5 State Policy Trends to Watch in 2023

IN THIS ARTICLE

Shifting ESG sentiment grows in the Midwest and South

Labor legislation gains momentum in blue states

Environmental safety regulations are in the works in a dozen states

Eight states join the data privacy race

Gender-related developments take center stage  in 27 states

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Members-elect were sworn in to the 118th U.S. Congress earlier this year, with Republicans having a slim majority in the House and Democrats narrowly controlling the Senate. With the chambers divided, the likelihood of gridlock is high. However, as legislative sessions begin at the state level, officials might pass policy reforms that will have lasting effect.

2023 has brought new or renewed attention to a variety of issues, including fair wages and anti-harassment policies at the workplace, state data privacy legislation amid an absent federal law, tighter restrictions or prohibitions on hazardous chemicals in consumer products, anti-ESG (environmental, social, and governance) versus pro-ESG bills, and bans on gender-affirming medical care for transgender youth. Here are five key state policy areas to watch in greater detail.

Shifting ESG sentiment grows in the Midwest and South

This year, GOP officials have drafted anti-ESG legislation that would penalize companies that prioritize climate change and diversity issues over the bottom line. Lawmakers in Republican states plan to restrict ESG-invested companies from state contracts and pension funds. This is part of a growing dispute over the inherent value-added nature of environmental, social, and governance factors.

If the anti-ESG bills are enacted, more firms will be torn between the pressure from shareholders to have stronger corporate social responsibility and penalties from legislators who are disrupting the ESG regulatory landscape.

Proposed bills in Arkansas, Oklahoma, and Wyoming would grant state government contracts only to companies that do not discriminate against industries, such as oil and gas. In Mississippi and South Carolina, lawmakers have introduced measures to prohibit public pension investment decisions based on anything other than profit.

These bills are likely to face opposition, as they complicate contract negotiations. Some lawmakers are seeking middle ground and advocate using ESG factors for financial gains rather than mission-related goals, especially if businesses are operating across state lines. Regardless, organizations will still face complex regulations and reputational risks based on their ESG definition.

Labor legislation gains momentum in blue states

Paid leave, pay equity, and anti-harassment policies will be hot topics debated in statehouses in 2023. With significant blue gains after the 2022 midterm elections, states such as Michigan and Minnesota are pushing labor-related issues, since Democrats now control both chambers of their legislature.

In Michigan, labor leaders are challenging right-to-work laws that prohibit mandatory union membership as a condition of employment. Legislators in Michigan, Minnesota, Maine, and New Mexico are working on passing paid leave laws this year, as Congress has failed to enact leave legislation.

Last November, Washington, D.C., passed an initiative to phase out tip credit laws and replace them with local minimum wage thresholds plus any additional tips. New York is also poised to end subminimum wages and raise the state’s minimum wage from $15 to $21 to offset the effects of inflation.

Eighteen states have enacted the CROWN Act, an anti-discrimination law protecting employees from harassment based on hairstyle or hair texture; Minnesota legislators have drafted a similar bill for a House vote. In the wake of the #MeToo movement, California and Maine have banned sexual harassment and discrimination non-disclosure agreements (NDAs). More states are slated to tackle workplace harassment through legislative measures.

Download: 2023 State Policy Watchlist

From a backlash against ESG investing to a rise in state privacy legislation, this comprehensive report has everything you need to know about critical 2023 state policies.

Environmental safety regulations are in the works in a dozen states

More than a half-dozen states banned per- and polyfluoroalkyl substances (PFAS), compounds found in consumer goods that have been connected to environmental damage and health problems. Maine is leading the charge as the first state to implement a widespread ban on PFAS in all products this year.

Effective as of Jan. 1, 2023, the first phase of Maine’s PFAS ban requires that the hazardous chemical be discontinued from rug and fabric treatments. Unless their use is unavoidable, PFAS will be eliminated from all clothing, cookware, packaging, and furniture manufacturing in Maine by 2030.

PFAS, also called “forever chemicals,” do not easily break down and cause toxic buildup in soil and waterways. The EPA linked 1,4-dioxane – a type of PFAS found in detergents – to cancer, leading New York to outlaw this carcinogenic substance. California also placed restrictions on PFAS and is requiring cookware manufacturers to disclose if their products contain noxious chemicals, such as Bisphenol-A (BPA) and perfluorooctanoic acid (PFOA).

Public utilities in Pennsylvania and Rhode Island must test water for PFOA and other PFAS and treat it if it exceeds appropriate thresholds. Colorado, Hawaii, and Vermont have banned other use cases of PFAS to combat environmental degradation.

Eight states join the data privacy race

Legislators in New York, Indiana, Kentucky, Tennessee, Mississippi, Oklahoma, Iowa, and Oregon have filed privacy bills. If enacted, 13 total states will have broad privacy laws, indicating a growing trend to protect consumers’ personal information and privacy rights.

Currently, there is no comprehensive federal privacy law, leaving it up to the states to enact their own rules and regulations. This patchwork approach carries compliance and liability risks. Organizations that do business at a national level may encounter difficulties in complying with each state’s privacy law, especially if new legislation significantly deviates from the five state privacy laws already in place.

The pending privacy bills overlap but also have differing provisions. New York’s proposed privacy bill would allow consumers to examine automated choices that affect their housing, health care, insurance, and other services. Other states are looking to address more specific privacy issues, including biometric data, reproductive health, and age-appropriate design code.

Building on momentum from 2022, legislators in Indiana and Iowa are reintroducing privacy bills that stalled during last year’s session, with amendments to boost the chances of their becoming law. More states are likely to draft their own privacy bills in 2023.

Gender-related developments take center stage in 27 states

In the 2022 – 2023 legislative cycle, conservative lawmakers have written nearly 100 bills in 27 states that aim to limit or ban gender-affirming medical care for transgender youth, creating a cascade of lawsuits from LGBTQ+ rights groups that have filed discrimination claims.

LGBTQ+ advocates point out that the bills are inherently discriminatory because the same therapies and interventions used during gender-affirming care are available to children with other medical conditions, such as precocious puberty and intersexuality. Republicans contend that minors are not developed enough to make informed decisions on the risks of gender-affirming treatment; however, trans-allied groups note that a young person’s parents or guardian are the ones consenting to care.

This year, 21 states introduced measures that impose civil fines, embargoes, and medical license revocation on those who offer gender-affirming services. In 11 states, medical providers and parents could face criminal charges, with Oklahoma imposing the harshest penalty: a maximum of 10 years in prison and a fine up to $100,000.