Over the past decade-plus, New York lawmakers have passed several laws intended to combat perceived wage theft across the Empire State. On September 6, 2023, lawmakers in Albany continued this trend by passing a bill that codifies wage theft as criminal larceny.

Specifically, the bill adds a new subsection to the New York Penal Law’s larceny statute to include wage theft, which it describes as when a person is hired “to perform services and the person performs such services and the [employer] does not pay wages, at the minimum wage rate and overtime . . . to said person for work performed.” In such a case, the prosecution is permitted to aggregate multiple non-payments or underpayments from an individual or workforce, even if such incidents occurred in multiple counties.

Simply put, New York State employers who fail to timely and fully pay all wages due to their employees could potentially now be subject to criminal penalties (in addition to the preexisting civil damages and penalties). In light of this new law, employers should review their policies and records to ensure immediate compliance.

On August 30, 2023, the U.S. Department of Labor (DOL) proposed a regulatory rule that would raise the minimum salary threshold for employees who are classified as “exempt” under the white collar exemptions to the Fair Labor Standards Act (FLSA) by nearly 55 percent. The proposed rule would also create a new mechanism for subsequent, automatic increases every three years.

Under the proposed rule, the DOL seeks to:

  • Increase the minimum salary threshold for employees classified as exempt under either the executive, administrative, or professional exemptions by changing the test so that the threshold increases from $684 per week ($35,568 annually) to $1,059 per week ($55,068 annually).
  • Increase the minimum salary threshold for highly compensated employees by changing the test so that the threshold increases from $107,432 per year to $143,988 per year.
  • Apply the increased salary threshold requirements to Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands (the U.S. territories subject to federal minimum wage).
  • Increase the special salary levels for American Samoa to 84 percent of the standard salary level (which under that test increase the threshold from $380 per week to $890 per week).
  • Increase the base rate for exempt employees in the motion picture industry from $1,043 per week to $1,617 per week.
  • Establish a new mechanism to automatically increase the minimum salary threshold every 3 years (i) for white collar exemptions to the current 35th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, and (ii) for highly compensated employees to the current annualized weekly earnings of the 85th percentile of full-time salaried workers nationally. These automatic increases could be temporarily delayed by the DOL when unforeseen economic or other conditions warrant.

The DOL has published FAQs about the proposed rule. Under the FLSA, employees must be paid at least the minimum salary threshold and the employee’s job position must also meet certain tests regarding their job duties for an employee to be properly classified as “exempt”. The DOL indicates that under the proposed rule, the agency expects many currently salaried employees to no longer be eligible to be classified as “exempt” and therefore eligible for overtime wages. The DOL has also clarified that the proposed rule does not seek to change the duties tests for these exemptions.

The DOL’s proposed increase comes after the Trump-era DOL raised the salary threshold in 2019 from the long-standing $455 per week to $684 per week (and also raised the highly compensated employee threshold to $107,432 up from $100,000). That action came after the Obama-era DOL attempted to raise the minimum salary threshold to $913 per week, but that increase was challenged by employer groups, stayed by a federal court, and ultimately withdrawn. The current proposed regulations appear susceptible to the same challenges raised by employer groups to the Obama-era regulations that were withdrawn.

Employers or other interested stakeholders will have 60 days from publication of the proposed regulations in the Federal Register to submit public comment to the DOL. Employers should monitor these developments and evaluate how the proposed rule will impact their workforce and current wage and hour practices. If you have any questions on these proposed requirements, need assistance developing wage and hour policies and procedures, or have other questions related to wage and hour compliance, please contact Betty Graumlich at bgraumlich@reedsmith.com, Christopher Bouriat at cbouriat@reedsmith.com, Noah Oberlander at noberlander@reedsmith.com, or the Reed Smith lawyer with whom you normally work.

The National Labor Relations Board (“NLRB”) issued a decision in Cemex Construction Materials Pacific, LLC announcing a new framework for determining when employers are required to bargain with unions without a representation election. In the decision, the NLRB overruled the long-standing standard in Linden Lumber because, in the Cemex majority’s view, it was inadequate to safeguard the fundamental right to organize and bargain collectively.

In Cemex, the NLRB found that the employer engaged in over twenty instances of unlawful conduct after filing a petition for election was filed but before the election was held. In applying the new Cemex framework retroactively, the NLRB dismissed the petition and ordered the employer to recognize and bargain with the union.

The new Cemex framework creates a fundamental change of dynamics relating to the representation process. Under Cemex, when a union requests recognition based on a majority support of the employees to be in the bargaining unit, an employer must either: (1) recognize and bargain with the union; or (2) promptly file a RM petition to challenge the union’s claim of majority support by seeking an election, pursuant to Section 9(c)(1)(B) of the NLRA, unless the union has already filed a petition for a representation election pursuant to Section 9(c)(1)(A) of the Act.

The Board has also significantly shifted the remedy scheme for addressing cases in which an employer, after filing a RM petition but before the election, commits an unfair labor practice that causes the election to be set aside. Under long-standing precedent, typical remedies included conducting another election or, in cases of egregious violations, a Gissel order requiring the employer to bargain. According to the Cemex majority, however, that remedy scheme was inefficient and ineffective towards preserving a free and fair election. Now, under Cemex, the default remedy stands to be dismissal of the employer’s RM petition and an order for the employer to recognize and bargain with the union.

