By Rachel V. See and Annette Tyman

Seyfarth Synopsis:  The Office of Management and Budget (OMB) finalized its guidance to federal agencies regarding the risk management steps the federal government must take when using artificial intelligence. OMB’s guidance establishes the minimum AI risk management practices federal agencies must follow for “safety-impacting” and “rights-impacting” AI applications and includes a broad list of employment-related applications that are presumed to be “rights-impacting.” The AI risk management practices OMB is requiring for these “rights-impacting” employment applications are broadly consistent with principles that leaders from the Department of Labor and the EEOC have been discussing, and we expect future guidance and “promising practices” from those agencies will closely align with the principles outlined in today’s OMB guidance.

On March 28, 2024, OMB finalized and published Memorandum M-24-10, “Advancing Governance, Innovation, and Risk Management for Agency Use of Artificial Intelligence.”  This document contains OMB’s guidance to federal agencies regarding the risk management steps the federal government must take for its own use of artificial intelligence.

As we previously wrote when OMB issued a draft of this guidance, private-sector employers using AI should pay attention to the way the federal government thinks about AI risk and the AI risk management practices it begins implementing. Moreover, as a large-scale purchaser of AI systems from private-sector developers, the government’s own purchasing requirements will influence the development of systems that are sold to both the government and to private industry.  

While OMB’s final guidance purports to speak solely to the federal government’s own use of AI, and clarifies that it does not apply to federal agencies’ own regulatory efforts, past experience suggests that the federal government will ultimately decide that the AI risk management “best practices” it applies to itself should also be adopted by private-sector AI deployers. We also predict that these governmentwide AI risk management principles will influence the EEOC’s thinking on AI risk and risk management; at a minimum, these principles will shape EEOC executives’ experience with AI risk management concepts as the EEOC starts using AI in its internal processes.

Today’s AI guidance from OMB establishes minimum risk management practices for “safety-impacting” and “rights-impacting” AI. Importantly for private-sector employers using AI in hiring, M-24-10 contains a very broad list of employment-related AI applications that are presumed to be “rights-impacting” and thus subject to the memo’s minimum risk management processes. This list includes AI applications that “control or significantly influence the outcome[] of”[1]:

Determining the terms or conditions of employment, including pre-employment screening, reasonable accommodation, pay or promotion, performance management, hiring or termination, or recommending disciplinary action; performing time-on-task tracking; or conducting workplace surveillance or automated personnel management;

Notably, in addition to those employment-specific applications, M-24-10 also includes in its list of presumptively “rights-impacting” AI applications ones used for “biometric identification for one-to-many identification in publicly accessible spaces” and any application that seeks to “Detect[] or measur[e] emotions, thought, impairment, or deception in humans.” The inclusion of these categories in M-24-10 echo similar categorizations of “unacceptable risk” found in the recently finalized EU AI Act, highlighting ongoing convergence on AI risk issues.

As discussed in Seyfarth’s March 25, 2024 client update, leaders from the Department of Labor, including the Solicitor of Labor and the Acting Director of OFCCP, have recently confirmed that they will be issuing a “broader value-based document” that contains “principles and best practices” for both employers using AI and developers of the AI tools. Core concepts from the principles these leaders mentioned, such as the need for stakeholder engagement, validation and monitoring, and greater transparency, are also emphasized in OMB’s final guidance issued today, and in risk-management documents that others in the federal government have championed, such as the AI Risk Management Framework (RMF) issued by NIST, the National Institute of Standards and Technology.

Regarding the need for stakeholder engagement for rights-impacting systems, OMB is directing federal agencies to consult affected communities and solicit public feedback “in the design, development, and use of the AI and use such feedback to inform agency decision-making regarding the AI” and must include “seeking input on the agency’s approach to implementing … minimum risk management practices”.

Regarding testing, validation and monitoring, OMB is requiring agencies to “conduct adequate testing to ensure the AI, as well as components that rely on it, will work in its intended real-world context.” And while OMB is also requiring an “independent evaluation” of the AI “to ensure that the system works appropriately and as intended, and that its expected benefits outweigh its potential risks,” and further requires, “[t]he independent reviewing authority must not have been directly involved in the system’s development,” OMB does not require the independent reviewing authority to come from outside the agency itself.[2] 

OMB is also requiring federal agencies to conduct ongoing monitoring to detect both “degradation of the AI’s functionality” as well as “changes in the AI’s impact on rights and safety”. OMB further directs the monitoring process to include an annual human review “to determine whether the deployment context, risks, benefits, and agency needs have evolved,” and emphasizes that this human review must include testing and “include oversight and consideration by an appropriate internal agency authority not directly involved in the system’s development or operation”.

In her remarks at an American Bar Association meeting on March 20, 2024, EEOC Chair Charlotte Burrows discussed her concerns regarding the data used to train AI systems. Consistent with remarks she has made in the past, Chair Burrows cited concerns that people with protected characteristics were disproportionately over-represented in “bad” data sets that were being used as AI training data. She also cited concerns that these same categories of people were disproportionately under-represented in “good” data sets being used to train AI. 

The data-quality concepts mentioned by Chair Burrows are present in OMB’s guidance to federal agencies regarding their own use of AI. For “rights-impacting” AI applications, OMB directs federal agencies to “assess the quality of the data used in the AI’s design, development, training, testing, and operation and its fitness to the AI’s intended purpose.” Among other things, OMB directs federal agencies to document the quality and representativeness of the data for its intended purpose, and if the agency is using an AI tool provided by a vendor, the agency “must obtain sufficient descriptive information from the vendor” about the data. OMB’s directive to federal agencies further cautions, “[a]gencies should assess whether the data used can produce or amplify inequitable outcomes as a result of poor data representativeness or harmful bias. Such outcomes can result from historical discrimination, such as the perpetuation of harmful gender-based and racial stereotypes in society.”

