As the Biden-Harris administration draws to a close, EPA has issued its third annual report touting the progress made under the PFAS Strategic Roadmap.

In the report, EPA notes the major legal, technical, and policy developments it has enacted since the PFAS Strategic Roadmap was adopted in 2021. Those developments include the following:

  • Designation of PFOA and PFOS as CERCLA Hazardous Substances. This final rule will allow EPA and others to pursue potentially responsible parties under CERCLA for PFAS contamination. According to EPA, this designation will ensure that polluters, and not taxpayers, will pay for PFAS cleanups.
  • Creation of Drinking Water Standards for Certain PFAS. This final rule established enforceable drinking water standards for 5 individual PFAS and mixtures of any 2 or more of 4 individual PFAS. These drinking water standards are as low as 4 parts per trillion for PFOA and PFOS.
  • Chemical and Product Regulation. EPA has enacted or proposed a number of regulations under the Toxic Substances Control Act (TSCA) to eliminate and reduce PFAS in commerce. It also is requiring manufacturers and importers of PFAS (including PFAS-containing items) to report PFAS-related information to EPA by (in most cases) January 11, 2026.
  • Issuance of PFAS Enforcement Strategy. EPA issued a PFAS Enforcement Discretion and Settlement Policy Under CERCLA, detailing its priorities and plans when it comes to PFAS enforcement. In the policy, EPA makes it clear that it intends to pursue enforcement against manufacturing and industrial entities, and not public entities that operate water and wastewater systems, airports, or fire stations.
  • PFAS-Related Investments. The Biden-Harris administration committed to investing significant funds to address PFAS contamination, including $10 billion to assist communities and water systems impacted by PFAS and other emerging contaminants.
  • Advancing the Science on PFAS. EPA has engaged in a number of initiatives to gather more data about the presence of PFAS in the environment and in products, analyze appropriate test methods, and study potential human health risks associated with a variety of PFAS compounds.

EPA also announced future priorities, which include developing effluent limitations guidelines for the PFAS manufacturing sector. If adopted, these guidelines would restrict PFAS in discharges from potentially a number of industrial entities, including metal finishers and landfills. EPA also continues to invest in collecting data from a variety of sources, including wastewater treatment facilities, to further understand where PFAS are being found so it can develop effective ways to address them.

Of course, with the impending change in administrations could come a change in EPA’s priorities related to PFAS. The change could also impact initiatives and regulations that are already in place or in the works. We will continue to monitor PFAS developments as we head into 2025.

This post was co-authored by Labor + Employment Group lawyer Madison C. Picard.

Last week, the United States District Court for the Eastern District of Texas vacated and set aside the United States Department of Labor’s (DOL) final rule raising the minimum salary threshold for the Fair Labor Standards Act’s (FLSA) white-collar overtime exemption.

Recently, we discussed parts of this rule that have already taken effect. Specifically, as of July 1, 2024, the minimum salary threshold for executive, administrative, and professional (EAP) employees was raised from $684 per week ($35,558 per year) to $844 per week ($43,888 per year), and the salary threshold for the highly compensated employee (HCE) exemption was raised from $107,432 to $132,964. The salary thresholds were scheduled to rise again on January 1, 2025, with the EAP exemption salary threshold rising to $1,128 per week ($58,656 per year) and the HCE exemption rising to $151,164 annually.

The court concluded that the rule exceeded the DOL’s statutory authority under the FLSA. Previously, the court enjoined enforcement of the rule for the state of Texas as an employer; however, this time, the court struck down the rule as it applies to all employers nationwide. The court’s ruling also entirely vacated the DOL’s rule, meaning the July 1, 2024, increases are now nullified. Consequently, the salary thresholds will revert to what they were under the DOL’s 2019 rule, with the EAP salary threshold at $684 per week ($35,558 annually) and the HCE threshold at $107,432 annually.

The DOL may appeal the decision to the Fifth Circuit; however, with the incoming administration, it is possible that the DOL will decline to appeal or will repeal the rule entirely. Therefore, manufacturers should operate as though the January 1, 2025, increases will not take effect. Manufacturers who adjusted salaries or exemption statuses because of the July 1, 2024, increases should consult with counsel on how to proceed.

