Labor & Employment

California continues to solidify its role as a national leader in regulating “AI” in the employment context. On June 25, 2026, Governor Gavin Newsom announced the launch of the “California AI-Unemployment Tracker,” a first-of-its-kind tool designed to monitor, track, and anticipate AI-related job loss trends in California. A publicly available dashboard developed in partnership between the California Policy Lab and the California Employment Development Department (EDD), the AI Unemployment Tracker seeks to gather evidence to determine how the adoption of generative AI affected workers and the labor market statewide since late 2022. The announcement of the AI-Unemployment Tracker follows two recent actions taken in California to address AI in the employment context. First, Governor Newsom issued a May 2026 executive order directing state agencies, labor experts, economists, universities, and industry leaders to assess AI’s labor market impacts and develop policy responses for affected workers. Second, as we previously discussed, California's Civil Rights Council finalized regulations in June 2025, effective October 1, 2025, that clarified that employers may be liable under the existing Fair Employment and Housing Act (FEHA) framework. Employers using AI-driven hiring, promotion, productivity, or discipline tools are now expected to evaluate those systems for disparate impact, maintain relevant records, and make sure algorithmic outputs do not unlawfully influence employment decisions. The AI-Unemployment Tracker is a further signal that California continues to lead the way in exploring AI in the employment context. Rather than focusing only on discrimination risks, the state seems increasingly concerned with broader labor market disruption, including displacement, retraining needs, and workforce transition planning. Employers should expect continued scrutiny over how AI affects employment decisions and the workforce structure itself. However, scrutiny does not automatically translate to liability under FEHA’s anti-discrimination framework. It is too early to predict if data from the AI-Unemployment Tracker will support a claim under FEHA or similar statutes.  Data-wise, the California Policy Lab and EDD’s initial data shows no evidence of rising statewide unemployment claims in AI-exposed occupations, and the data did not show large disproportionate increases by race, ethnicity, gender, or age in the number of high AI-exposure unemployment insurance claimants. Procedurally, California’s Unemployment Insurance Code bars litigants from using unemployment insurance hearing findings as evidence in separate or later actions. For now, these developments reflect California’s evolving regulatory strategy: not only addressing how AI impacts workers when used to make employment decisions, but now also tracking how AI impacts workers’ employment status when used to replace workers’ job functions. As California continues building this regulatory infrastructure, employers should continue building processes and designating personnel to perform impact assessments, perform bias audits, and report any adverse findings from the assessments and audits to relevant internal stakeholders. Dorsey continues to monitor new developments in the AI employment and workplace privacy space. Contact Melonie Jordan or your preferred Dorsey attorney for guidance in this fast-evolving area.

U.S. law has long prohibited the “importation of goods mined, produced or manufactured in whole or in part with forced labor.” Initiation of Section 301 Investigations of Acts, Policies, and Practices of Various Economies Related to the Failure to Impose and effectively Enforce a Prohibition on the Importation of Goods Produced with Forced Labor, 91 Fed. Reg. 12,884 (March 17, 2026). Yet, the practice of receiving work or services from people under the “menace of any penalty for its nonperformance and for which the worker does not offer himself voluntarily” persists. Id. The International Labour Organization estimates that more than twenty-seven million individuals work under conditions of forced labor worldwide. These individuals work in industries that feed, clothe, and power the consumer economy in the United States. For U.S. companies operating in high-risk sectors, addressing forced labor risk is both a matter of corporate social responsibility and a compliance obligation. U.S. government interest in forced labor enforcement is intensifying on multiple fronts. For example, the Uyghur Forced Labor Prevention Act creates a presumption that goods originating from the Xinjiang region of China are made with forced labor, and companies can face detention of shipments, civil fines, and sanctions if they cannot rebut that presumption. The law thus places the burden squarely on the U.S. importer to demonstrate that forced labor is not found in their supply chains. Most recently, the Trump administration launched forced labor investigations into dozens of countries as part of its expanded enforcement posture, signaling that exposure is no longer confined to any single geographic region or industry. Against that backdrop, plaintiffs’ lawyers have increasingly used the Trafficking Victims Protection Reauthorization Act (TVPRA), codified at 18 U.S.C. § 1595, to bring civil claims against persons or entities for their participation in, or benefit from, forced labor and human trafficking that occurs anywhere in their supply chains. Although certain industries such as textiles, critical minerals, and agriculture are particularly at risk, companies across industries can face meaningful exposure under the statute. U.S. courts have found that the TVPRA does not confine liability to those who directly participate in a violation but extends it to any commercial actor that benefited from a venture the actor “knew or should have known” was violating the law. Because plaintiffs frequently bring TVPRA claims against multiple defendants and often pursue their claims as class actions, a single lawsuit can expose a company to significant damage claims, attendant litigation costs, and reputational harm. Thus, companies should establish appropriate mechanisms to identify, address, and confirm the absence of forced labor in their supply chains. Background: 18 U.S.C. § 1595. The TVPRA extends civil liability beyond those who directly commit the offenses. Specifically, liability reaches any person or entity that (1) knowingly benefits, financially or otherwise, (2) from participation in a venture (3) that the person knew or should have known was engaged in forced labor, human trafficking, or other conduct prohibited by the statute. 18 U.S.C. § 1595. Knowledge. Courts have drawn a firm line between general awareness that a sector or region has a forced-labor problem and actual or constructive knowledge that a particular supplier or a particular facility has engaged in specific violations. The former, standing alone, does not suffice to establish knowledge of the prohibited activity. How specific that knowledge must be, however, is a question courts have answered differently. Some courts have required that defendants be shown to have constructive knowledge tied to the specific individual bringing the claim. Doe v. Red Roof Inns, Inc., 21 F.4th 714, 725 (11th Cir. 2021). Other courts have found that constructive knowledge of the venture’s general pattern of violations is sufficient. G.G. v. Salesforce.com, Inc., 76 F.4th 544, 558 (7th Cir. 2023). Participation in a Venture. Whether a company has “participated in a venture” turns on the nature and depth of its relationship with the offending entity, not just whether a commercial relationship existed. For courts to find that an entity is a venture, the offending entity does not need to be a trafficking or forced labor enterprise; a legitimate business whose operations have engaged in conduct that violates the statute can qualify as a venture. However, not every commercial relationship rises to the level of participation. For example, a company that purchases goods through a supply chain without exercising meaningful operational involvement in or control over its suppliers’ conduct has not crossed the “participation in a venture” threshold. The decision in Doe v. Apple Inc., 96 F.4th 403 (D.C. Cir. 2024) illustrates how courts have drawn the line between participation and non-participation in an offending enterprise. In that case, plaintiffs claimed that major technology companies such as Apple, Alphabet, Dell Technologies, and others were liable under the TVPRA for purchasing cobalt that was sourced by their suppliers through mining companies that used forced labor in the Democratic Republic of the Congo. The U.S. Court of Appeals for the District of Columbia Circuit affirmed the lower court’s dismissal of the case. On the venture element, the appeals court held that end-purchasers who had no direct relationship with, or operational involvement in, the mining operations where the abuses occurred had not participated in a venture within the meaning of the statute finding that they had merely bought a product at arm’s length. Apple Inc., 96 F.4th at 415–16. The appeals court went further, finding that certain facts that plaintiff relied upon to establish the defendant’s “control,” including the commercial pressure held by defendants over the supplier and the contractual rights to inspect and conduct third-party audits of supplier facilities, were insufficient to transform a commercial relationship into venture-level participation. Id. at 416. Companies can draw two primary lessons from Apple Inc. First, the case confirms that downstream purchasers who lack operational entanglement with their suppliers are not, by virtue of that commercial relationship alone, participants in a venture under the TVPRA. Second, Apple Inc. signals that companies investing in robust supplier audit programs should not fear that those efforts will be turned against them as evidence of control. The court  made clear that having the contractual right to audit differs from exercising the kind of operational control that transforms a buyer into a participant. Therefore, companies should not let fear of exposure to TVPRA liability deter them from proactively building a robust compliance program. On the contrary, as explained in the section below, requiring supplier compliance with U.S. law is an integral part of any successful compliance program, as it both reduces the likelihood of forced labor occurring in the supply chain and preserves a company’s ability to defend itself against a TVRPA claim. Framework for Reducing Exposure. Companies with different supply chain structures, vendor relationships, and operating models face different risk profiles. But the doctrinal picture that emerges from the TVPRA case law demonstrates that courts rely heavily on the facts of a case to determine liability. Therefore, companies would be wise to be proactive when building their compliance programs to ensure they are conducting necessary due diligence and implementing safeguards to prevent exposure. To achieve that objective, companies may wish to consider the following guiding principles: Understand the Supply Chain Meaningful supply chain visibility, meaning beyond Tier 1, is the best way for companies with multi layered supply chains to identify weaknesses or areas of potential risk. Knowing not just who your suppliers are, but how they operate, who they engage with, and where risk concentrates allows companies to direct due diligence resources where they matter most and to intervene before a compliance problem becomes a legal one. Conduct Supplier or Vendor Due Diligence Before engaging with a new supplier or affiliate, companies should screen such potential vendors against restricted government entity and sanctions lists, review publicly available information about the supplier’s labor history or working conditions, ask the supplier directly for documentation of its compliance programs, and retain that information. Both the Department of Homeland Security and the Department of Labor have resources outlining goods, industries, and countries where the U.S. agencies suspect forced labor to be prevalent. Companies should create a record that demonstrates its diligence efforts and outlines the reasons why they did or did not proceed with the engagement. Implement Strong Internal Policies, Monitor, and Enforce Companies should operationalize their supplier codes of conduct and anti-forced labor policies through defined procedures, consistent monitoring of supplier conduct, and clear consequences for suppliers that fail to meet the company’s stated standards. Training for procurement and sourcing personnel should equip employees with specific “red flag” indicators of forced labor and establish a clear path for raising concerns to the appropriate personnel. Include Enforceable Standards Into Vendor or Supplier Contracts Contractual provisions requiring suppliers to comply with applicable labor laws, prohibiting forced labor and granting company audit rights, serve two functions: they reduce the risk of forced labor occurring and they establish, for litigation purposes, that the company did not simply acquiesce or turn a blind eye to its suppliers’ practices. A company with a documented history of detailing and enforcing these obligations is better positioned to argue that it lacked the actual or constructive knowledge of specific violations that the statute requires. Reprinted with permission from the June 1, 2026 edition of the New York Law Journal  © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

Dorsey Partner Nisha Verma offered perspective on the legal and reputational fallout surrounding the Blake Lively and Justin Baldoni dispute. Drawing on her experience in workplace investigations and employment disputes, Nisha addressed both the legal significance of the settlement and the reputational consequences of handling workplace-related disputes in the public eye. Nisha was quoted in a USA Today article, noting that “they both have a right to claim victory,” adding that each party prevailed on “significant and novel issues within their respective cases.” She also discussed the lasting reputational impact public litigation can have on individuals and organizations alike. Find the full article: Nisha Verma Offers Insight on Lively/Baldoni Settlement and Reputational Impact | News & Resources | Dorsey

https://dorsey.gjassets.com/content/uploads/2026/05/Robinow-WARN-Act-1.mp4 Whether and when to notify employees about a hotel sale is often overlooked during hotel acquisitions and is often viewed as solely an HR matter.  In practice, however, compliance with mandatory employee notification requirements can significantly impact transaction timing, operational continuity, and post-closing liability allocation between a hotel buyer and seller. The WARN Act requires employers to provide at least 60 days’ advance notice to employees, union representatives, and certain government entities in the event of certain plant closings or mass layoffs. The statute is designed to give employees time to prepare for job loss, seek alternative employment, or pursue retraining. Owners and operators, however, often believe that providing advance notice of an impending hotel sale to employees may undermine the continuity in staffing and management needed to transition the hotel through closing.  Front-line employees and department heads are critical to maintaining guest experience during a transition.  Providing advance notice of potential layoffs may lead employees to seek other opportunities, undermining stability during the transition period. Not every hotel falls within the WARN Act’s scope.  The statute generally applies to employers with at least 100 full-time employees, or 100 or more employees (including part-time workers) who collectively work at least 4,000 hours per week, excluding overtime.  In the hospitality sector, roughly 10% of U.S. hotels fall within its scope.  If you are buying or selling a hotel that may meet these thresholds, you should engage experienced hospitality-focused counsel with labor and employment specialists to advise on WARN Act exposure and strategy. The employer’s obligation to provide notice is triggered by: a plant closing affecting 50 or more full-time employees; or a mass layoff affecting at least 50 full-time employees where they represent at least 33% of the workforce at a single site, or 500 or more full-time employees regardless of percentage. Keep in mind, employment losses occurring within a 90-day period may be aggregated to meet these thresholds, preventing employers from structuring staggered terminations to avoid compliance. Allocating Liability in a Hotel Purchase and Sale Transaction When a hotel is sold, WARN Act liability does not disappear but generally shifts to the buyer as of the closing date of the transaction. That timing distinction is critical when planning workforce changes shortly after the closing. The transfer of employment from seller to buyer is not considered an employment loss under the WARN Act as long as those employees (or a sufficient amount) are rehired by the buyer under certain circumstances, after the transaction closes.  Buyers can avoid WARN Act liability by rehiring, or causing a new hotel management company to rehire, a sufficient amount of employees under these rules.  Note, however, that if these employees are offered re-employment with significant changes to their wages, benefits, job duties, or working conditions it may constitute “constructive discharge”. If notification is required, the seller will want to defer any termination of employees until after the transaction closes in order to reduce or eliminate the seller’s exposure under the WARN Act and shift the notification burden to the buyer.  This approach also helps preserve operational continuity and reduces the risk of employee attrition if the transaction does not close. Buyers must consider any anticipated workforce reductions shortly after closing and plan accordingly.  If a buyer plans a qualifying layoff at or within 60 days after closing, it will need to coordinate with the seller to fulfill its pre-closing notice obligations.  Purchase and sale agreements for hotels often restrict a buyer’s ability to communicate with employees and any notification of employees prior to closing should come from the seller.  Both sellers and buyers can avoid the associated risks of pre-closing notification by delaying any qualifying employee layoffs or closures until 60 days or later after the sale is completed. Temporary Layoffs Branded hotels are often required by the franchisor to complete significant renovations as directed under a property improvement plan (PIP) in connection with the hotel transfer and execution of a new hotel franchise agreement.  Any resulting full or partial hotel closure may require the owner or manager to temporarily lay off employees while the renovations are underway.  Under the WARN Act, temporary layoffs expected to exceed six months are treated the same as permanent layoffs and trigger notice requirements. Third-Party Management Often hotels are operated by third-party managers who serve as the employer in lieu of the hotel owner.  As a result, hotel managers often seek contractual protection against owner-driven decisions, such as a sale or closure that could trigger WARN Act obligations. If a hotel is subject to a hotel management agreement, upon the sale, the agreement can either be assigned to the buyer or terminated. If the hotel management agreement is terminated, the buyer may decide to transition the hotel to self-management or enter into a new hotel management agreement with the existing manager or a new third-party manager.  In any case, the buyer may desire to retain selected employees for operational continuity.  Note that if a third-party manager is employed, it will typically have operational control to decide most personnel decisions and in most cases an owner’s input is limited to the hotel’s general manager and some key personnel. State-Specific Requirements In addition to federal requirements, approximately 20 states—including California, New York, and New Jersey—have their own “mini-WARN” statutes, some of which impose stricter thresholds or longer notice periods.  For example, in California, the layoff of 50 employees will trigger the statute, even if 33% of the workforce is not affected.  These laws may apply independently of the federal statute and should be analyzed on a jurisdiction-by-jurisdiction basis. Bottom Line If you’re buying or selling a hotel with 100 employees and plan to either close the location (including sometimes temporarily) or terminate the employees or offer employment under materially different terms, you may be subject to the WARN Act which requires 60 days’ prior notice to employees, throwing a massive wrench in your plans to maintain operational continuity through the closing of the sale.  Buyers and sellers who address these issues early are better positioned to avoid disruption and liability.  Hotel investors should engage legal advisors experienced in the hospitality industry and labor and employment issues to guide them through the transaction process and advise on strategies to mitigate WARN Act exposure while managing operational continuity.