Implications for Employers

While the Department of Labor’s deadline to publish “principles and best practices for employers that could be used to mitigate AI’s potential harms to employees’ well-being and maximize its potential benefits” is still a month away, at the end of April 2024, we anticipate that the information in OMB Memorandum M-24-10 provides a sneak peek at the “principles and best practices” that the Department of Labor will be issuing to private employers. While some variance between public-sector and private-sector practices are reasonable to expect, we are likely to see similar themes between the documents.

At a minimum, employers already using AI in their labor and employment practices should evaluate and consider how their current AI risk management practices align with today’s OMB guidance that establishes minimum requirements for the federal government’s own use of AI.

We will continue to monitor these developing issues, especially as the Department of Labor and other agencies continue their work to issue AI guidance and other documents set forth in President Biden’s executive order on AI. For additional information, we encourage you to contact the authors of this article, a member of Seyfarth’s People Analytics team, or any of Seyfarth’s attorneys.

[1] Notably and unsurprisingly, the scope of this list, and the operation of the “control or significantly influence” language, is significantly broader than New York City’s Local Law 144, for which enforcement began in July 2023. Among other things, to constitute an “automated employment decision tool” under New York City’s law, the tool must “substantially assist or replace discretionary decision-making”.

[2] This view of independence is consistent with prior guidance issued in 2011 by the Federal Reserve Board in SR 11-7, its seminal “Supervisory Guidance on Model Risk Management” applicable to the financial industry.

By Rachel See, Dawn Solowey and Adrienne Lee

Seyfarth Synopsis: In a written opinion issued on March 7, 2024, the EEOC confirmed that an employee must not only show a sincerely held religious belief, but that the employee’s religious belief is actually in conflict with the workplace training or program. The EEOC’s opinion also confirmed that an undue hardship analysis is not limited to considerations of an employer’s financial cost, and that an employer’s undue hardship could include impacts on rights and interests that are protected by Title VII itself. In its written decision, the EEOC emphasized that the training it was evaluating did not require employees to change their personal beliefs, and that the training was respectful of diverse viewpoints including religious beliefs. While the EEOC’s opinion does not constitute binding judicial precedent for federal judges ruling on private-sector claims, it contributes to the ongoing dialogue as employers and policymakers wrestle with assertions that Diversity, Equity, Inclusion, and Belonging (“DEIB”) initiatives discriminate against a protected class, and how employers should navigate employees’ assertions that an employer’s DEIB training might conflict with an employee’s sincerely held religious beliefs.

On March 7, 2024, the EEOC, acting in a quasi-judicial capacity, issued a written appellate opinion in Barrett v. Vilsack, EEOC Decision No. 2019005478, 2024 EEOPUB LEXIS 515 (Mar. 7, 2024). The EEOC affirmed[1] a federal agency’s dismissal of an employee’s EEO claim that asserted a conflict between the agency’s mandatory civil-rights training and the complaining employee’s alleged sincerely held religious beliefs. The agency’s training emphasized the importance of treating all customers and employees, including LGBTQI+ individuals, with courtesy and respect, and the employee asserted that this requirement conflicted with his sincerely held religious beliefs as a Roman Catholic. On appeal, the EEOC upheld the agency’s decision to dismiss the employee’s claim.

Why This Decision Matters

The EEOC’s recent decision is an important one for private-sector employers to digest and apply, given the increase in employees requesting religious exemptions from discrimination training and employers’ DEIB programs.  Here are a few key points:

  1. The EEOC noted that an employee must not only state a sincere religious belief, but must also assert that that belief is actually in conflict with the employer’s workplace training or program. The EEOC’s opinion makes clear that a bare assertion of a conflict —without more—is not sufficient. Thus, when conducting an interactive process, employers can consider whether the employee has identified an actual conflict with their sincerely held religious beliefs.  A well-crafted written religious accommodation request form can help employers better-understand the employee’s basis for the accommodation request. 
  2. The EEOC confirmed that an “undue hardship” analysis “is not limited to considerations of financial cost” even after Groff.  In holding that granting the religious accommodation would have imposed an undue hardship on the Department of Agriculture, the EEOC recognized that the undue hardship included “impacts on rights and interests that are protected by Title VII itself.” The EEOC further recognized, as part of the “undue hardship” analysis, the fact that the employer had legal obligations to comply with Title VII and other EEO laws.  This is an important principle that employers can reference in considering whether a particular requested accommodation creates an undue hardship.
  3. The content of the workplace training or program matters. The EEOC relied on the fact that the training was designed to promote compliance with EEO laws and the employer’s standards of conduct for interacting with customer and coworkers, as well as the fact that it did not require the employee to affirmatively profess support for any values contrary to his religious beliefs.  The EEOC’s opinion on appeal referenced the slide deck used at the employer’s training, which was placed into evidence. Employers should keep these principles in mind when crafting or approving their training programs, and should compose and maintain their written materials with these considerations in mind.

The EEOC’s Role in Federal Sector EEO Appeals

EEOC’s role in federal-sector cases is often not well understood by private-sector employers. For charges of discrimination involving private-sector employers, the EEOC investigates the charges, and the EEOC can choose to initiate litigation in the federal courts, or allow private litigants to pursue those claims. In contrast, the EEOC exercises supervisory authority over the federal government’s own EEO programs, and the EEOC’s Office of Federal Operations handles appeals from final federal agency EEO determinations and dismissals. In limited circumstances, sitting in a quasi-judicial capacity, the full EEOC votes to affirm or deny the appeal.

While the EEOC’s federal sector decisions do not constitute binding precedent, they can serve as oft-cited persuasive authority in private-sector litigation, including at the appellate level. The EEOC’s use of its federal-sector opinions to drive policy discussions gained wider attention over a decade ago, when the EEOC issued federal-sector opinions involving LGBTQI+ federal employees.[2] Before the Supreme Court weighed in on the intersection of Title VII and sexual orientation and gender identity in Bostock v. Clayton County,[3] the EEOC’s federal-sector opinions were cited often by courts and private-sector litigants, and helped shape the ongoing dialogue.

