In this Legal Alert, we review some of the hot topics in employment law that employers should watch out for as we move forward into 2023. Legislative and regulatory developments affecting the workplace across the country are expected to continue, and employers should remain informed and proactive in updating policies and practices as these developments occur.
Classification of Workers: Employee or Independent Contractor: The U.S. Department of Labor (“DOL”) proposed a rule regarding independent contractor status on October 11, 2022. After extending the public comment through December 13, 2022, the DOL announced at the beginning of this year that the final rule is scheduled for publication in May 2023. The proposed rule would rescind the 2021 Independent Contractor Rule issued by the DOL, which emphasized the factors of control and opportunity for profit to determine classification, and would use a six-factor test and would consider other factors that may be relevant. Those six factors are: (1) opportunity for profit or loss depending on managerial skill; (2) investments by the worker and the employer; (3) degree of permanence of the work relationship; (4) nature and degree of control; (5) extent to which the work performed is an integral part of the employer’s business and (6) skill and initiative. Each of these factors is slanted towards classifying the worker as an employee.
The practical result of the new DOL rule is that more workers will be classified as employees and some who have already been classified as independent contractors may have to be reclassified as employees. This may result in a larger number of the workforce becoming eligible for overtime pay. Some states have more stringent tests to determine whether workers should be classified as employees rather than independent contractors; thus, employers also need to be aware of any existing state laws or developments concerning the state standard on this issue.
The Future of Noncompetes: The Federal Trade Commission (FTC) proposed a rule on January 5, 2023, prohibiting noncompetition provisions in employment agreements. The FTC rule proposed to ban agreements that are written so broadly as to effectively ban working in the same field post-employment and ban clauses that require paying unreasonable training costs if the employment terminates within a specified period. If the rule is implemented as proposed, it would bar employers from entering into or enforcing noncompete agreements with employees or independent contractors. The proposed rule would also nullify any existing agreements within six months from the date the rule takes effect. The public has an opportunity to submit its comments to the proposed rule through March 6, 2023. The FTC may issue a final rule after the 60-day comment period ends. For more information on the proposed rule, please see our recent Legal Alert.
Employers should review their existing agreements and consider revising the agreements to include other contractual provisions that would protect their legitimate business interests even if the FTC rule takes effect.
Pay Transparency Laws: Generally, these laws require employers to disclose prospective salary or salary range when advertising an open employment position. More specific obligations vary by state. Employers who violate pay transparency laws are subject to monetary damages, civil damages, or other relief, such as amending the job posting. The remedies for a violation depend on the state law that applies.
The most recent pay transparency laws include those passed by New York City, New York state, California, and Washington state. Employers in these states should review their upcoming job postings to ensure compliance. There is an expectation that this will continue as a trend in other states. For more information on this trend, please see our recent Legal Alert.
Artificial Intelligence in the Workplace: The term generally refers to computer technology that uses algorithmic tools to perform tasks that typically require human decision-making. In the workplace context, this technology may be used to help with employee management functions, such as recruiting and hiring by analyzing resumes, predicting job performance or evaluating a job candidate’s attention span. While the hope in using these tools in the recruitment process is to reduce or eliminate bias, the use of artificial intelligence is not without risk and may give rise to employment discrimination claims even on a class-wide basis. Last year, the Equal Employment Opportunity Commission issued a guidance on AI decision making tools and algorithmic disability bias. Also last year the Biden administration issued an Artificial Intelligence Bill of Rights. The AI Bill of Rights provides a set of five recommendations to ensure that artificial intelligence is safe and equitable in various sectors of society, including the workplace.
Some states, such as New York, Illinois, and Maryland have enacted measures to regulate the use of algorithms in the workplace. Employers in these states should review these laws. It is anticipated that other states may propose legislation in this area. It will also be interesting to watch how courts will analyze discriminatory intent under the existing federal and state antidiscrimination laws when AI was involved in the decision making process.
Discrimination Based on Hairstyles: Creating a Respectful and Open World for Natural Hair, referred to as the CROWN Act, is a law that prohibits race- and national origin-based hair discrimination. This includes hairstyles such as locks, twists, braids or hair texture that are associated with race. A significant number of states have passed CROWN laws. California, Illinois, Colorado, Connecticut, Massachusetts, New York, and Tennessee are among some of the states with CROWN laws. While some states do not have CROWN laws, such laws have been passed at the local level. For example, there is no state CROWN law in Florida but Broward County and Miami Beach have local ordinances prohibiting hair discrimination. At a practical level, those in states or cities with these laws will need to review their existing grooming polices to ensure compliance. Employers that are not subject to CROWN laws may consider incorporating them into their policies and practices as part of their diversity initiatives in the workplace.