Michigan Supreme Court Hears Arguments on “Adopt & Amend”

In early December, the Michigan Supreme Court heard oral arguments whether the 2018 Michigan Legislature’s use of the “adopt-and-amend” strategy related to two ballot initiatives violates the Michigan Constitution. The Court’s ruling will impact two key laws: the current minimum wage and the current Paid Medical Leave Act. The Court could decide to reinstate the versions of those two laws originally proposed by the ballot initiatives in 2018, which would have a significant impact on all employers in Michigan.

The Court appears divided and there is no clear answer on how it will ultimately decide the case. However, the Court’s questions did indicate that if it reinstates the prior versions of the minimum wage and sick leave laws, there would be serious concerns with doing so either retroactively or immediately. It’s believed that Michigan employers would have some time to prepare if the ballot initiative versions of the minimum wage and paid sick leave are reinstated.

We will continue to keep you updated on any important developments.

Improving Access to Mental Health Care

Over the last few years, the federal government has taken various steps to promote mental health awareness and improve access to care. In 2023, the DOL launched a “Mental Health at Work” initiative to encourage the creation of workplaces that prioritize mental health. At the same time, the DOL and the Dept. of Health and Human Services have made mental health parity compliance a top enforcement priority for employer-sponsored health plans and health insurance issuers.

In 2024, the Biden administration will continue to take steps to improve access to mental health and substance use disorder care by focusing on employers’ obligations, particularly concerning mental health parity compliance.

Employers play a critical role in creating environments where workers are as comfortable seeking treatment for mental health conditions as they are with other types of illnesses. Employers are required to comply with the following federal laws to support workers’ mental health:

• Mental Health Parity and Addiction Equity Act (MHPAEA)
• Family Medical Leave Act (FMLA)
• ADA

In 2024, the federal government will continue its efforts to improve access the mental health and substance use disorder care, with a top enforcement priority being on MHPAEA.

Employers Empowered to Help Employees with Student Loan Debt

Traditionally, employers have been hesitant to offer student loan repayment benefits because of administrative concerns (such as limited guidance on how to structure these benefits) and budgetary concerns, including a lack of tax exemptions. According to a 2023 industry survey, only about 8% of U.S. employers provide student loan repayments to eligible employers.

Student loan relief received a lot of attention during the COVID-19 pandemic. At the start of the pandemic, temporary relief was given to eligible student loans, automatically suspending loan payments, stopping collections on defaulted loans, and reducing interest rates to 0%. After many extensions, this relief ended, and, on Sept. 1, 2023, interest rates resumed, and the first post-pandemic student loan repayments became due in October 2023. As a result, some employers are prioritizing student loan repayment benefits as a recruitment, engagement, and retention tool in 2024.

The timing of repayments, combined with recent tax legislation, has put employers in a good position to offer student loan repayment benefits in 2024. By taking advantage of this legislation, employers can improve their employees’ overall financial well-being and thereby attract and retain key talent in 2024 and beyond. Specifically, two new ways employers can help employees with their student loan debt in 2024 are:

1. Making tax-free payments of up to $5,250 toward employees’ student loans. This was initially made possible by the CARES Act and was extended through 2025 by the CAA. During this time, employer payments toward their employees’ qualified educational loans can be excluded from their employees’ taxable income, resulting in tax advantages for both parties. Employer contributions made outside of this time frame or in excess of the monetary limit are generally considered taxable wages subject to all employment taxes.
2. Matching contributions under a 401(k) plan, 403(b) plan or SIMPLE IRA concerning qualified student loan repayments. This was made possible by an omnibus bill that includes the SECURE 2.0” legislation, which is effective for contributions made for plan years beginning after Dec. 31, 2023. This SECURE 2.0 provision is intended to assist employees who may not be able to save for retirement because they are overwhelmed with student debt and thus are missing out on available matching contributions for retirement plans.

A New Standard for Denying Religious Accommodations

Title VII requires employers with 15 or more employees to reasonably accommodate employees’ sincerely held religious beliefs. Some examples of religious accommodations include allowing time off for religious holidays, designating prayer spaces in the workplace, and granting dress code exceptions for religious clothing. This has been a requirement for employers unless it would cause “undue hardship”, and since 1977, the question of undue hardship was determined based on whether the employer could prove that the accommodation would impose “more than a de minimus cost” on its business. However, on June 29, 2023, the Supreme Court changed this with its decision in Groff v. DeJoy. Under the holding in that case, an employer that wishes to deny a request for religious accommodations based on undue hardship must now show that the burden of granting an accommodation would result in “substantial increased costs in relation to the conduct of its particular business.”

