2021 Fall Outlook: Are You Ready for the Policy Tsunami Ahead?

This fall, with key agencies staffed and their leaders in place, government regulations implementing the Biden administration’s agenda will begin to emerge on a scale and frequency not seen since the Obama years.  In Congress, continuing attention to COVID relief efforts and philosophical disagreements within the Democratic caucus have stalled much of the President’s legislative agenda, which would also have to clear the Senate filibuster hurdle.  The lack of legislative action is creating a new sense of urgency—and energy in federal agencies—to move the agenda through regulatory action, as doubts grow about Democrats’ ability to maintain control of Congress after the 2022 elections.

Proposed SEC human capital management (HCM) disclosure rules, major employment and health care changes in the budget reconciliation bill, a newly-Democratic NLRB and White House labor task force poised to facilitate union organizing, the impact of the FDA’s vaccine approval amid the Delta variant, international workforce management, the global war for talent, and many other policy and practice developments will impact workplaces at breakneck speeds.  Taken together, these issues raise the question: is your company positioned to respond? Read on for our staff’s projections of the most pressing of these items expected to take place through the remainder of 2021. 

COVID-19, TALENT WARS ACCELERATE WORKPLACE CHANGES:  In the midst of new COVID variants, rising infections, a push to increase vaccinations, and increasing mandates, HR Policy’s Evolving Workplace Initiative has been providing resources, webinars, and expert opinion on the current state and what’s next for employers.  See our Evolving Workplace page on the HR Online Community for more.

• Employer vaccine mandates on the rise:  Following the FDA's August 23 approval of the Pfizer vaccine (with Moderna's expedited application pending and Johnson & Johnson to come later this year), many employers have moved forward with mandatory vaccine policies, including the possibility of insurance surcharges or other disincentives for unvaccinated employees.  We expect more in the weeks to come. 
    
• A historic talent shortage:  The Great Resignation, anti-immigration policies, and the ongoing impact of the pandemic have all combined to create a historic talent shortage likely to continue post-COVID.  Employers are focusing on culture, communication, and flexible talent strategies to bridge the gap, including expanding talent pools and considering the role of AI technologies in workforce planning. 
    
• Our upcoming Washington Policy Conference will explore how employers are planning for the talent needs of the future, including acquisition, development, engagement/retention, and making a flexible workplace work (especially when Delta variant has pushed back return-to-workplace dates for many companies). 

EMPLOYMENT REGULATION AND LABOR LAW BACK IN FULL FOCUS:  Key positions at the Department of Labor and the National Labor Relations Board are now filled, and the policy pendulum is about to swing hard in a daunting direction.  Some key trends to watch over the next few months: 

• With the PRO Act facing an uphill battle in Congress, keep your eye on the NLRB:  The National Labor Relations Board now has a 3–2 Democratic majority and a relatively free hand to shift labor law in a more pro-union direction.  Widespread implementation of card check recognition, more stringent handbook rules and independent contractor classification, more liberal union access, and many other issues were featured in a recent memorandum by NLRB General Counsel Jennifer Abruzzo, who sets the Board’s agenda by deciding which cases to bring. 
    
• Paid leave and labor penalties in budget reconciliation bill?  Paid family and medical leave—proposed as a government benefit funded by taxes—could be included in the reconciliation package.  The Association has weighed in with concerns about the impact such a program would have on the generous benefits large companies already provide, while reiterating support for preemption of the myriad state and local paid leave laws.  The reconciliation bill could also incorporate financial penalties found in the PRO Act—including personal liability for company officers for labor law violations—in addition to the traditional, exclusively “make whole” remedies currently in the law. 
    
• Coming soon: executive orders imposing union-friendly labor policies on federal contractors:  By October 23, the White House Task Force on Worker Organizing and Empowerment will issue a report with “…as long a list as possible of recommendations to the President for executive action using authority within existing programs, policies, and practices that would facilitate worker organizing.”  Among its most significant proposals will likely be one or more executive orders imposing new requirements on federal contractors—such as remaining neutral during union organizing.

INCLUSION AND DIVERSITY:  Our recently-created Council on Inclusion and Diversity, which has over 50 participating companies, is focused on two core projects—a DE&I playbook and diversity data disclosure principles and resources.  Meanwhile, the use of software incorporating artificial intelligence is gaining attention from regulators.

• Best practices playbook for companies looking to expand representation and inclusion:  With many companies in search of effective approaches, we are interviewing Council members on the practices that have helped measurably expand representation and inclusion in the past, as well as the approaches they are considering for the future.  The interviews will be synthesized into a playbook for member companies later this fall. 
    
• Disclosure principles and resources to aid companies as HCM mandates emerge:  Investors increasingly expect greater diversity data disclosure, and the SEC is poised this fall to propose diversity disclosures as part of its HCM standard.  In anticipation, the Association staff is completing the distillation of diversity data disclosure practices for large companies.  Leading examples will be shared with Council members and used to develop principles for effective disclosure of diversity data that will be shared externally. 
    
• Artificial intelligence is taking a more prominent role of the job life cycle, and the Equal Employment Opportunity Commission is taking notice.  The Commission held a webinar on the use of AI and the potential for discrimination, with Commissioner Keith Sonderling noting, “From the standpoint of AI and workplace anti-discrimination law, the future is now.” 

EXECUTIVE COMPENSATION:  The SEC will soon propose a rule to require specific human capital metrics disclosures such as workforce turnover, skills and development training, part-time vs. full-time employee counts, compensation (potentially including a pay raise ratio), benefits, workforce demographics including diversity, and health and safety.

• Investor expectations likely to shift:  The SEC is expected to publish its proposed HCM disclosure rules this October.  Once finalized, shareholder proposals requesting enhanced disclosures will likely cease for the next several years (this applies to climate change, too).  The Center will continue to advocate for principles-based disclosure guidance that allows companies to communicate directly with shareholders about their most material human capital risks and opportunities. 
    
