FEDERAL UPDATES

Federal Contractors +: DEI Programs and Reporting.  Last week President Trump issued an Executive Order revoking EO 11246 and many of President Biden’s other orders affecting discrimination (including one that added sexual orientation and gender identity to the list of protected classes).  EO 11246 has been in effect for 60+ years, prohibits federal contractors from discriminating based on race, color, religion, sex, sexual orientation, gender identity, or national origin, and requires them to take “affirmative action” to provide equal opportunity in employment as well as file affirmative action plans with the OFCCP. President Trump’s new order purports to eliminate “illegal and immoral discrimination programs” allegedly caused by DEI programs and affirmative action.

The new EO directs OFCCP to “immediately cease”:

• Promoting “diversity”
• Holding Federal contractors and subcontractors responsible for taking “affirmative action” and
• Allowing or encouraging Federal contractors and subcontractors to engage in workforce balancing based on race, color, sex, sexual preference, religion, or national origin.

Other provisions include adding a section to future federal contracts or subcontracts that require the contractor to (1) agree that compliance with all applicable federal anti-discrimination laws is “material to the government’s payment decisions” for purposes of the False Claims Act and (2) certify that the contractor does not operate any DEI or similar program that violates federal anti-discrimination laws.

The DOL Secretary issued an order directing DOL/OFCCP to immediately “cease all investigative and enforcement activity” and to notify anyone with an open review or investigation that it has been closed by January 31, 2025.  OFCCP has simply acknowledged the order, noting that “[f]or 90 days from the date of this order, Federal contractors may continue to comply with the regulatory scheme in effect on January 20, 2025. Requirements under Section 503 of the Rehabilitation Act, 29 U.S.C. 793, and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA), 38 U.S.C. 4212, both enforced by OFCCP, are statutory and remain in effect.  OFCCP is updating the website to bring the information into compliance with the new executive order. Please check back for updates and further guidance”.

Although the order does not require private entities to comply, it does call for increased scrutiny of their DEI programs to identify illegal preferences, quotas, or other types of discrimination.  Federal agencies are required to identify up to nine potential civil compliance investigations of publicly traded corporations, large non-profit corporations or associations, foundations with assets of $500 million or more, state and local bar and medical associations, and institutions of higher education with endowments over $1 billion.

The order is brand new, contains many new and undefined terms, and is expected to be challenged in court (like a similar 2020 executive order challenged during Donald Trump’s first term in office).  In addition, it is silent as to veterans and individuals with disabilities because those requirements are statutory and not subject to change through an executive order, so it is not yet entirely clear whether OFCCP will continue to require AAP submissions for these categories.  EEO-1 and VETS reporting, self-identification processes, job posting requirements, and state/local laws will continue for now.

Federal Contractors – Nondisplacement of Service Contract Workers (rescinded).  Both Biden and Obama issued executive orders requiring certain federal contractors covered by the Service Contract Act to offer qualified employees of a predecessor to the contract a “right of first refusal” for available jobs.  President Trump has rescinded that order.  Contractors are currently under no obligation to offer an available position to these employees and no longer need to include “non-displacement” provisions in their service contracts.

Sex and Gender Executive Order.  President Trump issued an Executive Order (one of many similar orders) entitled “Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government”.  It requires the federal government to recognize only “male” and female” as determined “at conception” as biological sexes and directs federal agencies to replace the term “gender” with “sex” on official documents (including passports).  It also orders the EEOC and DOL to prioritize investigations and litigation related to gender identity and purports to overturn Title VII protections for LGBTQ+ workers.  Employers should expect federal agencies to begin producing new forms that only allow for male or female designations, substantial litigation over gender-neutral bathrooms, anything related to leaving or other protections for abortion-related issues, and the US Supreme Court’s Bostock ruling equating “sex” with “gender identity”.

