Policy Matters Newsletter - June 23, 2023

Aaaaaand we're back! As we did around the same time last year, we would like the thank the readers for y’all’s patience during our summer hiatus to allow our authors to take a short break to get some Vitamin D and replenish. But now, let’s get to it!

Legislation On A Road To Nowhere, But A Good Marker For 2024 Potentialities. This week, the Senate HELP Committee held hearings on, and advanced, three pieces of big employment legislation: S. 567, or the PRO Act, which we discussed here, S. 728, or the Paycheck Fairness Act, which we discussed here, and S. 1664, or the Healthy Families Act, which would guarantee at least seven paid sick days per year to workers at businesses with 15 or more employees. “These are not radical ideas,” stressed chairman Bernie Sanders, but we think a majority of employers would disagree. These measures passed after defeating a number of Republican-offered amendments, reinforcing the committee’s progressive bona fides. At least in this iteration of Congress, these bills have no chance of seeing President Biden’s desk. But, if 2024 sees a bigger blue wave than 2020, employers should brace for compliance with these extraordinary pieces of legislation.

Six Labor And Employment Bills Moving In – Wait For It – The GOP-Controlled House. It has flown low under the radar that the House Ways and Means Committee has been marking up six bills intended to provide relief for small businesses, many of which have bi-partisan authorship:

• The CHOICE Arrangement Act. Introduced by Rep. Kevin Hern (R-Okla), R. 3799 would allow employers to provide tax-advantaged funds to reimburse employees for buying their own health insurance on the individual market. It would codify two major rules promulgated during the Trump administration: a 2018 rule that permits businesses to join together to provide association health plans, and a 2019 rule that allows employers to provide tax-free contributions to employees to pay for Affordable Care Act plans. The White House and entire Democrat caucus oppose; indeed, an amendment that would have required Health and Human Services to confirm that it wouldn’t increase premiums on older Americans failed by a party-line vote of 211-220. This bill has moved the furthest on the legislative time line, passing the House by roll call vote 220 – 209.
• The Small Business Flexibility Act. The House Ways and Means Committee recently advanced R. 3798, introduced by Rep. Claudia Tenney (R-NY), which would amend the Internal Revenue Code to require the Department of the Treasury to “notify employers of the availability of tax-advantaged flexible health insurance benefits, with an initial focus on small businesses.”
• The Chronic Disease Flexible Coverage Act. The House Ways and Means Committee recently advanced R. 3800, introduced by Reps. Brad Wenstrup (R-Ohio) and Earl Blumenauer (D-Ore). The bill would codify a rule promulgated during the Trump administration allowing employers to offer pre-deductible coverage of 14 chronic care health services for employees using a high-deductible health plan (“HDHP”), such as Beta-blockers for patients with congestive heart failure. According to the Committee, “[t]his flexible option allows employers to incentivize their employees to adhere to key chronic disease management services, improving patient health while reducing disease  progression and costly hospitalizations.”
• The Telehealth Expansion Act of 2023. Introduced by Reps. Michelle Steel (R-Calif), Susie Lee (D-Nev), Adrian Smith (R-Nev), and Brad Schneider (D-Ill), R. 1843 would permanently allow pre-deductible coverage of telehealth services for HDHPs. Congress has extended this flexibility through 2024, but according to the Committee, “many employers want to make this benefit permanent.”
• The Paperwork Burden Reduction Act. Introduced by Reps. Jason Smith (R-Mo) and Jimmy Panetta (D-Calif), R. 3797 would allow employees to access certain health insurance coverage forms related to ACA coverage online in lieu of by paper through the mail. According to the Committee, the Act would “reduc[e] unnecessary paperwork mandates while ensuring the form is still available to employees who may need it.”
• The Employer Reporting Improvement Act. Introduced by Reps. Adrian Smith (R-Nev) and Mike Thompson (D-Calif), R. 3801 would provide employers with relief from some of the ACA reporting requirements. Specifically, the measure would provide a six-year statute of limitations for the law’s employer shared responsibility payments, which the IRS can assess on large employers who fail to offer affordable health coverage with minimum value to their employees. In addition, the bill would permit employers at up to 90 days to appeal an adverse assessment before any enforcement. Finally, the measure would allow employers to send coverage information to employees via email with the employee’s consent.