• Activist investors to press companies on linking DEI metrics to pay: The number of companies linking executive pay to improved DEI goals/representation is increasing, but approaches vary widely.  Given the SEC's anticipated corporate disclosure requirements will aim for comparability, activist investors may begin to push companies for clearer, more quantitative links between DEI goals and pay. 
    
• SEC proposal on climate impact expected this fall:  Anticipated proposed climate change disclosure requirements raise the question whether the rule will lead to environmental metrics tied to compensation.  The SEC is likely to focus on both direct and indirect emissions and has indicated a preference for developing the full list in-house, rather than using an existing regime such as the Sustainable Accounting Standards Board.  Companies that make “net-zero” commitments will need to disclose data and metrics on progress toward defined goals. 
    
• Potential bans on non-competes:  Following President Biden’s Executive Order, the Federal Trade Commission is expected to curtail the use of non-compete agreements.  As the Center did in early 2020, we will advocate for their availability for specific employees including executives, employees in R&D, and employees with access to sensitive data. 
    
• 10b5-1 plan changes:  SEC Chair Gensler has discussed revamping Rule 10b5-1, which allows executives to adopt preset trading plans to mitigate potential insider trading violations.  In several speeches he has highlighted likely elements of reform including: 
     
  • A cooling off period of 4–6 months between enacting a plan and the first trade;
  • Limits on cancelling plans;
  • Enhanced disclosure requirements on new plans, modifications, or cancellations; and
  • A limit on the number of active plans an employee may have. 

HEALTH CARE:  Significant health care reforms may be passed in the budget reconciliation package without GOP votes.  Meanwhile, Senate leadership has indicated interest in additional reforms later this fall.  All will impact the employer market.

• Drug pricing reform could increase annual health insurance costs by 3.7%:  The budget reconciliation package will include a measure allowing Medicare to negotiate drug prices directly with pharmaceutical manufacturers.  It is unclear if budget reconciliation rules will also allow Congress to enable employer plans to access Medicare’s negotiated drug prices.  Without access to these prices, the pharmacy supply chain will shift costs to employer plans and health plan costs could increase up to an average of 3.7% per year from 2023–2028 above normal cost trends. 
    
• Lowering Medicare eligibility hangs by a thread:  There will likely not be enough revenue offsets to lower Medicare eligibility age to 60.  If included, employees with an offer of affordable coverage from their employer would likely not be eligible for this benefit. 
    
• Price transparency regulation deadline delayed as AHPI files comments on surprise billing regulation:  DOL delayed the enforcement of transparency deadlines for machine-readable files until July 1, 2022, which required group health plans to publicly disclose information regarding in-network rates and out-of-network allowed amounts and billed charges for services and covered prescription drugs.  The American Health Policy Institute is working on comments to Part 1 of the surprise billing interim final rule, which is the first of three rules implementing the No Surprises Act.  Our comments will focus on how the Departments can ensure the rules achieve cost reductions while eliminating the practice of surprise billing. 
    
• Mental health top priority for HR Policy and our members:  To improve access to and quality of mental health and substance use disorder care, HR Policy sent a request for information (RFI) to four national and 13 regional health carriers.  From the RFI, we hope to establish a national baseline of network access across carriers, educate employers about the marketplace, and determine opportunities for pilot programs to improve access and the use of collaborative care models.  We will be talking more about the RFI and approaches to collaborative care on our September 15 Webinar.  Click here for more information or to register.

GLOBAL ISSUES:  HR Policy Global continues to monitor policies and practices around the globe regarding COVID-19 vaccine rates and requirements, return-to-office issues, and remote work.  Meanwhile, China and Mexico remain the most concerning markets as their transnational relationships with the U.S. bring uncertainty to businesses.

• Asia Pacific 
     
  • Forced labor in Xinjiang remains a sensitive topic as tension between the U.S. and China intensifies, placing mounting pressure on global companies and their supply chains.  Meanwhile, disgruntled employees are increasingly using social media to voice their concerns on issues such as working hours and sexual harassment at workplace.  HR Policy Global will talk more about employee voice in China on our September 23 webinar. 
      
  • Australian casual worker regulations deadline approaches:  Employers will need to make changes to comply with the new regulations on casual workers by September 27.  
      
  • India labor reforms likely to take effect this fall:  India has enacted four new codes on wages, employment conditions, social security, and occupational health, safety, and working conditions.  The labor reforms will have significant impacts on businesses in India once they are made effective, likely in October.  
      
• Latin America 
    
  • In Mexico, labor reform just getting started:  As the first cases filed under the USMCA Rapid Response Mechanism are being resolved, we can expect further significant developments in Mexican labor law.  Drastically different from previous “protection union” practices, companies should prepare for multiple unions competing for a collective bargaining agreement.  Additionally, the outsourcing ban is now fully effective.  We will monitor how the law will be enforced and its impact on employers in the coming months.  
      
  • Brazil:  Proposed labor law changes seek to reduce the alarmingly high unemployment rate affecting younger workers in the country and to provide employers with more hiring options.
       
• EU and UK 
     
  • EU and UK employers face unique challenges regarding COVID-19:  Complex laws and privacy culture make it difficult for employers to mandate vaccines.  Return-to-office plans and hybrid models will further test public policies on health and safety, data protection, and working time in all EU countries and the UK.  
      

European Commission initiatives have been promoting collective bargaining as the most effective way to manage pay and terms and conditions of employment, including for gig workers.  More importantly, in a proposed law on minimum wages, the Commission wants EU member states to present action plans for when the workers covered by collective bargaining fall below 70% of the country’s workforce.