On Tuesday, May 14, James Newland, partner in Seyfarth’s Construction practice and co-chair of the International Dispute Resolution group, will speak in a panel discussion on “Becoming an Owner, Designer, or Contractor of Choice” at the 2024 ACI-NA/ACC/AGC Airport Construction Strategy Summit in Chicago.

The panel will discuss the key characteristics of successful airport capital project partners. The summit features other panel discussions on topics such as airport project delivery systems and construction, and provides attendees networking opportunities and a tour of recent capital projects at Chicago-O’Hare International Airport.

Panel Participants

Linda Konrath, HKA

James Newland, Seyfarth Shaw

Chris George, San Diego County Regional Airport Authority

Dwight H. Pullen, Jr., AECOM

Iana Tassada Stuard, JE Dunn Construction

For more information and to register, click here.

This blog has been cross-posted to Seyfarth’s Gadgets, Gigabytes & Goodwill site.

A whole host of creators have filed suit in the U.S. alleging that AI companies improperly used the creators’ content to train AI programs (if you need to catch up on these lawsuits, we recommend our video blog here).  In most cases, the creators don’t know for sure whether the AI companies copied their works, although they allege that copying can be inferred based on the AI programs’ outputs.  But a new law in the EU may soon provide creators with a mechanism to find out if their works have been copied, and may provide those creators with greater protections than those afforded to creators in the U.S.

On March 13, 2024, the European Parliament approved the Artificial Intelligence Act, known as the AI Act.  Formal adoption of the AI Act is expected in early Summer 2024, with implementation spearheaded by the newly-formed European AI Office.  The AI Act is the one of the first major legislative frameworks in the world to emerge in response to the spread and seeming ubiquity of the relatively new generative AI technologies. The Act aims to ensure safety and compliance with certain individual and property rights, including IP rights.

The AI Act will regulate AI programs based on the level of risk they present.  Generative AI programs that are capable of generating text, images, and other content, and may perform any number of functions with general or specific purposes, are classified as “high risk.”  The AI Act refers to these programs as “General Purpose AI” or GPAI.  The AI Act places the most stringent obligations on developers and deployers of high-risk AI systems that are put to use in the EU, even if the developer or deployer is not actually based in the EU.  This partly because the EU believes that application to non-EU companies whose programs will be used in the EU is “necessary to ensure a level playing field among providers of [GPAI] models where no provider should be able to gain a competitive advantage in the EU market by applying lower copyright standards than those provided in the [EU].”   

Under the AI Act, GPAI model providers must:

  1. provide technical documentation, including training, testing processes, and results of evaluations;
  2. provide information and documentation to supply to end providers that intend to integrate the GPAI model into their own AI system so that the latter understands the capabilities and limitations thereto and is able to comply with the AI Act’s requirements;
  3. establish a policy to abide by the EU Copyright Directive; and
  4. publish a detailed summary about the content used for training the GPAI model.

One goal of these provisions to ensure that AI developers are disclosing whether the used material subject to copyright protection to train their AI programs.  There are some exceptions, however, including for “open license” AI models, which only have to provide disclosures if their AI programs present a “systemic risk.”

For those companies required to make disclosures, they must prepare sufficiently technical summaries to encourage IP rightsholders or others with legitimate interests to exercise and enforce their rights in the EU.  The EU AI Office will not be conducting a “work-by-work” assessment to ensure that GPAI providers are abiding by copyright laws.  Instead, the Office has passed the onus on to GPAI providers to satisfactorily educate rightsholders about their enforcement rights and responsibilities vis-à-vis the use and incorporation of their content by GPAI.

Companies must also “establish a policy to abide by the EU Copyright Directive,” that “requires the authorization of the rightholder concerned” before using any copyright protected content “unless relevant copyright exceptions and limitations apply.” The Directive does have some exceptions to this requirement, such as allowing reproductions of works for the purposes of text and data mining in certain limited scenarios.  Unless that text/data mining is for scientific purposes, however, the rightsholder can opt out. 

If a rightsholder opts out, then under the terms of the Copyright Directive and the AI Act, companies must “identify and respect the reservations of rights expressed by rightsholders pursuant to Article 4(3) of Directive (EU) 2019/790.”  Accordingly, GPAI providers would have to obtain special permission from the rightsholder that opted out in order to proceed with text/data mining activities that would access or utilize their protected content.

