Federal Policy Updates for Employers: What to Watch in 2025

• Executive Order 11246 is repealed.
  
  
• AAPs do not require employers to use quotas or reserve jobs for women or minorities. 
  
  
• AAPs for veterans and the disabled are still regulated by existing statutes.

• The Executive Order is being challenged in court.
  
  
• Federal contractors should review AAP programs with legal counsel for compliance.
  
  
• Review AAP programs to identify each component for potential change as challenges develop.
  
  
• Employers may still engage in recruiting efforts that seek to diversify the applicant pool for the best opportunity to attract talent. 
  
  
• Continue to comply with state AAP requirements as applicable.
  
  
• Have any proposed changes to federal contracts reviewed by legal counsel. 

• Executive Order 14110 of October 30, 2023 (Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence) is revoked.
  
  
• Some state laws require human oversight of AI in employment decision-making to ensure against discriminatory practices.
  
  
• Employers may be held responsible for violations of anti-discrimination laws that involve AI decision-making.

• No current impact on employers.

• Contributions to HSAs may only be made
  for individuals who are covered by HDHP and do not have disqualifying coverage.

• In 2019, the IRS issued guidance expanding the list of preventive care benefits provided under a HDHP, including certain chronic care services without a deductible.  

• Legislation could be passed in Congress to permit HDHP to cover some chronic disease treatments
  (such as asthma inhalers) before the plan’s deductible is met and preserve HSA eligibility. 

Congressional Review Act: Final regulations issued under the Biden administration in the fall of 2024 may be vulnerable to being overturned under this Act.

• Mental Health Parity and Addiction Equity Act (MHPAEA): Final regulations issued in September 2024 to strengthen parity between mental health and substance use disorder benefits and med/surg benefits, including codifying the comparative analysis and
  fiduciary certification. 

• The CRA allows Congress to overturn federal regulations issued by government agencies. This means that any new rules or changes to existing rules issued in the fall of 2024 could be nullified.

DEI: Federal contractors are prohibited from engaging in “illegal” DEI practices. Private employers are “encouraged” to end “illegal” DEI practices. (EO 14173)

“Illegal” DEI practices are not currently defined.

Instead, the federal government will promote hard work, excellence, and individual achievement. 

See White House Fact Sheet for more information.

16 state Attorneys General issued Guidance on permissible DEI practices.

• Title VII of the Civil Rights Act prohibits discrimination based on race, color, national origin, ancestry, religion, and sex, including preferential hiring based on a protected category.
  
  
• Most state laws prohibit discrimination on the basis of these same protected categories.
  
  
• In 1978, the U.S. Supreme Court in Bakke v. University of California said that engaging in workforce balancing based on race, color, sex, sexual preference, religion, or national origin is prohibited.
  
  
• In 2023, the U.S. Supreme Court in Students for Fair Admissions, Inc. v. President and Fellows of Harvard College (SFFA) said that direct consideration of a college applicant’s race in achieving diversity in higher education is unlawful. However, the Court said that federal law does not exclude considering a university applicant’s racial experiences if they are tied to the person’s unique character traits or abilities. 

• The Executive Order is being challenged in court. There is a preliminary injunction barring canceling federal contracts with DEI components and requiring federal contractors to certify that they do not engage in DEI practices that violate anti-discrimination laws. It also prohibits targeting publicly traded employers and large universities for freedom of speech protected expression supporting DEI views. Further rulings are anticipated on whether the injunction becomes permanent.
  
  
• Employers must continue to follow existing anti-discrimination laws, including on the basis of race, color, national origin, and ancestry.
  
  
• Federal contractors are not required to have DEI programs.
  
  
• DEI programs are not per se “illegal.”
  
  
• Employers should locate and review any DEI and EEO policies and programs for compliance with existing anti-discrimination laws.
  
  
• Federal contractors should review DEI programs with legal counsel for compliance.
  
  
• Employers may still engage in equal employment opportunity strategies and maintain inclusive business cultures.

[Read More] Is DEI on the Chopping Block?

[Read More] Assessing & Minimizing Risk for Your Talent Management Programs Amid Anti-DEI Efforts

[Employer Insight] DEI Strategies for Employers

[Blog] Federal Anti-Discrimination Laws: A Quick Look at Employer Obligations

• The EEOC requires at least 3 members to take action. 

