Key Highlights The EEOC has submitted a rulemaking item for White House regulatory review that would rescind its 1979 Interpretive Rule, “Affirmative Action Appropriate Under Title VII of the Civil Rights Act of 1964.” The 1979 rule currently provides the EEOC’s framework for when employers may adopt voluntary affirmative action plans under Title VII, including where a reasonable self-analysis identifies adverse impact, the effects of prior discrimination or artificially limited labor pools. A rescission would not, by itself, change Title VII or erase Supreme Court precedent allowing certain voluntary affirmative action plans, but it would remove a longstanding EEOC framework and allowing increased scrutiny of diversity, equity and inclusion (DEI) programs that consider race, sex, national origin or other protected characteristics in employment decisions. What Is Changing? The EEOC has moved to rescind its 1979 Interpretive Rule, codified at 29 C.F.R. Part 1608, which has long provided guidance on when voluntary affirmative action may be appropriate under Title VII. The agency’s release does not provide much detail, but the practical issue for employers is clear: the EEOC is looking to withdraw a rule that has served as a roadmap for evaluating voluntary affirmative action plans. The proposed rescission reflects the EEOC’s broader shift toward increased scrutiny of employment practices that expressly consider race, sex or other protected characteristics, particularly in the context of DEI-related initiatives. Part 1608 Currently Gives Employers a Framework for Voluntary Affirmative Action Plan Under the current rule, voluntary affirmative action may be appropriate where an employer’s self-analysis identifies actual or potential adverse impact, the continuing effects of prior discriminatory practices or artificially limited applicant or promotion pools. The rule provides that an affirmative action plan should include three elements: a reasonable self-analysis, a reasonable basis for concluding that action is appropriate and reasonable action in relation to the problem identified. The rule also has a reliance component. It identifies itself as a “written interpretation and opinion” of the EEOC under Section 713(b)(1) of Title VII, which allows employers to argue that actions taken in good-faith reliance on the rule are protected even if that interpretation is later modified or rescinded. Rescission Would Remove the EEOC’s Agency-Endorsed Framework, Not Rewrite Title VII A rescission would not automatically make all voluntary affirmative action unlawful. In United Steelworkers v. Weber, the Supreme Court upheld a private employer’s voluntary affirmative action plan where the plan was designed to address a manifest racial imbalance in traditionally segregated job categories, did not unnecessarily trammel the interests of white employees and was temporary. The Court later applied similar principles in Johnson v. Transportation Agency, upholding a plan that considered sex as one factor in a promotion decision where women were underrepresented in a traditionally segregated job category and the plan was moderate, flexible and case-by-case. Although the Supreme Court’s decision in Students for Fair Admissions v. Harvard addressed higher education admissions rather than employment practices under Title VII, the decision has significantly influenced the broader legal and enforcement landscape surrounding DEI initiatives. Since SFFA, employers have faced increased scrutiny of programs that expressly consider protected characteristics, including through litigation challenges, agency investigations and employee complaints. Even so, losing Part 1608 would matter. Employers would no longer have the same EEOC-endorsed rule to rely on when defending future race-, sex- or national-origin-conscious employment decisions or any voluntary affirmative action programs, disparity analysis or adverse impact analysis. The move also fits within the EEOC’s broader stated focus on “rooting out unlawful DEI-motivated race and sex discrimination.” Employers Should Review Programs that Consider Protected Characteristics Employers should not treat every EEO, DEI, outreach, mentoring, recruiting or pipeline program the same. Programs that expand opportunity without using protected characteristics as a selection factor generally present different risks than programs that reserve slots, apply preferences, set quotas or otherwise tie employment decisions to race, sex, national origin or another protected trait. Employers should identify any programs that rely on Part 1608 or otherwise consider or provide opportunity based on protected characteristics in hiring, promotion, internships, fellowships, leadership development, training access, compensation, layoffs or other employment opportunities. For any such program, employers should review whether it is supported by a current self-analysis, whether it is focused on one race or sex or all, whether goals are aspirational rather than mandatory, whether the program is tied to identified barriers or imbalances, whether the employer can clearly articulate and document the program’s factual and legal justifications, whether the program is applied consistently in practice and whether it includes limits, review points and an endpoint. Programs lacking documented support or clear limiting principles or that are narrowly focused on certain races or ethnicities may face greater scrutiny in the current enforcement environment. Why This Matters Rescission of the 1979 rule would not end lawful equal employment opportunity efforts, and it would not repeal Weber or Johnson. But voluntary affirmative action plans have always required careful structuring to fit within Title VII’s nondiscrimination requirements. The anticipated elimination of Part 1608, together with other EEOC developments reflecting a more “color-blind” approach to Title VII enforcement, would only heighten the need for employers that maintain these programs to carefully assess the factual and legal justifications for them, how they are applied in practice and whether they remain appropriately limited. In the current enforcement environment, employers should expect greater scrutiny of programs that use protected characteristics in employment decisions and should review those programs now, before a charge, complaint or litigation challenge forces that review on a less favorable timeline. Employers with questions about voluntary affirmative action plans, DEI-related employment programs or how to assess risk in light of the EEOC’s anticipated rescission should contact their Polsinelli Labor and Employment attorney.

Key Highlights On April 22, 2026, Virginia approved a statewide paid family and medical leave (PFML) program, joining several other states across the nation that have enacted such programs. The new program will be administered by the Virginia Employment Commission (VEC), funded through payroll contributions beginning April 1, 2028, and will begin paying benefits on December 1, 2028. For Virginia employers, the larger story may be that this is not simply federal Family and Medical Leave Act (FMLA) with wage replacement added. Virginia’s PFML program differs from its federal counterpart in who is covered, which relationships and reasons qualify, how benefits are funded, and when job-restoration rights attach. Virginia’s New PFML Program Creates a Separate State Leave Framework The new law establishes a state-administered insurance program through the VEC. Under the statute, the VEC must establish and administer the program by January 1, 2028, begin collecting contributions on April 1, 2028, and begin receiving claims and paying benefits on December 1, 2028. The law also permits employers to apply to satisfy their obligations through an approved private plan if that plan provides benefits equal to or greater than those required by the statute. As enacted, Virginia PFML will provide up to 12 weeks of paid leave in a benefit year for the birth, adoption, or foster placement of a child, the employee’s own serious health condition, care for a family member with a serious health condition, qualifying military family needs, and care for a covered service member. The law also provides up to four weeks of paid leave to seek defined “safety services” for the employee or a family member. Weekly benefits are set at 80% of average weekly wages, subject to a statutory minimum and maximum, and the law expressly allows intermittent or reduced-schedule leave. PFML leave that also qualifies as leave under the FMLA runs concurrently with FMLA leave, so the employee receives only a total of 12 weeks per year for leave qualifying under both laws. The PFML statute allows employers to require that PFML be used concurrently with any “disability or family care leave” the employer provides, but it is unclear whether this would permit the employer to require the employee to use PFML concurrently with PTO or general paid sick leave, as is commonly required under employer leave policies. Virginia Joins Other States in Expanding Its PFML Program Beyond FMLA Because Virginia historically has not imposed paid leave obligations on private employers, the familiar statutory reference point for Virginia employers has been the federal FMLA. Virginia’s new program, however, does not just mirror the federal scheme; instead, it goes well beyond FMLA’s leave entitlements. 1. Virginia PFML Reaches a Broader Pool of Workers than FMLA FMLA coverage applies to private employers with 50 or more employees and only to employees who have worked for the employer for at least 12 months, worked at least 1,250 hours in the prior 12 months, and work at a site with 50 employees within 75 miles. Virginia officials, by contrast, describe the new PFML benefit as being widely available to nearly all workers in the Commonwealth, and the statute itself makes benefits available to “covered individual[s]” which generally means a worker who satisfies Virginia’s unemployment-law monetary eligibility criteria. On the employer side, the statute also borrows from Virginia’s unemployment-law, which generally reaches an employing unit that paid $1,500 or more in wages in a calendar quarter or had at least one individual in employment for part of a day in each of 20 different weeks in the current or preceding year. These unemployment benefit thresholds for employee and employer coverage are extremely minimal and will be met by the vast majority of employees and employers. 2. Virginia’s Covered Relationships and Qualifying Reasons also Exceed Those Under FMLA The new Virginia PFML law also provides more reasons for employees to take leave than federal FMLA. PFML not only covers the FMLA-qualifying reasons, but adds a new category of “safety services” related to domestic violence, harassment, sexual assault, or stalking for which an employee can take extended paid leave. In addition, while FMLA allows employees to take leave to care for only very close relatives (a child, parent, or spouse), PFML expands the leave entitlement to allow extended paid leave for an employee to care for more attenuated relations. 3. Unlike Many Other States Virginia Merges Benefit Eligibility and Job Protection One critical way in which Virginia PFML is broader than both FMLA and other state PFL laws is in its provision of job protection. In most states with similar PFL laws, paid leave and job protection are separated to balance employer and employee interests. An employee might be entitled to paid leave under the broader state program but is only entitled to restoration to their position if they meet FMLA’s requirements for tenure, employer size, etc…, or fit within the requirements of other specific laws like the Americans with Disabilities Act, Pregnant Workers Fairness Act, or state analogues. Virginia PFML, on the other hand, provides job protection and restoration rights for all employees who meet the relatively short 120-day tenure requirement with their current employer before taking leave. Why This Matters Virginia PFML adds more than a new leave right. It also adds a new payroll tax, notice requirements, and administrative system. Although employers have a two (2) year lead time before PFML begins to actively operate, the time will soon come for employers to review their leave policies to ensure that PFML leave is coordinated to work alongside the employer’s other leave requirements, and that all leave policies are in line with the new law’s requirements. Employers can consult their Polsinelli Labor and Employment attorney with any questions.

Key Highlights Effective April 18, 2026, New York State now generally prohibits employers from requesting or using consumer credit history for employment purposes, subject to limited statutory exemptions. The statute defines “consumer credit history” broadly enough to reach credit reports, credit scores and certain information obtained directly from an applicant or employee. New York City employers remain subject to the City’s more protective local regime because the state law expressly preserves local laws that afford greater protection. What Changed on April 18, 2026? New York employers face a significant statewide change in recruiting and other employment decision-making practices. Effective April 18, 2026, amendments to New York’s Fair Credit Reporting Act now make it an unlawful discriminatory practice for employers, labor organizations, employment agencies and their agents to request or use the consumer credit history of an applicant or employee for employment purposes, or otherwise discriminate on that basis with respect to hiring, compensation or the terms, conditions or privileges of employment. The statute also changes what may be furnished for employment purposes by requiring employment reports to exclude information bearing on a person’s creditworthiness, credit standing, credit capacity or credit history unless an exemption applies. 1. The law reaches more than hiring. The new restriction is not limited to pre-employment screening. Under the statute, “employment purposes” includes evaluating an individual for employment, promotion, reassignment or retention, and the operative ban also reaches compensation and other terms, conditions and privileges of employment. For employers that have historically used credit information in internal mobility or role-based screening, that broader reach is particularly notable. 2. “Consumer credit history” is defined broadly. The law does not target only traditional credit reports. It also covers credit scores and information obtained directly from the individual about credit accounts, late or missed payments, charged-off debt, collections, credit limits, prior inquiries, bankruptcies, judgments or liens. In practical terms, the definition reaches not only vendor-supplied reports, but also certain questions directed to applicants or employees themselves. 3. The exemptions are narrow and role-specific. The statute contains a limited set of exemptions, including roles where use of credit history is required by state or federal law or by a self-regulatory organization; peace and police officers and certain law-enforcement roles; positions subject to background investigation by a state agency; positions requiring bonding or security clearance; certain non-clerical roles with regular access to trade secrets, intelligence information or national security information; positions with signatory or fiduciary authority over at least $10,000; and positions with regular duties that allow the employee to modify digital security systems designed to prevent unauthorized access to networks or databases. 4. New York City employers still have an added compliance layer. The statewide law expressly preserves local laws that provide greater protection, which leaves New York City employers with an additional layer of compliance. City guidance continues to construe exemptions narrowly, notes that the City law applies when an employer has four or more employees or one or more domestic workers and contemplates notice and five-year recordkeeping when an employer invokes an exemption. That same guidance also describes the $10,000 funds exemption and the digital-security exemption as generally executive-level, rather than blanket exemptions for finance or IT roles. Why This Matters By extending New York City’s existing credit-check restrictions statewide, the NYFCRA expands the issues that can arise in recruiting, background-check administration and role-based exemption analysis. The April 18 effective date places renewed attention on application materials, interview practices, vendor instructions and exemption analyses—particularly in New York City, where the local law continues to add its own notice, recordkeeping and interpretive overlay. This law also joins New York State’s Article 23-A framework and New York City’s Fair Chance Act as another highly granular regulation of the pre-hire and onboarding process. Employers should review their onboarding and recruiting processes to ensure compliance with the Empire State’s increasingly technical hiring requirements and consult their Polsinelli Labor and Employment attorney with any questions.

