Insights

Late on Friday, a federal judge in Maryland issued a preliminary injunction pausing certain elements of the Trump Administration’s two recent executive orders (“EOs”) addressing “illegal DEI programs.” The two EOs, Exec. Order 14151, Ending Radical and Wasteful Government DEI Programs and Preferencing (the “J20 Order”) and Exec. Order 14173, Ending Illegal Discrimination and Restoring Merit-Based Opportunity (“J21 Order”), contain a number of provisions that, among other things, direct the federal government to dismantle “illegal DEI programs” within federal agencies and federal contractors. Please refer to our prior alert on these EOs for a full breakdown of the provisions in each.

The first day of the Trump Administration included the issuance of 26 executive orders(“EOs”), the most in modern presidential history. Among these EOs, President Trump signed the Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government Executive Order (the “EO” or “Order”). While focused on federal policy, the Order has broad implications for private sector employers.

Late on the night of January 21, 2025, President Trump signed the “Ending Illegal Discrimination And Restoring Merit-Based Opportunity” Executive Order (the “EO”). This EO, like a number of the executive orders issued on his first day in office, took aim at Diversity, Equity, and Inclusion (“DEI”) programs by, among other things, broadly directing executive agencies and departments to terminate all “discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements;” curtailing the Office of Federal Contract Compliance Programs’ (OFCCP) operational authority and directing agencies to scrutinize the DEI practices of private sector employers. Additionally, this language raises questions about the future and status of certain programs, preferences, and set-aside procurements administered by the U.S. Small Business Administration, U.S. Department of Transportation, and other agencies. 

Following a multi-million-dollar ruling against it by the National Labor Relations Board (“NLRB”), nursing home operator Care One, LLC, is now challenging the authority of NLRB-appointed Administrative Law Judges (“ALJs”) on constitutional grounds before the Second Circuit Court of Appeals. The Second Circuit’s line of questioning during the November 12, 2024, oral argument revealed the Court’s apparent skepticism towards Care One’s challenges, creating the prospect of a circuit court split on key issues that are likely to make their way to the Supreme Court. Care One’s arguments follow the trend over the past several years of employers increasingly questioning the authority of ALJs to adjudicate their labor and employment claims before administrative agencies.

On October 29, 2024, the Office of Federal Contract Compliance Programs (“OFCCP”) published a notice in the Federal Register that it received two requests under the Freedom of Information Act (“FOIA”) for 2021 Type 2 EEO-1 Reports filed by federal contractors.  The two requests came from the University of Utah and a non-profit organization named “As You Sow.”  The OFCCP notified federal contractors that the information might be protected from disclosure under FOIA Exemption 4, which protects disclosure of confidential commercial information, and requested that any entities that filed these reports and object to their disclosure submit objections by December 9, 2024.  Objectors are strongly encouraged to use the OFCCP portal.  Alternatively, contractors may also submit written objections via email at OFCCPSubmitterResponse@dol.gov, or by mail. 

On Friday, October 4, 2024, the Supreme Court granted certiorari in an appeal from the Sixth Circuit decision in Ames v. Ohio Department of Youth Services, a Title VII case involving claims of reverse sexual orientation discrimination.  Plaintiff Marlean Ames, a heterosexual woman, alleges that she was demoted and replaced by a gay man and was also denied a promotion in favor of a gay woman because of her sexual orientation.  The Sixth Circuit affirmed summary judgment in favor of the employer-defendant, holding that—to establish a prima-facie case under Title VII as a member of the majority—in addition to the “usual” showing Plaintiff was required to make an additional showing of “background circumstances to support the suspicion that the defendant is that unusual employer who discriminates against the majority.” 87 F.4th 822, 825 (6th Cir. 2023) (citation omitted). The Court observed that such a showing is typically made with evidence that the minority group (here, gay people) made the challenged employment decision or with statistical evidence showing a pattern of discrimination by the employer against members of the majority group—neither of which Plaintiff satisfied.

Effective January 1, 2026, H.B. 3773 amends Article 5, Section 2 of the Illinois Human Rights Act to explicitly prohibit employers from using artificial intelligence (“AI”) for a broad swath of employment decisions, including recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment, if such use has the effect of subjecting employees to discrimination on the basis of a protected class.  The amendment also prohibits employers from using zip code as a proxy for protected classes.  H.B. 3773 further provides that employers will be required to provide notice to employees prior to using AI for such employment-related purposes.  The law applies to any employers employing one or more employees within Illinois during 20 or more calendar weeks during the calendar year. 