Since its inception, California’s Private Attorneys General Act has provided the plaintiff’s bar with a uniquely powerful tool. By deputizing “aggrieved employees” to enforce California’s Labor Code on the state’s behalf, PAGA has enabled private counsel to pursue civil action even when the individual employee’s harm may be minimal or even nonexistent. This framework has facilitated the rise of “headless” claims: representative actions where the named plaintiff dismisses their individual PAGA claim – often because the Federal Arbitration Act (FAA) mandates enforcement of an arbitration agreement – and exists as a procedural hook to assert representative PAGA claims on behalf of others. This risk-free practice, which often leverages boilerplate allegations to force extensive discovery or settlements, has largely benefited plaintiff’s counsel, while providing minimal recovery to the named plaintiff. Indeed, in reality, most of the money from a PAGA settlement doesn’t reach the employees: roughly a third goes to plaintiff’s counsel in attorneys’ fees, 65% of any PAGA penalties are paid to the state, and only 35% of any PAGA penalties goes towards the employees, which is then divided among all those covered by the claim – leaving each individual with a fraction of the total. PAGA litigation therefore often benefits lawyers and the state far more than the workers that the statute was designed to protect. Current legislative and administrative reforms sought to curb aggressive litigation tactics by refining penalty structures and dramatically expanding an employer’s right to “cure” identified violations. New administrative regulations aim to standardize filings and limit abusive practices while implementing procedural mechanisms, such as early judicial evaluation, that allow the courts to narrow the scope of the cases from the outset. Concurrently, case law continues to evolve regarding the enforceability of provisions in arbitration agreements that require adjudication of an individual employee’s PAGA claim in arbitration first, before the representative claims on behalf of other allegedly aggrieved employees can proceed in court (commonly called “headless” claims) – a question that has courts divided and is pending Supreme Court review[1] in a decision that could effectively end these “headless” PAGA claims. Yet, despite these reforms, one central reality persists: PAGA continues to exert significant pressure on employers. Filings remain robust, settlement incentives remain high, and trials are exceedingly rare. Compliance audits, cure efforts, and procedural refinements matter – but they do not eliminate the leverage embedded in representative claims or repeated filings. PAGA has been shaped, structured, and regulated – but it has not been diminished. The current landscape reflects a complex interplay of reform, litigation strategy, and enforcement dynamics, where standing, repeated filings, and settlement pressures continue to define employer exposure. Legislative Reform and Cure: Structure Without Contraction The July 2024 legislative amendments championed by Governor Gavin Newsom demonstrated a profound and meaningful effort to rein in abusive bounty-hunter litigation towards a system that incentivizes employer transparency. By implementing strict standing requirements and robust “cure” provisions, the amendments have sought to reduce the prevalence of opportunistic filings, on one hand, while simultaneously affording a larger share of recovered penalties delivered directly to the impacted work force, on the other. First, the 2024 reform tightened standing by requiring that a PAGA plaintiff personally suffer each specific alleged violation within the one‑year statute of limitations. This replaces the previous, highly permissive standard that allowed an employee to act as a proxy for the entire workforce and pursue penalties for a wide array of Labor Code violations they never actually experienced, so long as they suffered at least one unrelated violation, even if the underlying labor code violation was outside the statute of limitations. Put simply, this change requires PAGA plaintiffs to have more “skin in the game” for all the violations alleged, thus narrowing what claims an employee may pursue on behalf of others. In theory, the reforms created a procedural threshold that should filter out claims that exist primarily as leverage for settlements rather than vindicate actual employee harm. The 2024 reform has had particularly pronounced effects in headless PAGA cases – where the named plaintiff’s individual PAGA claim has been dismissed – raising the question as to whether that plaintiff retains standing to pursue the representative PAGA claims on behalf of others. This question, which has the courts divided, is now situated for Supreme Court review, and the answer is not purely academic; rather, this determination will inevitably influence settlement strategy, affect the effectiveness of arbitration, and shape how repeated filings are leveraged. In other words, if an employee’s individual PAGA claim is first compelled to arbitration, that employee must successfully arbitrate their claims in full before proceeding in court with respect to PAGA claims on behalf of others. In effect, counsel may have to actually litigate individual cases rather than simply leveraging settlements based on unverified representative claims. However, until resolved by the Supreme Court, representative claims can continue to generate significant pressure, independent of other procedural or statutory refinements, as counsel hems and haws about how the law will unfold until this decision has been rendered. Second, those reforms also refined how penalties are assessed and capped for common errors and expanded opportunities to cure violations by making aggrieved employees whole. On paper, through internal audits, employers can now identify and correct potential violations, implement compliance measures, and document “reasonable steps” that legally cap penalty exposure: 15% if completed before a PAGA demand or 30% if completed after notice of the PAGA action. As it stands, legislation is unclear as to how often these audits are to be performed, but an annual audit may ensure compliance well before any demand arises. Further, the 2024 amendments also offer an additional defense: once an employer has performed a qualifying audit and cured identified errors, they have a statutory right to “stay” subsequent litigation for early judicial evaluation through an early neutral evaluation (“ENE”). However, while the ENE promises to clarify disputed issues, evaluate proposed cures, and streamline resolution, the reality is that this forum is ripe with uncertainty and offers less flexibility than traditional mediation. Experienced neutrals and practitioners have raised concerns that this “newfangled” step may complicate rather than simplify resolution. Because the statute does not clearly map out what happens once an evaluation is initiated, parties may find themselves navigating a process that adds time and expense without necessarily making settlements easier or more likely than achieved by mediation with a mutually agreed-upon mediator who is trusted by both parties. Because very few PAGA actions ever go to trial, as most are resolved through negotiation or settlement long before formal adjudication, the true impact of these reforms is largely untested. Until these limitations are litigated, the practical effect of these reforms remains more theoretical in nature. Employers will likely cite to audits and cure efforts while plaintiff’s lawyers continue to cast aside their impact on settlement strategy. Further Legislative Reforms Attempt to Curtail the Reach of PAGA The ongoing tension between expanding enforcement and controlling abuse remains ever present in the legislative reforms and administrative developments. On February 2, 2026, the Legislature rejected Senate Bill 310 (“SB 310”), which sought to push back on the July 2024 reforms and create a standalone private right of action for untimely wage payments, which would increase PAGA penalties. Days later, on February 6, 2026, the LWDA Notice of Proposed Rulemaking demonstrated yet another meaningful effort to rein in PAGA. If adopted, these regulations would: Standardize administrative notice requirements and require detailed factual and evidentiary certification; Impose additional certification for high-frequency filers (200+ notices annually) with increased scrutiny for noncompliance; Clarify the cure process and how employers can document remediation; and Enhance oversight of settlements, including opportunities for affected employees to comment. However, these mechanisms do not materially change the economic incentive for plaintiffs to file broad, representative claims. The proposed rules may refine the process and filings, but repetitive, lightly modified claims will persist absent litigation as to the full impact and extent of these changes. The State of Play for PAGA and the Path Forward The recent PAGA reforms aim to narrow the statute’s reach, but their ultimate effect depends on how case law continues to solidify in 2026. Compliance programs, audits, and well-designed policies remain as critical as ever, and their importance will only grow if courts begin to give real weight to these defenses, providing meaningful tools to cap PAGA penalties. Historically, because most PAGA cases never reach a verdict, these actions have been driven by settlement pressure rather than adjudication. Yet, this evolution of PAGA presents opportunities for courts to impose meaningful caps on penalties for employers who conduct audits, cure and require individualized litigation before representative claims can proceed. This shift restores the significance of the individual employment relationship – historically sidelined in a lawyer-driven process – by requiring plaintiffs to personally suffer every alleged violation to maintain standing. Thus, by focusing on strong employee relationships and proving compliance, employers effectively neutralize the settlement-driven momentum that has largely driven PAGA litigation. [1] The California Supreme Court is expected to release its decision in Leeper v. Shipt, Inc. in early 2026, having granted review in April 2025, with a briefing schedule that concluded in December 2025.

https://dorsey.gjassets.com/content/uploads/2026/04/Illinois-Law-Changes-5.mp4 Illinois lawmakers were busy in 2025, passing laws and amendments to existing laws that impact Illinois employers as of January 1, 2026. First, Illinois amended the Illinois Human Rights Act (“IHRA”), which prohibits discrimination, harassment, sexual harassment, and retaliation against individuals in connection with employment. The Illinois Department of Human Rights (“IDHR”) administers the IHRA and is the agency to which employees submit complaints when they believe an employer has engaged in conduct that violates the IHRA. Effective January 1, 2026, it is now discretionary, rather than mandatory, for the IDHR to bring employee complaints to a fact-finding conference. This means the IDHR now has discretion to investigate employee complaints based on written submissions by the parties alone. Further, a previously passed IHRA amendment making it a civil rights violation for an employer to use AI in a manner that subjects employees to discrimination went into effect on January 1, 2026. Illinois employers must now ensure that AI used or relied upon to make employment decisions does not have a discriminatory effect on employees based on a protected class. Failure to notify employees of the employer’s use of AI is also now a civil rights violation. Third, Illinois’ VESSA law was amended and expanded as of January 1 to prohibit employers from firing, refusing to hire, discriminating against, or otherwise retaliating against an empl oyee who uses employer-issued devices to record a crime of violence, including domestic violence or sexual violence, committed against the employee or their family or household member. Next, the legislature amended the Illinois Workplace Transparency Act (“IWTA”). First enacted in 2019 in the midst of the #MeToo era, the IWTA restricted nondisclosure and nondisparagement language in employment, separation, and settlement agreements unless the clauses were mutual; limited the use of mandatory arbitration for sexual harassment or other discrimination claims; required annual sexual harassment training for all employees; and mandated that employers report settlements and adverse judgments to the Illinois Department of Human Rights. As of January 1, 2026, the IWTA has been amended to expand its scope and impact on employment, separation, and settlement agreements. For example, the definition of “unlawful employment practice” has been expanded to include most employment claims, including wage and occupational safety claims. The law also now includes a definition of “concerted activity” and provides that agreements may not prohibit, prevent, or restrict an employee from reporting allegations of unlawful conduct to government officials or engaging in concerted activity to address work-related issues. Perhaps most consequentially, the amendments address several technical provisions. The IWTA now provides that employers may not condition employment or continued employment on an agreement to shorten the applicable statute of limitations, apply non-Illinois law to an Illinois employee’s claim, state that confidentiality is the employee’s preference, or require a venue outside of Illinois to adjudicate an Illinois employee’s claim. Finally, confidentiality provisions related to alleged unlawful employment practices must be supported by distinct, bargained-for consideration separate from the consideration provided in exchange for a general release of claims. This may be accomplished by explicitly allocating a portion of the consideration payment to the confidentiality provision within the agreement. Other Illinois employment laws that went into effect on January 1, 2026, include:• Employee Blood and Organ Donation Leave Act: amended to apply to part-time employees• Nursing Mothers in the Workplace Act: requires employers to provide nursing mothers with reasonable paid break time to express milk• Family Neonatal Intensive Care Leave Act: requires employers to provide unpaid leave if an employee’s child is in the NICU In light of these changes to Illinois employment laws, now is a good time to review employment policies and agreements to ensure compliance with these acts and amendments.

