September Legal Updates

5^th Cir Skeptical About DOL OT Rule

A Fifth Circuit panel told the government during oral arguments last Wednesday that the US DOL needed to provide more substantial reasoning as to how it determines workers' OT eligibility, saying that just because it has set salary thresholds for nearly a century doesn't mean it gets carte blanche.

Further, Judge Jennifer Walker Elrod said that the question wasn't whether the agency was doing a good job setting a salary limit, it was whether Congress delegated the power to the DOL.

MA WC Poster Updated

The MA Department of Industrial Accidents has revised the Notice to Employees poster, and all employers are required to utilize and repost the updated version by September 16, 2024. It can be accessed on the DIA website. 

NY Sets IC Requirements

The recently-enacted NY “Freelance Isn’t Free Act” (“Act”) goes into effect on August 28, 2024. The Act will require individuals and entities who engage individual or single owner entity independent contractors (ICs) to enter into a written contract with those independent contractors (physically or electronically), and to provide timely payment to ICs. But, the Act does not apply retroactively to IC relationships formed prior to August 28, 2024.

The Act also imposes new recordkeeping requirements on the hiring party, and strictly prohibits any hiring party from retaliating or discriminating against independent contractors who exercise their rights under the Act. Because the Act applies to any IC arrangement having a value of at least $800, it will likely impact the many businesses throughout the state that rely on the work of independent contractors to operate.

IL To Require Disclosure of Employer Use of IA

H.B. 3773, signed last Friday, amends the IL Human Rights Act to make it unlawful for employers to use AI in recruitment, hiring, promotion, discipline, termination and other terms, privileges or conditions of employment if the technology is discriminatory. The legislation, which goes into effect January 1, 2026, also restricts employers from using ZIP codes as a stand-in for protected classes in addition to requiring companies to notify workers about the use of AI.

OH Recreational Pot and Employment

While OH legalized recreational use of marijuana, Employers’ rights remain the same. Employers are not:

• Required to permit or accommodate an employee’s use, possession, or distribution of marijuana; nor
• Prohibited from refusing to hire, discharging, disciplining, or otherwise taking an adverse action against an individual because of the individual’s use, possession, or distribution of marijuana.

the Department of Labor (DOL) issued new guidance titled “Artificial Intelligence and Worker Well-Being: Principles for Developers and Employers” in May. The guidance offers a framework to address the complexities of AI usage in the workplace.

Here’s a summary of the principles in this framework and what they mean for employers.

The DOL’s new AI principles

The new AI principles hope to encourage the responsible, transparent use of AI in the workplace. The goal is to ensure workers benefit from new opportunities created by AI and protect them from its potential harms.

Here are the eight principles:

• [North Star] Centering Worker Empowerment: Workers and their representatives, especially those from underserved communities, should be informed of and have genuine input in the design, development, testing, training, use, and oversight of AI systems for use in the workplace.
• Ethically Developing AI: AI systems should be designed, developed, and trained in a way that protects workers.
• Establishing AI Governance and Human Oversight: Organizations should have clear governance systems, procedures, human oversight, and evaluation processes for AI systems for use in the workplace.
• Ensuring Transparency in AI Use: Employers should be transparent with workers and job seekers about the AI systems that are being used in the workplace.
• Protecting Labor and Employment Rights: AI systems should not violate or undermine workers’ right to organize, health and safety rights, wage and hour rights, and anti-discrimination and anti-retaliation protections.
• Using AI to Enable Workers: AI systems should assist, complement, and enable workers, and improve job quality.
• Supporting Workers Impacted by AI: Employers should support or upskill workers during job transitions related to AI.
• Ensuring Responsible Use of Worker Data: Workers’ data collected, used, or created by AI systems should be limited in scope and location, used only to support legitimate business aims, and protected and handled responsibly.

The principles apply “during the whole lifecycle of AI — from design to development, testing, training, deployment and use, oversight, and auditing.”

DOL’s AI In the Workplace Guidance

The US DOL issued new guidance titled “Artificial Intelligence and Worker Well-Being: Principles for Developers and Employers” in May. The guidance offers a framework to address the complexities of AI usage in the workplace.