Cemex represents a significant pivot by the Board away from long-standing precedent and represents a return significantly closer to the long-idle Joy Silk doctrine. The Board, however, stopped short of entirely reviving Joy Silk insofar as it made clear that the new framework does not require an employer’s “good-faith doubt” of a union’s majority status to file a RM petition. Rather, under Cemex, the employer’s subjective view of the union’s majority status is immaterial.

The impact of Cemex is expected to be profound. Unionization efforts are reported to be at peak levels compared to recent decades. Employers should fully expect that trend to continue following Cemex and should be fully prepared in terms of responding to a union’s request for recognition based on majority support, and in terms of mitigating the risk of unfair labor practices during the critical period between the filing of an RM petition and the representation election. Missteps could lead to a requirement to recognize and bargain with the Union under Cemex.

The United Kingdom has published plans on proposed changes to paternity leave. These extend the period over which leave can be taken and streamline the administration process.

The UK’s statutory paternity leave regime currently allows eligible employees to take two weeks of leave (at the statutory rate at the time, currently £172.48 per week) in the first 56 days after birth or adoption. The proposals, announced in the UK Government’s Good Work Plan, provide employees more flexibility about how and when they take their paternity leave. Should the plans come into force, eligible employees will be able to take paternity leave in two separate blocks of one week at any point in the first year, spreading out the period over which leave can be taken.

There will also be changes to simplify the administration process. At the moment, employees must inform their employer of their intended leave dates 15 weeks before the expected week of childbirth. To reduce this burden, the UK Government’s proposals reduce the period of notice required from employees to 28 days before the intended start date(s) of paternity leave.

No changes are proposed to statutory paternity pay or the eligibility requirements for paternity leave.

The Good Work Plan appears to acknowledge that the proposals will enable more employees to take paternity leave whilst remaining affordable. There is a long way to go before these proposals become law; the legislative process has not yet started, and these things can take time if it is not a priority area.

In the meantime, there have been developments in relation to other family friendly law reforms – over the summer, changes that have been in the pipeline for several years have now completed their passage through the process and passed as Acts, including: amendments to flexible working laws (read more on our blog); adjustments to the laws applicable to expectant and new mothers facing potential redundancy; and new statutory rights for carers and parents of neo-natal babies. These changes do not take immediate effect – we will need regulations on the detail so do not expect the changes to take effect until next year.

With a general election predicted in 2024, it remains to be seen whether the changes outlined will be given priority. We will keep you abreast of developments through our blog.

On August 18, 2023, the Fifth Circuit sitting en banc in Hamilton v. Dallas County unwound its long-held limitation that an adverse employment action must be an “ultimate employment decision” to be actionable under Title VII. The majority reasoned that this limitation was incongruent with the broad language of Section 703(a)(1), which states that “[i]t shall be an unlawful employment practice for an employer… to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileged of employment, because of such individual’s race, color, religion, sex, or national origin…”

This case presents with “unusual” facts, as characterized by Judge Edith H. Jones in her concurrence, joined by Justice Smith and Justice Oldham. Hamilton was brought by nine female correctional officers who alleged their employer, Dallas County, violated Title VII by adopting a sex-based scheduling policy in place of a seniority-based policy, which allowed only male officers full weekends off. Interestingly, the County stood behind its policy, reasoning that it would be safer for the male officers to be off on the weekends, because having none on duty during the week would be an unsafe practice. The district court granted the County’s 12(b)(6) motion to dismiss and held that changes to an employee’s work schedule, such as the denial of weekends off, was not an ultimate employment decision. The Fifth Circuit initially affirmed on the same grounds, but a rehearing en banc was granted to reexamine the “ultimate employment decision” requirement.

The Fifth Circuit has limited disparate-treatment claims under Title VII to those involving “ultimate employment decisions” for decades, holding that “only ultimate employment decisions such as hiring, granting leave, discharging, promoting, or compensating” were actionable. But in Hamilton, the Fifth Circuit then held that the “ultimate employment decision” standard, which it stood alone amongst the federal circuits in applying, was based on fatally flawed foundations.

In nullifying the “ultimate employment decision” standard, the Fifth Circuit applied Title VII as written, noting that “[n]owhere does Title VII say, explicitly or implicitly, that employment discrimination is lawful if limited to non-ultimate employment decisions.” In addition to expressly prohibiting discrimination in hiring, refusing to hire, discharging, and compensation, Section 703(a)(1) also prohibits an employer “otherwise to discriminate against” an employee “with respect to his terms, conditions, or privileges of employment.” To require an “ultimate employment decision” would render this statutory language meaningless.

Using the new interpretation of Section 703(a)(1), the Fifth Circuit held the County’s change to a sex-based scheduling policy was actionable at the pleading stage given: (1) the days and hours that an employee works are quintessential “terms and conditions” of employment; and (2) the female officers’ allegations support a plausible inference that the right to pick work shifts based on seniority under the County’s prior policy was a “privilege” of employment.