Sweeping amendments to New York City’s Earned Safe and Sick Time Act (“ESSTA”), N.Y. C. Admin. Code. 20-911 et seq. recently took effect on February 22, 2026.  ESSTA requires employers to provide employees in New York City with paid and unpaid time off for a variety of reasons related to health, safety, childcare, legal proceedings for public benefits and housing, and public disasters. Originally enacted in April 2014, the law has been amended several times to expand employee rights to protected time off.  Last year, the New York City Council enacted the most significant changes yet to ESSTA.  As part of these amendments, the City has also begun referring to ESSTA as the “Paid Time Off Law.”  ESSTA now requires private sector employers to provide three different forms of job-protected leave: paid safe and sick leave, unpaid sick and safe leave, and paid prenatal leave.  The recent amendments to the law provide important protections to employees, but they also impose significant new compliance obligations on employers amid an increasingly complex landscape of leave administration. Multistate employers face a growing patchwork of state and local sick leave laws across the country.  In recent years, numerous states and municipalities have passed laws mandating job-protected sick leave for private sector employees.  At least seventeen states, the District of Columbia and numerous municipalities require employers to provide job-protected sick leave to their employees.  In this article, we will summarize the new requirements imposed by ESSTA. Amendments to ESSTA In 2025, the New York City Counsel amended ESSTA to require employers to provide employees with 20 hours of paid prenatal leave, 32 hours of unpaid safe and sick leave (in addition to up to 56 hours paid safe and sick leave), and to provide for expanded uses of safe and sick leave, including to care for a minor child or attend a legal proceeding for subsistence benefits.  New York City Mayor Zohran Mamdani’s office recently issued a press release announcing an enforcement blitz by the Department of Consumer and Worker Protection (“DCWP”), the agency responsible for enforcing ESSTA.  DCWP sent out compliance warnings to more than 56,000 employers, and announced a new data-driven enforcement strategy to compare paid sick leave use in employer records with national data from the U.S. Centers for Disease Control and Prevention for evidence of likely noncompliance.[1] Scope of ESSTA.  The law applies to private sector employees who work in New York City, with the exception of certain employees covered by collective bargaining agreements and certain hourly professionals licensed by the New York State Education Department. Employers located outside of New York City must provide ESSTA leave to any of their employees who work in New York City, including employees who work remotely in New York City or who live outside of the City. Paid Safe and Sick Leave Employers with fewer than 100 employees in the U.S. must provide employees with 40 hours of paid sick and safe leave per year.  However, if an employer has fewer than five employees and a net income of less than $1 million in the previous tax year, it may provide this 40-hour allotment of safe and sick leave as unpaid time off.  Employers with 100 or more employees in the U.S. must provide employees with 56 hours of paid safe and sick leave per year. Employers may calculate safe and sick leave time based on the calendar year, a benefits year, or some other 12-month period. Paid safe and sick leave accrues at the rate of one hour for every 30 hours worked.  For purposes of accrual, most exempt employees are assumed to work 40 hours per week.  Employers have the option to frontload paid safe and sick time by making it available at the beginning of each year, rather than requiring employees to accrue it over time.  Frontloading the full amount of paid safe and sick time at the beginning of the year relieves employers of the obligation to track and note accruals on pay statements.  However, it does not relieve them of the obligation to track and note an employee’s use and balance of safe and sick leave on pay statements, as described in more detail below. Pursuant to ESSTA, employees may carryover from one year to the next up to 40 hours (for employers with fewer than 100 employees) or 56 hours (for employers with 100 or more employees) of accrued, unused paid safe and sick leave.  However, employers may cap the use of paid safe and sick leave at 40 or 56 hours per year (depending on employer size).  The ability to carryover paid safe and sick time from one year to the next is beneficial for employees who may need to use such time early in the year, before they have accrued sufficient paid leave in that year.  Employers who both frontload the full amount of paid sick and safe time at the beginning of each year and pay employees for any unused time at the end of the year do not need to permit carryover. Unpaid Safe and Sick Time All employers, regardless of size and net income, also must provide employees with 32 hours of unpaid safe and sick leave as of February 22, 2026, upon hire and on the first day of each year.  The annual 32 hours of unpaid safe and sick time may not be prorated, including for employees who commence employment mid-way through the year. Unlike paid safe and sick time, these 32 hours of unpaid leave do not accrue, and are available for immediate use on the first day of each year or upon hire.  Employers are not required to allow employees to carryover unused unpaid safe and sick leave from one year to the next.  Employers must, however, allow employees to exhaust their paid safe and sick leave before using any unpaid safe and sick time. Permitted Uses of Safe and Sick Leave Both paid and unpaid safe and sick leave may be used for a number of reasons, including (i) to care for an employee’s own health needs or that of a family member, (ii) during a business, school or daycare closure for a public health emergency, (iii) to seek assistance or take safety measures if an employee or a family member is the victim of domestic violence, unwanted sexual contact, stalking, human trafficking or workplace violence, (iv) to care for a child or for a family or household member with a disability, (v) to attend housing and public benefits appointments and hearings, and (iv) to stay home when the government declares a public disaster (e.g., fires, hurricanes, terrorist attacks). Paid Prenatal Leave In addition to safe and sick leave, ESSTA also requires employers, regardless of size and net income, to provide employees with 20 hours of paid prenatal leave.  Employers must provide employees with a separate bank of paid prenatal leave that is distinct from, and cannot be combined with, any other leave including safe and sick leave. Paid prenatal leave does not accrue and is immediately available for use upon hire and on the first day of every 52-week period.  For purposes of calculating paid prenatal leave, a 52-week period for a particular employee will begin on the first day that the employee uses paid prenatal leave.  Employees may use paid prenatal leave to receive health care during pregnancy or related to pregnancy, including fertility treatment.  Only employees who are directly receiving health care for their pregnancy may use paid prenatal leave, and such leave may not be used after childbirth. Additional Requirements ESSTA imposes several additional obligations and restrictions on employers. First, employers must note on an employee’s pay statement or other form of written documentation provided each pay period: (i) the amount of paid safe and sick time the employee has accrued during a pay period; (ii) the amount of paid and unpaid safe and sick time the employee used during a pay period; and (iii) the amount of paid and unpaid safe and sick time the employee has available for immediate use. Additionally, for each pay period in which an employee uses paid prenatal leave, an employer must note on the employee’s pay statement or in other written documentation provided to the employee, both the amount of paid prenatal leave used during the pay period and the amount of paid prenatal leave available for immediate use. Second, ESSTA only permits employers to require reasonable documentation from an employee that their use of leave was for an authorized purpose when the employee takes leave for more than three consecutive workdays.  The law also circumscribes the types of documentation that employers may require, and prohibits employers from requiring employees to disclose the nature of the employee’s or family member’s medical condition or care, or the underlying reason for using safe time. Third, employers may require reasonable advance notice of an employee’s need for leave.  When the need for leave is foreseeable, an employer may require notice up to seven days in advance.  However, when the need for leave is not foreseeable, an employer may only require notice as soon as practicable, including upon the employee’s return from leave. Fourth, employers must provide employees with a written notice of rights under ESSTA upon hire and within 30 days of any change to such rights.  Employers also must post a notice of rights in the workplace.  The DCWP published a model notice of employee rights on its website that employers may use. Finally, employers must maintain a written policy on ESSTA leave that addresses several issues including accrual, frontloading and carryover of safe and sick time,  the amount of safe and sick leave that is immediately available for use, the availability of a separate bank of paid prenatal leave, any advance notice requirements and procedures, requirements regarding written documentation of leave and consequences for failing to provide such documentation, minimum increments for use, any policy regarding misuse of leave, and a statement that the employer will not ask employees for details about the reason for use of ESSTA leave and that the employer will treat any information it receives as confidential.  Employers should update their policies as necessary to reflect the recent amendments to ESSTA. Employers who fail to comply with their obligations under ESSTA may be subject to progressive civil penalties assessed on a per employee and per instance basis as well as private rights of action by employees to recover compensatory damages, injunctive and declaratory relief, and attorneys’ fees and costs.   [1] New York City Mayor’s Office, Mayor Mandani Announces Major Expansion of Protected Time Off for 4.3 Million Workers and New Data-Driven Enforcement strategy (February 20, 2026): https://www.nyc.gov/mayors-office/news/2026/02/mayor-mamdani-announces-major-expansion-of-protected-time-off-fo; New York City Department of Consumer and Worker Protection, Benchmarks for Evaluating Compliance with NYC’s Protected Time Off Law: https://www.nyc.gov/assets/dca/downloads/pdf/media/Protected-Time-Off-Report.pdf. Reprinted with permission from the April 6, 2026 edition of the New York Law Journal © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

https://dorsey.gjassets.com/content/uploads/2026/04/WorkWatch-Nisha-5.mp4 Following his inauguration in January 2025, President Trump signed a flurry of executive orders affecting diversity, equity, and inclusion (“DEI”) policies across the public and private sector. Particularly concerning for private employers who are federal contractors, Executive Order 14173, “Ending Illegal Discrimination and Restoring Merit-Based Opportunity,” addresses “illegal” private DEI and diversity, equity, inclusion, and accessibility (“DEIA”) policies by directing agencies, such as the Equal Employment Opportunity Commission (“EEOC”), to “combat illegal private-sector DEI preferences, mandates, policies, programs, and activities.” Additional information about the EEOC and its guidance is available here and here. Private employers have also been taking note and updating their policies. However, the EEOC’s ability to enact this directive was hindered until it gained a quorum in October 2025. Now that it is operating at full capacity, emplhoyers have some visibility into the agency’s priorities. After a slow start, the EEOC initiated litigation against an employer for sponsoring a female-only networking event. The EEOC filed suit on February 17, 2026, against Coca-Cola Beverages Northeast, Inc., over its DEI initiatives, alleging that by sponsoring a two-day networking event at a casino for only female employees, Coca-Cola had discriminated against male employees on the basis of their sex. Female attendees were excused from their work duties, received their regular pay, and reimbursement for food and lodging expenses. The EEOC claims that the exclusion of male employees from attending the event was a denial of equal compensation, terms, conditions, or privileges of employment on the basis of sex. The EEOC’s subpoena and enforcement authority has become a preferred investigative and enforcement tool in reviewing private employers. Although the EEOC has always had broad authority to subpoena private employer records while an investigation is pending, the agency has demonstrably increased its use of this authority. Just a month after obtaining a quorum, the EEOC sought an enforcement action against Northwestern Mutual Life Insurance Co. in Wisconsin. While investigating a claim that an employee had been discriminated against based on his sex (male), race (white), and national origin (American-Irish) in violation of Title VII, the agency sought extensive information pertaining to Northwestern’s training, development, and promotion policies and initiatives over a three-year period. When Northwestern objected, the EEOC brought the lawsuit to compel compliance. The EEOC specifically demanded the following information:• Employee records from 2022 to 2025 for any training where race, national origin, sex, or sexual orientation was a criterion considered for participation in any employer-sponsored advisor or mentorship program.• All reports or summary documents from 2022 to 2025 that consolidated information about diversity and inclusion at Northwestern.• Based on a racial-equity initiative published on the company’s website, documents reflecting the structure, function, budget, staffing, programs, and participation in that initiative. • A list of employee names and contact information for anyone who had either received a “Diversity & Inclusion Champion Award,” and each woman or person of color retained, promoted, or sponsored, for whom another manager received “credit” or “positive feedback.”• Documentation of Northwestern’s performance management metrics and systems, including any systems used to track DEI goals and progress. The Wisconsin court has not yet decided whether to limit the EEOC’s inquiries. Other courts have found that the EEOC has broad statutory authority to investigate and request any company information relevant to a charge, which could include company-wide data and policies. For instance, in December, a California court ordered a supermarket chain operated by Vallarta Food Enterprises, Inc., to comply with an EEOC subpoena. The agency, investigating whether the company had excluded non-Hispanic individuals from employment, requested: extensive applicant and employee data (including demographic and contact information); screening questions used during the hiring process; job descriptions; and information about other race and national origin complaints. External advocacy efforts may be contributing to EEOC-led investigations into employer DEI practices. Although EEOC investigations are typically triggered by an individual complaint filed by a current or former employee or applicant, the EEOC can initiate investigations based on other information as well. Recent filings in the EEOC’s enforcement action against Nike, Inc. reveal that the EEOC’s now-Chair Andrea R. Lucas issued a Commissioner Charge against Nike in 2024 following receipt of more than 30 letters by America First Legal (“AFL”) urging the agency to investigate major corporations’ DEI programs. AFL is a nonprofit organization that litigates social and corporate issues and prioritizes (among other things) “Dismantling Diversity, Equity, and Inclusion.” Nike’s campaigns and public documents commenting on social justice and inequity had previously drawn attention from policymakers. The EEOC issued wide-ranging requests for information, including:• Nike’s organizational structure• Programs used to increase racial and minority representation in its U.S. workforce• The effect of minority representation on executive compensation• Employee layoffs in 2024• Racial and ethnic minority employee data• Consideration, application, and selection materials and information for 16 employment-related programs The court has not yet decided whether Nike must comply with all of the EEOC’s requests. Employers continue to settle discrimination claims investigated by the EEOC. Over the past few months, the EEOC has announced several settlements with employers over discrimination claims. A few notable examples include:• A $1.4 million settlement with LeoPalace Resort in Guam over allegations that it treated Japanese employees more favorably than non-Japanese (including those of American national origin) employees.• A $1.1 million settlement with Battleground Restaurants Group, Inc., which owns and operates several Kickback Jack’s restaurants in North Carolina. The lawsuit alleged the restaurants violated Title VII by intentionally failing to hire male applicants for host, bartender, and server positions.• A $150,000 settlement with Seward & Son, a large farming operation in Missouri accused of discriminating against American (and primarily Black) farm workers by providing foreign workers with preferential job assignments and other fringe benefits. However, a recent decision in Missouri suggests employers may be able to limit certain legal challenges to DEI programs. The state of Missouri sued Starbucks last February for its hiring, mentorship, and promotion policies and programs, claiming that its initiatives placed non-white, non-male, and “other preferred minorities” in an unlawful position of advantage over others in the workforce, in violation of state and federal laws. The heart of the allegations rested on Starbucks’ mentorship and employee-led affinity groups, which for a time were limited to specific employee populations. However, on February 5, 2026, the lawsuit was dismissed because the state had failed to allege its own specific injury or that of any individual or group of employees. Other EEOC actions demonstrate continued investigations of traditional discrimination claims. Based on these recent developments, employers might assume that the EEOC’s priorities have shifted. However, the agency continues to pursue allegations of race, sex, disability, and pregnancy discrimination and retaliation. Recent lawsuits include a Tennessee employer accused of restricting Black employees from a breakroom reserved for white employees and firing a supervisor who “failed to restrain” one of his direct reports from making internal and external complaints of discrimination. Another involves a Michigan-based in-home health care provider who refused to assign home visits based on a nurse’s race because it believed that some residents would prefer to be cared for by a non-Black nurse. Recent settlements also involved:• $100,000 settlement of a former employee’s religious discrimination claim against the Young Men and Women’s Hebrew Association. The EEOC found that the employer failed to accommodate a Christian employee’s request to attend Sunday church services and retaliated against her, forcing her to resign.• $95,000 settlement with JACO Coach Company, LLC following an employee’s report of sexual harassment and unwanted touching by a male coworker.• $75,000 settlement of age discrimination and retaliation claims by workers in a long-term care facility who were mocked because of their age and treated less favorably than younger workers. The EEOC’s focus on DEI-related enforcement is likely to continue. Employers can expect that the EEOC’s pursuit of Title VII discrimination and retaliation claims will continue. On February 26, Chair Andrea Lucas issued a letter to 500 of the largest employers in the U.S., urging chief executive officers, general counsel, and board chairs to “reject identity politics” and hire and promote individuals based on merit rather than protected characteristics. The EEOC appears committed to this approach through education, compliance efforts, and enforcement actions. Employers facing discrimination charges or agency information requests should engage legal counsel early to evaluate and preserve potential defenses. Employers who value and promote diversity may also wish to review programs, policies, and public-facing information to assess potential risks while fostering an inclusive, respectful workplace. Dorsey’s labor and employment attorneys are well-prepared to provide guidance as employers navigate the evolving DEI landscape. [1] Ending Illegal Discrimination And Restoring Merit-Based Opportunity – The White House [2] https://aflegal.org/priorities/

