Winds of Change: Construction Companies Eye Legislative, Regulatory Issues That May Impact Them in 2025
Re-Published With Permission From Construction News and ReviewBy Kerry Smith Buck
From cybersecurity reporting frequency to permitting hurdles, contractor misclassifications to tariffs, OSHA walkarounds to reverse auction requirements and upskilling, 2025 will surely be a year when contractors, subcontractors and project team players will be eyeing how decisions regarding these topics – and others – may well impact their company and their industry this year.
“We can expect across-the-board labor laws that are much improved over the next three to four years,” said Jack Burkman, partner at D.C.-based lobbying group JM Burkman & Associates, LLC.
National Labor Relations Board MakeUp, Memos
With the election of President-Elect Donald Trump on November 6, 2024, attorneys and their clients are anticipating that the National Labor Relations Board will become much more employer-friendly, like it was during Trump’s first administration. However, there are several reasons all employers should stay vigilant and pay close attention to the NLRB during the next two months and possibly during the first two years of the Trump Administration.
By way of history, the NLRB is a fiveperson board established by Congress in 1935 for the purpose of safeguarding and adjudicating the rights set forth in the National Labor Relations Act. The NLRA essentially protects the rights of nonmanagement employees to (1) make or form a union and
(2) engage in protected concerted activities (actions taken by employees, either individually, or as a group of employees, to address workplace issues related to their terms and conditions of employment).
The NLRB also employs a General Counsel, currently Jennifer Abruzzo (since July 2021), whom Trump will very likely replace. The GC regularly issues memoranda setting forth changes to existing law that she would like to see the board implement – and asking each of the 32 NRLB regional offices to look for violations with issues and fact patterns that would allow the NLRB board to change the law consistent with the GC memos.
On President Biden’s inauguration day (January 20, 2020), he fired the board’s then-sitting GC, Peter Robb, whose four-year term was not set to expire until November 2021.
This move allowed Abruzzo to begin issuing GC memos early in Biden’s term with the aim of undoing many of the changes made during the first Trump administration. The firing also allowed Abruzzo to further expand the rights of employees by making unionization easier and expanding the definition of and the protections afforded to “protected concerted activity.” Some examples during the past four years have been new rules (a) limiting the types of policies that can be included in employee handbooks, (b) making it easier for independent contractors to qualify as employees and (c) forcing employers to unionize even without a union election, despite the fact the employees overwhelmingly voted against unionization.
Zachary Wiseman, labor and employment attorney at Salt Lake City-based Ray Quinney & Nebeker, says that, like her predecessor, Abruzzo will be fired.
“A new general counsel likely will rescind certain GC memos, including one directing the breadth of consequential damages that regional offices should seek and another finding ‘stay-or-pay’ provisions unlawful,” Wiseman said. A “stay-or-pay” provision, Wiseman notes, requires employees to repay a certain amount of money in the event they do not work a specified timeframe at the employer.
“Another big change will be that the NLRB board composition is expected to become majority Republican – unlike how its current Democratic majority – and return to employer-friendly standards and rules,” he added.
Many current GC memos will be rescinded, says Wiseman. For example, GC Memo 24-04 discusses the breadth of consequential damages that regional offices have sought and continue to seek, including:
- Loss of contributions already made to a retirement fund due to failure to complete a vesting period;
- Lost anticipated earnings from already accumulated retirement fund amounts;
- Penalties imposed for early retirement fund withdrawal caused by cessation of participation;
- Unreimbursed tuition payments, where that reimbursement was part of the employee’s compensation package;
- Unreimbursed web development, marketing and business insurance costs made by an employee on commission in order to increase sales of the employer’s product;
- Job search costs, such as reimbursement of mileage and gas costs, car/ride service payments, job search app costs and resume printing fees;
- Daycare costs;
- Specialty tool costs;
- Late fees and/or related accrued interest on payments of rent, utilities, mortgage, tax, auto loans and credit cards; bank overdraft fees;
- Utility disconnection/reconnection fees;
- Reductions in earnings and/or penalties resulting from an individual dipping into savings or retirement funds to replace lost income;
- Legal representation costs in eviction proceedings; and
- Expenses resulting from a change in immigration status.