Key Highlights New York City’s Earned Safe and Sick Time Act (ESSTA) adds 32 hours of frontloaded unpaid safe/sick time to its existing paid safe/sick time requirements for employers. The ESSTA also expands the permissible uses for both types of leave under the Act to include scenarios tied to caregiving, housing or subsistence proceedings, public disasters and workplace violence. Employers, however, will no longer be required to grant a set number of temporary schedule changes; employees, instead, will enjoy a protected right to request such changes. What Is Changing on February 22, 2026? New York City employers should prepare for significant changes to the City’s ESSTA taking effect February 22, 2026—joining changes to New York state laws affecting disparate impact liability and the use of “stay-or-pay” contracts. The amended ESSTA includes a new bank of 32 hours of unpaid safe/sick time, expanded permissible uses of safe/sick time and a scaling back of obligations under the City’s Temporary Schedule Change Act (TSCA). 1. Employers must provide 32 hours of unpaid safe/sick time in addition to paid ESSTA leave. The ESSTA will require employers to provide employees, upon hire and on the first day of each calendar year, a minimum of 32 hours of unpaid safe/sick time that is immediately available for use. Employers will not, however, be required to carry over unused hours from this unpaid bank to the next calendar year. The Act further contemplates that when an employee needs time off for an ESSTA-covered purpose, the employer generally must provide paid safe/sick time first (if available), unless ESSTA paid time is unavailable or the employee specifically requests to use other leave (e.g., other PTO pursuant to an employer’s vacation policy). One potential issue for employers lies in the Act’s text. It ties the unpaid bank to “upon hire” and “the first day of each calendar year.” With a February 22, 2026, effective date, it is not clear from the statute whether employers must make the unpaid bank available to current employees as of the effective date. Given the short time before the effective date, employers likely will have to make a decision on this point before any additional guidance from the City’s Department of Consumer and Worker Protection becomes available. 2. Employees may now use paid and unpaid safe/sick time for new “covered uses.” ESSTA continues to allow leave for traditional illness/injury, preventive care and care of family members but now expands certain categories and adds new ones, including: Sick Time Additions Leave related to business closure or child school/childcare closure may now include closures tied to a public disaster—not just a public health emergency. Instances in which a public official directs an employee to remain indoors or avoid travel during a public disaster that prevents an individual from reporting for work. Safe Time Additions Circumstances where the employee or a family member is the victim of workplace violence in addition to the existing domestic violence/sexual offense/stalking/human trafficking categories. Certain instances of caregiving for minor children or other care recipients. Legal proceedings or hearings related to subsistence benefits or housing and other related steps necessary to apply for, maintain, or restore benefits or shelter. These expansions overlap with what NYC historically treated as “personal events” under the TSCA’s framework but now more expressly integrates the framework into the ESSTA. 3. The TSCA moves from “must grant” to “right to request” when it comes to temporary schedule requests. Following its effective date, the amendment softens the temporary schedule change regime in the City. Employees remain protected from retaliation for requesting a temporary schedule change, but the law provides that an employer may grant or deny the request, must respond as soon as practicable and may propose an alternative change, which the employee is not required to accept. Employers should keep in mind that independent obligations under federal, state and local accommodation laws remain unchanged, so some schedule adjustments may still be required as reasonable accommodations even where the TSCA request itself is discretionary. Why This Matters These amendments significantly expand the scope and administration of protected leave in New York City. By adding a new unpaid ESSTA leave bank, broadening the reasons that trigger protected absences, and shifting temporary schedule changes to a right-to-request framework, the City increases the risk of missteps in policy drafting, payroll administration and day-to-day management of leave requests. Employers should take time now to evaluate how these changes affect their existing leave, scheduling and reporting practices ahead of the February 22, 2026, effective date. Employers with questions about the amended ESSTA, or who would like assistance assessing or updating their policies and practices in advance of the effective date, should contact their Polsinelli Labor and Employment attorney.

Key Highlights New York prohibits arrangements requiring employees to repay or reimburse their employer: The newly enacted Trapped at Work Act bars employers from enforcing agreements that require workers to repay or reimburse training or other costs or payments if they leave employment before a specified period. Ambiguous language creates risk for common compensation practices: Although motivated by controversial training repayment arrangements, many commonplace practices like education stipends, tuition assistance programs, forgivable loans, advanced retention bonuses and certain consulting arrangements may now face challenges. Law applies broadly to workers beyond employees: The Act covers not only employees, but also independent contractors, interns, volunteers, apprentices and other service providers, with only limited statutory exceptions. New York employers are now prohibited from enforcing or requiring so-called “stay-or-pay” contracts that obligate employees to repay money to their employer if they leave employment prior to a stated date.  With the new “Trapped at Work Act,” New York joins other states, including Colorado and California, in protecting employees from requirements to reimburse their employer for employer-provided training. Although the Act and other similar laws have been motivated by criticisms of employer training repayment requirements, the breadth and ambiguity of New York’s new law threaten to go beyond that immediate concern and prohibit or render uncertain many commonplace employee compensation arrangements. The Act prohibits employers from using or enforcing any “employment promissory note,” which is defined as “any instrument, agreement or contract provision that requires a worker to pay the employer, or the employer's agent or assignee, a sum of money if the worker leaves such employment before the passage of a stated period of time,” including any agreement to reimburse training provided by the employer. The scope of the Act is broad, as it applies not only to traditional employees, but also to independent contractors, interns and externs, volunteers, apprentices and sole proprietors providing services. The Act does exclude certain types of agreements from its prohibition, including: Agreements to repay the employer for sums advanced to the employee, other than sums for “training related to the worker’s employment with the employer”; Repayment for property sold or leased to the employee; or Repayments pursuant to a collective bargaining agreement. Although the Act is aimed at controversial arrangements requiring employees to repay their employer for mandatory trainings, it may inadvertently sweep in other commonplace employee compensation frameworks that do not raise similar controversy. These include: Education Stipends: Employers often provide educational or tuition stipends to employees, and it is common to have retention provisions included in such arrangements. It is not clear whether such arrangements would continue to be permissible, given that the funds may not be advanced directly to the employee and the education likely relates to the employee’s position. Forgivable Loans/Advanced Retention Bonuses: Arrangements where funds are fronted to employees, subject to a retention requirement, can potentially fall within the Act’s exceptions, but they must be carefully structured to avoid penalties and enforceability issues. These types of arrangements and bonuses are common in many industries, especially financial services. Liquidated Damages for Consulting Arrangements: Given that the Act applies to independent contractors (even if properly classified as such), it is arguable that a penalty for the contractor’s early termination of the agreement would violate the Act. Even as New York Governor Hochul signed the Act, she noted that its language “was ambiguous in certain respects” and stated that she had agreed with the Legislature to “address these concerns” in the future. Unless and until clarification is provided, however, employers in New York will have to review and carefully modify any agreements that require employees or other workers to repay sums to the employer based on retention considerations.  Failure to do so can lead to the agreement being deemed null and void and subject the employer to fines, ranging from $1,000 to $5,000 for each worker with whom they have a prohibited agreement, as well as liability for attorneys’ fees incurred by the employee in defending against enforcement. For assistance reviewing agreements or other questions relating to this law, be sure to contact your Polsinelli attorney.

Key Highlights: A recent amendment expressly codifies disparate impact liability under the New York State Human Rights Law (NYSHRL) for employment discrimination claims. This comes as the U.S. Equal Employment Opportunity Commission has backed away from disparate impact theories in enforcing federal employment discrimination statutes. The increasing use of Artificial Intelligence (AI) tools in personnel processes and decision-making has the potential to raise disparate impact issues to the extent that AI processes have varying effects on specific groups. New York employers may face increased potential exposure from neutral employment practices, underscoring the importance of proactive review and documentation. New York Governor Kathy Hochul signed Senate Bill S8338 on Dec. 19, 2025, which codifies that a facially neutral employment practice may violate the New York State Human Rights Law (NYSHRL) based on its discriminatory effects, even absent discriminatory intent. While the amendment largely clarifies existing law, it comes at a time when federal enforcement of disparate impact theories has become less certain as the U.S. Equal Employment Opportunity Commission has taken a more restrained approach to pursuing disparate impact claims under federal employment discrimination statutes. Against that backdrop, the amendment underscores the continuing importance of state-law compliance and employer attention to outcome-based employment practices, as well as the purportedly neutral decisions of their AI tools. What the Amendment Does The legislation adds a new subdivision to New York’s Executive Law § 296, providing that, in NYSHRL employment discrimination cases, an unlawful discriminatory practice may be established where an employer uses a policy or practice that actually or predictably results in a disparate impact based on a protected characteristic. The statute makes clear that proof of discriminatory motive is not required. After the employee demonstrates that a particular employment practice causes, or predictably will cause, a disparate impact on a protected class, the employer then bears the burden to establish that the practice is job-related for the position in question and consistent with business necessity. Even if that showing is made, an employee may still prevail by showing the employer’s business necessity could be satisfied by a less discriminatory alternative. The statute also requires that an employer’s justification be supported by evidence and not based on hypothetical or speculative considerations, reinforcing the need for objective validation and documentation of employment criteria. Although disparate impact liability is not a new concept, the amendment injects ambiguity into the analysis by prohibiting policies and practices that “actually or predictably” yield disparate results. This raises the specter of challenges to practices that do not “actually” cause a disparate impact but can be argued to “predictably” do so. Given the litigation climate in New York, this additional language creates another reason for employers to be intentional in assessing the effect, or event "predicted" effect, of personnel practices and policies. Why This Matters Now, Especially as AI Gains Ground in Employment Practices By codifying disparate impact liability, New York has increased scrutiny of ostensibly neutral employment practices — such as hiring criteria, screening tools, promotion standards and compensation structures — that may produce statistically significant disparities. AI tools are often adopted to promote efficiency and consistency and typically would not be viewed as intentionally discriminatory. However, these tools present disparate impact risks to the extent that the data inputs, models or selection criteria underlying those tools have varying effects on specific groups. For example, even in the relatively early phases of AI’s adoption, there have been claims in litigation that an employer’s use of AI training datasets disproportionately composed of one protected group (for example, males) results in an adverse disparate impact to members of other groups (for example, females). The beefed-up disparate impact liability under NYSHRL, combined with New York City’s 2023 regulations on AI use in personnel processes, guide in favor of an intentional approach by employers in using these tools for employment decisions. Looking Ahead This amendment applies to employment discrimination occurring on or after its effective date of Dec. 19, 2025, making proactive compliance efforts particularly important. Employers should consider reviewing key employment practices to assess disparate impact risk, ensure that job-related criteria are well supported, and evaluate whether alternative approaches could achieve business objectives with less discriminatory effect. If you have questions about how this amendment may affect your organization, or would like assistance evaluating existing policies and practices, contact your Polsinelli Labor & Employment attorney.

What You Need to Know: Equal Protection Under Title VII: On June 5, 2025, the U.S. Supreme Court unanimously ruled that Title VII’s protections apply equally to all individuals, regardless of whether they are in a majority or minority group, reinforcing a plain-language interpretation of the statute. DEI Implications and Legal Scrutiny: The decision comes amid increasing scrutiny of employer DEI initiatives, highlighting the need for programs to comply with Title VII’s equal treatment requirements for all protected groups. More Changes on the Way? A concurring opinion questions whether the longstanding McDonnell Douglas standard should govern at summary judgment in Title VII cases, possibly foreshadowing more changes to come. In Ames v. Ohio Department of Youth Services, the U.S. Supreme Court unanimously rejected a rule requiring that Title VII discrimination claims brought by “majority-group” plaintiffs meet a heightened evidentiary standard to establish a prima facie case of discrimination. In doing so, the Court held that Title VII applies equally to all groups within its protected classes based on the plain language of the statute that does not differentiate amongst groups. This decision is significant in light of the shifts in the Equal Employment Opportunity Commission’s position on employer diversity, equity, and inclusion (DEI) initiatives. In Ames, a heterosexual woman plaintiff alleged that she was denied a promotion and subsequently demoted due to her sexual orientation. The district court granted summary judgment to the employer on the grounds that the plaintiff failed to meet the Sixth Circuit’s "background circumstances" rule. Plaintiffs who are members of a majority group are required to establish “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” Multiple other Circuits similarly imposed heightened evidentiary burdens on majority group plaintiffs. The Supreme Court unanimously rejected the background circumstances rule, holding that Title VII's text does not support imposing a heightened standard on majority-group plaintiffs. Justice Ketanji Brown Jackson, delivering the unanimous opinion for the Court, stated that Title VII's protections apply equally to all individuals; they do “not vary based on whether or not the plaintiff is a member of a majority group.” While the decision is not necessarily unexpected, the impact of the Ames decision could be heightened given the recent focus on employer DEI initiatives. In recent guidance finding that employer DEI programs that provide benefits to employees based on race or other protected group status may be unlawful, EEOC has similarly expressed that Title VII’s protections and requirements are equally applicable to all protected groups. Also notable is a concurring opinion issued by Justices Clarence Thomas and Neil Gorsuch. In addition to noting their agreement with the majority, Justices Thomas and Gorsuch questioned the lower court’s use of the McDonnell Douglas burden-shifting standard in awarding summary judgment to the employer. The concurring opinion expressed that requiring employees to meet the McDonnell Douglas standard at the summary judgment stage was an excessive burden, and invited future challenges to the standard’s application. The Ames decision underscores the importance of treating all employees fairly under Title VII. Further, the decision emphasizes the need to assess workplace programs for vulnerabilities in light of the EEOC’s DEI focus. For questions or guidance regarding compliance, please contact Valerie Brown, Jack Blum, Earl Gilbert, or your Polsinelli attorney.

