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Caroline Burnett

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Caroline Burnett is a Knowledge Lawyer in Baker McKenzie’s North America Employment & Compensation Group. Caroline is passionate about analyzing trends in US and global employment law and developing innovative solutions to help multinationals stay ahead of the curve. Prior to joining Baker McKenzie in 2016, she had a broad employment law practice at a full-service, national firm. Caroline holds a J.D. from the University of San Francisco School of Law (2008) and a B.A. from Brown University (2002).

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SHRM reports that one in four organizations currently use AI to support HR-related activities, with adoption of the technology expanding rapidly. The compliance risks arising from generative AI use also are intensifying, with an increasing number of state and local laws restricting employer use of AI tools in the United States. And not to be outdone, substantial regulation impacting multinational employers’ use of AI is emerging in other parts of the world (e.g., the EU AI Act).

One rapidly growing use case is applicant recruiting and screening, a trend likely to continue given recent increases in remote hiring and hybrid work arrangements. AI tools can streamline talent acquisition tasks by automatically sorting, ranking, and eliminating candidates, as well as potentially drawing from a broader and more diverse pool of candidates.

Employers who use AI tools must comply with significant new (and existing) laws that focus on data protection, privacy, information security, wage and hour, and other issues. The focus of this blog, however, is the legislative efforts in the US to protect against algorithmic bias and discrimination in the workplace stemming from the use of AI tools to either replace or augment traditional HR tasks.

IL Becomes the Second State (After CO) to Target Workplace Algorithmic Discrimination

On August 9, 2024, Gov. Pritzker signed H.B. 3773, making it unlawful for employers to use AI that has the effect of discriminating against employees on the basis of protected class in recruitment, hiring, promotion, discipline, termination and other terms, privileges or conditions of employment. The law, effective January 1, 2026, also prohibits employers from using ZIP codes as a stand-in or proxy for protected classes.

Like Colorado, Illinois’ new law also contains a notice requirement: employers must notify applicants and employees when using AI with respect to “recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment.”Continue Reading Illinois Joins Colorado and NYC in Restricting Generative AI in HR (Plus a Quick Survey of the Legal Landscape Across the US and Globally)

This summer SCOTUS published three major decisions impacting workplace immigration decisions. Two of the decisions may require employers to shift their strategies for managing foreign-national talent, and the third essentially preserves the status quo.

Below we outline the impact of the decisions on US-based employers:

1. SCOTUS strengthens the doctrine of consular nonreviewability limiting options for employers and visa applicants who receive unfavorable denial

      In Department of State v. Munoz (July 21, 2024), SCOTUS ruled that US citizens do not have a fundamental liberty interest in their noncitizen spouses’ ability to come to the US.

      In Munoz, the spouse of a US citizen was denied an immigrant visa by a US consulate on ground that the consulate had “reason to believe” the spouse would participate in illicit activity if admitted to the US. The consular denial provided limited explanation for the decision – simply citing the “reason to believe” statute (a legal standard under which foreign nationals can be barred from entering the country if USCIS has a “reason to believe” the individual has been involved in illicit or illegal conduct) – and was extremely slow in providing this basis for its decision. The US citizen petitioning spouse sought judicial review and argued that she had a liberty interest in the matter given her US citizenship and that the impact of the consular decision deprived her of the fundamental right to marriage. But after receiving a favorable decision by the Ninth Circuit Court of Appeals, the Supreme Court reversed and held that no such liberty interest exists in this context.

      While the facts of Munoz did not involve a US employer, the underlying doctrine at issue – the ability to challenge a consulate’s decision on a visa – has direct implications to US employers who seek employment-based visas for employees. In reversing the Ninth Circuit’s decision, the Court upheld and arguably expanded the doctrine of “consular nonreviewability” – i.e. the inability to challenge the decision of a consular officer in US federal court.

