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Biden administration and employment practices liability

Financial, Executive and Professional Risks (FINEX)
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By Lisa N. Sheldon and Talene M. Carter | August 19, 2021

With the change in political power, the Biden administration has an eye towards reversing many of the prior administration’s employer friendly objectives.

Typically, when there is a change in political power in Washington, DC, we expect to see an impact to legislation, regulatory activity, and laws consistent with the new administration’s priorities. The Biden administration has been no different, wasting no time with significant agency leadership appointments and actions that highlight the administration’s focus on pro-employee, pro-labor policies with an eye towards reversing many of the Trump administration’s employer friendly objectives.

Fair Labor Standards Act (“FLSA”) changes

Swift action has been taken to revisit and replace Trump’s pro-employer policies, and with the nomination of former Obama administration Department of Labor (DOL) Wage and Hour Chief David Weil to his former role, we expect to see more aggressive enforcement actions and penalties targeted at employers who are not in compliance with the FLSA’s wage/overtime laws. Weil has also supported government crackdowns on gig-economy companies over their workforce models, strongly advocating for most employees to be classified as statutory employees rather than independent contractors.1 The DOL recently proposed withdrawing the Trump-era independent contractor rule in its entirety.2 The rule was intended to recognize a more employer friendly test (based on “economic realities”) for determining whether a worker is an employee covered by the FLSA’s minimum wage and overtime standards or an independent contractor. Additional proposed changes include expansion of the definition of joint employer to include significantly more companies to be a “joint employer” of other businesses’ workers and expansion of the scope of “unfair practices.”3 The Biden administration has also indicated possible new overtime regulations.

Pay equity

Both President Biden and Vice-President Harris made addressing gender-based pay inequality a key part of their campaign platforms.4 Biden has pledged support for the Paycheck Fairness Act, which would change the legal defense in wage discrimination claims from “any factor other than sex” to “a bona fide factor other than sex, such as education, training, or experience” as justification for a pay difference between individuals of another sex who perform substantially equal jobs and work at the same place of business. Pay differentials based on subjective criteria including performance evaluations, could be subject to legal challenges. The Act would also create a federal ban on requesting a job candidate’s prior salary history or using pay history to determine salary/wages. Harris championed an aggressive proposal on addressing gender wage gap during her campaign, establishing a 1% profit fine on employers for every 1% wage differential between men and women performing comparable work.5

Increased enforcement activity expected from the EEOC and DOL’s Office of Federal Contract Compliance Programs (OFCCP)

Immediately after his inauguration, President Biden designated Democratic Commissioners Charlotte Burrows and Jocelyn Samuels as Chair and Vice Chair of the EEOC. While Republican commissioners are expected to hold the EEOC majority until mid-2022, Chairwoman Burrows controls the commission’s agenda and is expected to aggressively pursue litigation and initiatives consistent with President Biden’s priorities and initiatives including prioritization of federal anti-discrimination laws, a focus on systemic racism and gender discrimination/ gender-based pay inequality, and a refocus on pay data collection efforts.6 With the proposed 2022 budget, the EEOC’s funding could increase by $41 million over 2021, supporting Burrows’ indicated intent to hire several hundred more employees including lawyers, investigators and mediators.7 President Biden appointed former EEOC Commissioner Jenny Yang, a key advocate for the EEOC’s pay data collection, to head OFCCP. Biden’s proposed 2022 budget looks to boost the OFCCP’s funding by 33% from 2021. The increased funding would certainly support Yang’s goal to increase the agency’s enforcement capabilities and staff levels.8

Impact on employment related claims and insurance

EEOC statistics saw a dramatic drop in 2020, with the lowest number of charges filed in over 20 years. In fact, the number of charges has steadily declined since 2016.9 While it is difficult to pinpoint exactly why there has been such a decline in charges, some possible factors are a change in EEOC intake procedures, changes in workplace environments and most recently, the COVID-19 pandemic. Interestingly, there was a decrease in every category of charges between 2019 and 2020 with the exception of a modest increase in charges alleging claims under the Americans with Disabilities Act (ADA), charges alleging claims of color discrimination under Title VII, and, most notably, charges alleging claims under the Genetic Information Non-Discrimination Act (“GINA”), which doubled since FY 2019 and reached the highest number of charges filed since the Act was passed in 2008.

As discussed above, the Biden administration thus far has pushed a pro-employee agenda. While it is too soon to tell whether this will impact claims activity, there is certainly the potential of increased activity over the next few years. Specifically, with a more pro-employee administration, we tend to see more enforcement activity from the government agencies, which leads to more litigation.

Fluctuations in claims activity naturally impact the insurance market as well. In 2020, the EPL insurance market gradually hardened, largely because of the uncertainty with respect to the COVID-19 pandemic and uncertainty regarding the level of claims activity. As insurers are becoming more comfortable with the pandemic’s impact on the workplace, there is still some uncertainty as to what the new administration’s policies will mean with respect to claims. However, because there were such dramatic shifts in the market last year, we expect that the market will gradually neutralize over the next 12-18 months.

Best practices

As the laws impacting the workplace continue to evolve, employers should continuously work with counsel to review their policies and procedures to ensure they include the most up to date laws and regulations. In addition, as changes are made to policies and procedures it is imperative to effectively communicate those changes to your employees. And finally, it is important to continuously update your training, especially for line managers.

Footnotes

1 https://www.littler.com/publication-press/publication/hitting-ground-running-first-100-days-biden-administration-and-key

2 https://www.dol.gov/newsroom/releases/whd/whd20210505

3 6th Annual Employment Practices Liability Insurance ExecuSummit panel presentation: Biden Administration Impact on Employers

4 Id

5 Id

6 https://www.littler.com/publication-press/publication/hitting-ground-running-first-100-days-biden-administration-and-key

7 https://www.law360.com/governmentcontracts/articles/1389465/biden-s-budget-floats-big-funding-hikes-for-bias-watchdogs

8 Id

9 https://www.eeoc.gov/statistics/charge-statistics-charges-filed-eeoc-fy-1997-through-fy-2020

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.

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Claims, FINEX North America

Employment Practices Liability Thought and Product Leader,
FINEX North America

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