Underlying Facts and  Procedural Posture

In Barrett V. v. Vilsack, EEOC Decision No. 2019005478 (Mar. 7, 2024), the complainant, a Design Engineer at the Department of Agriculture’s Natural Resources Conservation Service in Temple, Texas, was scheduled to attend a mandatory civil rights training which would cover the need to treat all customers and employees with courtesy and respect, including members of the LGBTQI+ community. Barrett requested to be excused from attending the portion of the training that would provide information on how the topic of professionalism applies when interacting with members of the LGBTQI+ community, reasoning that this topic contradicted his sincerely held religious beliefs as a Roman Catholic.

The Agency denied Barrett’s religious accommodation request, and Barrett attended the training. (He conceded in a subsequent affidavit that the training was respectful of his religious beliefs.) Barrett then filed an EEO complaint alleging that the Agency discriminated against him based on his religion when it (1) denied him an exemption from attending the training, and (2) warned him that failure to participate in any portion of the training could lead to discipline.

The Department of Agriculture dismissed Barrett’s claim. Among other things, it found that Barrett failed to establish a prima facie case for failure to accommodate based on religion because Barrett agreed to attend the training, was not penalized, and excusing him from the training would have imposed an undue hardship on the Agency. Barrett then appealed the Agency’s decision to the EEOC.

EEOC Decision

On appeal, in analyzing the Agency’s dismissal, the EEOC applied the standard for analyzing Title VII claims of religious discrimination via failure to accommodate as recently clarified by a unanimous Supreme Court in Groff v. DeJoy, 600 U.S. 447 (2023). When an employee informs an employer of a sincere religious belief that conflicts with a workplace rule, the employer must engage in an interactive process to determine if it can provide a reasonable accommodation without incurring undue hardship. Groff held that “undue hardship” means substantial additional costs in light of the employer’s business.

Applying these standards, the EEOC affirmed the Agency’s decision, finding that the Agency did not discriminate against Barrett when it declined to exempt him from the mandatory civil rights training and warned him that failure to participate could lead to disciplinary action.[4]

The EEOC emphasized that Barrett had failed to identify even generally, a religious belief, observance, or practice that conflicted with the Department of Agriculture’s mandatory civil-rights training. The EEOC noted that the training “simply discussed and reinforced laws and conduct rules requiring employees not to discriminate against or harass others on numerous protected bases, including sexual orientation, and to treat customers and coworkers professionally.”

Although Barrett had alleged on appeal that the Agency “substantially” pressured him to “modify his religious observance or practice,” the EEOC found that the evidence did not support this allegation. The EEOC stated, “But Complainant does not explain how the training worked, or even attempted, to modify, criticize, or pressure him to change his religious observance or practice–whether before, during, or after the training.  In the entire deck of training slides, LGBTQI+ issues were referenced only in the context of explaining bases for prohibited discrimination under equal employment opportunity laws. . . . Moreover, Complainant’s own statements after the training belie his arguments. He acknowledged that the portion of the training covering LGBTQI+ issues was ‘professional, proportionate, and produced in a manner which was respectable to those with sincerely held religious beliefs like mine.’”  Thus, the Commission held that Barrett had failed to show that the training conflicted with his sincerely held religious beliefs, observances, or practices.

The EEOC also found that even if he had identified a conflict between his religious practice and the training, excusing Barrett from attending the civil rights training would impose an “undue hardship” on the Agency’s business under Groff.  The EEOC reasoned that an exemption would have interfered with the Agency’s efforts to meet its legal obligations under equal employment opportunity laws such as Title VII, which requires federal agencies to take affirmative steps to prevent discriminatory harassment.

Concluding Thoughts

Religious accommodation requests must be handled carefully by employers, particularly when alleged religious rights are in conflict with other protected classifications.  Each request must be considered on its individual facts. For assistance with religious accommodation requests – including process maps, written religious accommodation request forms, customized talking points for the interactive process, and template approval and denial documents, reach out to the authors.

For other questions about trends in religious accommodation, cultural flashpoints in the workplace, or the EEOC, reach out to the authors or a Seyfarth attorney. 

Rachel See, Senior Counsel in Seyfarth’s Washington, DC office, spent over six years in leadership and policy roles at the EEOC, including a senior role in the EEOC’s Office of Federal Operations and as the EEOC’s Acting Executive Secretary, the EEOC official who signs and issues federal-sector determinations by the Commission. Dawn Solowey is a Labor & Employment Partner in Seyfarth’s Boston office, and an expert in religious discrimination and accommodation.  Dawn and Rachel are both members of the firm’s Cultural Flashpoints Team. Adrienne Lee is a Labor & Employment associate in Seyfarth’s Boston office.

[1] As of the publication of this blog, the Commission has not posted its voting results for the opinion. We expect the opinion was approved in a 3-2 split vote, with the three Democrats on the Commission voting to approve and the two Republicans on the Commission voting to disapprove.

[2] See, e.g., Macy v. Dep’t of Justice, EEOC Appeal No. 0120120821, 2012 WL 1435995 (Apr. 20, 2012) (holding that discrimination against a transgender individual constituted discrimination based on sex and therefore violates Title VII), Lusardi v. Dep’t of the Army, EEOC Appeal No. 0120133395, 2015 WL 1607756 (Apr. 1, 2015) (holding that Agency’s restrictions on transgender employee’s restroom usage constituted disparate treatment in violation of Title VII), and Baldwin v. Dep’t of Transp., EEOC Appeal No. 0120133080, 2015 WL 4397641 (July 15, 2015) (holding that a claim alleging discrimination on the basis of sexual orientation necessarily states a claim of discrimination on the basis of sex under Title VII).

[3] 590 U.S. 644 (2020).

[4] The EEOC disagreed with the Agency’s suggestion that a complainant making a claim for failure to accommodate religion was required to show a separate adverse employment action beyond the denial of a religious accommodation. 

By Rob Whitman, Elliot Fink, and Paxton Moore

Seyfarth Synopsis: New York’s highest court, settling a long-standing question dividing state and federal courts, has held that the New York State and City anti-discrimination statutes apply to non-residents who apply for jobs that would be based physically in the State or City.