What You Need to Know The U.S. Department of Labor has announced it will no longer enforce the 2024 independent contractor rule under the Fair Labor Standards Act (FLSA), reverting to the more employer-friendly 2008 “economic reality” test. The 2008 Rule and a reinstated 2019 Opinion Letter—favorable to app-based and gig economy businesses—will guide enforcement actions, emphasizing factors like control, investment, and profit/loss potential to determine worker status. While the shift is seen as beneficial to businesses, employers must continue to monitor developments and ensure compliance with federal, state, and local classification standards to avoid misclassification penalties. On May 1, 2025, the Wage and Hour Division of the U.S. Department of Labor (“DOL”) announced that it will no longer enforce its 2024 independent contractor rule under the Fair Labor Standards Act (“FLSA”). The nixed 2024 rule previously set forth a six-factor test to classify workers as employees or independent contractors based on a “totality of the circumstances test” of non-exhaustive factors. The 2024 rule had been subject to numerous legal challenges in district courts across the country because employers considered it to skew towards classifying workers as independent contractors. Now, the DOL will revert back to the framework set out back in 2008 in Fact Sheet #13 (the “2008 Rule”) until it can develop a revised standard. The DOL’s Guiding Independent Contractor Standard (for now) The 2008 Rule asserts that “an employee, as distinguished from a person who is engaged in a business of his or her own, is one who, as a matter of economic reality, follows the usual path of an employee and is dependent on the business which he or she serves.” Under this 2008 Rule, the employer-employee relationship under the FLSA is tested by “economic reality” rather than “technical concepts.” It also states that the following factors are considered significant in determining whether there is an employee or independent contractor relationship: The extent to which the services rendered are an integral part of the principal’s business; The permanency of the relationship; The amount of the alleged contractor’s investment in facilities and equipment; The nature and degree of control by the principal; The alleged contractor’s opportunities for profit and loss; The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor; and The degree of independent business organization and operation. Finally, the 2008 Rule provides that certain factors, such as (i) where work is performed; (ii) the absence of a formal employment agreement; (iii) whether an alleged independent contractor is licensed by a state or local government; and (iv) the time or mode of pay, are immaterial to determining whether there is an employment relationship. Impact of the DOL’s Recent Departure from the 2024 Test The DOL’s announcement does not formally revoke the 2024 rule, but it does indicate that changes to the rule will be forthcoming. The DOL will now utilize the Fact Sheet #13 and a 2019 Opinion Letter (which was previously withdrawn) to conduct audits and other enforcement actions. The 2019 Opinion Letter re-instituted by the DOL on May 2, 2025, addresses whether the workers of a virtual marketplace company that provides an “online and/or smartphone-based referral service that connects service providers to end-market consumers” are independent contractors or employees. In essence, the 2019 Opinion Letter concludes that these “on-demand” workers for virtual marketplace companies, who perform services for users (such as transportation, delivery, shopping, moving, etc.), are independent contractors, not employees. App-based rideshare companies and other similar technology-based service companies will be directly impacted by the DOL’s announcement. While these recent DOL announcements are generally viewed as more employer-friendly, time will tell if that is the practical reality of these changes. Don’t forget – state and local laws can impact the analysis of proper worker classification, so employers need to stay vigilant to ensure they are not making any major changes that would violate those pesky geographic nuances. Employers Should Proactively Monitor This Area Employers should evaluate their existing employee classifications in light of these recent developments to ensure that employees are properly classified to avoid violations of the FLSA’s requirements, including minimum wage, overtime, and recordkeeping. This is particularly important for employers to consider because misclassification issues can be costly. Additionally, employers need to stay alert for any further changes because the DOL has signaled that additional rulemaking regarding independent contractor classification under the FLSA is expected. Please contact your Polsinelli attorney if you have any questions related to this important legal development.

On March 14, 2025, President Trump issued an Executive Order rescinding 18 previous orders, including Executive Order 14026, which had raised the minimum wage for federal contractors to $17.75 per hour, higher than both the federal and most state minimum wages. The rescission ends the legal uncertainty around this wage increase, which had been invalidated by the Ninth Circuit but upheld by the Fifth and Tenth Circuits. While the new order does not rescind Executive Order 13658, which set a lower minimum wage, it creates uncertainty about federal contractors' obligations under existing contracts that included the $17.75 wage. Read the full update.

During her 2025 State of the State Address on January 14, 2025, New York Governor Kathy Hochul announced a plan to support workers displaced by Artificial Intelligence (AI) by requiring employers who engage in mass layoffs or closings subject to New York’s state Worker Adjustment and Retraining Notification law (“NY WARN”) to disclose whether AI automation played a role in the layoffs. Governor Hochul stated that the goal of these disclosures is to understand “the potential impact of new technologies through real data.”  The Governor’s announcement states that she is directing the New York Department of Labor to impose this requirement, so presumably the change will be imposed without the need for legislative action. Specific details about the scope of the new disclosure requirement are not yet available. The rise of AI in the workplace has been a matter of concern to many state lawmakers across the nation, as well as federal regulators. In New York, for example, New York City’s 2021 Local Law 144 placed guardrails on employers utilizing AI and other Automated Employment Decision Tools (“AEDTs”) in employment related decisions by requiring bias audits of AEDT tools and employer notice to employees and candidates of their use. Similarly, California nearly passed a law in 2024, SB 1047, requiring notice to employees when an AI system is used in employment decisions. While the bill was stalled out at the end of the 2024 California legislative session, California is expected to propose more AI safety legislation in 2025. Colorado will also impose a new requirement in 2026 for developers and users of employment-related AI to “use reasonable care to protect consumers from any known or reasonably foreseeable risks of algorithmic discrimination in the high-risk system.” At the federal level, the Equal Employment Opportunity Commission (EEOC) issued two guidance documents in 2023 concerning the issues of adverse impact and disability accommodations in the use of AI and machine learning tools in making workplace decisions. These proliferating laws show the need for employers to be intentional about their use of AI tools in making employment decisions. Legal and human resources leaders should familiarize themselves with how their organizations are using AI tools in the employment context, and design policies to ensure that the rapidly proliferating state and local requirements around AI usage are met. 

On January 21, 2025, President Trump issued an Executive Order revoking Executive Order 11246, which imposes anti-discrimination and affirmative action requirements on federal government contractors and subcontractors. This action, part of the new administration’s broader assault on DEI efforts in the federal government and private sector, may eliminate a significant compliance obligation for federal contractors. However, much remains uncertain about the going forward status of affirmative action requirements in federal contracting.  The new Executive Order requires the Office of Federal Contract Compliance Programs (OFCCP), which administers Executive Order 11246 among other laws, to immediately cease promoting diversity, stop federal contractors and subcontractors from taking affirmative action and end workforce balancing by federal contractors based on race, color sex, sexual preference, religion or national origin. The Executive Order also states that federal contractors shall not consider race, color, sexual preference, religion or national origin “in ways that violate the Nation’s civil rights laws” when making employment, procurement and contracting decisions. The Executive Order states that federal contractors may continue to comply with the regulatory scheme required by Executive Order 11246 until April 20, 2025. OFCCP did not immediately issue guidance on how the new Executive Order impacts contractors’ obligations. Given that OFCCP’s regulations provide that affirmative action goals are not quotas or set-asides, do not supersede merit selection and do not justify making employment decisions in a discriminatory manner, it is unclear how they conflict or would interact with the Executive Order’s prohibition of illegal discrimination and workplace balancing.  With that said, the now-revoked Executive Order 11246 is the source of those OFCCP regulations and contractor race and gender affirmative action obligations. It does not appear that the Executive Order would affect veteran affirmative action plan obligations under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA) or disability affirmative action plan obligations under Section 503 of the Rehabilitation Act, given the statutory basis for those requirements. In addition to eliminating Executive Order 11246, the new Executive Order requires that every federal contract or grant award must now include a term certifying that the contractor or award recipient will not operate any programs promoting DEI that violate federal anti-discrimination laws, and a term requiring compliance “in all respects with all applicable Federal anti-discrimination laws.” The Executive Order states that this term is material to the government’s payment decision. This raises the specter of potential whistleblower actions under the False Claims Act against contractors operating allegedly discriminatory programs. The revocation of Executive Order 11246 underlines the extent to which DEI efforts are in the Trump administration’s crosshairs. On the same day as the new Executive Order, the Office of Personnel Management issued a memorandum immediately suspending with pay all federal employees working in agency DEI offices. As other agencies continue to take actions based upon President Trump’s DEI-related executive orders, companies that do business with the federal government will need to pay close attention. While much remains unclear, the new Executive Order will undoubtedly be a sea of change for federal contractors and subcontractors. Polsinelli is available to assist contractors in navigating the changing landscape surrounding affirmative action and other DEI requirements.

Effective October 1, 2024, Maryland will become the sixth state (plus the District of Columbia), to require that employers provide an upfront disclosure of the wage or salary range for open positions in job listings. The new law follows a recent proposed rule similarly seeking to require federal contractors to disclose pay information in job postings. These proliferating pay transparency requirements demonstrate the need for employers to continue focusing on achieving pay equity throughout the workforce. Maryland’s law is applicable to all employers within the state, regardless of size, and applies to any position that will be physically performed, at least in part, in Maryland. As with transparency laws enacted by other states, this leaves uncertainty about the law’s application to fully remote positions that can conceivably be performed from anywhere. The new law requires that employer job listings, whether posted directly or through a third party like a recruiting firm, include a wage and salary range, as well as a general description of the benefits offered for the position. The wage or salary range must be set in good faith by reference to: (1) Any applicable pay scale;  (2) Any previously determined minimum and maximum hourly rate or minimum and maximum salary for the position; (3) The minimum and maximum hourly rate or minimum and maximum salary of an individual holding a comparable position at the time of the posting; or (4) The budgeted amount for the position. The law also applies to internal postings for promotions or transfers.  If this information is not included in a job posting, it must be provided to the applicant before any discussion of compensation takes place, or earlier upon the request of the applicant. Notably, the factors that must be referenced in setting the wage range could potentially be inconsistent – for example, an employer could be hiring for a position in which comparable employees make between $80,000 and $120,000 but have $100,000 budgeted for the hire. The law does not provide guidance on how employers should navigate such discrepancies. In addition to the job posting requirements, the law sets forth anti-retaliation and recordkeeping obligations for employers. Penalties for violation of the new law range from $300 to $600 and take effect only upon a second or subsequent offense, as the law provides that employers will receive a compliance warning for a first offense. The law is enforceable only by the Maryland Department of Labor and does not contain a private right of action. Employers with jobs that can be performed, at least in part, in Maryland should review their pay equity and transparency practices in light of this new law. If you have questions about pay equity and pay transparency practices, contact your Polsinelli attorney.

On January 31, 2024, several U.S. government agencies released proposals and guidance aimed at imposing new pay transparency and salary history requirements upon federal government contractors and subcontractors. These proposals, should they go into effect, will subject federal contractors and contractors to a suite of pay equity regulations mirroring those recently enacted in progressive states like California and New York. Proposed FAR Clause Implementing Salary History Restrictions Most significantly, the FAR Council, which consists of the Administrator for Federal Procurement Policy and the heads of the Defense Department, NASA, and the General Services Administration, published a proposal to amend the Federal Acquisition Regulation (FAR) to implement a new pay equity clause. Under the new proposal, the new clause would be applicable to the bulk of federal government contracts that are performed in the United States and its outlying areas, and will also flow down to subcontractors at any tier.  The proposed clause applies to recruitment for any position that works “on or in connection with” a federal contract – an established standard covering not just the employees who perform the direct services called for under the contract, but also support services that are necessary for the contract’s performance. The proposed FAR clause prohibits several actions in connection with an employer’s use of an applicant’s prior compensation level in past positions during the recruiting process: Contractors cannot seek an applicant’s compensation history from the applicant or the applicant’s former employer, or require the applicant to disclose compensation history. Contractors cannot retaliate against or refuse to interview or hire applicants who do not respond to an inquiry about compensation history. Contractors cannot rely on an applicant’s compensation history (if known or discovered) as criteria for screening applications or in determining the applicant’s new compensation upon hire. Notably, the prohibition on using prior compensation in setting an applicant’s new compensation applies even if the applicant voluntarily discloses their compensation in pay negotiations. The proposed clause would also impose compensation disclosure requirements for contractors’ job advertisements. The clause requires that all advertisements for positions that work on or in connection with a federal contract must disclose the range of salary or wages the contractor believes in good faith that it will pay for the position. Job listings must also disclose a “general description” of benefits and other types of compensation (i.e., commissions, bonuses, etc…) offered. If more than 50% of compensation will come from non-wage or salary compensation, then the contractor must specify the percentage of overall compensation or dollar amount of each other form of compensation. Job advertisements must also include a notice of rights under the new FAR clause and information about how to submit claims of discrimination. New OFCCP Guidance on Salary History Concurrently with the proposed FAR clause, the Office of Federal Contract Compliance Programs (OFCCP) issued Frequently Asked Questions guidance about the use of salary history in setting compensation. The guidance does not, at least directly, impose new obligations on contractors, but does suggest that OFCCP will view an employer’s use of salary history in setting compensation as a potential indicia of pay discrimination. OFCCP’s guidance does not explicitly take the position that contractors may not use or rely upon salary history in setting compensation. Rather, the guidance states that “the practice may contribute to unlawful discrimination, depending on the specific facts and circumstances at issue.” The guidance also does not treat the use of salary history data voluntarily provided by an applicant in negotiations as different from information collected or required to be provided by the employer. The guidance suggests that the use of salary history by a contractor may be reviewed by OFCCP in compliance evaluations as part of its examination of the employer’s broader compensation policies. The FAR Council is accepting comments on its proposed rule until April 1, 2024, which could lead to changes in its scope prior to implementation. Still, federal contractors and subcontractors should review their compensation and recruiting practices to identify whether salary history data is collected and how it is used in setting compensation, as even absent these proposals, the use of salary history in setting compensation is a potential vulnerability that may expose an employer to equal pay claims.

