Top 10 trends for US employers Mid-year update - EMPLOYMENT GROUP - DLA Piper
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Top 10 trends for US employers
Mid-year update
EMPLOYMENT GROUP
Top 10 trends for US employers – mid-year update It’s been a busy first half of 2021. COVID-19 issues continued to dominate employer agendas, with new and evolving laws and guidance at the federal, state and local levels. The pandemic has permanently altered work for many of us. Businesses are evaluating new strategies such as remote and hybrid working to attract and retain talent and considering how best to risk-proof their workforce policies and practices in a dynamic regulatory environment. In this review, we recap key developments over the last six months and look at the potential changes ahead related to the top 2021 trends we identified at the start of the year: 1. Worker health, safety and well-being 2. Workplace equality 3. SESG (Sustainability, Environmental, Social and Governance) 4. Social and labor unrest 5. Remote working 6. The ABC test 7. Economic recovery 8. Digital transformation and privacy 9. The litigation landscape 10. More change ahead Of course, things are changing fast and this report does not capture all new laws and developments nationwide. If you have questions about a specific issue or jurisdiction, please reach out to any member of our US employment practice.
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MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
Worker health, safety and well-being
1 remain top priorities
Even before the COVID-19 pandemic, organizations were looking at strategies to
address employee health and well-being as a way to retain talent and optimize
business performance. As the pandemic continues, worker physical and mental
health and compliance with new laws remain top priorities for employers.
2021 developments and what to expect next
COMPLIANCE WITH LEAVE LAWS GETS HARDER retaliating against employees for exercising their
Employers continue to be challenged by new and rights under the law. The law is set to expire on
evolving emergency and permanent leave laws with December 31, 2022.
varying requirements.
• Private employers with 50 or more employees in
In the first half of 2021, states and cities enacted
Nevada must provide all employees with up to four
new laws to provide leave for reasons related to
total hours of paid leave for the purpose of receiving a
COVID-19, including vaccination. For example:
COVID-19 vaccine through December 31, 2023.
• California’s SB 95 provides up to 80 hours of
COVID-19 supplemental paid sick leave for eligible • Effective June 7, the Massachusetts Emergency Paid
employees. The bill extends protections through Sick Leave Act (EPSL) requires all employers to provide
September 30, 2021 and is retroactive to sick leave up to 40 hours of emergency paid sick leave to eligible
taken beginning January 1, 2021. employees for qualifying COVID-19-related reasons.
The law is set to expire on September 30, 2021 (or
• Various California county and city ordinances remain when program funds run out).
in effect. For instance, on June 8, the Sonoma County,
California Board of Supervisors enacted an urgency • March guidance issued by the Illinois Department
ordinance that amends and extends its emergency of Labor provides that the time an employee spends
paid sick leave (EPSL) ordinance through September obtaining a vaccination mandated by the employer
30, 2021. On June 24, Los Angeles Mayor Eric Garcetti is likely compensable, even if it is non-working time,
revised his Supplemental Paid Sick Leave Due to under the Illinois Minimum Wage Law. The guidance
COVID-19 (SPSL) Order – which applies until two also clarifies that an appointment to receive the
calendar weeks after the local COVID-19 emergency COVID-19 vaccine qualifies as a permissible medical
period ends – and issued a new order, Vaccine appointment under the Illinois Employee Sick
Paid Sick Leave Due to COVID-19, which applies Leave Act.
retroactively to January 1, 2021 and will remain in
effect until September 30, 2021. • Effective April 21, a Chicago city ordinance prohibits
adverse action against all Chicago workers, including
• Effective March 12, New York requires all employers independent contractors, who take time off from work
to provide employees with up to four hours of paid to receive a COVID-19 vaccine.
time off per COVID-19 vaccine injection. The law
further prohibits employers from discriminating or Employers are urged to monitor this area closely and to
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track expiration dates. Some state and local emergency expand the law’s eligibility and leave provisions. The
laws and ordinances expired in the first part of the year, amendments, which take effect on January 1, 2022,
while others are set to expire later this year or after the provide for leave to employees who are reemployed
COVID-19 local emergency period expires. after a separation or return to work after a temporary
cessation within 180 days and expand eligibility and
State and local governments continue to enact leave rights during public health emergencies.
permanent paid leave laws. Laws enacted this
year include: • Under Nevada’s AB 190, effective October 1, 2021,
employers that provide paid or unpaid sick leave must
• On April 7, New Mexico enacted the Healthy allow employees to use a portion of that leave for the
Workplaces Act (HWA), which requires private care of immediate family.
employers to provide paid sick leave to employees.
• Maryland SB 473, which takes effect on October 1,
• On April 27, Illinois Governor J.B. Pritzker signed 2021, amends the Maryland Flexible Leave Act to
House Bill 158, which amends the Employee Sick require employers with 15 or more employees to
Leave Act (ESLA) to allow employees to take personal permit the use of any existing accrued paid leave for
sick leave for absences due to “personal care of a bereavement purposes.
covered family member,” such as activities to ensure
that the family member’s basic medical, hygiene, • Washington SB 5097 (effective July 25, 2021) expands
nutritional, or safety needs are met, or to provide the definition of family member for purposes of
transportation to medical appointments, for a family family leave to include anyone with a relationship
member who is unable to meet their own needs. that creates an expectation and actual dependence
on care.
• On May 11, Philadelphia enacted amendments to
increase workplace protections for victims of domestic Going forward, employers are likely to see a continued
violence under its Promoting Healthy Families and push for paid leave laws in various states and localities.
Workplaces Ordinance.