FLSA Exempt Employees/Burden of Proof.  In a unanimous decision that reversed a lower court, the U.S. Supreme Court rejected the higher burden of proof (“clear and convincing”) in some jurisdictions to verify FLSA exempt status.  It held that employers must only prove that an exemption applies by a “preponderance of evidence”. This makes it much easier to defend claims that an employee was misclassified and should have been paid overtime and invalidates any contrary decisions in federal courts.  States may have their standard and are not affected by this decision.

FMLA – Use of Paid Time Off. The DOL just issued an opinion letter stating that employers cannot require (but can allow) employees to substitute accrued paid time off during FMLA if they are also receiving benefits under a state or local paid family or medical leave program.  The confusion stemmed from the FMLA regulations, which permit either the employee or the employer to require “substitution” of other accrued paid leave for “unpaid” FMLA leave.  Previous opinion letters determined that when an employee takes FMLA leave and is partially compensated through disability or worker’s compensation programs, the leave is not “unpaid” and therefore both the employer and the employee must agree to use accrued paid time off to supplement compensation up to 100% of their salary.  This letter extends the same rules to an FMLA leave that runs concurrently with state-paid family and medical leaves: if an employee is receiving wage replacement benefits, the leave is not unpaid and both parties must agree to use PTO/vacation/sick leave to top off their benefits.  If no state wage replacement benefits are available (or they run out before FMLA), then the period that is solely unpaid FMLA leave allows either party to require the use of PTO/vacation/sick leave benefits.

DOL Opinion Letter FLSA2025-1:  Managers and Tip Pools.  Although not entirely new, the DOL recently published an opinion letter to clear up some confusion when it comes to managers and tip pools.  Highlights include:

• Reiterating that managers/supervisors may keep tips that they receive directly from customers based on the service they “directly and solely” provide, but can never participate in a tip pool.
• A supervisor or manager who works a shift in a non-supervisory capacity is still prohibited from participating in a tip pool; the definition of a manager/supervisor is based on primary duties on at least a workweek period, and allowing it to vary shift by shift would circumvent the purpose of the statute.
• Just because someone is the highest-ranking person on a shift, it does not make them a manager/supervisor under the statute or prohibit them from participating in a tip pool. Managers/supervisors have a primary duty of management and meet the executive employee (or other exempt category) duties test; occasional managerial duties do not prohibit them from participating in the tip pool.

STATE/LOCAL UPDATES

Illinois

Pay Transparency.  As of the first of the year, 15+ employers (nationwide) are required to include a pay scale and benefits in internal and external job postings for positions that are expected to be physically performed in whole or in part in Illinois, as well as those that will report to a supervisor, office, or worksite in Illinois.  In addition, within fourteen calendar days after externally posting a job, employers must also “announce, post or otherwise make known “all opportunities for promotion” to current employees.

• “Pay scale and benefits” means “the anticipated wage or salary, or the wage or salary range, and a general description of the benefits and other compensation, including, but not limited to, bonuses, stock options, or other incentives the employer reasonably expects in good faith to offer for the position.”
• IDOL expects to provide additional information regarding required benefits disclosures, but for now, employers are “encouraged to consider all possible benefits”.
• The pay range cannot be open-ended (i.e. “$50,000 and up”, “up to $50,000”, or “starting at $50,000). It must have a lower and upper range.
• If pay depends on location, different ranges must be provided.
• It is acceptable to provide a hyperlink to a public webpage that includes the pay scale and current benefits in an easily accessible, central, public location on the employer’s website—and refer to that hyperlink in the job posting.
• Employers are required to provide this information to third parties they use to post positions.
• The IDOL has published the required “Equal Pay Act Pay Transparency Notice” in English, Polish, and Spanish on its website.
• Penalties range from $250 for a first-time violation for a posting that is no longer active, up to $10,000 for third and subsequent offenses.
• FAQs are also available on the IDOL website and are expected to be updated in the coming months.