• Dismissed personnel are likely to file legal challenges.
  
  
• The Commission cannot take actions like issuing regulations or guidance without the required minimum members. 

Family-Building Benefits: Executive Order to promote in vitro fertilization (IVF) treatment, including reducing statutory or regulatory burdens, to make IVF procedures significantly more affordable. 

• Although not currently passed on a federal level, some states already mandate coverage of certain IVF services by health plans.
  
  [Read More] IVF Treatment Coverage Mandates: A State-by-State Breakdown
  
  
• In a private letter ruling, the IRS address the deductibility under Code Section 213(d) of certain medical and related costs to IVF procedures and gestational surrogacy. The IRS concluded that several costs involving IVF and surrogacy were not deductible medical care expenses.

•   Potential for mandated coverage of certain IVF services. Any statutory changes addressing access to IVF would need to be enacted by Congress. However, the administration could shape IVF-related guidance, such as medical expense deductibility for surrogate’s medical care.

Federal Funding: The White House OMB issued a memo directing all federal agencies to pause spending on grants, loans, and other federal financial assistance. Two days later, the memo was rescinded, but the administration maintained that the rescission of the memo did not rescind the federal funding freeze.

There is a TRO prohibiting the pause on federal financial assistance. The administration was found to be in violation of the TRO and ordered to immediately restore the frozen funding and end the federal funding pause.

• OMB Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards govern federal funding. (2 C.F.R. § 200.1)

• Review business operations to determine fiscal impacts from delayed or lack of federal funding.
  
  
• Review contract-based awards and funding for termination terms related to convenience and lack of funding.
  
  
• Implement business strategies to manage financial impact (e.g., furlough, RIFs, work share programs, etc.).

[Resource] Federal Funding Impacts: Top Employer Questions Answered

[FAQ] Impact of Employer Subsidized COBRA

[FAQ] Benefits During a Leave of Absence

[FAQ] Benefits During a Furlough

Gender: Federal recognition of two genders – male and female, as determined at conception. “Sex” does not include “gender identity.”

Federal agencies are directed to use “sex” and not “gender” in regulations and guidance, and remove references to “gender ideology.” Federal funds cannot be used to promote gender ideology.
(EO 14166)

The EEOC is taking the position that it will “defend the biological and binary reality of sex and related rights, including women’s rights to single-sex spaces at work.”

• Title VII of the Civil Rights Act prohibits discrimination on the basis of sex.
  
  
• In 2020, the U.S. Supreme Court in
  Bostock v. Clayton County said that Title VII protections for “sex” include sexual orientation and transgender status.
  
  
• Most state laws prohibit discrimination on the basis of gender identity and transgender status.
  
  
• Several courts and states recognize “gender dysphoria” as a qualified disability under the Americans with Disabilities Act (ADA) and similar state disability protection laws.
  
  
• The “Enforcement Guidance on Harassment in the Workplace” (April 29, 2024) is ordered to be rescinded by the EEOC once it has enough members to take action. 

• The Executive Order is being challenged in court.
  
  
• Employers must continue to follow existing anti-discrimination laws, including existing protections for gender identity and transgender status.
  
  
• Expect federal funds to be leveraged to impact gender recognition and protections, and federal enforcement of single-sex spaces in the workplace.
  
  
• Conflicts exist between the federal enforcement mandate and certain state requirements for employers to accommodate bathroom and changing room use based on gender identity.
  
  
• Consult with legal counsel to address internal employee conflicts related to gender identity and transgender status.

[Read More] Sex or Gender – Do Federal Changes Impact Employers?

[Blog] Federal Anti-Discrimination Laws: A Quick Look at Employer Obligations

Gender-Affirming Care for Minors: Executive Order 14187 prohibits the funding, sponsoring, promoting, or assisting of gender-affirming care. The EO directs HHS to take all actions to end gender-affirming care for children under the age 19 including regulatory and sub-regulatory action involving, among others, Section 1557 of the ACA and essential health benefits. 

A provision of this order requiring federal funds to be withheld to medical institutions that provide gender-affirming care was temporarily blocked by a district court.  

• Section 1557 of the ACA prohibits individuals from being excluded from participation in, being denied the benefits of,
  or being subject to discrimination under any health program or activity that receives federal financial assistance on specified grounds. It is historically one of the most litigated provisions of the ACA. Final rules issued in 2024 include discrimination on the basis of sexual orientation, gender identity, sex stereotypes, sex characteristics, and pregnancy or related conditions in the definition of sex discrimination.
  