Here are the eight principles:

• [North Star] Centering Worker Empowerment: Workers and their representatives, especially those from underserved communities, should be informed of and have genuine input in the design, development, testing, training, use, and oversight of AI systems for use in the workplace.
• Ethically Developing AI: AI systems should be designed, developed, and trained in a way that protects workers.
• Establishing AI Governance and Human Oversight: Organizations should have clear governance systems, procedures, human oversight, and evaluation processes for AI systems for use in the workplace.
• Ensuring Transparency in AI Use: Employers should be transparent with workers and job seekers about the AI systems that are being used in the workplace.
• Protecting Labor and Employment Rights: AI systems should not violate or undermine workers’ right to organize, health and safety rights, wage and hour rights, and anti-discrimination and anti-retaliation protections.
• Using AI to Enable Workers: AI systems should assist, complement, and enable workers, and improve job quality.
• Supporting Workers Impacted by AI: Employers should support or upskill workers during job transitions related to AI.
• Ensuring Responsible Use of Worker Data: Workers’ data collected, used, or created by AI systems should be limited in scope and location, used only to support legitimate business aims, and protected and handled responsibly.

The principles apply “during the whole lifecycle of AI — from design to development, testing, training, deployment and use, oversight, and auditing.”

TX Fed Court Blocks FTC Non-Compete Rule

Yesterday, a Texas federal judge permanently blocked the FTC’s rule that would ban on noncompete agreements in employment contracts in the basis that the regulation exceeded the agency's authority.

The FTC's ban on noncompete agreements in employment contracts was supposed to go into effect on September 4^th.

In a 27-page decision, U.S. District Judge Ada E. Brown granted tax company Ryan LLC and the U.S. Chamber of Commerce summary judgment and rejected the FTC's opposing summary judgment bid.

The judge found that the FTC improperly exceeded its statutory authority by creating a new rule banning noncompetes based on the FTC Act's "housekeeping rules" that lack statutory penalties, as opposed to the statute's "substantive rulemaking power" provisions. She additionally concluded that the "sweeping" rule is an arbitrary and capricious "categorical ban" that violates the Administrative Procedure Act.

As the court held, "In sum, the Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious. Thus, the FTC's promulgation of the Rule is an unlawful agency action”.

Previously, the noncompete ban had been cleared by a Pennsylvania federal judge and slightly narrowed by a Florida federal judge, so the Texas federal court was the first to block it outright.

IL Employers Must Disclose Use of AI

IL Gov. Pritzker signed H.B. 3773 last week that will require IL employers to inform employees and applicants about their use of AI technology in making employment decisions. The law also prohibits the use of AI that leads to discriminatory practices against employees. It will now be a potential violation of the IL Human Rights Act by listing the use of AI in a discriminatory manner.

The law takes effect on January 1, 2026.

Davis-Bacon Rule Blocked

A TX Federal court has issued a nationwide preliminary injunction blocking certain of the DOL’s wage rules under the Davis-Bacon Act (DBA), which requires contractors and subcontractors performing construction, alteration, or repair work on federally funded or assisted contracts to pay laborers and mechanics employed under the contract no less than the locally prevailing wages and fringe benefits for corresponding work on similar projects in the area.

On August 23, 2023, the DOL issued a final rule revising the DBA. The final rule became effective October 23, 2023, and applies to new contracts entered into after this date. Through rule made signficant changes to the DBA standards, including extending coverage to workers who are not mechanics and laborers, and expanding the scope of the work covered by the DBA to include work not performed “directly on the site of the work.” Some of the specific changes in the final rule include (1) eliminating the 20% threshold exception for material suppliers in favor of a de minimis standard; (2) applying the DBA’s prevailing wage requirements to work done by truck drivers who make deliveries to work sites; and (3) providing that the DBA’s prevailing wage standards could apply to a contract by “operation of law,” even when the contract did not incorporate the required DBA clauses and wage determinations.

The judge found that (1) elimination of the 20% threshold for material suppliers was contrary to the plain language of the DBA; (2) expanding DBA prevailing wage requirements to truck drivers was arbitrary and capricious; and (3) the DBA may only be applied to contracts containing specific provisions incorporating the required DBA clauses.