What are you hearing? What do the “multiples” look like in my [insert sub-industry] in manufacturing? 

These are two common questions that I get asked a lot by owners and executives at manufacturing companies. Granted, we are involved in many M&A transactions – particularly in the lower middle market. We represent buyers and sellers, and over the past five years, we have been involved in a lot of transactions. 

For buyers, our clients tend to be “strategics” or “corporates” that are looking to acquire other manufacturing companies for a various reasons. Sometimes, strategics are looking to diversify their product lines or expand their customer base. In the past few years, sometimes it is simply to obtain “talent” at both the executive and non-executive levels. A number of companies were flush with cash on their balance sheets after COVID-19 and are looking to deploy capital. 

We also have clients that are “financial sponsors,” including private equity firms. There is no shortage of PEs that are looking to acquire (typically at least a majority interest) of manufacturers in certain industries. The hottest industry for PEs typically is aerospace and defense although be careful not to generalize that interest as PEs focus on certain sub-sectors of A&D companies to acquire based on the market.

For sellers, we typically represent small to mid-size privately held manufacturers – many of which are family-owned and operated. Sometimes, the sellers hire investment bankers to aid in that process – sometimes not. Sometimes, there are “auctions” where several potential suitors are brought in to bid and other times there are so-called “proprietary” transactions where one lucky buyer has exclusive rights to negotiate with the seller. 

One theme throughout all of these transactions is the never-ending search for a proper business valuation. The short-hand way that many companies get there is through a “multiple” that compares the total value of a company’s operations relative to its earnings before interest, taxes, depreciation, and amortization. There are a number of people out there who write countless articles about whether EBIDTA multiples make sense or not. This is not the point of this post.

Rather, when manufacturers call me to ask what other companies in their sector are getting for “multiples’ they likely want to just multiple that “X” (e.g., 5X, 8X, 12X) times their EBIDTA (typically over the trailing twelve months, as may be adjusted) to get a sense of the enterprise value if they were to sell.  Oftentimes, they may not want to sell. Sometimes they do. 

As one of my CEO clients tells me, “multiples are NOT a random force on value. There are many factors driving it.” As an example, the ultimate transaction price is often driven by customer contracts, margins, a track record, sound management, etc. And, it is not coincidence that higher multiples come down the pike when a company’s EBIDTA is higher. 

What is my main message when I get those calls? Just be careful not to distill your business down to one number. A manufacturing business is a complex, living, breathing organism and there are lot of factors that go into valuation. We can help with the legal aspects of the acquisition or sales process obviously – just go into it with an open mind about the potential outcomes.

This post was co-authored by Labor + Employment Group lawyer Madison C. Picard.

There is no greater Halloween horror for employers than a workplace celebration that creates legal risks such as inappropriate costumes or safety hazards, among other issues. Thus, there are many considerations when planning an office celebration for this spooky holiday. If you are a manufacturer hosting an office Halloween party, consider following these three tricks to make the best out of your workplace treat. 

1.  Provide Guidance on Expectations                                        

First and foremost, manufacturers should be transparent about expectations surrounding employee participation including costumes. With regard to costumes, when crafting guidance, manufacturers should consider both civility as well as safety, especially if the employees will be permitted to wear their costumes during the workday. For example, employees should understand what costumes or outfits do and do not meet manufacturing floor safety guidelines. Employees should also be expressly reminded that costumes must conform to all employer policies including anti-harassment, discrimination and respect policies and that costumes, outfits or accessories that violate such policies will not be tolerated. 

This election year in particular, some employees may don political costumes. The free speech rights under the First Amendment of the U.S. Constitution do not apply to employees working for private manufacturers. Thus, private manufacturers can generally establish rules that, for example, prohibit costumes that support (or criticize) a political candidate or party. That said, manufacturers should be aware that several states have laws regulating when employers can lawfully discipline employees for political activity; further, there are state and federal laws that may be implicated with regard to employees expressing political views. If manufacturers are considering disciplining an employee for a political costume, they should first consult with legal counsel.  