On June 29, 2023, the United States Supreme Court issued its ruling in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (along with Students for Fair Admissions, Inc. v. the University of North Carolina, et al.), bringing an end to a near decade long legal battle regarding affirmative action at universities. The Court struck down affirmative action policies that provide a “plus” or a “tip” to applicants based on race, holding instead that the Constitution and Title VI of the Civil Rights Act (applicable to federally-funded programs) require colorblindness. As it relates to private-sector employers, the decision is only indirectly applicable because such employers are generally not subject to the Constitution’s equal protection clause and are governed by Title VII of the Civil Rights Act, rather than Title VI.  Generally speaking, Title VII case law does not permit the use of race in employment decision-making in the same fashion as universities have used race in admissions decisions.  However, the decision’s strong language regarding the application of Title VI’s language – which is nearly identical to Title VII’s – to affirmative action programs that arguably seek to benefit certain minority groups, will likely bleed over into Title VII case law. Despite the decision, however, affirmative action is not banned, so long as it is not a quota or determining factor.  Employers may continue to focus their affirmative action efforts on increasing the pipeline of qualified applicants from underrepresented groups.  Employers are not required to abandon their ongoing DEI efforts, but should be mindful of the potential for discrimination claims (which may include reverse discrimination claims). It would be prudent to review your company’s DEI commitments and initiatives, along with hiring policies, to ensure they are encouraging diversity while not crossing the line into discrimination.  This is particularly true given the publicity the Supreme Court’s decision has generated. Polsinelli has experience advising employers on crafting compliant affirmative action programs.  If you need assistance with such programs, or have any questions about the decision, including the potential impact on your company, or need assistance in reviewing your initiatives and policies, contact your Polsinelli attorney.

So far in 2023, artificial intelligence (AI) has been at the leading edge of the technological revolution, as the potential applications for tools like ChatGPT have drawn considerable buzz.  In April 2023, we reported on New York City’s first-in-the-nation ordinance imposing notice and audit requirements on the use of artificial intelligence tools by employers.  More recently, the Equal Employment Opportunity Commission (EEOC) issued two guidance documents addressing AI in the HR context, specifically tackling the issues of adverse impact and disability accommodations. Employers are increasingly using AI and machine learning (ML) tools to help optimize employment decisions like hiring, promotions, and terminations.  Some examples of these tools identified in the EEOC guidance include resume scanners to identify promising candidates, employee monitoring software that rates employees based on productivity metrics, virtual assistants or chatbots that question applicants about their qualifications, video interviewing software that evaluates facial expressions and speech patterns, and testing software that provides job or cultural fit scores.  Generally, an AI/ML tool is one that wholly or partially relies on a computerized analysis of data to make employment decisions.  As with many new technologies, however, in some cases, technological advancement may jeopardize legal compliance.  Employers will have to consider the implications of these tools under both new laws (like New York City’s) and older laws like those administered by the EEOC. EEOC’s first guidance document assessed the employer’s obligation to ensure that AI/ML tools used in employment selection procedures do not adversely impact protected classes under Title VII (e.g., gender, race).  An AI/ML tool that has a “substantial” disproportionate impact on a protected class may be discriminatory if it is not job-related and consistent with business necessity or if more favorable alternatives are available.  An adverse impact can occur if a tool awards higher ratings or is more likely to select or reject, members of a certain protected class in comparison to other protected classes.  A few important takeaways from EEOC’s guidance on adverse impact: Employers may be responsible for the effect of third-party software.  EEOC’s guidance signals the agency will look to hold employers responsible for adverse impact even if the AI/ML tool in question is third-party software the employer did not develop.  The guidance states that this responsibility can arise from either the employer’s own administration of the software or a vendor’s administration as an agent of the employer. Employers rely on vendor assurances at their own risk.  Although EEOC encourages employers to “at a minimum” ask their AI/ML software vendors about steps taken to assess adverse impact, EEOC’s position is that reliance on the vendor’s assurances is not necessarily a shield from liability.  Employers still face liability “if the vendor is incorrect about its own assessment.” Self-audits are advisable.  Given the inability to rely on a vendor’s assurances, employers are best served by periodically auditing how the AI/ML tools they use impact different groups.  To do such an audit, employers need access to the AI/ML tool’s underlying data, which is best ensured at the time the tool is implemented. EEOC’s second guidance document addressed the impact of AI/ML tools on individuals with disabilities under the Americans with Disabilities Act (ADA).  The ADA guidance makes clear that this is an altogether different analysis than the Title VII adverse impact analysis described above.  Moreover, because of the individualized nature of the impact of disabilities and the ADA reasonable accommodation analysis, validation of an AI/ML tool, or a statistical finding that the tool does not adversely impact individuals with disabilities generally, are not sufficient to ensure ADA compliance.  Instead, EEOC anticipates a more individualized process in which the employer assesses whether the limitations of a particular employee or applicant’s condition would cause the employee or applicant to be “screened out” or unfairly rated by the AI/ML tool.  EEOC’s guidance anticipates that employers, as a best practice, would provide relatively in-depth notice of the operation of AI/ML tools and the availability of alternative processes in order for the accommodation process to occur. AI/ML offers the potential to transform the workplace, among other business processes, by allowing employers to sort through vast quantities of data and quickly glean actionable insight.  However, EEOC and jurisdictions like New York City have identified the potential for discriminatory biases to be built into AI/ML algorithms, or for these algorithms to disadvantage individuals with disabilities.  In order to avoid running afoul of new laws designed to address AI/ML, and existing laws like Title VII and ADA that went into effect decades ago but nonetheless govern AI/ML use, employers should carefully review their processes for using these tools in the human resources and recruitment context.

On April 25, 2023, the Office of Federal Contract Compliance Programs (OFCCP) issued an updated self-identification form for applicants and current employees to voluntarily self-identify as an individual with a disability.  Federal contractors and subcontractors subject to Section 503 of the Rehabilitation Act must invite applicants for employment to self-identify at the pre-offer and post-offer stages, as well as invite current employees to update their self-identification every five years.  Contractors and subcontractors must use the information provided in this form in their Section 503 affirmative action program for individuals with disabilities. The revised form implements updates based on the preferred language for disabilities and includes additional examples of disabilities, among other changes.  The changes are relatively non-substantive in nature, and do not materially alter the contractor’s obligation to invite applicants and employees to self-identify. Employers are required to begin using the revised form by July 25, 2023.  Employers must continue using the prior version of the form until they implement the revised form. The revised form is set to expire on April 30, 2026. Employers can get the new form in English here. The OFCCP is expected to provide the form in additional languages in the coming months. The self-identification requirement for individuals with disabilities is just one of the unique requirements that OFCCP imposes on federal contractors and subcontractors in the recruitment and onboarding processes.  The updated self-identification form presents a good opportunity for employers that have newly become federal contractors or subcontractors, or that have not reviewed their processes for a number of years, to bring their recruiting and onboarding processes into greater compliance (including requirements for third-party recruiters acting on the contractor’s behalf), as failure to collect the sometimes granular information required by OFCCP can have negative consequences in the event of a compliance evaluation. If you have any questions about the updated Voluntary Self-Identification of Disability form, please contact Polsinelli’s OFCCP and Affirmative Action Plans team.

On April 25, 2023, the Office of Federal Contract Compliance Programs (OFCCP) issued an updated self-identification form for applicants and current employees to voluntarily self-identify as an individual with a disability.  Federal contractors and subcontractors subject to Section 503 of the Rehabilitation Act must invite applicants for employment to self-identify at the pre-offer and post-offer stages, as well as invite current employees to update their self-identification every five years.  Contractors and subcontractors must use the information provided in this form in their Section 503 affirmative action program for individuals with disabilities. The revised form implements updates based on the preferred language for disabilities and includes additional examples of disabilities, among other changes.  The changes are relatively non-substantive in nature and do not materially alter the contractor’s obligation to invite applicants and employees to self-identify. Employers are required to begin using the revised form by July 25, 2023.  Employers must continue using the prior version of the form until they implement the revised form. The revised form is set to expire on April 30, 2026. Employers can get the new form in English here. The OFCCP is expected to provide the form in additional languages in the coming months. The self-identification requirement for individuals with disabilities is just one of the unique requirements that OFCCP imposes on federal contractors and subcontractors in the recruitment and onboarding processes.  The updated self-identification form presents a good opportunity for employers that have newly become federal contractors or subcontractors, or that have not reviewed their processes for a number of years, to bring their recruiting and onboarding processes into greater compliance (including requirements for third-party recruiters acting on the contractor’s behalf), as failure to collect the sometimes granular information required by OFCCP can have negative consequences in the event of a compliance evaluation. If you have any questions about the updated Voluntary Self-Identification of Disability form, please contact Polsinelli’s OFCCP and Affirmative Action Plans team.

On April 6, 2023, the New York City Department of Consumer and Worker Protection issued its final rule interpreting the City’s Local Law 144 regulating the use of "automated employment decision tools," which went into effect on January 1, 2023. These AI-powered tools—ranging from programs that screen resumes for basic qualifications to those that assess and assign scores to candidates based on mannerisms and responses in video interviews—are increasingly being used by employers, but have generated controversy due to the potential for bias. The new regulations provide important guidance and clarification on Local Law 144’s requirements, and employers in the City should ensure that any automated tools used in their human resources processes are compliant with the new requirements. First, the regulations clarify the types of "automated employment decision tools," or AEDTs, that are subject to Local Law 144. The ordinance defines AEDTs as a "computational process, derived from machine learning, statistical modeling, data analytics, or artificial intelligence, that issues simplified output, including a score, classification, or recommendation, that is used to substantially assist or replace discretionary decision-making for making employment decisions." The regulations clarify when an AEDT will be found to "substantially assist or replace discretionary decision-making, listing three scenarios that will subject an AEDT to Local Law 144: The employer relies “solely” on the AEDT’s score, ranking, or recommendation in making employment decisions; The employer relies on other factors in addition to the AEDT’s output, but weighs the AEDT’s output more heavily than any other criterion; or The AEDT’s output is used in a way that can overrule conclusions from other factors, including human decision-making. Employers using AEDTs in their hiring or promotion selection processes would therefore be well-served to adopt policies explicitly setting out how the AEDT’s output is used in the process. The regulations also address the bias audits required by Local Law 144. An employer’s use of an AEDT in the City is unlawful unless the AEDT has undergone a bias audit within the year prior to its use. Bias audits must be conducted by an independent auditor who, as the regulations provide, (i) has not been involved in the use, development, or distribution of the AEDT, and (ii) does not have an employment relationship with or financial interest in, the employer or a vendor that develops or distributes the AEDT. The bias audit must assess the selection or scoring rate and impact ratio for each rating or classification assigned by the AEDT based on EEO-1 sex, race, and ethnicity categories, as well as intersectional categories of sex, ethnicity, and race (i.e., white females vs. Hispanic males). The regulations also prescribe what types of data (i.e., single employer data, multi-employer data, or test data) can be used in the audit. Employers implementing AEDTs will need to obtain and closely review bias audits for the AEDT to ensure compliance with Local Law 144. Finally, the regulations address the notices of AEDT usage required by Local Law 144. Employers using an AEDT must provide notice to employees and applicants of the AEDT’s use and publish a summary of the results of the most recent bias audit for the AEDT. The regulations confirm that these notices can largely be provided through the employer’s website if certain conditions are met, but to the extent AEDTs are used in promotion decisions, additional notice must be circulated to existing employees through a written policy or other means. The regulations confirm that although the employer must notify employees and applicants of a procedure to request an alternative selection procedure not utilizing an AEDT, employers are not required to provide an alternative if requested. Finally, the regulations also outline the employer’s obligation to retain documents regarding the use of AEDTs and produce them to employees upon request, unless releasing the records is otherwise barred by law. New York City’s Local Law 144 is the most comprehensive regulation to date of the use of artificial intelligence and machine learning applications in human resources, but employers should expect other jurisdictions to quickly follow suit given the recent media attention to ChatGPT and other AI applications. In light of the new regulations, employers will need to take stock of what AI applications they are using in their human resources processes and how those applications are being used, and ensure that the applications are supported by appropriate bias audits and notices.

