Employer Considerations for DOL’s New AEWR Rule

The U.S. Department of Labor (DOL) issued its final Adverse Effect Wage Rates (AEWR) rule that will continue to calculate the AEWR from wage survey information and likely to continue to escalate the AEWR. This rule is effective on March 30, 2023. Any job orders filed on or before March 29, 2023 will not be subject to this rule.

In addition, the rule allows for the potential of additional wage surveys to be conducted to further increase to the highest of all wages assessed. Finally, the most problematic portion of the AEWR rule is that, if there are multiple activities included in the description that fall outside the agricultural Standard of Occupation (SOC) codes, DOL will require use of the highest applicable wage. 

The largest impact will be in situations where job duties contain driving/transportation/supervisory responsibilities as wages for those SOC codes are typically higher than AEWR. Employers should consider separate contracts for driving/transportation/supervision activities to avoid the higher wage applying to all H-2A worker activities. The higher wages for the separate contracts would also apply to corresponding employment.

The final AEWR rule can be found here.

Varnum and Great Lakes Ag Labor Services will hold a call on March 6, 2023 from 11:30am to 12pm for Agricultural Employment Compliance Guide subscribers to discuss the new rule.

At what age can a child decide whom they want to live with in Michigan?

“Doesn’t my child get to decide where she lives?  She is 13.”

Any parent who is in the middle of a child custody dispute finds themselves asking this question. In making a decision about child custody, Michigan law requires that the court consider and determine custody after looking at the 12 best interest factors set forth in MCL 722.23. 

Child Preference in Custody Disputes

Under Michigan law, a child does not legally get to decide where she lives until she is 18. The reasonable preference of a child is only one factor of the 12 best interest factors. Although the court’s analysis does not require that each factor be given equal weight, the weight to be given to any factor is in the court’s discretion. Riemer v. Johnson, 311 Mich App, 632, 876 NW2d 279 (2015). If the issue of child custody is brought before the court in an evidentiary hearing or trial, the court interviews the child privately, outside the courtroom to protect the child from the trauma of choosing between the parents in open court. Impullitti v.Impullitti, 163 Mich App 507, 415 NW2d 261 (1987). Furthermore, the court is not to cover any other matters other than the child’s preference during the interview. In fact, the Michigan Court of Appeals has held that reversible error may occur if the court uses information during the interview about which parent took the child to the doctor, cooked meals, cleaned or helped with homework when determining the best interest of the child.  Thompson v. Thompson, 261 Mich App 353, 364-65, 683 NW2d 250 (2004).

The interview itself is not required to be recorded, although many judges do record the interview to preserve the record for the appeal. The private interview is limited to what the child likes or dislikes about each parent’s home, and how the child would set things up if she was in charge. The court is not required to disclose the child’s preference, and the child’s preference is only one element used to make the court’s decision. There are different developmental considerations depending on a child’s age, and while there is no rule that a teenager’s preference must be given great weight, the teenage child’s preference may have more influence than the preference of a younger child. In conclusion, a child does not get to decide which parent to live with in any child custody matter. However, the child’s preference is one factor for the court to take into account in making its decision.

If you have any questions, please contact a member of Varnum’s Family Law Practice Team.

Illinois High Court Allows Catastrophic Damages for Biometric Information Law Violations

In a February 17, 2023 opinion in Cothron v White Castle System, Inc., a narrow 4-3 decision of the Illinois Supreme Court held that the plaintiff was entitled to a separate cause of action for each and every time the use of her biometric data was used in violation of the Illinois Biometric Information Privacy Act, 740 ILCS 14 et seq. (the “BIPA”).[1] The decision paves the way for potentially record-setting damages and presents significant exposure to private entities that collect, use and disclose biometric data such as fingerprints, facial recognition and retina scans to manage employees or in the course of business. The White Castle decision also underscores the importance for private entities doing business in Illinois to ensure compliance with BIPA.

