2023 and Beyond – What Employers Need to Know and Watch For

As companies have shifted their focus to 2024, it is important employers be mindful of key labor and employment developments in 2023 and their impact on 2024, as well as likely developments in 2024 that will create new compliance hurdles. This article summarizes many of the key labor and employment developments in 2023 and highlights developments that employers should watch for in the year to come.

General Employment Law

Key Developments in 2023

• Religious Accommodations. On June 29, 2023, the Supreme Court of the United States (SCOTUS) clarified the “undue hardship” standard in Groff v. DeJoy. While discussed in detail in our prior blog, the court rejected the previously adopted “de minimis cost” test and held that an employer denying a religious accommodation must show that the burden of granting an accommodation “would result in substantial increased costs in relation to the conduct of this particular business.”
• Religious Exemptions to Bostock. As previously reported, in Braidwood Managements, Inc. v. EEOC, the Fifth Circuit carved out an exemption to the blockbuster case Bostock v. Clayton County, Ga., holding that a faith-based for-profit management company cannot be sued by the EEOC over its policy prohibiting employees from engaging in homosexual or gender non-conforming conduct. The Court held that “[b]eing forced to employ someone to represent the company who behaves in a manner directly violative of the company’s confiscations is a substantial burden and inhibits the practice of [the company’s] beliefs.”
• Ultimate Employment Decision. The Fifth Circuit upended decades long precedent by holding that requiring an employee demonstrate he or she had been subjected to an “ultimate employment decision” ignored the “terms, conditions, or privileges of employment” language of the anti-discrimination provision in Title VII. The Fifth Circuit further held that “[t]he days and hours one works are quintessential ‘terms or conditions’ of one’s employment.” The decision has been appealed to SCOTUS.

What to Look for in 2024

• Employee Transfers. Awaiting opinion by SCOTUS is Muldrow v. City of St. Louis, as more thoroughly discussed here, on whether a transfer within the same department can support a claim of discrimination. In this case, the female officer was transferred to a new division within the same department. Though her pay and job title did not change, the transfer changed her schedule, overtime opportunities, prestige, and comfort of work clothing. The district court found in the employee’s favor, but the Eighth Circuit disagreed holding that “an employee’s reassignment, absent proof of harm resulting form that reassignment, is insufficient to constitute an adverse employment action.” When SCOTUS issues an opinion, it will resolve the current circuit split as to what constitutes an adverse employment action under Title VII.
• Religious Discrimination. In Kluge v. Brownsburg Community School Corporation, a district court was directed by the Seventh Circuit to reevaluate its prior ruling in light of SCOTUS’s recent ruling in Groff v. DeJoy. The plaintiff in Kluge is a former high school music teacher who sued the school after refusing to follow its policy for addressing transgender students. Specifically, plaintiff requested an accommodation due to his religion and asked to refer to students by their last name, as often coaches will do. Despite being initially granted an accommodation, the school later revoked the accommodation and separated employment. The district court has not yet issued a ruling after considering Groff v. DeJoy. 
• Independent Contractor Test. Currently there are two federal court challenges to the DOL’s new test for determining whether an individual is an independent contractor under the Fair Labor Standards Act (FLSA). The first challenge is pending at the Fifth Circuit and challenges the independent contractor rule promulgated by the Biden administration that withdrew a previous Trump administration rule. The second challenge is by group of independent contractors that argues that the new test forces them into “employment relationships they neither want nor need” and forces them to unnecessarily incur costs to further demonstrate their independent status.