Some state legislatures are pushing back on
• In June, Oregon amended its Family Leave Act to
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MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
local ordinances. In April, the Texas Senate passed services or healthcare support services (with certain
Senate Bill 14 (SB 14), which would prevent cities and exceptions). It also released updated guidance for
counties from adopting any rule requiring terms of all employers on how to mitigate and prevent the
employment that exceed or conflict with federal or spread of COVID-19 in the workplace, with a focus
state law, including leave, hiring practices, employment on unvaccinated or otherwise at risk workers. Most
benefits and scheduling practices. This is on top of Texas recently, the CDC updated its guidance to recommend
federal and state court decisions enjoining paid sick additional safety measures in high exposure areas.
leave ordinances in Dallas, Austin and San Antonio as On August 13, OSHA issued updated guidance on
preempted by the state’s minimum wage act. SB 14 did protecting unvaccinated and other at-risk workers.
not pass during the 87th legislative session – and was
not on the special session agenda for July – but Texas States are also revisiting their COVID-19 safety
lawmakers may take it up again. regulations based on updated federal guidance and
changing conditions.
At the federal level, the American Rescue Plan (ARP)
extended the Family First Coronavirus Response In addition, some states have increased whistleblower
Act (FFCRA) payroll tax credits available to covered protections for workplace safety complaints. On
employers who voluntarily offer leave through the end of June 15, Oregon enacted SB 483, which amends the
September 2021. Oregon Safe Employment Act to add a “rebuttable
presumption” of discrimination or retaliation if an
Whether permanent federal legislation will emerge employee or prospective employee experiences an
remains uncertain. The Biden Administration’s proposal adverse employment action within 60 days after
includes up to 12 weeks of paid leave for the birth or engaging in protected activity.
adoption of a child, the serious illness of a worker or
their family member and for other covered reasons PREPARING FOR FUTURE PUBLIC HEALTH
related to military service or domestic violence. In recent EMERGENCIES
months, members of Congress have introduced various The COVID-19 pandemic has prompted some legislators
proposals, including the Family and Medical Insurance to consider how to protect workers from the next
Leave Act (FAMILY Act) and the Building an Economy for outbreak of infectious disease. At the federal level, the
Families Act. Biden Administration plans to push for occupational
safety rulemaking that would protect workers
MORE AGGRESSIVE ENFORCEMENT OF COVID-19 against all airborne infectious diseases.
HEALTH AND SAFETY MEASURES
In March, OSHA announced a COVID-19 National State legislators are also anticipating future public
Emphasis Program (NEP) and an Updated Interim health emergencies. On May 5, New York Governor
Enforcement Response Plan for Coronavirus 2019 Andrew Cuomo signed into law the New York Health
(ERP). Under the NEP, OSHA is focusing its enforcement and Essential Rights Act (the NY HERO Act), which
efforts on establishments that have workers with requires employers to implement enhanced health and
increased potential exposure to COVID-19 and that put safety protections to protect employees from workplace
the largest number of workers at serious risk, as well exposure to future airborne infectious diseases.1
as on employers that retaliate against employees who
complain about unsafe working conditions.
On June 10, OSHA published its long-awaited COVID-19
Emergency Temporary Standard, which applies to
settings where any employee provides healthcare
1
DLA Piper Employment Alert, New York employers set to reopen must
comply with expansive new worker safety standards (May 20, 2021).
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Section 1 took effect on July 5, 2021 and requires In the meantime, plan administrators face litigation
employers to adopt and disseminate an Airborne risk. On March 5, 2021, in Jane Doe v. United Behavioral
Infectious Disease Exposure Prevention Plan. Section 2, Health, a federal district court in California found that the
which relates to the establishment of workplace safety plan administrator violated the mental health parity law
committees, will take effect on November 1, 2021. when it refused to cover certain autism therapy services
Templates and model plans from the NYS DOL are for a participant in a plan sponsored by a technology
available here. company (which was not a party to the suit).
Other states (eg, Colorado, Maryland, New Jersey and ACA AND CAA COMPLIANCE
Oregon) have passed laws that require employers to On June 17, the US Supreme Court rejected the latest
provide certain leave rights to employees in the event challenge to the Affordable Care Act (ACA), holding
of a public health emergency; establish a rebuttable that the state and individual plaintiffs lacked standing
presumption of an occupational disease for workers’ to challenge the law’s minimum essential coverage
compensation coverage for frontline employees in provision because they did not show a past or future
certain circumstances (eg, Washington); or provide for injury fairly traceable to defendants’ conduct enforcing
rapid reporting requirements and additional protections the provision. 2
for “high risk” employees who seek an accommodation
to avoid exposure to the disease creating the public Companies are encouraged to evaluate their current
health emergency (eg, Washington). health plan structure to determine if proactive
modifications would assist with the transition to a more
PUSH FOR MENTAL HEALTH PARITY robust ACA compliance environment. 3
The Biden Administration has stated its commitment
to ensuring that health plans comply with the mental In addition, companies should evaluate the impact of
health parity laws. This year the DOL began auditing the CAA on their current health plan structure. The
employer-sponsored health plans for compliance CAA will generate the largest systemic overhaul of health
with the Consolidated Appropriations Act (CAA), plan operations since the ACA, while affording very little
which requires group health plans to formally analyze runway to achieve the required compliance by January 1,
and document their compliance with Mental Health 2022. 4
Parity and Addiction Equity Act requirements related
to nonquantitative treatment limitations. On April 2, 2
DLA Piper Employee Benefits Alert, SCOTUS upholds the ACA: Next steps
for employers (July 8, 2021).
2021, the tri-agencies (HHS, DOL and Treasury) issued
guidance on complying with the requirements of the
3
See our report, Top employee benefits issues to watch (March 2021),
discussing likely changes to the ACA’s regulatory regime.
new law.
4
Id.
Employers are also tracking proposed legislation. The
Parity Enforcement Act of 2021 would give EBSA the
authority to investigate and levy monetary penalties
against health insurers and plan sponsors that offer
health plans to employers that violate the Mental Health
Parity and Addiction Equity Act of 2008.
