Policy Matters Newsletter - March 17, 2023

#EmbraceEquity — International Women’s Day and Month. March of each year is designated as Women’s History Month, and March 08 as International Women’s Day. Seyfarth has its own tag dedicated to issues of pay equity and, in celebration of International Women’s Day, Seyfarth’s global Pay Equity Group released four reference guides: (1) updated 50 State Equal Pay Reference Guide, (2) Developments in Equal Pay Litigation, and (3) Global Pay Equity Desktop Reference Reports, and (4) introducing our new Pay Transparency Wage Range Disclosure Compendium. All of those resources can be found here.  Seyfarth’s pay equity maestros also hosted a webinar on the continued push towards increased reporting and pay transparency. Finally, this blog, penned by the Pay Equity Group, contains excellent insights from numerous female leaders from Seyfarth’s International Employment Law practice who share their insights on fundamental ways that leading employers can #EmbraceEquity in the workplace. It is worth the read.

Silicon Valley Bank. As reported by Seyfarth here, the abrupt closure of Silicon Valley Bank sent shockwaves throughout the nation on Friday, March 10, 2023, ultimately resulting in a takeover by the Federal Deposit Insurance Corporation (“FDIC”). The FDIC reported shortly after the closure that all insured depositors would have full access to their deposits, calming the nerves of many in the industry who feared further bank closures. Nevertheless, this matter is still developing, and Seyfarth has formed a cross-disciplinary, rapid-reaction Task Force consisting of experts in FDIC receiverships and banking regulation, insolvency and restructuring, labor and employment, securities, corporate governance and responsibility, real estate and real estate finance, crisis management, and other applicable fields of law, all of whom are ready to assist businesses with navigating the myriad challenges that the abrupt closure of SVB presents for employers across the country. This Task Force has already released a fair amount of content discussing the contours of what comes next.

Inflation Reduction Act: Tax Credits for Electric Vehicles. The automotive industry is changing rapidly. Indeed, receipts from the gas tax have plummeted over the last few years as more and more consumers turn to hybrid and electrical vehicles. As Seyfarth routinely comments on, with the rapid emergence of industry-altering technologies—such as autonomous vehicles, electric vehicles, and connected software—the roadmap forward for automotive companies has become even more complicated. The IRS recently posted the qualifications for obtaining tax credits for new clean vehicles purchased in 2023 or after, due to the Inflation Reduction Act of 2022. The process for obtaining such tax credits can be difficult, and there are many strings attached to the purse, but the potential rewards are astronomical — commercial vehicles can yield between $7,500 to $40,000, depending on the vehicle weight, which could be a huge boon for agriculture.

Update on Biden’s Nomination of Julie Su To Replace Marty Walsh. As Seyfarth reported in the previous iteration of the Policy Matters Newsletter, President Biden recently announced the nomination of Julie Su to replace Marty Walsh to lead the Department of Labor. Now, Su will face a confirmation vote that has been described as “tricky,” particularly given the amount of moderate senators and Independents up for reelection in 2024, as well as business groups standing in fierce opposition to Su’s nomination. As of the date of this newsletter, the Senate has yet to set a date for Su’s confirmation hearings, but her confirmation was referred to the Committee on Health, Education, Labor, and Pensions on March 14, 2023, so we should expect to see some more activity in the near future. Stay tuned.

Implications of DOL Contractor Rule And Marty Walsh Departure. Speaking of Julie Su and the DOL, as Seyfarth detailed here, on October 11, 2022, the Department of Labor (DOL) issued a Notice of Proposed Rulemaking defining employee versus independent contractor status under the Fair Labor Standards Act. In this space, we highlighted the problems with the proposed Rule should it become final. In an attempt to bring some clarity to the issue, Seyfarth is releasing a multi-part series that explores the implications of the Department of Labor’s proposed independent contractor rule. Seyfarth has released the first part of the series, focusing specifically on proposed changes to the control factor concerning legal, safety, contractual, and other similar requirements.

The Rule itself has also once again grabbed headlines, especially since the announced departure of Marty Walsh and subsequent nomination of Julie Su. In light of the leadership vacuum, many businesses are urging the DOL to delay implementation of the Rule until it is settled. Businesses are right to be concerned — as we have noted in this space, when Julie Su was California’s Labor Commissioner, she was instrumental in the roll-out of AB 5, rendering classification of workers as independent contractors versus employees difficult to impossible in most circumstances. 

Rare IC Court Win — In California, No Less — For Employers. As we noted here, a couple of years back, in the most expensive initiative battle in the history of the state, California voters passed Proposition 22, which exempts certain gig companies from having to reclassify their workers as employees and instead requires those companies to offer a limited package of new benefits in order to keep the independent contractor classification.

In our follow up, we discussed a trial court ruling from Alameda County holding that the measure violated the California Constitution and the offending provisions cannot be severed—the baby was tossed with the bath water, so to speak. We have been following this case while on appeal, and the ruling just dropped. In Castellanos v. State of California, the First Appellate District, Division Four, reversed the trial court, holding that most of Proposition 22 is constitutional, and gig employers may continue to classify workers as independent contractors under the Proposition 22 scheme. The Court did, however, strike down two provisions of Prop 22 (B&P Code sections 7465(c)(3)-(4)) — the Court held that the initiative’s definition of what constitutes an “amendment” impermissibly intrudes on the judiciary’s role to make that determination in violation of separation of powers principles. However, unlike the lower court, the Appellate Division held that the unconstitutional provisions can be severed from the rest of the initiative, leaving the main thrust intact and enforceable.

S.400: Airline Disability-Related Complaints. We here at the PMN fully expect the rapid pace of legislative accomplishments we surprisingly saw over the last two years to grind to, basically, a halt given the divisions in Congress. However, that has not slowed members from introducing all kinds of legislation. Of particular interest is S.400, recently introduced by Senators Tammy Duckworth (D-Ill) and Deb Fischer (R-Neb), which would require DOT to publish annual reports about disability-related complaints from air travelers, along with specifics as to how the complaints were resolved. The measure has the backing of the Association of Flight Attendants-CWA union, the Allied Pilots Association, and a litany of other aviation associations. A similar measure has been introduced in the House of Representatives. Perhaps the path forward legislatively is through much narrower measures, such as S.400, that can draw bicameral and bipartisan support. Stay tuned.