The AI Act includes a carve-out for small GPAI providers, such as start-ups, to promote innovation even for those with fewer resources than large corporations.  The carve-out provides “simplified ways” for smaller providers to comply with the AI Act.  The idea is that compliance with the AI Act should not “represent an excessive cost” or “discourage the use of [GPAI] models.”

It remains to be seen what will happen once the AI Act is officially enacted, but we expect an uptick in copyright litigation and related counseling (as well as costs) in the EU brought by copyright owners and other rightsholders.  We also expect that the number of potential stakeholders will increase by virtue of the ubiquity of GPAI and the ease and accessibility of content via the Internet and connected devices.  With this may come niche legal practices and novel legal issues, which will likely result in changes to the AI Act or its interpretation.  It will be crucial for owners of IP and AI companies to understand their respective rights and obligations under the AI Act; otherwise, IP holders risk unfettered and unauthorized use of their creative content, while AI companies run the risk of being sued.

About the Program

Wednesday, 10 April 2024
5:45 p.m. – 6:00 p.m.   Registration
6:00 p.m. – 7:00 p.m.   Panel Program
7:00 p.m. – 8:00 p.m.   Networking and Apertivo

Magna Pars L’ Hotel À Parfum
via Forcella, 6
20144 Milano, Italy
Meeting room: Ambrosia Hall

In an era of rapid change and increasingly complex global workplace issues, staying ahead of the curve is not just an advantage—it’s a necessity. Seyfarth is pleased to offer this opportunity to hear from our distinguished panel from Brembo S.p.A., Fava & Partners, Pentair, and Seyfarth Shaw on their experiences and insights in navigating organizations’ most pressing issues. The panelists will explore the problems keeping legal and business leaders up at night, sharing effective strategies and best practices.

Following the panel presentation, the event will conclude with a networking reception, providing a relaxed environment for further discussion. This promises to be a unique opportunity to gain invaluable insights from our panelists, and to connect with legal industry peers.

Click this link to register your attendance at this exclusive event before 1 April. We look forward to an evening of knowledge sharing and networking.

Please note that the panel discussion will be conducted in English.

Panelists

  • Laura Colamartino, HR Director, EMEA Water Solutions & Pool, Pentair
  • Domenico Fava, Founder, Fava & Partners – Studio Internazionale Tributario
  • Umberto Simonelli, General Counsel, Brembo S.p.A.
  • Peter Talibart, Partner and International Department Co-Chair, Seyfarth Shaw (UK) LLP

Moderator

  • Sofia Bargellini, Partner, Seyfarth Shaw S.t.A S.r.l

Wednesday, November 15, 2023
11:00 a.m. to 12:00 p.m. Eastern
10:00 a.m. to 11:00 a.m. Central
9:00 a.m. to 10:00 a.m. Mountain
8:00 a.m. to 9:00 a.m. Pacific

About the Program

On Wednesday, November 15, from 11 am to 12 pm Eastern, Seyfarth and Lexology will host a Masterclass webinar titled, “AI Gone Awry: Lessons from an AI Fiasco,” and presented by Seyfarth attorneys Owen Wolfe, Eddy Salcedo, and Jamie Anderson.

With the recent New York federal court case involving the use of ChatGPT and the AI-generated court decision citations, it is important that lawyers learn how to use AI properly as part of a legal practice and understand its strengths and weaknesses. During this webinar, the attorneys will discuss the court case and the impact of AI on the legal practice, including:

  • What went wrong for the attorneys involved in the New York case
  • Non-AI related lessons from the New York case
  • Impact of the New York case on other court cases and court rules
  • What leading AI programs currently can and cannot do as it relates to legal practice
  • Best practices for use of AI in both litigation and non-litigation settings
  • The future of AI in the legal practice

REGISTER HERE

中美贸易:敏感技术的对外投资管制制度

Executive Order on Outbound Investment 有关对外投资的行政令

A new executive order signed by President Biden in August 2023 restricts outbound investment to China in several critical cutting-edge technologies with military, surveillance, and cyber-enabled capabilities, deemed critical to US national security interests. Citing an “unusual and extraordinary threat” to the national security of the US, Biden declared a national emergency alongside the executive order.

