Chicago’s New Paid Leave and Paid Sick Leave Ordinance Delayed Six Months

Just over a month after passing the Chicago Paid Leave and Paid Sick Leave Ordinance (the Ordinance), which brought sweeping new paid leave and paid sick leave requirements to employers with Chicago employees, the city has amended the Ordinance to delay its effective date and limit the number of covered employees.

As amended, the Ordinance will not take effect until July 1, 2024, rather than December 31, 2023. In addition, the Ordinance no longer covers employees who have worked merely two hours within the city in any two-week period. Instead, the Ordinance now reverts to the definition of “Covered Employee” found in the current Chicago and Cook County paid sick leave ordinances: an employee who has worked at least 80 hours in any 120-day period within the city’s geographic limits.

The amended Ordinance also potentially gives employers an opportunity to remedy Ordinance violations before being subject to claims for non-compliance. Specifically, employees will be prohibited from filing claims against their employers until the earlier of 16 days or the next regular payday after the employer’s alleged violation. While described by some as a “cure” period, there is no requirement that an employee actually notify their employer of an alleged violation before bringing a claim. For employers concerned about fielding claims for inadvertent violations, this change may be small comfort.

With the effective date of the Ordinance delayed until July 1, 2024, Chicago employers now have six more months to prepare for its new requirements. In the meantime, the city’s current paid sick leave ordinance remains in effect, so for now that benefit is business as usual for Chicago employers.

DOJ Fighting for E-Sports Player Compensation

The Biden administration continues its campaign against wage suppression as a source of harm to workers, competitive markets, and the economy. In its latest move, the Department of Justice is supporting players in professional e-sports leagues with a suit to stop Overwatch and Call of Duty developer, Activision Blizzard, Inc., from capping player compensation. Unlike salary restrictions in traditional sports leagues, those implemented by Activision were not produced through collective bargaining and, therefore, are not exempt from antitrust scrutiny.

Complaint and Consent Decree

The DOJ filed suit to challenge Activision’s wage restrictions on April 3rd, alleging Activision and independently-owned teams in two e-sports leagues agreed to implement certain wage restrictions, including a “Competitive Balance Tax.” The tax penalizes teams in the Overwatch and Call of Duty leagues if player compensation exceeds a threshold set by Activision. According to the complaint, this agreement violates Section 1 of the Sherman Act.

The DOJ concurrently filed a consent decree to address the competition issues. If approved by the court, the consent decree would prohibit Activision from implementing any restriction that would limit player compensation directly or indirectly. It would also require Activision to, among other things, certify it has terminated competitive balance taxes and implement antitrust compliance and whistleblower policies.

Ongoing Antitrust Issues Concerning Activision-Microsoft Merger

 While Activision was negotiating the consent decree with the DOJ, its potential parent company, Microsoft, was continuing to defend its proposed $69 billion acquisition of Activision. In December 2022, the FTC sued to block the merger, claiming “the largest ever [acquisition] in the video gaming industry” would enable Microsoft to suppress competitors of Xbox and its rapidly growing subscription content and cloud-gaming business. This case remains pending.

[Read Jonathan Rubin’s Dec. 12, 2022, commentary on the FTC’s challenge, titled, “An Unstoppable Force Meets an Immovable Object: Microsoft to Fight FTC Over Activision Deal.”]

Microsoft has had more success with antitrust agencies overseas. While the European Commission initially put the deal on hold in December 2022Reuters and Polygon.com reported the Commission’s concerns have been mollified by Microsoft’s commitment to offer licenses to rival gaming companies. Polygon has also reported that the U.K. Competition and Markets Authority has “set aside some of its main concerns” about the merger. It quotes the CMA as stating that “the cost to Microsoft of withholding Call of Duty from PlayStation would outweigh any gains from taking such action.” The deal has also been approved in Japan, Chile, Brazil, Saudi Arabia, and Serbia, Polygon reports.