2. Prioritize Safety

There are more safety hazards at workplace Halloween parties than the cavity causing candy. This is especially true if the celebration is being held on the manufacturer’s shop floor. Manufacturers should ensure that all of the decorations in the workplace comply with the fire and safety codes set forth by local governments and by OSHA. Manufacturers should also avoid activities that inherently involve risks and could result in workplace injuries, such as pumpkin carving contests.

Lastly, manufacturers should carefully consider whether to serve alcohol. If the celebration is being held on the shop floor, it is highly recommended that alcohol is not served, especially if heavy machinery is accessible. For celebrations held elsewhere, manufactures should consider taking steps to ensure alcohol is consumed in moderation and is not central to the party, and follow best practices for serving alcohol; when considering tips for limiting alcohol consumption or its impact on employees, employers should consider only serving beer and wine, serving a meal (as compared to light appetizers), limiting the amount of alcohol served by, for example, using a drink ticket system, using bartenders to serve alcohol, serving non-alcoholic options; among other practices. In some circumstances, manufacturers may be legally responsible for the conduct of their intoxicated employees.

3. Make it Optional

Workplace celebrations are a great way to boost employee morale and help foster employee relationships. That said, these celebrations should generally be optional. Manufacturers should keep in mind that employees may not want to attend a Halloween party for various reasons, including, for example, their religious practices and beliefs; therefore, ensuring that the party is optional may support all employees including those that do and do not celebrate Halloween. 

 If attendance is mandatory, there may be implications from a workers’ compensation perspective if there are any injuries or illnesses. Further, manufacturers should pay the employees for their time pursuant to the Fair Labor Standards Act (FLSA) and applicable state laws regardless of whether the celebration was held outside of normal working-hours. Requiring non-exempt employees to attend unpaid celebrations can expose the manufacturer to wage and hour claims in the future.

This week’s post was co-authored with Kathryn M. Rattigan, David E. Carney and Edward J. Heath.  We are members of Robinson+Cole’s Manufacturing Industry Team and regularly counsel clients on trade compliance, anti-corruption compliance, and other corporate compliance issues.

The recent enforcement activities of the newest federal strike force serve as a warning to U.S. manufacturers and other businesses involved in the export of products that the government is doubling down on prosecuting trade violations. The expressed mission of the multi-agency Disruptive Technology Strike Force (Strike Force) is “to counter efforts by hostile nation states to illicitly acquire sensitive U.S. technology to advance their authoritarian regimes and facilitate human rights abuses.” The latest Strike Force criminal indictments focus on technology such as:

  • Aerospace and defense source code,
  • Aircraft components,
  • Microelectronic components used in unmanned aerial vehicles (UAVs),
  • Laser welding machinery.

There is every reason to expect that the Department of Justice’s (DOJ) future targets will extend beyond the kind of individual defendants who have been the focus of the 24 criminal indictments to date and include legitimate companies whose compliance program deficiencies allow the illicit exports to occur. Ensuring that a company’s trade compliance program meets or exceeds the expressed standards of the DOJ and the Department of Commerce (DOC) is now more essential than ever.    