On June 13, 2024, The Supreme Court ruled in Starbucks v. McKinney that the National Labor Relations Board (“Board”) must meet the same four-part test that other litigants must satisfy in order to obtain a preliminary injunction. This holding resolves a split amongst the circuit courts, some of which have applied a “less exacting” two-factor test to preliminary injunctions under Section 10(j) of the National Labor Relations Act (“NLRA”).

On June 3rd, 2024, in a 2-1 ruling, the 11thCircuit U.S. Court of Appeals granted a preliminary injunction against Fearless Fund (“Fearless”), enjoining the Fearless Strivers Grant Contest, a privately-funded grant competition open only to businesses owned by black women.  In another victory for the American Alliance for Equal Rights (“Alliance”) and Edward Blum, the legal strategist behind the Supreme Court’s recent rulings against college race-based admissions, the 11thCircuit held that the Alliance had standing to sue on behalf of three pseudonymously named business owners who were “ready and able” to enter the Contest but “were excluded from the opportunity to compete . . . solely on account of the color of their skin.”  The Court determined that plaintiffs were likely to prevail in the lawsuit, finding that privately funded businesses like Fearless can violate 42 U.S.C. § 1981, originally enacted as Section 1 of the Civil Rights Act of 1866, through contract-based programs restricted to persons of color.  

On May 17, 2024, Colorado Governor Jared Polis signed S.B. 24-205, Consumer Protections for Artificial Intelligence, the first state law in the country to regulate employers’ use of artificial intelligence in employment decisions.  This law regulates both companies that develop and companies that deploy “high-risk” artificial intelligence systems (“AI systems”).  In particular, the law sets forth a set of provisions designed to ensure that developers and deployers use “reasonable care” to protect consumers from any “known or reasonably foreseeable risks to algorithmic discrimination” arising from the use of the AI system.  The law then creates a rebuttable presumption, for both deployers and developers, that reasonable care was used if they meet specific requirements and disclose key information about high-risk AI systems.  This law will be enforced by the Colorado Attorney General, and a violation of the law constitutes an unfair trade practice.  The law becomes effective on February 1, 2026.

Now more than ever, federal contractors find themselves at the intersection of innovation and regulation, particularly in the realm of Artificial Intelligence (AI).  AI is now incorporated into a broad range of business systems, including those with the potential to inform contractor employment decisions.  For that reason, the Office of Federal Contract Compliance Programs (OFCCP) has issued new guidance entitled “Artificial Intelligence and Equal Employment Opportunity for Federal Contractors” (the “AI Guide”).  OFCCP issued the AI Guide in accordance with President Biden’s Executive Order 14110 (regarding the “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence”), which we reported on here.  The AI Guide provides answers to commonly asked questions about the use of AI in the Equal Employment Opportunity (EEO) context.  The AI Guide also offers “Promising Practices,” which highlight a number of important considerations for federal contractors.  Focusing on federal contractors’ obligations and attendant risks when utilizing AI to assist in employment-related decisions, the AI Guide also provides recommendations for ensuring compliance with EEO requirements while harnessing the efficiencies of AI.

On April 23, 2024, the Federal Trade Commission (“FTC” or “the Agency”) voted 3-2 along partisan lines in a special public meeting to adopt the “Non-Compete Clause Rule” (the “Final Rule”), which will prohibit most employee non-competes with retroactive effect, except existing non-compete provisions of “senior executives.”  The Final Rule will also ban future non-compete agreements, including for senior executives, with limited exceptions.  The rule will not become effective until 120 days after publication in the Federal Register, and covered employers will be required to comply with the Final Rule by that effective date, which could come as early as August this year.  By the FTC’s own estimate, this ban could affect up to one-in-five American workers.

On April 17, 2024, the Supreme Court handed down a unanimous decision in Muldrow v. City of St. Louis, Missouri, No. 22-193, holding that transferees alleging discrimination under Title VII of the Civil Rights Act of 1964 need only show that a transfer caused harm with respect to an identifiable term or condition of employment.  The Court’s decision upends decades of lower court precedent applying a “significant harm” standard to Title VII discrimination cases.  As a result, plaintiffs claiming discrimination under Title VII will likely more easily advance beyond motions to dismiss or motions for summary judgment. In the wake of the Court’s decisions in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (6-2), No. 20-1199, and Students for Fair Admissions, Inc. v. Univ. of North Carolina (6-3), No. 21-707 (June 29, 2023), Muldrow will also likely continue to reshape how employers conceive of, implement, and communicate workplace Diversity, Equity and Inclusion (“DEI”) efforts.  The decision may be used by future plaintiffs in “reverse” discrimination actions to challenge DEI or affinity programs that provide non-economic benefits to some – but not all – employees.  For example, DEI programs focused on mentoring or access to leadership open only to members of a certain protected class could be challenged under Muldrow by an employee positing that exclusion from such programs clears this new, lower standard of harm. 