Non-Statutory Exemption Inapplicable to E-Sports Salary Restrictions

Readers may be wondering why salary caps are commonplace in traditional sports leagues like the NFL, NBA and NHL but not permitted in e-sports leagues. The key distinction is that the salary caps in traditional sports leagues are negotiated and agreed to by player unions as part of the collective bargaining process. As a result, these salary caps (and the agreements containing them) fall under the “non-statutory antitrust exemption,” which was created by the Supreme Court to resolve the inherent conflict between the underlying goals of antitrust laws and labor laws.

Specifically, the non-statutory exemption relieves parties to an agreement restraining trade from antitrust liability where (1) the restraint primarily affects the parties to the agreement and no one else, (2) the agreement concerns wages, hours, or conditions of employment that are mandatory subjects of collective bargaining, and (3) the agreement is produced from bona fide, arm’s-length collective bargaining. The restraints at issue here do not satisfy either the first or third prongs because they affect the e-sports players, who were not parties to the agreement, and were not produced through collective bargaining. Therefore, unlike salary restrictions in other professional sports leagues, those agreed to by Activision and the independent teams are subject to the antitrust laws.

© MoginRubin LLP
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Sexual Harassment Prevention Training Deadline Approaches for Chicago Employers

As a reminder to employers in Chicago, anti-sexual harassment training is required by Chicago’s Human Rights Ordinance and must be completed by July 1, 2023.  This requirement applies to all Chicago employers, regardless of size or industry.

The training consists of one (1) hour of anti-sexual harassment training for all non-supervisory employees and two (2) hours of anti-sexual harassment training for supervisory employees.  Regardless of supervisory status, all employees must also undergo one (1) hour of bystander training.  Employers must provide training on an annual basis.  Additional information about training requirements can be found here. Employers who fail to comply may be subject to penalties.

© 2023 Vedder Price

Michigan House Moves Quickly to Repeal Michigan Right to Work Act

The Michigan House of Representatives moved quickly yesterday to advance legislation repealing Michigan’s Right to Work law, which has been in effect for the last decade. Right to Work prohibits the inclusion of a clause in a union labor contract that conditions access to employment (and continued employment) on becoming and remaining a Union member in good standing. Before enactment of Michigan’s Right to Work law, Unions could legally negotiate a union security clause into a labor contract. In a nutshell, union security means that employees performing work covered by a labor contract must join the union and remain in good standing with the union or be terminated. On March 8, the House passed both House Bill 4005 (private sector unions) and House Bill 4004 (public sector unions). The bills will now be taken up by the Michigan State Senate.

What Does Repeal of Right to Work Mean for Michigan Companies?

If Right to Work is repealed, employers with Union labor contracts can expect requests to meet and bargain regarding union security clauses. If repealed, existing labor contracts will not be presumed to include such clauses. Rather, union security clauses and the terms and scope of such provisions are a subject of negotiation. Existing labor contracts should be reviewed with labor counsel to determine the employer’s obligations to engage in mid-contract bargaining on this important topic. Labor contracts on this issue vary. For example, labor contracts may contain:

  • A union security clause that becomes effective upon a change in the law;
  • An obligation to meet and negotiate with the Company upon a change in the law; or,
  • The labor contract may be silent on the issue.
© 2023 Varnum LLP

NLRB Determines Confidentiality and Non-Disparagement Provisions to be Unlawful in Severance Agreements

The National Labor Relations Board (the NLRB or the Board) issued a decision earlier this week that purports to ban confidentiality and non-disparagement provisions from most employee severance agreements.

In McLaren Macomb, the Board scrutinized severance agreements an employer gave to 11 employees who had recently been laid off. The confidentiality provision stated that the terms of the severance agreement were confidential and must not be disclosed to anyone with few exceptions (e.g., the employees’ spouses). The non-disparagement provision barred the employees from making statements to anyone that could disparage or harm the image of the employer or its officers, directors, employees, etc. These provisions are obviously common in severance agreements.