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MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
Actions to consider
➤ Continue to take all reasonable health and safety and managers, on anti-retaliation obligations.
measures to protect employees based on local, state
➤ Anticipate and listen to employee concerns and
and federal regulations and guidance.
ensure a robust communications and engagement
➤ Be mindful of requirements under the ADA and plan is in place to reassure workers that their health
applicable state disability laws. This is an area and well-being is a top priority.
likely to heat up as more employees return to the
➤ Prioritize mental health parity compliance.
workplace. Major depression, anxiety and other
Sponsors and administrators with fully insured
mental health disorders may qualify as disabilities,
products are encouraged to reach out to their
obligating employers to provide a reasonable
insurance carriers and request a copy of the
accommodation absent undue hardship.
most recent nonquantitative treatment limits
➤ Designate a knowledgeable point person or team comparative analyses. Those with self-insured
to handle leave and accommodation requests and health plans are urged to work with their third-party
ensure policies are up to date. administrators (TPAs).
➤ Take stock of your corporate compliance program,
including hotlines and complaint and investigation
policies and procedures, to ensure they are fit for
purpose. Train the workforce, particularly supervisors
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2 Toward workplace equality
Issues of racial equality, social justice and diversity and inclusion in the workplace
continue to reverberate across the country. Employers can expect more legislative
activity at the local level; continued pressure from stakeholders; and aggressive use
of executive, regulatory and enforcement authority by the Biden Administration.
Key 2021 developments and what to expect next
CONTINUED FOCUS ON DIVERSITY Various states also enacted new laws:
On June 17, President Joe Biden signed the Juneteenth
National Independence Day Act, designating June 19 as • A new Indiana law (HB 1309) requires an
a federally recognized public holiday. Many employers employer to respond to an employee’s request for
quickly moved to give paid time off to employees, while a pregnancy accommodation within a reasonable
others are considering their approach for 2022. time frame. Minnesota and Connecticut also
enacted laws that provide enhanced protections for
Companies continue to examine the composition of their breastfeeding employees.
workforces, as well as policies and processes for hiring,
• Effective July 1, 2021, HB 1848 amends the Virginia
pay and promotion. Investors and other stakeholders
Human Rights Act to provide additional employment
also are keeping the pressure on companies to do more,
protections to individuals with disabilities. The new law
including to release workforce data on race, ethnicity
requires employers to update employee handbooks
and gender.
to include information on employees’ rights to
reasonable accommodations for disabilities and to
In addition, diversity goals increasingly are being tied
comply with posting and notice obligations.
to compensation. According to a recent survey, by this
spring, a third of S&P 500 companies had disclosed • New Mexico, Oregon and Nebraska joined a
using a diversity measure in their compensation growing number of states with legislation that
structures or mentioned diversity in explaining prohibits employers from discriminating against
executive pay. 5 individuals based on physical characteristics
historically associated with race, including hair texture
EXPANSION OF ANTI-DISCRIMINATION AND and protective hairstyles.
HARASSMENT LAWS
• Effective September 1, 2021, Texas SB 45 will impose
On May 14, the House passed the Pregnant Workers
a stricter standard for employers related to sexual
Fairness Act in a 315-101 vote. The bill, which would
harassment. The law provides that it is an unlawful
require most employers to provide reasonable
employment practice if sexual harassment of an
accommodations for pregnant employees unless doing
employee occurs and “the employer or employer’s
so would impose an “undue hardship” (similar to the
agents or supervisors: agents or supervisors (1) know
ADA) is pending in the Senate.
or should have known that the conduct constituting
sexual harassment was occurring; and (2) fail to take
immediate and appropriate corrective action.”
5
Emily Glazer and Theo Francis, CEO Pay Increasingly Tied to Diversity Goals,
WSJ (June 2, 2021).
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MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
NEW PROTECTIONS FOR LGBTQ+ a protected class. Notably, the Act includes exceptions
On the federal legislative front, the House passed the for private clubs and owners or operators of religious
Equality Act in February (224-206). The legislation organizations and confirms that those organizations
would prohibit discrimination on the basis of sexual may give preference to members of that denomination.
orientation and gender identity under a range of federal
laws and limit the ability of employers to invoke the Other states, while not adopting explicit protections,
Religious Freedom Restoration Act as a defense to have endorsed the Supreme Court’s decision
employment discrimination claims. The bill is unlikely to in Bostock to apply to state laws prohibiting sex
pass the Senate. discrimination. For instance, in March, a Texas Court
of Appeals held that Bostock applied to the Texas
Even if legislation remains out of reach, employers are Commission on Human Rights Act (TCHRA), which bans
likely to see continued executive and regulatory action employment discrimination on the basis of sex. Other
consistent with President Biden’s Executive Order on states have similarly adopted the Bostock rationale into
Preventing and Combating Discrimination on the Basis state law.
of Gender Identity or Sexual Orientation. On May 10,
2021, the US Department of Health and Human Services BATTLES OVER RELIGIOUS FREEDOM CONTINUE
(HHS) announced that it will begin enforcing Section The Supreme Court acknowledged that its Bostock
1557 of the ACA to prohibit discrimination based on decision did not address how to reconcile religious
sexual orientation and gender identity. In June, the EEOC freedom with the rights of LGBTQ individuals. Its recent
also issued new resources for employers addressing decision in Fulton v. City of Philadelphia, which focused
sexual orientation and gender identity discrimination. on the facts of the case, does not offer much guidance.
