Year in review and 2021 preview - Top 10 trends for US employers - EMPLOYMENT PRACTICE GROUP
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Year in review and 2021 preview –
Top 10 trends for US employers
EMPLOYMENT PRACTICE GROUP
Year in review and 2021 preview – Top 10 trends for US employers 2020 was one of the most challenging years of our lifetimes. In the US alone, the COVID-19 pandemic swept across the country in the early months of the year, followed by economic turmoil, climate disasters, protests concerning racial equality and social justice, and a contentious national election. These events and their aftershocks will continue to challenge employers. In this review, we identify the top 10 trends impacting US businesses as we close out 2020 and enter 2021: 1. Worker health, safety and well-being take center stage 2. Toward workplace equality 3. ESG (Environmental, Social and Governance) 4. Social and labor unrest 5. Remote working goes mainstream 6. ABC (the test frequently used to determine employee vs independent contractor status) 7. Responding to the economic crisis 8. Digital transformation and privacy 9. Shifting litigation landscape 10. Uncertainty ahead As we look ahead to the other side of the pandemic, there are some bright spots. While employers are facing different challenges, many are innovating at a new pace out of necessity. Leaders are connecting with and empowering their people like never before. Employees are working in new ways – whether remotely, as part of new teams, or with different technologies and responsibilities. And businesses are rethinking their purpose and business model to better meet the needs of workers, customers and communities. By staying nimble and working together, we can head into this new year stronger, with more innovative workforce solutions to support your business.
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YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
Worker health, safety and well-being
1 continue to take center stage
Even before the COVID-19 pandemic, organizations were looking at strategies to
address employee health and well-being as a way to retain talent and optimize
business performance. The current crisis has underscored the need for action as
people struggle with illness, caregiving responsibilities, and anxiety and depression.
In response, employers and lawmakers increasingly are taking steps to address the
physical and mental health of the workforce.
2020 developments and what to expect next
NEW LAWS REQUIRING PAID LEAVE, WITH MORE Going forward, the crisis may spur lawmakers and
ON THE WAY employers to consider more permanent changes.
Prior to the pandemic – and in the absence of national Already new state leave laws that expand coverage
legislation providing for paid sick leave – many states, or entitlements took effect on January 1, 2021.
cities and counties enacted laws requiring certain private For example:
employers to provide some form of paid sick leave to
• California SB 1383 expands job-protected family leave
eligible employees. The result has been a patchwork of
to cover employers with five or more employees.
laws with different requirements.
• California AB 2992 expands leave for victims of
As a result of COVID-19, federal, state and local domestic violence, sexual assault or stalking to include
governments enacted legislation to create rights to leave for the victim of any crime that caused a physical
emergency sick leave benefits, including the Family First injury or mental injury with a threat of physical injury
Coronavirus Response Act (FFCRA). The new federal and any employee whose immediate family member
pandemic relief bill does not extend the mandatory leave died due to a crime.
requirements of the FFCRA into 2021; however, covered
• Colorado’s new paid sick leave law calls for employees
employers who voluntarily offer leave may utilize
to accrue one hour of paid sick leave for every 30
payroll tax credits to cover the cost of benefits paid to
hours worked, capped at 48 hours. The law applies to
employees through the end of March 2021.1 Some state
employers with 16 or more employees (and then to all
and local emergency leave laws expired at the end of
employers in 2022).
2020, while others remain in effect.
• Maine’s earned paid leave law allows employees
President Joe Biden is calling on Congress to put the to earn one hour of paid leave for every 40 hours
FFCRA requirement back in place and to eliminate worked, up to 40 hours per year, to be used for
exemptions for employers with more than 500 and less any reason (where the employer has more than
than 50 employees. The Administration’s proposed relief 10 employees).
package, the American Rescue Plan, also includes over
• Massachusetts’ Paid Family and Medical Leave Law
14 weeks of paid sick and family and medical leave for
provides covered individuals with up to 12 weeks of
reasons related to COVID-19 and a maximum paid leave
paid family leave and 20 weeks of paid medical leave.
benefit of $1,400 per-week for eligible workers.
1
FFCRA paid leave requirements set to expire – but employer payroll tax
credit extended, DLA Piper Employment Alert (December 29, 2020).
4
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• New York State’s Paid Sick Leave Law allows eligible Mr. Biden has vowed to, among other things:
employees to start using accrued sick leave, and
• Immediately release and enforce an Emergency
amendments to New York City’s Paid Safe and Sick
Temporary Standard. The US Department of Labor
Leave impose more generous requirements.2
(DOL) has declined to enact such a standard, and
lawsuits attempting to force such a measure have
Whether national legislation will emerge is uncertain but
failed. In the meantime, several states (including
now more likely with a Democrat-controlled Senate. Mr.
California, Virginia, Michigan, and Oregon) have
Biden has called for the creation of a national paid family
adopted their own emergency rules – with some being
and medical leave program to give all workers (including
challenged in court.
public- and private-sector workers, part-time workers,
independent contractors, workers who change jobs, • Finalize a permanent infectious disease standard
and small business employees) up to 12 weeks of paid requiring health facilities and certain other high-
leave based on the FAMILY Act. He also has called for exposure workplaces to permanently implement
permanent, paid sick leave of the type called for in the infection-control programs.
Healthy Families Act.
• Increase the number of Occupational Safety and
Health Administration (OSHA) investigators to enforce
Even in the absence of legislation, many companies are
the law and existing standards and guidelines.
looking at their workplace policies through a new lens
as they aim to reassure workers and customers that it is
On January 22, 2020, President Biden signed an
safe to get back to business.
Executive Order on Protecting Worker Health and Safety
directing OSHA to release within two weeks revised
MORE AGGRESSIVE FEDERAL ENFORCEMENT
guidance to employers on workplace safety during the
EXPECTED GOING FORWARD
pandemic and to consider whether any emergency
In 2020, employers struggled to comply with a steady
temporary standards are needed. Most recently, on
stream of federal, state and local laws, regulations and
January 29, 2021, OSHA released additional guidance
guidance aimed at reducing the impact of COVID-19 in
for businesses.
the workplace. Employers can expect a more aggressive,
national response from the Biden Administration.
