Policy Matters Newsletter - July 26, 2023

After Lengthy Confirmation Fight, Brace For Intrusive EEOC Action. On July 13, the Senate finally confirmed attorney Kaplana Kotagal — whom we have had numerous occasion to discuss in this space — to join the Equal Employment Opportunity Commission in a 49-47 vote. Her confirmation marks the end of a lengthy process that will establish a Democratic majority on the five member panel for the first time since President Biden took office. Although President Biden nominated Ms. Kotagal in April 2022 to replace Republican Commissioner Janet Dhillon, the Senate’s Health, Labor, Education, and Pensions Committee deadlocked on Kotagal’s nomination and it took over a year for her confirmation to pass along party lines.

Her confirmation marks a political shift that will inevitably impact how the EEOC develops and enforces its agenda. Companies should expect for the EEOC’s Strategic Enforcement Plan to move ahead now with full force. The EEOC’s plan proposes an aggressive stance on a host of issues including those related to the LGBTQI+ community, immigrant and migrant workers, the use of technology in hiring, and other employment decisions. Overall, companies should anticipate that the EEOC will tackle more progressive policy goals under the Democrat controlled EEOC.

For a more detailed look at EEOC Initiated litigation and its impact on employers, please see Seyfarth’s EEOC-Initiated Litigation Report.

SCOTUS Continues To Change The Personal Jurisdiction Game. In International Shoe Co. v. Washington, SCOTUS, recognizing an increasingly mobile economy, moved the personal jurisdiction (“PJ”) analysis from a more territorial based approach to a due process / minimum contacts analysis. It only took oh, seven decades, but in 2014, with Daimler AG v. Bauman, SCOTUS’ analytical directives on PJ finally coalesced into two neat buckets: (1) specific jurisdiction, where a defendant’s contacts with the forum are sufficiently related to the cause of action that the exercise of personal jurisdiction comports with due process; and (2) general jurisdiction, where a defendant can be sued for any claim – even claims unrelated to the defendant’s connection to the state – within the sovereign borders where the defendant is truly “at home,” i.e., where a corporation is incorporated.

Just a few weeks ago though, SCOTUS issued its opinion in Mallory v. Norfolk Southern Railway, Co., upending, to some extent, the tranquility of the bilateral PJ analysis civil litigators had become accustomed to. At issue in Norfolk was a Pennsylvania statute requiring out-of-state companies that register to do business in Pennsylvania to agree to appear in its courts on “any cause of action.” The Court held that the Due Process Clause did not prevent Norfolk from being sued in Pennsylvania even though the cause of action pressed against it had no connection to Pennsylvania whatsoever, and Defendant was not “at home” there. The holding caused Civil Procedure professors to run to their syllabi — most court commentators assumed that the Due Process Clause prevents the assertion of jurisdiction over claims wholly unrelated to a defendant’s connection to the forum (See Amy Coney Barret’s well-written dissent). To be fair, though, consent to jurisdiction has always been a traditional basis of jurisdiction, but prior consent analyses typically involved waiver of PJ after a matter had been filed through making a voluntary appearance.

The immediate concern, obviously, is that this decision spells personal jurisdiction against any corporation that wishes to register to do business in any state, leading to a wild world of litigation where forum shopping abounds. This, of course, is a theoretical possibility. But, the question now becomes one of public policy. In light of the decision, how many states will pass similar registration statutes inviting general jurisdiction of all claims? That much remains very unclear. We would be willing to bet that not every state is keen on inviting a flood of litigation unrelated to its borders. We will be paying particular attention to how legislatures in California, Texas, Illinois, and New York respond. Stay tuned.

Pay Transparency In Paradise. On the eve of Independence Day, Hawaii followed in the footsteps of California, Colorado, and New York City by passing ACT 203: Relating to Employment Earnings, which Seyfarth discussed here. The law, which goes into effect on January 1, 2024, requires all employers with fifty or more employees to include pay or salary information as part of a job advertisement in order to increase pay transparency and equal pay for all employees. Employers must disclose the hourly rate or salary range that reasonably reflects the actual expected compensation, and are prohibited from discriminating against employees in any protected category through payment of lower wages. The law permits employees to establish a claim through a comparator performing “substantially similar work” — in lieu of the “equal work” term employed by the federal equal pay act — but receiving higher wages. Washington D.C.’s council is currently considering a similar measure.

For more information regarding the changing Equal Pay Landscape, please see Seyfarth’s Pay Equity: Issues and Insights. Seyfarth’s Pay Equity Group also provides other resources such as: 50 State Equal Pay Reference Guide - 2023; Pay Transparency Wage Range Disclosure Compendium; The Developments in Equal Pay Litigation Report – 2023 Update; and the 2023 Global Pay Equity Desktop Reference.  