There, the Court held that Philadelphia’s refusal to
Various states continue to advance nondiscrimination contract with Catholic Social Services for the provision of
protections for LGBTQ individuals. For example, on foster care services unless CSS agreed to certify same-
May 20, 2021, Colorado enacted the Gender Identity sex couples as foster parents violated the Free Exercise
Expression Anti-Discrimination Act, which amends Clause of the First Amendment. Notably, the Court
the definition of “sexual orientation” and adds the declined to revisit its holding in Employment Division
terms “gender expression” and “gender identity” to v. Smith, 494 U.S. 872 (1990), that laws incidentally
statutes prohibiting discrimination against members of burdening religion are ordinarily not subject to strict
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scrutiny under the Free Exercise Clause so long as they • Colorado’s Equal Pay for Equal Work Act (effective
are neutral and generally applicable. According to the January 1) requires employers to notify employees
Court, it was unnecessary to do so because the terms of of promotional opportunities (ie, job vacancies that
the city’s contract with CSS met the requirement of being are superior to the job held by at least one employee
neutral and generally applicable. at the same company) and to include detailed
compensation and benefits information as part of the
Several states have enacted laws which seek to job posting. In addition, employers must keep records
provide protections for the exercise of religious of job descriptions and wage rate history for each
freedom. In March, South Dakota enacted the employee for the duration of employment plus two
Religious Freedom Restoration Act, which provides that years after the termination of employment.
the state may “substantially burden a person’s exercise
of religion unless applying the burden to that person’s • Enacted on March 23, 2021, Illinois SB 1480 amends
exercise of religion in a particular situation is essential the Illinois Equal Pay Act to require employers with
to further a compelling governmental interest and is more than 100 employees in Illinois to obtain an
the least restrictive means of furthering that compelling “equal pay registration certificate” within three years of
government interest.” Montana’s governor signed a the effective date of the new law.6 It also amends the
similar bill in April. law to prohibit retaliation.
PAY EQUITY STILL FRONT AND CENTER • Enacted on June 8, 2021, Connecticut House Bill No.
Gender equity and equality remain top priorities for 6380 requires employers to disclose wage ranges for
the Biden Administration. On March 8, 2021, President vacant positions. The law also modifies the prohibition
Biden signed an Executive Order establishing a White against gender-based discriminatory pay practices
House Gender Policy Council to coordinate federal by making it unlawful for an employer to pay unequal
government efforts to advance gender equity and wages for comparable work on a job (instead of equal
equality, including policies and programs to combat work). The new requirements take effect on October
systemic biases and discrimination and to address 1, 2021.
structural barriers to women’s participation in the labor
force, such as wage gaps. The EO directs the Council to • Nevada enacted SB 293 (effective October 1, 2021),
submit a strategy within 200 days. which prohibits an employer or an employment
agency from seeking the salary history of an applicant
While the Senate failed to advance the Paycheck Fairness
or discriminating against an applicant for not revealing
Act, pay equity is at the top of the EEOC’s agenda. In
their salary history. In addition, the law requires
addition to traditional enforcement, including litigation,
an employer or employment agency to provide an
the EEOC has stated its intent to pursue ways to address
applicant who has completed an interview for the
pay discrimination and unjustified wage gaps through
employment position: (1) the wage or salary range or
pay data collection. However, employers are unlikely to
rate for the position; and (2) the wage or salary range
see big changes (including the reintroduction of EEO-1
or rate for a promotion or transfer to a new position if
Component 2 pay data reporting) while Republicans
certain conditions are satisfied.
hold a majority of the EEOC’s five seats.
States and localities continue to enact laws to • A new Rhode Island law (H 5261A, S 0270A)
address equal pay issues. For example: prohibiting salary inquiries and requiring pay scale
disclosures will go into effect on January 1, 2023.
• Changes to the California Equal Pay Act took effect
this year and require private employers with 100 or
more employees to file an annual pay data report that
details specified wage information.
6
DLA Piper Employment Alert, Criminal conviction records and diversity and
pay reporting: What Illinois employers need to know about Senate Bill 1480
(April 1, 2021).
11MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
Legislation targeting pay gaps, including bills requiring EFFORTS TO TACKLE INCOME INEQUALITY CONTINUE
companies to provide compensation information for While federal minimum wage legislation passed by the
jobs, have been proposed by lawmakers in other states. House currently lacks the necessary votes to clear the
Senate, President Biden is using his executive powers to
Equal pay lawsuits continue to shape the landscape press his agenda.
for employers. In May, a California state court judge
allowed a class of over 10,000 women to move forward On April 27, President Biden issued an Executive Order
with pay discrimination claims against a company requiring contractors and subcontractors working “on
under the California Equal Pay Act. Plaintiffs maintain or in connection with” a covered federal contract to pay
that the company systematically paid women less and workers a minimum wage of $15 per hour effective
promoted them more slowly and less frequently than January 30, 2022. In July, the DOL issued proposed
their male counterparts. The lawsuit further alleges that regulations to implement the order.
the company’s practice of asking candidates about their
salary history perpetuated wage inequalities. 7 The court On April 28, the DOL announced a final rule delaying
held that because the case could be adjudicated using portions of the 2020 Tip final rule until December 31,
common evidence, proceeding as a class action would 2021 and allowing the remainder of the rule to become
be superior to requiring thousands of putative class effective on April 30, 2021, including rules addressing
members to pursue individual claims. According to the tip sharing. More recently, the DOL issued a notice
court, “jobs do not need to be identical or require of proposed rulemaking to amend its regulations to
exactly the same duties” to be “substantially similar.” clarify that an employer may only take a tip credit when
its tipped employees perform work that is part of the
In a similar vein, a divided Ninth Circuit held that a employee’s tipped occupation.
University of Oregon psychology professor should have
been granted a trial on her claim that the university In addition to federal action, employers will see more
violated the Equal Pay Act by paying her less than three changes at the state and local levels later this year,
male professors in her department. The court held including minimum wage increases; changes to the
that a reasonable jury could find that the plaintiff and minimum salary for executive, administrative, or
her counterparts had the same “overall job” insofar as professional employees; and increases to the minimum
they all conducted research, taught classes, advised cash wage for tipped employees.
students and served on various committees and in
other roles in service to the university. The fact that they
did not teach the same courses or supervise the same
doctoral students or manage the same centers did not
mean their “responsibilities were so unique that they
could not be compared.” Rather, according to the Ninth
Circuit, courts should consider the overall job and core
tasks consistent with the broadly remedial nature of the
Equal Pay Act.