2
Expanded NYC Earned Safe and Sick Leave Law imposes
additional obligations on employers, DLA Piper Employment Alert
(October 8, 2020).
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YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
PREDICTIONS OF A SECOND PANDEMIC – In the meantime, states are taking action. Several
OF MENTAL HEALTH states passed new mental health and substance abuse
The rise of COVID-19 has highlighted the importance parity requirements; Colorado’s new paid sick leave law
of, and challenges to, employee mental health. (SB 20-205) allows employees to use the benefit for
A Centers for Disease Control and Prevention (CDC) their own or their family members’ mental illness; and a
survey found that over 40 percent of Americans have new California law (SB 855) increases commercial health
struggled with behavioral or mental health issues plans and insurers’ coverage obligations for mental
during the COVID-19 pandemic. health conditions and substance use disorders.
In response, employers are considering how they can AFFORDABLE CARE ACT (ACA) PIVOT
better support employee health and well-being. More Employers are watching the fate of the ACA. Even if
employers are offering employee assistance programs the Supreme Court upholds the constitutionality of the
or other counselling services, providing access to ACA, the ACA regulatory regime will necessarily sustain
mindfulness or resilience courses, communicating a fundamental pivot in 2021 in a wide variety of arenas.
regularly with the workforce about available resources, For example:
and exploring ways to create a more supportive work
• ACA Section 1557, which prohibits discrimination in
environment.3 Others are reviewing the feasibility of
healthcare for protected classes, will likely expand
providing additional benefits (e.g., expanded leave
the definition of sex discrimination to include sexual
options, caregiving and childcare resources, tuition
orientation and gender identity.
reimbursement, financial wellness programs) to help
employees meet personal and work challenges. Some • The number and types of employers who are exempt
larger employers – even outside the healthcare sector – from providing employee access to contraceptive
are looking to appoint Chief Medical Officers for the first coverage will likely decrease.
time to steer the company’s well-being strategy.
• The ability of unrelated employers to band together
to provide healthcare coverage and the ability of
Employers are likely to get support from the Biden
working owners to join association health plans will
Administration. Mr. Biden has committed to ensure
likely be eliminated.
enforcement of mental health parity laws and expand
funding for mental health services. • The availability and accessibility of short-term limited
duration health plans will likely decrease.
Employers also are tracking Equal Employment
Companies are encouraged to evaluate their current
Opportunity Commission (EEOC) proposed rules that
health plan structure to determine if proactive
address what level of incentives employers may offer to
modifications would assist with the transition to a
encourage employee participation in wellness programs
more robust ACA compliance environment. In addition,
that require disclosure of medical information without
companies should evaluate the impact of the
violating the Americans with Disabilities Act (ADA) and
Consolidated Appropriations Act (CAA) on their current
the Genetic Information Nondiscrimination Act (GINA).
health plan structure. The CAA, which was enacted on
On January 20, 2021, the Biden Administration withdrew
December 27, 2020, will generate the largest systemic
the proposed regulations from publication in the Federal
overhaul of health plan operations since the ACA, while
Register pending review by newly appointed EEOC Chair
affording very little runway to achieve the required
Charlotte Burrows.
compliance by January 1, 2022.
3
Mental Health Matters: Managing Workplace Wellbeing across the
Globe, DLA Piper Global Employment Guide (October 2020) (examining the
regulatory framework in 16 countries).
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GREATER COMPLIANCE RISK negligence and public nuisance claims by employees
The COVID-19 pandemic has complicated the and their family members alleging failure to maintain
employment compliance landscape. Employers, a safe working environment; failure to comply with leave
particularly those with multi-state operations, have had laws; failure to accommodate disabilities; retaliation,
to navigate varying and rapidly developing health and whistleblower, and wrongful discharge claims based
safety standards and guidance at every level – federal, on protected activity (e.g., raising health and safety
state and local. At the same time, employers are seeing complaints); and data privacy claims arising from
an increase in COVID-19-related litigation, including screening, testing and contact tracing protocols.
Actions to consider
➤ Continue to take all reasonable health and safety ➤ Following the Supreme Court’s decision on ACA
measures to protect employees based on local, constitutionality, coordinate with counsel to
state and federal regulations and guidance and develop an action plan to address the impact of
informed by industry best practices. New laws and the decision on your business and plan participants.
guidance related to COVID-19 will continue in 2021. If your business provides health coverage through
For example, effective January 1, 2021, California an association health plan, reach out to counsel to
AB 685 will require employers to notify employees, evaluate and prioritize any necessary modifications to
employers of subcontracted employees and any the healthcare arrangement.
exclusive representative (and, in some cases, local
➤ Take stock of your corporate compliance program,
health departments) about potential COVID-19
including hotlines and complaint and investigation
exposures at work.
policies and procedures, to ensure they are fit for
➤ Be mindful of requirements under the ADA and purpose. Train the workforce, particularly supervisors
applicable state disability laws. Major depression, and managers, on anti-retaliation obligations.
anxiety and other mental health disorders may qualify
➤ Anticipate and listen to employee concerns and
as disabilities, obligating employers to provide a
ensure a robust communications and engagement
reasonable accommodation absent undue hardship.
plan is in place to reassure workers that their health
➤ Designate a knowledgeable point person or team and well-being continues to be a top priority – which
to handle leave requests and ensure policies are up can also provide a competitive advantage when it
to date. comes to attracting and retaining talent.
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YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
2 Toward workplace equality
The well-publicized events of 2020 have shone a spotlight on issues concerning racial
equality, social justice and diversity and inclusion in the workplace, stirring powerful
conversations on these subjects both in and out of the workplace. Many employers
took a public stance, sharing their values and making significant commitments to
drive meaningful and lasting change.