美国总统拜登于2023年8月签发一项新的行政令,在一些被认为对美国国家安全利益至关重要的、具有军事、监控和网络功能的关键尖端技术方面,限制对中国的对外投资。拜登以美国国家安全面临“非常规和特殊的威胁”为由,在发布行政令的同时宣布全国进入紧急状态。

The latest move in a series of US policies aimed at limiting the sharing of advanced technology with, the executive order is apparently designed to initiate the process of enacting restrictions on US investment in China in three “sensitive” technology sectors, focusing on specific end uses of these emerging technologies,  and restricting military applications of (1) semiconductors and microelectronics, (2) quantum information technologies and (3) artificial intelligence systems (“AI”).

作为美国一系列旨在限制与中国分享先进技术的政策中的最新举措,该行政令显然旨在启动对美国在三大“敏感”技术领域对华投资的限制程序,重点关注这些新兴技术的特殊终端用途,并限制(1)半导体和微电子、(2)量子信息技术、以及(3)人工智能系统(“AI”)的军事应用。

US Investor Restrictions 对美国投资者的限制

Under the executive order, US investors, including private equity, venture capital and joint venture firms, will be restricted from new investments in Chinese semiconductor and quantum computer companies. In this regard, it is noted that certain US investors have already taken actions, such as Sequoia Capital sawing off its Chinese branch[1]. Furthermore, Americans doing business in China must notify the US government of any direct investment in AI and the semiconductor field. Investment in technology destined for military or surveillance is banned while investment in less sensitive areas are permitted with government notification.

根据该行政令,包括私募股权、风险投资和合资公司在内的美国投资者将被限制对中国半导体和量子计算机公司进行新的投资。在这方面,我们注意到某些美国投资者已经采取了行动,如红杉资本(Sequoia Capital)已裁撤其中国分支机构。此外,在中国经商的美国人必须向美国政府通报任何在人工智能和半导体领域的直接投资。禁止投资用于军事或监控的技术,而允许投资较为不敏感的领域,但必须向政府通报。

Narrowly Limited Scope of Investment Controls 投资管制的范围受到严格限制

The program of outbound investment restrictions proposed by the executive order follows on other regulatory regimes such as traditional US trade export controls, US sanctions programs and inbound foreign direct investment controls yet creates another level of controls. The proposed rules focus on limiting access to US capital flows and intangible benefits such as know-how, market access, investment and talent networks, and other managerial expertise.

行政令提出的对外投资限制计划是在传统的美国贸易出口管制、美国制裁计划和外商直接投资管制等其他监管制度的基础上提出的,但它形成了另一个层面的管制。拟议规定主要集中在限制对美国的流动资本以及无形利益的获取,如技术秘诀、市场准入、投资和人才网络,以及其他管理能力。

The executive order states that it intends to narrowly limit the scope of the proposed investment restrictions to preventing China’s military advancement and reduce the US national security risk, rather than causing China economic harm. Also, heated lobbying efforts from the private sector has also limited the scope of the proposed investment controls.

该行政令指出,它打算将拟议的投资限制范围严格限制在防止中国军事进步和降低美国国家安全风险上,而不是对中国造成经济损害。此外,私营部门的激烈游说也限制了拟议投资管制的范围。

Investors who violate those rules may face civil penalties (with criminal penalties being referred to the US Justice Department) and fines, and be compelled to divest their stakes. The rules do not target less involved investment in publicly traded securities such as Chinese stocks and bonds.

违反这些规定的投资者可能面临民事处罚(刑事处罚将提交美国司法部处理)和罚款,以及被迫撤资。这些规定并不针对涉及面较小的公开交易证券投资,如中国股票和债券。

Timing – Public Notice Before Implementation 时间安排-实施前的公示

Tasked with implementation of the executive order, Treasury has issued an advance public notice with details on the proposed rules and solicited public comment. The outward investment program will be implemented after this public notice and feedback period (ending September 28, 2023). No date has been set yet for the actual rules to take effect and it may take months before the final rules are implemented.

负责执行该行政令的财政部已经发布了关于拟议规则详细的事先通知,并征求了公众意见。对外投资计划将在公示和反馈期(截至2023年9月28日)后实施。实际规则的生效日期尚未确定,最终规则的实施可能仍需要几个月的时间。 

Proposed Executive Order Outbound Investment Controls 拟议的对外投资管制行政令:

  1. Semiconductors 半导体

With respect to investment bans in the semiconductor industry, the US Treasury is considering banning US investment in the same areas covered by the Commerce Department’s October 2022 semiconductor export controls.