7
Federal and states courts remain mixed on whether prior salary history is
a defense to equal pay lawsuit claims. In a recent case in Virginia, a federal
district court held that the defendant company could point to prior salary
history as a valid factor “other than sex” for paying female workers less than
similar male employees. Abe v. Va. Dep’t of Envtl. Quality, 2021 BL 125254,
E.D. Va., No. 3:20-cv-00270 (April 5, 2021).
12DLAPIPER.COM
Actions to consider
➤ Continue taking steps to ensure your responses ➤ Consider a proactive pay equity analysis. The
to the pandemic (including any vaccination direction of travel is clear – pay equity issues are on
policy) do not have an adverse impact on those in the agenda of lawmakers and regulators at all levels.
protected classes.
➤ Review compensation policies and practices based
➤ Prepare carefully before making public statements on new state pay transparency laws, including those
or releasing diversity-related data to protect your relating to recruiting and hiring.
organization’s brand, culture and morale and minimize
➤ Adopt more proactive approaches to identifying
the risk of lawsuits.
and correcting potential discrimination and
➤ Consider steps that can be taken lawfully to harassment, with a focus on training.
address inequality in the workplace. There are
➤ Be mindful of the need to update policies,
many affirmative steps that companies can take
agreements, training and dispute resolution practices
to drive greater diversity and inclusion; however,
(including settlement agreement language) based
companies considering voluntary affirmative action
on changes to state and local harassment and
programs that go beyond aspirational goals are urged
discrimination laws.
to consult with counsel and ensure that such efforts
are consistent with discrimination laws.
13MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
Sustainability, Environmental,
3 Social and Governance (SESG)
SESG issues remain at the forefront in 2021, fueled by the COVID-19 pandemic, the
racial justice movement and climate change concerns. With all signs pointing toward
the continued growth of SESG reporting and disclosure requirements, boards and
corporate leaders are urged to take stock of their approach to these issues.
Key 2021 developments and what to expect next
DOL WILL NOT ENFORCE TRUMP-ERA RULES ON advance recent SEC initiatives relating to climate
PROXY VOTING AND ESG INVESTING change and human capital management. In June 2021,
In March, the US Department of Labor (DOL) said it Gensler suggested that potential climate change
would not enforce two Trump-era final rules on proxy disclosure requirements could relate to greenhouse
voting and ESG investing in retirement plans subject gas emissions, forward-looking climate commitments,
to the Employee Retirement Income Security Act or applicable legal requirements to achieve specific,
(ERISA). The Administration is undertaking a review of climate-related targets, and that potential human
these regulations. capital disclosure “could include a number of metrics,
such as workforce turnover, skills and development
SEC SET TO MOVE ON ESG INITIATIVES training, compensation, benefits, workforce
In March, the SEC announced the creation of a demographics including diversity, and health and
Climate and ESG Task Force in the Division of safety.” 8
Enforcement to “develop initiatives to proactively
identify ESG-related misconduct” with an initial focus SEC APPROVES NASDAQ BOARD DIVERSITY RULE
on identifying material gaps or misstatements in • On August 6, the SEC approved Nasdaq’s Board
issuers’ disclosure of climate risks under existing Diversity Rule, which requires most Nasdaq-
rules. The task force also plans to analyze disclosure listed companies to (1) publicly disclose annually
and compliance issues relating to investment board-level diversity statistics using a standardized
advisers’ and funds’ ESG strategies. template; and (2) have or explain why they do not
have at least two diverse directors. The rule provides
The SEC also invited public comments on whether additional flexibility for Smaller Reporting Companies
current climate change disclosures are adequate and and Foreign Issuers, which can meet the diversity
how the SEC can best regulate disclosures. objective by including two female directors, and for
all companies with five or fewer directors, which
SEC PUSHES CLIMATE CHANGE AND HUMAN can meet the diversity objective by including one
CAPITAL REPORTING diverse director.
In 2020, the SEC amended certain disclosure
• The Improving Corporate Governance Through
requirements to include a description of the
Diversity Act of 2021: If enacted, this bill would
registrant’s human capital resources to the extent
require public companies to disclose information
material to understanding of the registrant’s business.
SEC Chair Gary Gensler is expected to continue to
8
US Securities and Exchange Commission, Prepared remarks at London
City Week (June 23, 2021), available at https://www.sec.gov/news/speech/
gensler-speech-london-city-week-062321.
14DLAPIPER.COM
related to the racial, gender and ethnic makeup • State board diversity laws may face new
and veteran status of their boards and senior challenges: In June 2021, the Ninth Circuit held that
management, as well as any plan to promote racial, a shareholder has Article III standing to pursue his
ethnic and gender diversity among these groups. It claim that California’s SB 826, which requires publicly
would also establish a Diversity Advisory Group at traded corporations based in the state to have at least
the SEC to make recommendations on strategies to one female director (and up to three for boards with
increase diversity among board members. at least six directors), requires or encourages him
to discriminate based on sex. Other board diversity
• Leading proxy advisory firms weighed in on
mandates, including California’s AB 979 (requiring at
diversity: During the 2021 proxy season, ISS and
least one board member from an underrepresented
Glass Lewis applied new voting guidelines on
community by the end of 2021), may face a
diversity. Companies can expect more of the same
similar challenge.
moving forward. For 2022, for companies in the
Russell 3000 or S&P 1500 where the board has no • Meanwhile, courts have dismissed several
apparent racial or ethnically diverse members or shareholder derivative actions: Activist
women on the board, the ISS policy will provide for shareholders have brought claims against directors
recommending voting against or withhold from the and management regarding the lack of diversity
chair of the nominating committee (or other directors among their ranks. Lawsuits commonly allege that
on a case-by-case basis). Glass Lewis has announced the board and executive team lack diversity, ignored
a similar approach. This year it noted “as a concern internal controls and misled investors by making false
boards consisting of fewer than two female directors”; statements about the company’s commitment to
beginning with shareholder meetings held after diversity in filings with the SEC and failed to disclose
January 1, 2022, it will generally recommend voting fraudulent business practices – namely, discriminatory
against the nominating committee chair of a board hiring and compensation practices – that put the
with fewer than two female directors. 9
company at material risk. Several federal court cases
in California were dismissed on the basis of forum
selection clauses in certificates of incorporation.