LA Job Ordinance To Take Effect

The Los Angeles County Fair Chance Ordinance for Employers takes effect on September 3.

The law applies to employers doing business in LA County with five+ employees.

Employers that conduct background checks must:

• Revise job postings to include specific disclosure text and a list of job duties that may warrant disqualification based on criminal history.
• Revise offer letters to explain why the employer has good cause to review criminal history. General statements like “due to safety concerns” are not sufficient. Offer letters must also disclose what other types of background information will be gathered.
• Update the pre-adverse action process with a new written individualized assessment. The law requires that notices be sent by both email and in hard copy format. The notices must include information about waiting periods and timelines, and there are font requirements.
• Update the adjudication process to evaluate new information provided by the applicant.
• Update the post-adverse action notice and process.
  
  

CA Min Wage Increasing

CA’s minimum wage will increase to $16.50/hour (up from $16) on January 1, 2025. In turn, the exempt employee minimum salary will increase in CA to $68,640. As CA cities and counties also regulate hourly wages (such as Los Angeles, Los Angeles County, Santa Monica, West Hollywood, etc.), the minimum wage in those jurisdictions may be different than the state rate.

5^th Circuit Says “No” To DOL Tip Rule

Last Friday, the Fifth Circuit struck down a US DOL rule on tipped wages. A unanimous three-judge panel said the rule, which clarified when employers can take a tip credit, set a restriction that Congress did not intend in crafting the FLSA and therefore can be set aside under the Administrative Procedure Act. The panel vacated the rule, which had taken effect in December 2021 and was challenged by the Restaurant Law Center and the Texas Restaurant Association.

"The final rule is attempting to answer a question that DOL itself, not the FLSA, has posed," U.S. Circuit Judge Jennifer Walker Elrod wrote on behalf of the panel.

Under the FLSA, employers can take a tip credit and pay workers $2.13 an hour, below the federal minimum wage of $7.25 an hour, with the expectation that tips make up the difference.

IL Right to Privacy in the Workplace Act Amendment

1. The amendment specifies several prohibited actions for employers using Employment Eligibility Verification Systems:
2. Pre-Hiring Verification: Employers cannot use these systems to verify job applicants before hiring. 
3. Adverse Actions: Employers must not terminate or take adverse action against an employee before receiving a final nonconfirmation notice from DHS or the Social Security Administration. 
4. Notification Requirements: Employers must notify employees in writing of any tentative nonconfirmation notices and provide information on how to contest them. 
5. Safeguarding Information: Employers must protect the information and access credentials related to these systems. 9

Employees are granted several protections under this amendment:

1. Discrepancy Notification: Employers must provide specific documents deemed deficient and instructions on how to correct them if there is a discrepancy in employment verification information. 
2. Representation Rights: Employees have the right to have representation during related meetings or proceedings. 
3. Notification of Inspections: Employers must notify employees within 72 hours of any inspections of I-9 forms or employment records by federal entities. 

CA Captive Audience Law Passed

The California Worker Freedom from Employer Intimidation Act is a legislative measure designed to protect employees from coercion or intimidation by their employers regarding their political activities or beliefs. Here are the key points of the Act:

• The Act aims to safeguard workers' rights to engage in political activities or hold political beliefs without fear of retaliation or coercion from their employers.

Key Provisions

1. Prohibition of Coercion:
   • Employers are prohibited from making any attempt to influence or coerce employees into adopting or refraining from political activities or beliefs.
   • This includes threats of job loss, demotion, or any other form of retaliation.
2. Protection of Political Activities:
   • Employees have the right to participate in political activities outside of work hours without interference from their employer.
   • Political activities include voting, campaigning, attending political meetings, and other forms of political expression.
3. Non-Discrimination
   • Employers cannot discriminate against employees based on their political activities or beliefs.
   • This includes hiring, firing, promotion, and other employment decisions.
4. Legal Recourse:
   • Employees who believe they have been subjected to intimidation or coercion can file a complaint with the appropriate state agency.
   • The Act provides for remedies including reinstatement, back pay, and other compensatory damages.