Su’s Contentious Nomination Reflects Stagnation On Proposed Rules Marinating At DOL. We have had many occasions to discuss personnel as policy at the DOL, especially since the departure of then Secretary Marty Walsh and nomination of Julie Su to replace him. Su attended her final committee hearing in late April, when her confirmation advanced out of the Senate Health, Education, Labor and Pensions (“HELP”) Committee on a strictly party line vote. Since Walsh departed, and Su took on the role of Acting Secretary, the agency hasn’t finalized or proposed any new regulations. And it’s not just Su — as we noted here, Jessica Looman, Biden’s pick to head the Wage and Hour Division, has been waiting for a full Senate vote since July 2022. Biden’s nominee to lead the Employment and Training Administration has been lingering in the Senate for even longer than Looman.

A full Senate vote on Su’s confirmation was supposed to occur at the end of May, but did not, and a vote has not been scheduled. It remains very unclear whether Su will be able to pull needed votes from Sens. Joe Manchin of West Virginia, Mark Kelly of Arizona and Jon Tester of Montana, as well as Sens. Kyrsten Sinema (I-Ariz.) and Angus King (I-Maine).

Su’s stagnant confirmation process mirrors proposed rulemakings regarding both overtime compensation and the classification of independent contractors that have been languishing at the DOL. As Seyfarth noted here, the IC proposed rule was issued almost a year ago, and the target date for finalizing the rule has been consistently pushed back, this time with fingers crossed for an October date. At the same time, without finalizing the rule, some businesses are accusing the DOL of ignoring the standard set by the DOL during the Trump administration, which remains the law of the land, leaving employers confused about what standard to apply. More than anything, though, “[w]hat employers are really looking for right now is certainty.”

The target date for issuing a notice of proposed rulemaking to increase the minimum salary that employers must pay to most of their exempt employees — which has been on the Agency’s regulatory agenda for almost a year — has been similarly pushed further into the calendar, as Seyfarth explained here.

As somewhat of an aside, it should be noted that Julie Su was recently involved intimately in negotiations between the ILWU and Pacific Maritime Association, which resulted in a tentative labor agreement regarding the very important operations at 29 West Coast Ports. Whether Su’s attendance helped form the deal is an open question. But one thing is for sure: Su’s intimate involvement in the negotiations should dispel, at least a modicum, some concerns that the nominee is too cagey.

That AI…Still So Hot Right Now. Artificial intelligence remains the salient issue in the L&E community, and it is surely making its mark on the world of policymaking and legislation. As Seyfarth recently discussed, on May 18, 2023, the Equal Employment Opportunity Commission (EEOC) released Technical Assistance guidance on the use of advanced technologies in the workplace. This publication stressed that existing EEOC policies and practices will and continue to apply to new technologies like AI in the workplace. The guidance also outlined the broad systems that might be subject to employment laws and posed a series of questions and answers designed to help employers avoid discriminatory employment decisions, regardless of whether those decisions are made by humans or machines.

Local governments are looking to review and regulate AI as well. Recently, as we discussed,  New York City’s Department of Consumer and Worker Protection held a roundtable to discuss the final rules implementing New York City Local Law 144 of 2021, which regulates the use of automated tools in employment decisions. At the roundtable, employers and business advocates revisited the requirements under the law, and the EEOC intends to address questions that remain in an upcoming FAQ-type guidance set to be released sometime before the law’s July 5, 2023 enforcement date. As always, we will stay tuned to these developments and keep our readers informed with the wonderful world of AI’s impact on legislation and policy.

At-Will Employment: Not Just Montana Anymore! Seyfarth recently reported that New York State is considering a bill that would, in essence, abolish at-will employment. While still in its infancy, with many potential amendments to be addressed, if it passes, the bill would prohibit employers from discharging employees absent cause or a bona fide economic reason. The bill would also require employers to administer progressive discipline programs and provide reasoned notices of termination except in circumstances involving egregious misconduct.

If passed, New York State would join Montana as the only states in the Union without at-will employment laws, something that was covered in this publication earlier this year.