Although Hamilton expanded the reach of actionable discriminatory acts by eliminating the “ultimate employment decision” standard, the Court refused to opine on “the precise level of minimum workplace harm a plaintiff must allege on top of showing discrimination in one’s ‘terms, conditions, or privileges of employment.’” The Court punted on this issue partly because the Supreme Court is poised to address it in Muldrow v. City of St. Louis, an Eighth Circuit case for which certiorari was recently granted. The only guidance given by the Fifth Circuit on this issue is that Title VII does not permit liability for “de minimis workplace trifles.” As Judge Jones put it in her concurrence, “[t]he majority holding amounts to this: we hold that speeding is illegal, but we will not say now what speed is illegal under what circumstances.”

The majority’s incomplete ruling now leaves employers in the Fifth Circuit guessing as to where the line is drawn for actionable adverse employment actions. Until the Supreme Court clears up this issue in Muldrow, if it so choses, the murkiness of this line will force employers to examine more of their actions taken that affect employees to minimize potential liability under Title VII. Particularly, employers will need to carefully scrutinize any policies or practices in place, or set to be implemented, that may disadvantage certain employees belonging to a protected class.

Notwithstanding the murkiness that remains, the Fifth Circuit’s decision in Hamilton will certainly expand the landscape of disparate-treatment claims employees will bring.

If you have questions about this alert or any issues related to it, please contact the authors or the Reed Smith lawyer with whom you normally work.

On August 2, the National Labor Relations Board issued the Stericycle, Inc. decision, in which it reinstated a modified version of the Board’s pro-employee Lutheran-Heritage standard for scrutinizing employer workplace rules. Under this new standard, a rule or policy is “presumptively unlawful” if it tends to chill employees from engaging in protected conduct under Section 7 of the National Labor Relations Act (“NLRA”). In such cases, the new standard requires employers to demonstrate that the rule advances a legitimate and substantial business interest that cannot be advanced by a more narrowly tailored rule.

Employers should carefully review and evaluate their workplace rules and policies for compliance and prepare for potential challenges those rules and policies.

The Lutheran Heritage Standard

The Board first adopted the Lutheran Heritage standard in 2004, in a purported effort to prohibit work rules that would tend to chill employees’ exercise of their Section 7 rights. Lutheran Heritage Village-Livonia, 343 NLRB 646. Under Lutheran Heritage, a facially neutral workplace policy would violate the NLRA upon a showing of one of the following: (1) employees would “reasonably construe” the language to prohibit Section 7 activity; (2) the rule was promulgated in response to union activity; or (3) the rule was applied to restrict the exercise of Section 7 rights.

Following its decision in Lutheran Heritage, the Board found unlawful many otherwise neutral policies, including rules prohibiting the use of cameras in production areas, disruptive behavior in the workplace, and rules limiting employees’ ability to speak to the public or media.

The Boeing and LA Specialty Produce Standard

The Board’s Stericycle decision overrules its 2017 decision in Boeing Co., which had overruled the Lutheran-Heritage decision. The Boeing Board established a balancing test for determining whether a facially neutral work rule was unlawful, which considered both the “nature and extent of the potential impact” on employee’s NLRA rights alongside an employer’s “legitimate justifications associated with the rule.” As part of its framework, the Board established a categorical approach in which workplace rules would fall into one of three buckets:

  • Category 1. Rules that are always lawful to maintain because, under any reasonable interpretation, the rules would not interfere with NLRA rights or because the potential adverse impact on protected rights would be outweighed by justifications for the rules.
  • Category 2. Rules that warrant individualized scrutiny in each case because the impact on protected rights may outweigh any legitimate justifications.
  • Category 3. Rules that are always unlawful to maintain because any legitimate justification for the rules would be outweighed by the chilling effect on NLRA rights.

In LA Specialty Produce (2019), the Board clarified three points regarding its Boeing ruling: (1) the NLRB General Counsel bore the burden of proving that a reasonable employee could interpret the rule to interfere with NLRA rights; (2) if the General Counsel met that burden, then the Boeing analysis required a balancing of the two parts of the test, which could result in certain types of rules being broadly applied to fit within Categories 1 and 3; and (3) in some instances, the analysis would not permit broader application beyond the specific circumstances of the rule at issue (Category 2 rules).

The Stericycle Decision

The Stericycle Board upended the Boeing framework, overruling Boeing and its progeny, including LA Specialty Produce and Apogee Retail (2019), which held that rules requiring employees to maintain confidentiality of workplace investigations were categorically lawful. The Board justified doing so because, in its view, “Boeing gave too little consideration to the chilling effect that work rules can have on workers’ [NLRA] rights.”

In place of Boeing’s balancing test, the Board established a two-step analysis. Under the first step, the General Counsel must clear an initial (low) bar of proving that an employee “could reasonably interpret the rule to have a coercive meaning,” leading to a chilling effect on protected activity. Specifically, the Board will assess “the specific wording of the rule, the specific industry, and workplace context in which it is maintained, the specific employer interests it may advance, and the specific statutory rights it may infringe.” In doing so, the Board will analyze a rule from the “perspective of the economically dependent employee [on their employer] who contemplates engaging in Section 7 activity.” Under this framework, a rule is presumptively unlawful if it has a “reasonable tendency” to chill employees’ exercise of Section 7 rights. Notably, the employer’s intent in establishing a rule is entirely immaterial. Thus, a rule may be presumptively unlawful, “even if a contrary, noncoercive interpretation of the rule is also reasonable.”