On the legislative front, states and cities remained the primary drivers of efforts to address workplace equality in
2020. Employers can expect more activity at the state and local level and aggressive use of executive, regulatory and
enforcement authority by the Biden Administration.
Key 2020 developments and what to expect next
HEIGHTENED FOCUS ON RACIAL DIVERSITY PRESIDENT BIDEN REVOKES CONTROVERSIAL TRUMP
The events of 2020 have led many companies to look EO ON FEDERAL CONTRACTOR DIVERSITY TRAINING
more deeply at the composition of their workforces, On September 22, 2020, President Trump signed
as well as policies and processes for hiring, pay and EO 13950 on Combating Race and Sex Stereotyping
promotion. For example, last year the CEOs of the 27 prohibiting federal contractors, subcontractors and
largest employers in New York formed a coalition that certain grant recipients from using “any workplace
aims to hire 100,000 low income and Black, Latino training that inculcates in its employees any form
and Asian New Yorkers by 2030; the Board Challenge of race or sex stereotyping or any form of race or
launched a movement to improve the representation of sex scapegoating.”4 In October, the OFCCP released
Black directors; and numerous companies announced frequently asked questions and a complaint hotline. In
that they would increase the number of Black or Latino December 2020, a federal judge granted a preliminary
employees and take other steps to promote equality in nationwide injunction prohibiting the OFCCP from
the workplace. implementing or enforcing the order with respect
to government contractors and other recipients of
In addition to internal demands, investors and other federal funding. Most recently, President Biden revoked
stakeholders are calling on companies to do more, the order as part of a broader Executive Order on
including to release workforce data on race, ethnicity Advancing Racial Equity and Support for Underserved
and gender. Communities Through the Federal Government.
At the same time, DOL inquiries into whether companies SUPREME COURT ISSUES LANDMARK DECISION ON
violated the law by committing to double their ranks LGBTQ RIGHTS
of Black managers and executives put companies on In June 2020, the US Supreme Court held in Bostock v.
alert to tensions between voluntary efforts to improve Clayton County, Georgia that an employer who fires an
diversity and potential discrimination claims. individual merely for being gay or transgender violates
Title VII’s ban on employment discrimination based
4
New Executive Order “Combating Race and Sex Stereotyping” –
what federal contractors need to know, DLA Piper Employment Alert
(October 7, 2020).
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on sex. The question going forward is how far the BATTLES OVER RELIGIOUS FREEDOM CONTINUE
decision’s reach will extend. Justice Alito’s dissenting Notably, the Supreme Court acknowledged that its
opinion predicted that the majority’s interpretation of Bostock decision did not address how to reconcile
“sex” to encompass discrimination because of sexual religious freedom with the rights of LGBTQ individuals.
orientation or gender identity “is virtually certain to This is an area to watch, particularly as the composition
have far-reaching consequences” and cited to more of the Supreme Court has changed since Bostock.
than 100 federal statutes prohibiting discrimination
because of sex. On the federal legislative front, Mr. Biden has promised
to make enactment of the Equality Act a top priority
Notably, on January 20, 2021, President Biden issued during his first 100 days as President. The legislation
an Executive Order on Preventing and Combating would prohibit discrimination on the basis of sexual
Discrimination on the Basis of Gender Identity or orientation and gender identity under a range of federal
Sexual Orientation stating that it is the policy of the laws and limit the ability of employers to invoke the
Administration to fully enforce Title VII and other laws Religious Freedom Restoration Act as a defense to
that prohibit discrimination on the basis of gender employment discrimination claims.
identity and sexual orientation. The EO directs the head
of each agency to review all existing orders, regulations, Even if legislation remains out of reach, employers
guidance documents, policies, programs and or are likely to see executive and regulatory action
other agency actions promulgated or administrated targeting Trump Administration EOs and rulemaking
by the agency under Title VII or any other statute or efforts, including:
regulation that prohibits sex discrimination that may be
• President Trump’s EO 13831 promoting religious liberty,
inconsistent with the Administration’s policy.
• a Trump Department of Health and Human Services
Employers are also seeing new activity at the state and (HSS) rule reversing an earlier Obama-era rule
local levels. For example, last year Virginia adopted a clarifying that protections regarding “sex” in the ACA
law prohibiting discrimination on the basis of sexual encompass those based on gender identity and
orientation, gender identity, and veteran status. allowing health care workers to refuse to provide
medical services that conflict with their moral and
religious beliefs (currently enjoined and the subject of
ongoing litigation), and
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YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
• a DOL final rule that would broaden exemptions from • Allow for voidable “golden parachute” provisions for
anti-discrimination liability for religious organizations management employees (e.g., Oregon)
that contract with the federal government.
• Limit or ban the use of mandatory arbitration for
certain claims (e.g., California, Illinois); although some
Employers are also following developments related to
of these laws are being challenged.
EEOC updates to its Compliance Manual on Religious
Discrimination approved on January 15, 2021. The EEOC
At the federal level, Mr. Biden has voiced support for
has stated that amendments are necessary to reflect
the Bringing an End to Harassment by Enhancing
recent legal developments, including the Supreme
Accountability and Rejecting Discrimination in the
Court’s ruling last year in Our Lady of Guadalupe v.
Workplace (BE HEARD) Act, which would significantly
Morrissey-Berru, 591 U.S. _ (2020). The EEOC guidance
expand the applicability of Title VII to cover all workers
includes a more flexible definition of a “religious
(e.g., all employees regardless of business size,
employer” and broadens the “ministerial exception.”
independent contractors, volunteers, trainees).
Employers can expect continued litigation over issues at
Even if legislation stalls in Congress, employers can
the intersection of employment law and religion in 2021
expect more aggressive executive action, rulemaking
and beyond.
and enforcement under the Biden Administration.
However, some efforts may be slowed until Democrats
STATES ENACT NEW PROTECTIONS IN THE WAKE
assume control of the EEOC.