Compliance Keys

  • Exposure Risk for Manufacturers and Distributors. The export-diversion schemes prosecuted to date share a common element—a bad actor sought to exploit innocent U.S. manufacturers and distributors by misrepresenting their identity and end-use plans or by seeking to compromise the manufacturer’s computer systems. As U.S. export controls (particularly those aimed at Russia and China) have expanded over the past several years, schemes like those alleged in these indictments have proliferated. Failing to be alert for the warning signs of such schemes may expose a company to becoming a victim of sanctions evaders or, worse, an enforcement target for ignoring red flags. The Export Administration Regulations prohibit companies from engaging in a transaction with the knowledge that a violation has occurred or will occur. “Knowledge” is not limited to actual knowledge; it can also be inferred from turning a blind eye to red flags in a transaction. As a result, having personnel trained to identify and respond appropriately to red flags suggesting that diversion could be occurring can be crucial to avoiding export violations.
  • Precautions to Detect and Prevent Imposter Schemes.
    • First, a written risk-based export control compliance plan can be a valuable aid in detecting diversion schemes and other illicit behavior. Such plans detail procedures employees must follow for conducting diligence on new and existing customers and transactions, evaluating when export licenses are required for a transaction, and detecting and responding to red flags. They provide clear guidance on when and how to escalate potential issues. Such a compliance plan gives employees the tools to help them identify when their company may be facing a diversion scheme and how to respond appropriately before a transaction is executed.
    • Second, companies can emphasize conducting “know your customer” (KYC) diligence on transactions. The importance of such diligence is heightened when new customers are involved, when business with an existing company is expanding to new products, or to involve new product destinations. The DOC has published extensive guidance on KYC diligence (often in conjunction with other U.S. government agencies and with enforcement authorities in allied countries). This week, the DOC and export control authorities from the other G7 countries issued new guidance that identifies items most likely to be the subject of diversion efforts by Russia, lists common red flags suggesting potential export control and sanctions evasion in a transaction, and suggests some diligence best practices to prevent diversion and evasion. This new guidance echoes similar guidance issued by U.S. and allied government agencies over the last two years for detecting diversion schemes in the current environment of export controls and sanctions regarding Russia and China. (For example, our summary of the joint guidance issued last year by export-control authorities in the United States, the United Kingdom, Canada, Australia, and New Zealand addressing 45 types of goods at high risk for diversion and recommended KYC diligence steps can be found here.) Companies should be tracking and incorporating, as appropriate, these guidance updates
    • Third, companies can be knowledgeable about the potential uses of their products and technology. This knowledge informs when and where a company may face diversion risk. Products and technology with permissible uses could be a target for diversion where they can be used for purposes the U.S. government restricts. For example, in one of the recent Strike Force cases, U.S. v. Postovoy, the alleged diversion scheme targeted a company whose microelectronic components could be used in drones and UAVs. Keeping U.S.-origin components out of such vehicles used by Russia in the war with Ukraine has been a major U.S. export control policy priority. Similarly, in another Strike Force case, U.S. v. Teslenko, the alleged diversion scheme targeted a company whose laser welders had applications that could aid Russia’s nuclear weapons program. Knowing the market for illicit uses for a company’s products and technology helps a company tailor its compliance efforts by identifying what products may be attractive to bad actors and what specific red flags may be of most concern regarding the company’s products and technology.
  • Cybersecurity Vigilance to Prevent Technology Theft. Another case announced alongside the Strike Force cases, U.S. v. Wei, is a reminder that U.S. manufacturers of sensitive technology face a multifront effort by foreign malign actors to gain access to that technology. In addition to ensuring up-to-date export controls and sanctions compliance programs, U.S. manufacturers should consider measures to protect their technology from misappropriation through cyber intrusion by implementing appropriate processes and tools to prevent and detect such activity by these actors. These processes and tools can include:
    • Regularly sharing cyber hygiene tips and training on current phishing schemes and conducting phishing tests to increase employee awareness of these risks,
    • Maintaining system hygiene by regularly scanning systems for vulnerabilities and unauthorized accounts, monitoring access logs for suspicious activity, and prohibiting automatic email forwarding to external addresses to prevent data leakage,
    • Installing a secure email gateway to filter out spam, malware, and phishing attempts and employing email authentication techniques (e.g., SPF, DKIM, and DMARC),
    • Tracking and monitoring all endpoints and mobile devices to detect suspicious activities and regularly auditing access logs to identify violations or attempted violations of access policies, and
    • Restricting administrative and privileged account access to minimize potential damage and limiting remote access to critical data and functions.

The Indictments

The six most recent indictments relating to the Strike Force’s efforts confirm that export control and sanctions compliance, particularly concerning Russia, China, and Iran, is a significant enforcement priority for the DOJ and other government agencies. As one Strike Force member stated, the DOJ, “through the work of the Strike Force, will continue to do all [it] can to prevent advanced technologies from falling into the hands of our adversaries and protect our national security.” These indictments and a related indictment announced simultaneously highlight the risks of manufacturers and distributors falling victim to schemes like those alleged in the indictments or becoming the focus of enforcement efforts for committing export control violations.

