Policy Matters Newsletter - July 15, 2022

Annnnd We're Back: Legislative Update. We appreciate this audience bearing with us as this newsletter has been on a short hiatus in light of some scheduling issues. During that brief respite numerous different pieces of legislation have moved in different legislative bodies. First, on the federal side, during the last week in June, the House Committee on Appropriations met to mark up a number of bills delineating FY 2023 appropriations for a variety of departments including Justice, Labor, Commerce, Agriculture, and others. For example, proposed legislation would appropriate $242.1 billion to labor health and other related agencies — an increase of $28.5 billion, or 13 percent. The bill provides a total of $15 billion in discretionary appropriations for the DOL, an increase of $1.9 billion above the FY 2022 enacted level and $125 million above the President’s budget request; and would appropriate  $2.2 billion for Worker Protection Agencies, including the Wage and Hour Division ($62 million increase), OSHA ($712 million increase), and OFCCP ($147 million increase).

As Seyfarth explained here, we noted here and here, and podcasted earlier this year, Congress recently passed and the president signed H.R. 4445, permitting persons alleging sexual assault or harassment to do so in court, even if the aggrieved person signed a pre-dispute agreement to arbitrate all claims. In light of the passage of that bill, as Seyfarth explained here, the Financial Industry Regulatory Authority edited the industry code to conform to the Act. Text of the changes can be found here.

In a recent issue, we queried whether Congress would introduce more legislation like H.R. 4445, continuing the recent trend of legislation aimed toward ensuring transparency in the employer-employee relationship, sometimes to the detriment of profitable business practices. We also recently discussed H.R. 963, which would expand H.R. 4445’s prohibition on arbitration of sexual harassment claims to all forms of disputes between consumers and sellers, disputes that relate to an actual or potential work relationship, alleged violation of antitrust laws, and all disputes alleging violation of antidiscrimination laws. We noted that the latter measure did not have the same bipartisan support as H.R. 4445. But a recent measure with similar aims in a different context does enjoy more bipartisan support. H.R. 8227, or the SPEAK OUT Act, would prohibit employers from enforcing pre-dispute nondisclosure agreements when a worker reports sexual harassment or assault. Rep. Lois Frankel (D-Fla.) is sponsoring the measure, which has the backing of Reps. Ken Buck (R-Colo.), Morgan Griffith (R-Va.), and Cheri Bustos (D-IL). A Senate companion is expected to be introduced with a GOP name recognition from Sens. Marsha Blackburn (R-Tenn.) and Lindsey Graham (R-S.C.), per Lift Our Voices.

At the beginning of this year, we reported on the introduction and subsequent consideration of H.R. 4521, or the United States Innovation and Competition Act of 2021, including certain provision of the PRO Act that have migrated into this bill. The bill has now passed both the House and the Senate, in slightly different forms, requiring conference between the two houses to square up the differences before it can go to the President’s desk. After the bill passed the Senate, Speaker Pelosi announced the legislators on the conference committee. Despite the creation of the committee almost three months ago, no squared-up measure has been released publicly. A serious sense of urgency now exists to get a bill to the President before it’s too late. “There is no reason that we should not pass this bill through Congress in July,” Speaker Pelosi and Senate Majority Leader Chuck Schumer said in a joint statement last week. The White House (including Cabinet members) and the scientific community are pressing Congress for a fix now.

As we have noted, often legislation from both California and New York has outsized influence on statehouses in other states, and sometimes even on Congress. Seyfarth has compiled two excellent resources (California and New York) summarizing the relevant bills being considered in both statehouses. In California, SB 1162 — which requires that employers with 100 or more employees provide the Department of Fair Employment and Housing (“DFEH”) with specified EEO-1 pay data that the Agency will make public, among other burdensome requirements — will likely have the largest influence on other legislation.  Pay equity remains a hot topic, and it is likely other statehouses will run to pass similar legislation during the next session.

While not as far reaching as SB 1162, the New York Senate and Assembly recently passed a similar pay data disclosure bill, S9427A, modeled after New York City’s measure, that would require businesses with four or more employees to include the range of compensation for any job, promotion, or transfer opportunity advertised. The New York State legislature also passed the Warehouse Worker Protection Act, which is similar to AB 701 passed in California last year. The bill requires covered companies to disclose production quotas to warehouse workers and prohibits companies from preventing employees from taking legally-protected breaks.