Pay Equity

Key Developments in Pay Equity, Transparency, and Reporting in 2023

• 2023 Legislative Trends. Pay equity continued to trend in 2023 as states and localities passed pay disclosure and transparency laws to further assist employees in evaluating whether they are being paid fairly. Many pay transparency laws require employers to include a position’s pay scale in job postings, or to applicants upon request. By the end of 2023, at least thirteen different jurisdictions had enacted pay disclosure or transparency laws. Read about each of these laws here, here, and here.
• Pay Reporting. As we previously reported here, pay reporting is a tool in lawmakers’ pay equity toolbox – requiring employers to submit pay data to state agencies for review. Currently, only five states – California, Washington, DC, Illinois, Minnesota, and New Jersey – have laws requiring some level of pay reporting and/or certification. The requirements under each law are different. In California, for example, only employers with 100 or more employees must submit pay data reports to the California Civil Rights Department annually, while in Minnesota and New Jersey the pay reporting law only applies to certain state contractors.
• The Rise in Pay Equity Claims. Pay equity claims are on the rise as additional pay transparency and reporting legislation continues to be enacted. We previously reported here and here that, with claims on the rise, employers face the tough task of navigating a complex patchwork of pay equity laws in order to achieve legally-compliant compensation practices that reflect the reality of a workforce with differing job positions, responsibilities, and performance outcomes. Courts across the country continue to wrestle with the question of which jobs are “substantially equal” under the Equal Pay Act and which employees are “similarly situated” under Title VII. To complicate things further, state pay equity laws have differing standards to prove these claims. In some states, employees must show that they were paid less for “equal work”, while in other states the standard is “equivalent/similar work.” A minority of states use the “same work” standard while others evaluate equal pay claims with a “substantially similar” standard. This patchwork of standards and interpretations of equal comparators continues to create confusion for multi-state employers seeking to comply with equal pay obligations under multiple statutes.

On The Horizon in 2024

Expect that pay transparency legislation will continue to be passed in additional jurisdictions.

• Washington, DC. Mayor Muriel Bowser signed a bill set to go into effect on June 30, 2024 (after review by Congress) requiring that employers in Washington, DC post the minimum and maximum projected salary in all job postings. The law also prohibits employers from requesting an applicant’s wage history from the applicant themselves or the applicant’s previous employers. Finally, the new law requires DC employers to disclose available healthcare benefits to candidates before their first interview. See this blog post for a more in-depth analysis of the new DC law.
• Michigan. Michigan has two pay transparency laws currently pending. The first would require employers to provide wage information for similarly situated employees covering a period of 3 years before a current employee’s request. The second would require employers to create and maintain a job description for each position, including salary information which must be available to job applicants and to any employee upon request.
• Connecticut. Connecticut already has a pay transparency law under which employers may not fail or refuse to provide applicants with the wage range for the position for which they are applying, upon the earlier of either an applicant's request or prior to or at the time an employer offers an applicant an offer of compensation; or fail or refuse to provide employees with the wage range for their position upon their hiring, a change in their position with the employer, or their first request for a wage range. Under proposed legislation, employers will also be required to disclose salary ranges in job postings.
• Massachusetts and Oregon. Both Massachusetts and Oregon have proposed legislation that would require employers to disclose salary ranges and other compensation details in job postings.
• Virginia. Recently, on March 14, 2024, Virginia Governor Glenn Youngkin vetoed Senate Bill 370, which would have barred employers from asking candidates about their salary history and required compensation estimates in job postings. Governor Youngkin stated his concern over wage inequality, but believed the legislation was an “overreach.” Although this first attempt to pass pay transparency legislation in Virginia stalled, employers should watch for additional developments and initiatives as this is a bi-partisan issue.
• Federal Contractors. Federal contractors will likely soon have to post pay ranges based on proposed rules by the FAR Council (see more below).

Artificial Intelligence

Key Developments in 2023

• EEOC Guidance. In May 2023, the EEOC, as part of its continuing Algorithmic Fairness Initiative, announced additional guidance for employers using artificial intelligence tools. The guidance focused on employers’ use of AI in “selection procedures” (e.g., hiring, promotion, and termination) and the potential for disproportionate adverse effects (i.e., “disparate impact”) on applicant groups that are protected under Title VII. The EEOC defined certain key terms, such as software, algorithms, and artificial intelligence, and made clear that the 1978 Uniform Guidelines on Employee Selection Procedures would be used by the EEOC to assess the lawfulness of any adverse impact caused by artificial intelligence tools. We previously blogged about this guidance here.
• New York City Bias Audit Law Takes Effect. In one of the most groundbreaking laws on artificial intelligence, NYC’s “Bias Audit Law” went into effect on July 5, 2023. The law takes aim at “automated employment decision tools” (AEDT). Any employer “in the city” (based on job or office location for remote workers) generally must, 1) provide notice to applicants and employees if the employer intends to use an AEDT in their selection process; 2) prior to using any such tool, have a third party perform a bias audit; and 3) publish the results of that bias audit, including the selection rates and impact ratios on each race/ethnicity and sex. There are monetary penalties for noncompliance. We previously blogged about the NYC Bias Audit Law here and here.