In the opinion, the court explained that when a non-resident applicant is denied a State- or City-based job based on discrimination prohibited by the statutes, the “impact” of that discrimination is felt locally because the applicant “loses the chance to work, and perhaps live, within those geographic areas.” In so holding, the court applied the “impact test” it first laid out in 2010 in Hoffman v. Parade Publications, under which statutory coverage depended on whether the “impact” of the alleged discrimination was felt in the State or City.

Before this new decision, New York courts had narrowly construed the Hoffman test and held that, in order for a plaintiff to be protected by the New York State or New York City Human Rights Laws, the victim of the alleged discrimination must be physically present in the State or City.

Following Hoffman, courts applying the “impact test” generally interpreted it strictly, particularly in the context of job applicants. For example, one federal court dismissed a remote employee’s claims where she expected to work in-person in New York City when her employer’s offices reopened after COVID-19 closures were lifted, but was terminated before that occurred. The court held that the plaintiff’s expectation to work in the City was insufficient, because “[p]leading impact in New York City by unspecified future career prospects” would be an “impermissible broadening” of the statutes.

On the other hand, a federal court determined that a plaintiff who was terminated while working remotely from his New Jersey home during the pandemic met the impact test under the State and City Human Rights Laws. Another federal court held that the impact requirement is clearly satisfied by job applicants applying for jobs in New York State or City.

Until now, New York’s highest court had not weighed in on this question. The Court of Appeals in this new opinion clarified the law by holding explicitly that the plaintiff’s anticipated physical presence in New York State or City was sufficient to satisfy the “impact test.” The plaintiff, a Washington-D.C.-based woman of South Asian descent, alleged that her employer discriminated against her when it refused to transfer her to one of several open, in-person positions in New York City. She resigned and claimed that she was subjected to a constructive discharge based on the denial of the New York-based positions.

The U.S. District Court dismissed the plaintiff’s claims under Hoffman. On appeal, the Second Circuit noted the conflicting decisions involving out-of-state applicants and certified the question to the Court of Appeals, which held that the statutes apply to the plaintiff’s circumstances (but without addressing the merits of her claims). It buttressed its conclusion by noting that discriminatory conduct toward out-of-state job applicants harms not only the applicants but also “the state and the city [which] are deprived of . . . economic and civic contributions from [these] individuals.”

Critically, the Court of Appeals made clear that its holding is limited to positions “that require[] the employee to be physically present in New York” (emphasis added). Thus, the anti-discrimination statutes do not apply where a non-resident is seeking a remote position for a New York City or State employer.

This decision reaffirms that all employers should ensure that any hiring for positions based in New York State or New York City, regardless of the location of the applicant, are handled on a non-discriminatory basis in compliance with the strict requirements of the applicable statutes. Employers with questions about navigating the effects of this decision should reach out to Seyfarth for specific guidance.

By Andrea N. Vizzo and Joshua A. Rodine

Seyfarth Synopsis: On March 25, 2024, the California Supreme Court unanimously answered three questions regarding the meaning of  “hours worked” that had been certified to it by the Ninth Circuit Court of Appeal. This ruling illuminates what constitutes employer control sufficient to render particular activities compensable under Industrial Welfare Commission Wage Order No. 16. Huerta v. CSI Electrical Contractors.

The Facts

CSI Electrical Contractors (CSI) hired George Huerta and others to work at power facilities located in Monterey and San Luis Obispo counties. This employment was governed by two collective bargaining agreements, which provided for a thirty-minute unpaid meal period.

At the beginning of the workday, Huerta was required to report to a security gate located about ten to fifteen minutes from the employee parking lot. Cars formed a long line outside the security gate, while security guards scanned each worker’s badge, and occasionally looked inside cars and truck beds. This same procedure occurred at the end of the work day, and it could take up to a minute or more per vehicle, thereby causing exit delays of between five and thirty minutes.

Huerta was not paid for the time he spent waiting to pass through the security gate at the beginning or the end of the work day. Huerta was also subject to a speed limit between five to twenty miles per hour while inside the security gate due to the presence of endangered species near the site.

Huerta filed a wage and hour class action in the Superior Court of Monterey County on behalf of himself and similarly situated individuals against CSI claiming that he should have been paid for the time waiting for the security check and for the time spend driving from the security gate to the parking lot. The case was removed to the United States District Court for the Northern District of California.

The Lower Court Decisions

The district court granted Huerta’s motion for class certification. CSI then moved for, and was granted, partial summary judgment on Huerta’s class claims. CSI then filed a second motion for partial summary judgment on the remaining class claim that had survived the first motion for summary judgment. This motion was also granted.

Huerta appealed to the Ninth Circuit, which certified the following questions to the California Supreme Court:

  1. Is time spent on employer premises waiting in a personal vehicle to scan an identification badge and have a security guard peer into a personal vehicle compensable as “hours worked”?
  2. Is time spent on employer premises in a personal vehicle, driving from the employee parking lot to the security gate—subject to certain employer rules—compensable as “hours worked” or “employer-mandated travel”?
  3. Is time spent on employer premises, where workers are prohibited from leaving but not required to engage in employer-mandated activities, compensable as “hours worked” when that time is designated as an unpaid meal period under a collective bargaining agreement?

The California Supreme Court Decision

The California Supreme Court answered the first question in the affirmative. It concluded that Huerta was subject to employer control while waiting in the line to exit through the security gate—even while in his personal vehicle. The Court reached this conclusion because the search was for CSI’s benefit (i.e., preventing theft of tools and endangered species on the site), and the employee was to do more than merely present a badge to exit (i.e., undergo the examination of the vehicle).

The Court answered the second question by holding that the time spent traveling to the security gate at the end of the workday could possibly be compensable as “employer-mandated travel” but not “hours worked.” Part of the reasoning for this conclusion was that the mere fact that the employee is required to follow employer mandated rules relating to safe travel does not render the employee subject to employer control (i.e., not hours worked). Under the language of the Wage Order at issue, travel time is compensable when an employee travels between two locations, and the employee’s presence at the first location serves some employment-related purpose. When an employee must be present at a location because it is the lone means of ingress/egress to a worksite, that does not necessarily render the employee’s presence at that location “required by the employer.”