Many have suggested that President Trump may “one-up” President Biden’s unprecedented firing of the then GC Robb on January 20, 2020 by terminating both GC Abruzzo and one or more board members on inauguration day to ensure he has a majority pro-employer board throughout his administration.
“Technically, President Trump can only remove board members for ‘neglect of duty or malfeasance in office’ but many legal scholars have long opined that this limitation is unconstitutional,” Burkman said. “Only time will tell what President Trump will do, but all employers should pay close attention to the board in the coming weeks and months,” he added.
Banking Regulations
The incoming Trump administration is likely to lead to swift turnover at bank regulatory agencies, which would push finalization of new capital standards for large banks further down the road.
Trump will likely delay Basel III, an internationally agreed set of measures developed by the Basel Committee on Banking Supervision in response to the 2008 U.S. financial crisis.
While the goal of these reforms has been to strengthen the banking sector’s ability to withstand financial stress, improve risk management and promote transparency in international banking, the latest series of reforms introduced during 2024 quadrupled the amount of capital required to gain funding for clean energy projects.
In short, says JM Burkman & Associates Partner Jacob Wohl, if Basel III were left in place, it could impact many lenders to developers and owners of construction projects.
“We’re hopeful, as are our clients in the construction sector and elsewhere, that President Trump will delay or reform this provision that in reality would only benefit the big banks,” Wohl said, adding that under Basel III the feds have been asking banks to withstand a financial stress test but won’t tell institutions what the test is. “Overall this action would hugely impact the construction world in a positive way, as the capital requirements for banks would loosen without Basel III.”
Trump Tariffs
President Trump’s bark is worse than his bite, says Wohl, when it comes to tariffs on imported construction materials.
“China is so interwoven into the very nature of the construction supply chain,” he said. “For example, there are Chinese manufacturers in the hardwood flooring business that will pay the U.S. import tariffs yet still be able to sell their product to U.S. construction firms for less than their U.S. competitors.”
Yet many in the industry are watching and waiting to see how the increased tariffs on Canadian, Chinese, the European Union and South Korea will impact critical material supply chains for contractors and their suppliers.
Ken Simonson, chief economist for the Associated General Contractors of America, says that while construction material prices peaked in mid-2022, for much of 2023 they remained lower than the prior year.
“But the prospect of higher tariffs may drive up construction costs and invite retaliatory action by U.S. trading partners,” he said.
Permitting Reform
This topic is one within which the nonresidential construction sector will likely see positive traction under the second Trump Administration, according to Alex Etchen, vice president of government relations for the Associated General Contractors of America.
“We’re definitely going to notice a big emphasis on comprehensive permitting reform,” said Etchen. “Renewable energy projects can break down and meet some of the climate goals they’ve set, but under the Trump administration there will be a broad approach.”
Streamlining the federal permitting process continues to be a huge advocacy focus for the American Subcontractors Association. ASA Director of Government Relations Mike Oscar says the national association of more than 33 chapters is pushing for one federal decision framework to simplify and speed up the construction permitting process. “We want any measures that can simplify and expedite this process so that subcontractors are paid sooner,” Oscar said. “The Environmental Protection Agency (EPA), U.S. Dept. of Transportation (USDOT), Army Corps of Engineers, the Dept. of Defense and other agencies are all operating according to their own schedules and deadlines. All this takes time. And the longer that permit is held up, the longer the subcontractor is waiting,” he added.
Hazardous Material Definition
Speaking of uncertainties, the EPA’s current definition of what constitutes a hazardous material has broadened since the agency’s final rule went into effect during 2024. The rule amends the definition by designating two commonly used construction compounds – PFAS and PFOS – as hazardous substances under the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as CERCLA or Superfund).
The EPA announced its final rule on April 19, 2024.
Perfluoroalkyl and polyfluoroalkyl substances, or PFAS, are a group of chemicals made by humans. Since the 1950s, PFAS have been used in construction projects as surface sealers for stone, tile, grout and concrete to increase resistance to oil, water and stains. They are also used in numerous types of building products. PFAS also function as weatherproofing and corrosion prevention.