The decision in Groff also clarified that employers may not rely on co-worker impact to show undue hardship in religious accommodation cases. Instead, workplace morale issues are only relevant if and to the extent that they directly affect the employer’s costs of conducting its business.

Employers should also take note of other recent developments that may impact how they should handle workplace religious issues in the year ahead. Specifically, the EEOC issued a new proposed regulation on workplace harassment and a new Strategic Enforcement Plan (SEP) in September 2023. These publications include updates to reflect the Supreme Court’s 2020 holding in Bostock v. Clayton County that Title VII’s prohibition against discrimination based on sex includes discrimination based on sexual orientation and gender identity. For example, the SEP indicates that the EEOC plans to pay special attention to enforcing rules that protect “particularly vulnerable workers and persons from underserved communities,” which include “LGBTQI+ individuals.” In addition, the EEOC’s proposed rule on harassment prohibits “intentional and repeated use of a name or pronoun inconsistent with the individual’s gender identity (misgendering)” and “the denial of access to a bathroom or other sex-segregated facility consistent with the individual’s gender identity.” Because certain religious beliefs may present challenges in implementing and enforcing workplace policies consistent with this guidance, employers may expect increased tensions between inclusivity and religious freedom, such as in circumstances where religious convictions dictate an individual’s perception of gender identity. Thus, employers will need to balance these competing concerns, especially amid any of their efforts to promote diverse work environments that support all employees.

Please contact us for assistance if you have compliance-related questions or concerns about this.

Ongoing Expansion of Pregnancy-related Protections

Two new laws that were enacted as part of the federal omnibus spending bill in December 2022—the Providing Urgent Maternal Protections for Nursing Mothers (PUMP) Act and the Pregnant Workers Fairness Act (PWFA)—have significantly expanded workplace rights for employees affected by pregnancy, childbirth and related conditions in 2023. These new laws, along with EEOC guidance and similar state and local laws, will likely continue impacting employers in 2024. While the PWFA applies only to employers with 15 or more employees, those with fewer employees are likely subject to a similar state or local law, as more than 30 states and localities currently have laws providing accommodations for pregnant workers.

Effective upon enactment, the PUMP Act amended the FLSA to require employers to provide break time and a private place, other than a bathroom, for all employees (including those who are exempt from FLSA overtime rules) to express breast milk. It also clarified that these breaks must be paid work time if an employee is not completely relieved of all work duties during them. A hardship exemption is available for employers with fewer than 50 employees. Starting April 27, 2023, the PUMP Act also allows individuals to obtain damages and other remedies from employers that violate the new mandates.

Effective June 27, 2023, the PWFA amended the ADA, which applies to employers with 15 or more employees. Under the PWFA, employers must provide reasonable accommodations for a qualified individual’s known limitations related to pregnancy, childbirth or related medical conditions unless it would impose undue hardship on the business. These accommodations must be determined through an informal, interactive process with the requesting individual, and employers may not deny opportunities based on the need to make the accommodations. The PWFA also prohibits employers from requiring leave as accommodation if another change can be provided. Retaliation against an employee for requesting or using a PWFA accommodation is also prohibited.

On Aug. 7, 2023, the EEOC issued a proposed rule to implement the PWFA (the EEOC was also required to issue final regulations by Dec. 29, 2024). The rule explains how the EEOC proposes to interpret the law and key terms within it. For example, the PWFA allows an individual affected by pregnancy or a related condition to be considered “qualified” even if the individual is unable to perform one or more essential functions of a job, but only if the inability to perform the essential functions is temporary, the individual could perform the essential function in the near future, and the inability to perform the essential functions can be reasonably accommodated. The proposed rule defines the term “temporary” as lasting for a limited time, not permanent, and may extend beyond “in the near future.” It defines “in the near future” as generally up to 40 weeks, though the actual length of a temporary suspension of essential job functions will usually depend on what the employee actually requires. Employers may find these details helpful when analyzing the potential impact of granting any PWFA accommodation involving the suspension of an essential job function.