The Court answered the third question by holding that, even if a qualifying collective bargaining agreement exempts employers from the requirements of Wage Order No. 16, an employee must be paid a minimum wage for meal periods when an employer prohibits employees from leaving the premises, and this prevents employees from engaging in personal activities they could otherwise engage in if permitted to leave.

What Huerta Means For Employers

The questions addressed by Huerta were narrow, and extremely fact specific. While the decision provides employers with some guidance as to what may constitute control, it does so in a very particular scenario.

At first glance the decision may appear more decisive in relation to the question presented regarding the compensability of travel time (though the Court expressly stated it was not reaching a decision on the facts presented). Some plaintiffs’ attorneys may argue for a broad reading to the decision, claiming that “employer related travel” and “hours worked” constitutes a difference without a distinction. However, the language on which the decision turned does not appear in other Wage Orders, thereby further limiting the scope of the holding. 

About the Program: Seyfarth is pleased to introduce Seyfarth’s latest resource, the “Avoiding Duty of Oversight and Fiduciary Duty Breach Claims“ Flipbook, a tailored guide designed specifically for in-house counsel navigating the intricate world of corporate directors and officers. 

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Wednesday, April 17, 2024
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Access the Flipbook: We cordially invite you to explore the “Avoiding Duty of Oversight and Fiduciary Duty Breach Claims” Flipbook at your convenience. To access this invaluable resource, click here.

Join us for an exclusive webinar for in-house counsel featuring Seyfarth’s co-chair of the securities & fiduciary duty litigation practices group, Greg Markel, and partner Gina Ferrari. Together, they will delve deeper into the intricacies of these claims, providing practical guidance and real-world examples.

Speakers

Greg Markel, Partner, Seyfarth Shaw LLP

Gina Ferrari, Partner, Seyfarth Shaw LLP

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By Rachel V. See and Annette Tyman

Seyfarth Synopsis: The Acting Director of OFCCP and the Solicitor of Labor indicated that they are moving full speed ahead on developing guidance regarding employers’ use of artificial intelligence, and that the Department of Labor is working on a “broader value-based document” that contains “principles and best practices” for both employers using AI and developers of the AI tools. OFCCP is working on “promising practices” regarding AI selection tools. Additionally, leaders from the EEOC, NLRB, and the Department of Justice continue to emphasize their commitment to using their existing enforcement authority regarding AI issues.

On March 20, 2024, at an American Bar Association meeting held in Boston, Solicitor of Labor Seema Nanda and the Acting Director of OFCCP, Michelle Hodge, indicated that the Department of Labor is moving full speed ahead on issuing multiple guidance documents regarding artificial intelligence, as directed by President Biden’s expansive AI executive order, signed on October 30, 2023. On the same panel, independent agency heads, notably Chair Charlotte Burrows of the EEOC and NLRB General Counsel Jennifer Abruzzo, emphasized their ongoing commitment to use their agencies’ existing enforcement authority to address concerns with employers’ use of AI.

1. The Department of Labor and OFCCP Are Working on AI Guidance and Promising Practices

President Biden’s EO on artificial intelligence initiated a comprehensive government-wide approach to AI regulation, and set in motion actions across multiple executive agencies. One of the Secretary of Labor’s many deliverables under the EO is to develop and publish, by the end of April 2024, “principles and best practices for employers that could be used to mitigate AI’s potential harms to employees’ well-being and maximize its potential benefits.” In her remarks, Solicitor Nanda shed light on the Department of Labor’s approach towards this guidance. Notably, she said that the Department of Labor will be issuing a “broader value-based document” that contained “principles and best practices” for both employers using AI and developers of the AI tools.

Among the “principles and best practices” the Solicitor discussed were the need for employers using AI to engage with their workers, especially if their workers were unionized. She asserted, “If you are developing AI without engagement of workers, you’re going to be missing a key component.” The need for stakeholder engagement is not a new concept in AI risk management, and the inclusion of this principle should not come as a surprise to observers paying attention to other federal government efforts on AI, as the concept of stakeholder engagement was explored as part of NIST’s AI Risk Management Framework issued in January 2023.

Other principles that Solicitor Nanda mentioned were the need for human oversight of AI systems and the need for validation and monitoring. “You have to make sure it [the AI] is working,” she said. Solicitor Nanda also discussed the need for greater transparency regarding the AI systems employers were using, inviting employers and AI developers to consider whether they were creating an avenue for the public or job applicants to know that AI is being used to make an employment selection decision that might be screening out candidates.

President Biden’s executive order also specifically directs the Secretary of Labor’s report due at the end of April 2024 to cover “job-displacement risks and career opportunities related to AI, including effects on job skills and evaluation of applicants and workers.” In her remarks, Solicitor Nanda confirmed that the Department of Labor was also working on this job-displacement report.

Solicitor Nanda also confirmed that the Department of Labor’s Wage and Hour Division is working on guidance that would make it clear that employers who deploy AI systems to monitor workers “must make sure workers are compensated.” While Solicitor Nanda did not provide further details about this guidance, President Biden’s executive order specifically directs that the Secretary of Labor “shall issue guidance to make clear that employers that deploy AI to monitor or augment employees’ work must continue to comply with protections that ensure that workers are compensated for their hours worked” in order to “support employees whose work is monitored or augmented by AI in being compensated appropriately for all of their work time.”

Both Solicitor Nanda and OFCCP Acting Director Michelle Hodge discussed the progress of OFCCP’s work on additional AI guidance. (President Biden’s executive order directs the Department of Labor to “publish guidance for Federal contractors regarding nondiscrimination in hiring involving AI and other technology-based hiring systems” within one year – i.e., by the end of October 2024.) Acting Director Hodge specifically confirmed, “We are working on new FAQs and promising practices.” In this context, we expect that Acting Director Hodge was referring to updates to OFCCP’s FAQ on Validation of Employee Selection Procedures from 2019, that touches on AI issues.

