Federal Deregulation Reshapes HR Compliance

The Trump administration’s push to reduce federal workplace regulations is reshaping the compliance landscape for employers, creating more flexibility but also new challenges for HR leaders.

At a recent hearing before the Subcommittee on Workforce Protections, Republican lawmakers and business advocates argued that regulatory requirements have become an impediment to hiring, investment, and business growth. Labor advocates countered that workplace protections are being weakened at the expense of employee safety, health, and economic security.

For HR executives, the debate is more than political. Changes involving independent contractors, joint-employer liability, overtime, union reporting, and occupational safety can directly affect workforce models, compensation practices, employee relations, and compliance strategies.

Rep. Ryan Mackenzie, R-Pa., who chaired the hearing, said employers need a regulatory environment that promotes growth rather than imposing unnecessary administrative burdens.

He argued that regulatory uncertainty and compliance costs can make it more difficult for employers to create jobs and urged policymakers to minimize bureaucratic slowdowns while maintaining appropriate environmental and safety standards.

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A Push for Greater Flexibility

A central theme of the hearing was that existing labor laws were designed for a workforce and economy that no longer resemble today’s labor market.

Austen Bannan, employment policy fellow at Americans for Prosperity, pointed to the age of two foundational federal employment statutes: “The National Labor Relations Act is 91 years old, while the Fair Labor Standards Act is 88 years old,” he said. “Both were written for an economy where Americans often worked their full careers at one or very few employers, in fixed shifts, and in one career pathway.”

Bannan noted that more than 70 million U.S. workers now earn some or all of their income through self-employment, and that today’s labor market is characterized by independent contracting, frequent job changes, technological disruption, and evolving skill requirements.

That has significant implications for HR departments increasingly managing blended workforces that can include traditional employees, contractors, freelancers, and other contingent workers.

“U.S. workers both need and want more flexibility to thrive in this dynamic landscape,’ he said.

“In other words, creating ample opportunity for workers to choose how they work is one of the most critical ways to protect workers and American families in our economy.”

A prime example is independent-contractor classification. The Department of Labor proposed in February to restore a framework centered primarily on two factors: the degree of control a business exercises over the work and the worker’s opportunity for profit or loss. The proposal would replace the six-factor approach adopted in 2024.

The Business Case for Controlling Regulatory Costs

Douglas Holtz-Eakin, president of the American Action Forum, framed the issue primarily as an economic one.

“Compliance with the regulatory state is costly and those funds compete with paying higher wages, providing workers benefits, and expanding the productivity of the firm,” he said.

He added that regulations should be used only when necessary and designed to minimize costs, while advocating for Congress to make regulatory reform permanent.

Holtz-Eakin presented on the recent history of the costs imposed on the private sector by federal regulations. According to his data, the Obama administration averaged $108 billion in annual regulatory costs over eight years, while the first Trump administration imposed $16 billion over four years.

“The difference is like night and day to the small business community and its workforce,” he said. “The Biden administration averaged a stunning $469 billion over four years, including one year exceeding $1 trillion. This administration has reversed course sharply.”

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Small Employers Face a Different Compliance Reality

The regulatory debate takes on particular importance for smaller organizations, which often lack the HR, legal, and compliance resources of large employers.

Elizabeth Milito, executive director of the National Federation of Independent Business’ (NFIB) Small Business Legal Center, said small businesses are struggling to balance hiring and operational demands with an expanding regulatory burden.

“For many small employers, the challenge is no longer simply finding customers. It’s finding workers, keeping the doors open, and staying compliant,” Milito said.

She pointed to federal regulations finalized between 2005 and 2024, which she said imposed an estimated $3 trillion in costs on the private sector and generated more than 1.4 billion hours of paperwork. Those costs can fall disproportionately on smaller employers that lack dedicated compliance officers, HR teams, or in-house counsel.

Milito emphasized that reducing regulatory complexity does not necessarily mean reducing workplace safety.

“Cutting red tape and protecting workers are not competing goals,” she said. “Small businesses need clear, workable rules written with an eight-employee business in mind, not a Fortune 500 compliance department.”

Heat Safety Illustrates the Divide

Addressing workplace heat exposure illustrates the competing perspectives on regulation.

Milito urged Congress and the administration to block the Biden administration’s proposed federal heat standard, arguing that it could impose substantial new requirements on small employers. The NFIB has collected more than 10,000 signatures from small-business owners opposing a nationwide heat standard, according to her testimony.

Rep. Ilan Omar, D-Minn., took the opposite view, arguing that the regulatory rollback threatens basic workplace protections.

“Just last month, Committee Republicans voted to block OSHA from ever issuing any standard protecting workers from extreme heat — in one of the hottest summers in our country’s history,” she said.

“My Republican colleagues love to talk about getting rid of red tape, but let’s look at what they actually want to get rid of,” Omar said, pointing to workplace protections such as construction-site lighting, respirator requirements and mine inspections.

Rebecca Reindel, director of occupational safety and health at the AFL-CIO, similarly argued that the regulatory changes go beyond eliminating obsolete requirements.

“These are efforts to eliminate regulations that have been grounded in science and real-world evidence, based on public and expert input from all corners and have been effective and achievable for decades,” Reindel said.

“July 2026 was the hottest month ever recorded in the contiguous United States,” she said. “More than 2,600 workers died from heat exposure in the past five years alone. Yet, the Trump administration has refused to act on a comprehensive heat standard that would have guaranteed workers basic water, shade, and rest breaks from their employers. Instead, they have weakened OSHA’s existing heat enforcement program and have announced plans for a potential heat standard that would give employers more flexibility.”

Reindel argued that regulations can also drive workplace innovation rather than simply impose costs.

“Regulation spurs innovation,” she said, citing OSHA standards that she said have encouraged new technologies and practices while improving cost-effective compliance and reducing workplace deaths and injuries.

The takeaway for employers is that deregulation may provide more flexibility in some areas, but their workforce expectations, operational risks, and reputational exposure remain.