OF #METOO
Last year states continued to take the lead on legislation
NEW STATE LAWS FOCUS ON PAY EQUITY AND
addressing workplace discrimination, harassment and
INCOME EQUALITY
retaliation. For example, new laws that took effect in
States and localities continue to enact laws to address
2020 or will take effect in 2021:
equal pay issues. For example, laws that took effect over
• Lower the standard for proving harassment the last year ban salary history inquiries (e.g., New Jersey,
(e.g., Montgomery County, Maryland) New York, Maryland, Cincinnati, Colorado); prohibit
retaliation against an employee for discussing wages
• Mandate sexual harassment training, with
or compensation with another employee (e.g., Virginia);
some state agencies releasing model training
require pay data reporting (e.g., California); and
(e.g., California, Illinois)
mandate job posting and compensation disclosures
• Expand the scope of existing laws to cover smaller (e.g., Colorado).
employers or non-employees such as interns,
independent contractors and freelancers (e.g., Illinois, At the federal level, the Biden Administration has
New York City, Virginia) committed to reinstitute the EEOC’s pay-data reporting
requirements as part of a focus on ending the gender
• Extend the time for an employee to file an administrative
pay gap. Mr. Biden also has voiced support for the
complaint or lawsuit (e.g., California, New York)
Paycheck Fairness Act, which would, among other
• Require reporting of adverse judgments and things, restrict employer defenses to sex-based wage
administrative rulings (e.g., Illinois) discrimination claims, update class action provisions
of the Equal Pay Act (EPA), preclude the use of salary
• Limit or prohibit nondisclosure, non-disparagement
history to set wages or make hiring decisions, prohibit
or no-rehire provisions in certain settlements or
retaliation against workers for discussing wages,
employment agreements (e.g., California, Illinois,
strengthen remedies available under the EPA, and
Oregon, New Mexico)
require the federal collection of pay data.
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These measures are part of a broader Biden plan to Actions to consider
tackle income inequality. President Biden’s $1.9 trillion
pandemic relief package includes raising the federal ➤ Continue taking steps to ensure your responses
minimum wage to $15 and ending the tipped to the pandemic do not have an adverse impact
minimum wage and sub-minimum wage for people on those in protected classes.
with disabilities. Even if legislation stumbles, federal
➤ Be prepared for pay equity – and wider gender
contractors could see changes. On January 22, 2021,
equality issues – to return to the agenda during
President Biden initiated a process that would allow him
2021. Recent data indicates that the pandemic is
within 100 days to issue an executive order requiring
disproportionately impacting women’s careers.
federal contractors to pay at least $15 minimum wage
In September 2020, 865,000 women left the US
and to provide emergency paid leave to workers.
workforce – four times more than men – according
to the Bureau of Labor Statistics (BLS). Employers
In addition to federal action, employers will continue
may want to consider various measures such as
to see changes to the minimum wage at the state and
flexible and part-time work options, paid leave, and
local levels.
funding for childcare.
Mr. Biden also has pledged to expand overtime pay. ➤ Consider steps that can be taken lawfully to
In 2016, the Obama DOL issued a rule that would have address inequality in the workplace. There are
raised the overtime pay salary threshold to $47,476; many affirmative steps that companies can take
however, the rule was blocked nationwide by a court to drive greater diversity and inclusion; however,
order. On September 24, 2019, the DOL announced a companies considering voluntary affirmative action
final rule, effective January 1, 2020, raising the minimum programs that go beyond aspirational goals are
threshold to be exempt from overtime to $35,568 for a urged to consult with counsel and ensure that such
full-year worker. efforts are consistent with discrimination laws.
➤ Prepare for greater transparency on D&I
In addition, issues such as executive pay equity could
issues. Lawmakers, regulators, investors and
gain traction. Employers may see renewed legislative
other stakeholders increasingly are calling on
efforts targeting significant disparities between CEO and
companies to report on the racial, ethnic and
worker pay. Executive compensation committees are
gender composition of their workforce and to do
urged to monitor developments in this area.
more to address imbalances.
BIPARTISAN SUPPORT FOR PREGNANT WORKERS ➤ Monitor proposed EEOC guidance on religious
FAIRNESS ACT discrimination and carefully consider requests for
In September 2020, the US House of Representatives religious accommodations.
passed the PWFA with strong bipartisan support. If
➤ Adopt more proactive approaches to identifying
enacted, the law would require most employers to
and correcting potential discrimination and
provide reasonable accommodations for pregnant
harassment, with a focus on training.
employees unless doing so would impose an “undue
hardship” (similar to the Americans with Disabilities Act). ➤ Be mindful of the need to update policies,
Mr. Biden has pledged his support for the Act. agreements, training, and dispute resolution
practices (including settlement agreement
language) based on changes to state and local
harassment and discrimination laws.
11YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
Environmental, Social
3 and Governance
In August 2019, more than 180 CEOs of the Business Roundtable overturned
a 22-year-old policy statement that defined a corporation’s principal purpose
as maximizing shareholder return and embraced a more stakeholder-driven
approach to governance. The new Statement on the Purpose of a Corporation
declares that companies should not only serve their shareholders but also
deliver value to their customers, invest in employees, deal fairly with suppliers
and support the communities in which they operate. A cornerstone of this new
“stakeholder capitalism” model is Environmental, Social and Governance (ESG)
investing, which has become a standard for top-tier institutional and public
institutions, private lenders and other stakeholders.5
In the employment area, ESG issues were at the forefront in 2020 as the COVID-19 pandemic and racial justice
movement prompted more companies to review their business practices related to worker health and safety,
diversity and inclusion, and human capital management for both the short- and long-term new normal.
The Biden Administration could further boost ESG issues. Mr. Biden has called for “an end to the era of shareholder
capitalism”; he campaigned on such issues as social justice, diversity, human rights, climate change, and corporate
transparency and accountability.
With all signs pointing toward the continued growth of ESG and reporting and disclosure requirements, boards and
corporate leaders are urged to take stock of their approach to ESG in this unprecedented environment.