Ryan Gehbauer joined Dorsey as a Partner in the Labor & Employment group in Dallas. Ryan handles matters arising from all aspects of the employment relationship, including wage and hour issues, hiring disputes, background checks, and restrictive covenants. Read more >

On March 23, 2026, Washington’s Governor Bob Ferguson signed a law that eliminates non-compete agreements, severely restricts non-solicitation agreements, and imposes other requirements related to all Washington employees. Who is covered? This law applies to all employees in Washington, even if their employer is based elsewhere. My company is based outside Washington state, and we have only one employee there. Does the law apply to us? This law applies to all employees in Washington, even if their employer is based elsewhere. We’re a really small company, does it apply to us? Yes. The Act includes all entities employing one or more people and which has business activity in Washington. Even if the company is small, and even if it is based elsewhere. What is prohibited? The law defines a non-compete agreement to include any written or oral covenant, agreement or contract that “prohibits or restrains” a worker (employee or independent contractor) from engaging in a lawful business. The phrase is to be liberally construed against enforcement of a noncompetition covenant. The law gives several examples, including contracts that “directly or indirectly prohibits the acceptance or transaction of business with a customer,” or between performers and locations. How about retention incentive agreements or training benefits? The law expressly prohibits any threat or demand that an employee repay or return any compensation or benefit as a consequence of engaging in a lawful profession. This arguably includes stay incentives, training benefits conditioned on continued employment, and the like. There is a limited exception for educational expenses, so long as the covenant expires within 18 months of the start of employment (not the start of the educational program), it is limited to pro rata repayment and releases the obligation if the employee is separated based on “good cause” (a defined term). Are there exceptions? Yes, but narrow ones. Nonsolicitation agreements are allowed, but not if they ““directly or indirectly” prohibit the acceptance or transaction of business with a customer. This language is intentionally very broad. Restrictions on confidentiality, trade-secret protections, and sale of goodwill of a business are allowed (but then only if the person signing the covenant owns 1% or more of the business), and some franchisee agreements. What if I have an existing noncompete agreement with an employee who moves to Washington from out of state? The new law would apply to that employee and the noncompete agreement would be unenforceable. Does the law require me to do anything? Yes. By October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenant is still within its effective time period that their noncompetition covenant is void and unenforceable. When does this law start? The Act generally takes effect June 30, 2027. The written notice must be sent by October 1, 2027. What should I do now? Employers should review all noncompetition, nonsolicitation, and confidentiality agreements now to ensure either compliance or an orderly transition of agreements. This includes handbooks, policies, and other documents which could directly or indirectly impose an unlawful restraint. Employers should also begin planning for the employee notice (due on October 1, 2027). Experience in other states cautions that this process can be more complicated and time-consuming than expected.

Many Canadian employers expanding into the U.S. believe the U.S. legal presumption of at-will employment will provide them with additional protection against wrongful termination claims. Unfortunately for those employers, this belief is a trap. In Canada, employees who are terminated without cause often must be paid severance. In the U.S. however, an employer is generally not obligated to pay severance when an employee is fired without cause unless there is a contract requiring severance. The reality in the U.S. is that essentially every employee falls into an exception to the at-will employment doctrine. Wrongful termination claims in the U.S. are almost always discrimination or retaliation claims. In the former claim, the employee alleges that they were terminated due to some protected characteristic such as age, gender, or race. In the later claim, the employee alleges that they were terminated because they engaged in some protected activity, such as taking protected leave or complaining about workplace harassment. Once an employee alleges discrimination or retaliation, the presumption of at-will employment falls away and the employer must demonstrate a legitimate non-discriminatory and non-retaliatory reason for the termination, which the employee cannot show was a mere pretext. Because just about every employee is in some protected class or has recently engaged in some protected activity, U.S. employers must have a legitimate reason for the termination supported by strong documentary evidence. Otherwise, the employee gets to tell their story to a jury predisposed to rule against any employer who cannot provide a satisfying reason why they terminated that employee. And U.S. juries over the last several years have rendered several devastating verdicts, including a $366 million verdict handed down by a Texas jury in a case alleging race discrimination. As this case demonstrated, these verdicts are not limited to states with a reputation for being employee friendly such as California. Employers’ best defense against such verdicts is a strong performance management system that documents the legitimate non-discriminatory and non-retaliatory reasons for a termination. This requires documenting performance issues over time, not coming up with and documenting reasons after the fact. Even better, if an employer can show, with documentation, that they tried to help the employee be successful, but the employee lacked either the ability or the inclination to do so, it can help stop an employment claim before it can move much past the demand letter stage. Canadian companies taking on employees in the U.S. should make sure they have a firm grasp of the kinds of performance management practices that will keep them out of trouble. Relying on at-will employment alone is a recipe for disaster.

Susan Lorenc joined Dorsey as a Partner in the Labor & Employment group in Chicago. Susan brings extensive experience to her nationwide employment law practice, advising organizations on a wide range of workforce and compliance matters. She represents employers across industries, with a particular focus on the technology sector and numerous Chicago-area tech companies. Read more >

Dorsey Partner Nisha Verma offered perspective on the Department of Labor’s (DOL) planned recission of the previous administration’s 2024 independent contractor rule. The DOL intends to reestablish the “economic reality test” under the Fair Labor Standards Act, which evaluates independent contractor status by examining the individual’s control over their work and their opportunity for profit or loss based on initiative or investment. Nisha contributed to an HR Dive article saying, “commentators like to call the newer rule ‘employer-friendly’ and the prior 2024 rule ‘employee-friendly,’ but in my experience, that is reductive and ignores the nuance these situations present.” She added, “I would like to see worker choice play more of a role in the analysis going forward, particularly since workers are more aware of their own tax circumstances, ability to earn other income, and need for flexibility than the business.” Read the full article in HR Dive

Dorsey Partners Matt Durham and Lisa Patmore discussed liabilities that arise from employment relationships in the U.S. and U.K. during an episode of SharkCast Litigation Risks Podcast. In this episode, they address employment litigation and discuss how HR professionals, lawyers, and others responsible for managing these claims must understand the distinctions between the U.S. and U.K. legal structures. Play the episode >

Ketul Patel joined Dorsey as a Partner in the Labor & Employment group in Southern California. Ketul brings deep experience defending employers in a full spectrum of labor and employment matters, and he provides proactive counsel to help organizations mitigate risk and prevent disputes before they arise. Read more >

Just about 20 years ago, Schlichter Bogard LLC, a prominent national plaintiffs’ law firm, filed a wave of putative ERISA class actions challenging how employers administered their 401(k) plans.  Those cases led to two decades of litigation.  Hundreds of similar cases were filed, resulting in billions in settlements and judgments.  What largely started as a challenge to a discrete issue—how 401(k) plans used revenue sharing—quickly turned into lawsuits challenging almost every aspect of how employers and fiduciaries administer 401(k) plans. Just before Christmas 2025, the Schlichter firm once again delivered an unwelcome holiday surprise to employers across the United States. On December 23, Schlichter filed four nearly identical class action lawsuits targeting co-called “voluntary benefit plans.” The complaints named as defendants United Airlines, CHS/Community Health Systems, Laboratory Corporation of America Holdings, and Universal Services of America along with their benefits consultants—Mercer, Gallagher, Willis Towers Watson, and Lockton. These lawsuits represent what may well be the opening salvo in a new wave of ERISA litigation. Plaintiffs’ lawyers hope these cases will fundamentally reshape how employers offer voluntary benefits like accident, critical illness, cancer, and hospital indemnity insurance to their employees. “Voluntary Benefits” The term “voluntary benefits” is a colloquial term referring to non-traditional benefit plan options that employers might offer to their employees.  Generally speaking, these plans offer benefits that traditional ERISA benefit plans (such as group health and disability plans) do not cover.  Common examples include insurance that covers out-of-pocket costs resulting from accidents or hospital stays, or long-term care coverage. In theory, employers do not directly fund or sponsor these plans, but instead simply give insurers the opportunity to pitch these products to employees.  Employees get the benefits of group rates along with the convenience of having premiums deducted from their paychecks. ERISA Coverage The first question raised by these cases is whether ERISA (and its fiduciary obligations) even apply.  Many employers believe their voluntary benefits fall under a Department of Labor safe harbor (29 C.F.R. § 2510.3-1(j)) that exempts such plans from ERISA coverage. To qualify for this exemption, four conditions must be met: (1) the employer cannot make any contributions to the plan (2) it must not receive more than reasonable compensation for administrative costs, (3) employee participation is completely voluntary, and (4) the employer does nothing to endorse or administer the plan beyond allowing payroll deductions. In the new wave of complaints, Schlichter argues that the employers have failed to satisfy the second and fourth requirements.  The complaints allege that the employers indirectly benefited by receiving indirect compensation from the brokers and sponsors.  The Schlichter complaints likewise argue that the employers have endorsed the plan by engaging in seemingly innocuous activities, such as notifying insurers of newly eligible employees, issuing enrollment reminders via email, or including the employer's logo on communication materials.  The complaints also allege that the employers reportedly conceded in their Form 5500 filings with the Department of Labor that their voluntary benefit plans are subject to ERISA. The Allegations The four complaints make similar allegations. Each alleges that ERISA applies to these plans, and thus the employer has a fiduciary obligation to properly administer these plans.  Each alleges that the employers breached their fiduciary duties under ERISA by failing to properly monitor and control the costs of these voluntary benefit programs. For example, the complaints contend that defendants failed to monitor premiums, failed to properly vet insurers and the plans’ loss ratios, and failed to monitor broker commissions. The complaint against United Airlines exemplifies Schlichter’s strategy.  The approximately 50-page complaint alleges that United Airlines breached its fiduciary duties with respect to its voluntary benefit plan by failing to compare premiums charged to other similarly situated plans.  It further alleges that the voluntary benefit programs allegedly adopted by United Airlines had subpar loss ratios (i.e., the amount that the plans paid out in benefits compared to the amount of premiums received).  Further, the complaint presents a comparison showing that while comparable voluntary benefit programs had broker commissions averaging between 2.1% and 19% of premiums, United's program allegedly featured commissions of 36%, raising costs to participants. The complaint further alleges claims against United Airline’s broker, Mercer Health and Benefits Administration.  The complaint alleges that Mercer became a fiduciary when it steered the employer toward more expensive, commission-rich products.  The complaint further alleges that both United and Mercer engaged in self-dealing—Mercer profited from steering employees toward more expensive, commission-rich products while United allegedly benefited from indirect services and support provided by the broker. This dynamic created a conflict of interest that the complaint characterizes as operating at the expense of plan participants. Practical Steps To avoid the expenses and distraction of litigation, employers offering voluntary benefits should consider taking the following proactive steps to minimize litigation risk: Assess ERISA Coverage Status. Employers should carefully evaluate whether their voluntary benefit programs truly meet all four requirements of the Department of Labor's safe harbor exemption. If the plan involves any employer contribution, endorsement activities, or if the employer receives benefits from brokers/sponsors (cash or otherwise), future plaintiffs may allege, rightly or wrongly, that the plan falls under ERISA's fiduciary requirements.  Employers should know that the open-ended nature of the DOL safe-harbor poses some challenges to employers seeking to comply with their duties under ERISA.  To maximize the likelihood that ERISA will not apply, at a minimum, 5500 filings should be carefully reviewed to ensure the employer is not endorsing the plan as an ERISA plan if the employer is not treating it as an ERISA plan. Ensure ERISA Fiduciary Compliance:  Even if the employer does not believe the plan is covered by ERISA, given the risks the employer should consider administering the plan as if it were governed by ERISA.  This can include soliciting competitive bids from multiple carriers, engaging in RFPs periodically, and carefully documenting the decisions the employer makes along with the reasons for such decisions. Demand Broker Transparency. Request full disclosure of all broker compensation, including base commissions, contingent commissions, bonuses, and any other forms of payment received from carriers. The Schlichter complaints emphasize the alleged failure to disclose conflicts of interest, so documenting these arrangements and evaluating whether compensation is reasonable is essential.  Consider, for example, moving to a flat fee arrangement or otherwise limiting the possibility that brokers might have a conflict of interest. Document Fiduciary Processes. Establish and follow formal procedures for selecting carriers, monitoring plan performance, and reviewing costs. Maintain detailed records of committee meetings, requests for proposals, carrier evaluations, and the rationale for decisions. Review Insurance Loss Ratios. Request and analyze loss ratio data from carriers—the percentage of premiums actually paid out in claims. Avoid Indirect Benefits:  To avoid self-dealing claims (and ensure compliance with the safe harbor), employers should ensure that they do not receive compensation from then brokers or insurers in connection with the voluntary benefit plan. Looking Ahead Interest in these lawsuits is exceptionally high given Schlichter Bogard's track record.  If history repeats itself, the four initial complaints may represent just the first batch of a much larger litigation campaign. For employers offering voluntary benefits, the message is clear: voluntary benefit plans are targets for plaintiffs’ class action firms.  Benefits consultants and brokers face similar pressures to demonstrate that their compensation is reasonable and that they are acting in plan participants' best interests rather than their own. As these cases proceed through the courts, the entire voluntary benefits industry will be watching closely to see whether Schlichter Bogard can replicate its 401(k) litigation success in this new arena. The immediate risk to unprepared employers can be significant. Taking proactive steps now to evaluate ERISA coverage, enhance oversight processes, and ensure broker arrangements serve participants' interests, can help employers avoid becoming the next target in Schlichter Bogard's litigation campaign. _____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ "Reprinted with permission from the February 2, 2026 edition of the New York Law Journal  © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com."