On March 1, 2023, the Office of Federal Contract Compliance Programs (OFCCP) published a Final Rule rescinding a prior rule the agency published late in the Trump administration that broadened the scope of Executive Order 11246’s religious exemption. As a result of the new rule, fewer federal contractors or subcontractors will likely qualify for the religious exemption, and the scope of conduct exempted from Executive Order 11246’s anti-discrimination requirement will likely be reduced. Since the Bush 43 administration, Executive Order 11246 and OFCCP’s implementing regulations have provided that the Equal Employment Opportunity clause required by Executive Order 11246 would not apply to “a Government contractor or subcontractor that is a religious corporation, association, educational institution, or society, with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities.” The 2020 rule provided definitions of the terms “religion,” “particular religion,” “religious corporation, association, educational institution, or society,” and “sincere” that arguably broadened the scope of the exemption beyond the corresponding exemption in Title VII of the Civil Rights Act. The 2020 rule also provided that OFCCP’s should be construed in favor of broad protection of religious exercise. With the 2020 rule’s definitions, and the broad construction provision now eliminated, the interpretation of the religious exemption reverts back to Title VII standards. This will likely make it more difficult for some organizations (particularly those that are for-profit) to claim the exemption. In addition, there will likely be less protection for actions taken based on religion-adjacent tenets, as opposed to membership in a particular sect. The practical effect of the 2020 rule was limited, and the effect of its rescission will likely also be limited. Religious contractors remain subject to Executive Order 11246’s other requirements, such as its affirmative action obligations. In addition, contractors are also covered by other federal, state, and local laws prohibiting discrimination on the basis of religion. Federal contractors who wish to consider religious factors in making personnel decisions should work carefully with legal counsel to evaluate their status as a religious entity under the exemption’s new scope and other applicable laws and ensure the religious nature of each position is well documented in order to lessen the risk of discrimination claims in making religion-influenced personnel decisions.

To ring in the 2023 new year, the Federal Trade Commission (“FTC”) has taken multiple actions targeting the use of non-compete agreements, all of which are consistent with President Biden’s July 2021 Executive Order on competition in the labor market. The FTC has proposed both a rule banning the use of non-compete agreements with employees and independent contractors, and it also took legal action under its existing authority against three companies for their use of non-competes. The FTC’s proposed rule would ban employers from entering into, maintaining, or enforcing non-compete clauses with their workers, including employees, independent contractors and unpaid workers. The FTC’s notice does not mince words about its effect, as the agency states its intention to “categorically ban employers from using non-compete clauses.” The rule defines a non-compete clause as “a contractual term between an employer and a worker that prevents the worker from seeking or accepting employment with a person, or operating a business, after the conclusion of the worker’s employment with the employer.” Though the rule does not target non-solicitation or non-disclosure clauses, it proposes a functional test to determine whether a clause meets the definition, meaning that a non-disclosure or non-solicitation covenant that effectively bars an employee from seeking employment in their chosen industry could be considered a non-compete. Non-compete clauses that require the employee to pay liquidated damages to the employer in the event of competition are also prohibited. The rule would apply retroactively and require employers to rescind any existing non-compete contracts within 180 days after publication of the final rule. Employers would also be required to provide individualized notice to the employees within 45 days of rescinding the non-compete clause. Importantly, the rule would not apply in the context of a sale of a business or ownership interest of at least 25%. The FTC also brought an enforcement action against three different companies to invalidate their respective worker non-compete agreements pursuant to its broad authority under Section 5 of the FTC Act. In the respective legal actions, the FTC ordered the companies to cease enforcing their agreements and to notify all employees they were no longer bound by the agreements. This comes on the heels of the FTC’s major policy announcement that the agency would vigorously enforce Section 5’s prohibition on unfair methods of competition and that this enforcement effort would cover areas that may otherwise not be within the purview of other antitrust laws, such as the Sherman and Clayton Acts. If ultimately published as a final rule, employers can anticipate the non-compete ban will face immediate legal challenge on numerous grounds, as noted in FTC Commissioner Wilson’s lone dissent to the proposed rule. Given the importance of non-compete agreements to many employers’ efforts to protect their competitive information and relationships, employers should carefully monitor these developments. Now is the time to re-evaluate strategies for protecting competitive information by focusing on other avenues available by contract or under law that do not rely on non-competes. This includes careful examination and identification of protectable information (trade secrets), the measures in place to keep such information secret, and employees’ access to such information. Employers can contact their Polsinelli attorneys to assist with drafting comments to the proposed rule and guidance on auditing and re-tooling these strategies in the wake of these FTC developments.

On November 21, 2022, OFCCP proposed a new Scheduling Letter and Itemized Listing that will greatly increase the amount and specificity of documents and information that federal government contractors must provide in compliance evaluations.  The Scheduling Letter is the notice that OFCCP issues to contractors and subcontractors selected for the agency’s annual compliance evaluations.  These changes highlight the agency’s increased focus on enforcement, and the need for contractors to carefully document their performance of affirmative action plan requirements. OFCCP’s new proposed Scheduling Letter seeks to add numerous additional document requirements beyond those the agency currently requests in its audits.  These new requirements fall into several categories: Focus on Action-Oriented Programs and Outreach Activities:   OFCCP’s regulations have long required that contractors implement action-oriented programs to seek to increase the representation of minority, female, individuals with disabilities, and military veteran employees, and engage in outreach activities to effectively recruit members of those groups.  The proposed Scheduling Letter increases the level of specificity of the information OFCCP will be seeking from contractors about these efforts, as OFCCP is proposing to require contractors to provide documentation of outreach and recruitment activities, as well as the criteria that the contractor uses to evaluate the effectiveness of the activities and implement alternative efforts in the event that existing outreach is deemed ineffective. Scrutiny of Artificial Intelligence in Hiring Decisions:   The proposed Scheduling Letter seeks to add a new document request for documentation of the contractor’s policies and practices regarding the use of artificial intelligence, algorithms, automated systems, and other technology-based procedures in recruiting, screening and hiring.  With recent legislation in New York City and elsewhere, the use of AI in personnel decision-making is becoming an area of interest to legislators, and OFCCP appears to be joining that trend. More Detailed Data on Personnel Transactions:   OFCCP is also proposing to require contractors to provide additional data about personnel transactions over the prior affirmative action plan year.  For promotions, a stated area of focus for the agency in recent years, OFCCP proposes to require contractors to state whether each promotion was competitive or non-competitive, provide documentation about policies and practices concerning promotions, and also identify the supervisors involved in the promotion and the effect of the promotion on compensation.  For terminations, employers under OFCCP’s proposal would be required to provide information about the reason for each employee termination (i.e., retirement, resignation, conduct) over the previous plan year. Additional Data on Employee Compensation:    OFCCP similarly is proposing to require more contractors to submit more detailed data about employee compensation.  First, OFCCP has expanded the scope of the compensation data production by requiring two years of compensation data, up from one under the current Scheduling Letter, and also requiring information about the compensation of individuals provided by staffing agencies.  Second, whereas under the current Scheduling Letter, contractors may submit information about factors used to determine compensation (such as education, experience, etc.) and compensation policies, this submission would become a requirement under OFCCP’s new proposal. Providing Information About Compensation Analyses:   On the heels of OFCCP’s directive earlier in 2022 requiring federal contractors to perform pay equity audits (later rephrased by the agency as a “compensation analysis”), OFCCP is proposing to require contractors to provide certain information about their performance of the analysis.  Notably, OFCCP’s directive on compensation analyses stated that such information would be required only where OFCCP’s audit revealed pay disparities, but OFCCP is now proposing to require all contractors selected for audit to provide the information up-front in response to the Scheduling Letter.  Under the proposal, contractors must provide documentation showing that they satisfied the obligation to evaluate their compensation systems, including documentation demonstrating when the analysis was completed, the number of employees included or excluded in the analysis, what forms of compensation were reviewed, confirming that compensation was analyzed by race, gender, and ethnicity, and identifying the method of analysis used. Production of Policies and Arbitration Agreements:   Finally, OFCCP is proposing to require contractors to produce equal opportunity, harassment, and similar employment policies.  Interestingly, the agency is proposing to require employers to also provide employment agreements containing arbitration clauses. OFCCP’s current Scheduling Letter does not expire until April 30, 2023, and the new letter, if approved, would take effect after that point.  Contractors and others may submit written comments as part of the approval process through January 20, 2023.  Although it remains to be seen whether the proposed Scheduling Letter will ultimately be approved in its proposed form, OFCCP’s proposals highlight the need for federal contractors and subcontractors to take the outreach and evaluation (including compensation analysis) requirements in OFCCP’s affirmative action plan regulations seriously, as OFCCP is signaling that it intends to take a hard look at contractors’ efforts in meeting these obligations.

On November 8, 2022, Washington, D.C. voters approved Initiative 82, which will eliminate the ability of employers in the city to rely on a tip credit to meet the minimum wage requirement for employees who regularly receive tips.  Once certified and implemented, the District will join seven other states that have eliminated the tip-credit system, including Alaska, California, Minnesota, Montana, Nevada, Oregon, and Washington state, with still more jurisdictions considering similar proposals. Under current District law, much like federal law and that of most other states, employers can rely on tips paid by customers to satisfy a portion of the minimum wage requirement for employees who customarily and regularly receive more than $30.00 per month in tips.  Currently, the “cash wage” portion of the District minimum wage that must be paid directly by the employer is $5.35, with the remainder of the $16.10 minimum wage eligible to be satisfied through tips from customers.  This difference of $10.75 is called the “tip credit.”  The employee must actually receive sufficient tips to make up the difference between the cash wage and the minimum wage. Employers of tipped employees in the District will need to prepare to revamp their wage structures to comply with the new Initiative. Initiative 82 will eliminate the ability to take advantage of the tip credit and pay a reduced cash wage by July 1, 2027.  The Initiative does this by rapidly increasing the minimum cash wage until it achieves parity with the generally-applicable minimum wage.  At that point, employers will no longer be permitted to use the tip credit to meet the minimum wage.  Initiative 82’s staged increases are scheduled as follows: January 1, 2023:              $6.00 per hour July 1, 2023:                     $8.00 per hour July 1, 2024:                     $10.00 per hour July 1, 2025:                     $12.00 per hour July 1, 2026:                     $14.00 per hour July 1, 2027:                     Same as minimum wage Employers of tipped employees will be in for an immediate shock as the Initiative’s pair of 2023 increases will raise the cash wage that employers must pay to tipped employees by approximately 50% within less than a year after the Initiative’s passage.  Notably, the District’s minimum wage is tied to inflation, so by 2027, it could be higher than the current $16.10 per hour level. Initiative 82 also opens the door for employers to implement mandatory tip pooling arrangements that include non-tipped employees beginning in 2026.  For example, at a restaurant, this type of arrangement may require servers to split their tips with back-of-house employees like cooks or dishwashers.  Federal law sets forth requirements for such tip-pooling arrangements, which have been the subject of considerable litigation, so employers should consult counsel before requiring employees to pool their tips. Initiative 82 applies to all workers who receive tips, including restaurant servers, bartenders, hairdressers and barbers, nail salon workers, valets, and other hospitality workers. An almost identical initiative, Initiative 77, was approved by voters in 2018 but was subsequently repealed by the District’s Council. This time around, however, reports indicate that a majority of the Council is likely to uphold the voters’ decision and implement Initiative 82.  Employers with tipped employees in the District should prepare for the effects of the decreasing and eventually eliminated tip credit. For questions regarding the new minimum wage initiative for tipped employees, contact your Polsinelli attorney.

On November 1, 2022, job postings for positions in New York City – including remote positions that can be performed in New York City – must include a salary range listing the minimum and maximum salary or hourly wage amounts the employer believes it will offer for the advertised job.  New York City’s law follows a similar measure in Colorado, with additional pay transparency requirements in California, Washington state, and potentially New York State slated to follow. The New York City law is relatively typical of the new wave of pay transparency laws that are being considered by state legislatures nationwide.  It applies to all employers with at least four (4) employees or independent contractors (even if properly classified as such), and at least one (1) employee working in New York City.  Such employers must include in any job advertisement or listing a description of the lowest and highest salary or hourly wage that the employer believes in good faith as of the time of the posting that it will pay for the position.  Unlike Colorado’s pay transparency law, employers need not include amounts payable as benefits, bonuses, commissions, or other compensation – only hourly wages or salary.  The law applies not only to external job postings but also to internal promotion or transfer opportunities.  The law applies to any job opportunity that can or will be performed, in whole or part, in New York City, including remotely from the employee’s home.  The law provides for steep maximum penalties of up to $250,000 per violation, though employers can avoid penalties for a first-time violation by correcting the job posting within 30 days of receiving notice of the violation. Employers face several challenges from pay transparency laws like New York City’s.  For example, some employers regard their pay data as proprietary information, which now must be disclosed publicly in job listings.  That said, many employers also find benefit in setting applicants’ pay expectations prior to investing time in interviewing applicants who would not be willing to accept an eventual offer.  Likewise, pay transparency laws can bring pay disparities among existing employees to light.  For example, if an employer discloses that a position has a pay range of $100,000 - $250,000, an employee on the lower end of the scale may assume that they are paid less than others due to their sex or other protected characteristic.  The employer then has the burden to justify the differential under many existing pay discrimination laws. With pay transparency becoming a nationwide trend, employers across the country – particularly those with employees in the affected states or who offer remote positions – should take several steps to identify and address pay equity issues that may be brought to light by pay transparency laws: Evaluate Employee Compensation for Potential Disparities:  An ounce of prevention is worth a pound of cure, and if employers review and address pay disparities before disclosing a pay range, the risk of disclosure can be greatly reduced. Create, Bolster, and Publish Compensation Policies:   Private sector compensation is often based on numerous factors about the employee’s position and background, and employer transparency about these factors both bolsters arguments that differences are justified by legitimate concerns and may educate employees on why they are paid differently, so they do not jump to the conclusion of discrimination. Consider Whether Positions Should Be Fully Remote:   Pay transparency laws offer few options for employers that do not wish to publish pay ranges, but in some cases, the laws may not apply if a position is tied to a specific geographical area based on legitimate, business justifications. From their start in Colorado and New York City, pay transparency laws will likely proliferate to numerous other jurisdictions, including some of the country’s major commercial centers.  The best way for employers to mitigate the risks created by the new pay transparency laws is to tackle pay equity issues within their workforces.  For questions regarding the new pay transparency laws, contact your Polsinelli attorney.