A related PWFA paradigm that some employers may find challenging is the proposed rule’s framework for establishing undue hardship to justify denying an employee’s request for temporary suspension of an essential job function as accommodation for pregnancy, childbirth or a related condition. For all other types of accommodations requested under the PWFA, an employer’s burden for establishing undue hardship is identical to the one that applies when determining whether an accommodation for disability would cause undue hardship under the ADA. Both the PWFA and the ADA generally require employers claiming undue hardship to show that an accommodation would cause “significant difficulty or expense” when viewed in light of several factors, such as the employer’s size and the nature of its business. However, when a requested accommodation involves a temporary suspension of an essential job function under the PWFA, an employer wishing to deny the accommodation must analyze and consider additional factors to establish undue hardship. These include the length of time the individual will be unable to perform the essential function, the nature and frequency of the essential function, and several others.

Industry experts expect the PWFA will result in an increase in accommodation requests by pregnant employees. While the PWFA is modeled after the ADA, there are some critical differences. For example, under the ADA, employers aren’t required to modify the essential functions of a job to accommodate an employee. However, the PWFA allows employers to reevaluate a job’s essential functions in light of pregnancy, childbirth and other related medical conditions and make changes. Additionally, while the ADA and other federal fair employment laws (Title VII, the PUMP Act, and the FMLA) safeguard the rights of pregnant workers, the PWFA mandates that employers take further steps to accommodate employees. As a result, employers should become familiar with the reasonable accommodations outlined in the PWFA to comply with the new law. The proposed rule provides numerous examples of potential reasonable accommodations for pregnancy, childbirth and related conditions to aid employers in their compliance efforts. The EEOC is expected to issue a final version by the end of 2023. As the EEOC’s interpretation of the PWFA continues to develop and evolve in the meantime, employers should also prepare for the potential need to quickly adapt their policies and practices to align with any updated or additional guidance relating to pregnancy accommodations that the agency may provide in the future.

Because the PWFA and the PUMP Act significantly expand workplace rights and protections for employees affected by pregnancy, childbirth and related conditions, employers will likely face increased compliance burdens and litigation risks in 2024. Employers should also anticipate experiencing a learning curve and other growing pains related to certain PWFA concepts and how they may interact with other applicable employment laws in 2024 and beyond. For example, many states already have their own laws requiring accommodations for pregnancy, childbirth and related medical conditions, and an ongoing trend toward more expansive and enhanced protections for employees is expected to endure. These laws often provide greater employee protections than those granted under the PWFA and usually apply to smaller employers as well. Thus, many employers may expect to encounter differing standards when analyzing whether they can reasonably accommodate an employee’s known limitation related to pregnancy or childbirth.

We will keep you updated on this as more information is available. Meanwhile, please contact us with your questions and we will be happy to assist you!

Navigating the Evolving Landscape of Employment Laws: Key Legislation Updates in 2024

As we step into a new year, it’s crucial to stay informed about the dynamic changes in employment laws that can significantly impact your business operations. One of the focal points continues to be the distinction between employees and independent contractors. Misclassifying workers can lead to severe consequences, including fines, criminal charges, and civil penalties.

Proposed Overtime Exemption Rule by the U.S. Department of Labor (DOL)

The DOL’s proposed rule aims to update the salary threshold for executive, administrative, professional, outside sales, and computer employees. If adopted, the standard salary level will increase, affecting the exempt status of many workers. Employers must be prepared for potential challenges and increased operational and compliance costs.

It is vital for employers to:

1. Understand the proposed changes.
2. Review employee compensation data.
3. Plan for compliance in anticipation of the final rule, expected to be issued in 2024.

Proposed Independent Contractor Classification Rule by the DOL

The DOL’s proposed rule seeks to replace the 2021 independent contractor classification rule. The new rule introduces a multifactor totality-of-the-circumstances analysis, weighing factors equally to determine worker classification. This shift may result in classifying more workers as employees, particularly impacting the gig economy.

Employers should:

1. Monitor developments.
2. Familiarize themselves with the proposed factors.
3. Prepare for potential enforcement efforts, as misclassification can lead to severe penalties.