Employers often must consider conflicting objectives when deciding whether to include arbitration provisions in their employment agreements.  On the one hand, employers may desire to arbitrate disputes with employees in a rapid, inexpensive, and confidential manner. On the other hand, employers must consider whether a court will find the arbitration provision to be enforceable under an increasingly complex and developing body of law. The Second Circuit Court of Appeals recently considered the complexities in the law governing arbitration in a case addressing an arbitration requirement contained in the Constitution of the National Football League (“NFL”).  In Flores v. N.Y. Football Giants, Inc., 150 F.4th 172 (2d Cir. 2025), the Second Circuit declined to enforce the arbitration requirement in the NFL’s Constitution, which was incorporated into an employment agreement that football coach Brian Flores entered with the New England Patriots.  Instead, the Court allowed Flores to pursue his claims of race discrimination in hiring against the Denver Broncos, the New York Giants, the Houston Texans and the NFL in federal court, though the NFL and these teams had moved to compel arbitration of these claims.  These claims arose out of the Broncos’ failure to hire Flores as its head coach in 2019 and the Giants’ and Texans’ failure to hire him to fill head coaching positions in 2022. In this article, we review the Second Circuit’s decision in Flores and analyze the need for employers to specify legally adequate arbitration procedures as a condition to the enforcement of their arbitration clauses. Background In an August 14, 2025 opinion, the Second Circuit held that Brian Flores, who has coached for multiple NFL teams, was not required to arbitrate his claims of racial discrimination in hiring against the Denver Broncos, the New York Giants, the Houston Texans, and the NFL pursuant to the NFL Constitution’s arbitration provision, to which Flores assented through an employment agreement with the New England Patriots. Flores v. N.Y. Football Giants, Inc., 150 F.4th at 182-87. Although the parties did not dispute that the NFL Constitution’s arbitration provision applied to Flores’s discrimination claims, the Second Circuit agreed with Flores that the arbitration provision lacked protections required by Federal Arbitration Act (“FAA”) and was, therefore, unenforceable.  Specifically, the Court reasoned that the arbitration clause “fail[ed] to guarantee that Flores can ‘vindicate [his] statutory cause of action in [an] arbitral forum.’” Id. at 182 (quoting Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, 473 U.S. 614, 637 (1985)). The Court found that the arbitration provision contained in the NFL’s Constitution did not meet the requirements for enforcement under the FAA because it granted the NFL Commissioner unilateral procedural and substantive discretion over the arbitration proceedings, denying Flores an independent arbitral forum for bilateral dispute resolution. Id. at 183. It also failed to specify “the procedure to be used in resolving the dispute,” meaning that there would be no way for Flores to predict how the arbitration would be conducted and that he would be at the Commissioner’s whim. Id. at 184-85. Separately, the Court found that the arbitration provision was unenforceable under “the effective vindication doctrine,” established by the Supreme Court in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc. The Court reasoned that enforcing the arbitration clause “would require Flores to submit his statutory claims to the unilateral discretion of the executive of one of his adverse parties, without an independent arbitral forum under contract and without a process for bilateral dispute resolution.” Id. at 185-86. Accordingly, the Second Circuit affirmed the district court’s holding that the NFL would be required to litigate against Flores in federal court. In an October 2025 order, the Second Circuit declined to reconsider its decision.  Flores, No. 23-1185, ECF No. 200 (2d Cir. Oct. 6, 2025) (Order denying petition for rehearing). FAA’s Procedural Requirements One concern driving the Second Circuit’s analysis in Flores was the NFL Constitution’s creation of an arbitral tribunal within the NFL itself.  However, the larger and ultimately fatal problem with the NFL Constitution’s arbitration provision was the lack of procedural specificity needed to ensure that Flores could effectively vindicate his rights through a bilateral dispute resolution process. Arbitral tribunals within an industry, or even within the larger organization against which a party seeks to bring a claim, are not in and of themselves fatal to having an enforceable arbitration clause.  Rather, courts have held that such arbitration requirements may be enforced when the arbitration will be conducted in a manner that can be predicted based on the terms of the agreement, the proceedings are not one-sided, and they allow for substantive rights and statutory claims to be heard. See, e.g., Hooters of Am., Inc. v. Phillips, 173 F.3d 933, 938-40 (4th Cir. 1999). The Eleventh Circuit’s decision in Garcia v. Church of Scientology Flag Serv. Org., Inc., No. 18-13452, 2021 U.S. App. LEXIS 32601 (11th Cir. Nov. 2, 2021) illustrates this principle. In Garcia, former Church of Scientology members Luis and Maria Garcia brought claims for fraud, deceptive trade practices, and breach of contract against the Church. Id. at *4. The Church moved to compel arbitration pursuant to an arbitration agreement within Scientology applications signed by the Garcias providing that disputes would be resolved through “Scientology's Internal Ethics, Justice and binding religious arbitration procedures.” Id. at *6. According to the arbitration agreement, this binding religious arbitration would be conducted in accordance with established arbitration procedures of Church of Scientology International, which included “procedures for submitting a request for arbitration to the International Justice Chief of Scientology and the opposing party and for the selection of three arbitrators to hear and resolve the matter.” Id. at *6-7. Each party would designate one arbitrator, and those two arbitrators would select a third panel member, though all arbitrators had to be Scientologists in good standing, and if arbitrators were not appointed within a designated time, they would be appointed by the Scientology Justice Chief. Id. at *7. The district court held, and the Eleventh Circuit affirmed, that this arbitration agreement was enforceable—even though the very entity the Garcias were suing was conducting the arbitration—because it “included enough procedures to give the Garcias some idea of the matters to be arbitrated and the manner of effecting arbitration.” Id. at *7, 11-12, 25-27, 34-35. The predictability of the composition of the arbitration panel and the procedures the forum will follow distinguishes Garcia from Flores.  In contrast to the arbitration provision in Garcia, the arbitration provision in Flores provided “for no independent arbitral forum, no bilateral dispute resolution, and no procedure.” 150 F.4th at 183. This emphasis on procedural predictability may at first blush appear to be a departure from the Second Circuit’s prior decision regarding internal NFL arbitrations related to the Tom Brady “Deflategate” dispute. In NFL Mgmt. Council v. NFL Players Ass'n, 820 F.3d 527 (2d Cir. 2016), the Second Circuit held that the NFL’s disciplinary arbitration proceedings (which are governed by the Labor Management Relations Act (“LMRA”), not the FAA) were permissible.  In NFL Mgmt. Council, the Court reasoned that the NFL Commissioner properly exercised his authority to serve as the hearing officer for Brady’s arbitration proceedings, because the Commissioner was granted broad discretion to resolve intramural controversies between the League and players in the Collective Bargaining Agreement (the “CBA”) between the League and the NFL Players Association. 820 F.3d at 532-34. While the relevant CBA article governing arbitration may appear to be at odds with the Second Circuit’s reasoning in Flores, in Flores the Second Circuit reconciled this apparent inconsistency by noting that in NFL Mgmt. Council it had conducted only a “very limited” post-arbitration-award review that concerned contractual, not federal statutory, rights.  Flores, 150 F.4th 172, 186 n.72 (2d Cir. 2025). Although the relevant CBA article in NFL Mgmt. Council “[did] not articulate rules of procedure for the hearing, except to provide that ‘the parties shall exchange copies of any exhibits upon which they intend to rely no later than three (3) calendar days prior to the hearing,’” NFL Mgmt. Council,  820 F.3d at 537, the Court held that the NFL provided Brady sufficient notice of the prohibited conduct and potential discipline.  Brady’s only other arguments against arbitration did not refute the existence of such notice.  Rather Brady argued only that the equipment violations at issue should have been punished only with a fine under the Player Policies, that the Commissioner wrongfully analogized the “Deflategate” dispute to steroid use, and that “no NFL policy or precedent provided notice that a player could be subject to discipline for general awareness of another person's alleged misconduct” (referring to the individual who actually deflated the game balls). Id. at 538-42 (citing NFL Mgmt. Council v. NFL Players Ass'n, 125 F. Supp. 3d 449, 466 (S.D.N.Y. 2015)). The Court also disagreed that the exclusion of the NFL General Counsel’s testimony and denying Brady’s counsel access to certain investigative files amounted to fundamental unfairness. Id. at 546-47. Practical Considerations Within the Second Circuit and New York state case law, there are many examples of organization-specific and industry-specific arbitration bodies that provide for sufficient procedures and thus maximize the likelihood that a Court will find that such arbitration clauses comport with either the FAA or LMRA. These examples include arbitrations according to the Rules and Constitution of the New York Stock Exchange, e.g., Salvano v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 85 N.Y.2d 173 (1995), arbitrations under the National Association of Securities Dealers Code of Arbitration Procedure, e.g., Thomas James Assocs. v. Jameson, 102 F.3d 60 (2d Cir. 1996), and various arbitration procedures set forth in collective bargaining agreements, e.g. Germosen v. ABM Indus. Corp., No. 13-cv-1978 (ER), 2014 U.S. Dist. LEXIS 119092 (S.D.N.Y. Aug. 26, 2014). Post-Flores, employers operating within organizations or industries with arbitration requirements analogous to those of the NFL may wish to clarify the procedures that will govern their arbitrations.  For example, employers may spell out in as much detail as practicable how the arbitration will proceed such that an arbitrator can simply read the agreement and know how to manage the arbitration proceedings. To the extent feasible, employers may consider providing for an arbitration panel, rather than a single arbitrator, as was the case in Garcia. In Garcia, each party appointed an arbitrator and then the two appointed arbitrators selected the third panel member. Having a multi-arbitrator panel may mitigate allegations of arbitrator partiality such as the claims made about the NFL Commissioner in Flores. Of course, employers may seek to opt out of such organization or industry arbitration regimes and instead agree upon the procedural rules of an arbitral institution like AAA or JAMs, which have well established procedures and rules to govern arbitration. ____________________________________ Reprinted with permission from the December 8th, 2025 edition of the New York Law Journal © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com

California’s employment law landscape is changing fast — and this time, it’s simply not a minor revision to the Private Attorneys General Act of 2004 (PAGA). The 2024 legislative reforms and the growing split among appellate courts over so-called “headless” PAGA claims reveal a widening gap between statutory reform and judicial practice. First, “headless claims” arise when an employee dismisses their individual PAGA claim—often because the Federal Arbitration Act (FAA) mandates enforcement of an arbitration agreement—but seeks to continue only the representative claims on behalf of other allegedly aggrieved employees. This strategy, increasingly used by plaintiffs’ counsel to bypass arbitration, has divided California’s appellate courts on a critical question: does a plaintiff retain standing to pursue representative PAGA claims once their individual claims are dismissed? Second, the 2024 amendments to PAGA – effective June 19, 2024 – create tools for employers to defend against PAGA actions.  The reforms redefine who qualifies as an “aggrieved employee,” expand employers’ opportunities to cure alleged violations, and reduce penalties where reasonable compliance efforts are shown. Most notably, the reforms impose a personal standing requirement: employees may only pursue penalties for Labor Code violations they personally experienced. This change curtails the “kitchen-sink” approach to PAGA pleadings and limits who may serve as a proxy for the state under the Labor and Workforce Development Agency (LWDA). Together, these developments mark a pivotal moment for one of California’s most powerful wage-and-hour enforcement tools. At the center lies a collision between California’s public enforcement model under the LWDA and the FAA’s mandate to enforce arbitration agreements – a collision that could fundamentally reshape how, and by whom, California labor laws are enforced. I. The LWDA’s Role — and Its Limits, Particularly with the Result on Headless Claims The LWDA’s position as the “real party in interest” in every PAGA case defines what these actions are, and what they are not. PAGA suits are not private disputes between an employer and an employee; they are enforcement actions brought on behalf of the state. In Rose v. Hobby Lobby Stores, Inc., the First District reaffirmed that while the LWDA owns the substantive rights being enforced, it is not financially responsible for litigation costs when it does not intervene. The LWDA holds the substantive right being enforced, but delegates its prosecution, permitting private plaintiffs act as its proxies.  That balance worked under the former PAGA structure, but the LWDA’s ability to act through private enforcement may be curtailed in practice, should “headless” claims be disavowed.  In effect, the state will still own the claims, but those claims will live or die based on the private employee’s arbitration. II. The "Headless Claims" Conundrum: A Circuit Split in Action If the California Supreme Court sides with the Second District and rejects headless claims, plaintiffs will be required to arbitrate their entire individual case before representing anyone else. On paper, that’s a win for employers — reinforcing arbitration programs and narrowing sprawling PAGA exposure. But beneath that surface lies a fundamental limitation on the LWDA’s ability to act through private plaintiffs. Here’s how the appellate landscape currently breaks down:   Appellate District  Position  Key Case(s)  Reasoning Second Appellate District Rejected headless claims entirely Leeper v. Shipt, Inc. (Dec. 2024) (pending review) Williams v. Alacrity Solutions Group, LLC (April 2025) PAGA includes individual and non-individual claims, regardless of how the complaint is framed, so purely headless claims cannot avoid arbitration. Fourth Appellate District Permitted headless claims on purely procedural grounds Rodriguez v. Packers Sanitation Services LTD., LLC (Feb. 2025) (pending review) There is no individual PAGA claim to compel to arbitration in a purely headless claim, but this leaves open the potential for other pleading challenges, such as demurrer or motion to strike. Fifth Appellate District Permitted headless claims pre-2024 bill reforms CRST Expedited, Inc. v. Superior Court (July 2025) Galarsa v. Dolgen California, LLC (Oct. 2025) PAGA’s representative structure provides three choices: (1) to pursue only their individual violations; (2) to pursue only non-individual violations; or (3) to pursue both.   Although the outcome of these cases will impact litigation strategy, all involve pre-reform PAGA claims, and have yet to address the implications of the post-2024 statutory standing requirement, which adds yet another layer of complexity moving forward. III. The Federal Constraints to PAGA – And What Remains Constant Despite the uncertainty surrounding headless claims, two federal pillars remain constant: the FAA and the Labor Management Relations Act (LMRA). Both impose preemption doctrines that define where federal law overrides state law — but they do so in very different ways. The FAA governs arbitration agreements, ensuring valid agreements are enforced unless a specific exemption applies.  For example, in Villalobos v. Maersk, Inc. (October 2025), there was no individual claim subject to arbitration because the plaintiff was a transportation worker exempt from the FAA. Simply, as made clear by the court in Villalobos, case authority related to headless claims cannot be used to bootstrap FAA coverage where none exists. Meanwhile, under the LMRA, preemption arises only when resolution of a PAGA claim requires interpretation of a collective bargaining agreement (CBA). In Renteria-Hinojosa v. Sunsweet Growers, Inc. (9th Cir. Aug. 2025), the court held that PAGA claims are not preempted if they merely reference, rather than interpret, a CBA. However, when an employee’s claim depends on exhausting a CBA’s grievance process, LMRA preemption applies. These federal anchors – FAA enforceability and LMRA preemption – remain stable amid California’s shifting state-law terrain and thus serve as guideposts in assessing arbitration risk and preemption defenses. IV. A New PAGA for a New Era With the California Supreme Court poised to decide Leeper and Rodriguez, and the 2024 reforms already in effect, PAGA is entering a defining chapter. The unanswered question is whether the LWDA can still meaningfully enforce labor laws through deputized private plaintiffs if every case must begin (and possibly end) in individual arbitration. For employers, that paradox is striking: a ruling requiring arbitration of individual claims first in all instances could mark the quiet sunset of PAGA’s broadest enforcement powers. Either way, the coming year will reshape the balance between state enforcement and federal arbitration mandates — and that balance will define the next decade of California wage-and-hour litigation.