      Takeaway:

      Munoz leaves employers and visa applicants with limited, if any, means for judicial redress in the event of an incorrect or unjust consular decision. Other avenues for challenging an unfavorable decision exist – including requesting supervisory review, review from the State Department’s Legal Net, or re-filing the application – but these fall short of and lack the teeth of formal judicial review.Continue Reading Triple Feature: SCOTUS Issues 3 Blockbuster Immigration Decisions This Summer Impacting Employers and Foreign National Employers

      On July 1, 2024 California Governor Newsom signed “compromise” PAGA reform bills into law (AB 2282 and SB 92) (PAGA Reform), which took the PAGA repeal initiative we told you about in May (see here) off the November 5, 2024 ballot.  

      On the bright side for employers, the new law shows leniency toward employers who can show they have taken reasonable steps toward PAGA compliance, through (among other things) caps on damages and expanded cure provisions. That said, employers will still need to be diligent to avoid wage and hour violations. One reason: while the ballot initiative (if passed) would have prevented plaintiffs’ attorneys from recovering fees, the PAGA Reform still allows plaintiffs to collect reasonable attorneys’ fees and costs. In addition, the PAGA Reform allows employees to keep a greater percentage of the recovery than before, meaning there is still plenty of incentive for employees to file PAGA claims–even with the employer-friendly changes.

      We hit the highlights of the PAGA Reform here.

      Effective date

      The PAGA Reform applies to PAGA civil complaints and notices of PAGA claims provided to the California Labor & Workforce Development Agency (LWDA) on or after June 19, 2024. Prior PAGA rules will apply to claims pending on or before June 19 or based on notices sent prior to June 19. (Though note that certain cure provisions do not take effect until October 1, 2024–see more below.)

      Stricter standing requirements, and statute of limitations questions clarified

      Under PAGA Reform, employees are now required to show they “personally suffered” each of the violations of the Labor Code they seek to pursue in a representative capacity under PAGA. Before the new law, if an employee could prove a single Labor Code violation, the employee could sue in a representative capacity on the same or any other Labor Code violation–even if the employee had not been personally affected by the other violations. (Note, the new standing requirement does not apply to certain nonprofit legal aid organizations that have served as counsel of record for PAGA civil actions for at least 5 years prior to January 1, 2025.)

      In addition, PAGA Reform clarifies that the statute of limitations to bring a PAGA claim is one year (the period prescribed under Section 340 of the Code of Civil Procedure)–dismissing interpretations that stemmed from the California Court of Appeals decision in Johnson v. Maxim Healthcare Services, Inc. that the PAGA statute of limitations defines the liability period for a PAGA claim, but otherwise places no time restriction on who may pursue a PAGA claim.

      However, even if an employee meets the statute of limitations under PAGA, if the LWDA (or any of its departments, divisions, commissions, boards, agencies or employees) has already–on the “same facts and theories”–timely cited an employer for violation of the same section of the Labor Code under which the employee is attempting to recover a civil penalty, or initiated a proceeding under Section 98.3 (allowing the Labor Commissioner to prosecute certain violations, including wage-related violations), the employee is barred from pursing that civil penalty. This restriction remains from prior PAGA rules, and helps to ensure employers are not penalized twice for the same conduct.

      Courts’ power to manage PAGA claims clarified

      Under PAGA Reform, courts have specified power to manage PAGA claims, including by limiting the scope of any claim to ensure it can be effectively tried, and limiting the evidence presented at trial–following the lead of the California Supreme Court decision Estrada v. Royal Carpet Mills, Inc., which held that though trial courts do not have inherent authority to strike PAGA claims on manageability grounds, a trial court can use its case management procedures to ensure that PAGA claims can be tried effectively.

      Injunctive relief and attorneys’ fees

      PAGA plaintiffs can now seek injunctive relief in any circumstances under which the LWDA could seek injunctive relief–in addition to the civil penalties and reasonable attorneys’ fees and costs PAGA plaintiffs can seek. However, injunctive relief is not available for violation of a posting, notice, agency reporting or filing requirement, unless the filing or reporting requirement involves mandatory payroll or workplace injury reporting.Continue Reading PAGA Reform: A Breath of (Some?) Fresh Air for Employers

      On the eve of the Fourth of July, the FTC rule banning most noncompetes is going up in smoke after a federal court in Texas held the US Chamber of Commerce and a tax firm are likely to prevail on their argument that the agency overstepped its authority to adopt the nationwide prohibition.