What to Look for in 2024

• Continued EEOC Guidance. In May 2022, the EEOC published guidance on how the use of artificial intelligence tools would be evaluated under the Americans with Disabilities Act. In May 2023, the EEOC published guidance on artificial intelligence as related to Title VII. If past is prologue, the EEOC will likely publish additional guidance in the artificial intelligence arena – perhaps related to pay equity or the Age Discrimination in Employment Act.
• State Legislation. Some states, including Illinois and California, have introduced bills that would institute notice and audit requirements that are similar in character to the NYC bias audit law.  While these bills are not yet law, it seems that it is only a matter of time before states enact versions of NYC’s notice and bias audit laws. 

Labor

Key Developments in 2023

• Confidentiality and Non-Disparagement Provisions Held Unlawful.  The National Labor Relations Board (NLRB) held in McLaren Macomb that an employer violated the National Labor Relations Act (NLRA) by including overbroad confidentiality and non-disparagement provisions in severance agreements.  More specifically, the NLRB concluded that the provisions at issue were unlawful because they had a reasonable tendency to interfere with employees’ exercise of their NLRA rights.  You can read a more detailed analysis of the McLaren Macomb decision here.  On the heels of the McLaren Macomb decision, NLRB General Counsel Jennifer Abruzzo issued an advice memorandum outlining her view that non-compete and non-solicitation agreements also violate the NLRA to the extent they have a tendency to chill employees in their exercise of their NLRA rights.  According the General Counsel, non-compete agreements can only be justified under the NLRA if the provisions are “narrowly tailored to special circumstances.”  Our recent blog posting here contains a more fulsome summary of the General Counsel’s memorandum. 
• Ambush Representation Election Rules. In 2023, the NLRB returned to the “ambush” election rule, which significantly shortens the time between when a petition is filed and the election itself. This gives employers less time to educate employees about unionization, and gives employees less time to consider how they will vote. To see a full list of how the election period has been shortened, visit our previous blog post here. In light of these new rules, employers should consider creating a plan ahead of time in the event they receive a demand for recognition or election petition.
• ULPs during an Election Campaign are more likely to lead to a Bargaining Order. In its decision involving Cemex Construction Materials Pacific LLC, the NLRB announced a more lenient standard for when employers will be required to bargain with unions as a remedy for an unfair labor practice committed during a union election process. Moreover, when a union requests recognition on the basis that a majority of employees in a bargaining unit have designated the union as their representative, an employer must either recognize the union and bargain, or file a petition seeking an election. If an employer commits an unfair labor practice in response to a union campaign which would previously have been remedied with a second election, the NLRB can issue an order to bargain with the union based on a single unfair labor practice committed during the critical period. Critics of this rule have claimed the board exceeded its power, and that this ruling conflicts with the SCOTUS precedent in NLRB v. Gissel Packing, which set forth a much higher standard for issuing a bargaining order.

What to Look for in 2024

• Captive audience meetings. “Captive Audience” meetings, where employers hold mandatory meetings during working hours to discuss issues related to unions, have been a target of recent state legislation. New York recently followed Connecticut, Oregon, Minnesota, and Maine, in prohibiting these meetings. NLRB General Counsel Jennifer Abruzzo has vocalized her support to ban captive audience meetings. More states may follow suit, or the NLRB may find an opportunity to overturn its precedent and ban captive audience meetings in 2024.
• Whether non-union employees have Weingarten rights. Weingarten rights currently give union employees the right to have a representative present at investigatory meetings that could lead to discipline. Currently this right is only available to those with union representation. General Counsel Jennifer Abruzzo has signaled that she would like to extend these rights to non-union employees.
• Changes to the Chevron Doctrine. SCOTUS heard oral argument this term in two cases that could upend or substantially alter the Chevron Chevron instructs courts to give deference to agency interpretations of ambiguous statutes. Agency deference produces unpredictability in the labor law context as the NLRB has a notorious reputation for flip-flopping in its interpretations of the National Labor Relations Act depending on the political makeup of the NLRB. Read about the amicus brief written by the HAK team, which was mentioned by the justices in oral argument, here.