As we previously reported, on August 26, 2022, the U.S. Court of Appeals for the Eleventh Circuit issued a decision narrowing the nationwide injunction against the COVID-19 vaccination mandate for federal contractor employees set forth in President Biden’s Executive Order 14042. Although the Eleventh Circuit found the vaccination mandate to be unlawful, it found the nationwide injunction (applicable to all federal contractors across the country) to be overbroad, and reduced to scope of the injunction to apply only to the States and parties that challenged the mandate in the case.  This allows the vaccination mandate to go into effect for federal contractors in the majority of the country.  On October 14, 2022, the Safer Federal Workforce Task Force issued guidance about its intentions and course of action following the Eleventh Circuit’s decision. The new Task Force guidance strongly implies that the federal government will resume enforcing Executive Order 14042’s vaccine mandate.  Before the government does so, however, the Task Force outlines a three-step process that will occur: First, the Office of Management and Budget will notify federal agencies regarding their obligations to comply with the remaining injunctions against Executive Order 14042, which continue in effect. Second, the Task Force will update its guidance regarding COVID-19 safety protocols for federal contractor and sub-contractor workplaces.  Due to the injunctions, the Task Force has not updated its contractor guidance since November 2021, despite great changes in the state of the COVID-19 pandemic since that time.  The October 14, 2022 notice does not provide any hints as to what types of updates the Task Force may make. Third, and finally, OMB will provide additional guidance to federal agencies regarding the resumption of enforcement of contract clauses implementing Executive Order 14042’s requirements.  Prior to this notice, the federal government will continue to not enforce any of Executive Order 14042’s requirements. The timeframes under which these steps will occur are not defined by the Task Force’s notice. As noted above, the Eleventh Circuit’s decision did not affect other pending injunctions prohibiting enforcement of the vaccination mandate against contractors and subcontractors in the States of Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, Wyoming, Kentucky, Tennessee, Ohio, and Florida.  In addition, members of the Associated Builders and Contractors also retain the protection of the former nationwide injunction. All other contractors not covered by pending injunctions will need to resume their efforts to comply with Executive Order 14042.  That said, it is unknown at this time how the Task Force will modify its guidance.  For example, will the Task Force now require that covered contractor employees obtain booster shots, in addition to the initial vaccination.  Although the exact contours of the modified guidance are important, there are steps federal contractors can take to begin preparing now, to avoid being caught under potentially short deadlines as the three-step process unfolds over an unknown timeline.

As we previously reported, on August 26, 2022, the U.S. Court of Appeals for the Eleventh Circuit issued a decision narrowing the nationwide injunction against the COVID-19 vaccination mandate for federal contractor employees set forth in President Biden’s Executive Order 14042. Although the Eleventh Circuit found the vaccination mandate to be unlawful, it found the nationwide injunction (applicable to all federal contractors across the country) to be overbroad and reduced the scope of the injunction to apply only to the States and parties that challenged the mandate in the case. This allows the vaccination mandate to go into effect for federal contractors in the majority of the country. On October 14, 2022, the Safer Federal Workforce Task Force issued guidance about its intentions and course of action following the Eleventh Circuit’s decision. The new Task Force guidance strongly implies that the federal government will resume enforcing Executive Order 14042’s vaccine mandate. Before the government does so, however, the Task Force outlines a three-step process that will occur: First, the Office of Management and Budget will notify federal agencies regarding their obligations to comply with the remaining injunctions against Executive Order 14042, which continue in effect. Second, the Task Force will update its guidance regarding COVID-19 safety protocols for federal contractor and sub-contractor workplaces. Due to the injunctions, the Task Force has not updated its contractor guidance since November 2021, despite great changes in the state of the COVID-19 pandemic since that time. The October 14, 2022, notice does not provide any hints as to what types of updates the Task Force may make. Third, and finally, OMB will provide additional guidance to federal agencies regarding the resumption of enforcement of contract clauses implementing Executive Order 14042’s requirements. Prior to this notice, the federal government will continue not to enforce any of Executive Order 14042’s requirements. The timeframes under which these steps will occur are not defined by the Task Force’s notice. As noted above, the Eleventh Circuit’s decision did not affect other pending injunctions prohibiting enforcement of the vaccination mandate against contractors and subcontractors in the States of Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, Wyoming, Kentucky, Tennessee, Ohio, and Florida. In addition, members of the Associated Builders and Contractors also retain the protection of the former nationwide injunction. All other contractors not covered by pending injunctions will need to resume their efforts to comply with Executive Order 14042. That said, it is unknown at this time how the Task Force will modify its guidance. For example, will the Task Force now require that covered contractor employees obtain booster shots in addition to the initial vaccination. Although the exact contours of the modified guidance are important, there are steps federal contractors can take to begin preparing now, to avoid being caught under potentially short deadlines as the three-step process unfolds over an unknown timeline.

On August 26, 2022, the Eleventh Circuit Court of Appeals issued its long-awaited decision in the federal government’s appeal of a lower court order striking down the Biden Administration’s COVID-19 vaccination mandate for federal contractors and subcontractors.  Although the Eleventh Circuit agreed with the district court that the vaccination mandate exceeded the President’s authority to issue, the appellate court found that the district court’s nationwide injunction was too broad in scope and limited the scope of the injunction to apply only to the parties before the court.  This means that the vaccine mandate could resume in many other states that are not covered by an injunction from another court. A brief history may be helpful:  On September 9, 2021, President Biden issued Executive Order 14042, directing federal agencies to include a COVID-19 vaccination mandate in new federal government contracts, renewals and extensions of existing contracts, and, where possible, existing contracts even in the absence of a renewal or extension.  On September 24, 2021, the Safer Federal Workforce Task Force issued guidance implementing the Executive Order’s requirements.  Several lawsuits were filed in federal district courts across the country challenging the vaccine mandate, leading to the issuance of numerous injunctions of varying scope.  One of these injunctions was issued by the U.S. District Court for the Southern District of Georgia and barred the vaccine mandate in all federal contracts and solicitations nationwide. In assessing the federal government’s appeal of the nationwide injunction, the Eleventh Circuit rejected the government’s argument that Congress had delegated the President authority to impose a vaccine mandate under the Federal Property and Administrative Services Act, also known as the Procurement Act.  Instead, the court held that the Procurement Act only provided limited authority to address the government’s procurement process, not impose health-related measures of vast, national significance. More significantly, however, the court found that the nationwide scope of the Georgia court’s injunction was overbroad and that the injunction should provide relief only to the parties in the lawsuit – i.e., the States of Alabama, Georgia, Idaho, Kansas, South Carolina, Utah, and West Virginia, and the members of the Associated Builders and Contractors (“ABC”).  As a result, the Georgia injunction is now limited to prohibiting the federal government from imposing the vaccine mandate requirement in new or existing contracts with those states or ABC members or considering the mandate in solicitations for which those states or an ABC member is a bidder.  Several other injunctions remain in effect, but cover only contractors in the States of Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, Wyoming, Kentucky, Tennessee, Ohio, and Florida.  The federal government can now enforce the vaccine mandate with respect to federal contractors and subcontractors outside of those states and ABC’s membership. As of the morning of August 29, 2022, the Safer Federal Workforce Task Force has not yet updated its website to account for the Eleventh Circuit ruling.  However, contractors outside of the states that remained covered by court injunctions must resume preparations to ensure that all “covered contractor employees,” as defined by the task force’s guidance, are vaccinated against COVID-19 or have a religious or medical exemption from vaccination.

On August 26, 2022, the Eleventh Circuit Court of Appeals issued its long-awaited decision in the federal government’s appeal of a lower court order striking down the Biden Administration’s COVID-19 vaccination mandate for federal contractors and subcontractors.  Although the Eleventh Circuit agreed with the district court that the vaccination mandate exceeded the President’s authority to issue, the appellate court found that the district court’s nationwide injunction was too broad in scope and limited the scope of the injunction to apply only to the parties before the court.  This means that the vaccine mandate could resume in many other states that are not covered by an injunction from another court. A brief history may be helpful:  On September 9, 2021, President Biden issued Executive Order 14042, directing federal agencies to include a COVID-19 vaccination mandate in new federal government contracts, renewals and extensions of existing contracts, and, where possible, existing contracts even in the absence of a renewal or extension.  On September 24, 2021, the Safer Federal Workforce Task Force issued guidance implementing the Executive Order’s requirements.  Several lawsuits were filed in federal district courts across the country challenging the vaccine mandate, leading to the issuance of numerous injunctions of varying scope.  One of these injunctions was issued by the U.S. District Court for the Southern District of Georgia and barred the vaccine mandate in all federal contracts and solicitations nationwide. In assessing the federal government’s appeal of the nationwide injunction, the Eleventh Circuit rejected the government’s argument that Congress had delegated the President authority to impose a vaccine mandate under the Federal Property and Administrative Services Act, also known as the Procurement Act.  Instead, the court held that the Procurement Act only provided limited authority to address the government’s procurement process, not impose health-related measures of vast, national significance. More significantly, however, the court found that the nationwide scope of the Georgia court’s injunction was overbroad and that the injunction should provide relief only to the parties in the lawsuit – i.e., the States of Alabama, Georgia, Idaho, Kansas, South Carolina, Utah, and West Virginia, and the members of the Associated Builders and Contractors (“ABC”).  As a result, the Georgia injunction is now limited to prohibiting the federal government from imposing the vaccine mandate requirement in new or existing contracts with those states or ABC members or considering the mandate in solicitations for which those states or an ABC member is a bidder.  Several other injunctions remain in effect, but cover only contractors in the States of Missouri, Nebraska, Alaska, Arkansas, Iowa, Montana, New Hampshire, North Dakota, South Dakota, Wyoming, Kentucky, Tennessee, Ohio, and Florida.  The federal government can now enforce the vaccine mandate with respect to federal contractors and subcontractors outside of those states and ABC’s membership. As of the morning of August 29, 2022, the Safer Federal Workforce Task Force has not yet updated its website to account for the Eleventh Circuit ruling.  However, contractors outside of the states that remained covered by court injunctions must resume preparations to ensure that all “covered contractor employees,” as defined by the task force’s guidance, are vaccinated against COVID-19 or have a religious or medical exemption from vaccination.

The District of Columbia Council passed the Non-Compete Clarification Act of 2022 (“Act”) in late July 2022, setting standards for how and when employers can use and enforce covenants not to compete. The Act notably clarifies and narrows the scope of D.C.’s Ban on Non-Compete Amendments Act passed in 2020, which (as its title suggests) banned the use of new non-compete agreements for all but certain medical employees. The new, clarified Act now allows the use of non-compete agreements for “highly compensated employees,” set at $150,000 per year in total compensation, as well as certain medical employees, and implements new substantive and procedural requirements for non-compete agreements. Employers May Use Non-Competes for Highly-Compensated Employees The biggest change implemented by the Act is restoring the ability of employers outside of the medical field to use non-compete agreements.  Employers may now enter and enforce non-compete agreements with “highly compensated employees” making over $150,000 in total compensation.  Employers can use a wide variety of forms of compensation to meet the threshold, including hourly or salary wages, bonuses, commissions, overtime, and vested equity, but may not include non-cash fringe benefits.  The Act continues to prohibit non-compete agreements for employees who do not meet this threshold.  However, the Act also scales back its application to employees who do not work primarily in D.C.  Whereas the original non-compete ban arguably applied to any employee who worked in D.C. for any period of time at all, the Act clarifies that the non-compete ban now applies only to employees who spend 50% or more of their time working in D.C. or who spend a “substantial” amount of work time in D.C. and do not spend more than 50% of their work time in another jurisdiction. The Act retains and modifies the prior non-compete ban’s exception for “medical specialists.”  Employers may permissibly enter a non-compete agreement with these employees if the employee is licensed to practice medicine, acts as a physician, has completed medical residency, and receives $250,000 or more in total compensation. Certain Agreements Not Subject to the Non-Compete Ban The Act excludes several types of agreements from its prohibition on non-competes for employees making less than the $150,000 threshold.  First, non-competes remain enforceable in connection with the sale of a business.  Second, the Act makes clear that non-disclosure agreements are not subject to the ban.  Finally, the Act contains an interesting, though somewhat ambiguous, exclusion for agreements providing a “long term incentive,” defined as bonuses or equity-type compensation “for individual or corporate achievements typically earned over more than one year.” Unfortunately, the Act does not clarify the prior non-compete ban’s ambiguity with respect to customer and employee non-solicitation agreements.  Although these agreements impose more limited restrictions on the employee’s activity and do not in most cases prohibit the employee from working in a particular field like a non-compete does, other states that have limited or prohibited non-compete agreements have taken varying and inconsistent positions on whether those limitations also apply to non-solicitation agreements.  Employers using non-solicitation agreements in D.C. should take care in structuring those clauses to avoid arguments that the non-solicitation acts in effect as a non-compete. Requirements for Non-Competes The Act imposes new substantive and procedural requirements that an employer must meet to enforce a non-compete against a highly-compensated employee: The agreement must specify the scope and nature of the non-compete (e.g. services, roles, competitive entities covered); The agreement must specific the geographic scope of the non-compete restriction; The duration of the non-compete may be for a maximum of one year for non-medical specialists or two years for medical specialists; The employer must provide the non-compete agreement 14 days in advance of the employee’s start date or the date the employee is required to sign the agreement. Employers Permitted to Limit Outside Employment The Act also restores D.C. employers’ ability to use “moonlighting” policies that limit or prohibit employees from working with other employers.  Previously, D.C.’s non-compete ban prohibited these policies, such that an employee could even work for a competitor during employment.  Now, employers may restrict employees from accepting outside employment when the employer reasonably believes working for a second employer will: Cause the employee to disclose confidential and/or proprietary information; Conflict with industry-specific or professional rules regarding conflicts of interest; or Impair the employer’s ability to comply with a contract, grant, or any law or regulation. New Notice Requirements The Act includes new notice requirements to employees. First, when an employer has a policy that includes one of the exclusions to the definition of “non-compete provision” (e.g. a policy limiting outside employment) the employer must provide such policy (1) within 30 days after October 1, 2022, (2) within 30 days of an employee’s first day of employment, and (3) after the employer makes a change to such policy. Additionally, employers must include a notice when presenting a highly compensated employee with a non-compete provision. D.C. employers should carefully review the Act and update their employment agreements to ensure that they continue to have the benefit of non-compete protection after the Act becomes effective in October 2022.