在半导体领域的投资限制方面,美国财政部考虑对商务部2022年10月发布的半导体出口管制所涉及的相同领域设置投资禁止。

Specifically, Treasury is planning to prohibit US entities from investing in Chinese technology related to the design and manufacture of advanced logic and memory chips, the installation of supercomputers powered by advanced chips, and the manufacture of these advanced chips.

具体而言,财政部计划禁止美国实体投资涉及先进逻辑芯片和存储芯片的设计和制造、先进芯片驱动的超级计算机的安装,以及有关上述先进芯片制造的中国技术。

  1. Artificial Intelligence 人工智能

The executive order’s restrictions on AI investment are significant not so much for its denial of US capital to Chinese AI startups, as much as they foreshadow the likelihood of further US investment restrictions and export controls on AI for China.

该行政令对人工智能投资的限制影响重大,不仅因其阻止了美国资本对中国人工智能初创企业的投入,更因其预示着美国将对中国人工智能的进一步投资限制和出口管制。

The scope of these likely AI export controls will be in part determined by the comments which the Treasury receives on its advance notice. As they formulate the executive order, the Biden Administration is trying to determine how to differentiate AI end uses that pose a national security risk from AI used for everyday business reasons.

拟议的人工智能出口管制范围将部分取决于财政部就其事先通知收集的意见。在制定行政令时,拜登政府试图明确如何区分终端用途中存在国家安全风险的人工智能和基于日常商业原因使用的人工智能。

  1. Quantum Information Technologies 量子信息技术

Outbound investment controls on quantum information technologies likely foreshadow complementary quantum export controls on China.

对量子信息技术的对外投资管制预示着对中国量子信息技术出口的补充性管制措施。

Otherwise, restrictions on quantum may be less significant than restrictions on semiconductor and AI investment in China given the current lack of US investment in Chinese companies developing quantum and practical applications of quantum computers are very rare.

在其他方面,鉴于目前美国对研发量子信息技术的中国公司缺乏投资,且量子计算机的实际应用非常罕见,对量子信息技术的限制可能不及对中国半导体和人工智能的投资限制重要。

More Restrictions to Come? 未来会有更多限制吗?

When it comes to protecting advanced technologies critical to US national security, the Biden administration speaks of maintaining a “small yard with a high fence”. Even so, US lawmakers are demonstrating an interest in expanding the restrictions and broadening the outbound investment screen to include key sectors identified by the Biden administration including semiconductors, AI, robotics, biotechnology, autonomous vehicles, advanced aviation, and energy, and to additional countries, including Cuba, Iran, North Korea, Russia, and Venezuela.

在保护对美国国家安全至关重要的先进技术方面,拜登政府提出保持“小院高墙”策略。但即便如此,美国立法者仍表现出对加强限制措施和扩大对外投资监管范围的兴趣,以纳入拜登政府确定的包括半导体、人工智能、机器人、生物技术、自动驾驶汽车、先进航空和能源等在内的关键领域,以及古巴、伊朗、朝鲜、俄罗斯和委内瑞拉等更多国家。

These expanded export controls will likely lead to increased and focused enforcement actions targeting Chinese entities and further accelerate the greater separation of the US and Chinese economies or “decoupling”.

这些被扩展的出口管制措施可能导致针对中国实体的大量且密集的执法行动,进一步加速中美经济的分离或“脱钩”。

While some lawmakers seek a more complete “decoupling”, others argue that when access to foreign technology know-how is eliminated, these controls could just contribute to Chinese growth and self-sufficiency.

虽然部分立法者寻求更彻底的“脱钩”,但有观点认为,若外国专有技术的获取途径被切断,这些管制措施反而将促进中国的经济增长和独立自足。

Suggested Risk Mitigation Measures: 风险缓释措施建议:

Given these recent measures, sensitive technology companies in the US involved in outbound investments should consider the risk factors and undertake risk mitigating steps including:

鉴于美方近期采取的这些措施,美国的敏感技术领域公司参与对外投资时应考虑风险因素,并采取以下风险缓释措施:

a. Clarify company’s current and potential investments status and US persons involvement in China

说明公司目前和潜在的投资状况,以及美国主体在中国的参与情况

b. Identify company’s investments that may fall within the  proposed executive order regime’s outward investment regime’s ambit