On January 30, 2024, the FAR Council issued a proposed rule entitled “Pay Equity and Transparency in Federal Contracting” (“Proposed Rule”). The Proposed Rule would: (1) prohibit contractors and subcontractors from seeking and considering information about job applicants’ compensation history when making employment decisions about personnel working on or in connection with a government contract; and (2) require contractors and subcontractors to disclose, in all advertisements for job openings involving work on or in connection with a government contract placed by or on behalf of the contractor or subcontractor, the compensation to be offered to the hired applicant for any position to perform work on or in connection with the contract.

On June 29, 2023, the Supreme Court held that it is unconstitutional (under the Constitution’s Equal Protection Clause, as to public institutions) and a violation of Title VI of the Civil Rights Act of 1964 (as applicable to private institutions accepting federal financial assistance) for colleges and universities to consider race as a factor in the admissions process. See Students for Fair Admissions, Inc. v. President & Fellows of Harvard Coll., No. 20-1199, 2023 WL 4239254 (U.S. June 29, 2023) (“Harvard”), a summary of which can be found here. This decision upended decades of precedent and has caused employers in the private sector to ask how the decision will impact diversity, equity, and inclusion (“DE&I”) initiatives and employment decisions. This article addresses the impact of Harvard, eight months later.

Following a January 29, 2024 White House announcement and Fact Sheet, on January 30, 2024, the Federal Acquisition Regulation (FAR) Council issued a Notice of Proposed Rulemaking (Proposed Rule) on salary-history bans and pay transparency for applicants and employees of federal contractors and subcontractors. On the same day, the Office of Federal Contract Compliance Programs (OFCCP) issued some FAQs on the compensation history issue. These actions by the federal government to ban prior salary information and require compensation information in job postings echo the efforts of multiple states and municipal governments that have enacted similar salary history bans and/or compensation disclosure requirements:

On Friday, January 12, 2024, the District of Columbia enacted a new pay transparency law, joining states like California, Colorado, Illinois, and New York, which have already enacted such legislation.  The legislation must first clear a 30-day congressional review period and, absent a Congressional vote to overrule the legislation, it will take effect June 30, 2024.

On October 27, the National Labor Relations Board (“NLRB”) issued a long-awaited Final Rule (“Final Rule”) that will dramatically alter the test for joint-employer status. As proposed,  the Final Rule rescinds the NLRB’s 2020 Final Rule, with the NLRB claiming that the new rule “more faithfully grounds the joint-employer standard in established common-law agency principles.”   In effect, the Final Rule will make it easier for employees of franchises, staffing agencies, and potentially a broad swath of contractors to show that two entities are joint employers. If an entity is found to be a joint employer with the direct employer of unionized employees, “under common-law agency principles,” the entity can be liable for the unfair labor practices of the co-employer and can be required to negotiate with the union representing the workers under the National Labor Relations Act (“NLRA”).  The NLRB’s new rule will take effect on December 26, 2023 and is not retroactive.

On September 13, 2023, the New York State Department of Labor released proposed regulations aimed at clarifying employer obligations under New York State’s pay transparency law (“Law”).  The Law, effective September 17, 2023, requires employers in New York State to disclose compensation or compensation ranges and existing job descriptions for all advertised jobs, promotions, and transfer opportunities. Crowell & Moring LLP previously reported on the Law, issued on December 21, 2022, and on its subsequent amendments, signed into law on March 3, 2023.

Illinois is poised to become the latest state to require employers to provide salary information in job postings.  Governor J.B. Pritzker is expected to sign House Bill 3129, which amends the Illinois Equal Pay Act (IEPA) and requires employers to include pay scale and benefits information in job postings.  If the Bill is enacted, its requirements will go into effect on January 1, 2025, and will apply to employers with 15 or more employees and to positions that are (i) physically performed, in whole or in part, in Illinois or (ii) physically performed outside of Illinois where the employee reports to a supervisor, office or other work site in Illinois.