NLRB’s New Joint-Employer Standard

The National Labor Relations Board (NLRB) introduces a final rule changing the joint-employer standard, effective February 26, 2024. This rule makes it easier for employers to be classified as joint employers, impacting liability for unfair labor practices and union-related activities. Franchises, staffing agencies, and seasonal employers, among others, should review the updated standard and assess their compliance liability.

Complying with the evolving landscape of employment laws is not just a legal obligation but a strategic move to safeguard your business’s bottom line. Nulty is here to help you stay informed and stay compliant. Here’s to a successful 2024!

The Rise of AI in the Workplace: Navigating Opportunities and Challenges in 2024

2023 was a year that marked a significant leap forward in the adoption of Artificial Intelligence (AI) in the workplace, with the proliferation of chatbots like ChatGPT playing a pivotal role. As AI technology becomes more accessible and accepted, it’s reshaping the way organizations operate and make decisions, offering unprecedented opportunities but also presenting unique challenges.

Transformative Impact of AI in the Workplace

AI tools, particularly chatbots, have found their way into various facets of employment, notably in recruiting and hiring processes. The ability to automate manual tasks, enhance workflows, and streamline operations has led to increased workplace efficiency. While larger organizations have embraced AI for years, recent advancements make this technology accessible to employers of all sizes, marking 2023 as a watershed moment for AI in the workplace.

Regulatory Response to AI Adoption

The widespread use of AI systems in employment has not gone unnoticed by the federal, state, and local authorities. In response to the transformative impact of AI, notable actions have been taken to address potential harms and ensure responsible innovation. The White House, in collaboration with federal agencies such as the FTC, EEOC, CFPB, and DOJ’s Civil Rights Division, has expressed a commitment to protecting the public from AI-related harm and enforcing anti-discrimination laws.

President Biden’s executive order in October 2023, aimed at establishing standards for AI safety and security, further emphasizes the need for responsible AI innovation. The EEOC’s Strategic Enforcement Plan (SEP) for FY’s 2024-2023 underscores the priority given to addressing AI’s impact on workplace discrimination, with the agency settling its first discrimination-in-hiring lawsuit related to AI use.

Opportunities and Risks of AI in Employment Decisions

Organizations are increasingly exploring AI’s potential to enhance productivity, efficiency, and decision-making across various employment areas. While AI offers benefits, it also presents risks that employers must carefully navigate:

• Biases and Discrimination: AI systems may perpetuate biases if not designed, implemented, or monitored properly, potentially leading to discrimination in hiring and other decisions.
• Lack of Transparency: The lack of clarity in AI decision-making processes poses challenges in interpreting and providing precise reasons for candidate selection or rejection.
• Ethical Concerns: The use of personal data in AI systems raises ethical and legal considerations, demanding policies to safeguard privacy and ensure responsible use.

The Regulatory Landscape: State and Local Actions

While federal regulation in AI employment contexts remain limited, several states and localities are taking steps to address potential issues and risks. New York City enacted AI-related legislation in 2023, joining other states like Maryland and Illinois. Employers should stay vigilant as more jurisdictions consider passing similar laws in 2024.

Mitigating Risks and Ensuring Responsible AI Use

As we step into 2024, it’s essential for employers to stay current on legal developments surrounding AI in the workplace. To mitigate potential liability and reduce risks associated with AI use, organizations can implement the following strategies:

• Monitor and Comply: Stay informed about applicable laws, consult with attorneys, and regularly monitor AI technology to ensure compliant usage.
• Ethical Guidelines: Develop clear internal policies addressing appropriate usage, consent procedures, and emphasizing transparency and accountability.
• Ensure Data Quality: Input accurate, diverse, relevant, and complete data into AI systems to minimize biases and produce compliant results.
• Human Oversight: Incorporate human oversight and intervention in decision-making processes to ensure legal and proper functioning of AI systems.
• Regular Audits: Conduct regular audits and evaluations of AI performance to address emerging risks and improve overall system functionality.

Navigating the Future of AI in the Workplace

As AI continues to advance, employers face both exciting opportunities and complex challenges. The careful consideration of AI’s positives and negatives in employment-related decisions will be crucial. By staying informed, implementing responsible practices and adapting to the evolving regulatory landscape, employers can harness the transformative power of AI while mitigating potential risks.