U.S. v. Postovoy. A Russian citizen living in the United States was indicted for conspiring to violate the Export Control Reform Act (ECRA), to smuggle, launder money, and defraud the United States. After Russia invaded Ukraine, the individual used a series of companies he owned around the world to obtain and unlawfully export microelectronic components that could be used in drones and UAVs from the United States to Russia. The individual concealed and misstated end-user and destination information in communications with U.S.-based distributors.

U.S. v. Song. A Chinese national was indicted for wire fraud and aggravated identity theft in connection with attempts to obtain software and source code from the National Aeronautics and Space Administration (NASA), research universities, and private companies. Over several years, the individual “spear phished” individuals at NASA, the Air Force, Navy, Army, and Federal Aviation Administration; research universities; and aerospace companies in an attempt to obtain code to which the individual suspected the victims had access. At all relevant times, the individual, who assumed the identities of persons known to the victims, was an employee of a Chinese state-owned aerospace and defense contractor.

U.S. v. Teslenko. A U.S. resident and a Russian national were indicted for smuggling and conspiracy to violate the ECRA, smuggle, and defraud the United States. For approximately six years, the individuals exported laser welding machines from one’s employer in the United States to a Russian company involved in Russia’s nuclear weapons program. The individuals falsified export documentation to conceal the end user.

U.S. v. Goodarzi. A dual U.S. and Iranian citizen was charged with smuggling UAV components to Iran from the United States. For four years, the individual obtained U.S.-originated parts and either transshipped them, typically through the United Arab Emirates or transported them in his own checked luggage during trips to Iran. The individual had acknowledged in numerous emails with U.S. suppliers that the parts could not be transferred to Iran because of sanctions. The individual also lacked the proper export license to send these items to a sanctioned country like Iran.

U.S. v. Nader. A dual U.S. and Iranian citizen was indicted for violating U.S. economic sanctions and other federal laws in connection with procuring U.S.-originated aircraft components for Iran’s armed forces. Customers in Iran placed orders with the individual, who, in turn, directly or through others, contacted U.S. companies for the components. The individual falsely identified himself or his U.S.-based company as the end user of the components. The individual attempted to export the components, including transshipment to Iran, on several occasions; however, DOC agents detained each export.

U.S. v. Wei. In addition to the above criminal cases brought through the work of the Strike Force, the DOJ announced the indictment of a Chinese national on charges of fraud, conspiracy, computer intrusion, and aggravated identity theft for unlawfully accessing the computer network of a U.S. telecommunications company. The individual—a member of the People’s Liberation Army—and co-conspirators accessed the company’s systems in 2017 and stole documents relating to communications devices, product development, testing plans, internal product evaluations, and competitive intelligence. The individual attempted to install malicious software to maintain access to the company’s systems; his access continued for approximately three months.

The Cybersecurity and Infrastructure Security Agency (CISA), along with the Federal Bureau of Investigation (FBI), the National Security Agency, and other international partners, issued an Alert on September 5, 2024, warning that cyber actors affiliated with the Russian military are targeting critical infrastructure, government services, financial services, transportation systems, energy, and healthcare sectors of NATO members.

The Alert warns that Unit 29155 cyber actors affiliated with the Russian military are collecting information for “espionage purposes, reputational harm caused by the theft and leakage of sensitive information, and systematic sabotage caused by the destruction of data.” The cyber actors of Unit 29155 have been assessed as officers of the GRU and are being assisted by “known cyber-criminals.” Some of the threat group names associated with these actors include Cadet Blizzard, Ember Bear, Frozenvista, UNC2589, and UAC-0056.

Unit 29155 is believed to be responsible for WhisperGate against Ukraine and is involved in attacking numerous members of NATO. “The activity includes cyber campaigns such as website defacements, infrastructure scanning, data exfiltration, and data leak operations. These actors sell or publicly release exfiltrated victim data obtained from their compromises.”