Enacted in 2008, the BIPA is one of the most comprehensive laws in the U.S. regarding the security and protection of biometric data collected and maintained by businesses. Key features of the BIPA are:

  • Informed consent requirement prior to collection of biometric data;[2]
  • Prohibition on selling, trading or profiting from biometric data;[3] and
  • Limitations on disclosure of biometric data to third parties.[4]

The BIPA also extends a private right of action to victims of a BIPA violation in addition to statutory liquidated damages for negligent and reckless violations.[5] BIPA has created a litany of private action suits seeking damages, most notably involving Facebook, where it was accused of unlawfully collecting and using biometric data in violation of BIPA. Plaintiffs in the consolidated suits alleged that Facebook’s use of facial recognition to suggest “tags” for user-uploaded photos on the platform was violation of the BIPA.[6] The resulting case In re Facebook Biometric Info. Privacy Litig., in 2022, produced a landmark $650 million dollar settlement between Facebook and consumers in the affected class.

The plaintiff in White Castle, Latrisha Cothron, was a manager at a White Castle restaurant where her fingerprint was scanned each time she accessed her pay stubs or utilized her employer’s computer system. The data was then disclosed to a third-party vendor to verify her identity using a stored fingerprint. Cothron claimed that she never consented to the collection or disclosure of her biometric data in violation of sections 15(b) and 15(d) of the BIPA. Although defendant White Castle argued that her claims were untimely since the first violation had occurred in 2008, Cothron argued – and the court agreed – that a new claim accrued, respectively, each time she scanned her fingerprint and the collected biometric data was disclosed to a third party.[7]

In its majority opinion, the White Castle court pointed to the notice requirement under the BIPA which requires that the subject be informed of the retention period for the data as evidence that the “legislature contemplated collection as being something that would happen more than once.”[8] Rejecting White Castle’s arguments that the loss of an individual’s right to control over biometric data is a “single overt act” resulting in only a single claim under the BIPA, the court held that in light of its decision in Rosenbach v Six Flags Entm’t Corp – which establishes that each statutory violation is itself an injury under the BIPA – each violation of the statute gives rise to a separate claim.[9]

Addressing the huge impact on damages this decision might have (White Castle estimated class-wide exposure of $17 billion given its 9,500 employees), the court’s majority clarified that damages were discretionary under the BIPA and were not intended by the legislature to “authorize a damage award that would result in the financial destruction of a business.”

Where an entity routinely collects and utilizes biometric data, the White Castle decision would create significant risk and exposure given the statutory damages permitted under the BIPA, even where such damages are discretionary. While the court acknowledged the potential catastrophic implications of the decision for businesses collecting biometric data, the court takes a hands-tied approach to its application of the statute and defers to the legislature to address “policy-based concerns about potentially excessive damage awards…”.[10] This decision underscores the risk for companies collecting biometric data in Illinois. It is important that businesses operating in Illinois carefully examine their collection, use and disclosure of biometric data.

If you have any questions or would like an attorney to review your company’s privacy practices, please contact a member of Varnum’s Data Privacy and Cybersecurity Team.

[1] Cothron v. White Castle Sys., Inc., 2023 IL 128004 (February 17, 2023).

[2] 740 ILCS 14/15(b).

[3] 740 ILCS 14/15(c).

[4] 740 ILCS 14/15(d).

[5] 740 ILCS 14/20 (provides liquidated damages up to $1,000 for negligent violations and up to $5,000 for intentional or reckless violations)

[6] See e.g. Pezen v Facebook Inc., 1:15-cv-03484 (N.D. Ill. Apr. 21, 2015); Licata v Facebook Inc., 1:15-cv-04022 (N.D. Ill. May 5, 2015); Patel v Facebook Inc., 1:15-cv-04265 (N.D. Ill. May 14, 2015) (collectively, In re Facebook Biometric Info. Privacy Litig., 185 F. Supp. 3d 1155, (N.D. Cal. 2016)). See also Gullen v Facebook Inc., 1:15-cv-07861 (N.D. Ill. Aug. 31, 2015) (dismissed for lack of personal jurisdiction).

[7] Id. at ¶ 30.

[8] Id. at ¶ 23.

[9] Id. at ¶ 37; see Rosenbach v. Six Flags Entm’t Corp., 2019 IL 123186, 129 N.E.3d 1197.

[10] White Castle, supra note1at ¶ 43.