Consistent with OFCCP’s existing FAQ, Acting Director Hodge emphasized that an employment selection procedure that includes AI “still is a selection procedure” that federal contractors must audit in order “to ensure [they] are not creating barriers to equal employment.” She reiterated OFCCP’s expectation that federal contractors “can’t just pull something off the shelf and decide to use it” and that OFCCP expected employers to “drill down, under the Uniform Guidelines.” She also discussed OFCCP’s recent changes to its scheduling letter, describing these amendments as coming from OFCCP’s desire “to know at the beginning of a compliance process, are you using AI or algorithms in your screening or hiring process.”[1]

Regarding Acting Director Hodge’s reference to “promising practices” documents we note that such documents issued by federal agencies do not establish new mandatory legal requirements under federal law. Thus, failing to follow a federal agency’s “promising practices” recommendations will not independently result in an enforcement action, and conversely, demonstrating compliance with them does not independently insulate an employer from liability.[2] Nevertheless, any AI “promising practices” document issued by OFCCP has the potential to reflect the developing consensus on best practices and industry standards for managing AI risk. Employers using AI selection tools, especially federal contractors, will be well-advised to carefully consider what OFCCP will say in this area, in order to achieve compliant and responsible AI usage.

2. EEOC and NLRB Agency Heads, and the Department of Justice, Emphasized Their Existing Authority

On the same panel, leaders from the EEOC and NLRB, along with a representative of the Department of Justice’s Civil Rights Division, all agreed that using their existing enforcement authorities as employers implement AI practices is an ongoing priority for their agencies.

Johnathan Smith, Deputy Assistant Attorney General and Acting Chief of Staff of the Department of Justice’s Civil Rights Division, briefly described how the Civil Rights Division’s convened federal government officials to discuss how they could work together on AI issues. He cited challenges faced by government agencies in hiring people with technical expertise and integrating them into their legal investigation and enforcement processes. He predicted, “AI issues are going to be something that we’re all going to be grappling with for many years to come.”

EEOC Chair Charlotte Burrows concurred, observing, “This is really an area where we are taking a whole of government approach…We are talking to each other and other agencies at the principal levels and up and down at all levels.”

Chair Burrows emphasized that the existing laws the EEOC enforces “really do give a lot of applicable tools to protect against harms” from AI, and that it was important for technology creators to understand that. She mentioned the EEOC’s prior technical assistance documents regarding the applicability of the Americans With Disabilities Act and Title VII to AI tools.

In response to a question regarding whether the EEOC was considering updating the 1978 Uniform Guidelines on Employee Selection Procedures, Chair Burrows suggested that while there might be some “clarification” forthcoming, she felt the Uniform Guidelines were “fairly clear” and the problem was not with the guidelines themselves, but rather the “way people are thinking” about them, which included “an over-simplification” of the 4/5ths test[3] set forth in the Uniform Guidelines. In her remarks, Chair Burrows emphasized, “I think the Uniform Guidelines are pretty clear that this is a rule of thumb, not an active bright-line,” and that the EEOC’s statistical cases involving discrimination were “more-sophisticated than the 4/5ths test.”

In additional comments, Chair Burrows identified two distinct issues regarding AI.

First, consistent with remarks that Chair Burrows has made in the past, she cited concerns that people with protected characteristics were disproportionately over-represented in “bad” data sets that were being used as AI training data. She also cited concerns that these same categories of people were disproportionately under-represented in “good” data sets being used to train AI.  

Second, Chair Burrows expressed concern about algorithms and AI being used to monitor employees, especially monitoring that might be happening without employees knowing about it or understanding enough about it in order to exercise their rights under the Americans With Disabilities Act.  She also expressed concern that an employee could be “stuck in a feedback loop” without being able to “find a person to talk to” to request an accommodation, in violation of the interactive process requirements in the ADA.

NLRB General Counsel Jennifer Abruzzo also spoke at length about her assertions that an employer’s electronic surveillance and algorithmic monitoring of workers could violate Section 7 of the National Labor Relations Act. She cited her prior GC memo regarding electronic monitoring, issued in October 2022.

GC Abruzzo specifically expressed concerns regarding electronic monitoring or algorithmic management that prevented workers from taking breaks together, or which forced them to increase the pace of their work. She asserted that these practices were “interfering with [workers’ rights] … to engage together to address areas of mutual concern” and that workers were entitled to do so under the NLRA. She concluded her remarks on AI emphasizing, “AI can be a great thing in so many ways, but it also can interfere with workers’ rights.” 

Implications for Employers

President Biden’s directive that the federal government adopt a “whole of government” approach to regulating AI is in full-swing, as evidenced by recent comments by multiple agency heads. Employers should expect the heightened enforcement scrutiny on AI issues from OFCCP, EEOC, the NLRB, and the Department of Justice to continue. We will continue to monitor these developing issues, especially as the Department of Labor and other agencies continue their work to meet the multiple deadlines for issuing AI-related guidance set forth in President Biden’s executive order on AI.

For additional information, we encourage you to contact the authors of this article,  a member of Seyfarth’s People Analytics team, or any of Seyfarth’s attorneys.

[1] Contractors who are scheduled for a compliance audit are now required to “identify and provide information and documentation of policies, practices, or systems used to recruit, screen, and hire, including the use of artificial intelligence, algorithms, automated systems or other technology-based selection procedures” at the time of the initial desk audit submission. 

[2] In fact, the EEOC’s “promising practices” document regarding the prevention of harassment observes that while the practices described in the document are not legal requirements, “refraining from taking certain actions recommended here as promising practices may increase an employer’s liability risk in certain circumstances.” [3] As described in the EEOC’s technical assistance on Title VII and AI, issued in 2023, “The four-fifths rule, referenced in the [Uniform] Guidelines, is a general rule of thumb for determining whether the selection rate for one group is “substantially” different than the selection rate of another group. The rule states that one rate is substantially different than another if their ratio is less than four-fifths (or 80%).”