Among other things, the Board determined that both provisions unlawfully prevented the former employees from speaking out about working conditions and compensation (including the severance) offered by the employer and assisting with NLRB and other government investigations. Historically, the NLRB has gone back and forth on whether such provisions are lawful. However, the position taken this week is the NLRB’s most aggressive position to date. Specifically, the Board determined that the mere inclusion of such provisions in a severance agreement is unlawful because they have a deterrent and chilling effect on worker’s rights, even if the employee does not sign the agreement or the employer does not enforce the provisions against an employee who breaches confidentiality or disparages the company after signing.

It is important to note that this decision has some limitations:

  • First, it does not apply to “supervisors” (as defined by the NLRA) or to independent contractors. Who is a “supervisor” under the NLRA involves several factors, including whether the employee has the authority to hire, fire, discipline, or direct the work of another employee. Therefore, it is clear that executives and upper-level management are not covered by this ruling, and, depending on the circumstances, middle and even lower level managers may not be covered either.
  • Second, some have questioned whether a smartly worded disclaimer may permit employers to include limited confidentiality and limited non-disparagement provisions in severance agreements given to rank-and-file employees. For instance, in the past, employers often included a broad statement that the severance agreement is not intended to and in fact does not infringe upon any rights the employee may have under the NLRA. Unfortunately, the Board did not specifically address this issue, but, given the aggressive position taken in the Board’s decision this week, there is definitely some risk of liability even with such disclaimers. That determination should be made based on the employer’s risk-tolerance, along with the circumstances of the individual severance agreement, and is best determined by speaking with legal counsel.

The NLRB General Counsel is expected to release additional guidance on this issue in the coming months. Until that happens, employers should seriously consider this decision when drafting severance agreements.

© 2007-2023 Hill Ward Henderson, All Rights Reserved
For more Labor Law news, click here to visit the National Law Review.

The NLRB Curtails the Scope of Nondisparagement and Confidentiality Provisions in Severance Agreements

On Tuesday, February 21, 2023, the National Labor Relations Board (“NLRB” or “Board”) issued McLaren Macomb, a decision that curtails the permissible scope of confidentiality agreements and non-disclosure provisions in severance agreements. See McLaren Macomb, 372 NLRB No. 58 (2023). Analyzing the broad provisions in the agreements at issue in this case, the Board held that simply offering employees severance agreements that require employees to broadly waive their rights under Section 7 of the National Labor Relations Act (“NLRA” or “the Act”) was unlawful. The Board held:

Where an agreement unlawfully conditions receipt of severance benefits on the forfeiture of statutory rights, the mere proffer of the agreement itself violates the Act, because it has a reasonable tendency to interfere with or restrain the prospective exercise of Section 7 rights, both by the separating employee and those who remain. Whether the employee accepts the agreement is immaterial.

The Board’s decision is part of a broader trend by courts and administrative agencies applying heightened scrutiny to contractual provisions that limit employees’ rights. The decision also provides a crucial reminder to union and nonunion workers alike of the relevance of federal labor law in providing legal protections for most private-sector workers.

Case Background

The case arose when Michigan hospital operator McLaren Macomb permanently furloughed eleven employees, all bargaining unit members of Local 40 RN Staff Council, Office of Professional Employees International Union (OPEIU), AFL-CIO, because it had terminated outpatient services during the COVID-19 pandemic in June 2020. After McLaren Macomb furloughed these employees, it presented them with a “Severance Agreement, Waiver and Release” that offered severance amounts to the employees if they signed the agreement. All eleven employees signed.

The agreements provided broad language regarding confidentiality and nondisparagement. The confidentiality provision stated, “The Employee acknowledges that the terms of this Agreement are confidential and agrees not to disclose them to any third person, other than spouse, or as necessary to professional advisors for the purposes of obtaining legal counsel or tax advice, or unless legally compelled to do so by a court or administrative agency of competent jurisdiction.” (emphasis added). The non-disclosure provision provided, in relevant part, “At all times hereafter, the Employee agrees not to make statements to Employer’s employees or to the general public which could disparage or harm the image of Employer…” The employees faced substantial financial penalties if they violated the provisions. The Employer conditioned the payment of severance on Employees’ entering into this agreement.