Key 2020 developments and what to expect next
Several employment-focused “social” and “governance” on the plan’s financial returns” and prohibiting the
developments in 2020 could have long-term impacts selection of investments based on “non-pecuniary
on public companies and their interactions with goals” (although non-pecuniary considerations could
stakeholders, while others are likely to be reversed by a be used as a deciding factor when the fiduciary
more ESG-friendly Biden Administration. cannot distinguish among investments based on
pecuniary factors alone). The rule is currently under
TRUMP DOL RULES DISCOURAGE CONSIDERATION review by the Biden Administration. The fate of a
OF ESG FACTORS related proxy rule requiring fiduciaries to act soley in
In October 2020, the DOL released a final rule the accordance with the “economic interests” of the
requiring ERISA plan fiduciaries to be “focused solely plan is uncertain.
5
ESG: The rise of private ordering and the role of the NCGC committee,
DLA Piper Handbook (March 26, 2020).
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SEC PUSHES HUMAN CAPITAL REPORTING NASDAQ PROPOSAL REQUIRES DIVERSITY REPORTING
In 2020, the SEC amended certain disclosures required On December 1, 2020, Nasdaq filed a proposal with
in various filings, including Form 10-K and registration the SEC seeking approval of new listing rules that
statements.6 The final rule – which took effect on would require most Nasdaq-listed companies to 1)
November 9, 2020 – expands the current requirement publicly disclose annually, to the extent permitted
disclosing the number of persons employed by the by law, diversity statistics regarding their boards of
registrant to include a description of the registrant’s directors and 2) have, or explain why they do not have,
human capital resources to the extent such disclosures at least two “Diverse” directors, including one who
would be material to an understanding of the self-identifies as Female and one who self-identifies as
registrant’s business taken as a whole. The SEC either an Underrepresented Minority or LGBTQ+.
specifically called out “attraction, development and
retention of personnel” as examples of subjects that TOWARD COMMON ESG METRICS AND
may be material. The exact measures to be disclosed CONSISTENT REPORTING
similarly depend on what the company believes is In September 2020, the World Economic Forum (WEF)
needed to inform investors of its HR resources. released a set of universal ESG metrics and disclosures
prepared in collaboration with the four major
Notably, as highlighted in various dissents, the accounting firms to measure stakeholder capitalism.7
amendments do not address disclosures related to Among other things, the WEF’s report calls for people
climate change risk or certain topical ESG information. metrics and disclosures related to diversity and
The Biden Administration could push for more inclusion, pay equality, wage level, health and safety,
standardized ESG disclosures, including those related and training. Five standard-setting institutions – the
to human capital. Carbon Disclosure Project (CDP), Climate Disclosure
Standards Board (CDSB), Global Reporting Initiative
(GRI), International Integrated Reporting Council
(IIRC) and Sustainability Accounting Standards Board
(SASB) – also announced their shared vision for a
comprehensive corporate reporting system.
6
Key Reg S-K disclosure rules amended: Fundamental issues to 7
Measuring Stakeholder Capitalism Towards Common Metrics and
consider in your next SEC filing, DLA Piper Corporate Governance Alert Consistent Reporting of Sustainable Value Creation, World Economic Forum
(September 9, 2020). (September 2020).
13YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
STATES MANDATE BOARD DIVERSITY SHAREHOLDER DERIVATIVE LAWSUITS TARGET LACK
Last year, California passed AB 979 requiring publicly OF RACIAL DIVERSITY
traded companies headquartered in California to have Some investors are turning to derivative litigation to
at least one board member from an underrepresented challenge boards of directors and other corporate
community by the end of 2021 and at least two or leaders regarding the lack of diversity among their
three – depending on the board’s size – by the end of ranks. Lawsuits commonly allege that the board and
2022. AB 979 follows a similar 2018 California law SB executive team lack diversity, ignored internal controls
826 requiring at least one female director by the end and misled investors by making false statements about
of 2019 (the subject of several pending lawsuits). In the the company’s commitment to diversity in filings with the
wake of SB 826, other states have enacted legislation SEC and annual reports, and failed to disclose fraudulent
imposing diversity requirements, requiring disclosures business practices – namely, discriminatory hiring and
related to the diversity of board members and/or compensation practices – that put the company at
encouraging minimum levels of representation (e.g., material risk. While these claims face legal hurdles, this is
New York, Illinois, Washington). an area to watch.
Actions to consider
➤ Review your approach to human capital • How does the company define diversity? Should
disclosures. While this area is evolving, companies the definition be expanded to include other factors,
should consider key questions: such as LGBTQ+ status, veteran status, or even
political ideology?
• How does or should the board and its committees
allocate oversight of various dimensions of human • How does the company’s proxy statement highlight
capital or culture? the diversity of its board and management?
• What are the key performance indicators (KPIs)
➤ Reexamine processes for recruiting and selecting
applicable to the company is this arena?
directors. While SEC approval of Nasdaq’s proposal
• What are the key practices or developments related is not certain – and there would be a time lag in
to compensation of the broader workforce? any event before the requirements are imposed –
we anticipate that these diversity requirements or
• What are some measures of workforce diversity
something similar will ultimately be put in place for
data (e.g., percentage of women and/or people
US public companies. The proposal is consistent with
of color across the global or US workforce, at the
legislation Congress is considering, and a number of
management level, in leadership positions or across
groups have already published statements in support
incoming hires) that are relevant to the company?
of Nasdaq’s proposal. The proposal aligns with the
approach those firms are taking during the 2021 proxy
➤ Prepare for greater transparency on D&I issues.
season. Acting now to identify qualified, diverse board
Workforce diversity is a leading goal of human capital
candidates may make any later transition much easier.
management and will continue to be an important
focus of legislative and shareholder initiatives. In ➤ Walk the walk. SEC Commissioners from both
response, companies are encouraged to be prepared parties have expressed concern that corporate
to answer key questions such as: ESG investment strategies do not “walk the ESG
walk.” Going forward, enforcement efforts – and the
• What is the diversity of the company’s board and its
plaintiffs’ bar – may focus on the accuracy of asset
C-suite executives?
managers’ ESG claims. Companies are urged to take
• How will the company respond to increased regulatory care to avoid inconsistencies between what they say
and shareholder attention to board diversity? and do from a trust, brand and risk perspective.