Dorsey Partner Mike Sevilla commented on how employers can protect themselves as the federal government changes US immigration rules with increasing frequency. “Everyone’s wanting to be above board,” Mike Sevilla told HR Brew for an article published October 7, 2025. “It’s probably impacting smaller employers in a larger way, just because of the resources allocation required to kind of spend time in, in terms of figuring out a complex situation.” Read the full article >

The U.S. Department of Justice (“DOJ”) and the Securities and Exchange Commission (“SEC”) have announced several changes to their whistleblower programs and rules, reflecting the federal government’s continued focus on encouraging individuals to report corporate misconduct. Specifically, on May 12, 2025, DOJ expanded its whistleblower program to prioritize additional “high impact” subject areas. On September 9, 2024, during the Biden administration, the SEC announced settled charges against seven public companies for Rule 21F-17(a) violations in connection with employment-related agreements that impeded whistleblowers from reporting potential misconduct to the SEC. As federal agencies strengthen protections for whistleblowers, employers likewise face evolving challenges. These developments not only increase the likelihood of internal concerns being brought to the attention of federal authorities but also raise the stakes for organizations that fail to comply with whistleblower protections. In this article, we examine changes in whistleblower programs and enforcement trends, including key updates to federal policies and notable enforcement actions. We also discuss the practical implications for employers navigating this complex web of legal requirements and heightened scrutiny. Finally, we offer actionable strategies to help organizations foster a culture of compliance, respond effectively to whistleblower reports, and reduce the risk of costly investigations or penalties. By understanding these new risks and proactively addressing them, employers can better protect their interests while supporting a transparent and ethical workplace. DOJ’s Whistleblower Program Expands  During the early months of the second Trump administration, the DOJ Criminal Division announced changes to the Division’s corporate and white-collar enforcement policies and priorities aimed at bringing the Division’s priorities in line with those of the new Trump administration. The head of the Criminal Division, Matthew R. Galeotti, announced those changes in a speech on May 12, 2025. Remarks at SIFMA’s Anti-Money Laundering and Financial Crimes Conference, Matthew R. Galeotti, 12 May 2025, available here. On the same day, Galeotti issued a memorandum that laid out changes to the Criminal Division. DOJ Criminal Division Memorandum: Focus, Fairness, and Efficiency in the Fight Against White-Collar Crime, Matthew R. Galeotti, 12 May 2025, available here. In the memorandum, Galeotti announced that the Criminal Division will prioritize investigating and prosecuting corporate crime in ten “high-impact” areas. To further underscore the Division’s focus on these priority areas, Galeotti simultaneously announced an expansion of the Criminal Division’s Corporate Whistleblower Awards Pilot Program (“CWAPP”) to encompass these areas. As background, the Biden administration established the CWAPP in August 2024 to encourage individuals with knowledge of specific categories of white-collar crime to come forward in exchange for potential financial compensation provided the information enables the DOJ to recover more than $1 million dollars in civil or criminal forfeiture. DOJ Press Release: Corporate Whistleblower Awards Pilot Program, available here. The potential financial compensation for DOJ whistleblowers is substantial: whistleblowers may receive up to 30 percent of the first $100 million in net proceeds forfeited, and up to 5 percent of any net proceeds forfeited between $100 million and $500 million. CWAPP does include a safe harbor provision whereby companies that voluntarily self-report within 120 days of receiving an internal whistleblower report may be eligible for a presumption of a declination under the Division’s Corporate Enforcement and Voluntary Self-Disclosure Policy. DOJ Press Release: Temporary Amendment to the Criminal Division Corporate Enforcement and Voluntary Self-Disclosure Policy, available here. In the memorandum, Galeotti announced that the CWAPP would be expanded to encompass violations committed by or through companies that reflect the Trump administration’s broader enforcement priorities, including: “Violations by corporations related to international cartels or transnational criminal organizations, including money laundering, narcotics, Controlled Substances Act, and other violations;” “Violations by corporations of federal immigration law;” “Violations by corporations involving material support of terrorism;” “Corporate sanctions offenses;” “Trade, tariff, and customs fraud by corporations;” and “Corporate procurement fraud.” Employers should take particular note of the inclusion of immigration law violations as among the administration’s enforcement priorities now eligible for CWAPP awards. This change marks a significant departure from the prior administration’s priorities. Potential corporate violations of immigration law may include knowingly employing unauthorized workers, misuse of or circumvention of visa programs, failure to properly maintain I-9 Forms for all employees, or immigration fraud. Traditionally, the Department of Homeland Security enforced corporate violations of immigration law through the Immigration and Customs Enforcement agency and its worksite enforcement program. Expanding the DOJ Criminal Division’s CWAPP to cover violations of federal immigration law—effectively placing immigration law violations in the same category as traditional white-collar crimes like money laundering and material support of terrorism—may reflect a shift towards increased criminal enforcement of these violations through the DOJ. At a minimum, whistleblowers will now have financial incentive through the CWAPP to bring information related to possible federal immigration law violations to the DOJ. To mitigate the risk of whistleblower activity and enforcement related to violations of federal immigration law, employers should thoroughly assess any vulnerabilities in their immigration policies, practices, and procedures. This should include a close examination of hiring and sponsorship practices, I-9 Form procedures, and third-party staffing contracts. Employers should also establish robust and confidential reporting channels through which employers encourage employees to report any concerns regarding immigration compliance. SEC Rule 21F-17(a) In 2010, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), Congress established the SEC’s whistleblower program to incentivize whistleblowers to report information about possible federal securities laws violations. Pub. L. No. 111-203, 124 Stat. 1376 (2010). Dodd-Frank authorizes the SEC to provide monetary awards to eligible individuals who come forward with information that leads to enforcement actions in which over $1 million in sanctions is ordered. Awards range between ten to thirty percent of the money collected. In 2024, the SEC granted over $255 million in whistleblower awards, underscoring the program’s robustness. SEC Office of the Whistleblower Annual Report to Congress for Fiscal Year 2024, available here. Dodd-Frank and the Sarbanes-Oxley Act, Pub. L. No. 107-204, 116 Stat. 745 (2002), afford whistleblowers certain legal protections. After Dodd-Frank, the SEC implemented rules enabling the SEC to take legal action against employers who have retaliated against whistleblowers. The SEC also promulgated a rule that prohibits any person from taking any action to “impede an individual from communicating directly with the Commission staff about a possible securities law violation.” SEC enforcement actions based on Rule 21F-17(a) “impeding” violations have recently played a more prominent role in the SEC’s enforcement strategy. During the Biden administration, there was an uptick in enforcement actions against companies for Rule 21F-17(a) violations based on employee agreements. For example, on September 9, 2024, the SEC announced settled charges against seven public companies for violations of Rule 21F-17(a) in connection with employment, separation, and other agreements that impeded whistleblowers from reporting potential misconduct to the SEC. SEC Press Release: SEC Charges Seven Public Companies with Violations of Whistleblower Protection Rule, 9 Sept. 2024, available here. More recently, on January 16, 2025, the SEC announced settled charges against an investment advisory firm for, in part, violating Rule 21F-17(a) by requiring departing employees in separation agreements to state that they had not filed a complaint with any governmental agency. Two Sigma Investments, LP, and Two Sigma Advisers, LP, Securities Exchange Act Release No. 102207 (Jan. 16, 2025), available here. The SEC found that this requirement could, in effect, identify whistleblowers and prohibit them from receiving post-separation payments and benefits, thereby constituting illegal impeding activity. Employers should remain aware and monitor the extent to which the SEC continues to focus on Rule 21F-17(a) enforcement actions during the current Trump administration. During the first Trump administration, the SEC did not prioritize Rule 21F-17(a) enforcement actions based on language in employer agreements that might potentially impede reporting. The SEC instead focused its enforcement efforts on cases where individuals were actively impeded from reporting information to the SEC by company actions. For example, on November 4, 2019, the SEC filed suit against a company alleging, among other things, that the company “took actions to impede individuals from communicating directly with SEC staff about possible securities violations, including by enforcing and threatening to enforce confidentiality agreements with respect to such communications.” Amended Complaint at ¶ 11, United States Securities and Exchange Commission v. Collector’s Coffee, Inc. (d/b/a Collectors Café), and Mykalai Kntilai, 697 F. Supp. 3d 138 (S.D.N.Y. 2023) No. 1:19-cv-04355, available here. While the SEC has not yet announced settled charges based on Rule 21F-17(a) under the current Trump administration, in April the SEC issued a press release publicizing a $6 million whistleblower award, signaling a continued commitment to the program. SEC Press Release: SEC Awards $6 Million to Joint Whistleblowers, 21 April 2025, available here. Further, in the past month the SEC announced five additional whistleblower awards. Whistleblower Award Proceeding File No. 2025-45, 28 Aug. 2025, available here; Whistleblower Award Proceeding File No. 2025-47, 2 Sept. 2025, available here; Whistleblower Award Proceeding File No. 2025-48, 2 Sept. 2025, available here; Whistleblower Award Proceeding File No. 2025-49, 3 Sept. 2025, available here; Whistleblower Award Proceeding File No. 2025-51, 4 Sept. 2025, available here. To mitigate the risk of Rule 21F-17(a) enforcement actions, employers should review all employee-related procedures, policies, and agreements to eliminate any language that reasonably could be interpreted to impede reporting to the SEC. This includes compliance manuals, ethics codes, training manuals, non-disclosure agreements, confidentiality agreements, contractor and consulting agreements, and separation agreements. For example, the SEC charged a Rule 21F-17(a) violation where a company’s compliance manual prohibited employees from initiating contact with any regulator without prior approval from the company’s legal or compliance department. Guggenheim Securities, LLC, Securities Exchange Act Release No. 92237 (June 23, 2021), available here. In another enforcement action, the SEC charged a Rule 21F-17(a) violation where a company entered into severance agreements that required departing employees to forgo any monetary recovery in connection with filing a charge or complaint with any applicable governmental administrative agency. Gaia, Inc. and Paul C. Tarell, Jr., CPA, Securities Exchange Act Release No. 97548 (May 23, 2023), available here. Additionally, if an employee, or other individual, raises concerns about securities law violations, employers should avoid taking actions against the employee, or individual, that could be seen as impeding their ability to report to the SEC, including limiting their access to company systems. David Hansen, Securities Exchange Act Release No. 94703 (April 12, 2022), available here (charging a Rule 21F-17(a) violation where a company co-founder removed an employee’s access to company computer systems after the employee raised concerns that the company was overstating its number of paying customers). ________________________ Reprinted with permission from the October 1st, 2025 edition of the New York Law Journal © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com  