The NLRB’s Decision

In McLaren Macomb, the Board held that simply offering employees severance agreements that contain these broad confidentiality and nondisparagement provisions violates the NLRA.

The NLRA provides broad protections of employees’ rights to engage in collective action. Section 7 of the NLRA vests employees with a number of rights, including the right “to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” Section 8(a)(1) of the Act makes it an unfair labor practice (ULP) for an employer to “interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7.” As the Supreme Court, federal courts, and the NLRB have repeatedly held and reaffirmed, Section 7 provides broad rights for employees and former employees—union and nonunion alike—to engage in collective action, including discussing terms and conditions of employment and workplace issues with coworkers, a union, and the Board. As the Supreme Court has stated in elaborating on the broad construction of Section 7, “labor’s cause often is advanced on fronts other than collective bargaining and grievance settlement within the immediate employment context.” Eastex, Inc. v. N.L.R.B., 437 U.S. 556, 565 (1978).

Applying these foundational principles to the severance agreements at hand, the Board reversed Trump-era NLRB precedent and concluded that the employer’s proffer of these broad nondisparagement and confidentiality provisions contravened the employees’ exercise of Section 7 rights, which is an unfair labor practice under Section 8(a)(1). Notably, the Board held that an employer’s merely offering such broad provisions violates the Act—it does not matter whether the employee signs the agreement or not.

The Board determined that the nondisparagement provision substantially interfered with employees’ Section 7 rights on its face. That provision prohibits the furloughed employee from making any “statements to [the] Employer’s employees or the general public which could disparage or harm the image of [the] Employer.” Analyzing this language, the Board reasoned that the provision would encompass employee conduct or critiques of the employer regarding any labor issue, dispute, or term and condition of employment. Accordingly, this proscription sweeps far too broadly—it prohibits employees from exercising their right to publicize labor disputes, a right which is protected by the Act. Moreover, the nondisparagement provision chills employees from exercising Section 7 rights, including efforts to assist fellow employees, cooperate with the Board’s investigation and litigation of unfair labor practices, and raise or assist in making workplace complaints to coworkers, their union, the Board, the media, or “almost anyone else.” As the Board underscored, “Public statements by employees about the workplace are central to the exercise of employee rights under the Act.”

The Board then concluded that the confidentiality provision also interfered with employees’ Section 7 rights in at least two ways. First, the Board explained that because the confidentiality provision prohibits the employee from disclosing the terms of the agreement “to any third person,” the agreement would reasonably tend to coerce the employee not to file a ULP charge with the Board or assist in a Board investigation. (emphasis added). Second, the same language would also prohibit the furloughed employee from discussing the terms of the agreement with former coworkers in similar situations, which would frustrate the mutual support between employees at the heart of the Act. As the Board summarized, “A severance agreement is unlawful if it precludes an employee from assisting coworkers with workplace issues concerning their employer, and from communicating with others, including a union, and the Board, about his employment.”

Takeaways for Employment Lawyers and Plaintiffs

First, while one might assume that labor law is exclusively the province of unions, their members, and their lawyers, McLaren Macomb demonstrates the relevance of the NLRA for employees regardless of union status. Although the workers in this case were unionized, the Section 7 rights at the heart of the NLRA apply to most private-sector employees, including nonunion employees. Indeed, because nonunion workers often have fewer workplace protections than their unionized counterparts, Section 7’s protections are critically important for nonunion employees. Employees who are asked to sign confidentiality and nondisparagement provisions and their attorneys should be aware that broad restrictions on employees’ concerted activity may be illegal.