The NLRB Changes the Rules on Severance Agreements Again: What Employers Need to Know

The National Labor Relations Board (the “Board”) recently overruled a pair of 2020 Board decisions holding that severance agreements containing broad confidentiality and non-disparagement provisions unlawfully restrict employee Section 7 rights to discuss terms and conditions of employment. The decision, issued on February 21, 2023, held that a Michigan hospital violated federal labor law when it offered employees a severance agreement containing what the Board defined as broad confidentiality and non-disparagement provisions that could be interpreted to preclude employees from discussing terms and conditions of employment with co-workers or other third parties, including administrative agencies such as the Board. The Board held that such provisions chill the exercise of Section 7 rights. The 2020 Board decisions had held that inclusion of such provisions were not per se violations of the National Labor Relations Act, and instead required the presence of other unfair labor practices to find them unlawful. Moving forward, the Board will review confidentiality and non-disparagement provisions to determine whether the provisions restrict Section 7 rights regardless of whether there is evidence of union animus or other alleged unfair labor practices.

This change in precedent was not completely unexpected. The Office of the General Counsel announced its intent to review and change the law with respect to confidentiality provisions and separation agreements back in August of 2021. The 21-04 GC Memo also announced the General Counsel’s intent to review existing case law regarding employer handbook rules. In light of this new (or, rather, new again) legal standard, employers should review existing employment documents and policies for overly broad language that could render the desired protections as unlawful. 

Please contact your Varnum Labor and Employment attorney with any questions.

Michigan’s Wetlands: What Land Developers and Landowners Need to Know

Oftentimes land developers and landowners in Michigan assume that they can do whatever they want with their property—after all, it was President George Washington that said “Freedom and Property Rights are inseparable.” Such a sentiment may feel right, but one area of Michigan’s environmental law is less concerned with your property rights and more interested with protecting natural resources—wetlands. 

Part 303 of Michigan’s Natural Resources and Environmental Protection Act (“Part 303”), formerly known as the Wetland Protection Act, regulates Michigan’s wetlands. Section 404 of the Federal Clean Water Act regulates certain wetlands as well, but the State of Michigan and United States Environmental Protection Agency have an agreement that in most cases allows Michigan’s Department of Environment, Great Lakes and Energy (“EGLE”) to administer the federal program for such wetlands.

Under Part 303, an individual must obtain a permit from EGLE prior to impacting a regulated wetland. Perhaps surprising to some, Part 303 is also unconcerned with whether you know there is a regulated wetland on your property before you make an unpermitted impact. That’s right, saying, “I did not know that was a regulated wetland,” does not shield you from Part 303. That being said, land developers and landowners should understand the key issues below to ensure they don’t inadvertently violate Part 303.

Regulated Wetlands

The first steps in avoiding a Part 303 violation is to determine if your property contains any regulated wetlands. Part 303 defines “wetland” as “a land or water feature, commonly referred to as a bog, swamp, or marsh, inundated or saturated by water at a frequency and duration to support, and that under normal circumstances does support, hydric soils and a predominance of wetland vegetation or aquatic life.” MCL 324.30301(n). Michigan’s regulations go on to further define wetlands based on a number of factors. 

However, not every wetland is a regulated wetland. To be regulated by the State of Michigan, the wetland generally must:

  1. Be connected to, or located within 1,000 feet of a Great Lake or Lake St. Clair;
  2. Be connected to, or located within 500 feet of an inland lake, pond, river or stream
  3. Be more than five acres in size;
  4. Have documented presence of certain endangered or threatened species; or
  5. Be considered a rare or imperiled wetland. 

MCL 324.30301(n)(i)-(v)

Classifying a regulated wetland will require more than a mere once over. Because regulated wetlands are defined by consideration of hydrology, soil and presence of vegetation and aquatic life, you should engage an environmental consultant. A qualified consultant can properly determine whether your property contains a regulated wetland and can further provide a wetland delineation for your property. 

Prohibited Activities and Permits

Once you’ve determined that your property contains a regulated wetland, a second step is to ensure that you do not impact a regulated wetland prior to obtaining a Part 303 permit from EGLE. Part 303 states that an individual shall not do the following activities without a permit (unless the activity meets one of several exemptions listed in the statute):

  • Deposit or permit the placing of fill material in a wetland;
  • Dredge, remove or permit the removal of soil or minerals from a wetland;
  • Construct, operate or maintain any use or development in a wetland; or
  • Drain surface water from a wetland.