  [Read More] HHS Issues Final Rule Aimed to Strengthen Nondiscrimination Protections in Health Plans
  
  
• In July 2024, 3 district courts issued stays and preliminary injunctions barring enforcement of these provisions as applicable to gender transition services.  
  
  
• Essential Health Benefits (EHBs). Under the ACA, fully insured health plans in the small group insurance market – in addition to plans in the individual insurance market – must cover a set of specified benefits known as EHBs. Self-funded group health plans and fully insured plans in the large group market are not required to cover EHBs. However lifetime, annual and other cost sharing limits do apply to EHBs these plans offer. In 2021, Colorado included gender-affirming care in its EHB.  

• There is a potential that the 2024 Section 1557 rules will be rescinded, and it remains to be seen if regulatory action might impact the ability of group health plans to provide gender-affirming care.  

• The 14th Amendment to the U.S. Constitution states: “All persons born or naturalized in the United States … are citizens of the United States…”
  
  
• In 1898, the U.S. Supreme Court in
  United States v. Wong Kim Ark affirmed that birthright citizenship extended to all children born in the United States regardless of their parents’ citizenship.

• The Executive Order is being challenged in court. There is a temporary restraining order against the Executive Order. The Ninth Circuit Court of Appeal refused to hear an emergency appeal of the decision. Other courts have also implemented preliminary injunctions.
  
  
• Based on the effective birth date, if allowed to proceed, there is no immediate effect on employer obligations.

[Read More] Immigration Update for Employers

• The Immigration and Nationality Act provides for the detention and removal of aliens.
  
  
• The Laken Riley Act allows for the detention and deportation of undocumented immigrants accused of certain crimes before conviction.

• Form I-9 audits. Expect to see increased auditing of Form I-9’s. Employers should self-audit and make corrections as appropriate.
  
  
• Workplace inspections and raids. Expect to see increased inspections and raids for deportation purposes. Employers should have a plan in place for how to manage these processes.
  
  
• Deportations. Expect to see increased deportations. Employers should implement legacy and contingency plans for addressing operational disruptions.
  
  
• Work authorizations. Employees with expired work authorizations may not get their documents renewed.

[Read More] Immigration Update for Employers

[Resource] Immigration Enforcement Response Checklist

Immigration: An Executive Order instructs the Secretary of State, Attorney General, Secretary of Homeland Security, and the Director of National Intelligence to increase vetting and screening of noncitizens entering or already in the United States “to the maximum degree possible.” (EO) 

An Executive Order indefinitely suspended the U.S. Refugee Assistance Program (USRAP). (EO) 

• The Immigration and Nationality Act provides for the detention and removal of aliens.
  
  
• The Laken Riley Act allows for the detention and deportation of undocumented immigrants accused of certain crimes before conviction.

• Plan for delays in recruiting and hiring foreign workers.
  
  
• Industries that depend on refugee labor, like food processing, logistics, and agriculture are most likely to be affected.

[Read More] Immigration Update for Employers

National Origin: The EEOC announced it intends to prosecute employers for national origin discrimination, including those engaging in anti-American bias. Specifically, the EEOC considers employers who make illegal preferences against American workers, in favor of non-American workers.

• The EEOC announced it intends to prosecute employers for national origin discrimination, including those engaging in anti-American bias. Specifically, the EEOC considers employers who make illegal preferences against American workers in
  favor of non-American workers. 

• Review hiring of employees with non-citizen work authorization status for compliance with existing immigration laws.

• Ensure job postings are neutral as to national origin. 

• Use recruiting strategies that cast a wide net for applicants to find the best talent for the position. 

National Labor Relations Board (NLRB):
A new chair and general counsel were named and Democratic-appointed members were dismissed.

The NLRB General Counsel rescinded a number of previous NLRB General Counsel memos, such as those regarding severance agreements, noncompete and stay-or-pay agreements, and electronic monitoring.    

• The NLRB requires at least 3 members to take action. Dismissed personnel are likely to file legal challenges.
  
  
• NLRB General Counsel memos are not binding law, but reflect guidance on NLRB enforcement strategy. 