      The decision, on the heels of the US Supreme Court’s ruling reining in federal agency power under the Chevron doctrine, demonstrates the challenge the FTC faces in promulgating substantive regulations dealing with competition in the economy.Continue Reading Red, White and Blocked: Federal Judge Pauses FTC’s Ban on Employment Noncompetes

      On May 17, 2024 Colorado Governor Polis signed the landmark Colorado AI Act (Senate Bill 24-205) into law. Colorado is now the first US state with comprehensive AI regulation, adopting a classification system like the European Union’s recent AI Act. The law will take effect February 1, 2026. 

      The law exempts small employers (fewer than fifty full-time employees) from some of its requirements but otherwise requires companies to take extensive measures to protect Colorado residents against harms such as algorithmic discrimination.

      SB 205’s Details

      SB 205 requires “developers” and “deployers” of “high-risk artificial intelligence systems” to use “reasonable care” to protect Colorado resident consumers from any known or reasonably foreseeable risks of “algorithmic discrimination.” As written, the law most likely applies to both creators of high-risk AI systems, as well as employers adopting high-risk AI technologies within their organization.  Continue Reading From Brussels to Boulder: Colorado Enacts Comprehensive AI Law with Significant Obligations for Employers on the Heels of the EU AI Act

      The FTC rule banning post-employment noncompetes was published in the Federal Register on May 7, which means the rule will take effect on September 4, 2024, unless pending lawsuits to void the rule are successful.

      Despite considerable uncertainty around when, or even whether, the rule will apply, employers should prepare now so as not to be caught flatfooted. The first step is to understand the rule’s parameters and potential impact on your business. Our FAQs guide you through the intricacies of the rule and the steps you should take while waiting for the lawsuits challenging the rule to be resolved.

      Application of the Rule to Workers

      1. Does the rule apply to B2B noncompetes?

      No, the FTC rule does not apply to business-to-business (B2B) noncompetes. Instead, existing federal antitrust laws should continue to be considered when evaluating B2B noncompetes.

      2. Does the rule apply to all workers?

      No, there are limited exceptions. First, the rule does not invalidate existing noncompete agreements (i.e. agreements entered into on or before the effective date of September 4, 2024) with “senior executives.” After that date, new noncompetes with all US employees will be prohibited.

      “Senior executive” means a worker who received “total annual compensation” of at least $151,164 in the preceding year (or the equivalent amount when annualized if the worker was employed during only part of the year) and who is in a “policy-making position.”

      • “Total annual compensation” may include salary, commissions, nondiscretionary bonuses, and other nondiscretionary compensation earned during the preceding year, but does not include the cost of, or contributions to, fringe benefit programs.
      • Those in a “policy-making position” may include the President, CEO or equivalent, or others with “policy-making authority,” meaning “final authority to make policy decisions that control significant aspects of a business entity or common enterprise.” In the Supplementary Information to the rule (the FTC’s commentary on the rule), the Commission notes “many executives in what is often called the ‘C-suite’ will likely be senior executives if they are making decisions that have a significant impact on the business, such as important policies that affect most or all of the business. Partners in a business, such as physician partners of an independent physician practice, would also generally qualify as senior executives under the duties prong, assuming the partners have authority to make policy decisions about the business.”

      Second, the rule does not apply to workers outside of the United States. See FAQ 11 below.Continue Reading Thirteen Things You Didn’t Know About the FTC’s Noncompete Ban and Five Steps to Prepare Now in Case it Takes Effect

      Millions of additional employees will soon be eligible for federal overtime because of the Department of Labor’s April 23 Final Rule. Under the Fair Labor Standards Act (FLSA), certain salaried employees are exempt from federal minimum wage and overtime requirements if they are employed in a bona fide executive, administrative, or professional (EAP) capacity. This is sometimes called the “white collar” exemption. The Final Rule:

      • Increases the minimum salary requirement for the EAP exemption from $684 per week ($35,568 annualized) to $844 per week ($43,888 annualized) effective July 1, 2024 and to $1,128 per week ($58,656 annualized) effective January 1, 2025; and
      • Increases the minimum total annual compensation level for exemption as a “highly compensated employee”—e.g., one who customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee—from $107,432 to $132,964 effective July 1, 2024 and to $151,164 effective January 1, 2025.

