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ANALYSIS: Risks That Employers Need to Know in Post-Dobbs US

Aug. 19, 2022, 9:00 AM

Since the US Supreme Court overruled Roe v. Wade in June, many employers have found themselves in a tough position: They have to balance their employees’ and the public’s expectations regarding employer-provided benefits against the realities of the new criminal and civil laws related to abortion.

Several employers, such as Apple, Citigroup, and Levi’s, have publicly announced that they’ll provide abortion-related benefits, including abortion-related expenses for employees.

But this is a risky step to take. The stakes—criminally, financially, and operationally—are high for organizations that continue to provide these benefits in states where they’re banned.

Moving forward, the following are critical considerations employers will face in the post-Dobbs world.

Criminal Law Implications

Some of the largest law firms and corporations have publicly announced that they intend to maintain abortion-related benefits or to begin providing additional ones. But several states have moved in the opposite direction by passing stricter laws on abortion that carry hefty legal consequences.

Some organizations are already feeling the heat.

For example, a group of Texas legislators recently informed Lyft and Sidley Austin that their abortion-related benefits were unlawful under existing law and that they could expect more laws to be passed that would criminalize employer-provided abortion benefits.

The extent to which criminal laws on abortions may impact employee reproductive benefits is unclear, but the broadest reach of the criminal laws could have widespread impacts.

Applying criminal penalties to employers that provide abortion benefits opens the door to personal criminal liability for many members of an organization. Everyone from the company leaders making the benefits decisions all the way to the human resources administrators approving the company’s abortion-related benefits could be liable if the laws are written or interpreted broadly.

The criminal law angle could also affect business travel (and travel in general). A corporate officer, for example, may not want to travel to a state where they could be arrested for—as an example—offering abortion-related benefits to employees because they’re illegal there even though they aren’t in the state where the officer works.

Beyond the direct impacts of these laws, some organizations and sectors may simply find it too difficult to recruit and attract talent in places with these laws. This may lead to businesses leaving states or not doing business in states that criminalize abortion—impacting the job market and leaving residents with fewer services.

These scenarios may not come to pass. However, if businesses are subject to strict criminal laws on abortion, some of the hypotheticals aren’t outside of the realm of possibility. And if businesses do leave states, there could be political and policy implications, including a softening of criminal laws as they apply to employer-related issues.

It’s also unclear where the debate will lead. There are concerns that Dobbs v. Jackson Women’s Health Organization could be applied to other procedures such as in-vitro fertilization, forcing employers to decide whether to cover these treatments.

For all these reasons, it’s necessary for organizations to keep an eye on post-Dobbs developments and to seriously consider the risks of flouting laws in certain jurisdictions.

Civil Liability Implications

While employers face criminal liability for providing abortion-related benefits to employees, they’ll likely have to navigate even more perilous civil liability repercussions.

In the communication that Lyft received, a group of Texas legislators said that they plan to introduce a bill that would make it a per se breach of fiduciary duty for corporations to pay for elective abortions or to reimburse employees for abortion-related expenses in most situations.

The letter also said that Texas residents who are shareholders in companies will have a right to sue directors and officers of these publicly traded companies for any breaches.

If this bill passes in Texas (or similar ones in other states), it will be difficult for any public corporation to provide these benefits to employees, as they will likely have shareholders who could sue.

But questions of the legality and enforceability of such a law remain.

For example, can a state expand or change the definition of fiduciary duty and legislate per se breaches? If this is possible, can Texas apply this law to corporations in other states like Delaware, which incorporates more than 60% of Fortune 500 companies?

If Texas can do this, it could open a Pandora’s box of corporate liability.

A dangerous trend could follow: What if other states follow this path? What if another state, for example, provides for similar breach suits for corporations that don’t provide abortion benefits? Or, on a different note, for those that don’t meet certain environmental standards?

To draw a parallel, in response to Texas’s “fetal heartbeat” law that allows private citizens to file a civil lawsuit against individuals who perform (or intend to perform) a prohibited abortion or against anyone who helps a woman get an abortion, California passed a similar law related to guns.

It’s unclear if California (or any other state) would mimic a shareholder suit law if Texas ended up passing one, and there hasn’t been a robust discussion of such laws, but the California versus Texas battle on abortion and guns shows that there is the potential for such a move.

If such laws pass, corporations won’t simply be able to leave a state where abortion is banned to escape liability, as they may be able to in order to escape criminal liability. This could result in a hyperpolitical environment for corporations, resulting in expensive and lengthy litigation on any issue for which such a law is passed.

The Evolving Landscape

The legal issues and debate surrounding abortion are not static and won’t be for years to come, so employers need to gird themselves. An act that an employer may legally take today could be illegal tomorrow—or vice versa—so remaining informed about current laws and potential changes to them is necessary.

More laws—both progressive and regressive—regulating reproductive health will be passed, and there will be ensuing litigation.

A strong labor market further complicates the legal uncertainty for employers, as it provides employees with an escape hatch to leave their jobs if they disagree with their employer’s stance, silence, or benefits options.

For the foreseeable future, a patchwork of laws will govern abortion coverage for employers, and frequent compliance audits and review of legal developments will help to ensure employers are operating legally.

In related pieces, Rachael Pikulski’s Aug. 18 analysis looks at what the Dobbs ruling means for law firms, and Abigail Gampher’s Aug. 17 article examines what employee benefit inquiries corporations should expect from shareholders.

Bloomberg Law subscribers can find related content in our In Focus: Abortion Law and Labor & Employment Practice Center pages.

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