Enforcement of wage and hour laws is also a salient topic amongst legislatures. In Massachusetts, for example, the Legislature is considering H.4681 or “An Act to Prevent Wage Theft, Promote Employer Accountability, and Enhance Public Enforcement,” which buttresses the State Attorney General’s ability to enforce the State’s Wage Act by permitting public enforcement by a “relator,” i.e., a whistleblower acting on behalf of an aggrieved person, which can include current and former employees and other individuals that provide services to an employer that were not classified as employees. The measure has been dormant since it was referred to the Ways and Means Committee in April, so it is possible it will not move further. This is in many ways similar to California’s Private Attorney General Act, which was the subject of an important Supreme Court decision, as summarized below.

We have been East and West, so what is happening in the South? Legislation from Florida has been a lively part of the zeitgeist recently, especially as businesses prepare for compliance with the Parental Rights in Education Act -- colloquially referred to as the so-called “Don’t Say Gay Bill” — and the Stop WOKE Act. The former measure, publicly opposed by a number of large employers, bans the discussion of sexual orientation or gender identity in the state’s public schools; the latter prohibits employers from requiring any training or program that “espouses, promotes, advances, inculcates, or compels” concepts addressing diversity and inclusion. The latter measure certainly places a heavy hand on what Florida business can and cannot do.

For assistance with complying with any of these measures, please reach out to your favorite Seyfarth counselor.

All The Agency Rulemaking. Perhaps SCOTUS’ decision in West Virginia v. Environmental Protection Agency — which threatens the functioning of the so-called administrative state —caused a kick in the proverbial regulation writing derriere of many agencies, but a number of important agencies are currently pressing regulations that will affect the employer community.

First, of course, is the all-important rulemaking from the Department of Labor concerning Independent Contractors. We have been following the DOL Independent Contractor saga since the election of Joe Biden. In a background nutshell, (1) On January 6, 2021, the DOL under President Trump finalized a new rule, making it easier for companies, including those in the “gig economy,”  to classify their workers as independent contractors, rather than employees; (2) the Biden Administration, on January 20, 2022, stayed the effective date for all pending regulations, including the new IC rule, and the DOL published a notice for comment formally extending the effective date for the Independent Contractor regulation for an additional 60 days; (3) on March 11, the DOL issued a new notice of proposed rulemaking that eventually rescinded the Trump-era rule; (4) in March, a federal judge in Texas issued an order enjoining the DOL from withdrawing the Trump-era rule; and (5) the Department of Labor has appealed that ruling. Not only is the DOL appealing the decision, it has also drafted a notice of proposed rulemaking currently under review by the White House’s Office of Information and Regulatory Affairs. The White House received the proposal Tuesday, but other details about the rulemaking weren’t available — employers should expect a proposed rule more similar to California’s ABC Test and less similar to Economic Realities type test employed in the Trump-era rule.

OSHA‘s most publicized rulemaking was the so-called vaccine mandate, and we all know how that went. OSHA, however, has not been constrained to rulemaking in the COVID-19 vaccine space. As we noted here, OSHA has also been busy in other spaces. For example, On May 25, 2022, Douglas Parker, Assistant Secretary for OSHA, testified — and issued a written statement — before the U.S. House Committee on Education and Labor’s Workforce Protections Subcommittee, identifying development of an infectious disease standard for high-risk workplaces as a priority. OSHA is opening new COVID-19 programmed inspections focused on high hazard worksites. Employers should also be cognizant of the National Emphasis Program OSHA launched in April concerning indoor and outdoor heat illness, which Seyfarth summarized here. OSHA also expects to issue final rules in September 2022 for its Subpart U—Emergency Temporary Standard for healthcare workers—COVID-19 (1218-AD36), and in December 2022 on its Update to the Hazard Communication Standard (1218-AC93).

Apart from Independent Contractors and workplace safety, the DOL is working on a variety of other regulations — the full list can be found here — that would that would protect workers from heat; dictate when retirement plans can account for climate-related risks; bolster registered apprenticeships; update federal contractors' affirmative action programs; and revise prevailing wage policy.