If a party challenging a work rule carries its low burden, the rule is “presumptively unlawful,” which an employer must rebut by demonstrating both (1) the rule advances a legitimate and substantial business interest and (2) the rule could not be replaced with a more narrowly tailored one. If the employer can meet this burden, the rule will be found lawful. There is little guidance, however, what the Board will consider a sufficiently legitimate and substantial interest to overcome the presumption.

Employer Takeaways

Employers must scrutinize all workplace rules, policies, and procedures—current and future—through the lens of the new Stericycle test and brace for unfair labor practice charges and litigation on any and all rules in place. Specifically, employers should first consider whether the rule has any potential whatsoever to chill protected activity—namely, any concerted activity that could concern employees’ right to self-organization, to form, join, or assist labor organizations. Under its current makeup, the Board likely will take a broad view of what constitutes protected activity as well as what rules could reasonably chill such activity. Given that and without additional guidance at this point, it is probably safe to assume the rule will be deemed presumptively unlawful. Accordingly, employers should always be prepared to demonstrate both requirements under the second step.

In particular, employers should next consider the reason for the rule, asking what legitimate business reason would exist to justify the rule if scrutinized by the Board and whether the rule could be more narrowly tailored. For example, as the General Counsel explained in a 2015 memorandum providing guidance on the Board’s application of the Lutheran Heritage standard, employers could maintain work rules requiring employees to abide by employer policies and to cooperate fully in investigations that the employer may undertake. As explained in the 2015 memorandum, the employer should make clear that the policy regarding cooperation applies only to investigations of workplace misconduct, rather than investigations of unfair labor practices or other protected activity. Importantly, when adopting and implementing such policies, employers should create documentary evidence of the justification of the work rules and that it is as narrowly tailored as possible to achieve the business interest. This documentary evidence should reflect the employer’s justification and internal discussion from the inception of the rule through its implementation.

Regardless of their diligence, however, employers must prepare for the potential that this new framework will allow nearly any workplace rule to be interpreted as interfering with NLRA rights and protections. Employers should monitor Board activity on this issue, as rulings striking down workplace rules as unlawful likely will continue for as long as the current Board is in place. It is still unclear whether the Board’s decision will be appealed. In the meantime, however, the decision is enforceable and employers should ensure their work rules and policies are compliant.

On August 8, 2023, the U.S. Department of Labor (DOL) announced a final rule that will change the prevailing wage rate landscape for employers on construction projects backed by federal funds (the Rule). The Rule updates regulations to the Davis-Bacon Act and related acts (the Acts) to change the way that prevailing wage rates are calculated and to place additional compliance obligations on federal contractors.

The Rule applies to federal contractors in the construction industry (covered employers), which the DOL expects will encompass over one million workers and $200 billion in covered work. The Rule will take effect 60 days after its final publication in the federal register, which should occur in short order, and will apply to new covered contracts with the federal government. With a limited exception addressed herein, current contracts are not impacted.

New prevailing wage rate methodology

Employers receiving federal funds for construction projects are required by the Acts to pay a “prevailing wage.” Since 1982, the prevailing wage rate has been deemed the wage rate earned by a majority of workers in a job title within a geographic area – typically a county – and, if there is no such rate, a weighted average of the rates earned by workers in that job title within that geographic area.

The Rule returns to a pre-1982 scheme that adds an intermediate step. If there is no majority-earned wage rate in the geographic area, the prevailing wage will be calculated based on the wage rate paid to the greatest number of employees within a given job classification within the geographic area, provided that rate was paid to at least 30 percent of such employees. The weighted-average method will apply only where there is no wage rate applied to at least 30 percent of employees within a given job classification.

Other key changes

The Rule presents additional changes and clarifications to the regulatory framework, including the following key changes:

  • Updates to the area and geographic scope. The Rule updates the definitions of “area” and “geographic scope” to allow the DOL Wage and Hour Division (“WHD”) to issue multi-county project wage determinations with a single wage rate per job classification, using data from all relevant counties, and permits state highway districts or similar State geographic subdivisions to serve as the “area” for a highway project. The Rule also permits WHD to pull data from adjacent counties when a given county does not have sufficient wage data, even when one county is characterized by the regulations as “metropolitan” and the other as rural. The elimination of the strict bar on mixing metropolitan and rural county data is a significant departure from current processes that may result in significant wage increases.
  • Updates to wage rates for a given contract. While wage-rate determinations generally still apply for the life of a contract, the Rule clarifies that, if a contract is modified to include additional substantial construction, alteration, or repair work, or to require the contractor to work for longer than originally obligated, then the wage-rate determination will be updated. This provision includes instances where a federal agency exercises an option to unilaterally extend the term of a contract. This update provision applies to current contracts later amended or extended after the effective date of the rule. For indefinite-delivery-indefinite-quantity contracts, wage rates must be determined on an annual basis.
  • Applicable projects and job classifications. The Rule clarifies whether several types of projects and job classifications are subject to the regulations and under what circumstances. For instance, demolition and removal activities are subject to the standards “when such activities in and of themselves constitute construction, alteration, or repair of a public building or work.”
  • Fringe benefit changes. The Rule addresses several issues regarding the treatment of fringe-benefit obligations under the Acts, including the creditability of unfunded plans, apprenticeship programs, and expenses incurred in administering a fringe-benefit plan against the Acts’ obligations, as well as the requirement that fringe benefits be annualized. Annualization refers to a method for calculating the hourly equivalent amount of an employer’s contributions to fringe benefit plans that may be credited against the employer’s contribution obligations.
  • Assumption of liability. The Rule clarifies existing requirements that prime and upper-tier subcontractors are liable for back wages owed by lower subcontractors and adds that prime contractors are liable for such back wages “regardless of intent,” whereas upper-tier subcontractors must have some degree of intent, such as recklessness or knowledge, to be liable.
  • Anti-retaliation and debarment. The Rule requires that applicable employers have an anti-retaliation provision in contracts that will prevent covered employers from taking adverse employment action against employees who participate in WHD investigations and other compliance actions. The Rule also strengthens debarment provisions that allow the DOL to bar employers from future contracts when they show a “disregard of obligations to employees or subcontractors.”
  • Recordkeeping. The Rule heightens recordkeeping requirements for covered employers, requiring that records are kept for at least three years, as well as including a requirement that employers keep additional records of employees, including email addresses and phone numbers, and for longer than previously prescribed.

The Rule is a robust reframing of the regulatory scheme and has several changes beyond the key changes identified herein.

Moving forward for employers

Although it is likely that lawsuits will be brought that seek to stall the Rule’s imminent effective date, covered employers should do the following to ensure compliance alongside business needs:

  • Prior to bidding for or entering a covered contract, covered employers should ensure they are aware which prevailing wage rate is applicable and consider that rate in calculating any bid for contracted work or to determine whether the contract is economically viable. Covered employers must also consider changes to wage rates when modifying contracts.
  • Covered employers should avoid provisions in contracts that allow for unilateral extension of the contract by a federal agency, which could bind the employer to unaffordable updated wage rates.
  • Covered employers should have anti-retaliation training and processes in place that cover protections for employees who initiate or otherwise participate in WHD investigations or other compliance activities.
  • When in doubt, employers should confirm whether they are covered by the Acts and regulations based on new or clarified interpretations in the Rule. Employers should also confirm which job classifications on a project will be covered by a prevailing wage rate.

The Rule will likely increase covered employers wage costs and present additional regulatory hurdles and risks, but proactive measures can ensure that covered employers minimize risk while continuing to participate in over $200 billion in covered work.

On June 29, 2023, the U.S. Supreme Court upended affirmative action in higher education admissions in its landmark Students for Fair Admission v. UNC and Students for Fair Admissions v. Harvard decision. The decision will no doubt force colleges and universities to reevaluate how they determine the makeup of their student bodies.

The effects of the Supreme Court’s decision, however, will likely be felt beyond just the classroom. Specifically, the decision may well have wide-ranging implications for employers, particularly with respect to corporate diversity, equity, and inclusion (DE&I) initiatives, which many employers use to attract diverse applicants and to retain and promote diverse employees.

In light of the Court’s decision, U.S. employers will want to consider how their DE&I programs are structured and whether their initiatives may be challenged by individual plaintiffs, third-party advocacy groups, state attorneys general, or administrative agencies tasked with enforcing equal opportunity at work (such as the US Equal Employment Opportunity Commission (EEOC)).

The Supreme Court Ends Affirmative Action

By way of background, in a 6-3 decision, the Supreme Court struck down the use of affirmative action admissions policies at Harvard University and the University of North Carolina at Chapel Hill. The Court’s conservative majority held that these policies violate the equal protection clause of the Constitution’s 14th Amendment, effectively ending decades of precedent on affirmative action in college admissions. The ruling had an immediate impact on higher education institutions, prompting many colleges and universities to re-evaluate their admissions processes and diversity initiatives.

Our prior coverage of the decision can be found here.

US Employers Wonder About Workplace Impact

Though the Court’s decision pertains directly to university admissions, U.S. employers immediately began to wonder, following issuance of the ruling, whether there would be repercussions for the American workplace.

With that in mind, shortly after the decision was handed down, Charlotte Burrows, the Chair of the EEOC and a Democratic appointee, issued a statement noting in pertinent part that “the decision in Students for Fair Admissions, Inc. v. President & Fellows of Harvard College and Students for Fair Admissions, Inc. v. University of North Carolina does not address employer efforts to foster diverse and inclusive workforces or to engage the talents of all qualified workers, regardless of their background. It remains lawful for employers to implement diversity, equity, inclusion, and accessibility programs that seek to ensure workers of all backgrounds are afforded equal opportunity in the workplace.”