The FBI has detected more than 14,000 instances of domain scanning and “have defaced victim websites and used public website domains to post exfiltrated victim information.”

The Alert details the tactics, techniques, and procedures the threat actors use. To mitigate this, the Alert urges organizations to:

  • Prioritize routine system updates and remediate known exploited vulnerabilities.
  • Segment networks to prevent the spread of malicious activity.

Enable phishing-resistant multifactor authentication (MFA) for all externally facing account services, especially for webmail, virtual private networks (VPNs), and accounts that access critical systems.

This post was authored by Data Privacy + Cybersecurity Team chair Linn Foster Freedman and is also being shared on our Data Privacy + Cybersecurity Insider blog. If you’re interested in getting updates on developments affecting data privacy and security, we invite you to subscribe to the blog.

This post was co-authored by Labor + Employment Group lawyer Madison C. Picard.

As the seasons change, so do manufacturers’ priorities. Fall is typically one of the busiest hiring periods of the calendar year, so many manufacturers are likely bracing themselves for this challenge. That said, there were several significant labor and employment updates this spring and summer of which manufacturers should be aware; below are four key trends that may require action to ensure compliance.

1. Worker Classification – Independent Contractor Versus Employees

Earlier this year, the U.S. Department of Labor (DOL) issued a final rule regarding employee and independent contractor status under the Fair Labor Standards Act (FLSA). The new rule, which took effect March 11, 2024, adheres to a “totality of the circumstances” approach and involves consideration of six factors. Manufacturers who rely on independent contractors to perform work and provide services should consider reviewing those relationships to ensure they are adequately characterized as independent contractors rather than employees.

2. Salary Threshold for Exempt Employees Increasing

This past spring, the DOL issued a final rule that included raising the federal minimum salary threshold for exempt employees. Previously, the salary threshold for executive, administrative, and professional employees was $684 per week (or $35,568 per year). Effective July 1, 2024, however, the salary threshold became $844 per week ($43,888 per year), and on January 1, 2025, it will once again rise to $1,128 per week ($58,656 per year). The final rule also states that the threshold will increase on July 1, 2027, and every three years thereafter. Manufacturers should review these thresholds, as well as any state or local thresholds that may exist to ensure compliance and prepare for the January 1, 2025, increase.

3. Pay Transparency Laws

Pay transparency laws, including those requiring employers to provide the pay range to applicants, candidates, and employees or to include it in job postings, continue to be passed in states nationwide. On July 31, 2024, Massachusetts passed a law requiring employers to include a “pay range” in all job postings, including those posted by third parties, such as recruiters. Massachusetts joins several other states in enacting such laws: Maryland, effective October 1, 2024; Minnesota and Illinois, both effective January 1, 2025; Vermont, effective July 1, 2025; and Washington, D.C., which took effect on June 30, 2024. Notably, the Massachusetts law also contains pay data reporting requirements for employers that are subjected to annual federal Equal Employment Opportunity (EEO) report requirements, which includes many manufacturers. Specifically, covered manufacturers must submit an annual report of pay data categorized by race, ethnicity, sex, and job category to the Secretary of the Commonwealth, with the first report due no later than February 1, 2025. Manufacturers might consider reviewing the pay transparency and pay data reporting laws in those states where they employ workers or engage in recruiting.

4. Paid Sick Leave Laws

While paid sick leave has been trending for a number of years, there have been significant developments in recent months. In Connecticut, the sick leave law was recently expanded significantly, and now nearly all private employees are entitled to such leave. New York has also recently become the first state in the nation to enact paid prenatal leave benefits for pregnant workers. Specifically, effective January 1, 2025, pregnant workers will be entitled to up to 20 hours of paid leave in a 52-week period to attend prenatal medical appointments and procedures. This leave is not accrued; rather, it must be immediately available to employees, and it is in addition to the paid sick and safe leave to which employees are already entitled. Manufacturers who are multi-state employers should consider engaging in a comprehensive review of their PTO and sick leave policies to ensure compliance with these recent advancements.