In March 2022, we reported on a controversial directive issued by the Office of Federal Contract Compliance Programs (OFCCP) that appeared to assert, for the first time, that federal contractors and subcontractors are required to conduct statistical pay equity audits on an annual basis, and also took an aggressive position that documents relating to these audits are likely not protected by the attorney-client privilege or work product doctrine.  In response to widespread criticism from the contractor community, OFCCP, on August 18, 2022, issued a new, “revised” directive that yields ground on some of the prior directive’s more aggressive positions.  That said, the new directive makes clear that OFCCP is not relaxing its focus on pay equity, and contractors and subcontractors similarly should not relax their efforts in this area. First, OFCCP clarified that the compensation analysis that its regulations require contractors to perform is not necessarily a statistical regression analysis of the type preferred by OFCCP.  The revised directive replaces the term “pay equity audit” with “compensation analysis” and clairifies that various methods may suffice.  However, contractors should not take this as a license to perform only cursory analyses.  When OFCCP reviews the information about the compensation analysis that is required to be provided (described below), it could conclude that an employer’s chosen method of analysis was insufficient.  In addition, conducting rigorous pay equity analyses has its own business case independent of OFCCP’s requirements, as ensuring pay equity aids significantly in an employer’s talent acquisition and retention efforts, helps maintain workplace morale and mitigates the risk of private-plaintiff pay discrimination litigation. Most importantly, OFCCP’s revised directive abandons the agency’s prior position that it would seek “a complete copy” of a contractor’s pay equity audits and that such audits conducted for the purpose of complying with OFCCP regulations are, by definition, not privileged.  OFCCP’s revised directive provides contractors with three options to provide in lieu of the full analysis: A redacted version that removed privileged material. A separate, non-privileged analysis to be provided in full. A detailed affidavit describing the contractor’s efforts. Regardless of which of these options the contractor elects, the information provided to OFCCP must describe: when the analysis was conducted, the number of employees included and number and categories of any employees excluded from the analysis, what forms of compensation the contractor analyzed and how different types of compensation were separated or combined for analysis, a confirmation that compensation was analyzed by gender, race, and ethnicity, and the method of analysis used by the contractor. OFCCP also “recommends” that contractors provide additional information about their compensation analyses.  The revised directive states that OFCCP would also like to receive information about the employee pay groupings evaluated, how and why employees were grouped into these groupings, and what variables, factors, and controls the contractor used (such as time in the role, degrees, performance ratings, etc…), and the model statistics for any regression analyses conducted.  Unlike the prior directive, OFCCP recognizes that many contractors consider these types of information to be privileged.  That said, there can be value in providing these types of information to the agency – for instance, OFCCP may accept a contractor’s pay analysis groups if provided, rather than forming its own (typically overbroad) groups.  The decision on whether to provide this information will need to be made after careful analysis with counsel of the benefits and drawbacks of doing so. Finally, OFCCP’s revised directive also requires contractors to disclose certain information about any corrective measures it takes in response to disparities found during the compensation analysis.  The contractor must provide information regarding the nature and extent of any disparities, whether the contractor investigated the root cause of the disparities, what types of “action-oriented programs” the contractor implemented to correct the disparities, and how the contractor intends to measure the impact of its programs. Although OFCCP’s revision to its controversial directive is a welcome sign for contractors, it does not signal any reduction in OFCCP’s emphasis on combatting actual or perceived pay discrimination.  Nor does it imply that contractors should reduce their efforts to proactively monitor their compensation systems.  Pay equity is an area in which an ounce of prevention is worth a pound of cure, and it benefits employers to stay on top of their data to identify and redress the potential disparities that may inevitably develop over time.  However, even the more limited revised directive makes clear that federal contractors and subcontractors must carefully structure these analyses to satisfy OFCCP’s requirements and maintain the protection of attorney-client privilege.

In a July 28, 2022 e-mail communication, OFCCP emphasized the need for federal government contractors to certify their compliance with the affirmative action plan (AAP) requirements of Executive Order 11246 through OFCCP’s Contractor Portal. Although the June 30, 2022 deadline for AAP certification has passed – and OFCCP’s e-mail makes clear the deadline was not extended – contractors who have not yet certified compliance should do so immediately to avoid additional consequences. OFCCP’s e-mail asserts that federal contractors and subcontractors who do not certify compliance with the applicable AAP requirements will “be more likely to appear on OFCCP’s scheduling list than those who have certified their compliance.” Reducing the likelihood of being audited by OFCCP provides a strong incentive for contractors to ensure they are compliant with any AAP requirements and to certify those requirements. OFCCP’s e-mail also clarifies that both contractors who fail to certify and those who state in their certification that they have not developed or maintained an AAP will face an increased risk of audit. Accordingly, businesses that work for or with the federal government – whether directly or indirectly – should immediately ascertain whether they are subject to AAP requirements, implement any required AAP and certify compliance. Contractors who do not certify compliance by September 1, 2022 will face additional consequences. OFCCP’s e-mail states that the agency will send a list of non-certifying contractors to federal agency contracting officers for the purpose of those contracting officers assisting OFCCP in achieving compliance. Notably, penalties under OFCCP’s regulations for failure to maintain an AAP include withholding of progress payments due under a federal contract, cancelation or termination of contracts and debarment from federal contracting. Even if a contractor avoids these drastic penalties, it may be faced with the requirement to enter a conciliation agreement with OFCCP that imposes burdensome recordkeeping and reporting obligations. The certification requirement applies to all federal supply and service contractors and subcontractors who are required to implement an AAP - i.e., those with 50 or more employees and contracts of $50,000 or greater in value. OFCCP has not yet imposed a certification requirement on construction contractors. Although the June 30, 2022 deadline for contractors to certify AAP compliance via the Contractor Portal has passed, federal contractors and subcontractors still have time and incentive to belatedly comply with the certification requirement. However, that time is running short with the September 1, 2022 deadline fast approaching, and contractors will need to act expediently to identify and comply with their AAP obligations.

On June 7, 2022, the D.C. Council approved a bill that limits an employer’s ability to test for cannabis.  Under the Cannabis Employment Protections Amendment Act, most D.C. employers may not fire, fail to hire, or take other personnel actions against an employee for using cannabis, participating in D.C.’s or another state’s medical cannabis program, or failing an employer-required or requested cannabis drug test.  The bill also provides that employers must allow employees to use medicinal marijuana as a disability accommodation in most circumstances. The new employment protection for cannabis use is subject to several exceptions.  Adverse actions based on an employee’s or applicant’s cannabis usage are not prohibited where the employee’s position is designated as “safety sensitive,” the employer’s action is required by a federal statute, regulation, contract, or funding agreement, the employee engaged in cannabis-related conduct (i.e., use, possession, transfer, display, sale, growth) at the employer’s premises, while working, or during working hours, or in situations where an employee is impaired while working or during working hours. The bill defines “safety sensitive” positions as those “in which it is reasonably foreseeable that, if the employee performs the position’s routine duties or tasks while under the influence of drugs or alcohol, he or she would likely cause actual, immediate, and serious bodily injury or loss of life to self or others.”  These positions include police, special police, hazardous machine operators, and active construction site workers.  The bill also does not prohibit employers from adopting or implementing drug-free workplace policies or testing employees for cannabis after an accident, upon reasonable suspicion of drug use, or if the employee works in a safety-sensitive position. Under the bill, employers will be required to issue a notice of employee rights regarding cannabis use within 60 days after the bill becomes “applicable,” and annually thereafter.  The notice must also include whether the employee’s position has been designated a safety sensitive position and state the employer’s protocols for any testing for alcohol or drugs. Employers who violate the bill could face civil fines for each violation, payment of lost wages, compensable damages, and attorneys’ fees. Mayor Muriel Bowser has until July 17, 2022 to sign the bill. If the Mayor signs the bill, it will become law after a 60-day Congressional review. However, many of the above-referenced provisions will not be “applicable” to employers until their fiscal effect is included in an approved budget plan or 365 days after Mayor Bowser approves the act, whichever is later. Covered employers in the District should begin reviewing their drug testing and drug-free workplace policies to ensure compliance with the new bill.  In addition, it will be critical to designate safety-sensitive positions that remain subject to testing requirements (other than post-accident or reasonable suspicion).  Finally, due to the requirement that adverse actions based on an employee’s impairment be supported by specifically articulable symptoms, employers that are concerned about employee drug usage should train managers on recognizing and documenting workplace impairment.

On June 24, 2022, the United States Supreme Court issued its long-anticipated ruling in Dobbs v. Jackson Women’s Health Organization. In Dobbs, the Supreme Court upheld Mississippi’s abortion restrictions making most abortion procedures illegal after 15 weeks of pregnancy, and, in the process, overturned Roe v. Wade and Planned Parenthood v. Casey, which established a federal constitutional right to abortion. By holding there is no constitutional right to an abortion in the United States Constitution, the Supreme Court has left to the states policy related to abortion. Although the Dobbs decision itself did not outlaw the procedure, several states have “trigger laws,” designed to go into effect upon Roe’s and Casey’s reversal, or pre-Roe laws that outlaw or limit abortions. Other states are expected to implement additional restrictions and bans in the coming months. This leaves employers to grapple with a patchwork of state laws addressing abortion and related issues. At the same time, several federal laws remain in place that impact employers addressing abortion-related issues in the workplace. Included in the issues that should be on employers’ minds are the following: Anti-discrimination laws Leave laws Speech issues Privacy Employee benefits Travel assistance / relocation policies Criminal liability Updating policies Join us on July 12 as we discuss the employment law and employee benefits issues that arise out of the Dobbs decision. You may RSVP to the Webinar via the link here. In the meantime, if you have any questions or would like to discuss how the Dobbs decision impacts your workforce and company, contact your Polsinelli attorney.

On May 20, 2022, the Office of Federal Contract Compliance Programs (OFCCP) released its Corporate Scheduling Announcement List (CSAL), which identifies 400 federal supply and service contractor and subcontractor establishments that will be audited by the agency in fiscal year 2022. The CSAL does not commence OFCCP’s compliance evaluation, but does notify the identified contractors that they will soon receive a scheduling letter requiring the production of affirmative action plan (AAP) documents and data. The timing under which scheduling letters will issue may change as the Biden OFFCP moves away from certain Trump administration practices.  Under the Trump OFCCP, the agency built in a 45-day delay between the publication of the CSAL and the mailing of scheduling letters, to allow contractors to prepare for the compliance evaluation. In a recent directive, OFCCP eliminated that delay period. In addition, the Trump OFCCP allowed contractors to produce the written portion of their AAP in response to the scheduling letter while obtaining a 30-day extension of time to produce the voluminous personnel transaction data that the scheduling letter requests.  OFCCP also eliminated that extension in most cases.  These changes mean that contractors may face a dramatically reduced period of time in which to compile their AAP materials, review them, and make any necessary corrections prior to submission to the agency. Also of note is that OFCCP identified only 400 supply and service contractor establishments in the FY2022 CSAL.  For FY2021, the CSAL scheduled 750 supply and service contractor establishments for audits.  Consistent with OFCCP’s renewed focus on enforcement, the smaller number of contractors selected for audit may indicate that the agency intends to take a deeper dive in each audit into reviewing the contractor’s compliance. In light of the changes to the audit process, contractors who find themselves listed on the CSAL should consult with counsel regarding their response to the agency in order to ensure that their AAPs are fully compliant with OFCCP regulations and their personnel data does not show potential gender or race-based disparities in hiring, termination, promotions, or compensation.  There is much to be gained for contractors in identifying and addressing these issues before submitting documents or data to OFCCP.  Polsinelli regularly represents federal contractors and subcontractors in OFCCP audits, and is available for consultation with contractors identified in the CSAL.

