What Employers Need to Know About Shifting Caselaw and Legislation

U.S. Supreme Court's Impact on Agency Authority

Recent decisions from the U.S. Supreme Court have significantly altered how agency regulations are reviewed by the Judicial Branch. This is important for employers, as many legal changes to the HR landscape typically come from agency rulemaking rather than through legislation.

• Loper Bright Enterprises v. Raimondo (2024): The U.S. Supreme Court rejected the longstanding "Chevron deference" doctrine, which required courts to defer to agency interpretations of ambiguous statutes. Courts will now exercise independent judgment when determining whether agencies acted within their statutory authority when issuing new regulations.
• U.S. Securities and Exchange Commission v. Jarkesy (2024): This ruling determined that the SEC cannot use administrative tribunals to adjudicate civil penalties for securities fraud and must instead bring such cases in federal court, where defendants are entitled to a jury trial under the Seventh Amendment. The decision has far-reaching implications for other agencies, potentially including the U.S. Equal Employment Opportunity Commission (EEOC).

Takeaways for Employers

• Expect a more favorable environment for challenging agency regulations that seem to overreach statutory authority.
• Prepare for potential delays in of proposed or final rules from agencies, especially broad or controversial rules, as these are likely to be challenged in court.
• Stay aware of proposed and final rules and be prepared to comply, however, consider the company’s ability to delay implementation until the new rule is actually in effect.
• Watch for opportunities to challenge administrative proceedings by requesting cases be heard in federal court instead.
• Anticipate increased litigation as the boundaries of agency authority continue to be tested and redefined.  

Impact of Trump Administration Executive Orders

In the opening days of his administration, Trump issued several executive orders with significant implications for employment law. Notable actions include:

• Rollback of Executive Orders Related to DEI: President Trump has issued multiple executive orders rolling back DEI initiatives, including rescinding an EO that required federal contractors to implement affirmative action programs, and rescinding an EO that protected contract workers from discrimination based on sexual orientation and gender identity. The Office of Federal Contract Compliance Programs has been directed to stand down on enforcement of these previous Eos.
• DEI initiative impacts: Federal employees working on diversity, equity and inclusion initiatives have been placed on paid leave, and the administration has halted DEI efforts across federal agencies.
• EEOC harassment guidance: The administration has rescinded the EEOC’s April 2024 harassment enforcement guidance, which covered harassment based on race, color, religion, sex, national origin, disability, age and genetic information. This rescission does not repeal federal anti-discrimination laws but shifts how the EEOC interprets and enforces them, particularly regarding gender identity and sex-based protections.
• The federal government and many state governors have begun sending letters to large employers with DEI programs demanding that any unlawful DEI programs be terminated.

Takeaways for Employers

• Several of the new administration’s executive orders are now the subject of court challenges, with some stays or injunctions in place. Employers should ensure they follow the progress of those cases closely.
• While none of these executive orders deal directly with private employers, employers with DEI programs should review their DEI programs to make sure these programs do not violate Title VII of the Civil Rights Act or state and federal laws, as the Trump administration is taking a strong stance against any programs that could violate existing discrimination laws.
• Monitor state-level developments, as many states are likely to enhance their own anti-discrimination protections in response to federal rollbacks.
• Document decision-making processes thoroughly, as changing standards may create uncertainty about what constitutes discriminatory practices.
• Federal contractors should consult with legal counsel before dismantling existing affirmative action programs, as state and local requirements may still apply.
• Carefully evaluate anti-discrimination policies, particularly regarding LGBTQ+ protections, as underlying statutory protections remain in effect despite policy shifts.  

Salary Threshold Updates

The U.S. District Court for the Eastern District of Texas has vacated the Department of Labor's rule raising the salary threshold for exempt workers. This means we’ve now returned to the 2019 rule with a threshold of $684 per week.

This situation mirrors what happened during Trump's first term when an Obama-era salary threshold increase was vacated, followed by a more modest increase in 2019. Employers should be prepared for a potential moderate increase in the salary threshold at some point during this administration.

Takeaways for Employers

• Plan for a moderate increase: Given historical trends, the Trump administration may implement a more modest salary threshold increase rather than the larger changes previously proposed.
• Review payroll classifications: Audit employee classifications to ensure compliance with the reinstated threshold and be prepared for potential adjustments.
• Stay updated on DOL actions: Keep an eye on future rulemaking or legal challenges, as another shift in the salary threshold remains a possibility.  

FTC Non-Compete Ban

The Trump administration is not expected to appeal a Texas District Court’s decision to stop the Federal Trade Commission (FTC) from banning non-compete agreements. This ban was slated for September 2024, but instead, non-compete regulation has shifted to the state level, with many states introducing their own legislation on the issue.

Even with an administration that appears unwilling to enforce the FTC non-compete ban, there may still be scrutiny from the agency focused on employment matters. At a Feb. 24 event, new FTC Chairman Andrew Ferguson announced a task force to investigate corporate actions that harm workers in ways that violate antitrust and consumer protection laws. He indicated this will be a top priority.

For now, employers should have legal counsel review their existing agreements with restrictive covenants to ensure that the covenants are narrowly tailored and enforceable.

South Carolina Legislative Updates

Several bills have been introduced in the South Carolina legislature that employers should monitor:

• “Ban the box” legislation: This bill would prohibit job applications from including questions about criminal convictions unless directly related to the position.
• Expanded parental leave: This proposal suggests expanding parental leave for state employees from six to 12 weeks, with partner leave increasing from two to four weeks.
• Physician non-compete ban: This legislation would ban non-compete and non-solicitation agreements for physicians, with limited exceptions for practice sales.

Recent Case Law Updates

Several 2024 Fourth Circuit and U.S. Supreme Court decisions provide employers with additional guidance on hard-to-navigate issues around FMLA, ADA, mental health, and taking adverse actions against employees.

FMLA litigation: Good Faith Belief of Misuse

In Michael Shipton v. Baltimore Gas and Electric Co., the U.S. Court of Appeals for the Fourth Circuit affirmed that an employer's good faith belief that an employee was misusing Family and Medical Leave Act (FMLA) leave can be a valid basis for termination, even if the employee was not actually misusing the leave. This decision gives employers more discretion in disciplining or terminating employees who are on FMLA.

 

ADA Case: Disability Accommodation Requests

In Kelly v. Town of Abington, the Fourth Circuit clarified that employees making an accommodation request must provide enough information to inform the employer of their disability and draw a nexus between their disability and the requested accommodation. General workplace grievances and demands,even if such requests would alleviate a mental health issue, do not constitute proper accommodation requests under the Americans with Disabilities Act (ADA) if there is not a nexus between the disability and the request.

 

Title VII Case: Job Transfers as Adverse Actions

In Muldrow v. City of St. Louis, the Supreme Court unanimously ruled that a job transfer can be an adverse employment action under Title VII even if the employee maintains the same rank and pay. If the transfer results in loss of certain benefits, perks or standing, it can be considered adverse.

For a deeper dive into these employment law updates, check out our recent webinar for employers.

HSB’s employment law team will continue to monitor these developments and provide updates as the new administration's policies take shape. For specific questions about how these changes may affect your organization, please contact our employment law practice group.