With the presidential election fast approaching in November, there are likely to be changes to the above, including enforcement priorities for the executive branch and relevant government agencies. Employers who require assistance with labor and employment law compliance should consult competent employment counsel.

Below is an excerpt of a legal update authored by Robinson+Cole’s Trevor Bradley, Ian Clarke-Fisher, and Stephen Aronson.

On August 20, 2024, in Ryan LLC v. Federal Trade Commission, the U.S. District Court for the Northern District of Texas entered summary judgment in favor of the plaintiffs and set aside the Federal Trade Commission’s (FTC) Final Rule, prohibiting the FTC from enforcing the Final Rule and the Final Rule taking effect nationwide. As succinctly stated by the district court in its decision, “The Court sets aside the Non-Compete Rule. Consequently, the Rule shall not be enforced or otherwise take effect on its effective date of September 4, 2024, or thereafter.” Decision at 2. 

Background

As we reported in January 2024, April 2024, and July 2024, the FTC issued the Final Rule on April 23, 2024, banning nearly all worker non-compete agreements nationwide effective September 4, 2024. 

On July 3, 2024, the Ryan court enjoined the FTC from implementing or enforcing the Final Rule against only the plaintiffs in that case. Importantly, the July 3rd ruling did not restrain the FTC from enforcing the Final Rule against other employers. At that time, the court stated it intended to issue a decision on the ultimate merits of the case by August 30, 2024, a promise it made good on this week. 

To read the legal update, click here.

This post was co-authored by Labor + Employment Group lawyer Madison C. Picard.

Artificial Intelligence (AI) can greatly benefit manufacturers in the workplace. That said, it should be handled with care. States across the country are attempting to regulate the use of AI in various contexts, from political campaigns to social media, and the workplace appears to be next. Colorado recently enacted the first comprehensive AI legislation regarding the development and deployment of AI, the “Colorado AI Act” (the Act), and its impact will reach various workplaces nationwide. Here is what manufacturers should know about the Act:

  • The Act, which takes effect on February 1, 2026, and will become a part of Colorado’s Consumer Protection Act, regulates “developers” and “deployers” of AI. However, manufacturers will likely fall under the latter category.
  • The Act requires deployers to use “reasonable care” to avoid algorithmic discrimination from using “high-risk” AI systems. It defines “high-risk” AI systems as any system that “makes, or is a substantial factor in making, a consequential decision,” meaning “a decision that has a material legal or similarly significant effect,” including decisions related to employment. The Act defines a “substantial factor” as one that “assists in making a consequential decision,” “is capable of altering the outcome of a consequential decision,” and is “generated” by an AI system. Thus, AI systems used in human resources practices, such as screening candidates in the recruiting/hiring process, may be classified as “high-risk.”
  • Manufacturers may be wondering how they can ensure that they use “reasonable care” when using these kinds of high-risk systems. Interestingly, the Act includes a rebuttable presumption that a deployer is using reasonable care if they:
    • Implement a risk-management policy that is “reasonable,” as defined by the Act based on various considerations, and is regularly and systematically reviewed and updated.
    • Complete annual impact assessments for high-risk AI systems. The Act outlines various elements that the risk assessment must include.
    • Provide several notices required by the Act, including a notice to consumers that AI is being used “to make, or be a substantial factor in making, a consequential decision,” which must be provided to the consumer before that consequential decision has been made. For consumers who are adversely affected by an AI system (for example, denied an employment opportunity), notice must be provided that they have “an opportunity to correct any incorrect personal data” used by the AI system and “an opportunity to appeal an adverse consequential decision.” Manufacturers who employ fewer than 50 employees, do not use their own data to train AI systems, deploy the AI systems for their intended purpose, and make impact assessments available to consumers may be exempt from some of these notice requirements.  
    • Disclose to the Attorney General the discovery of algorithmic discrimination that the AI system has caused within 90 days of discovery.
  • There currently is no private right of action under the Act, meaning the attorney general’s office has exclusive enforcement authority. The Act does outline some affirmative defenses that manufacturers may use if facing an enforcement action.

