Unraveling Complex Compliance Issues Amid the Texas Regulatory Consistency Act

The compliance landscape for employers has become increasingly challenging. As they navigate the intricate web of federal, state, city, and county laws, various new laws and regulations, such as privacy laws, fair chance initiatives, salary history restrictions, and marijuana laws continue to be passed across the country. These laws are not just at the state level, though. Many states also have additional city or county laws that further compound the challenges and complexities faced by employers.

In June of this year, the Governor of Texas signed the Texas Regulatory Consistency Act, also known as House Bill 2127 (H.B. 2127), which could reduce this burden for employers doing business in the state. This Act brings about significant changes to local governance in Texas by amending many statutory codes, including the Labor Code, and asserting Texas’s “sovereign regulatory powers” in various areas. By doing so, it would limit the authority of cities and counties to pass local ordinances that go beyond the scope of existing state laws, thereby eliminating the patchwork of laws employers have to navigate … at least within the state.

Patchwork of Laws Means Compliance Struggles for Employers

As Hire Image predicted in our Top Ten Background Screening Predictions for 2023, compliance challenges have increased with the patchwork of state and local laws. Reconciling various state laws with impacts on employment policies and procedures (along with nuances within those laws) is becoming increasingly challenging for employers. What applies to one state doesn’t necessarily apply to another in more ways than one, including the availability of personal identifying information, the accessibility of criminal information, the legality of marijuana, and the determination of former compensation.

Privacy Laws

With regard to privacy laws, employers must contend with a patchwork of different state laws regarding the collection, storage, and use of employee and applicant data. California began this trend with the California Consumer Privacy Act (CCPA), but other states were quick to follow, including Colorado, Connecticut, Virginia, Iowa, Montana, Indiana, Tennessee, and Utah. However, each state’s laws have their own nuances. This fragmented approach creates a significant compliance burden, particularly for employers operating across multiple states.

The laws have several provisions in common, including the right to access and delete personal information and to opt-out of its sale, among others. However, there are many differences, as well. California’s law, being the first of its kind in the United States, provides the most extensive consumer rights. However, unlike some of the other laws, it does not include specific protections against targeted advertising or profiling. Connecticut’s statute closely mirrors the Colorado and Virginia laws, even incorporating some of the exact wording regarding personal data, its processing, and conducting data protection impact assessments. On the other hand, Utah’s law is more limited in scope with a narrower definition of personal data and high thresholds for determining which companies are subject to it. Utah’s law also does not grant consumers the right to correct their personal data held by companies or appeal a company’s decision.

To alleviate the burden of understanding what compliance means in each of these states, there is a growing argument for the establishment of a comprehensive federal privacy law that sets a unified standard for all employers. A federal law would provide consistency and clarity, simplifying compliance efforts and reducing the risk of unintentional violations. Moreover, it would enable employers to allocate their resources more efficiently, ensuring compliance across the board.

Fair Chance Initiatives, Salary History, and Marijuana

Fair chance initiatives, such as Ban the Box and Clean Slate laws, add another layer of complexity for employers. While some states have enacted this legislation at the state level, several cities and counties within those states have implemented their own variations of these laws. For example, Lakeland, Florida, Montgomery County, Maryland, and St. Louis, Missouri are just a few cities and counties with their own version of Ban the Box, while Philadelphia, Pennsylvania has its own Clean Slate law. Consequently, employers must navigate a complex landscape of different requirements and timelines, making it challenging to maintain a consistent hiring process. And, in particular, even knowing who they are hiring.

Similarly, salary history restrictions pose yet another compliance hurdle for employers. Several states and cities have implemented legislation prohibiting employers from asking job applicants about their salary history, including New York, Colorado, and California, as well as Westchester County, New York, and Ithaca, New York. The specific laws and their nuances vary greatly from jurisdiction to jurisdiction, including what can and cannot be asked and when, increasing the difficulty for employers to comply.

Further, the increasing trend of legalizing marijuana presents an area of complexity that seems to get more compounded by the day. While some states have legalized medical marijuana and others have legalized recreational use (or both), the substance remains illegal at the federal level. This dichotomy poses an enormous number of challenges for employers, particularly those with drug testing policies or safety-sensitive positions. For example, in certain states, such as California, employers will be prohibited from disciplining or terminating employees for their off-duty marijuana consumption as of January 1, 2024.

Similarly, in Rhode Island, employers cannot “fire or take disciplinary action against an employee solely for an employee’s private, lawful use of cannabis outside the workplace and as long as the employee has not and is not working under the influence of cannabis,” unless they fit within certain exemptions. The law further provides that an employee is not considered “under the influence solely for having cannabis metabolites in his or her system.” As such, more Rhode Island employers are now forgoing pre-hire drug tests for marijuana use.