MCL 324.30304. 

The permit application process can be lengthy, so it is important to plan accordingly and allow enough time for the process to be completed. Before EGLE will issue a Part 303 permit, a proposed permittee will have to show:

  1. That proposed wetland impact is primarily dependent upon being in a wetland, or
  2. There are no feasible and prudent alternatives to the proposed wetland impact. 

To obtain a Part 303 permit, individuals should also engage qualified environmental legal counsel and an environmental consultant to assist in this complex analysis, and to otherwise help in navigating the permitting process under Part 303.  

Violations

Not only does EGLE provide Part 303 permits, it also brings enforcement action against violators of Part 303. If you do impact a regulated wetland prior to receiving a Part 303 permit, EGLE may serve you with a Notice of Violation. This is often followed by EGLE’s request to inspect your property. EGLE also often requests that violators enter into an administrative consent agreement (“ACA”), which will contain mandates to bring the property back into compliance with Part 303. An ACA may require a violator to mitigate wetland impacts—including restoring wetlands, creating new wetlands, acquiring approved wetland mitigation banking credits or preserving existing wetlands, accompanied by a civil penalty for the Part 303 violation. In extreme cases, EGLE is also authorized to bring criminal enforcement.

In conclusion, property rights in Michigan take a backseat to the mandates of Part 303. Land developers and landowners should familiarize themselves with Part 303 and ensure that their land development does not impact a regulated wetland prior to obtaining the proper permits. 

Varnum has significant experience in counseling and representing land developers, landowners and other parties in relation to Michigan’s wetland law. If you need to obtain a wetland permit, if EGLE serves you with a Notice of Violation or if you have other wetland compliance concerns, please contact Seth Arthur or Kyle Konwinski from Varnum’s Environmental Team. 

SECURE 2.0 Act Brings Slate of Changes to Employer-Sponsored Retirement Plans

In December, the SECURE 2.0 Act of 2022 (“SECURE 2.0”) was passed, a package of retirement provisions providing comprehensive updates and changes to the SECURE Act of 2019. The legislation includes some key changes that affect employer-sponsored defined contribution plans, such as profit-sharing plans, 401(k) plans, 403(b) plans and stock bonus plans. While some of the changes are effective immediately upon the law’s enactment, most required changes are not effective before the plan year beginning on or after January 1, 2024, so employer sponsors have time to prepare for compliance.

Required Changes

Mandatory automatic enrollment in new plans.

Plan sponsors are currently allowed to provide for automatic enrollment and automatic escalation in 401(k) and 403(b) plans. SECURE 2.0 requires new 401(k) and 403(b) plans to automatically enroll participants at a new default rate, and to escalate participants’ deferral rate each year, up to a maximum of 15%, with some exceptions for new and small businesses. This provision applies to new plans with initial plan years beginning after December 31, 2024.

Changes to long-term part-time employee participation requirements.

The Act currently requires 401(k) plans to permit participation in the deferral part of the plan only by an employee who worked at least 500 hours (but less than 1000 hours) per year for three consecutive years. SECURE 2.0 changes this participation requirement by long-term part-time employees working more than 500, but less than 1000, hours per year to two consecutive years instead of three. However, this two-year provision does not take effect until January 1, 2025, which means the original SECURE Act three-year provision still applies for 2024. Employers should start tracking hours for part-time employees to determine whether they will be eligible in 2024 or 2025 under this provision. For vesting purposes, pre-2021 service is disregarded, just as service is disregarded for eligibility purposes. This provision is applicable to 401(k) plans and 403(b) plans that are subject to ERISA and does not apply to collectively bargained plans. This provision applies to plan years beginning after December 31, 2024.

Changes to catch-up contributions limits.

If a defined contribution plan permits participants who have attained age 50 to make catch-up contributions, the catch-up contributions are now required to be made on a Roth basis for participants who earn at least $145,000 (indexed after 2024) or more in the prior year. This provision is effective for taxable years beginning after December 31, 2023.

Changes to the required minimum distribution (RMD) age.