14DLAPIPER.COM
Increasing social unrest
4 and labor activism
The 2020 election underscored the stark political polarization in the US. Differing
views on political and social issues can lead to discord among employees in the
workplace. Employees and consumers often want to know where companies
stand on these issues. Meanwhile, all of this may be playing out on social media.
Companies are carefully weighing whether and how to enter the fray in a manner
consistent with their corporate values; how to navigate employee discussions at
work; and how to respond to employees who may engage in controversial activities
outside of the workplace.
EMPLOYEE SPEECH GETS COMPLICATED the advancement of beliefs and ideas, and espousal
In a recent Society for Human Resources Management of candidates or causes.” Other state laws or public
(SHRM) survey, 44 percent of HR professionals reported policy exceptions to the at-will doctrine similarly prohibit
intensified political volatility at work in 2020 (compared employers from preventing employees from engaging
to 26 percent in 2016). These disagreements not only in political activities and/or terminating an individual
impact employee morale and productivity but can carry because of their political affiliation.
legal implications. Likewise, controversial employee
speech and activity outside of the workplace may While tensions may lessen in the new year, political
impact the workplace or even the employer’s brand if the divisions will continue. Employers are considering
controversial employee is identified as being affiliated workplace policies and strategies to support a more
with the company. But may an employer discipline or collaborative, inclusive culture.
terminate workers for participating in off-site actions
that offend co-workers or that conflict with the UNIONS ATTEMPT TO GAIN GROUND
employer’s interests? Some employers have experienced a surge in worker
activism during the COVID-19 pandemic, with non-union
Federal law generally doesn’t prohibit private employers workers on the frontlines of the pandemic staging
from taking action against workers on the basis of walkouts and unions leveraging worker concerns to
political activity, political group membership or political support organizing efforts.
beliefs – but some state laws do. For example, California
Labor Code Sections 1101 provides that employers may The labor movement is likely to get a boost from the
not “adopt, or enforce any rule, regulation, or policy” Biden Administration. Mr. Biden has an ambitious plan
that controls “the political activities or affiliations of to strengthen unions and reform the National Labor
employees.” Section 1102 bars any threat of discharge to Relations Act (NLRA). Key proposals include:
influence a “particular course or line of political action or
• Create a cabinet-level working group that will solely
political activity.” Notably, the California Supreme Court
focus on promoting union organizing and collective
has held that these protections “cannot be narrowly
bargaining and deliver a plan to “dramatically increase
confined to partisan activity,” but include such activities
union density and address economic inequality” in the
as “the wearing of symbols, association with others for
first 100 days of the Administration
15YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
• Support the Protecting the Right to Organize (PRO) Act presumed valid, and employers may lawfully discipline
and remedies that would impose financial penalties on an employee who violates such rule, even if the
companies and executives that interfere with workers’ employee has not interrupted work”).
organizing efforts
• 800 River Road Operating Company, LLC d/b/a Care
• Repeal the Taft-Hartley provisions that allow states to One at New Milford, 369 NLRB No. 109 (overruling
impose “right to work” laws an Obama-era decision and restoring the previous
standard providing that an employer has no duty
• Enact legislation codifying the Browning-Ferris
to bargain before imposing discretionary serious
Industries joint employer definition into law
discipline so long as the discipline is materially
• Modify antitrust law to allow independent contractors consistent with the employer’s established policy
to organize and bargain collectively or practice).10
• General Motors LLC, 369 NLRB No. 127 (modifying the
While much of Biden’s agenda depends on changes
standard for determining whether employees have
to the law, changes to federal contracting could be
been lawfully disciplined or discharged after making
done administratively.
abusive or offensive statements in the course of
activity otherwise protected under the NLRA).11
THE COMING NLRB FLIP-FLOP
The NLRB continued its pro-employer swing in 2020. • California Commerce Club, Inc., 369 NLRB No.
The agency published its final rule with the DOL 106 (holding that an employer lawfully included
interpreting “joint employer status”8; implemented new confidentiality language in an arbitration agreement
election rules – a reversal of tight constraints imposed by its employees were required to sign as a condition
the 2014 “quickie” election rules9; and delivered various of employment).
pro-employer decisions, including:
Employers can expect more labor-friendly decisions from
• Wynn Las Vegas, LLC, 369 NLRB No. 91 (holding that “a
the NLRB when it attains a Democratic majority.
rule prohibiting solicitation during working time is
8
Game changer – DOL and NLRB issue final rules interpreting joint NLRB overturns pre-discipline bargaining obligation, DLA Piper
10
employer status, DLA Piper Employment Alert (March 5, 2020). Employment Alert (July 2, 2020).
9
NLRB proceeds with partial implementation of new election rules 11
NLRB overturns restrictions on employee discipline for profane or abusive
after adverse federal court ruling, DLA Piper Employment Alert outbursts, DLA Piper Employment Alert (July 31, 2020).
(June 3, 2020).
16DLAPIPER.COM
Actions to consider
➤ Review your policies. A number of companies privacy, statement that activities protected under
are amending their policies to address employees’ NLRA and state laws are not prohibited)
discussions of politics in the workplace. Some
• Provide clear procedures for reporting and
have declared that the company has an apolitical
responding to complaints of violations
culture and will not condone political debates
among employees, while others have implemented
➤ Proceed cautiously when it comes to politics.
guidelines around community discussions on
Employers should be responsive to employee
internal message boards. Others are less prescriptive
complaints about harassment, discrimination and
but require that discussions remain inclusive and
hate speech on company communication channels,
respectful; such companies have created accelerated
but should also exercise caution before taking action
processes for raising and responding to concerns.
against workers for engaging in political discourse.