After Chair Burrows issued the above statement, however, Andrea Lucas, an EEOC Commissioner appointed under a Republican administration, penned this article in which she laid out a potential roadmap for the EEOC to more closely scrutinize workplace DE&I programs should there be a change in political administration, as follows:

“[T]wo Title VII cases the Supreme Court may hear next term could have further ramifications for corporate diversity programs. Federal courts across the country uniformly hold that Title VII applies to hiring, promotion, and termination decisions. But recently, the EEOC and DOJ have advocated a broader, textualist reading of what constitutes ‘adverse action’ in the workplace under Title VII — and some federal appellate courts have begun to agree. This issue will be before the Supreme Court next term if it agrees to hear Muldrow v. St. Louis and Davis v. Legal Services Alabama, Inc.

A more expansive view could have serious implications for certain diversity programs. The EEOC and DOJ’s existing position is that Title VII bars discrimination in all actions affecting ‘terms, conditions, or privileges of employment’ — including actions falling short of hiring, firing, or promotion. This expansive reading of Title VII could implicate a host of increasingly popular race-conscious corporate initiatives: from providing race-restricted access to mentoring, sponsorship, or training programs; to selecting interviewees partially due to diverse candidate slate policies; to tying executive or employee compensation to the company achieving certain demographic targets; to offering race-restricted diversity internship programs or accelerated interview processes, sometimes paired with euphemistic diversity ‘scholarships’ that effectively provide more compensation for ‘diverse’ summer interns.”

Commissioner Lucas has not been alone, however, in her suggestion that the Harvard/UNC decision may have seismic implications for corporate programming and the US workplace.

Shortly after the Court issued its decision, for instance, 13 Republican attorneys general issued a letter to business leaders warning against race-based discrimination in corporate DE&I initiatives. The attorneys general argued that the Court’s reasoning applied not only to university admissions but also, and equally, to employment and contracting practices. They stated that racial discrimination, even for allegedly benign purposes, is unlawful, and urged companies to avoid using quotas or race-based preferences in their hiring practices. The attorneys general further warned that employers who engage in such practices could face investigations and would be held accountable “sooner rather than later” and concluded their letter by bluntly stating that “the Supreme Court’s recent decision should place every employer and contractor on notice of the illegality of racial quotas and race-based preferences in employment and contracting practices.” 1

In a similar letter, Senator Tom Cotton wrote to 51 of the county’s leading law firms (including Reed Smith) on July 17, 2023, warning against (i) firms advising their clients on the clients’ DE&I programs and (ii) the continued use of DE&I initiatives within the firms themselves. Like the attorneys general, Senator Cotton’s letter focused on the perceived “race-based quotas and benchmarks” allegedly adopted by some law firms and their corporate clients as part of their DE&I programs. Senator Cotton concluded by warning that such programs may violate federal law and “[t]o the extent that your firm continues to advise clients regarding DEI programs or operate one of your own, both you and those clients should take care to preserve relevant documents in anticipation of investigations and litigation.”

Threats of investigation and litigation for maintaining DE&I programs are only expected to intensify in the coming months and years, particularly if there is a challenge in the political administration in the White House. Indeed, experts around the country had already reported an uptick in reverse discrimination lawsuits filed by white employees even prior to the Court’s decision. After the decision, third-party advocacy groups who oppose DE&I initiatives can be expected to turn their focus from university admissions to employers’ hiring, retention, and promotion practices.

Best Practices for Employers Going Forward

In light of the above, employers should consider how the Supreme Court’s decision might affect their own DE&I initiatives, and be proactive in ensuring compliance with state and federal laws. Employers should be especially mindful of the following:

  1. Employers should be cautious about considering race as a basis for employment decisions – either positive or negative decisions – as it is unlawful to use in hiring or promoting practices. Clear evidence that race influenced hiring or promotion decisions can lead to legal risks, with potential claims of discrimination.
  2. The Supreme Court’s decision may limit the slim exception allowing companies to remediate “manifest imbalances” in segregated job categories. This exception, which is already difficult to meet, could become even more challenging to invoke.
  3. Race-based quotas have long been illegal, but employers can set aspirational goals for improving diversity. However, after the Court’s ruling, quantitative goals may face greater legal risks than qualitative ones. Employers must be careful to avoid practices that could be seen as granting race-based preferences or unlawfully setting aside positions.
  4. While the Court allowed schools to consider race in application essays, private employers might be tempted to ask applicants about their experiences overcoming obstacles. While such information may be relevant, selective questioning or not offering equal chances could result in legal trouble.

To protect against potential legal challenges, employers should thoroughly review their DE&I programs, ensuring that they align with lawful considerations, and do not rely on race as a factor. Employers can prioritize diversity and inclusion without employing race-based quotas, while embracing inclusive decision-making processes and avoiding discriminatory practices. Open communication about DE&I goals, without resorting to profiling, is vital in creating diverse and inclusive workplaces.

As the legal landscape surrounding DE&I initiatives evolves, employers must stay informed about new legal trends and seek counsel to ensure their programs are compliant with existing laws. While the Supreme Court’s decision raises questions and potential risks, proactive measures can enable employers to advance their DE&I initiatives in ways that promote diversity, equity, and inclusion while staying within the bounds of the law.