Currently, required minimum distributions must begin at age 72 for participants who have terminated employment. SECURE 2.0 increases the age to age 73 starting on January 1, 2023, and to age 75 starting on January 1, 2033. This means that participants who turn 72 in 2023 are not required to take an RMD for 2023; instead, they will be required to start taking RMDs for calendar year 2024, the year in which they turn 73. This provision is effective for distributions made after December 31, 2022, for individuals who turn 72 after that date.

Changes to automatic enrollment for new plans.

Almost all new defined contribution plans will be required to auto-enroll employees upon hire (existing plans are exempt from this provision). This provision is applicable for plan years beginning on or after January 1, 2025.

Optional Changes

Additional catch-up contribution opportunities.

Currently, the catch-up contribution limits for certain plans are indexed for inflation and apply to employees who have reached the age of 50. SECURE 2.0 increases catch-up contribution limits for individuals aged 60-63 to the greater of: (1) $10,000 (indexed for inflation), or (2) 50% more than the regular catch-up amount in effect for 2024. This provision is effective for plan years beginning on or after January 1, 2025.

Additional employer contributions to SIMPLE IRA plans.

Current law requires employers with SIMPLE IRA plans to make employer contributions to employees of either 2% of compensation or 3% of employee elective deferral contributions. SECURE 2.0 allows employers to make additional contributions to each employee of a SIMPLE plan in a uniform manner, provided the contribution does not exceed the lesser of up to 10 percent of compensation or $5,000 (indexed). This provision is effective for taxable years beginning after December 31, 2023.

Replacing SIMPLE IRA plans with safe harbor 401(k) plans.

The new law also permits an employer to elect to replace a SIMPLE IRA plan with a safe harbor 401(k) plan at any time during the year, provided certain criteria are met. The current law prohibits the replacement of a SIMPLE IRA plan with a 401(k) plan mid-year. This provision also includes a waiver of the two-year rollover limitation in SIMPLE IRAs converting to a 401(k) or 403(b) plan. This change is effective for plan years beginning after December 31, 2023.

Increasing involuntary cash-out threshold.

Currently plans may automatically cash-out a vested participant’s benefit that is between $1,000 and $5,000 and roll this amount over to an IRA. SECURE 2.0 allows plans to increase the $5,000 involuntary cash-out limit amount to $7,000. This provision of the law is effective for distributions made after December 31, 2023.

Relaxation of discretionary amendment deadline.

Under current law, a discretionary plan amendment must be adopted by the end of the plan year in which it is effective. SECURE 2.0 allows plans to make discretionary plan amendments to increase benefits until the employer’s tax filing deadline for the immediately preceding taxable year in which the amendment is effective. This applies to stock bonus, pension, profit-sharing or annuity plans to increase benefits for the preceding plan year. This provision is effective for plan years beginning after December 31, 2023.

Elimination of unnecessary plan notices to unenrolled participants.

SECURE 2.0 eases the administrative burden on plan sponsors by eliminating unnecessary plan notices to unenrolled participants. Under the amended law, plan sponsor notices to unenrolled participants may consist solely of an annual notice of eligibility to participate during the annual enrollment period, as opposed to numerous notices from the plan sponsor. This provision is effective for plan years beginning after December 31, 2022.

Crediting of student loan payments as elective deferrals for purposes of matching contributions.

Under SECURE 2.0, student loan payments may be treated as elective deferrals for the purposes of matching contributions to a retirement plan. This provision is available for plan years beginning on or after January 1, 2024.

Matching contributions designated as Roth contributions.

Previously, employer matching contributions could not be made as Roth contributions. Effective on the date of the enactment of SECURE 2.0, 401(a), 403(b), or governmental 457(b) plans may allow employees the option to designate matching contributions as Roth contributions.

Expansion of the Employee Plans Compliance Resolution System (EPCRS).

Currently, EPCRS contains procedures to self-correct certain limited, operational failures that are insignificant and corrected within a three-year period. SECURE 2.0 expands this, generally permitting any inadvertent failure to be self-corrected under EPCRS within a reasonable period after the failure is identified, without a submission to the IRS, subject to some exceptions. This provision went into effect on the date of enactment.

Recoupment of overpayments.