Etchen says this EPA rule is not a good one as far as contractors are concerned. “This definition under the EPA Superfund Law creates liability for contractors,” he said. We’re (AGC of America) challenging it in court.”
Reforming Retainage Practices
Another significant focus that continues for the ASA in 2025 involves retainage practices. Oscar says the association is lobbying for a reduction in the maximum retainage rate on federal construction projects from 10 percent to five percent. “High retainage rates can strain subcontractors who must front the cost of labor and materials, impacting their liquidity and financial health,” Oscar said. “This change would alleviate financial pressure and improve the economic conditions for subcontractors.”
Tax Reform
No doubt every construction organization in the U.S. that is represented by an advocacy individual or team is closely eyeing any proposed tax reform that is set to occur under the second Trump administration. Simonson says contractors can expect more favorable tax and regulatory policies than in recent years. “But the timing of these changes remains murky,” he added.
The ASA supports renewal of the qualified business deduction – known as part 199A of the Tax Cuts and Jobs Act of 2017. “We also support all extensions of the provisions related to business succession planning,” said Oscar.
The Tax Cuts and Jobs Act has benefited construction industry companies by lowering corporate tax rates, thereby providing much needed tax relief for businesses, according to Trent Cotney, partner and construction team leader at Adams & Reese LLP. “The hope is to create jobs by attracting corporations back to the U.S. who moved overseas to take advantage of lower tax rates,” said Cotney. “If your business is a C corporation, meaning that your company is taxed on its net income, you now enjoy a flat 21 percent tax rate — a significant drop from the previous tax rate of 35 percent.”
S corporations, sole proprietors, or partners who qualify can now take advantage of a pass-through entity deduction of 20 percent. For qualified businesses in the maximum tax bracket of 37 percent, the maximum tax rate is reduced to a much more manageable 29.6 percent.
It’s not uncommon for a construction project to take years to complete, which makes filing taxes on revenue for a single year a challenge. Large construction companies use a percentage of completion method when calculating taxes; however, this method, says Cotney, can create cash-flow issues, especially for smaller contractors.
“Previously, contractors working on a project that was expected to be completed within two years, and with annual gross receipts under $10 million in the prior three years, were able to postpone taxation until project completion or final payment. This $10 million threshold prohibited many business owners from taking advantage of the exemption… the Tax Cuts and Jobs Acts increased the $10 million threshold to $25 million. Contractors that fall within this range are now using either method for recognizing revenue, whichever benefits their business the most. The contract completion method is far more preferable as it allows contractors ample time to collect on payments. We’re hopeful that Congress will take action so that the Trump era tax cuts will not expire.”
Construction Procurement Reform
The ASA, AGC and other industry associations support the House Construction Procurement Caucus, which focuses on improving construction procurement policies.
“This caucus serves as a platform for addressing issues that affect the construction industry and ensuring that procurement practices are equitable and efficient,” Oscar said.
AGC supports common sense procurement reforms to improve the delivery of federal construction services, and that benefit the government, taxpayers, small businesses and the entire construction industry, says Etchen.
“Reform of the federal procurement process should recognize construction’s unique melding of industry sectors while ensuring the government is using the most cost-effective method of procurement,” he added.
Given the magnitude of the external money and workforce, it is important that there be fairness, transparency and equity in federal awards, according to Darrell West, vice president and director of governance studies at Brookings. “That said, the government procurement process is not easy to navigate – especially for businesses without experience in submitting bids or understanding agency requirements and processes. There are paperwork barriers, geographic disparities, poorly trained officials and racial and gender inequities.”
The Federal Acquisition Regulation – and associated policies – contain thousands of pages of sometimes contradictory requirements that make full compliance nearly impossible. Construction firms, many of them minority-owned, say the procurement process can take so long that the contracts are often overcome by events before completion.
The Defense Innovation Board, which advises top Pentagon leaders on commercial sector innovation, called the web of procurement
regulations a “massive spaghetti code.”
Today, the FAR – the sets of rules governing the federal government’s purchasing process – is comprised of 53 parts and more than 2,000 pages of regulatory requirements, many of which are essential to everyday business operations, including setting pay terms, identifying small-business affiliation or meeting labor requirements set forth in the Service Contract Act.