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North American Edition
1st May 2024
 
THE HOT STORY
Google workers file complaint over firing for protesting Israeli government contract
A group of workers at Google has filed a complaint with the U.S. National Labor Relations Board, claiming that the company unlawfully fired them for protesting its cloud contract with the Israeli government. The workers allege that Google interfered with their rights under U.S. labor law to advocate for better working conditions. The complaint seeks reinstatement to their jobs with back pay and a statement from Google that it will not violate workers' rights to organize. Google has not yet responded to the complaint. The workers claim that the project supports Israel's development of military tools, but Google has stated that the contract is not related to sensitive or military workloads. One of the workers, Zelda Montes, who was arrested during a protest, said that Google fired employees to suppress organizing and send a message to its workforce. The NLRB general counsel will review the complaint and attempt to settle the claim. If that fails, the general counsel can pursue the case before administrative judges and a five-member board appointed by the U.S. president.
WORKFORCE
U.S. labor costs rise by most in 12 months
The Labor Department's employment cost index (ECI), a measure of worker salaries and benefits, rose 1.2% in the first quarter, higher than the 0.9% growth seen in the fourth quarter of 2023, and above the Dow Jones consensus estimate for a 1% increase. Higher benefits costs helped drive the index to its biggest quarterly increase in a year. They shot up to 1.1% from a 0.7% gain the prior quarter, while wage and salary growth was unchanged at 1.1%. On an annual basis, the index that measures changes in wages and benefits held pat at 4.2% for the year ending in March. The biggest pay gains were seen in the public sector, where compensation over the 12 months grew 4.8%. Federal Reserve officials are closely monitoring the trajectory of wage gains, out of concerns that accelerated compensation growth may serve as an inflation pressure. The central bank is holding its latest policymaking meeting this week and is expected to announce today that interest rates will remain unchanged.   “The Fed would now need to see a spectacular rollover in payrolls in May and June and equally spectacular inflation numbers in order to cut rates in June,” Ian Shepherdson, chief economist for Pantheon Macroeconomics, wrote in a note issued Tuesday. “That’s possible but the ECI has raised the bar for easing to the point where we now have to look for the first move in September instead.”
U.S. consumer confidence hits lowest level since 2022
U.S. consumer confidence fell in April to its lowest level since mid-2022, with Americans' views of the labor market and economic outlook deteriorating. The Conference Board's gauge of sentiment dropped to 97, its third consecutive decline, and well below the 103.5 forecast by economists polled by the Wall Street Journal. Expectations for the next six months also fell to the lowest level since July 2022. A measure that looks at how consumers feel about the economy right now dropped to five-month low of 142.9, while a confidence gauge looking ahead six months fell to 66.4, from 74 in March. “Elevated price levels, especially for food and gas, dominated consumer’s concerns, with politics and global conflicts as distant runners-up,” said Dana Peterson, chief economist at the board.
STRATEGY
Elon Musk lays off entire Tesla charging network team
Elon Musk has shut down the division that runs Tesla’s electric vehicle charging business, dismissed two senior executives and fired hundreds more staff, The Information has reported, citing an e-mail sent by Musk to senior executives. “Hopefully these actions are making it clear that we need to be absolutely hard core about headcount and cost reduction,” Tesla's chief executive wrote in the e-mail, the report said. Any manager “who retains more than three people who don’t obviously pass the excellent, necessary and trustworthy test” should resign, he added. Reuters says the decision blindsided automakers gearing up to equip new electric vehicles for customers to use the Tesla Supercharger network, industry officials and analysts said. Tesla’s public policy team will also be dissolved, according to the report.
HIRING
Canada to limit foreign students' off-campus work to 24 hours a week
The Canadian government is to limit foreign students' off-campus work to 24 hours a week in an effort to curb the program's explosive growth. The temporary policy, which allowed full-time work, will be ended. However, the previous 20-hour cap will not be restored. Instead, foreign students will be allowed to work a maximum of 24 hours a week starting in September. This measure aims to ensure that students focus primarily on their studies while still having the option to work if necessary. During academic breaks, students may continue working unlimited hours. The government's decision is part of a larger effort to address the unprecedented growth of the temporary resident population in Canada. The government has also pledged an overall cap on this demographic, a limit to foreign-student visas, and a new framework for colleges and universities that receive permits.
LEGAL
U.S. appeals court upholds Biden administration rule on contractor wages
A U.S. appeals court has upheld a Biden administration rule requiring government contractors to pay seasonal recreational workers at least $15 an hour. The ruling has sparked controversy, with a dissenting judge arguing that Congress has given the president too much power to regulate federal contracting. The court stated that the president's authority to dictate wages extends to workers who do not directly provide services to the government. However, a judge claimed that this broad discretion violates the U.S. Constitution. The rule, implemented by the U.S. Department of Labor, eliminates an exemption for seasonal recreational employers. The court found that higher wages would improve worker absenteeism and turnover, as well as the quality of services provided. The decision is seen as giving the president unlimited power to impose conditions on federal permit holders. The case may have broader implications for minimum wage regulations in the U.S. contracting industry.
