New year, new challenges – Top 10 trends for US employers

The pandemic has disrupted ways of working and accelerated changes for many businesses. Change is coming on many fronts, involving issues from pay and benefits transparency and diversity standards to remote working, artificial intelligence and non-competes. In this report, we identify top trends impacting US employers and share our predictions for 2022. You can also read our global employment law trends report and country by country reviews for 40 jurisdictions across EMEA, Asia Pacific and the Americas here. 

1.  Flexibility is key when it comes to talent

Flexibility is becoming more critical in a growing number of areas – worker mobility, work schedules, work location, benefits, etc.; however, challenges abound for employers seeking to meet employee demand for more flexible and agile arrangements. Remote work raises a host of challenges, from expense reimbursement to working time and data security – and that’s assuming guardrails are in place to manage employees who want to work from a different jurisdiction altogether. Transforming benefits and rewards, including highly regulated programs, to accommodate variety and give employees a choice about how they are rewarded requires careful planning.

Notwithstanding challenges, more employers are considering how to maximize choice and personalize offerings within organizational and regulatory frameworks. Some employers are waiving usual 90-day waiting periods for health coverage, thinking of new ways to get flex dollars into the hands of their employees, and offering equity to ever broader groups of employees (often, for stock options, with longer post-termination exercise periods).

2.  Hybrid and remote work are here to stay

Over two years into the pandemic, there is a broad consensus that remote and hybrid working are here to stay. The bigger questions are around how to manage legal requirements and challenges, what form hybrid working should take, and how to build a model that supports a strong culture and opportunities for all.

Employers are focusing on the legal implications of long-term remote work and worker mobility, including potential employment, corporate, tax, and insurance (eg, health, unemployment, workers’ compensation) issues, as they develop new policies and practices. Employers are also preparing for more employee requests for remote work as a reasonable accommodation under federal and state disability laws.

3.  Employers remain in the crosshairs of COVID-19 testing and vaccination measures

Employers will continue to be challenged by evolving federal, state and local health and safety measures in response to COVID-19, even as new issues emerge – What does it mean to be fully vaccinated? Will boosters be required? Are employers required to pay for vaccine and/or testing costs (eg, employee time, travel costs) under federal or state laws? Even now, employers are looking at pathways (eg, pharmacy benefit manager, captive pharmacy) to comply with the new requirement to provide free coverage of over-the-counter COVID-19 tests.

Lawsuits targeting all three federal government vaccine mandates are ongoing. On January 13, the Supreme Court stayed OSHA’s COVID-19 Vaccination and Testing Emergency Temporary Standard (ETS), while allowing the Centers for Medicare and Medicaid Services (CMS) COVID-19 Health Care Staff Vaccination rule to take effect. With the ETS enjoined, employers face varying requirements under state and local laws (some requiring vaccination and others limiting or even prohibiting mandates). Employers are also preparing for more COVID-19-related litigation, particularly disability discrimination (eg, failure to accommodate, COVID-19 as a disability) and retaliation claims.

Employers may also see more legislation addressing the control of infectious diseases in the workplace (eg, New York’s HERO Act) as lawmakers consider how to prepare for future pandemics.

4.  Transparency is the watch word for employee health benefits

Employers may face new compliance challenges as the Consolidated Appropriations Act (CAA) takes effect, including protections against “surprise” medical bills and changes related to mental health parity. Starting on January 1, 2022, the Transparency in Coverage Final Rule requires most group health plans and health insurance issuers to post surprise billing notices and to report certain pricing information based on the 2022 plan year (and to provide additional pricing information to participants, beneficiaries and enrollees for the 2023 and 2024 plan years). Employers sponsoring group health plans subject to the rule are working closely with their insurance carriers and third-party administrators and considering contractual provisions to delineate responsibilities – while also monitoring court challenges.

Employers also remain focused on ensuring compliance with the Mental Health Parity and Addiction Equity Act provisions of the CAA, under which the Departments of Health and Human Services (HHS), Labor (DOL) and the Treasury can request that group health plans provide evidence that their plans apply limitations on mental health and substance use disorder benefits in parity with those they apply to medical/surgical benefits.

5. Equality, gender pay, and harassment stay front and center

Employers may expect more regulation and pressure from stakeholders concerning equality issues in the workplace. More states and localities are expected to join those that recently passed laws to address pay transparency and pay equity (eg, Colorado, Illinois, Connecticut, Nevada and Rhode Island). For example, a New York City Council bill requiring employers to post salary information will take effect on May 14, 2022 (with a similar bill pending in the New York State Senate).