• Dismissed personnel have filed legal challenges. A U.S. District Court declared that Gwynne Wilcox remains a full member of the NLRB and finds that she was unlawfully dismissed. 
  
  
• The Board cannot issue any decisions or regulations, or take any action that requires Board approval without the required minimum members.
  
  
• Have employee agreements reviewed by legal counsel. 

Pregnant Worker Fairness Act (PWFA): Expect PWFA regulations to be rescinded based on required time off for abortion procedures.

• The Pregnant Worker Fairness Act, enacted by Congress, was effective as of 2023.
  
  
• Federal regulations for the PWFA were finalized in 2024.
  
  
• The PWFA protects pregnant workers, requiring employers to engage in the interactive process to determine reasonable accommodations, absent undue hardship.

• While PWFA regulations may change how the law is interpreted and enforced, employers will still be required to comply with the terms of the statute.
  
  
• A legal challenge to the regulations was reinstated by the Eighth Circuit Court of Appeals.

[Read More] What Employers Need to Know About Accommodations for Pregnant Employees

[Blog] Federal Anti-Discrimination Laws: A Quick Look at Employer Obligations

• Under the ACA, group health plans and insurers must comply with certain price transparency requirements. These requirements are known as the ACA’s transparency in coverage (TiC) rules,
  which included detailed price transparency regulations.
  
  
• The Consolidated Appropriations Act of 2021 (CAA-21) included additional provisions to promote price transparency to group health plans and insurers, including amendments to ERISA, the IRC, and PHSA.  

• The EO mandates disclosure of the actual price
  of items and services, rather than estimates; standardized and make pricing information easily comparable across hospital and health plans; and enforcement policies that ensure compliance with the reporting of complete, accurate, and meaningful data.

• HHS issued proposed regulations under HIPAA that would require numerous additional written policies and procedures, impose substantial ongoing maintenance efforts, and address compliance shortfalls identified by HHS in recent enforcement investigations.
  The proposed regulations offer HHS’s views
  on how the HIPAA rules apply to AI.   

• If finalized as proposed, HHS’s regulations would bring about major reworking of the existing Security Rule. However, the Trump administration could decide to defer the proposed rules, subject to further review.  

• Revokes EO 14076, Protecting Access to Reproductive Healthcare Services, issued under the Biden Administration, and EO 14079, Securing Access to Reproductive and Other Healthcare Services, issued under the Biden Administration, which was aimed at expanding access to reproductive health care. 

• The EO restricts abortion coverage for government-funded health insurance, such as Medicaid. 

Religious Freedom: The “Eradicating
Anti-Christian Bias” Executive Order seeks to eliminate anti-Christian bias from the federal government and enforce the First Amendment right of freedom of religion. The Order creates a federal task force for this purpose. (EO) 

Expect federal guidance and regulations
to change as a result of the task force’s findings.

• The First Amendment to the U.S. Constitution protects the freedom of religion.
  
  
• Title VII prohibits religious discrimination
  in employment.
  
  
• Most state laws protect the freedom of religion. 

• There is no change to employer obligations to prohibit discrimination on the basis of religion.

• The TCJA was enacted in 2017. It amended the IRC provisions governing business entertainment and meals, qualified transportation benefits, bicycle commuting reimbursements, qualified moving expenses, and employee achievement awards. 

• Unless extended by Congress, the TCJA provisions will expire at the end of 2025.  

• [Blog] Trump Rolls Back Federal Contractor Affirmative Action Plans
• [Blog] Is DEI on the Chopping Block?
• [Blog] Assessing & Minimizing Risk for Your Talent Management Programs Amid Anti-DEI Efforts
• [Resource] Federal Funding Impacts: Top Employer Questions Answered
• [Blog] Sex or Gender – Do Federal Changes Impact Employers?
• [Blog] Immigration Update for Employers
• [Resource] Immigration Enforcement Response Checklist
• [Blog] What Employers Need to Know About Accommodations for Pregnant Employees
• [Blog] Unpacking Recent Executive Orders: What’s Happened, Expected Legal Challenges, and Potential Effects on Benefit Plan Sponsors

• [Blog] Furloughs, Layoffs & Leaves: How Do They Affect Your Employee’s Health Benefits?

• [Blog] Strings Attached: Changing Premium Contributions for Cost Savings

• [Resource] A Leader’s Guide to Mental Health