识别公司的投资可能属于拟议行政令对外投资限制的范围

c. Apply risk mitigation measures in company’s investments in the sensitive technology sectors and areas

对公司在敏感技术领域的投资采取风险缓释措施

On the flip side of the same coin, Chinese companies that fall into those restricted categories may want to review their shareholders base and future financing plans to evaluate the potential impacts. There may be opportunities for non-US investors to gain access to investment into those Chinese companies from which the US investors are withdrawing. It is advisable for non-US investors to engage legal counsel to investigate and conduct due diligence before such investment, in light of the fast-changing CFIUS and other relevant rule and regulation.

换言之,属于受限投资范围的中国公司可能需要重新审视其股东基础和未来融资计划,以评估潜在影响。对非美国投资者而言,他们将获得对美国投资者撤资的中国公司的投资机会。鉴于美国外国投资委员会及其他相关规则在迅速变化,我们建议非美国投资者在进行此类投资前先聘请法律顾问开展尽职调查。


[1] https://www.economist.com/business/2023/06/08/why-sequoia-capital-is-sawing-off-its-chinese-branch

The short answer is no, not yet, but their future looks uncertain. In this update we have a look at developments affecting restrictive covenants across various jurisdictions around the globe and what multinational employers should know.

Non-competition clauses (otherwise known as “non-competes” or restraints of trade) are clauses aimed at preventing an employee from joining a competitor for a certain period after the termination of their employment. Non-competes have been around since the Middle Ages, with the first known English case involving a restraint of trade emerging in 1414, when a Mr. Dyer promised to not exercise his trade in the same town he had been trained in for six months.[1] Nowadays, non-compete clauses are common practice in the employment relationship and are often accompanied by other post-employment obligations including restrictions on soliciting or doing business with the former employer’s clients and other employees.

Continue Reading Are Restrictive Covenants a Thing of the Past?

Introduction

The United States Supreme Court recently granted Certiorari in a closely watched case that could have significant consequences for the Securities and Exchange Commission (SEC) and certain other federal administrative agencies.

In SEC v. Jarkesy, the Supreme Court will determine the constitutionality of the SEC’s broad discretion in deciding which cases will be tried to an SEC administrative law judge (ALJ) and which will be tried to a jury in an Article III federal court. It will also consider the constitutionality of Congress’ delegation of certain authority to the SEC relating to rules and regulations that the SEC has considered or adopted, and the SEC’s discretionary authority to make determinations on policy matters where Congress has not provided sufficient guidance. The Court also will consider the constitutionality of the rules on removal of administrative law judges.

In May of 2022, the Fifth Circuit Court of Appeals, in a 2-to-1 panel opinion, determined that the SEC’s current discretionary authority to bring civil fraud claims before its in-house administrative law judges in civil-enforcement proceedings is unconstitutional in three separate ways. First, the appeals court held that the use of administrative tribunals for enforcement of common law claims which are not public claims violates the Seventh Amendment right to a jury trial. Second it found that Congress violated the non-delegation doctrine in giving the SEC broad discretion to determine whether and when to prosecute enforcement proceedings before its own ALJ’s as opposed to federal courts. Third, the Fifth Circuit held that the SEC’s double layer of for-cause removal protection for administrative law judges was also unconstitutional.

To read the full article, click here.

The following post was originally published to Seyfarth’s Gadgets, Gigabytes & Goodwill blog.

The U.S. Supreme Court’s end-of-term decision in Abitron v. Hetronic seems to have created more questions than answers about U.S. brand owners’ ability to leverage the federal Lanham Act in global trademark disputes. In the few weeks since the Court issued its opinion, parties and courts alike are already struggling with exactly how to apply it.

Tenth Circuit Prompts Question As to Statute’s Reach

The Hetronic case originated in the Tenth Circuit. Oklahoma-based Hetronic, a manufacturer of remote controls for construction equipment, sued its former EU distributor for infringing trademarks and trade dress associated with authentic Hetronic products. A jury awarded Hetronic more than $115 million in damages, $96 million of which related to Lanham Act violations. The district court then granted Hetronic a worldwide injunction against defendant Abitron. Abitron appealed, arguing that the award was improper because 97 percent of the sales at issue occurred abroad. The Tenth Circuit tailored the injunction to apply only to markets where Hetronic was actually selling products, but upheld the damage award, reasoning that even activity occurring abroad had a “substantial effect” on U.S. commerce.