Maryland recently joined nine other states (and the District of Columbia) in providing employees in the state with a right to paid family and medical leave.  Although employer contributions to the paid family and medical leave program will not begin until 2023 and employees may not apply for benefits until 2025, when the law goes into effect it will dramatically expand the leave rights available to Maryland employees because the law applies to employees and employers who are not covered by the federal Family and Medical Leave Act (FMLA). When the new paid family and medical leave program takes effect, employees will be entitled to take up to either 12 or 24 weeks of paid leave per year for the following reasons: To care for a newborn child or a child newly placed for adoption, foster care, or kinship care. To care for a family member with a serious health condition. To attend to the employee’s own serious health condition that prevents the employee from performing the functions of his or her position. To care for a military servicemember with a serious health condition resulting from military service. Due to the deployment of a family member for military service. Ordinarily, an employee is entitled to a total of 12 weeks of leave per year, but if an employee takes leave for both the birth or placement of a child and the employee’s own serious health condition, the leave entitlement expands to a maximum of 24 weeks. The employee is entitled to paid benefits from a state-operated fund in a percentage of their average wages capped at $1,000 per week.  The paid leave fund is funded by employer and employee payroll tax contributions.  Although all employers in Maryland must provide leave, only employers with 15 or more employees (apparently, company-wide) must contribute to the state fund.  Alternatively, employers may establish self-funded private employer plans to provide paid leave, in which case they need not contribute to the state fund.  Any leave the employee takes runs concurrently to their FMLA leave entitlement, if any. The new paid leave law expands federal FMLA in several ways that will increase the number of employees entitled to leave. First, all employers with one or more employees in Maryland are covered by the law, dispensing with FMLA’s requirement that the employer have 50 or more employees within a 75-mile radius.  Second, employees need only be employed for 12 months and work 680 hours in that period to be eligible, decreasing FMLA’s 1,250 hour threshold.  Third, as noted above, employees can in some circumstances be entitled to 24 weeks of leave in a year, doubling the 12 week entitlement under FMLA.  Finally, employees are entitled to take intermittent leave (i.e., leave in small chunks rather than a continuous leave period) for all qualifying reasons, whereas FMLA does not permit intermittent leave for the birth or placement of a child in the absence of the employer’s agreement. As under the federal FMLA, employees are entitled to reinstatement to their former position upon return from leave.  However, the law potentially expands employee job protections by providing that an employee may be terminated only “for cause” while on leave.  It is unclear whether a termination due to a reduction in force or position elimination, which may be permissible under FMLA, would qualify as a “for cause” termination, or whether “cause” will require some affirmative misconduct by the employee.  Because the new law allows employees to recover up to three times the value of lost wages and other compensation, as well as reasonable attorney’s fees, in the event of a violation, employer missteps could carry significant consequences. The new Maryland leave entitlement is a reminder to employers that employee leave and other protections continue to proliferate at the state and local level.  As employers grow increasingly comfortable with remote work as a long-term arrangement, they should remain aware that many state laws, like Maryland’s new law, can be triggered by having a single employee working in the state – even if the employee is working from home.  Employers will need to keep track of the locations from which their employees are working (even as employees are increasingly mobile) and be aware of any specific leave or other entitlements under the laws of those jurisdictions. POLICIES AND PROCEDURESAPRIL 11, 2022

On March 31, 2022, the Office of Federal Contract Compliance Programs (OFCCP) issued its second Directive, No. 2022-02, of the Biden Administration.  The new Directive implements both procedural and substantive changes to OFCCP compliance evaluations that signal that the agency will seek to act more aggressively in identifying and prosecuting alleged discrimination in its compliance audits.  In the Directive, OFCCP rescinds four Directives (2018-06, 2018-08, 2020-02, 2021-02) issued under the Trump administration to increase the certainty, efficiency, and transparency of the agency’s operations, a major priority of former OFCCP Director Leen.  By eliminating these safeguards, the new Directive increases the risk that federal contractors and subcontractors face from OFCCP compliance evaluations. Some of the major changes implemented by the Directive include: Reducing Time for Contractor Response to Scheduling Letter:   The new Directive expedites the early stages of an OFCCP compliance evaluation, and reduces contractors’ opportunity to prepare for an evaluation after the publication of OFCCP’s Corporate Scheduling Announcement Letter (CSAL) listing the contractor establishments selected for audit.  First, the Directive rescinds the prior 45-day delay between the publication of the CSAL and OFCCP’s issuance of scheduling letters requiring the production of documents and data.  Second, the Directive requires that all affirmative action plan data be provided within 30 days of receipt of the scheduling letter, where previously contractors were entitled to a 30-day extension of time to provide granular, employee-level data regarding personnel transactions like hiring, firing, promotions, terminations, and compensation.  Contractors will now be losing the opportunity for advance notice of a compliance evaluation and will face tight timelines to collect, review, and analyze data that often can be voluminous. Coordination of Multi-Establishment Evaluations:  The Directive also provides that when a contractor has multiple establishments undergoing compliance evaluations, the agency will coordinate its reviews of “common policies and practices.”  Although this change could benefit contractors by providing certainty and streamlining multiple evaluations, it also poses the potential that OFCCP may seek to bootstrap alleged violations at one establishment into broader, multi-establishment relief by asserting the existence of a common policy or practice. Broader Scope of Supplemental Requests: The Directive also changes OFCCP’s approach to supplemental requests for documents and data outside the scope of the initial scheduling letter.  Although the Directive purports to retain the requirements that the agency “reasonably tailor” supplemental requests to areas of concern, allow a “reasonable time” to respond, and include the basis for the request, it broadens the scope of documents and information that OFCCP may request.  Although previous Directives limited the scope of supplemental requests to the types of data outlined in OFCCP’s scheduling letter at the desk audit stage, the new Directive omits this limitation and states that “supplemental requests do not limit the agency’s ability to request additional information or expand the investigation.”  OFCCP also claims the right to seek documents for a period of 2 years preceding the date of the scheduling letter, and also to seek documents post-dating the scheduling letter in order to “fully investigate and understand the scope of potential violations.” Increased Interviews Outside of the Onsite Process:   The Directive signals OFCCP’s intention to request witness information and conduct more witness interviews.  In conducting these interviews, OFCCP states its plan to “directly contact these individuals without the contractor serving as an intermediary.”  OFCCP limits the contractor’s right to have an attorney or representative present at an interview to its discussions with “upper-level managers and directors,” and denies the contractor the opportunity to be present for interviews with non-management personnel.  Although employees are given the opportunity to request to have “a personal representative, such as a union representative or personal legal counsel” present, it is not clear whether non-management employees could choose to be represented by their employer’s counsel.  OFCCP also reiterates its position that the contractor is not entitled to have counsel present in the agency’s interviews with former employees in most cases. Enhancements to the Neutral Selection Process for Evaluations:   The Directive indicates that OFCCP will “enhanc[e]” its methodology for scheduling compliance evaluations in order to “reach a broader universe of contractors and subcontractors” and “identify those with greater risk factors.”  The specifics of this effort are not outlined in the Directive. Emphasis on Contractor Self-Auditing Obligations:  Finally, the Directive hints that OFCCP will place enforcement priority on contractor self-auditing obligations to review and analyze their workforce data for potential roadblocks to equal employment opportunity.  In the previous Biden OFCCP Directive, OFCCP declared that the requirement that contractors perform an “in-depth analysis” of the “total employment process” imposed a requirement for annual quantitative pay equity analyses to identify and resolve disparities in compensation.  The new Directive continues this approach by emphasizing the need for “a proactive approach to compliance where federal contractors actively self-audit employment systems.”  This suggests that OFCCP may review whether contractors are sufficiently analyzing their employment systems in the “in-depth” nature OFCCP requires.  Contractors should ensure they are performing and documenting these analyses as OFCCP seems to be placing emphasis on the self-audit obligation. The new Directive is the latest indication that the Biden OFCCP intends to take a more aggressive enforcement approach than the Trump OFCCP under Director Leen.  The agency’s new approach of providing little advance warning of compliance evaluations and quick initial productions of full affirmative action plan data heightens the need for contractors to ensure they are actively maintaining their affirmative actions plans throughout the year, and not just in response to a scheduled evaluation.

The emerging trend of laws banning inquiries into salary history and promoting pay transparency will soon expand to federal contractors.  On March 15, 2022, President Biden issued an Executive Order titled “Executive Order on Advancing Economy, Efficiency, and Effectiveness in Federal Contracting by Promoting Pay Equity and Transparency.”  The Executive Order directs the FAR Council to issue a proposed rule that “enhances pay equity and transparency,” and to specifically limit or prohibit federal contractors from inquiring about and considering salary history information when making employment decisions.  Once issued, this regulation will be the first salary history law with national application at the federal level. While the Executive Order does not outline the specific restrictions on salary history inquiries for federal contractors, employers can look to the various state and local salary history laws that have been enacted over the past decade to get a flavor of the potential requirements of the forthcoming rule.  Most state salary history laws, at a minimum, prohibit inquiring about salary history on job applications, making it likely that the forthcoming rule will include such a provision.  Other elements of the rule may address (1) whether employers can rely on voluntary salary history disclosures provided by applicants during negotiations; (2) whether the prohibition on inquiring into salary history will apply to both applicants and current employees; and (3) whether there will be a requirement that salary ranges be provided in job postings (similar to the pay transparency laws in Colorado and New York City) or upon an applicant’s or employee’s request. Federal contractors should consider reviewing their job applications and hiring and promotion policies to determine what, if any, impact such a rule will have on their employment decisions. Even without a legal restriction on the use of salary history in setting compensation, reliance on an applicant’s salary history to set their new compensation is laden with risk as many courts find that salary history is not alone a legitimate justification for any resulting pay differentials.

On March 15, 2022, the Office of Federal Contract Compliance Programs (OFCCP) issued its first directive of the Biden Administration to address the requirement that federal government contractors and subcontractors perform pay equity audits. Consistent with predictions that the Biden OFCCP would focus on pay equity enforcement, the new Directive 2022-01 highlights the requirement that federal contractors and subcontractors perform regular pay equity audits as part of their affirmative action program (AAP) obligations, and indicates that OFCCP will closely scrutinize the results of these audits during its compliance evaluations. OFCCP’s AAP regulations have long required that a federal contractor “perform in-depth analyses of its total employment process to determine whether and where impediments to equal employment opportunity exist,” including evaluation of “compensation system[s] to determine whether there are gender-, race-, or ethnicity-based disparities.” However, OFCCP has not previously provided specific guidance about the scope of this requirement.  In the new directive, OFCCP appears to take the position that the AAP regulations require that contractors perform a regular, in-depth pay equity audit of their workforce to identify potential disparities. More importantly, OFCCP’s directive also makes clear that the agency intends to request and scrutinize contractor pay equity audits in its compliance evaluations.  Under the directive, if a compliance evaluation “reveals disparities in pay or other concerns about the contractor’s compensation practices,” then OFCCP intends to request documentation of the contractor’s pay equity audits.  Some circumstances that OFCCP identifies as triggering a request for this follow-up information include: 1.     Pay disparities or evidence of pay discrimination among similarly-situated employees. 2.     Employee complaints of pay discrimination or other anecdotal evidence of discrimination. 3.     Inconsistencies in how the contractor is applying its pay policies. 4.     Statistical analyses or other evidence that a group of workers is disproportionately concentrated in lower paying positions or pay levels based on a protected characteristic. If one of these circumstances occurs, OFCCP will seek “a complete copy” of the pay equity audit showing all pay groupings that were evaluated, any variables used, and the results of the analyses. OFCCP will also seek information about model statistics if a statistical analysis is employed and the frequency of audits, communication to management, and how the results were used. The directive also takes an aggressive position regarding the privileged status of contractor pay equity audits.  Contractors commonly perform pay equity audits with the assistance of legal counsel in order to ensure the audit is protected from disclosure by the attorney-client privilege.  In the directive, however, OFCCP takes the position that because its regulations require that contractors maintain and provide OFCCP with evidence of their compliance with the AAP obligations, “contractors cannot withhold these documents by invoking attorney-client privilege or the attorney work-product doctrine.”  The directive does recognize, however, that a contractor may conduct a “separate” pay equity audit for the purpose of obtaining legal advice, not for compliance with OFCCP obligations, which remains privileged.  The directive asserts that the failure to provide pay equity audits in response to an OFCCP request will be considered “as an admission of noncompliance with these regulatory requirements.” The new directive ups the ante for federal contractors and subcontractors to perform regular pay equity audits as part of their AAP compliance efforts.  Such audits have always been advisable as a best practice to identify and rectify potential compensation disparities before they ripen into litigation, but are now a required exercise for those doing business with the federal government.  In light of OFCCP’s aggressive positions about the application of the attorney-client privilege to pay equity audits, contractors and their counsel will also need to carefully structure their audits in order to ensure that at least a portion of the audit remains protected from disclosure.