One of the most frequently used tools by plaintiffs' employment attorneys in New York is a claim for unpaid wages under Article Six of the Labor Law. By alleging a violation of Article Six, a plaintiff can pursue not only the recovery of any unpaid wages but also liquidated damages for one hundred percent of the unpaid wages, along with interest and attorney’s fees. But what happens when wages are not “unpaid” at all—just paid late, in violation of the frequency of pay requirements set out in Labor Law § 191? In recent years, Plaintiffs’ attorneys increasingly have argued that an employer’s failure to pay “manual workers” on a weekly basis as required by § 191, in and of itself, triggers liability for both interest and liquidated damages equal to the amount of the delayed wages. On May 9, 2025, New York Governor Kathy Hochul signed an amendment to Labor Law § 198(1-a) that clarified this issue by changing the scope of damages available for an employer’s failure to pay wages to covered employees on a weekly basis in violation of Labor Law § 191. As one assemblywoman stated in support of the amendment, the amended law sought to end “the liquidated damage loopholes that have allowed for frequency-of-pay lawsuits to devastate small employers.” Gov. Hochul Signs FY 2026 Budget with Legislation for Education, Small Business, and Mental Health, WKTV (July 1, 2025), https://www.wktv.com/news/education/gov-hochul-signs-fy-2026-budget-with-legislation-for-education-small-business-and-mental-health/article_c9c686a5-52e7-4545-9447-c3465f395489.html (last visited July 29, 2025). In this article, we will analyze the split in authority that had arisen regarding whether delayed payment of wages allowed plaintiffs to recover liquidated damages under the Labor Law, and analyze how the recent amendment will now govern frequency of pay claims. Background Article Six of the Labor Law establishes a comprehensive framework to protect employees’ rights to timely and full payment of their wages. Its various provisions govern essential aspects of wage payment, including record-keeping, sick leave, permissible payroll deductions, and the frequency with which wages must be paid. Noncompliance can expose employers to significant civil—and in some cases, criminal—liability. For example, Labor Law § 193(1) prohibits employers from making unauthorized deductions from an employee’s wages, while § 191(3) requires that terminated employees be paid no later than the regular payday for the final pay period worked. The statute defines “wages” broadly under § 190(1) to include all earnings for labor or services rendered, whether calculated by time, piece, commission, or another method. Within this statutory scheme, recent amendments to Labor Law § 198 have significantly changed the remedies available for violations of the statute’s § 191 frequency of pay requirements. Prior to the recent amendment to § 198(1-a), courts in the First and Second Departments reached divergent conclusions regarding whether violations of the frequency of payment requirements of Article Six could form the predicate for a private right of action under § 198 In Vega v. CM and Assoc. Constr. Mgt., LLC,, 175 A.D.3d 1144 (1st Dept. 2019) plaintiff alleged that she was a “manual worker” who her employer paid on a biweekly basis in violation of § 191, which required weekly payment of wages.  The First Department affirmed the trial court’s denial of the employer’s motion to dismiss finding that plaintiff had stated a claim for liquidated damages under § 198.  The court rejected the employer’s argument that § 198 “provides remedies only in the event of nonpayment or partial payment of wages (but not in the event of late payment of wages).”  The court held that “the plain language of the statute indicates that individuals may bring suit for any ‘wage claim’ against an employer” reasoning that “[t]he remedies provided by section 198 (1-a) apply to ‘violations of article 6’. . . and section 191(1) (a) is a part of article 6.”  The court further rejected the employer’s argument that the claim under § 198 was extinguished by the employer’s late payment of the wages due, reasoning that “payment does not eviscerate the employee's statutory remedies.” In contrast to the holding in Vega, the Second Department in Grant v. Global Aircraft Dispatch Inc., 223 A.D.3d 712 (2d Dept. 2024) found that employees suing employers that paid wages at least twice a month solely for failing to pay every week, did not have a private right of action in § 198. The Grant court  disagreed with the reasoning in Vega, writing, “[t]he plain language of Labor Law § 198 (1-a) supports the conclusion that this statute is addressed to nonpayment and underpayment of wages, as distinct from the frequency of payment” and the court did “not agree that payment of full wages on the regular biweekly payday constitutes nonpayment or underpayment.” Against the backdrop of this split in authority, the Legislature amended § 198 to clarify the availability and scope of any remedies for violation of the frequency of payment requirements of Article Six. Analysis As amended, § 198 now states that employers who pay employees “on a regular payday, no less frequently than semi-monthly” will be subject to a claim for damages for their first violation of § 191(a) limited to “no more than 100% of the lost interest found to be due for the delayed payment of wages calculated using a daily interest rate” (§ 198(1-a)(i)). The amendment effectively modified the outcomes of both Vega and Grant.  The amendment modified Vega inasmuch as a first-time violator of § 191 would no longer be liable for liquidated damages equal to the amount of the wages that were paid late, but that employer could still be liable for interest and attorney’s fees. The amendment modified Grant in the sense that some liquidated damages could be sought by plaintiffs claiming that wages were not paid in conformity with § 191.  Furthermore, under the amendment where an employer “has been subject to one or more previous findings and orders for violations of [§ 191(a)]” the law now provides that a plaintiff may claim liquidated damages of “one hundred percent of the total amount of wages found to be due in violation of [§ 191(a)].” A recent decision by the U.S. District Court for the Southern District of New York illustrates how courts will now apply § 198 as amended. In Garzon v. Bldg. Servs. Inc., 2025 U.S. Dist. LEXIS 126441 (S.D.N.Y. July 2nd, 2025), a plaintiff who worked as a cleaner brought suit against her employer for a variety of Labor Law violations, including failing to pay her wages every week, as was her right as a manual worker, ultimately filing for and receiving a default judgement against the defendant employer after it failed to respond. Nonetheless, the court found that the employer was a first-time violator under the latest iteration of § 198, with no prior findings or suits against them for frequency of pay violations. As such, as damages for its frequency of pay violations the employer was required to pay only interest on payments that it had delayed paying the plaintiff, as well as any missing wages. The court did not provide plaintiff liquidated damages totaling the delayed wages because the court found that the employer was not a repeat offender who was subject to paying those heightened damages. Garzon thus confirmed that damages for first time violators were limited to the interest on an employee’s delayed wages and further confirmed that liquidated damages of one hundred percent of delayed wages would be available only in claims against repeat offenders. Practice Points Employers may find the requirement of Article Six to pay manual workers on a weekly basis to be administratively burdensome and different from the frequency of payment requirements in place for non-manual workers. For such employers, § 191(a)(ii) does provide a mechanism for employers to legally pay manual laborers biweekly wages by obtaining approval from the Commissioner of Labor.  As specified in the statute, such approval may be sought by employers that (1) either employ on average 1000+ individuals in New York or (2) for 1 year employed on average 1000+ individuals in New York and for the past three years employed 3000+ workers out of New York. In order to obtain such approval, employers must submit a written application on a form available on the New York Department of Labor’s website. In addition to considering employee size requirements, the Commissioner also will consider the following five factors in granting employers this permission: The employer’s history meeting its payroll responsibilities in New York state, or if no such history in New York state is available, other financial information; Proof of the employer’s coverage for workers’ compensation and disability; Proof that there are no outstanding warrants of the department of taxation and finance or the department of labor against the employer for failure to remit state personal income tax withholdings or unemployment insurance contributions; Proof that the employer has a computerized record keeping system for payroll which, at a minimum, specifies (i) hours worked, (ii) rate of pay, (iii) gross wages, (iv) deductions and (v) date of pay for each employee; and Consent of any labor organization that represent the employer’s manual workers. Accordingly, employers seeking permission to pay manual workers on a bi-weekly basis should ensure they can show that they satisfy these requirements. They must also carefully maintain compliance as permission can be rescinded if employers are found to no longer meet these responsibilities. __________________________________________________________________________________________________ Reprinted with permission from the August 5, 2025 edition of the New York Law Journal  © 2025 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com

Nisha Verma, a partner in Dorsey ’s labor and employment practice, was interviewed about the implications of the recently passed federal tax and spending law, often called the “megabill.” Nisha explained, “This will change the lives of Americans, but exactly how still has to be examined,” noting the law’s rapid passage “happened overnight and on a holiday weekend.” She highlighted potential impacts on workers, especially regarding the tax treatment of tips and overtime pay. Nisha shared, “Now that tips are more valuable, does that mean that rules like tip pooling … are going to be more scrutinized?” These changes could disincentivize wage increases and complicate workplace dynamics. Nisha’s insights shed light on the complexities and uncertainties businesses and employees may face as the law takes effect. Read the full article on CNN.

Since coming into office a little over four months ago, the Trump Administration has placed businesses on notice that it views certain actions intended to promote diversity, equity and inclusion (“DEI”) in the workplace as suspect and in violation of the anti-discrimination mandates of Title VII of the Civil Rights Act of 1964.  Employment lawyers have been busy helping their clients steer clear of and to prepare to defend against the Administration’s enforcement efforts.  At the same time, private plaintiffs have increased their own efforts to challenge DEI initiatives, which they allege illegally discriminate against majority groups.  Courts have grappled with such cases since long before the Trump Administration and have developed a body of case law that provides helpful guidance to employers seeking to comply with the law, while at the same time seeking to achieve equal employment opportunities for all workers. One important defense employers have against plaintiffs challenging DEI initiatives is to assert that the plaintiff lacks standing.  In this article, we examine the law of standing and cases addressing how standing principles apply in cases challenging DEI initiatives by private employers.  After analyzing some illustrative cases, we propose some measures employers may consider as they seek to comply with the law and defend against litigation by workers in majority groups. Title VII prohibits employment discrimination on the basis of race, color, religion, sex or national origin. 42 USC 2000e-2(a) & 2(d). The Supreme Court has long declared that Title VII’s protections apply to both majority and minority groups.  McDonald v. Santa Fe Trail Transp. Co., 427 US 273, 280 (1976). However, the Supreme Court has left the door open for affirmative action where the employer can point to a “conspicuous imbalance in traditionally segregated jobs.” See Johnson v. Transp. Agency, Santa Clara County, Cal., 480 US 616 (1987). According to opponents of DEI, the Supreme Court’s recent decision in Students for Fair Admissions v. President and Fellows of Harvard, 600 U.S. 181, 213, 143 S. Ct. 2141, 2166 (2023), narrowing the use of affirmative action in college admissions under Title VI, should apply with equal force to workplace DEI initiatives under Title VII. Opponents of DEI have been eager to litigate this position, as the number of anti-DEI lawsuits in 2024 was more than five times larger than the number in 2021. See https://advancingdei.meltzercenter.org/cases/ In many of these cases, standing has been an important defense for employers. To establish standing in federal court, a “plaintiff must demonstrate that an injury is ‘[(1)] concrete, particularized, and actual or imminent; [(2)] fairly traceable to the challenged action; and [(3)] redressable by a favorable ruling.’” Bolduc v. Amazon.com Inc., Civil Action No. 4:22-CV-00615, 2024 U.S. Dist. LEXIS 75524, at *10 (E.D. Tex. Apr. 25, 2024) (quoting Attala Cnty. v. Evans, 37 F.4th 1038, 1042 (5th Cir. 2022)). A key obstacle to standing in cases challenging DEI programs is the plaintiff’s ability to credibly allege both (1) that the plaintiff applied for some benefit, and (2) that the plaintiff was denied that benefit because of a protected characteristic such as age or gender. Bolduc v. Amazon.com Inc. illustrates the first requirement. While a plaintiff may object to a benefit being open only to a particular group, if the plaintiff did not apply for that benefit, the plaintiff does not have standing to sue in federal court. In Bolduc, the plaintiff sued under § 1981 of the Civil Rights Act of 1866, which prohibits discrimination on the basis of race, color, and ethnicity in the making and enforcement of contracts. 2024 U.S. Dist. LEXIS 75524 at *6. The United States District Court of the Eastern District of Texas assessed the plaintiff’s standing to sue over an Amazon.com program whereby “eligible Black/African American, Hispanic/Latinx, and Native American/Indigenous DSP owners receive a monetary stipend of $10,000 … [while] DSPs owned by Whites or Asian Americans … receive no such stipend.” Id. at 2. The plaintiff, who was white, claimed that this grant put her at a competitive disadvantage because she did not receive it. Id. at 8. The District Court ruled that the plaintiff did not have standing because her injuries were speculative. The plaintiff had not applied to Amazon’s DSP program and thus had not suffered an actual or imminent injury, nor had she alleged that applying to the DSP program would have been futile.  Id. at 11-13. Similarly, the Court in Correll v. Amazon.Com, Inc. dismissed a challenge to an Amazon program intended to benefit minorities because the plaintiff had not alleged that he was ready and able to take advantage of that program. No. 3:21-cv-01833 BTM, 2022 U.S. Dist. LEXIS 183736, at *6 (S.D. Cal. Oct. 6, 2022). In Correll, the plaintiff challenged Amazon “policies in place to promote, encourage, and incentivize minority certified sellers.” Id. at 2. The Court, however, dismissed the Plaintiff’s suit on standing grounds, noting that that he did not plead that the was “able and ready” to sell on Amazon’s website, and thus had no injury in fact. Id. When assessing legal risk, employers thus need to consider the number of applicants who actually applied for the benefit. If, for example, no non-African Americans applied for a program intended to benefit African American candidates, standing issues may render the overall potential liability to individual claimants relatively low. The Valencia Ag, LLC v. Reid case is a good illustration of the second requirement—that the plaintiff credibly allege that he or she was actually denied a benefit because of race, gender, or some other protected classification. In Valencia, the United States District Court for the Northern District of New York assessed the plaintiff’s standing to sue over New York’s Cannabis Law and regulations, which they claimed favored minority-owned and women-owned businesses. No. 5:24-CV-0116 (GTS/TWD), 2025 U.S. Dist. LEXIS 54706, at *1 (N.D.N.Y. Mar. 25, 2025). Like the plaintiff in Bolduc, the plaintiff in Valencia Ag argued that “social equity goals, including a goal that fifty-percent of licenses be given to SEE [Social and Economic Equity] applicants” put the plaintiff at a competitive disadvantage on the basis of race and sex. Id. 19. The plaintiff asserted that the Cannabis Law and regulations violated its rights under the Equal Protection Clause of the Fourteenth Amendment because they discriminate and grant preferential treatment to applicants on the basis of race and/or sex. Id. at *2. The Court, however, held that “a mere aspirational goal to have a certain percentage of licenses given to SEE applicants (a group that is not definitionally limited to only minority- and woman-based businesses) does not plausibly suggest an injury-in-fact.” Id. The Court noted that New York State’s goal does not require that a certain percentage of licenses be given to SEE applicants. In other words, the plaintiff had not plausibly alleged that the aspirational goals caused the plaintiff to be denied a benefit. Id. at *19. In contrast to Bolduc and Valencia Ag, LLC, Garnet v. GMC illustrates the type of case where the plaintiff has satisfied standing requirements by alleging that he or she did indeed apply for a benefit and that race, gender, or some other protected classification led the defendant to deny the plaintiff that benefit. 114 F. Supp. 2d 649, 656 (N.D. Ohio 2000). In Garnet, the benefit in question was an apprentice program open to the defendant’s existing employees. Id. at 650. Applicants were given interview and exam scores, and minority and female candidates were each given 7 extra points towards their total scores. The Court ruled that the plaintiff had alleged an injury in fact and thus standing to sue because “but for the addition of seven points to the scores of [other applicants] the Plaintiff would have been selected … .” Id. at 656. The Court ultimately dismissed the plaintiff’s case on other grounds.[1] As the Bolduc and Garnet cases illustrate, programs with aspirational goals rather than quotas or point systems are going to be far more difficult to challenge given the plaintiff’s inability to show that they were denied a benefit because of race, gender, or other protected classification. State courts, like federal courts, have their own standing requirements, which usually require an employee to allege an injury in fact and that the plaintiff would actually receive a benefit from the relief requested. In Washington state, for example, a party has standing to sue if he or she demonstrates a present substantial interest in the subject of the lawsuit, not a mere expectancy or future contingent interest, and demonstrates that he or she will obtain a benefit from the relief requested. Primark, Inc. v. Burien Gardens Assocs., 63 Wn. App. 900, 907, 823 P.2d 1116 (1992). Put another way, to have standing, a party must have a distinct and personal interest in the outcome of the case. Pac. Marine Ins. Co. v. Dep't of Revenue, 181 Wn. App. 730, 740, 329 P.3d 101 (2014); Erection Co. v. Dep't of Lab. & Indus., 65 Wn. App. 461, 467, 828 P.2d 657 (1992). A party who did not apply for a particular program will have difficulty making such a showing. These cases contain some lessons for employers assessing the risk of their DEI programs. First, programs with aspirational goals rather than quotas are less risky insofar as the plaintiff will have a difficult time showing that they were denied a benefit because of race, gender, or some other protected class. Second, employers should avoid programs that provide a clear numerical advantage to applicants (for jobs or for company programs) on the basis of race, gender or other protected class. Finally, employers will have defenses where no candidates outside of the preferred category apply. For example, if no white candidates apply to an internship designed to benefit minority candidates, there will be no individuals with a clear basis for standing to bring suit. Accordingly, employers will face less risk if they actively market such a program towards minority candidates, but accept applications from all otherwise qualified candidates and do not discriminate among applicants on the basis of race, gender, or other protected class. [1] The Sixth Circuit Court of Appeals has held that plaintiffs alleging “reverse discrimination” must make a showing that “background circumstances support the suspicion that the defendant is that unusual employer who discriminates against the majority.” Pierce v. Commonwealth Life Ins. Co., 40 F.3d 796, 801 (6th Cir. 1994). Following this precedent, the Court in Garnet held that there was no proof that the Defendant discriminated against white males in general, and thus the plaintiff had failed to make the required showing. Whether this additional element should be included in “reverse discrimination” cases is currently on appeal before the U.S. Supreme Court.  Ames v. Ohio Dep't of Youth Servs., 145 S. Ct. 118 (2024) (cert granted). Reprinted with permission from the June 3, 2025 edition of the New York Law Journal  © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