More Than De Minimis to Comply with Title VII. In an unanimous opinion, the Supreme Court held in Groff v. DeJoy that for employers to deny an accommodation under Title VII, they must demonstrate “substantial increased costs” in conducting their business. This ruling effectively disavows the long-standing de minimis standard previously established in Trans World Airlines, Inc. v. Hardison, decided in 1977, providing that accommodation creates an “undue hardship” if it caused more than a “de minimis” burden on the employer’s business. The Court also noted that an employer must show more than just that the accommodation forces other employees to work overtime, emphasizing that “[c]onsideration of other options, such as voluntary shift swapping, would also be necessary.” For a more detailed analysis of the case, see Seyfarth’s analysis here.

As a result of this holding, employers with seniority based systems – unionized and non-unionized – now face uncertainty. Although the holding kept in place Title VII’s protections for seniority based bidding systems, employers should not assume their seniority-based bidding system protects them from accommodation claims and should not rely on de minimis cost defenses in case their seniority system does not protect them. Even though the Court expressly declined to adopt the Americans with Disability Act (“ADA”) standards in the Title VII context, employers should expect to conduct a case-specific inquiry similar to what employers must perform under the ADA with respect to accommodation requests for time off. 

This ruling has and will continue to significantly impact employers. For a thorough overview of these impacts, please see Seyfarth’s Webinar, “Workplace Religious Accommodations under the New “Substantial Costs” Standard: Unanimous Supreme Court Decides Groff v. DeJoy.” For more information regarding the impacts of recent Supreme Court decisions, please see Seyfarth’s Navigating Cultural Flashpoints in the Workplace.

Recreational Cannabis Is The Rage. What About Employer Testing? For nearly a decade, Minnesota provided job applicants and employees with protections if they lawfully use cannabis for medicinal purposes. As Seyfarth recently reported, starting August 1, 2023, Minnesota will add additional protections for individuals who use cannabis for recreational purposes. The new law amends the state’s Consumable Products Act to protect off-duty cannabis use, as well as the state’s Drug and Alcohol Testing in the Workplace Act (“DATWA”) by excluding cannabis from the definition of “drug” and creating two different workplace drug testing schemes based on whether the positions is exempt from the cannabis testing prohibitions.

What does this mean for Minnesota employers, and employers in general? Minnesota is now one of a growing number of jurisdictions, such as California, New York, Montana, and Washington, D.C., which make it unlawful for an employer to take any action against a person for off-duty cannabis use, subject to certain restrictions such as the employer’s right to discipline an employee who is impaired by cannabis products during working hours. There are many considerations for employers pondering the future of their cannabis testing practices, as Seyfarth recently discussed in its blog The Blunt Truth®. Indeed, the rapidly evolving legal landscape surrounding cannabis presents new challenges for employers, especially multi-state employers. Employers considering discontinuing cannabis-testing should work with experienced counsel to discuss and weigh the various considerations surrounding testing, and should review their workplace drug-testing policies to be sure they comply with existing and soon-to-be-effective state and local laws.

SCOUTS AA Holding: Kinda The Death Knell. In Students for Fair Admissions v. Harvard, SCOTUS, by a vote of 6-3, effectively ended the use of consideration of race in college admission, overturing decades of precedent permitting the practice. The opinion essentially overruled Grutter v. Bollinger from 2003, which permitted the consideration of race “as one factor among many, in an effort to assemble a student body that is diverse in ways broader than race.” In her majority opinion in Grutter, Justice O’Connor noted that such programs with “race-conscious admissions policies must be limited in time” and such a “durational requirement can be met by sunset provisions in race-conscious admissions policies.” According to Chief Justice John Roberts, the sunset time is now: writing for the majority, he held that an applicant “must be treated based on his or her experiences as an individual — not on the basis of race.” While the decision is a general bar on even the consideration of race in analyzing an applicant, it leaves open a small sliver for applicants to describe, in their essays, how race may have played a part in developing personal characteristics or in overcoming life’s obstacles.

It Is Hot – Some States Are Mandating Employer Heat Protections, Some Are Not. Employers are feeling the heat as many states are beginning to mandate or further strengthen current heat-related protections for employees and particularly outdoor workers. For example, as recently reported by Seyfarth, effective July 17, 2023, employers with outdoor workers in the state of Washington will be required to follow a more stringent set of revised heat illness prevention rules. Additionally, earlier this year, California’s Cal/OSHA published its proposed indoor heat illness prevention standard which comes with its own set of requirements for employers to watch out for.

Other states aren’t as eager to mandate employer heat protections. Notably, Texas recently signed into law House Bill 2127 which actively prevents local entities from creating rules that go beyond what state law requires on issues such as labor, agriculture, business and natural resources. Critics of the bill say it strips outdoor workers of the right to mandated water and rest breaks in certain cities. Nevertheless, heat illness in the workplace has become a true concern for lawmakers — rising global temperatures paired with an aging workforce and tight labor markets have brought occupational heat illness to the forefront. As such, understanding how to protect employees from heat-related illnesses, and furthermore protect employers from liability due to heat-related illnesses is a growing concern. Those interested in the subject are invited to view an educational webinar Seyfarth recently hosted here.