Continue Reading Courts and Brand Owners Struggling With SCOTUS Decision Limiting Ability to Police Against Foreign Trademark Infringement

In a previous blog, we summarized the recent case of Groff v. Dejoy, where the U.S. Supreme Court unanimously clarified the undue hardship standard under Title VII, a federal law in the United States that prohibits employment discrimination based on race, color, religion, sex, and national origin.

The decision is in line with a general global trend in other common law based jurisdictions towards inclusivity in the workplace and the notion that an employer simply cannot deny such requests without at least a legitimate consideration of whether an accommodation based upon belief system can be made. Many employers acknowledge the importance of fostering a work environment that values and embraces diversity, equity, and inclusion, which includes recognizing and respecting religious differences. The challenge for all employers lies in ensuring that these considerations are balanced with commerciality. Additionally, multinational corporations need help ensuring compliance with the legal standards set by all the countries in which they operate, given the variations in standards and requirements across different countries.

Our international employment practitioners have provided some insights below for multinational employers regarding their obligations to accommodate employees’ religious beliefs in the United States, United Kingdom, Australia, and Hong Kong to highlight some of the differences in each jurisdiction.

Groff v. Dejoy and the New U.S. Standard Addressing Employee Religious Accommodations

In Groff v. Dejoy, the Court rejected the long-standing de minimis standard established in the TWA v. Hardison case, which held that employers cannot avoid meeting religious requests simply by arguing that it would cost them more than a trivial amount. Instead, the Court stated that an accommodation imposes an undue hardship on the employer only if it substantially increases costs directly related to business operations. Additionally, the Court emphasized that the impact of accommodation on co-workers is considered an undue hardship only if it affects the overall conduct of the business. Based on this new standard, the Court ruled that an accommodation that may compel other employees to work overtime does not automatically meet the criteria for undue hardship.

Although the case concerned accommodating a Christian’s observance of the Sabbath day, the obligation is not limited to traditional Judeo-Christian concerns. Amici representing the interests of many religions and faiths filed briefs arguing for a higher standard for many religions and faith practices. In the end, employers in the U.S. and in other common law states face an interesting question—does the ruling put larger employers with more resources under a greater obligation to make such accommodations than smaller employers with more limited resources? Only time, and jurisprudence, will settle that question.

United Kingdom

While there is no positive statutory duty in England and Wales for an employer to make reasonable adjustments to the work environment for religious belief, in the same way as the law of discrimination so clearly applies to disabilities, an employer would be at peril in failing to accommodate or at least trying its best to accommodate working constraints around employee belief systems.

The UK Equality Act 2010 prohibits both direct or indirect discrimination on the grounds of religion or belief in the workplace. Whilst direct discrimination is wholly prohibited, there are exceptions where indirect discrimination might be justified, where the contentious practice is a proportionate means of achieving a legitimate aim. Case law in this area is both legion and fact specific. An (easy and oversimplistic) illustration of this is where an item of religious clothing is prohibited for health and safety reasons or to ensure the personal safety of the employees. This is a legitimate aim and, provided it is reasonable in all of the circumstances, it is likely to be held to be lawful.

Had Mr. Groff bought this action in England and Wales, the analysis would be different because the UK has never really had the same “de minimis” standard as the United States has. The claim would most likely present under the auspices of indirect discrimination, and it would be for the employer to demonstrate that insisting Mr. Groff work Sundays contrary to his beliefs or disciplining him for failing to work Sundays would be a proportionate means of achieving a legitimate aim. The way this works in practice, in our experience, is that the employer must show it had little practical choice but to adhere to the policy in issue for sound operational reasons. But, employers must always start with a view to seeking a way to accommodate such requests if they are legitimate. Minor costs of waiving this requirement would probably not justify enforcing it, but major costs or other operational constraints attendant in doing so might.

Some critics in the UK claim that the Equality Act fails to provide the requisite protection for those seeking to assert their religious freedom. This has led to calls for clearer duties, not dissimilar to those imposed in the area of disability discrimination, to be established for religious rights. The Equality Act and the relevant code of practice supporting it make it clear that the law encourages balanced, pragmatic reasoning that should be engaged on a case-by-case basis by employers. The key is respect for the tenets of the religion or belief system and a genuine attempt to accommodate it within the operational parameters of the enterprise.