Other jurisdictions don’t allow marijuana testing at all in certain circumstances. For example, New York City, Nevada, and Philadelphia have all banned pre-employment marijuana testing. And while Washington D.C.’s law doesn’t similarly ban testing, it does prohibit employers from refusing to hire, terminate, suspend, fail to promote, demote, or penalize an applicant or current employee based on the individual’s use of cannabis. Employers must navigate the intricacies of all of these state and local laws, with the understanding of marijuana’s illegality under federal law, while balancing their priority in maintaining a safe and productive work environment. Admittedly, this is no easy task.

Texas Regulatory Consistency Act

The new law is scheduled to take effect on September 1, 2023 (although legal challenges are anticipated), with its primary goal of preempting local lawmaking in several fields of regulation. Among the local ordinances that may face preemptive invalidation are Austin’s Anti-discrimination Law that includes gender identity as a protected class and its Fair Chance Hiring Ordinance. However, the broad language of the Act makes it difficult to predict which local ordinances it will eventually invalidate. As a result, local governments may be hesitant to pass new ordinances, at least for the time being.

This Act represents a significant departure from Texas’s previous approach to local governance, which allowed its cities and counties considerable independence in governing their own jurisdictions. Instead, it strengthens state control and restricts local governments’ ability to take independent action. While the state constitution already prohibits cities from enacting laws inconsistent with state laws, the Act may go even further by preventing them from enacting laws that are not inconsistent or that address issues not covered by the state legislature.

Benefits to Employers

With the law striving to limit the authority of local governments to create their own regulations in certain areas, it would help ensure consistency across the state and eliminate the ever-increasing compliance burden on employers. Here are some key aspects of how Texas’s new law can assist employers in this predicament:

 

• Uniformity and Clarity. By asserting Texas’s “sovereign regulatory powers,” the law will help establish uniform rules and regulations across the state. This can provide greater clarity for employers as they don’t have to grapple with different requirements in different local jurisdictions within the state.

 

• Reduced Compliance Burden. With a more streamlined regulatory landscape, employers can benefit from a reduced compliance burden. Instead of having to comply with potentially conflicting or duplicative local regulations, they can focus on adhering to state-level requirements, which are now given priority.

 

• Avoiding Contradictions. In situations where local regulations differ from state laws, businesses may face contradictory requirements, leading to confusion and potential compliance issues. The new law helps avoid such conflicts by asserting Texas’s authority over certain areas, minimizing the risk of contradictory regulations.

 

• Consistent Business Practices. For businesses operating across multiple cities or counties in Texas, the new law ensures that they can maintain consistent business practices throughout the state. This can streamline operations and make it easier to apply uniform policies and procedures across their locations.

 

• Legal Protection. The law grants the state of Texas broader immunity from certain lawsuits, shielding both the state and its political subdivisions (such as cities and counties) from liability in specific cases. This legal protection can offer some assurance to employers that they won’t face inconsistent judgments or lawsuits due to varying local regulations.

Uncertain Future

Despite the Act’s upcoming scheduled effective date, pending litigation may delay or block its implementation. On July 3, 2023, the City of Houston filed a lawsuit against the state, arguing that the law violates the state constitution and undermines the self-governance authority of cities and counties. Houston contends that the Act conflicts with the constitutional provision allowing cities to enact their own laws, requiring a voter-approved constitutional amendment. The city has requested an expedited declaration voiding the Act, which could lead to a temporary stay or permanent block of its enforcement.

Employer advantages aside, the preemption of local lawmaking will always be a topic of debate, as some argue that local governments should have the flexibility to address unique issues and needs within their own communities. At the same time, employers face a daunting task when attempting to comply with federal, state, city, and county laws. The proliferation of regulations, such as privacy laws, fair chance initiatives, salary history restrictions, and marijuana laws adds layers of complexity. To streamline compliance and alleviate the burden on employers, there is a growing need for cohesive federal legislation in certain areas to establish consistent standards and simplify the compliance process. As with any regulatory changes, there will be differing opinions on the impact and efficacy of the new Texas law on businesses and overall state governance.

We will closely monitor developments in this area. In the meantime, employers should stay informed about ongoing developments and seek legal counsel to ensure compliance with all applicable laws and regulations in Texas. Hire Image strives to be your trusted background screening resource and partner in 2023 and beyond. For more information on various state laws and whether they affect your state, visit our resource guide at the Hire Image Resource Library.  If you have any questions about how to best protect your business, employees, and customers, please reach out at contact@hireimage.com.