Personnel Records Review Act (eff 1/1/25).  This Illinois Act (820 ILC 40) is now in effect and allows an employee to inspect any personnel documents used in employment decisions, as well as those used for qualification for benefits, employment-related agreements, all employee handbooks that they had access to or which they acknowledged receipt and any written policies that apply to them.  They are not entitled to an employer’s trade secrets or certain other confidential company information, records relevant to a pending claim discoverable in litigation, or records regarding an investigation of criminal conduct or other conduct detrimental to the company before an adverse action.

One significant change is that if the requested records include medical information, the employer must obtain a signed waiver from the employee before releasing this information to the employee’s designated representative.

Employees can inspect their personnel records twice per calendar year and can request copies with only a charge of the actual cost of duplicating them.  Requests must be in writing (text or email is sufficient) and must specify the records requested and the preferred format.  Employers have 7 business days to comply.

Illinois employers may want to review their personnel files, locate missing documents, update their handbooks, and create a formal records request policy that includes an optional medical information waiver and consent.

Michigan – Minimum Wage/Paid Sick Leave.  In July, the Michigan Supreme Court reinstated the voter-approved Earned Sick Time Act and Workforce Opportunity Wage Act (minimum wage).  They will now both become effective February 21, 2025.  This means that Michigan will have two minimum wage increases in 2025: On January 1st the minimum wage increased to $10.56/hour and on February 21, 2025, it will again increase to $12.48/hour.  The tip credit will also change ($4.01 tipped in January and $5.99 tipped in February) and is expected to be phased out completely by 2030.

In addition, The Earned Sick Time Act will now be implemented, and employees should begin accruing one hour of earned sick time for every thirty hours worked.  Employers with 1-9 employees can cap the use of paid sick time at 40 hours per year, with an additional 32 accrued hours available as unpaid time.  Employers with 10+ employees cannot cap the use of paid sick time at less than 72 hours per year. Employees are currently permitted to carry over an unlimited amount of earned sick time from year to year.

The permissible uses of earned sick time are broad, covering medical and health events for the employee and family members, domestic violence and/or sexual assault, or closure of businesses or schools. Employers can only require medical certification for leaves of more than three consecutive days, and even then can only require the medical provider to confirm whether the leave was necessary.

The legislature is rushing through some clarifying legislation that may or may not be finalized before the effective date, and that may affect the tip credits, carryover caps, permissible time increments, enforcement mechanisms, exempt employees, and other compromises or changes.

Minnesota – Pay Transparency (eff. 1/1/25).  Employers with 30+ employees in Minnesota must now include a salary range and a general description of benefits and other compensation in job postings. The salary range means a good faith estimate of the minimum and maximum salary, or if applicable a fixed pay rate, and cannot be open-ended (“$50,000 and up”, “up to $50,000”, or “starting at $50,000).  The statute does not specifically define benefits but does expressly mention health and retirement benefits. The law leaves several areas open-ended, such as enforcement, penalties, and definitions, so the hope is that administrative rules, FAQs, or other additional information are coming soon.

New York – Expanded WARN Notice Requirements.  Governor Hochul announced in her State of the State address that she will direct the NYDOL to amend the state WARN regulations to require employers to include in notices to employees whether the layoff is related to the use of artificial intelligence. This is to develop information regarding the effect of AI on the NYS workforce. In addition, a bill pending in the Senate (yet to be signed into law) would expand the state WARN Act coverage to some controlling parties/affiliates, count part-time employees when determining the threshold for a mass layoff or closure, and impose mandatory severance.

Ohio – Pay Stub Protection Act (eff. 4/8/25). All Ohio employers will soon be required to provide written or electronic pay statements to employees, which must include:

• employee name;
• employee address;
• employer name;
• total gross wages earned by the employee during the pay period;
• total net wages paid to the employee for the pay period;
• a listing of the amount and purpose of each addition to, or deduction from, the wages paid to the employee during the pay period; and
• date the employee was paid and the pay period covered by that payment.

