregulation can erode the foundation of sustainable success: a stable, engaged, and productive workforce. Business leaders should recognize that robust worker protections are integral to long-term profitability and growth.