Australia

Similar to the UK, there is no positive obligation to make adjustments to accommodate religious practices under Australian law. It is likely that an equivalent claim in Australia would have been argued on the basis of indirect discrimination, alleging that the employer’s requirement to work on Sundays was a requirement that (while appearing to apply equally to everyone) had a discriminatory impact by disadvantaging employees with religious commitments on that day. The lawfulness of any such requirement (and the capacity to enforce it) will turn on an assessment of whether the requirement is reasonable or not.

When assessing reasonableness, relevant factors include: whether a less discriminatory alternative exists; whether it would be as effective, efficient, and convenient; and the time, cost, and effort of not discriminating. While cost is one factor that will be considered, a de minimis cost impact is unlikely to be sufficient (on its own) to demonstrate reasonableness.

What is reasonable (and therefore lawful) for one employer might not be reasonable for another. Employers are expected to balance the discriminatory impact and the interest of individuals, as well as the broader objectives of promoting substantive equality. Less discriminatory alternatives need to be considered on a case-by-case basis, with potentially discriminatory requirements only used where these can be justified as reasonable.

Hong Kong

In Hong Kong, there is no statutory protection against religious discrimination. In fact, there are only four anti-discrimination ordinances in Hong Kong covering sex, race, disability, and family status. It may, however, be possible for an employee to bring a claim under the race anti-discrimination ordinance in respect of religion if the argument was made that the race, color, descent, national or ethnic origin, and the religion were intrinsically linked – certainly, we are aware of complaints being made to the Equal Opportunities Commission in Hong Kong by Muslims in respect of being treated discriminatorily due to wearing hijabs, although there have been no reported court cases of this nature. Therefore, practically, if an employee wanted their employer to accommodate their religious beliefs in the workplace, they could raise this internally first, through a complaint/grievance, and could then escalate it to the Equal Opportunities Commission or the District Court, if the matter was not resolved to their satisfaction.

Even though there is no positive statutory obligation for an employer to accommodate employee requests regarding religious beliefs in Hong Kong, as a matter of good practice, had Mr. Groff made his request to a Hong Kong employer, the employer should have properly assessed whether it was reasonable to accommodate the request. In doing so, the risks of any indirect racial discrimination claim relating to the religion of certain racial groups should be considered, and, if the employer was minded to reject the request, the reason for refusal should be legitimate and objective (e.g., costs or operational/business needs).

Further, if Mr. Groff was employed under a continuous contract (i.e., employed continuously for at least four weeks, with at least 18 hours worked each week), he would also have been entitled to at least one rest day per week in Hong Kong. In that case, the employer could, subject to operational needs, appoint Sunday as Mr. Groff’s weekly rest day to accommodate his request and discharge its statutory obligations.

The above examples have been chosen to highlight some of the differences, however, we are working with our clients across jurisdictions to ensure that they are compliant globally.

Seyfarth’s International Employment Team and International Dispute Resolution Group collaborate closely with multinational clients to address the complexities and opportunities that impact their cross-border operations. With our extensive expertise in International Labor and Employment matters, Seyfarth is uniquely equipped to assist in striking a balance between commercial considerations and the implementation of equity and inclusion best practices. Our global experience allows us to provide comprehensive legal guidance, develop and execute diversity and inclusion strategies, and track progress towards meaningful change.

Most of our readers have transnational business operations.  If they have employees in the United States, they should review carefully today’s decision of the United States Supreme Court.  In a 9-0 ruling, the Court clarified—and raised—the bar that employers must meet in order to show that a religious accommodation imposes an “undue hardship” under Title VII of the Civil Rights Act of 1964.  Groff v. DeJoy, Case No. 22-174 (June 29, 2023). Lower courts had for decades held that anything “more than a de minimis cost” sufficed to establish undue hardship, relying on language in Trans World Airlines v. Hardison, 432 U. S. 63 (1977). While declining to overturn Hardison, the Supreme Court held that employers must show that a proposed religious accommodation would result in “substantial increased costs in relation to the conduct of its particular business.”