By Bradley D. Doucette, Scott P. Mallery, and Noah A. Finkel

Seyfarth Synopsis: A new piece of legislation introduced in Congress, if enacted, would amend the Fair Labor Standards Act to establish 32-hour workweek for non-exempt employees, with no loss in pay. While the bill is unlikely to gain steam, it might trigger movement throughout the country to revisit what a “standard” workweek means for American employees.

We posted this blog entry on a Friday, so if you are reading it today, you probably are not among those enjoying a four-day workweek.  Some in Congress are trying to change that.

Last week, Senator Bernie Sanders introduced Senate Bill 3947, a “bill to amend the Fair Labor Standards Act of 1938 to reduce the standard workweek from 40 hours per week to 32 hours per week…”

Also dubbed the “Thirty-Two Hour Workweek Act,” the bill would amend the Fair Labor Standards Act to establish a 32-hour workweek without any reduction in pay for non-exempt employees. This would lower the existing threshold for overtime compensation for non-exempt employees working longer than eight hours in a day and also protect pay and benefits of workers to ensure that this reduction in the workweek would not cause a loss in pay. The bill also proposes gradual reduction period where over the next three years, the 40-hour workweek standard would reduce by two years until the ultimate 32-hour mark is reached.

In support of the bill, Senator Sanders cites to increases in productivity by American workers as well as continued technological advancements which should be earning workers more pay for less work. He argues that weekly wages are actually lower for the American worker than they were 50 years ago, and this decrease paired with an increase in pay for CEOs and shareholders show that working class families also need to be able to benefit from increased productivity in American companies. To introduce the bill, the HELP Committee held a hearing with support of union and employee advocates, while an employe representative testified as to the negative impact the bill would have on employers and employees alike, including that it would be a “short-term success [but] long-term failure” likely resulting in operational and financial failure down the road for employers.

As seen with similar legislation, it is unlikely that this bill will gain much traction. As Seyfarth discussed recently, similar bills have quickly lost steam due to technical and practical challenges faced by employers who have for nearly a century navigated the peculiarities of a 40-hour standard. Our colleagues overseas also recently have discussed the global interest in moving to the 32-hour workweek and similar challenges employers are facing in the UK and Italy.

Although all current signs point to the bill not succeeding, with the recent rise is similar legislation––or at least discussions about it––we can expect more local interest in shortening the workweek and could see states individually try move towards a shorter workweek.

Until then, get back to work: it’s still a workday.

Into the Breach is the first law firm podcast exclusively devoted to reps and warranties insurance and the transactional risk markets. Hosted by Seyfarth partners Bryan M. O’Keefe and Gena B. Usenheimer, the hosts in their unique, buoyant style, interview leaders from the industry, and explore the latest developments, market trends, and news impacting RWI and transactional risk insurance.

Bryan and Gena are joined by Lidore DeRose, Senior Partner and Leader of Transactional Risk, Baldwin Risk Partners and Emily Short, National Director of Cyber Product, Baldwin Risk Partners, for a discussion of underlying cyber insurance coverage and how cyber insurance intersects with transactional risk insurance on deals.

Seyfarth Into the Breach ·

Episode 32: Cyber Insurance: What You Need to Know for Your Next Deal

By Ilana Morady, Patrick Joyce, and Adam Young

Seyfarth Synopsis: The Cal/OSHA Standards Board was ready to vote on Cal/OSHA’s indoor heat rule at the March 21, 2024 Standards Board meeting, but at the 11th hour, the Board was ordered to cancel its scheduled vote.

Quick Summary

In a surprising development, the Cal/OSHA indoor heat rule, which was expected to be approved at the Standards Board’s March 21, 2024 meeting, has been delayed yet again. The delay was due to the state Department of Finance rejecting part of the Standardized Regulatory Impact Assessment (SRIA) the evening before the scheduled vote, due to concerns over compliance costs at state facilities. The Department of Finance apparently determined that the proposed rule’s fiscal impact on the State’s Department of Corrections and Rehabilitation would be overly burdensome, causing it to withdraw SRIA approval.

Union activists, who were at the meeting expecting to witness approval of the rule, become very upset. Although the cause of the delay appears to be purely due to withdrawal of SRIA approval, accusations about employer collusion began flying. The protesters became so disruptive that Sheriff’s deputies were summoned to remove them.

The Standards Board members, also apparently frustrated by the delay, decided to vote on the rule anyway. In a purely symbolic gesture, they approved the indoor heat regulation. According to a Department of Industrial Regulations spokesperson, a rule cannot become effective without SRIA approval, even if passed by the Board.

What’s Next

The Board and Department of Finance have just over a week to figure out what to do next. The proposed rule is set to expire on March 31, 2024 – 1 year after introduction of the rule on March 31, 2023 – after which rulemaking will have to start again from scratch. If the Board and the Department of Finance cannot work out their differences, labor and worker advocates asked Cal/OSHA to engage in an “emergency” rulemaking to ensure protections are in place prior to the summer heat setting in. The Board and Cal/OSHA have not officially signaled whether they are interested in emergency rulemaking.

Additional Background

For almost 20 years, Cal/OSHA has enforced a heat illness prevention standard that only applies to employees working outdoors, and used its IIPP standard to enforce heat hazards in indoor environments. In 2016, SB 1167 was signed into law, which required Cal/OSHA to submit a proposal to the Standards Board addressing employee protection from indoor heat hazards. Thus began Cal/OSHA’s work on an indoor heat illness prevention standard.

Three years later, on April 22, 2019, Cal/OSHA finally published its first draft standard, which we blogged about in 2019. However, the already slow Cal/OSHA revision process was further slowed by the pandemic and focus on COVID-19 regulations. The pace of regulation again quickened in 2023, when Cal/OSHA introduced an updated draft standard. Since then, a series of modified drafts were proposed.