1 Notably, on July 14, 2023, the Democratic Attorneys General Association (DAGA) issued a statement in response to the Republican attorneys’ general’s letter. In its response, DAGA wrote that “[w]e strongly condemn this anti-diversity, anti-business, and anti-economy letter by some Republican Attorneys General. They have wasted no time in trying to misinform the public and the business community on the Supreme Court’s recent affirmative action rulings by trying to take businesses and workers hostage with overt threats. Their letter contains cherry-picked sources that paint a false picture of America’s workforce today. They have impugned the integrity and skills of Americans with backgrounds and ability levels that are different from their own – whether those Americans are of a different race, a different sexual orientation or gender identity, or of a different ability level. To be clear: it is legal for businesses to be responsive to their workforce’s wishes and concerns through diversity programs and initiatives.”

Changes to the UK’s statutory regime for flexible working have been in discussion for several years, but reforms are now coming to fruition.

Improving flexibility for the modern working environment has been on the agenda for many years, and the flexible working movement gained further momentum following COVID-19 lockdowns, with developments in technology making remote working much easier for many. The Chartered Institute of Personnel and Development (CIPD) reports that 40% of businesses have seen a post-pandemic increase in flexible working requests with an estimated two million employees having left their jobs in the past year due to a lack of flexible working.

In this context, it was recently announced that several changes to the UK’s statutory regime for flexible working are expected to come into force next summer, and Acas began consultation on a new Statutory Code of Practice on flexible working.

The Employment Relations (Flexible Working) Act 2023 (the Act), which received Royal Assent on 20 July 2023, will increase the number of requests an employee can make and introduce a requirement for employers to consult with employees before rejecting a request. However, the change that continues to gain the most press attention, namely the right to make a flexible working request from day one of employment, is conspicuously absent from the Act.

We consider what these changes mean in practice for employers.

What is the current flexible working regime in the UK?

Currently, employees with at least 26 weeks’ continuous service can request changes to their employment contracts to allow for flexible working. Typical flexible working requests include a change of place of work (e.g., to work from home instead of the office) or working time (e.g., to increase or decrease days/hours or times of work).

Flexible working requests must (i) be in writing, (ii) be dated, (iii) state that it is a statutory request, (iv) specify the change sought and when the employee wants it to take effect, (v) explain what impact the change would have on the employer and how it could be dealt with and (vi) state whether a previous application has been made and when. Employees can make one request in a 12-month period.

Employers are not required to accept or accommodate every request. However, employers should deal with each request reasonably and must respond within three months of the request being made. Where employers refuse a request, it should only be for one or more of eight statutory grounds. These include the burden of additional costs, the detrimental effect on the ability to meet customer demand or performance/quality and an inability to reorganise work among existing staff. Employees can seek compensation before employment tribunals for a failure to comply with this regime. There are also risks of discrimination claims where requests are not treated fairly and consistently.

What changes will the Act introduce?

The Act, which is expected to come into force in summer 2024, introduces the following changes:

  1. Employees will be able to make two requests in a 12-month period (although they will not be able to make a second request whilst the first is outstanding).
  2. Employees will no longer have to explain in a written request the impact of their request on their employer (with the aim of making requesting flexible working easier and more accessible).
  3. The timeframe for an employer to respond to a request will be reduced from three months to two months.
  4. Whilst the eight statutory reasons for rejecting a request remain unchanged, employers will need to ‘consult’ with an employee before rejecting their request (draft guidance indicates a meeting and consideration of alternatives will be required ‒ see further below).

What other changes are expected?

Flexible working as a ‘day-one right’

Whilst most of the key changes arising out of the Government’s commitments following a 2021 consultation on flexible working have been addressed by the Act, there was one notable absence – the removal of the 26-week service requirement before an employee can make a request. This has previously been held out as a key part of the anticipated changes to the flexible working regime, and it has garnered significant attention, including in press reporting around the Act’s Royal Assent, despite it not actually being included in the Act.

However, it looks as though the Government still intends to introduce this change via secondary legislation when the Act comes into force. A recent Government press release announcing the Act receiving Royal Assent continues to refer to making flexible working requests a ‘day-one right’ and estimates that an additional 2.2 million employees will have access to the regime as a result.

New Acas Statutory Code of Practice

The Government has announced that these new measures will be supported by a new statutory Code of Practice on flexible working, which is being developed by Acas (to replace the existing 2014 Code) and will set out recommendations and details of best practices for employers. Acas has prepared a draft Code and will consult on it until 6 September 2023.

Acas says it aims to update the 2014 Code to reflect the upcoming changes in the Act and in light of the significant shift in flexible working and attitudes towards it post pandemic to ensure that its guidance remains relevant and helpful in today’s workplace.

As things stand, the new draft Code of Practice:

  • Seeks to encourage a more flexible approach to flexible working by encouraging employers to not reject flexible working requests by default and to instead engage in open-minded dialogue with employees.
  • Recommends that, as part of a reasonable consultation with the employee, a person with sufficient authority holds a formal meeting with them to consider their request and, where a request cannot be approved, discusses suitable alternatives that could work for the business and the employee.
  • Suggests that employers should set out, in writing and without unreasonable delay, the outcome of their decision and, where a request has been rejected, the business reasons relied upon and such additional information as is reasonable to help to explain their decision.
  • Recommends that employers should allow an appeal where a request has been rejected and provides guidance on the appeal process.
  • Extends the categories of those who can accompany an employee at a flexible working meeting to include trade union representatives (in addition to colleagues).