Most companies have tried to strike a balance
Employers are also encouraged to seek legal
between open discussions and managing content.
guidance before disciplining or firing an employee in
Policies designed to address the current political
relation to activity that arguably could be considered
climate frequently include some variants of the
political expression.
following provisions:
➤ Be mindful of NLRA Section 7 rights. Labor law
• Require that employees use only identification
protects employees – unionized and non-unionized
photos or initials as their electronic profile
– who take concerted action for their mutual aid
pictures (to prevent use of campaign or political
or protection regarding terms and conditions
slogans or inappropriate emojis) and prohibit
of employment (e.g., health and safety, wages
use of Zoom backgrounds and images that
and benefits).
promote particular candidates, causes or may be
otherwise offensive ➤ Evaluate labor risks in light of the new realities
imposed by COVID-19 and President Biden’s
• Limit political discussions to sections of internal
agenda and take steps to ensure a positive work
messaging boards dedicated for that purpose with
environment that is responsive to employee questions
disclaimers and guidelines for use
and concerns. Such actions may include reviewing
• Prohibit debates that are disruptive and unrelated compensation and benefits based on the market,
to work training supervisors and managers on how to spot
signs of union organizing and their responsibilities
• Include guidelines and expectations around
under the NLRA and developing a plan to respond to
accepted conduct on internal communication
potential union activity.
platforms (e.g., responsible use, no expectation of
17YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
5 Remote working goes mainstream
The mass global migration to home working started as a necessary temporary
lockdown measure. But as the pandemic continues to prevent a return to “normal,”
home working is fast becoming a longer-term reality for millions of employees
around the world. Many people don’t want to return to the old normal when the
COVID-19 crisis ends, and businesses are recognizing that they have the opportunity
to create something new. Employers that take the time to understand their
employees and how teams want to work and to experiment with configurations and
cadences can build a strategic advantage.12
Key 2020 developments and what to expect next
GREATER ACCEPTANCE OF FLEXIBLE AND REMOTE longer-term option raises additional challenges, from
WORKING ARRANGEMENTS compliance with employment and tax laws to potential
Before the pandemic, only about 7 percent of US impacts on organizational culture, talent development,
workers enjoyed the option to work from home, performance management and employee expectations.
according to the BLS. Now some studies suggest that Employers are thinking about how to manage the
42 percent of the US labor force is working from home parameters of remote work while creating a level playing
full-time,13 with more companies announcing plans to field and shared experiences for all employees.
permanently shift to some form of remote work (most
commonly a split between home and the office) and RISK OF GREATER INEQUALITY
even hiring for a new role – “Head of Remote Work.” The pandemic has exposed significant divides, including
between those who can and can’t work at home. A
WFH CHALLENGES recent McKinsey study suggests that while hybrid
Even as a short-term response to COVID-19, home models of remote work are likely to continue after the
working en masse raised logistical and structural pandemic, these options may exist principally for a
challenges. Businesses had to move quickly to set up highly-educated, well-paid minority of the workforce.15
the infrastructure to enable remote working, deal with This trend could further the inequities surfaced by the
employees stranded abroad due to closed borders, pandemic, with lower-wage workers and people of
and manage the panoply of risks related to a remote color less likely to be able to work remotely. Companies
workforce (e.g., cybersecurity, wage and hour, expense considering a permanent work from home option are
reimbursement, tax issues).14 Remote working as a weighing how “remote work for some” could impact their
workforce as a whole.
12
Global Guide to Remote Working, DLA Piper Global Employment Guide
(October 30, 2020) (examining remote working considerations in
30+ jurisdictions).
13
How working from home works out, Stanford Institute for Economic Policy
Research (June 2020).
Work from home or don’t work at all: telecommuting in the age of
14 15
What’s next for remote work: An analysis of 2,000 tasks, 800 jobs, and
COVID-19, DLA Piper Labor Dish (July 24, 2020). nine countries, McKinsey Global Institute (November 23, 2020).
18DLAPIPER.COM
Actions to consider
➤ Establish clear, objective eligibility criteria for ➤ Consider how current workplace policies apply
remote work in order to ensure consistency to remote working, including in such areas as
and minimize the risk of claims of discriminatory supervision, performance management, time
treatment. Employers are also urged to consider recording, privacy, confidentiality, IT and document
steps to preserve their flexibility to terminate management, expense reimbursement and insurance.
remote arrangements. Even ordinary compliance issues such as posting
applicable legal notices and posters can become more
➤ Ensure a common understanding of “remote.”
challenging when part of the workforce is remote.
Does the employee have to work from a primary
residence in the same region/state/country as their ➤ Ensure timekeeping policies require non-exempt
original jurisdiction of work? Can an employee relocate employees to record all working time, including
to a different state or even country? Defining the incidental time outside of normal working hours
parameters of remote work will enable the employer (e.g., answering an email), and to take legally
to appropriately scope and respond to risks. mandated breaks. Employers should also assess
working time issues related to new procedures such
as health screening, temperature checks and PPE.
19YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
6 ABC Test
All eyes were on California last year as Assembly Bill 5 (AB 5) took effect on January 1,
2020, codifying what is commonly known as the ABC test to determine if a worker
is an independent contractor or statutory employee under the California Labor
Code. It was a turbulent year for the new law – legal challenges continued to mount;
sweeping changes took effect in September 2020; and voters overturned the
application of AB 5 to app-based transportation and delivery drivers with passage of
the Proposition 22 referendum in November 2020.
It is unclear whether states will follow California’s lead when the current crisis abates. Certainly, California’s
experience may give them pause. The success of Proposition 22 could also encourage policymakers to consider
alternative models of regulation for the gig economy.
At the federal level, the Biden Administration is expected to undo Trump DOL rulemaking efforts which would make
it easier for businesses to classify workers as independent contractors. As in other areas, whether federal legislation
addressing the issue of worker classification will emerge is uncertain. In any event, employers should prepare for
more aggressive anti-classification enforcement efforts going forward.