DOL’s Mine Safety and Health Administration Proposed Regulation. This space has in the past highlighted then-current levels of stagnation at the DOL. It should also be noted, however, that it is not as though the DOL is sitting on its hands — external factors have slowed things down. Indeed, The Mine Safety and Health Administration (“MSHA”) at the DOL has proposed a rule that would apply to mine workers protections against certain carcinogens already applicable to construction workers and some other industries starting in 2016. 

Sorry California, But SCOTUS Has Spoken: Appealing Denial Of A Motion To Compel Arbitration Automatically Stays Trial Court Proceedings. Earlier this year, Senator Scott Wiener (D-SF) introduced into the California Legislature a bill that would have prohibited a trial court from staying proceedings when a party appeals the denial of a motion to compel arbitration. This would have required parties to waste resources litigating in dual tracks / forums: (1) the appeal of the denial to move the action into the forum contracted for, and (2) the very forum one party believes lacks jurisdiction to hear the matter. Frustrating that endeavor to some extent though, SCOTUS recently held in Coinbase, Inc. v. Bielski, that under the Federal Arbitration Act, a trial court must stay its proceedings while the interlocutory appeal on arbitrability is ongoing. Good news for employers from a blog that does not always offer the same!

NY Non-Compete Is Here. The State of New York is inching even closer to banning employee non-compete agreements. As Seyfarth reported last month, on Governor Kathy Hochul’s desk now sits a bill that, if signed into law, would void any employment agreement containing a prohibited non-compete restraint and would subject employers to potential litigation and liquidated damages. Indeed, as we recently discussed here and here, New York will likely join a number of states that prohibit non-compete clauses in employment agreements.

And speaking of New York, as we discussed here, the New York State Legislature has also recently passed a bill that increases the earnings threshold for executive, administrative, and professional employees to file a complaint with the New York Department of Labor for owed wages under Article 6 of the New York Labor Law.

OSHA Reinvigorates Workplace-Injury Reporting. As Seyfarth recently reported here, OSHA recently announced new rules requiring a broad range of employers to now electronically submit additional injury and illness information in 2024 through its Injury Tracking Application (“ITA”). The new compliance requirements impact a significant portion of the American workforce, including employers in the manufacturing, construction, health care, retail, warehousing, transportation, and performing arts industries. In light of the new compliance obligations, employers should consider developing strategies in addressing how to minimize the instances of recordable injuries or illnesses at the workplace, as well as ensuring all required OSHA records are properly kept.

NLRB Wipes Out Trump-Era Independent Contractor Rule. In an early June ruling, The Atlanta Opera, the National Labor Relations Board (“NLRB”) raised the standard that employers must use to determine when someone qualifies as an independent contractor, overturning Trump-era precedent and returning to the test announced by the Obama-era Board.

Now, the NLRB will review a multitude of enumerated and non-enumerated factors when determining independent contractor status, with no factor being given more weight. These factors include the following:

• The extent of control exercised by the employer over the worker;
• Whether or not the worker is engaged in a distinct occupation or business;
• The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the employer or by a specialist without supervision;
• The skill required in the particular occupation;
• Whether the employer or the worker supplies the instrumentalities, tools, and place of work for the person performing the work;
• The length of time for which the worker is employed;
• The method of payment, including whether payment is by time worked, job performed, or some other method;
• Whether or not the work is a part of the ”regular business” of the employer;
• What type of relationship the parties believe they are creating; and
• Whether the worker is or is not “in business.”

Employers should consider reviewing their independent contractor practices and policies to ensure they have properly classified groups of workers. For a more thorough analysis of the case please see Seyfarth’s analysis here.

Biden Administration Regulatory Agenda. At the onset of this administration, we expected a flurry of action in the form of final regulations from a variety of federal employment agencies.  While numerous regulations have been proposed, and there has been a flurry of enforcement and other non-binding guidance, those proposals have not been finalized. In other words, the GOP and some moderate Democrats have done a commendable job of gumming up the bureaucratic necessities of the administrative process (see e.g., Julie Su’s bumpy confirmation process). With this backdrop, the administration announced its spring 2023 regulatory agenda on June 13, 2023 (almost the end of spring!), which Seyfarth discussed here. The news from the released agenda: not much has changed. The DOL has yet to issue a proposed rule  on “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” and the “Employee or Independent Contractor Classification Under the Fair Labor Standards Act” proposed rule has moved from the proposed to final rule stage, but is still very delayed. Between the Office of Information and Regulation taking longer to review rules and Julie Su’s stalled confirmation, employers should expect this slow regulatory roll to continue. This is not necessarily bad news for employers, but at the same time, employers are looking for a little more certainty.