Second, this decision is part of a broader effort to protect workers from being muzzled by their employers. For instance, the recent federal Speak Out Act establishes that predispute nondisclosure clauses and nondisparagement clauses—often included in employment contracts—are unenforceable in disputes involving sexual assault or sexual harassment. These recent developments in the law should be on the radar of workers and their attorneys who are navigating employer’s contracts, policies, handbooks, and proposed severance agreements.

Katz Banks Kumin LLP Copyright ©

DOL Issues Guidance on Handling Telework Under FLSA, FMLA

The U.S. Department of Labor (DOL) has issued guidance on the application of the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA) to employees who telework from home or from another location away from the employer’s facility.

The Field Assistance Bulletin (FAB) 2023-1, released on February 9, 2023, is directed to agency officials responsible for enforcement and provides employers a glimpse into how the DOL applies existing law and regulations to common remote-work scenarios. FAB 2023-1 addresses FLSA regulations governing “hours worked,” rules related to break time and privacy for nursing employees, and FMLA eligibility factors.

Hours Worked

In the FAB, the DOL reviews the rules governing compensability of work time, explaining that, regardless of work location, short breaks (typically, 20 minutes or less) generally are counted as compensable hours worked, whereas, longer breaks “during which an employee is completely relieved from duty, and which are long enough to enable [the employee] to use the time effectively for [their] own purposes[,] are not hours worked.” Examples of short breaks, whether at home or in the office, include when an employee takes a bathroom or coffee break or gets up to stretch their legs.

Longer rest breaks and periods of time, when employees are completely relieved from duty and able to use the time for their own purposes, are not considered work time. Just as would be the case when an employee is working in the office, if during remote work an employee’s 30-minute lunch break is interrupted by several work-related phone calls, that 30-minute period would be counted as hours worked. Conversely, if an employee working from home takes a three-hour break to pick up their child or to perform household chores, that time does not count as work time under the FLSA. In short, the FAB reiterates the telework guidance set forth by the DOL in a Q&A series published during the height of the COVID-19 pandemic.

The FAB emphasizes that, regardless of whether an employee performs duties at home, at the worksite, or at some other location, if the employer knows or has reason to believe that work is being performed, the time must be counted as hours worked. Importantly, the FAB notes that an employer may satisfy its obligation to exercise reasonable diligence to acquire knowledge regarding employees’ unscheduled hours of work by providing a reasonable reporting procedure for employees to use when they work non-scheduled time and paying employees for all hours worked. This guidance was addressed in greater detail in FAB 2020-5.

Guidelines for Nursing Employees

The FAB further clarifies that, under the FLSA, an employer’s obligation to provide employees “reasonable break time,” as well as an appropriate place to express breast milk, extends to employees who are teleworking or working at an off-site location. Just as an employer has an obligation to provide an “appropriate place” for an employee to express milk while working at a client site, the employer should ensure a teleworking employee has privacy from a “computer camera, security camera, or web conferencing platform” to express milk.

Employers are not required to pay employees for otherwise unpaid breaks simply because the employee is expressing breast milk during the break, but if an employee is working while pumping (or if the pumping occurs during an otherwise paid break), they must be paid for that time. For example, in most cases, if a remote employee attends a call or videoconference off camera while pumping, that employee would be considered on duty and must be paid for that time.

The recently enacted PUMP Act expanded existing employer obligations under the FLSA to cover exempt employees, as well as non-exempt employees. The DOL has published more guidance on breast milk pumping during work.

Eligibility Under FMLA

The DOL also addresses FMLA eligibility requirements for remote employees both in terms of hours worked (employee must work 1,250 hours in the previously 12 months) and the small worksite exception (employee must work at a worksite with at least 50 employees in a 75-mile radius).

As with the FLSA, it is important for employers to have a system to track their remote workers’ hours. With respect to hours worked, the FAB reiterates that the 1,250 hours determination for remote worker is based on compensable hours of work under FLSA principles.