Federal Contracting

Key Developments for Federal Contractors in 2023

• Right of First Refusal Rule. As we previously reported here, the US Department of Labor (DOL) published a final rule that restricts contractors and subcontractors in the labor they can hire for service contracts.  The rule provides that contractors who obtain a Service Contract Act covered contract from another contractor are required to make a good faith offer of employment to the employees of the prior contractor.  Although there are some limitations on this requirement, it ultimately restricts the ability of contractors to hire who they want when executing a service contract.
• OFCCP Rule on Pre-Determination and Conciliation. We previously blogged here about the Office of Federal Contract Compliance Programs’ (OFCCP) long awaited final rule on “Pre-Enforcement Notice and Conciliation Procedures.”  This rule rescinded a 2020 rule that required the OFCCP to make certain evidentiary findings and comply with specific pre-determination notice requirements.  Under the new rule, the OFCCP now has flexibility to make discrimination findings without providing contractors with an evidentiary basis for those findings.  It also removes procedural safeguards, such as requiring the OFCCP Director’s approval before issuing pre-determination notices.  All in all, the rule vests the OFCCP with more flexibility, while creating considerable uncertainty for contractors.
• TikTok Ban. In a change of pace, the Federal Acquisition Regulatory Counsel issued an interim rule banning federal agencies and contractors from using TikTok or any other ByteDance products.  We blogged about this topic here. The interim rule not only prohibits contractors from having TikTok and ByteDance products on covered devices, it also covers any device using “information technology” in the performance of the contract. This means that the TikTok ban could extend to an employee’s personal device used for work.
• Project Labor Agreements. 2023 closed with a bang with the federal government issuing a final rule requiring construction contractors and subcontractors to negotiate private labor agreements (PLA) with potential employees. That rule, which we blogged about here, went into effect on January 22, 2024.  At bottom, the rule directs agencies to require prospective construction contractors for contracts valued at $35 million or more to execute PLAs with workers, unless a limited exception is granted.  It also gives agencies the flexibility to require PLAs on contracts valued at less than $35 million if certain conditions are met.  In essence, the rule gives the contracting agency the leeway to potentially require PLAs for most construction contracts.

What to Look for in 2024

• Pay Equity and Transparency in Federal Contracting. The most important development for federal contractors to keep an eye on is the FAR Council’s proposed rule on “Pay Equity and Transparency in Federal Contracting.” The Rule seeks to implement Executive Order 14069, which directed the FAR Council to “specifically consider whether any such rules should limit or prohibit Federal contractors and subcontractors from seeking and considering information about job applicants’ and employees’ existing or past compensation when making employment decisions.” Moreover, the FAR Council’s description of the proposal suggests that it might go even further in the proposed rule by also requiring a contractor “to disclose the compensation or range of compensation or range thereof to be offered to the hired applicant in job announcements for certain positions.” This proposed rule, which remains unpublished as of now, could further limit contractors and subcontractors’ ability to hire prospective employees on their own terms.
• AI Guidance. The OFCCP stated it is working on updated AI guidance and plans to publish such guidance in the near term. Importantly, in the recently updated scheduling letter, which we blogged about here, there is a specific item requesting information and documentation related to AI utilized by federal contractors in any employment activities.
• Regulatory Updates. The OFCCP has recently touted its internal efforts to review and “update” the current regulations as many are perceived as outdated. While the OFCCP has not substantively commented on what federal contractors can expect, contractors should be ready for increased burdens on documentation, stricter guidelines on compensation analyses, and more detailed information and analysis on contractors’ action-oriented plans.