A quick look at some recent federal regulatory developments and their implications for large companies:
White House doubles down on national AI law: On the heels of a recent Executive Order targeting state AI laws and calling for a national standard, the Director of the White House Office of Science and Technology Policy, Michael Kratsios, said passing a federal AI law should be a top priority for Congress in testimony before a House Subcommittee.
- Employers need “regulatory clarity and certainty,” said Kratsios.
- Notably, Kratsios said that any national AI law “should not preempt” certain state laws relating to child safety protections, compute and data infrastructure, and state government procurement.
- That would seem to leave open preemption of broader state laws aimed at providing protections for workers and consumers.
The bottom line: The White House continues to pressure Congress to get to work on a national AI law, boosting the chances of a legislative proposal this year – and one that could preempt more cumbersome state AI laws. However, bipartisan agreement will be difficult to achieve.
EEOC gives Chair Lucas more authority, signals next moves: The EEOC has cleared procedural hurdles for Chair Lucas to move quickly on her expected very aggressive agenda.
- The Commission voted 2-1 (along party lines) to remove the ability of individual Commissioners to require public meetings before the Commission moves forward on a policy change.
- Chair Lucas can now move more quickly on policy changes without getting bogged down by scheduling and holding public meetings on such proposed changes.
- Meanwhile, the Commission is already moving forward with officially rescinding existing anti-harassment guidance that provided broader protections for transgender employes.
The bottom line: With procedural hurdles removed, expect Chair Lucas to move more quickly on expected policy changes, including:
- Tighter scrutiny of DEI practices and use of foreign talent;
- Reductions in protections for transgender employees (and potential enforcement against employers that continue to enforce existing protections); and
- Removing coverage of abortions from new legal protections for pregnant workers.
New administration, new independent contractor changes: As has been the case for the past four straight administrations – a span of a quarter century – the second Trump administration is in the process of making changes to how employers can classify workers.
- Each of the last four administrations have rescinded the previous administration’s independent contractor rule and replaced it with their own.
- The administration has submitted a new proposed rule to the White House for review. It is expected that this rule will simply officially rescind the Biden-era rule, but it may also include a new independent contractor standard.
- Any new approach to worker classification under this administration is expected to be far more employer-friendly (i.e., will make it easier to classify workers as contractors) than the Biden-era rule.
The bottom line: A new proposed rule – which at minimum will rescind the Biden-era standard, but could also include a new, more lenient standard – is currently under review at the White House and will likely be made public within weeks.
House Passes Anti-ESG Investing Bill, Spikes Multiple Labor Bills
Legislation that would prohibit 401(k) and pension fund managers from considering ESG factors in investment decisions cleared the House, while House Republicans broke ranks to block a package of labor and employment and bills.
Protecting Prudent Investment of Retirement Savings Act (H.R. 2988): The bill, which passed by a vote of 213-205 (with three Democrats joining all voting Republicans), would amend the Employee Retirement Income Security Act (ERISA) to require managers of employer-sponsored retirement plans to make decisions purely based on financial considerations.
Why it matters: The bill is part of the wider campaign against ESG in recent years, of which the current administration is an active participant. In addition to this proposal, the Trump DOL is currently in the process of repealing a Biden-era rule that promoted ESG investing and replacing it with a rule similar to the above bill.
What’s next: The bill heads to the Senate, where its chances of garnering enough minority Democratic support to clear the 60-vote threshold for passage are slim. The House passed similar legislation last year, which never even got a vote in the Senate.
Multiple workplace bills blocked: House Republicans broke ranks and voted with Democrats against passage of a bill that would have enabled employers to hold voluntary training for employees outside of work hours without compensation (Flexibility for Workers Education Act, H.R. 2262).
- That result caused House Speaker Johnson (R-LA) to cancel votes on three other labor bills for fear of lack of Republican support, including bills that would:
- Codify an employer-friendly joint employer standard (H.R. 4366);
- Exclude childcare payments and subsidized services from an employee’s regular rate of pay (used for calculating overtime) (H.R. 2270); and
- Expand which tipped workers can be paid below minimum wage (H.R. 2312).
Why it matters: The results highlight the increasing fractures within the Republican party on workplace policy – the result of a pull towards worker-first populism and perceived vulnerability in upcoming elections. This reality may complicate implementing the President’s legislative agenda, particularly given that the current Republican House majority is razor thin.