With respect to the worksite size determination, the FMLA regulations explain that an employee’s personal residence is not a worksite. Instead, whether a remote employee is FMLA-eligible is based on the size of the worksite from which “they report to” or “their assignments are made.” If a remote employee reports into or receives assignments from a site with 50 or more employees working at that site (or reporting to or receiving assignments from that site) or within 75 miles, then that employee would meet that eligibility factor.

The DOL provided two examples of this rule:

  • When both a store employee and their supervisor are working from their homes temporarily due to a weather emergency, for FMLA eligibility purposes, the store remains their worksite.

  • When remote employees are working in various cities more than 75 miles away from the company headquarters but receiving assignments from a manager working at the headquarters, for FMLA-eligibility determination, the company’s headquarters would be considered the workplace for the remote employees.

Employers are reminded to review state and local wage and hour laws, paid and unpaid leave laws, and lactation accommodation laws.

Jackson Lewis P.C. © 2023

Non-Negotiable Arbitration Agreements May Be Required as a Condition of Employment

On February 15, 2023, the Ninth Circuit struck down AB 51, a California statute that imposed criminal and civil penalties against employers who required employees to enter into an arbitration agreement as a condition of employment, finding the statute to be an “unacceptable obstacle to the accomplishment and execution of the full purposes and objectives” of the Federal Arbitration Act (“FAA”).  Chamber of Commerce of the United States of America, et al. v. Bonta, et al., No. 20-15291 (9th Cir. 2023).

As discussed in our prior post and articles (link here), in August 2022 the Ninth Circuit withdrew its prior decision, which had upheld portions of AB 51, following the United States Supreme Court’s June 2022 decision in Viking River Cruises v. Moriana.

AB 51, embodied in California Labor Code §432.6 effective January 1, 2020, prohibited an employer from entering into a non-negotiable agreement that required the employee to waive “any right, forum, or procedure” for a violation of the Fair Employment and Housing Act or the California Labor Code, including “the right to file and pursue a civil action.”  Further, AB 51 imposed harsh penalties for employers who violated the statute, including a fine of up to $1,000 and up to six months’ imprisonment, as well as the potential for civil litigation by the State of California or by private individuals.  In an effort to avoid Supreme Court decisions striking down state laws that improperly targeted arbitration agreements, the California legislature also created the confusing outcome that potentially criminalized the formation of non-negotiable arbitration agreements, but permitted their enforcement once executed.

Noting that arbitration agreements by their very nature require parties to waive their rights to bring disputes in court, and crediting the plaintiffs’ evidence that the possible imposition of civil and criminal penalties deterred employers from attempting to enter into non-negotiable agreements with employees, the court affirmed the district court’s preliminary injunction in favor of several trade associations and business groups who sought to block the implementation of the statute.  Relying on principles of preemption and judicial precedent striking down similar state laws or judge-made rules that singled out executed arbitration agreements, the Court found AB 51 improperly “burden[s]” the formation of arbitration agreements in violation of the FAA.

Having written the previous 2-1 decision upholding AB 51, Judge Lucero now found himself dissenting.  Arguing that the majority “misconstrue[d] the jurisprudence” of the Supreme Court, the dissent claimed that arbitration was permissible only if consensual and that AB 51 only applied to conduct occurring prior to the formation of the contract and thus was not an obstacle to the objectives of the FAA.

Employers may require their California employees to sign non-negotiable arbitration agreements to obtain or maintain their employment.  Arbitration agreements may still be unenforceable however if they are procedurally and substantively unconscionable, if the agreement lacks mutual consent because a party was forced to sign by threats or physical coercion or “upon such grounds as exist at law or in equity for the revocation of any contract.”  Thus, employers should review their agreements to ensure they are in compliance with other California requirements, that the terms are not unfair or one-sided, and, the agreement presented is not unfair, surprising or oppressive.

