HR Policy Outlook: What CHROs Should Expect in 2024

Brace yourself for policy shifts that will have big implications for CHROs and their companies. 2024 is poised to buck the election-year trends of all talk, no action. Expect most developments to occur in the agencies and at the state level rather than the closely divided Congress.

The Broader Context:

• Geopolitics: Geopolitical instability around the world is putting companies in the spotlight as employees, customers, and other global stakeholders look to HR leaders for support and action.
  
  
• ESG Limbo: Companies are “caught in the middle” between some stakeholders, including federal agencies,  pushing to expand corporate disclosures (e.g., human capital metrics) and others pushing to end them. Corporate DEI efforts are often a focal point, now accentuated by geopolitical issues.
  
  
• Election Turmoil: The 2024 presidential election is shaping up to be even more divisive than the 2016 and 2020 elections, with a likely rematch between an unpopular labor-friendly president focused on using government to solve problems and a former president facing multiple indictments focused on shrinking government.
  
  
• Union-Friendly Environment: Public and employee interest in unions is at its highest level in 20 years, and federal labor law is more union friendly than ever.
  
  
• Supreme Court Impact: Following the 2023 Harvard/UNC decision, the Supreme Court is likely to expand discrimination litigation under Title VII. Also, by likely cutting back “Chevron deference” – judicial deference to agencies – the Court may restrict the ability of federal agencies to issue broad regulations when interpreting ambiguous statutes.

CHROs are tasked with navigating the internal and external dynamics of the current landscape while anticipating the impact of generative AI, navigating the expectations of multiple generations in the workplace, and focusing on culture in a hybrid work environment that continues to evolve and mature.

With those dynamics as background, here are the HR Policy Association team’s predictions for 2024:

Government Shutdown Risks. Despite the impending funding deadlines of January 19 and February 2, the House and Senate have not yet come to a consensus on topline spending figures for FY2024. This deadlock raises the specter of a government shutdown with major implications for federal contractors.

AI Regulation. All eyes are on how governments will regulate AI, as its use expands at an unprecedented pace. Agencies will implement President Biden’s Executive Order by formulating AI standards and guidance. 

• In May, DOL intends to release guidance for employers on balancing AI’s impact on employee well-being, maximizing its benefits, and labor law compliance. Further guidance for federal contractors on nondiscrimination in AI-based hiring is expected within the year.
   
• Lawmakers must engage in a delicate balance between establishing guardrails for responsible AI and avoiding excessive regulation. This is an opportunity for the Association to offer policymakers clear insights into AI’s employment applications and how this balance can be best achieved. 
  
  
• Internationally, the European Union will begin implementing its EU Artificial Intelligence Act which aims to classify and regulate AI applications based on their risk of harm. Much like the GDPR, the EU approach will likely inform AI regulation around the world. 

Executive Compensation and Governance. The SEC is focusing on rapid-fire regulation, with several rules on the agenda likely to result in more reporting disclosure requirements for companies.

• The HCM rule is expected to be highly prescriptive and detailed, including disclosure of independent contractors, turnover, and training spend.
  
  
• Despite lawsuit threats, the final climate rule is expected to be released ahead of the HCM rule, with more extensive disclosure and accounting impacts for companies.
  
  
• The SEC approved NASDAQ's required board diversity disclosures for listed companies, which will pave the way for a similar SEC rule for all public company board directors (annual director diversity statistics in standardized template). Companies may have to explain why they lack diverse directors.
  
  
• The Silicon Valley bank collapse sparked renewed focus on completing the intricate Dodd-Frank "section 956" incentive compensation rules which have been attempted twice before. If finalized, financial services firms will face mandatory disclosure and restrictions on certain incentive-based executive compensation plans that promote excessive risk-taking, with potential spillover effects to other industries.

Global. Global labor shortages, geopolitical conflicts, and trade restrictions will impact immigration and market accessibility around the world in 2024. In a 2023 KPMG survey, CEOs identified geopolitics and political instability as the main threats to growth globally.

• The convergence of global employment laws will persist, signifying that governments are seeking to address workplace issues like pay transparency, AI, work scheduling, and DEI.
  
  
• Presidential elections in Taiwan and the U.S. will impact the relative tranquility in U.S.-China relations while elections elsewhere in Asia, Europe, and Latin America will determine the course of business and employee management in those regions. 
  
  
• Multinational companies operating in Europe face a new wave of labor and employment related legislation on sustainability reporting, minimum wage, pay transparency, and works councils. 

Health Care. Miracle drugs or excessive cost? Analysts expect company drug spend to increase 50% if an employer expands access to weight loss drugs like Ozempic and Wegovy. Similar patterns are expected for other specialty drugs.

• Increasing price transparency and PBM reform legislation will continue to be a focus in D.C. These changes allow employers to make informed decisions regarding prescription drug offerings – a necessary step as more medications are released with high sticker prices but strong efficacy for chronic diseases.
  
  
• Preserving ERISA preemption is likely to be a hot topic on Capitol Hill this year because of state efforts to reform PBMs – which could leave large employers with a patchwork of state laws to follow.
  
  
• Expect additional attention on costly network adequacy requirements, particularly for behavioral health services, to ensure employers do not have “ghost” networks.

Labor Relations. Expect increased union organizing activity with federal agencies continuing to tilt the playing field in unions’ favor.

• NLRB rulings are expected to restrict or prohibit mandatory employer-held meetings (not just those involving union organizing), and restrict non-compete agreements, workplace monitoring, arbitration agreements, and more.
  
  
• The NLRB’s unprecedented broad joint employer rule will be litigated throughout 2024. If found valid, the rule could make companies liable for labor law violations of third parties (e.g., staffing firms) with which they do business.

Employment Regulation. With almost no chance of significant federal legislation being passed, expect federal regulations and state legislation to fill in the gaps.

• Several states are considering new legislation on non-competes, paid leave, pay transparency, and privacy.
  
  
  1. Governor Kathy Hochul’s (D) veto of the New York blanket non-compete ban included her support for limiting the ban to lower-paid workers. As a commercial and financial hub, NY’s support for a partial ban could influence the FTC as it considers whether to moderate (as HR Policy Association advocated) its insistence on a full ban.
     
     
• On the federal regulatory front, final rules are expected on non-compete agreements, overtime exemptions (new salary threshold), independent contractor status (FLSA), and OSHA workplace inspections, among others.
  
  
• The EEOC may try to fast-track a new collection of pay data from employers (EEO-1 “component 2”) potentially exposing existing pay gaps along racial or gender lines without meaningful context.
  
  
• The Supreme Court is likely to issue a decision expanding liability under federal discrimination law (Title VII) beyond final adverse employment decisions (such as terminations or passing on applicants), which could open the floodgates even further for lawsuits targeting corporate DEI practices.

Immigration. Anticipate significant activity from the Biden administration to address workforce shortages and backlogs in the visa renewal process through updates to the H-1B Lottery selection process, Schedule A occupations, and other related matters.