      Continue Reading DOL Raises the Federal Overtime Salary Threshold | Next Steps for US Employers

      On Tuesday this week, the Federal Trade Commission (FTC) issued its highly anticipated final rule on noncompetes, imposing a near-total ban on worker noncompetes in the United States. Barring injunctive relief from legal challenges (which have already started), the rule will take effect 120 days from publication in the federal register.

      Interestingly, the rule exempts noncompete covenants entered into pursuant to a bona fide sale of a business. While “bona fide” is not defined in the final rule, the Supplementary Information for the rule explains that the FTC considered but rejected percentage and dollar minimum thresholds for the sale of business exception to weed out “exploitative and coercive” noncompetes and clarified that excepted noncompetes must be given “pursuant to a bona fide sale.” The Supplementary Information further explains that the FTC considers a bona fide sale to be one that is made between two independent parties at arm’s length, and in which the seller has a reasonable opportunity to negotiate the terms of the sale. In contrast, the FTC specifically calls out as problematic “springing noncompetes,” which apply to employees in the event of a sale and mandatory stock redemption or repurchase programs because the employee has no goodwill to exchange in the sale for the noncompete and no meaningful opportunity to negotiate at the time of contracting.

      Nevertheless, the bona fide sale exception is broad and preserves the status quo by allowing buyers in M&A transactions to obtain noncompetes from individual sellers in circumstances where such noncompetes are otherwise permitted currently. While the pending and anticipated legal challenges to the rule are significant and place the entire rule in jeopardy, the sale of business exception is not likely to be narrowed because of these challenges.

      So, what does this new regime mean for M&A?

      What Type of Noncompetes Are Impacted?

      The Supplementary Information confirms that the new rule does not apply to B2B noncompetes or nonsolicits. Instead, the focus of the rule is noncompetes with workers that limit their ability to work for others. So the rule does not impact current B2B agreements.

      Second, the FTC repeatedly makes the point that noncompetes must meet existing state and federal law restrictions (e.g., reasonable in scope and duration; limited to the goodwill to be acquired, etc.) to be enforceable, even if they otherwise fall within the sale of business exception in the new rule. This is the case because the FTC rule creates a new floor for noncompetes by preempting more lax state rules, but it does not preempt more stringent state laws or federal antitrust restrictions.Continue Reading Still Going Strong: M&A Noncompetes and the FTC’s Final Rule on Noncompetes

      Employers have been eagerly awaiting the EEOC’s Final Rule to implement the Pregnant Worker Fairness Act, and it’s (finally!) here. On April 15, the EEOC issued the Final Rule, which largely follows the proposed rule (we blogged about the proposed rule here, and about the PWFA here). The Final Rule was published in the Federal Register on April 19, 2024 and will take effect on June 18, 2024. There are no major surprises for employers, but the Final Rule has arrived with a bit of controversy.Continue Reading Special Delivery: The PWFA Final Rule Has Arrived

      On April 23, the Federal Trade Commission voted 3-2 to issue its final rule on noncompetes, imposing a near-total ban on all employer-employee noncompetes in the US. Barring challenges (the first lawsuits have already been filed), the rule would become effective 120 days from publication.

      The rule will be a game-changer for companies operating in the US if it takes effect as issued.

      Breaking it Down

      What does the rule do?

      With only a few exceptions, the FTC’s now-final rule declares employer-employee noncompete clauses an “unfair method of competition,” and a violation of Section 5 of the FTC Act. The rule targets both formal noncompete clauses and “functional noncompete” clauses that have the effect of prohibiting the worker from seeking or accepting employment with a person or operating a business after the conclusion of the worker’s employment with the employer. This can include broad nondisclosure agreements that have the effect of precluding workers from seeking employment opportunities in the same field.Continue Reading Breaking News: The FTC Bans Nearly All Employer-Employee Noncompetes Except Those Given as Part of a ‘Bona Fide’ Sale of Business