Extending Ending Forced Arbitration Act To Include Race-Based Claims. On February 10, 2022, Congress passed significant new legislation amending the Federal Arbitration Act: The “Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act of 2021” precludes employers from mandating that employees arbitrate sexual harassment or sexual assault claims. Seyfarth reviewed the law in detail here.

Now, Congress is looking to expand the Act to include race-based claims — on May 2, 2023, Senator Cory A. Booker and Congressperson Hank Johnson introduced the “Ending Forced Arbitration of Race Discrimination Act” (S.1408 and H.R.3038). While the pace of legislation has slowed since the midterms elections, we have seen bipartisan legislation of this nature pass during this administration, and I would not count out an extension on the arbitration prohibition. Indeed, while admittedly much bluer legislative venues, as we noted here, California and Washington both recently passed what both term the “Silenced No More Act,” extending prohibitions on confidentiality clauses in cases of sexual assault / harassment to include race-based claims. We would not be surprised if D.C. followed. But, this new legislation is still in its infancy, so we will be sure to keep readers apprised of any developments as it moves forward.

More Withering of the Administrative State – The REINS Act. On June 14, 2023, the House voted 221-210 to pass the “Regulations from the Executive in Need of Scrutiny Act of 2023,” or the REINS Act. Passage of the Act, even if just in the House, is yet another punch in the onslaught against the administrative state.

We have discussed recent judicial and legislative antipathy toward the administrative state in this newsletter quite frequently. Given the number of words we have written on this issue, it might be helpful to provide a working definition of the administrative state. Some commenters would put it differently, but generally, it is the term used to describe Congress’ delegation of legislative powers to regulatory agencies that are under presidential management. For example, the DOL, NLRB, EPA, EEOC, and the SEC. While many have praised the expertise the administrative state provides on certain issues, many loathe its existence. Opponents argue that the administrative state has been used to excessively enact sweeping changes in the country without the backing of lawmakers who represent the voters. According to Chief Justice John Roberts, “hundreds of federal agencies [are] poking into every nook and cranny of daily life . . . and the danger posed by the growing power of the administrative state cannot be dismissed.”

As a result, on January 11th of this year, Congresswoman Kat Commack (R-FL) introduced the REINS act. The stated purpose of the bill is “to reassert Congress’ legislative authority and prevent excessive overreach by the executive branch in the federal rulemaking process.” Specifically, it requires that every new major rule proposed by federal agencies be approved by both the House and Senate before going into effect. The bill also preserves Congress’ authority to disapprove of a “nonmajor rule” through a joint resolution. “[T]he REINS Act is a core part of the House Republicans’ mission to reintroduce government accountability and to restore Congress’ role to check the regulatory agencies,” the measure’s author noted. Critics of the bill claim that it would hamstring the federal government and prevent the implementation of critical safeguards by enacting an unwieldy approval process.

The bill is unlikely to pass into law anytime soon, but could reappear in 2024.

Non-Compete Rules And Legislation…Also So Hot Right Now. As we have noted, the FTC proposed a rule that would constitute a blanket ban on non-competes. For more information on the FTC’s proposed rule, Seyfarth summarized the fallout of the proposed rule here, and we podcasted and summarized here as well. Another federal agency has decided to join the crusade — NLRB General Counsel Jennifer Abruzzo recently sent a memo to all regional directors informing them that non-compete provisions in employment contracts and severance agreement violate the National Labor Relations Act in all but very limited circumstances.

The memo takes the position that non-compete agreement are unlawful because they chill employees from exercising their rights under Section 7 of the NLRA. Not all non-competes would be illegal, though. Abruzzo vaguely stated that tightly crafted non-compete contracts could be legal in special circumstances such as a legitimate business interest in protecting proprietary or trade-secret information. But she qualified that response by stating that “employers’ desires to avoid competition, retain workers, and protect investments in training probably won’t justify noncompete agreements.” Notably, Abruzzo’s memo does not carry the force of law, but, through litigation, she has been able to accomplish most of the priorities laid out in her previous memo.