Manufacturers located in any state that are deploying AI as part of human resources practices, including candidate screening, talent management, performance management, and for other purposes, should consider developing or updating AI policies and frameworks to ensure compliance with this law and the other applicable laws, such as the New York City Automated Employment Decision Tools (AEDT) law. Other states are following suit, and the federal government is also focusing on this issue. We expect the number of states passing such laws to continue rising. In fact, the U.S. Department of Labor just recently released guidance on employers’ use of AI in the workplace, which contains suggested AI principles and foreshadows future federal legislation. Thus, if there is a time to prioritize AI governance – it is now!

This post was co-authored by Labor + Employment Group lawyer Jessica Pinto.

With the 2024 election fast approaching, and political news exploding, manufacturers are asking an important question: What is the role of political bobbleheads, pins, stickers, and discussions in the workplace? 

While public employers (i.e., government employers) are generally restricted from infringing upon employees’ free speech rights under the First Amendment of the U.S. Constitution, those same protections do not apply to employees working for a private employer. That being said, there may be protections under state and federal law. 

Under several state laws, employees’ political affiliation or related activity is protected. For example, in California, no employer may make, adopt, or enforce any rule, regulation, or policy that forbids or prevents employees from engaging or participating in politics or becoming candidates for public office, or controls or directs the political activities or affiliations of employees. The law further provides that employers may not coerce or influence employees to adopt, follow, or refrain from adopting or following a particular political action or activity. Similarly, in Colorado, it is unlawful to prevent employees from forming, joining, or belonging to any lawful political party or to coerce employees because of their connection to a lawful political party. New York also mandates that an employer cannot take certain adverse actions or discriminate against employees for their political activities outside of working hours, off the employer’s premises, and without using the employer’s equipment or property if the activities are legal. Moreover, Washington, D.C., also prohibits discrimination based on political affiliation by statute, and other states have passed similar laws in addition to those mentioned. While these protections relate to political affiliation and activity rather than speech at the workplace, they reveal some states’ desire to shield employees from employer action in the realm of politics.

State laws may also tackle political speech in the workplace, including Connecticut, which has generally extended free speech rights to employees of private employers, subject to a few exceptions. Namely, Connecticut law establishes that a private employer cannot discipline or threaten to discipline an employee for exercising free speech rights guaranteed under the federal or state constitutions unless the speech substantially or materially interferes with the employee’s job performance or working relationship between the employee and employer.

Political speech can also be protected under other federal laws in certain circumstances. For instance, the National Labor Relations Act (NLRA) applies to union and nonunion workplaces alike and protects employees’ rights to engage in certain protected activities, regardless of whether they are part of a union. Namely, Section 7 of the NLRA protects an employee’s concerted activity for the purposes of mutual aid or protection, which is construed broadly and must relate to wages, hours, or other working conditions. Therefore, the NLRA could apply to concerted activity involving speech with a political message or a connection to political expression (e.g., fair wages, minimum wage increases, etc.). A recent example includes a National Labor Relations Board (NLRB) decision holding that an employer violated the NLRA when it terminated an employee, who had joined with others and refused to remove letters stating “BLM,” which stood for Black Lives Matter, from their work apron. In that decision, the NLRB indicated the marking was a “logical outgrowth” of prior concerted protests concerning racial discrimination in the workplace and an attempt to bring complaints to the employer’s attention.

Finally, employers (e.g., owners, leadership, etc.) must be careful if they engage in political speech including endorsing certain political candidates or views. This can create challenges in the workplace including animosity and isolation for those who may disagree, and can result in harassment, discrimination, and other issues. In addition, employers’ ability to mandate that employees attend meetings and listen to such speech may be prohibited under some state and even federal laws, depending on the circumstances.

With election season around the corner, political discussions and politics in the workplace are bound to increase. In anticipation, manufacturers should consider:

  • Whether and how to implement a policy addressing speech in the workplace.
  • Reminding employees about cooperation and respect in the workplace.
  • Training managers on how to navigate such conversations or expressions should it arise.
  • Ensuring that the workplace remains an inclusive environment where employees can work cooperatively and efficiently.
  • Consulting with competent legal counsel if issues arise.