© 2023 Vedder Price

Biden Administration Sets New Course on ESG Investing in Retirement Plans

In late 2022, the Department of Labor finalized a new rule titled “Prudence in Selecting Plan Investments and Exercising Shareholder Rights,” largely reversing Trump-era guidance that had strictly limited the ability of plan fiduciaries to consider “environmental, social, and governance” (ESG) factors in selecting retirement plan investments and generally discouraged the exercise of proxy voting. In short, the new rule allows a fiduciary to consider ESG factors in selecting investment options, provided that the selection serves the financial interests of the plan and its participants over an appropriate time horizon, and encourages fiduciaries to engage in proxy voting.

The final rule moves away from 2020 Trump-era rulemaking by allowing more leeway for fiduciaries to consider ESG factors in selecting investment options. Specifically, the rule states that a “fiduciary’s duty of prudence must be based on factors that the fiduciary reasonably determines are relevant to a risk and return analysis and that such factors may include the economic effects of climate change and other ESG considerations on the particular investment or investment course of action.” The rule makes clear, however, that there is no requirement to affirmatively consider ESG factors, effectively limiting its scope and effect and putting the onus on fiduciaries to determine whether they want to incorporate ESG factors into their assessments of competing investments.

Overview

  • Similar to the Trump-era guidance, there is no definition of “ESG” or an “ESG”-style fund. Debate continues over what kinds of funds can be considered ESG investments, especially in light of the fact that some companies in industries traditionally thought to be inconsistent with ESG conscious investing are now trying to attract ESG investors (e.g. industrials, energy).
  • Fiduciaries are not required to consider ESG factors in selecting investment options. However, the consideration of such factors is not a presumed violation of a fiduciary’s duty of loyalty or prudence. Unlike the prior rule, which suggested that consideration of ESG factors could only be considered if all other pecuniary factors between competing investments were equal (the “tiebreaker” approach), the new rule allows a fiduciary to consider potential financial benefits of ESG investing in all circumstances.
  • Plan fiduciaries may take into account participant preferences in constructing a fund lineup. Therefore, if participants express a desire for ESG investment options, then it may be reasonable for plan fiduciaries to add ESG funds or to consider ESG factors in crafting the fund lineup.
  • ESG-centric funds may be used as qualified default investments (QDIAs) within retirement plans, reversing the prior outright prohibition on use of such funds as QDIAs.
  • In some situations, fiduciaries may be required to exercise shareholder rights when required to protect participant interests. It is unclear whether the exercise of such rights is only limited to situations that have an economic impact on the plan, or applies to additional situations. The clarification suggests that the exercise of proxy voting is not disfavored as an inefficient use of fiduciaries’ time and resources, as the prior iteration of the rule suggested.

Effective Date and Challenges to the Regulation

The new rule became effective in January 2023, except for delayed applicability of proxy voting provisions. However, twenty five state attorneys general have joined a lawsuit in federal court in Texas that seeks to overturn the regulation. The court is in the Fifth Circuit, which historically has been hostile to past Department of Labor regulations (including Obama-era fiduciary rules overturned in 2018, though the ESG rule is less far-reaching than the fiduciary rule and may survive a challenge even in the Fifth Circuit). Congressional Republicans have also introduced a Congressional Review Act (CRA) review proposal to repeal the regulation that has gained the support of Joe Manchin (D-WV). Although CRA actions are not subject to Senate filibuster rules, they are subject to presidential veto, which President Biden is sure to do if the repeal reaches his desk.

Action Steps

Employers should assume that the ESG rules will remain in effect and engage with plan fiduciaries, advisors, and employees and determine the extent to which ESG considerations should (or should not) enter into fiduciary deliberations when considering plan investment alternatives. Some investment advisors have already begun to include separate ESG scorecards for mutual funds and other investments in their regular plan investment reviews. Fiduciaries should also consider whether and how the approach that is ultimately taken should be reflected in the plan’s investment policy statement. Plans that delegate full control over investments to an independent fiduciary (an ERISA 3(38) advisor) should engage with their advisor to determine whether and the extent to which ESG considerations will be part of that fiduciary’s process, and whether that is consistent with the desires of the plan fiduciaries and participants.