Key 2020 developments and what to expect next
CALIFORNIA AB 5 GETS OFF TO A ROCKY START AB 5 carved out certain job categories and relationships,
Last year California passed AB 5, which codified the ABC with the vast majority of exceptions subject to a more
test set forth in the California Supreme Court’s decision flexible, multi-factor common law test. The bill was
in Dynamex v. Superior Court. Under the ABC test, an criticized by many, and dozens of bills seeking to amend
individual providing services to an entity is presumed to the law followed. On September 4, 2020, California
be an employee unless the hiring entity can establish passed AB 2257, effective immediately, to exempt
each of the following prongs: additional occupations and business relationships from
the ABC test under AB 5.16
A. The worker is free from control and direction of the
hiring entity in the performance of the work, both
Litigation has added to the confusion. While the State
under the contract for the performance of the work
of California’s legal battles with ride-share companies
and in fact
dominated the headlines last year, other industries have
B. The worker performs work that is outside the usual challenged the law’s application to them. For example,
course of the hiring entity’s business and on November 19, 2020, in CTA v. Becerra, a California
federal district court issued a preliminary injunction
C. The worker is customarily engaged in an independent
prohibiting the state from enforcing the ABC test
established trade, occupation, or business of the same
against motor carriers (a decision by the Ninth Circuit
nature as the work performed.
16
Changes to California’s AB 5 independent contractor law
create new opportunities and risks, DLA Piper Employment Alert
(September 16, 2020).
20DLAPIPER.COM
is pending). Meanwhile, on November 20, 2020, a state MORE STATES TACKLE WORKER MISCLASSIFICATION
appeals court held that the ABC test is not pre-empted Several states passed legislation to combat worker
by the Federal Aviation Administration Authorization Act. misclassification in 2020. For example, under a new
These and other cases will continue to move through the Virginia law, an allegedly misclassified worker may
courts in 2021. bring a civil action against their putative employer
“if the employer had knowledge of the individual’s
CALIFORNIA VOTERS APPROVE PROP 22 misclassification.” In New Jersey, Governor Phil Murphy
On November 3, 2020, California voters approved signed into law a package of six measures that, among
Proposition 22, which classifies drivers for app-based other things, grant the New Jersey Department of Labor
transportation and delivery companies as independent and Workforce Development stronger compliance and
contractors (unless certain criteria are met) and provides enforcement tools, create additional protections for
certain compensation, including minimum earnings, employees who have been misclassified as independent
healthcare subsidies, and vehicle insurance. Some gig contractors, and impose harsher penalties for employee
company CEOs have announced their intent to advocate misclassification.17 Employers are likely to see more
for similar laws in other states. Meanwhile, on January debate and legislation at the state and local levels in
12, 2021, a labor union and a group of gig workers filed 2021 as lawmakers pick up legislative efforts stalled by
a petition in the California Supreme Court challenging the pandemic.
the constitutionality of the measure.
New Jersey enacts sweeping legislation aimed to combat employee
17
misclassification, DLA Piper Employment Alert (January 30, 2020).
21YEAR IN REVIEW AND 2021 PREVIEW – TOP 10 TRENDS FOR US EMPLOYERS
DOL RULE MAKING IT EASIER TO CLASSIFY WORKERS provided health or retirement plans on terms that a
AS INDEPENDENT CONTRACTORS UNDER REVIEW business provides to its employees may be indicative of
On January 20, 2021, the Biden Administration halted employment status.
rules published in the Federal Register that have not yet
taken effect, including the DOL’s final rule addressing Employers can expect a focus on intentional
whether a worker is an “employee” or “independent misclassification and stricter enforcement of existing
contractor” under the Fair Labor Standards Act (FLSA). laws under the Biden Administration. Mr. Biden has
The rule, which was previously scheduled to take effect pledged to fund a dramatic increase in the number of
in March 2021, would have expanded the scope of investigators to facilitate a large anti-misclassification
workers who could be deemed contractors by placing effort. He also has also voiced support for a federal
an increased emphasis on two “core” factors: (i) the standard modeled on the ABC test for all labor,
nature and degree of the worker’s control over the employment and tax laws.
work and (ii) the worker’s opportunity for profit or loss
based on initiative and/or investment. The preamble The debate over how to regulate non-standard work
to the rule also addressed a comment by the Society arrangements is likely to take on increased urgency
for Human Resources Management requesting that as governments at all levels deal with the health and
the DOL clarify whether providing benefits to a worker financial impacts of the current crisis, including the
renders that worker an employee. The DOL noted that costs of increased benefits. Whether the debate will
offering a worker retirement and health benefits does result in more legislation broadening the definition of an
not automatically render the worker an employee, employee or other regulatory solutions to support new
but that providing workers with the same employer- ways of working remains to be seen.
Actions to consider
➤ Work with counsel to carefully review practices ➤ Review and revise (as necessary) independent
for retaining, using, compensating and contractor agreements. Under the various legal
terminating contractors. standards, simply labeling a worker as an independent
contractor, advisor or consultant is not, on its own,
➤ Consider regular audits of independent contractor
sufficient to establish a contractor relationship.
relationships. Initial steps may include: (1) designate
Independent contractor agreements should include
an audit team and include a human resources
language to establish the appropriateness of the
representative and a member of the legal department
classification in each case (rather than using a one-
and/or outside counsel; (2) collect all independent
size-fits-all form). Where possible, the company may
contractor agreements and any other documentation
wish to clarify that the relationship between the
related to terms of work and pay for independent
contractor and the company is not continuing but
contractors; and (3) identify the work location of each
shall terminate at the conclusion of the project.
individual designated as a contractor in order to
identify state laws that may be implicated. The audit ➤ Review benefit plans as needed to reduce
may also include an assessment of the independent the risk of retroactive coverage obligations for
contractor agreement, as well as the terms and misclassified employees.
conditions of the individual’s work. Legal counsel can
➤ Evaluate arbitration and class action waiver
help assess both applicable laws and legal risks.
strategies to mitigate the classification challenges
presented by the ABC test.
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