NRF Retail Law Summit covered top legal issues facing merchants

How will changes at the Federal Trade Commission affect retailers? Can artificial intelligence result in unintended discrimination? Where do diversity, equity and inclusion efforts intersect with immigration law?

Those were just a few of the issues addressed as more than 700 retail industry attorneys, risk and compliance officers, and human resources executives gathered for NRF’s online Retail Law Summit 2023. Speakers included a member of the Equal Employment Opportunity Commission, a former member of the FTC and practice chairs from some of the nation’s most prominent law firms.

Participants also heard from retail chief legal officers like Elisa Garcia of Macy’s Inc., who addressed the latest developments in federal administrative law, and Stacy Siegal of J.Crew Group, who discussed rising litigation risks.

The three-day conference covered workforce topics, consumer protection and the impact of technology. Here are some of the highlights.

Former FTC Commissioner: Who enforces the law ‘matters a great deal’

When former FTC Commissioner Noah Phillips was in law school, the focus was largely on judges, “as if the whole world was judge-made law.” On Capitol Hill, he learned “the judges don’t write the laws, the legislators write the law.” But when he got to the FTC, he found “the people who are enforcing the law matters a great deal, and who you put in charge has a great deal to say about where policy ultimately ends.”

“Especially with my former agency, the Federal Trade Commission, people are seeing what a difference an additional vote makes,” he said. “Who’s running the agency, how does it work on the inside, who are the people involved in making the decisions … are some things that I didn’t really know going in.”

Phillips, who was one of only two Republicans on the five-member commission, resigned last year amid conflict between Chairwoman Lina Khan and other commissioners. Last month the remaining Republican, Commissioner Christine Wilson, stepped down, citing Khan’s “attempts to remake federal antitrust law” and “disregard for the rule of law.”

“The agency leadership today is dramatically reinterpreting what the agency is doing, both in terms of the scope of the statutes that they’re enforcing and also in terms of the tools they have,” Phillips, now at Cravath, Swaine and Moore, said in a session moderated by NRF Chief Administrative Officer and General Counsel Stephanie Martz. It previously took a vote by the full commission to launch an antitrust investigation, for example, but now “the chair controls it.”

Phillips said the FTC is “quasi-judicial and quasi-legislative” with commissioners having power to propose and vote on regulations, bring an enforcement action under the regulations, and then “adjudicate it as an appellate court” if companies disagree with a ruling by the agency’s administrative law judges. “This leads a lot of people to raise questions,” he said.

Among pending issues is a proposal backed by Khan to bar employers from requiring workers to sign non-compete clauses. NRF opposes the measure, saying it would overturn decades of legal precedent and fails to distinguish between front-line workers and highly paid executives.

“There’s a big debate whether the agency even has competition rulemaking authority and it’s that authority that they’re proposing to use to do the non-compete rulemaking,” Phillips said. “If the idea of rulemaking stands, we could see a lot more regulation coming from the agency.”

Also of interest to retailers is a 2022 FTC proposal seeking input on potential privacy regulations. NRF filed comments asking the commission to consider that not all industries are the same. While banks and health care handle sensitive information, the data retailers gather from customers is more often along the lines of their favorite brand or size of shoes to let them know “there’s a similar pair on sale later that you might be interested in,” Martz said.

“It’s hard to judge right now whether the agency is going to go for some sort of broad comprehensive rule that applies to everyone or is looking at different industries differently,” Phillips said. With hundreds of questions, the proposal “is so broad and the questions so legion that the public really does not yet have a clue … where the agency is going.”

Bias in, bias out when AI is used improperly

Once companies started using artificial intelligence to sort through resumes, many assumed a computer wasn’t capable of bias or discrimination. But Adam Forman, who co-leads the AI practice at Epstein, Becker and Green, says that isn’t the case.

“They say garbage in, garbage out, so if the algorithm is trained or learns from bad data or biased data, that would impact the outcome,” Forman said. “By using an algorithm instead of human intervention, you would be screening out otherwise qualified applicants. In other words, it could be a flawed process.”

And if AI results in discrimination, blaming the computer won’t get companies off the hook, EEOC Commissioner Keith Sonderling said.

“No matter what you do as employers right now, you are liable for the employment decision whether it’s made by a computer or whether it’s made by a hiring manager,” he said. Employers know human bias can lead to discrimination and work to avoid it “but you have to take the same considerations when using AI … before you ever let it make a decision on someone’s livelihood.”

The EEOC joined with the Department of Justice last year to issue guidance on how to avoid discrimination in hiring under the Americans with Disabilities Act and held a hearing this January on “Navigating Employment Discrimination in AI and Automated Systems.” Other agencies including the National Labor Relations Board and the FTC are also taking a close look at AI and “it’s all going to affect you whether or not you think you’re actually regulated by these agencies,” Sonderling said.

Diversity, equity and inclusion – or immigration?

“DE&I” usually means “diversity, equity and inclusion.” But attorneys from Greenberg Traurig said the “new DEI” can mean “diversity, equity and immigration” instead.

As companies seek a more diverse workforce, that can mean more job applicants who are not U.S. citizens and “the issues are increasingly linked,” said John Richards, who co-chairs Greenberg’s DE&I group.

During job interviews, for example, companies can be “very focused on making sure that they are hiring individuals who are authorized to work,” said Courtney Noce, co-chair of the firm’s immigration and compliance practice. “We have to be careful about how we word those questions and how someone in that interview process is maybe going to change those questions or go beyond those questions into a way that’s going to open up possibilities of discrimination.”

Hiring a non-citizen can involve helping them obtain a visa or green card. While a worker with an H-1B visa, for example, is “tied to the company,” a green card is permanent and a company can “cover all of these costs for them and then they’re out the door,” Noce said. Job offers should be clear about which support is available and that hiring is contingent on government approval, she said.

Diversity begins with job postings, and Greenberg Director of DE&I Debra Sydnor said requirements like “great English-speaking skills” can discourage racial or ethnic minority groups because “an applicant who has a foreign accent or who has a regional dialect … may think ‘Oh, that doesn’t include me.’”

Sydnor said inclusive job posts attract more applicants of all backgrounds, increasing the chances of finding the right person. “This is not just about what we can do for diverse applicants,” she said. “This is really a situation where, by being more inclusive, you’re really deepening and expanding our job candidate pool across the board.”

The NRF Retail Law Summit ran from March 7-9 and included sessions with top industry experts sharing insights on the latest issues in retail law, including employment and workforce, privacy, litigation and artificial intelligence.