© 2023 Jones Walker LLP

Available Options for Completing Form I-9 in Remote-Work Scenarios

The American Immigration Lawyer’s Association (AILA), through its Verification and Documentation Liaison Committee (“Verification Committee”) recently issued an FAQ compiling updated information related to employment verification (I-9) compliance requirements during the COVID-19 Pandemic.

The FAQ addresses the viable options for completing the Form I-9 in remote-work scenarios and the most current developments in each type of process. Below are the main takeaways:

Process 1: In-person New Employee and HR/Admin Document Review: HR/Admin timely reviews the employee’s identity and employment authorization documents in the employee’s physical presence. Where employers have fully returned to in-office operations, or where they are no longer maintaining COVID-19 precautions, they must complete an in-person review of Form I-9.

Process 2: “Remote Hire” In-Person New Employee & Employer Authorized Representative Document Review: This is the so-called “Remote Hire” process, typically used in situations of on-boarding and new remote employee. Note that this is still an in-person document review conducted by a third party designated by the employer who acts as the agent. Also note that this process is not restricted only to employees based at remote locations but can also be used in any situation. Since the employer bears the liability for the agent’s errors it is best practice for the employer to train and/or provide instructions to the agents as well as perform a detailed review upon receipt of the completed Form I-9.

Process 3: Limited Temporary Option: HR/Adm’s Electronic Document Review: The virtual review option was first implemented March 20, 2020, and has been extended multiple times. The current extension expires July 31, 2023. With this process, HR/Adm timely reviews the employee’s identity and employment authorization documents electronically, not in the employee’s physical presence, but via video link, fax, email, etc.

Who can benefit from this option? The U.S. Immigration and Custom Enforcement (ICE) confirmed to the Verification Committee the general rule in applying this option:

  • Before April 1, 2021, the temporary I-9 option was available if a business was operating 100% remotely as a result of the pandemic. If it was not, the in-person verification for Form I-9 was required. ICE acknowledged, however, that the Agency will handle audits and future enforcement on a case-by-case basis. Employers do not need to have 100% of their workforce working remotely to take advantage of the virtual option if the employer has a record supporting that the virtual review option was necessitated by the pandemic.
  • On or after April 1, 2021, the temporary virtual document review option is available, but only where the remote employment is a result of COVID-19-related precautions. Employers hiring “true remote” employees should conduct in-person reviews as they would have prior to the COVID-19 virtual review option being offered.

While virtual review provides a practical alternative to the in-person review, there are additional requirements in this process in order to maintain compliance:

  • Create and retain a written document that captures the remote onboarding and telework policy in place when this option is used for any Form I-9 created under this process;
  • Retain copies of the documents presented, as per the original guidance issued by ICE Note that security of sensitive personal information must be maintained, and the company should work with its information-security team regarding the transmission and/or capture of personal information in these situations;
  • Add “COVID-19” in the Additional Information field/box on Section 2 of the Form I-9;
  • Tell the employee that no later than three business days of cessation of this temporary electronic document review option or once the employee commences non-remote employment on a regular, consistent, or predictable basis (whichever is earlier), an in-person meeting and physical inspection of the document(s) will occur;
  • Within three business days of such a date, coordinate the in-person meeting and physical inspection of the document(s); and,
  • Add “documents physically examined,” date and initial in Section 2 Additional Information field/box, or to Section 3 of Form I-9, as appropriate.

Importantly, the virtual review process requires the employer to “perfect” the Form I-9 with an in-person meeting at a future date.

The Department of Homeland Security (DHS) is currently reviewing the regulatory framework for document review in considering making virtual review a permanent option for I-9 compliance. DHS published a Notice of Proposed Rulemaking in the Federal Register and, since November 2022, has been reviewing comments. Simultaneously, ICE has ramped up audits and investigations as the pandemic has waned. Therefore, employers should maintain a fluid line of communication with their attorneys and employees to avoid any compliance issues.

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