U.S. Labor Department's overtime pay expansion faces potential legal challenges
The U.S. Labor Department's new overtime pay rule, set to take effect on July 1, is expected to face legal challenges. The rule will gradually increase the salary threshold for overtime eligibility, starting at $43,888 and rising to $58,656 on January 1. The first increase will use the methodology from the Trump administration's 2019 overtime regulation, which sets a lower salary threshold compared to the new process outlined in the Biden rule. This may provide a legal shield for the policy change. However, industry groups, such as the Associated Builders and Contractors, are considering legal challenges against the new rule, as it will make a significant number of employees newly eligible for overtime. The legal vulnerability of the rule is also influenced by a 2017 court decision that invalidated an Obama-era regulation. Some attorneys believe that the two-step increase in the salary threshold may not be an obstacle for legal challenges. The Trump-era overtime rule is also facing legal uncertainty, with a pending challenge in the U.S. Court of Appeals.
NLRB urges appeals court to uphold ruling on severance agreements
The National Labor Relations Board (NLRB) is urging a U.S. appeals court to uphold its ruling that common provisions in employee severance agreements violate federal labor law. The NLRB argues that overly broad confidentiality and non-disparagement provisions in severance agreements interfere with workers' rights to advocate for better working conditions. The ruling overturned previous Trump-era decisions that stated severance agreements only violate the National Labor Relations Act if employers engage in separate unlawful conduct. The NLRB's decision is being challenged by Michigan hospital operator McLaren Macomb. The case raises concerns about the impact on workers' rights and the reasoning behind the NLRB's ruling. The outcome of the case could have implications for companies that routinely ask terminated workers to sign agreements in exchange for severance pay.
CORPORATE
Practice group head at A&O leaves firm ahead of merger
Damian Carolan, a practice group leader at Allen & Overy, is quitting the U.K. legal firm just days before it combines with New York's Shearman & Sterling. Carolan, who served as head of A&O's U.K. financial services regulatory practice, has been a partner at the firm for 15 years. The merger between Allen & Overy and Shearman & Sterling is set to close this week, creating a new combined firm called A&O Shearman. The departure of Carolan comes as Allen & Overy undergoes leadership changes following the merger announcement. Managing partner Gareth Price has already left the firm, while senior partner Wim Dejonghe plans to retire. The new firm will have approximately 3,900 lawyers and a combined gross revenue of $3.4bn in 2022.
TECHNOLOGY
Internal audit faces talent crunch amid tech transformation
The Institute of Internal Auditors (IIA) has emphasized the urgent need for internal audit departments to hire more technologically adept professionals in response to the accelerating pace of technological innovation. This need is driven by emerging technologies such as AI and robotic process automation, which are transforming business models and operational strategies. The IIA's study, sponsored by Deloitte, highlights a critical challenge: the internal audit profession is not only competing for scarce talent in traditional accounting roles but also against major tech companies for graduates skilled in AI, cybersecurity, and data analytics. The shortage of suitable candidates is exacerbated by a significant decline in the number of accounting graduates, with a 7.4% drop in the 2021-2022 academic year alone, continuing a six-year downward trend reported by the AICPA. This decline in new professionals entering the field presents a considerable hurdle for internal audit functions that are increasingly reliant on advanced technological capabilities to enhance their efficacy and scope. According to IIA CEO Anthony Pugliese, the future of internal auditing will extend beyond traditional assurance roles to include more comprehensive advisory services and strategic business insights. This shift necessitates not only technological skills but also advanced soft skills in leadership and communication.
INTERNATIONAL
U.K. regulator quizzes Big Four on AI exam cheating
The U.K.'s Financial Reporting Council (FRC) has asked the Big Four audit firms to explain the measures they are taking to prevent professionals from using AI tools to cheat on exams. The watchdog said it continues to “work closely” with the leading auditing firms and professional accountancy bodies to ensure robust systems are in place to detect, monitor and combat activity which could undermine the quality of audits. An spokesman for the Institute of Chartered Accountants in England and Wales said it proactively works with regulators to monitor potential exam malpractice, adding that it is “constantly monitoring the use of AI and the risk that it poses.” While KPMG reportedly tells employees that cheating using AI could see them lose their jobs, Deloitte tells staff that using AI tools during exams will be considered gross misconduct. In 2022, the FRC ordered audit firms to crack down on cheating after discovering that a number of employees shared answers via email or messaging platforms such as WhatsApp when completing online tests introduced during the pandemic.
Blackstone-owned Crown Resorts to cut 1,000 jobs amid economic challenges
Blackstone-owned Crown Resorts will cut up to 1,000 roles in Melbourne, Perth, and Sydney due to weak economic conditions and regulatory obligations. Crown Resorts CEO Ciaran Carruthers stated that reduced foreign tourism, a decline in local workers, and gaming restrictions in Sydney and Melbourne have contributed to the challenges faced by the company. Crown Resorts currently employs over 20,000 people in various roles. Last year, the company agreed to pay a A$450m fine for breaking anti-money laundering laws. Despite investigations and inquiries, Crown Resorts has retained its licenses to operate its flagship and Sydney casino. Carruthers emphasized the company's commitment to regulatory obligations and ongoing transformation.
 


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