For hourly employees, the pay statement must also include:

• total number of hours the employee worked in that pay period;
• hourly wage rate at which the employee was paid; and
• hours worked more than forty hours in one workweek.

While most employers already provide these notices, this is a good time to ensure that current pay and timekeeping practices are compliant, and that pay stubs contain all of the required information.

Oregon – Paid Leave Administrative Amendments.  In a continuing effort to streamline and clarify rules under Paid Leave Oregon, the state recently finalized a few additional administrative rules, including:

• Employees taking Paid Leave in Oregon are entitled to use any accrued sick leave, vacation, or other paid time off to supplement their state benefits. OED is now authorized to share an employee’s weekly benefit amount with employers so they can calculate the amount that would be allowed to bring employees to their full wage replacement.
• The time an employer must respond to an OED notice to report any additional information before processing an employee’s claim has been reduced from ten calendar days to five.
• “Pre-placement leave” for adoption or foster placement falls under PLO (no longer OFLA) and may only be taken on an intermittent basis. Employees must submit verification of the adoption or foster placement (court order, letter from the attorney representing the foster or adoptive parent, document from the agency or social worker involved, etc.)
• Employees must include their date of birth on certification forms to ensure accurate identification, and employees may describe symptoms and treatments as an alternative to providing a medical diagnosis.

Wyoming – Legislative Update.  The Wyoming Legislature just reconvened and is considering an unusually large number of employment laws, including:

• “What is a Woman Act” (HB 32) identifies “sex” as either male or female and ties it to the person’s biological sex at birth. It also allows for separate accommodations for each sex and protects rules that recognize distinctions based on sex for athletics, prisons, domestic violence shelters, rape crisis centers, locker rooms and restrooms, and other areas where safety or privacy are implicated by establishing that those rules are substantially related to important governmental objectives of protecting safety and privacy
• DEI Prohibitions in the Public Sector. HB 147 and SF 103 would severely limit a government entity’s ability to engage in any DEI program, activity or policy or require any employee or contractor to participate in any DEI program or training. If adopted, the law would prohibit all governmental entities from establishing a DEI office or program; hiring an employee or contracting with a person to perform DEI duties; compelling a person to provide or abide by a DEI statement, or giving preference based on adoption of a DEI statement; give preference to an applicant or employee based on race, sex, color, ethnicity or national origin; or requiring participation in DEI training as a condition of employment.
• Preferred Pronouns. Senate File 77 would prohibit all governmental employers from requiring any employee to refer to another using the other employee’s preferred pronouns.
• Covenants Not to Compete. Senate File 107 would void nearly all noncompete agreements other than “executive and management personnel and officers and employees who constitute professional staff for executive and managerial personnel”.
• Time Off to Vote. If passed, paid time off to vote would be extended from one to two hours if an employee does not have at least three consecutive hours off work during polling hours or early voting.
• Weapons in the Workplace. HB 172 would repeal “gun-free zones” and prohibit public employers from banning employees from carrying concealed weapons at work.
• Immigration. HB 163 would make it a misdemeanor to employ or contract with a person not legally present or permitted to work in the US. Violations would draw a penalty of $1,000 for a first offense, and $5,000 for each additional offense (in addition to any federal penalties). The Senate version goes even further; it would require employers to report undocumented individuals to law enforcement or immigration authorities and impose fines that range from $375 to as much as $16,000 for multiple offenses. The measure also creates a felony criminal offense for transporting, concealing, or harboring any person in the U.S. illegally. Violations of this felony provision can result in imprisonment for up to five years, and a fine of up to $5,000.

To learn more about the best HR and compliance services for your company, reach out to our team of small business HR and payroll experts today.

Asure Software provides this information for general information purposes only.  We are not attorneys, and the information in this update should not be relied upon or regarded as legal advice.  This information may not be accurate or complete as it relates to a particular company or situation and does not reflect all developments or laws in all jurisdictions.