Employers may also continue to see state and local laws adding protections related to pregnancy, breastfeeding, disabilities, physical characteristics historically associated with race, sexual harassment, and gender identity and expression. For example, California’s law restricting non-disclosure and non-disparagement provisions in certain settlement and separation agreements took effect on January 1, 2022, and Minnesota started the new year with a new lactation break and pregnancy accommodations law. We expect these developments to be replicated elsewhere.  

Finally, the composition of workforces, as well as policies and processes for hiring, pay and promotion, including ban-the-box laws, will remain a focus for lawmakers.

6. Demands for greater transparency and progress on Environmental, Social and Governance (ESG) goals

Companies may expect rising regulation and expectations around transparency in ESG data in 2022. The US Department of Labor (DOL) is expected to finalize its proposed rule allowing plan fiduciaries to consider ESG factors when selecting investments and exercising shareholder rights, and the US Securities and Exchange Commission (SEC) is developing proposals related to human capital management and corporate board diversity. Companies are also eyeing compliance deadlines under Nasdaq’s Board Diversity Rule (currently being challenged in the courts).

We also expect to see stakeholders – as well as customers, investors and others – deploy ESG standards to exert pressure on businesses to take action on social justice and environmental issues (among others). Many companies are weighing how to respond to stakeholder demands consistent with their corporate values and legal obligations.

7. Increasing regulation of workplace technologies

The adoption of new technologies in response to the pandemic, including to support remote working and to protect worker health and safety, presents new concerns. The US Equal Employment Opportunity Commission (EEOC) is considering how artificial intelligence (AI) used in hiring and other employment decisions intersects with federal civil rights laws. Meanwhile, some states and localities (eg, Illinois, New York City) are moving forward with legislation.

AI recruiting tools and other technologies may also implicate biometric laws. This year, the Illinois Supreme Court is expected to decide whether employers are liable for each alleged violation of the state’s Biometric Privacy Act (as opposed to a “one time only” theory of claim accrual).

Employers will also see new laws related to electronic monitoring of workers. For example, an amendment to New York’s civil rights law will require employers that conduct electronic monitoring of employee telephone, e-mail or Internet usage to provide prior written notice to employees, while a California law will require warehouse employers to disclose to their workers the details of expected production targets or quotas. Employers considering the use of new technologies are reviewing and tracking evolving requirements.

8. Whistleblower reports – and protections – are on the rise

Since the pandemic, the number of whistleblower complaints has increased. Last year the SEC reported the highest number of awards, both in terms of dollars and individuals awarded, and the largest number of whistleblowing tips received. In the first week of 2022, the SEC announced a $13 million award.

New whistleblower protections will come into force this year, including in New York. In the current environment, employers are reviewing their policies and practices to ensure that proper reporting channels and protections are in place.

9. More restrictions on non-competes

In 2021, various states and localities passed new laws restricting the use of non-competition agreements (eg, prohibition on non-competes for employees earning below a certain wage). Employers will see more developments on this front in 2022. New laws in Illinois and Oregon took effect on January 1, 2022; the District of Columbia’s ban is expected to go into effect in April; and bills are pending in other states, including New Jersey and New York.

At the federal level, the Federal Trade Commission is considering whether to exercise its rulemaking authority to curtail the use of non-compete clauses. Employers are considering how best to protect their businesses in the face of changing laws, including the use of robust trade secret protections and non-disclosure agreements. 

10. Wage and hour issues loom large

The trend of rising wage and hour risk will continue in 2022. Arriving at the applicable standard to determine if a worker is an independent contractor or employee is more complicated than ever. Employers are monitoring ongoing challenges to California’s AB 5 and its ABC test, as well as new laws and potential models emerging at the state level.

The DOL is expected to adopt a more worker-friendly test in place of the now revoked Trump-era proposed rule. Meanwhile, the National Labor Relations Board (NLRB) is taking another look at its contractor status and joint employer tests.

Wage and hour lawsuits filed in 2021, including those under the federal Fair Labor Standards Act (FLSA) and state laws such as the California Private Attorneys General Act (PAGA), highlighted concerns with resulting from COVID-19 and remote working – a trend likely to continue. Compliance with state laws governing pay practices will remain challenging, particularly in California. Employers are also following PAGA developments, including a US Supreme Court case raising the question of whether the Federal Arbitration Act requires enforcement of an arbitration agreement providing that an employee cannot raise representative claims and a proposed ballot initiative that would effectively repeal PAGA.

MORE CHANGE AHEAD

Many employers will continue to adapt and embrace opportunities, from global expansion to restructuring, while managing new challenges. At the federal level, the scale and pace of change will largely depend on the outcome of mid-term elections and the scope of Executive Orders. Compliance with state and local laws promises to remain burdensome to track and manage, as legislative and regulatory action remain largely local.

Please contact any member of the DLA Piper Employment group, or your DLA Piper relationship attorney, if you have questions about any developments or how trends may impact your workforce in 2022.