Gerald Groff, an Evangelical Christian, delivered mail for the United States Postal Service (USPS). His religious belief that Sunday should be devoted to worship and rest eventually clashed with USPS’s requirement that drivers facilitate Sunday deliveries for Amazon. Groff received “progressive discipline” for failing to work on Sundays, and he ultimately resigned. Groff sued under Title VII, which prohibits discrimination “because of … religion.” The term “‘religion’ includes all aspects of religious observance and practice, as well as belief, unless an employer demonstrates that he is unable to reasonably accommodate to an employee’s … religious observance or practice without undue hardship on the conduct of the employer’s business.” 42 U. S. C. §2000e(j).

The District Court granted summary judgment to USPS, and the Third Circuit Court of Appeal affirmed. Relying on Hardison, the Third Circuit held that exempting Groff from Sunday work would impose “more than a de minimis cost” on USPS—namely, “impos[ing] on his coworkers, disrupt[ing] the workplace and workflow, and diminish[ing] employee morale.” Writing for a unanimous court, Justice Alito reversed.

The Supreme Court first put Hardison in context, noting that the principal issue in that case was whether Title VII “require[s] an employer and a union who have agreed on a seniority system to deprive senior employees of their seniority rights in order to accommodate a junior employee’s religious practices.” The answer was no: the employer (TWA) was not required to compel senior workers to work on the Sabbath in order to accommodate a junior worker’s religious belief. But Hardison contained this line: “To require TWA to bear more than a de minimis cost in order to give Hardison Saturdays off is an undue hardship.” That line, Justice Alito noted, “would later be viewed by many lower courts as the authoritative interpretation of the statutory term ‘undue hardship,’” though “it is doubtful that it was meant to take on that large role.” Instead, Hardison elsewhere described the governing standard as “substantial” “costs” or “expenditures.”

Articulating the governing standard, the Supreme Court held: “‘undue hardship’ is shown when a burden is substantial in the overall context of an employer’s business.” The Supreme Court directed lower courts to “apply the test in a manner that takes into account all relevant factors in the case at hand, including the particular accommodations at issue and their practical impact in light of the nature, size and operating cost of an employer.” While this is a “fact specific inquiry,” the Supreme Court provided some guidelines as to its contours: employers cannot “escape liability simply by showing that an accommodation would impose some sort of additional costs.” Nor does “a hardship that is attributable to employee animosity to a particular religion, to religion in general, or to the very notion of accommodating religious practice” qualify as “‘undue.’”

Rather, the Supreme Court held, “the modifier ‘undue’ means that the requisite burden … must rise to an ‘excessive’ or ‘unjustifiable’ level.” The court also had “no reservations in saying that a good deal of the EEOC’s guidance in this area is sensible and will, in all likelihood, be unaffected by our clarifying decision today.” Under that guidance, no undue hardship is imposed by temporary costs, voluntary shift swapping, occasional shift swapping, or administrative costs. 29 CFR §1605.2(d). But the Supreme Court stopped short of “ratify[ing] in toto a body of EEOC interpretation that has not had the benefit of the clarification we adopt today.”

Elaborating further, the Supreme Court held that “Title VII requires that an employer reasonably accommodate an employee’s practice of religion, not merely that it assess the reasonableness of a particular possible accommodation.” For a situation like Groff’s, “it would not be enough for an employer to conclude that forcing other employees to work overtime would constitute an undue hardship. Consideration of other options, such as voluntary shift swapping, would also be necessary.” The Supreme Court therefore sent the case back to the lower court “to apply our clarified context-specific standard.”

Of course, Groff and application of the new test is not limited to traditional Christian beliefs.  The Supreme Court relied on amicus briefs filed by “a bevy of diverse religious organizations”—including groups representing the Sikh, Muslim, Jewish, and Seventh Day Adventist faiths—who argued that the de minimis test had “blessed the denial of even minor accommodation in many cases.”

 Groff has major implications for U.S. employers. Faced with a heightened undue hardship standard, employers likely will need to accommodate a greater number of religious beliefs and practices in the workplace than they have done in the past. Requests for religious accommodation can run the gamut from work scheduling requests, to exemptions from dress code and grooming requirements and vaccination mandates. After Groff, evaluating such accommodation requests will be a “context-specific” inquiry, requiring a careful consideration of a number of the factors outlined in the Supreme Court’s decision.

Seyfarth lawyers are here to assist as employers navigate this new legal landscape. Seyfarth’s International Dispute Resolution Group will also provide an international perspective on these developments in a blog post next week.