What should employers do now?

The Act isn’t in force yet, but employers should review their existing flexible working policies and processes to ensure that they meet these new standards by July 2024 (by which point the Government have indicated it will introduce secondary legislation to bring these new measures into force).

Updates could include establishing a process to formally meet with employees who issue requests or establishing templates to respond to requests that provide the recommended level of detail. The changes to statutory timeframes will also need to be implemented. For many employers, this will mean changes to policies and practices.

Employers should ensure they are prepared for an increased number of flexible working requests as a result of flexible working requests becoming a day-one right and also that they are prepared to discuss flexible working options as part of the recruitment process.

Flexible working has inevitably been an important issue for employees in recent years, and these developments (and the publicity around them) could increase employees’ awareness of and appetite for making these requests, particularly for employers who continue to increase office working post pandemic. The main criticism of the flexible working regime – that it lacks teeth because employers can reject requests on subjective grounds – remains. However, employers should be alive to the public support for greater dialogue around flexible working, more accessible and employee-friendly practices and a greater acceptance of requests, which has influenced this revised flexible working regime.

The ongoing consultation on the new Code of Practice on flexible working also provides employers with an opportunity to provide their views on the proposed guidance and practicalities of handling flexible working requests under the new Act. Employers with an inclination to do so can find the consultation documentation, and details of how to respond, online.

Beginning August 1, 2023, the U.S Department of Homeland Security and U.S. Citizenship and Immigration Services (USCIS) have now established a new procedure to allow employers who participate in E-Verify and are in good standing, to conduct remote inspection of an employee’s documents when completing Form I-9. USCIS has also released an updated version of Form I-9 that all employers must use for new hires in the U.S. going forward.

During the COVID-19 pandemic, USCIS adopted (and repeatedly extended) a temporary policy allowing for remote inspection of employee documents that ended on July 31, 2023, with a requirement that employers perform all required physical examination of documents by August 30, 2023. The new remote inspection regulation is a permanent remote inspection option, but requires participation in E-Verify.

New remote completion procedure for E-Verify employers

Under federal law, employers must ensure that Form I-9 is timely completed to document verification of the identity and employment authorization for each new employee working in the United States. Section 1 of Form I-9 must be completed by the new employee on or before the employee’s first day of hire (but not before an offer has been accepted). Section 2 of Form I-9 must be completed by the employer (or its authorized representative) within 3 business days of the employee’s first day of work for pay.

Under current federal regulations, when completing Section 2 of Form I-9, the employer (or its authorized representative) must physically examine the documents presented by the employee in the employee’s presence to ensure that the documents reasonably appear to be genuine and relate to the employee. This physical examination requirement has sometimes presented a challenge for employers, particularly when hiring remote employees.

Under USCIS’s new remote inspection process, an employer who is enrolled in E-Verify and in good standing may conduct a remote inspection by: (1) obtaining and examining clear, legible copies of documents (front and back), (2) after receiving the copies, conducting a live video interaction with the employee presenting the documents to assess genuineness, (3) indicating on Form I-9 the employer has used the remote inspection procedure consistent with Form I-9 Instructions, (4) retaining copies of the documentation with the Form I-9, and (5) completing an E-Verify case and following E-Verify completion procedures.

Employers have the option to use this alternative remote inspection procedure for either all employees at an E-Verify hiring site or for all remote employees at the E-Verify hiring site. For example, an eligible employer may choose to continue physically examining documents for on-site and hybrid workers but use the remote inspection procedure only for remote employees. Nonetheless, an employer must use the procedure consistently at an E-Verify hiring site and may not use it for some remote employees but not other remote employees.

New version of Form I-9 for all employers

Employers should begin using the new version of Form I-9 with a version date of “08/01/23” (available here) for new hires immediately and must stop using the old version no later than October 31, 2023. Some of the notable changes in this new version of Form I-9 are:

  • A checkbox for employers who use USCIS’s new remote inspection process to indicate they examined the Form I-9 documentation remotely rather than physical examination.
  • A revised List of Acceptable Documents to now include some acceptable receipts as well as guidance and links to assist employers with information on automatic extensions of employment authorization documentation.
  • Section 1 and Section 2 are now on a single-sided sheet.
  • The Section 1, Preparer/Translator Certification is now on a separate, standalone supplement to be used only when necessary.
  • The Section 3, Reverification and Rehire is now a standalone supplement to be used only when necessary.
  • Revised Form I-9 Instructions that are now 8 pages rather than 15 pages. (Note that an employer is required to provide the Form I-9 Instructions with the Form I-9 to an employee when requesting the employee complete Section 1.)

In light of these developments, employers should review their Form I-9 document inspection practices. If you have questions on this update, need assistance enrolling in E-Verify or developing policies and procedures related to Form I-9 and E-Verify compliance, or have other questions regarding your workforce, please contact Noah Oberlander at noberlander@reedsmith.com or the Reed Smith lawyer with whom you normally work.