9
Proxy Voting Guideline Updates for 2021 (November 12, 2020), at
Americas-Policy-Updates.pdf (issgovernance.com).
15MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
Actions to consider
➤ Review your approach to human capital • How will the company respond to increased regulatory
disclosures. While this area is evolving, companies and shareholder attention to board diversity?
should consider key questions:
• How does the company define diversity? Should
• Is human capital material to the business, and if so the definition be expanded to include other factors,
how? What resources does the company have and such as LGBTQ+ status, veteran status or even
what does it focus on in managing the business? political ideology?
• How does or should the board and its committees • How does the company’s proxy statement highlight
allocate oversight of various dimensions of human the diversity of its board and management?
capital or culture?
➤ Reexamine processes for recruiting and selecting
• What are the key performance indicators (KPIs) directors. Public companies should consider creating
applicable to the company is this arena? a strategy for achieving gender and racial or ethnic
diversity. With Nasdaq’s proposal, legislation currently
• What are the key practices or developments related to
being considered in Congress and increased pressure
compensation of the broader workforce?
from shareholder advisory groups and institutional
• What are some measures of workforce diversity data investors, this issue seems likely to remain a key
(e.g., percentage of women and/or people of color topic. Acting now to identify qualified diverse board
across the global or US workforce, at the management candidates may make any later transition much easier.
level, in leadership positions or across incoming hires)
➤ Walk the walk. SEC Commissioners from both
that are relevant to the company?
parties have expressed concern that corporate
➤ Prepare for greater transparency on D&I issues. ESG investment strategies do not “walk the ESG
Workforce diversity is a leading goal of human capital walk.” Companies are urged to take care to avoid
management and will continue to be an important inconsistencies between what they say and do from a
focus of legislative and shareholder initiatives. In trust, brand and risk perspective.
response, companies are encouraged to be prepared
to answer key questions such as:
• What is the diversity of the company’s board and its
C-suite executives?
16DLAPIPER.COM
Social unrest
4 and labor activism
Social and political polarization in the US continues, with the potential for discord
in the workplace. Companies are carefully weighing whether and how to respond
consistent with their corporate values and legal obligations.
STATE AND LOCAL LAWS MAY PROTECT SPEECH AND In February, a federal district court dismissed
OFF-DUTY CONDUCT claims in a proposed class action lawsuit under Title
Controversial employee speech and activity outside VII challenging defendants’ decision not to allow
of the workplace are not new; however, as protests employees to wear Black Lives Matter masks and other
become more commonplace and debates rage on attire. The district court found that the employees failed
social media, employers are confronting questions to allege that they were treated differently “because
about whether they can discipline or terminate workers of” their race. The court further rejected the plaintiffs’
for actions outside the workplace that offend co- theory of associational discrimination, noting that Title
workers or conflict with the employer’s interests. VII “prohibits discrimination based on race” and does
not “extend its protections to employees who have
Federal law generally doesn’t prohibit private been disciplined for wearing clothes that violate a
employers from taking action against workers on the company dress code, even if that clothing is associated
basis of political activity, political group membership with individuals of a particular race.” The case is on
or political beliefs, but some state laws do. Similarly, appeal to the First Circuit.
many states protect employees who engage in lawful
off-duty conduct. 10 UNIONS ATTEMPT TO GAIN GROUND
While the Biden Administration has committed to
Some high-profile social media events have led strengthen unions and reform the National Labor
to lawsuits. For example, in May, a white woman Relations Act, its top priorities – and those of unions –
terminated by her employer after a viral confrontation face hurdles. The Protecting Right to Organize (PRO) Act
with a black birdwatcher in Central Park filed a lawsuit remains stalled in the Senate and the minimum wage
in federal court in New York. The plaintiff alleges that hike was defeated in the Senate.
her former employer discriminated against her on the
Meanwhile, the Administration’s budget proposal for
basis of her sex and race, characterized her as “racist”
the 2022 fiscal year includes $2.1 million to support
and falsely claimed it conducted an investigation
programs to inform workers about their rights under the
before firing her.
NLRA and an increase in overall funding.
In addition, the White House Task Force on Worker
Organizing and Empowerment - established by
President Biden to mobilize the federal government’s
policies, programs, and practices to empower workers to
10
These protections increasingly encompass lawful off-duty use of
organize and successfully bargain with their employers
cannabis. In March 2021, for example, the New York Marijuana Regulation
and Taxation Act (MRTA) took effect, expanding employment protections - is expected to make its final recommendations by
to include the use of cannabis in accordance with state law. Labor Law
Section 201-d makes it unlawful (with certain carveouts) for an employer to October 23.
discriminate against an individual because of the individual’s legal use of
marijuana prior to the beginning or after the conclusion of the employee’s
work hours, off the employer’s premises and without use of the employer’s
equipment or other property. The MRTA clarifies that an employer does not
violate Section 201-d when it takes an adverse action related to the use of
off-duty cannabis because the employee is impaired while working.
17MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
THE COMING NLRB FLIP-FLOP SUPREME COURT STRIKES DOWN RIGHT TO
In July, the Senate voted to confirm Jennifer Abruzzo, ACCESS REGULATION
a career NLRB attorney who more recently worked On June 23, in Cedar Point Nursery v. Hassid et al, the
for the Communication Workers of America union, to Supreme Court struck down a California regulation
serve as the Board’s General Counsel. The Senate also granting labor organizations a “right to take access”
confirmed Gwynne Wilcox, a partner at a labor-side labor to an agricultural employer’s property (for up to three
and employment firm and assistant general counsel to hours per day, 120 days per year) in order to solicit
Service Employees International Union (SEIU) Local 1199, support for unionization. The Court held that the access
and David Prouty, a prominent labor-side attorney, to the regulation constituted a per se physical taking under the
NLRB. Prouty will be seated at the end of August, giving Fifth and Fourteenth Amendments. The court remanded
Democrats a 3-2 majority. the case to the federal district court to determine
the appropriate remedy – injunctive relief and/or
Potential administrative actions include: compensation for access.
• Use NLRB rulemaking authority to rescind current The implications of the Court’s decision remain to be
joint employer test and return to the Browning- seen. Notably, the decision prohibits access at a time
Ferris standard (which would require a notice and when unions increasingly are claiming that right, either
comment process) contractually or based on international conventions.
More broadly, the decision seems to give new life to the
• Use case law to establish expansive independent
Takings Clause. As the dissent notes, “myriad regulatory
contractor test
schemes … depend upon intermittent, temporary
• Return to strict scrutiny of handbooks / policies government entry onto private property.”
under which a policy may be deemed unlawful if
it can be interpreted to in any manner infringe on
protected activities
• Rescind current election timelines and return to
“quickie election” timelines
18DLAPIPER.COM
Actions to consider
➤ Review your policies. A number of companies privacy, statement that activities protected under
are amending their policies to address employees’ NLRA and state laws are not prohibited)
discussions of politics in the workplace. Some
• Provide clear procedures for reporting and
have declared that the company has an apolitical
responding to complaints of violations
culture and will not condone political debates
among employees, while others have implemented
➤ Proceed cautiously when it comes to politics.
guidelines around community discussions on
Employers should be responsive to employee
internal message boards. Others are less prescriptive
complaints about harassment, discrimination and
but require that discussions remain inclusive and
hate speech on company communication channels,
respectful; such companies have created accelerated
but should also exercise caution before taking action
processes for raising and responding to concerns.
against workers for engaging in political discourse.
Most companies have tried to strike a balance
Employers are also encouraged to seek legal
between open discussions and managing content.
guidance before disciplining or firing an employee in
Policies designed to address the current political
relation to activity that arguably could be considered
climate frequently include some variants of the
political expression.
following provisions:
➤ Be mindful of NLRA Section 7 rights. Labor law
• Require that employees use only identification
protects employees – unionized and non-unionized
photos or initials as their electronic profile
– who take concerted action for their mutual aid
pictures (to prevent use of campaign or political
or protection regarding terms and conditions
slogans or inappropriate emojis) and prohibit
of employment (e.g., health and safety, wages
use of Zoom backgrounds and images that
and benefits).
promote particular candidates, causes or may be
otherwise offensive ➤ Evaluate labor risks in light of the new realities
imposed by COVID-19 and President Biden’s
• Limit political discussions to sections of internal
agenda and take steps to ensure a positive work
messaging boards dedicated for that purpose with
environment that is responsive to employee questions
disclaimers and guidelines for use
and concerns. Such actions may include reviewing
• Prohibit debates that are disruptive and compensation and benefits based on the market,
unrelated to work training supervisors and managers on how to spot
signs of union organizing and their responsibilities
• Include guidelines and expectations around
under the NLRA and developing a plan to respond to
accepted conduct on internal communication
potential union activity.
platforms (e.g., responsible use, no expectation of
19MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
5 Remote working goes mainstream
While the mass global migration to home working started as a necessary temporary
lockdown measure, it is fast becoming a permanent option in some form for many
employees. A recent study found that, not only do employees want remote work
post-pandemic, 58 percent say they would look for a new job if they weren’t allowed
to continue working remotely. Employers that consider how their employees and
teams want to work and account for risks can build a strategic advantage.11
Key 2021 developments and what to expect next
GREATER ACCEPTANCE OF REMOTE AND Lawsuits filed this year, including class actions under
HYBRID WORKING the FLSA and state laws such as PAGA, highlight risks
As employers refine their return to workplace plans and attendant to remote and hybrid working. Common
think about what comes next, remote or hybrid working allegations include:
is often in the mix. Deciding to allow remote work is
just the beginning, employers must also consider their • Failure to reimburse business expenses (eg, internet
approach – will it be remote only, remote first, office first, service, phone)
or something in between? Are employees required to be
• Failure to accurately record and pay for all time
in the office on certain core days or follow a set schedule
worked (eg, call/e-mails outside regular hours)
each week? For all employees or certain groups? How
will you ensure consistent experience and opportunities? • Failure to provide all mandated meal and rest breaks
Employers will continue to face legal, operational and or additional wages in lieu thereof
management challenges as they implement new ways
• Improperly classifying employees as exempt (due
of working.
to changes in duties when employees move to
remote work)
MANAGING LEGAL RISKS
Employers are planning ahead to address tax and
employment law exposure. Common challenges include
payroll withholding and taxes, choice of law issues and
data privacy and security considerations.
11
Global Guide to Remote Working, DLA Piper Global Employment Guide
(October 30, 2020) (examining remote working considerations in
30+ jurisdictions).