And it is not just the NLRB or the FTC, notable states are now also pressing legislation to enact a blanket ban on, as well as specified punishments for, including non-compete agreements in employment contracts. As we noted here, the NYS Assembly has joined the State Senate in advancing a bill to the Governor that would prohibit non-compete clauses in employment agreements. The Governor is expected to sign it.

GOP Takes Aim At ESG. In recent years, a business framework for evaluating a company’s performance and outlook based on environmental, social, and governance (ESG) factors has risen to prominence on Wall Street. ESG goes beyond financial metrics to consider broader societal and environmental issues in the context of corporate governance for the benefit of shareholders and other stakeholders. Seyfarth’s legal update provides a good primer on the same.

Despite its popularity amongst some corporations, ESG has landed in the crosshairs of some GOP politicians and lawmakers who consider the framework to be too “woke,” and a restraint on the free market. So far, most anti-ESG legislation has been limited to the state level. For example, last month, the Republican Governor of Florida and presidential candidate, Ron DeSantis, signed House Bill 3, which bans state and local governments from considering ESG factors when deciding to invest in or contract with specific businesses. With the recent growth in popularity of the anti-ESG movement, related legislation has also begun passing through Congress. Taking a pro-ESG stance, Democratic President Joe Biden issued the first veto of his presidency, striking a GOP-sponsored rule change that would restrict pension fund managers from considering ESG factors when investing. The fight will assuredly continue. Stay tuned.

A New Category Of Employment Protections: Caste. With Indian Prime Minister Modi currently in D.C., engaged in important talks with the President, no time is better than now to speak to this emerging issue.

As reported by AP News, “[c]aste is an ancient system of social hierarchy based on one’s birth that is tied to concepts of purity and social status.” While references to a societal hierarchy can be found in the Rig Veda (an ancient and sacred Hindu text), the caste system that exists now has evolved over centuries and under many empires. At the bottom of the caste ladder are the Dalits, who have historically performed tasks that were seen as too dangerous or inhumane for other members of society. While India has formally banned caste discrimination, caste-based prejudice (especially against Dalits) remains a serious problem not only there but also around the world. Caste is not a protected class in the United States, as explained by California State Senator Aisha Wahab, where “[t]he majority of Americans [have] never understood it, heard about it, been exposed to it.” Yet, a 2018 survey by Equality Labs found that most Dalits experience some form of caste-based discrimination because caste politics have followed South Asians to the US.  

Legislation across the United States has begun a push to ban caste discrimination. Earlier this year, Seattle became the first major US city to ban caste discrimination in the workplace, public spaces, and housing. More recently, Senator Wahab introduced SB 403, which proposes to add caste as a protected class, as Seyfarth noted here. While many groups across religions and caste backgrounds have supported the bill, it has also faced opposition from some Hindu organizations. Stay tuned — if this measure passes, it is likely to bleed into other state houses.

PWFA And The EEOC. Despite the enactment of the Pregnancy Discrimination Act (PDA) in 1978, putative plaintiffs did not have great success in bringing pregnancy accommodation claims against employers until Young v. United Parcel Service, Inc., which Seyfarth discussed here and here. Roughly 45 years after the PDA was enacted, 10 years after it was first introduced, and 8 years since the Young decision, the Pregnant Workers Fairness Act (PWFA) was signed into law under the Fiscal Year 2023 Omnibus Spending Bill. As reported earlier by Seyfarth, effective June 27, 2023, the law requires employers to provide reasonable accommodations to pregnant employees and job applicants with temporary physical or mental limitations due to pregnancy, childbirth, or related conditions.

Despite the all the time and notice the EEOC has had to prepare for the PWFA, it has not issued a Notice of Proposed Rulemaking as required by the PWFA. This has angered U.S. Senator Bill Cassidy (R-LA), the lead Republican sponsor of the PWFA, who wrote a letter to the EEOC seeking answers on its plans to follow its legal obligations under the PWFA. The Senator gave the EEOC a deadline of June 22^ndto respond to his letter.

As of publication, the EEOC has yet to reply to the letter, or issue a Notice of Proposed Rulemaking regarding the PWFA. Where the EEOC was once too many steps ahead of the judicial and legislative branches on interpreting pregnancy discrimination law, it is now lagging on providing much-needed guidance.