The NLRB has identified two items on its Spring 2022 Agency Rule List: proposed rules on joint-employer status under the NLRA; and procedures governing blocking charges, voluntary recognition, and the formation of Section 9(a) bargaining relationships in the construction industry.  The proposed joint employer rule will likely be a reversion to the standard that existed prior to the April 2020 rule, which was altered by the Trump-era NLRB, i.e., the prior Browning-Ferris standard that prevailed prior to 2020.

Federalism And Leave: None If By Congress, One if By Statehouse, Many If By Ordinance. We have discussed in this space numerous times Congress’ attempts to pass some form of mandatory paid leave at the federal level, but Congress has consistently failed in that endeavor, even with the open support of the current Commander in Chief. Some states have stepped in to fill the paid leave vacuum left by Congress, such as the Colorado Healthy Families and Workplaces Act. Indeed, as Seyfarth summarized here, New Mexico has recently joined a handful of states requiring paid leave for certain, enumerated reasons. Paid leave laws have also promulgated below the state level, at the local level. For example, as Seyfarth noted here, West Hollywood has joined a number of other cities passing ordinances creating new paid and unpaid time off mandates. The West Hollywood Ordinance permits employees to accrue up to 96 compensated hours per year for sick leave, vacation, or personal necessity, and up to 80 hours of uncompensated sick time. And leave programs are of course more prevalent outside our own sovereign borders. For example, as Seyfarth noted here, across the Atlantic in Spain, the Council of Ministers has recently approved a proposal to amend the Bill on Sexual and Reproductive Health to include mandatory paid sick leave for menstrual health. Seyfarth has its own page dedicated to Paid Family and Medical Leave, it is worth the read!

Viking River Cruises, Inc. v. Moriana: SCOTUS Addresses Arbitrability of PAGA Claims. In this issue, we previewed SCOTUS’ decision to “review whether courts can exclude claims brought under the PAGA from federal arbitration requirements,” and offered a primer on PAGA’s enforcement mechanism of labor laws in California. After Oral Argument, on June 15, 2022, SCOTUS issued its ruling that individual claims under the California Private Attorneys General Act (“PAGA”) can be compelled to arbitration under the Federal Arbitration Act, partially preempting the California Supreme Court’s longstanding and contrary Iskanian decision from the California Supreme Court. Seyfarth’s summary of the decision is worth the read.

As any attorney who has dealt with a PAGA claim will tell you, it is a confusing statute, and SCOTUS’ decision did not completely clear up the confusion. Indeed, Justice Sotomayor’s concurring opinion specifically states that “if this Court’s understanding of state law is wrong, California courts, in an appropriate case, will have the last word. Alternatively, if this Court’s understanding is right, the California Legislature is free to modify the scope of statutory standing under PAGA within state and federal constitutional limits.”

What do we know for sure from the ruling? Well, SCOTUS explained that the Federal Arbitration Act preempts Iskanian’s rule that PAGA claims cannot be divided into individual and non-individual actions through an arbitration agreement. The defendant was therefore entitled to enforce the agreement insofar as it mandated arbitration of plaintiff’s individual PAGA claim, and as such, a plaintiff lacked statutory standing to continue to maintain a representative PAGA claim in court. The correct course is to then dismiss the remaining claims. On the other hand, however, a waiver of “representative” PAGA claims is still invalid under Iskanian if construed as a “wholesale waiver” of such PAGA claims, and that this aspect of Iskanian was not preempted by the FAA. Going forward, PAGA waivers in arbitration agreements should be clear that there is no waiver of the right to bring a PAGA claim for violations allegedly suffered individually by the employee, but that there is a waiver of the right to bring a PAGA claim involving violations allegedly suffered by other employees.

Another big question will be whether the California Legislature accepts Justice Sotomayor’s invitation to amend PAGA to expand the standing requirement, i.e., who can bring a claim and where. There are a few things the legislature in California can do to make sure the PAGA coffers keep getting filled, including, among others: (1) legislation empowering the LWDA (the State) to exercise greater oversight over PAGA litigation, including the ability to intervene at any point in PAGA litigation; (2) legislation eliminating the requirement that a PAGA plaintiff be an aggrieved employee; and (3) legislation invalidating any agreement required as a condition of employment. Other states that are looking to enact their own versions of PAGA will be watching to see if and how the California Legislature adjusts the law. Stay tuned to this space, as we will report on how the California Legislature reacts to the decision.