The proposed rule (at 8 CCR 3396) would require covered employers to make potentially significant changes in their workplaces. Any employer with indoor work areas that are warm will need to evaluate whether the new Section 3396 applies.

Applicability and Summary of Requirements

At all indoor work areas where the temperature equals or exceeds 82 F when employees are present, employers will be required to implement a written Heat Illness Prevention Plan. The written Plan will need to be made available to employees upon request, will need to be in English and the language understood by the majority of employees. Required content of the written Plan is:

  • Procedures to access water;
  • Procedures to access cool-down areas;
  • Procedures to comply with assessment and control measures (when certain conditions exist);
  • Procedures for emergency response;
  • Procedures for acclimatization.

Covered employees will need to be trained on a variety of topics including but not limited to the indoor heat procedures, the different types of heat illness, and the importance of water consumption.

Importantly, the proposed rule contains an “incidental heat exposure” exception where an employee is exposed to temperatures at or above 82 F and below 95 F for less than 15 minutes in any 60 minutes period. This may help some employers avoid coverage under the new standard. The exception does not, however, apply to vehicles without effective and functioning AC, or shipping or intermodal containers during loading, unloading, or related work.

For indoor work areas that meet certain conditions set forth below, additional “assessment and control” measures will be required. Applicability of these measures will be when one or more of the following applies:

  • Temperature equals or exceeds 87 F when employees are present;
  • Heat index equals or exceeds 87 F when employees are present;
  • Employees wear clothes that restrict heat removal and temperature equals or exceeds 82 F; or
  • Employees work in a high radiant heat area and the temperature equals or exceeds 82 F.

For work areas that check one of these boxes, employers would be required to, among other things, measure the temperature and heat index, and record whichever is greater, as well as maintain these measurement records including date, time, and specific location of all measurements. Identification and evaluation of all other environmental risk factors for heat illness will also be required. Alternatively, employers can just assume a work area is subject to one of the triggering conditions and use the Hierarchy of Controls to minimize heat illness risk.

Workplace Solutions

Although the rule has not yet been approved, employers should be prepared to comply. All expectations are that, come summer, regulations will be in place. Whether that’s an emergency indoor heat rule, or a permanent one, remains to be seen. Stay tuned…

For more information on this or any related topic, please contact the authors, your Seyfarth attorney, or any member of the Workplace Safety and Health (OSHA/MSHA) Team.

By Danielle Shapiro

Seyfarth Synopsis: Last Friday, March 8, 2024, the United States District Court for the Eastern District of Texas struck down the National Labor Relations Board’s (“NLRB”) 2023 Joint Employer rule (“2023 Rule”) finding that it was both unlawfully broad and arbitrary and capricious.

Background

The 2023 Rule contains the following relevant provisions:

  • Subsection (a) provides that an “employer” is one who has an employment relationship with their employees under common-law agency principles.
  • Subsection (b) states that two things are required to be a “joint employer”: (1) being an employer under the common-law test (along with one other employer) and (2) “sharing or codetermining matters governing [the employees’] essential terms and conditions of employment.”
  • Subsection (c) clarifies that “sharing or codetermining” includes both actual control and possession or unexercised control over the employment terms.
  • Subsection (d) then lists seven broad categories that constitute “essential terms and conditions of employment”— wages, scheduling, assignment of duties, supervision, work rules and discipline, hiring/firing, and working conditions related to the safety and health of employees.
  • Finally, Subsection (e) details that “[p]ossessing the authority to control one or more essential terms and conditions” and “[e]xercising the power to control indirectly one or more essential terms and conditions” is sufficient to establish joint employer status.

The Court’s Analysis

The parties first disagreed over how the 2023 Rule operates in practice— while the Board argued that the regulatory framework implies the joint-employer inquiry has two steps (see Subsection (b)), the plaintiffs maintained that the inquiry is singular because the second test is always met when the first test is satisfied. When pressed by the court, the Board could not provide an example of any entity that would satisfy the first step, but not the second. For this reason, the court sided with plaintiffs on the first interpretive issued posed.

The parties then debated the proper interpretation of Subsection (e). The Board maintained that this subsection was intended only to apply to the second step of the joint-employer inquiry, such that it “merely confirms that reserved or indirect control over an essential term is sufficient to satisfy this step.” The Court, in agreement with the plaintiffs, quickly dismissed the Board’s interpretation, holding that Subsections (e)(1) and (2) can be satisfied independently and thus joint-employer status can attach without the need to demonstrate an employment relationship under the common law of agency.

Newsworthy Findings

Notably, the court also held that the 2023 Rule is unlawfully broad. Specifically, Subsections (d) and (e) are drafted so broadly that every entity that contracts for labor would be deemed a joint employer. This is because the rule, as written, finds the existence of a joint employment relationship so long as the entity exercised or even has the power to exercise control over at least one essential term. The court astutely points out that this would render every single contract for third-party labor a joint employment relationship because every labor contract has terms that impact at least one of the “essential terms and conditions of employment” addressed in Subsections (d) and (e).

Finally, the court, finding that the Board did not address the “disruptive impact” of the 2023 Rule, deemed the Board’s actions arbitrary and capricious. The court chastised the Board for failing to serve the intention behind policymaking in the first place: to provide a definite, readily available standard to assist employers and reduce litigation. On this basis, the Court vacated the 2023 Rule.

Now What?

After invalidating the 2023 Rule, the court was left to determine whether the Board’s rescission of the 2020 Rule, in advance of the 2023 Rule, should still stand. The court ultimately determined that the Board’s initial justification for rescinding the 2020 Rule was also arbitrary and capricious. For this reason, the rescission was unjustified and the 2020 Rule remains.

So, today, the law stands as it has for the last couple of years: only exercise of substantial direct and immediate control over one or more essential terms or conditions of employment warrants finding the existence of a joint-employment relationship.

Note: While perhaps beyond the scope of this microblog, the opinion also contains an interesting discussion about jurisdictional issues related to challenging the Board’s rulemaking under the NLRA (for all of the administrative law fans out there).