Currently, fiduciaries for plans that have mistakenly overpaid a participant must take reasonable steps to recoup the overpayment (for example, by collecting it from the participant or employer) to maintain the tax-qualified status of the plan and comply with ERISA. Under SECURE 2.0, 401(a), 403(a), 403(b), and governmental plans (not including 457(b) plans) will not lose tax qualification merely because the plan fails to recover an “inadvertent benefit overpayment” or otherwise amends the plan to permit this increased benefit. In certain cases, the overpayment is also treated as an eligible rollover distribution. This provision became effective upon enactment with certain retroactive relief for prior good faith interpretations of existing guidance.

Simplified plan designs for “starter” 401(k) and 403(b) plans.

Effective for plan years beginning after December 31, 2023, SECURE 2.0 creates two new plan designs for employers who do not sponsor a retirement plan: a “starter 401(k) deferral-only arrangement” and a “safe harbor 403(b) plan.” These plans would generally require that all employees be enrolled in the plan with a deferral rate of three percent to 15 percent of compensation.

Financial incentives for contributions.

SECURE 2.0 allows participants to receive de minimis financial incentives (not paid for with plan assets) for contributing to a 401(k) or 403(b) plan. Previously, plans were prohibited from offering financial incentives (other than matching contributions) to employees for contributing to a plan. This provision became effective for plan years starting after the date of enactment.

Early withdrawal tax exemption for emergency withdrawal expenses.

SECURE 2.0 provides for an exception from the 10% early withdrawal tax on emergency expenses, defined as certain unforeseeable or immediate financial needs, on a limited basis (once per year, up to $1000). Plans may allow an optional three-year payback period, and participants are restricted from taking another emergency withdrawal within three years of any unpaid amount on a previous withdrawal. This provision is effective for plan years beginning on or after January 1, 2024.

When do employers need to amend their plans for the SECURE Act, CARES Act, and SECURE 2.0 (“the Acts”)?

If a retirement plan operates in accordance with the Acts, plan amendments must be made by the end of the 2025 plan year (or 2027 for governmental and collectively bargained plans). (The amendment deadlines for SECURE and CARES were extended late last year.)

Clients are encouraged to call their Varnum contacts with any questions.

Registration for H-1B Cap-Subject Petitions Opens in March (H-1B Lottery)

The annual electronic registration process for H-1B cap-subject petitions will open at 12 pm EST on March 1, 2023 and run through 12 pm EST on March 17, 2023. U.S. Citizenship and Immigration Services (USCIS) will utilize a random lottery process to select 85,000 petitions for the H-1B cap (65,000 for the general category and 20,000 for the U.S. advanced degree category). Applicants selected in the random lottery will be notified by March 31 and will have until June 30 to submit the H-1B petition for the beneficiary named in the registration.

Varnum immigration attorneys have started to collect information to prepare for the March registration period. Employers with employees on F-1 Optional Practical Training (OPT) or candidates requiring cap-subject H-1Bs should contact us by mid-February for assistance with registration.

UPDATE: Michigan’s Paid Medical Leave and Minimum Wage Laws Remain Unchanged for Now

On January 26, 2023, the Michigan Court of Appeals released a highly anticipated opinion on Michigan’s Paid Medical Leave Act and minimum wage in the case of Mothering Justice v. Nessel which tackled the constitutionality of the legislative “adopt-and-amend” strategy that changed ballot proposals and impacted Michigan’s minimum hourly wage rate and paid medical leave.

The Court of Claims previously held that the adopt-and-amend strategy was unconstitutional. The Court of Appeals reversed the Court of Claims, effective immediately. Mothering Justice v. Nessel, No. 21-000095-MM 1 19-20 (Mich. Ct. App. 2023).

What Does This Mean for Employers?

  1. The Paid Medical Leave Act remains in effect without change, so employers no longer need to implement the Earned Sick Time Act in February of 2023.
  2. The current minimum wage remains unchanged.

Further appeal of the decision is anticipated. We will continue to monitor for any such appeal and any decision by the Michigan Supreme Court to review the case. Varnum’s Labor and Employment Team is prepared to assist clients with compliance on these issues. Please contact your Varnum Labor and Employment attorney with any questions.  

First year associate Rebecca Fadler contributed to this advisory.