20DLAPIPER.COM
Actions to consider
➤ Establish clear, objective eligibility criteria for ➤ Consider how current workplace policies apply
remote work in order to ensure consistency to remote working, including in such areas as
and minimize the risk of claims of discriminatory supervision, performance management, time
treatment. Employers are also urged to consider recording, privacy, confidentiality, IT and document
steps to preserve their flexibility to terminate management, expense reimbursement and
remote arrangements. insurance. Even ordinary compliance issues such
as posting applicable legal notices and posters
➤ Ensure a common understanding of “remote.” Does
can become more challenging when part of the
the employee have to work from a primary residence
workforce is remote.
in the same region/state/country as their original
jurisdiction of work? Can an employee relocate ➤ Ensure timekeeping policies require non-exempt
to a different state or even country? Defining the employees to record all working time, including
parameters of remote work will enable the employer incidental time outside of normal working hours (eg,
to appropriately scope and respond to risks. answering an email), and to take legally mandated
breaks. Employers should also assess working time
issues related to new procedures such as health
screening, temperature checks and PPE.
21MID-YEAR UPDATE – TOP 10 TRENDS FOR US EMPLOYERS
6 The ABC test
Arriving at the applicable standard to determine if a worker is an independent
contractor or employee is more complicated than ever. This year employers are
monitoring ongoing challenges to California’s AB 5 and its ABC test, as well as new
laws and potential models emerging at the state level. Employers are also waiting on
the DOL, which is expected to adopt a more worker-friendly test in place of the now-
revoked Trump-era proposed rule.
Key 2021 developments and what to expect next
CALIFORNIA AB 5 AND THE ABC TEST The DOL is expected to release new guidance or a
Litigation is ongoing over California’s AB 5, the law regulation on employee status under the FLSA. Notably,
codifying the ABC test established by the state Supreme President Biden’s pick to head the DOL’s Wage and
Court’s decision in Dynamex Operations v. Superior Court. Hour Division, David Weil (who led the WHD from 2014
through early 2017) issued a guidance document in July
In April, the Ninth Circuit held that because AB-5 is 2015 that took an expansive view of the employment
a generally applicable labor law that affects a motor relationship. Employers can also expect more aggressive
carrier’s relationship with its workforce and does not enforcement by the agency.
bind, compel or otherwise freeze into place the prices,
routes, or services of motor carriers, it is not preempted DOL REPEALS FORMER ADMINISTRATION
by the Federal Aviation Administration Authorization Act. JOINT EMPLOYER TEST
The California Trucking Association has filed a writ of On July 28, the DOL published a final rule rescinding
certiorari to the US Supreme Court. a Trump Administration regulation that limited the
circumstances in which multiple businesses share liability
Another case pending before the Ninth Circuit will for wage violations. The Trump-era joint employer rule
test whether gig workers can recover damages due to was enjoined nationwide by a federal court last year and
alleged misclassification prior to the enactment of Prop is currently on appeal. The DOL is expected to revert to
22. In the meantime, California authorities continue its broader Obama-era interpretation.
to seek to enforce AB 5 against service-based gig
companies, which are outside of Prop 22. STATE LAWS TARGET MISCLASSIFICATION
States continue to address misclassification issues. Most
THE LIKELY PATH OF THE DOL recently, on July 8, New Jersey Governor Phil Murphy
On May 5, the DOL rescinded the Trump-era regulation signed four bills furthering state efforts to target
that would have simplified the test for classifying employee misclassification. Among other things, the
workers as independent contractors under the FLSA. legislative package creates a new Office of Strategic
This means that employers are still subject to the multi- Enforcement and Compliance within the Department
factor economic realities test. Meanwhile, a lawsuit of Labor (DOL); simplifies the process for identifying
pending in Texas seeks to invalidate the DOL’s decision misclassified workers; and implements stop-work orders
to delay the Trump-era independent contractor rule. at worksites where misclassification is identified.
What happens next? A legislative overhaul is unlikely,
given the composition of the Senate composition.
22DLAPIPER.COM
INDEPENDENT CONTRACTOR+ agreement for drivers and another one for delivery
The debate over how to regulate non-standard work workers, if a union submitted letters of support from
arrangements has not abated in 2021. Some lawmakers at least 10 percent of active workers. 12 While the draft
are exploring legislation that would recognize a third legislation did not move forward during the most recent
path for gig workers. In New York, for example, gig session, a new model may yet emerge.
transportation companies negotiated with labor groups
over a legislative deal that would have labeled workers
as “network drivers” rather than employees and provided
for a range of protections. The draft legislation further
12
Josh Eidelson, N.Y. Lawmaker Drops Bid for Uber Driver Union Deal This Year,
provided for sectoral bargaining, with one sector-wide Bloomberg Law (June 8, 2021).
Actions to consider
➤ Work with counsel to carefully review practices for ➤ Review and revise (as necessary) independent
retaining, using, compensating and terminating contractor agreements. Under the various legal
contractors. standards, simply labeling a worker as an independent
contractor, advisor or consultant is not, on its own,
➤ Consider regular audits of independent contractor
sufficient to establish a contractor relationship.
relationships. Initial steps may include (1) designate
Independent contractor agreements should include
an audit team and include a human resources
language to establish the appropriateness of the
representative and a member of the legal department
classification in each case (rather than using a one-
and/or outside counsel; (2) collect all independent
size-fits-all form). Where possible, the company may
contractor agreements and any other documentation
wish to clarify that the relationship between the
related to terms of work and pay for independent
contractor and the company is not continuing but
contractors; and (3) identify the work location of each
shall terminate at the conclusion of the project.
individual designated as a contractor in order to
identify state laws that may be implicated. The audit ➤ Review benefit plans as needed to reduce the risk
may also include an assessment of the independent of retroactive coverage obligations for misclassified
contractor agreement, as well as the terms and employees.
conditions of the individual’s work. Legal counsel can
➤ Evaluate arbitration and class action waiver
help assess both applicable laws and legal risks.
strategies to mitigate the classification challenges
presented by the ABC test.
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