As many of us review our busted brackets ahead of this weekend’s Final Four match ups, universities across the country are preparing for the imminent changes to the rules governing name, image, likeness[1] (“NIL) payments to student-athletes, including whether the immigration laws permit international student-athletes to receive such compensation. The National Collegiate Athletic Association (“NCAA”) historically has prohibited its member universities from compensating their student-athletes in order to preserve the traditions of amateurism. A series of lawsuits over the years have chipped away at the NCAA’s prohibition on paying student-athletes for use of their NIL. See O'Bannon v. NCAA, 802 F.3d 1049 (9th Cir. 2015); National Collegiate Athletic Association v. Alston, 594 U.S. 69 (2021). In 2021, the NCAA agreed to allow student-athletes to benefit from their NIL but continued to prohibit member universities from making such payments. See https://www.ncaa.org/news/2021/6/30/ncaa-adopts-interim-name-image-and-likeness-policy.aspx. As a result, NIL collectives[2] formed to facilitate payments to student-athletes for use of their NIL. In the latest development, a groundbreaking settlement agreement in a class action lawsuit slated for finalization on April 7, 2025 will require the NCAA to pay approximately $2.8 billion in back payments to Division I student-athletes going back to 2016 and create a revenue sharing pool to allow universities to directly pay student-athletes for the use of their NIL. See In re College Athlete NIL Litigation, 4:20-cv-03919, (N.D. Cal.). These changes are fast approaching at the start of the 2025-2026 academic year, which begins on July 1, 2025. See https://www.knightcommission.org/wp-content/uploads/KnightCommissionBrief_HousevNCAA_182025.pdf.  This article explores the complications arising out of making direct payments to international student-athletes in F-1 student visa classification and highlights potential alternative visa classifications that may resolve the issue. Background Because upwards of 20,000 international students participate in collegiate athletics, universities wishing to recruit top international student-athletes have had to learn about the risks associated with making NIL and revenue sharing payments to these international student-athletes. See https://generalcounsel.uoregon.edu/name-image-and-likeness-international-student-athletes. The F-1 student classification, which covers most international students during their studies in the United States, allows foreign nationals to enter the country as full-time students at an accredited college, university, and other educational institution. See 8 C.F.R. § 214.2(f). Because this classification focusses on the student’s studying, and not working, the regulations clearly limit employment options available to students in F-1 status. These international students can lawfully obtain authorization to work under limited circumstances: on-campus employment, curricular practical training (CPT), and optional practical training (OPT). See 8 C.F.R. § 214.2(f)(9)-(10). The on-campus employment option is limited to twenty hours per week when school is in session. See 8 C.F.R. § 214.2(f)(9)(i). The CPT option is intended for use during the attainment of the degree in a manner where the CPT training relates directly to the student’s major area of study. See 8 C.F.R. § 214.2(f)(10)(i). OPT is intended for use after the completion of the student’s degree program and should also be in a field related to the student’s major area of study. See 8 C.F.R. § 214.2(f)(10)(ii). As such, the employment authorization afforded by the F-1 visa classification does not allow for direct NIL and revenue sharing payments to international student-athletes. In July 2021, the Student Exchange Visitor Program (SEVP), a program within U.S. Immigration and Customs Enforcement (ICE) overseeing student visas, indicated in a Broadcast Message that it “continues to assess the issue of F and M international student-athletes receiving compensation for the use of their name, image and likeness… and will provide additional updates through Broadcast Messages, Study in the States, social media and SEVP field representatives.” See https://www.ice.gov/doclib/sevis/pdf/bcm2107-02.pdf. But to date SEVP has provided no update or guidance. Given the lack of clarity from SEVP, universities face significant risk in making payments to international student-athletes in F-1 status.  However, alternative visa classifications may allow student-athletes to seek appropriate employment authorization to accept NIL and revenue sharing payments and to engage in full-time study. NIL and Revenue Sharing Payments For NIL and revenue sharing payments to comply with immigration laws, practitioners should seek to classify the payments within the scope of one of the three forms of work authorization or classify the payments as falling outside the definition of employment under the immigration laws. USCIS examines the specific activity conducted by the foreign national and location of the foreign national, when assessing whether work authorization is required. One solution based on existing F-1 work authorization proposed by immigration practitioners is for the international student-athlete to enroll in a “Business of Sports Management”, or similar, class, or series of classes, which would enable the international student to utilize CPT to obtain work authorization. See 8 C.F.R. § 214.2(f)(10)(I). The theory is that the NIL activity, and thus payment, constitutes training and relates directly to the student’s major area of study. This CPT work authorization could allow the international student to earn NIL income, while enrolled at a university. If the payments or activities fall outside the definition of employment under the immigration laws, more options exist. First, a popular approach across universities is to ensure international students receive payment and engage in promotional activities in their home countries. See https://generalcounsel.uoregon.edu/name-image-and-likeness-international-student-athletes. Immigration agencies review work authorization compliance from a geographic perspective and are concerned with work that occurs on U.S. soil. As such, this strategy should prevent a violation of the prohibitions of employment without work authorization in F-1 status because the payments and activities will occur outside the authority of the immigration agencies. Second, NIL deals for passive income, where the student-athlete is not engaged in activities to receive payment fall outside the definition of employment. See https://generalcounsel.uoregon.edu/name-image-and-likeness-international-student-athletes. Such passive income includes, for example, licensing of an international student’s NIL to a university for use on jerseys, t-shirts, photographs from practices or games, etc. The definition of what constitutes passive income has been subject to dispute, so the university and student-athlete should review these payments closely with an immigration attorney. Another proposed solution involves classifying international students as independent contractors for the purpose of these payments. The regulations provide that employers are not required to complete Form I-9 for an independent contractor. So, universities could make these payments without being required to verify the student-athlete’s work authorization. See https://www.uscis.gov/i-9-central/form-i-9-resources/handbook-for-employers-m-274/20-who-must-complete-form-i-9. Although the regulations would support such classification, the Department of Labor may scrutinize such independent contractor classifications closely and has historically been hostile to such classifications.  If the Department of Labor does not agree with the classification, it could take the position that the student-athlete should have completed a Form I-9. Having not completed one, despite the university believing the student-athlete did not need to, would result in a Form I-9 violation. See 8 C.F.R. § 274a; https://www.uscis.gov/i-9-central/form-i-9-resources/handbook-for-employers-m-274/140-some-questions-you-may-have-about-form-i-9. Because of this risk, universities and student-athletes should proceed carefully if they choose this option. Alternative Visa Classifications One way universities may seek to avoid the risks described above is to find a visa classification that does allow for direct NIL and/or revenue sharing payments. The most commonly explored visa classifications for international student-athletes are the P-1A, internationally recognized athletes; O-1A, athletes of extraordinary ability; and J-1 exchange visitor. These visa classifications allow for full-time study at the university level, but these nonimmigrants must abide by the rules of their status and cannot extend their stay in the United States for the purposes of completing a program of study or a degree. See https://www.ice.gov/doclib/sevis/pdf/Nonimmigrant%20Class%20Who%20Can%20Study.pdf. Further, these visa classifications allow the international student-athlete’s agent or an NIL collective to serve as a petitioner, rather than the university. As such, these alternative visa classifications significantly mitigate the risks associated with accepting payments under the permissible work authorization associated with F-1 status and any attempts to work around the limitations of F-1 work authorization. The P-1A classification applies to athletes with internationally recognized reputations or those who are members of an athletic team that is internationally recognized. See 8 C.F.R. § 214.2(p)(1)(ii)(A). Further, this classification requires the university to show that the “competition is at an internationally recognized level of performance such that it requires that caliber of athlete or team to be among its participants or that some level of participation by internationally recognized athletes is required to maintain its current distinguished reputation in the sport.” See https://www.uscis.gov/policy-manual/volume-2-part-n-chapter-2.Frequently, student-athletes receiving interest from an NIL and revenue sharing perspective are internationally recognized. The O-1A applies to athletes at the very top of their field. See 8 C.F.R. § 214.2(o). Because of this exacting requirement the O-1A may not be suitable for most international student-athletes. A crucial factor here could be the strength of the collegiate athletics program that the international student will be seeking to join. The J-1 visa classification is intended for participants in educational and cultural exchange programs. See 8 C.F.R. § 214.2(j). In order for the J-1 visa to be a viable option, the international student would need to enter the United States as part of a specific exchange program through a sponsoring entity that would allow for the participation in NCAA collegiate athletics. [1] Name, image, likeness refers to a person's legal right to control how their image is used, including commercially. [2] NIL collectives are support networks for college athletes where donors pool together money to compensate athletes for their name, image and likeness. Reprinted with permission from the April 1, 2025 edition of the New York Law Journal  © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

Businesses have long embraced the use of computer technology in the workplace as a means of improving efficiency and productivity of their operations. In recent years, businesses have incorporated artificial intelligence and other automated and algorithmic technologies into their computer systems. We will refer to these technologies as “AI Systems.”  Recent reports indicate that 99 percent of Fortune 500 companies and 70 percent of overall employers use some form of artificial intelligence to screen or rank candidates for hire.[1] For example, businesses may use video interview software to assess tone of voice, body language, speech patterns, and gestures of job candidates. Chatbots can ask job candidates questions, with pre-programmed follow-up questions which vary with the candidate’s responses. AI Systems can track work time for office workers using keystroke monitoring, eye movements or internet browsing history. Businesses may use AI Systems for scheduling and task assignment, or to track workers’ geographic locations. The number of current and future applications are limitless. Federal and state legislatures have not kept pace with the changes in technology. However, some federal government agencies previously identified the use of AI Systems as raising concerns regarding employers’ compliance with the law. Two states and one municipality have stepped into the breach and enacted laws governing the use of AI Systems in the workplace. In this article, we provide an overview of the federal regulatory guidance and the state and local rules in place so far. We then make several suggestions regarding how employers may wish to address these developments with policies and practices to reduce legal risk. Federal Guidance In recent years, the Equal Employment Opportunity Commission (EEOC) and Department of Labor (DOL) each released guidance pertaining to the use of AI Systems in the workplace.  The EEOC’s guidance addressed adverse impact in selection procedures under Title VII of the Civil Rights Act of 1964 (Title VII) and assessments of job applicants and employees under the Americans with Disabilities Act (ADA). The DOL issued its own guidance in October 2024 entitled, “Artificial Intelligence and Worker Well-Being: Principles and Best Practices for Developers and Employers” (Principles and Best Practices). Very recently, President Trump’s administration has taken steps to deregulate the development and use of AI Systems at the federal level, including by retracting the EEOC’s and DOL’s guidance, revoking former President Biden’s executive order on the “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence,” and retracting the Office of Science and Technology Policy’s “Blueprint for an AI Bill of Rights.”[2] Despite being retracted, the EEOC’s and DOL’s guidance may still offer helpful information for employers to consider in their efforts to ensure their use of AI Systems complies with the law. EEOC Guidance Under the EEOC’s Title VII guidance (issued in May 2023), the EEOC’s “Uniform Guidelines on Employee Selection Procedures” issued in 1978 (the Guidelines) apply to the use of “algorithmic decision-making tools” for a “selection procedure,” which is “any measure, combination of measures, or procedure if it is used as a basis for an employment decision.” The EEOC’s guidance makes clear that employers may use the calculations established in the Guidelines (which compare whether the selection rate for individuals in a protected group are “substantially different” than another group) as a “rule of thumb” to assess whether an algorithmic-decision making tool has an adverse impact on the basis of race, color, religion, sex, or national origin. The EEOC’s ADA guidance (issued in May 2022) warns employers that the use of algorithmic decision-making tools could violate the ADA by: (1) failing to provide applicants and employees with reasonable accommodations as necessary to be fairly and accurately assessed by the algorithm, (2) relying on an algorithmic decision-making tool that intentionally or unintentionally “screens out” an individual with a disability who could perform the essential functions of a job with a reasonable accommodation, and (3) adopting a tool that poses “disability-related inquiries” or seeks information from an applicant that qualifies as a “medical examination” before extending a conditional offer of employment. DOL Principles and Best Practices The DOL’s Principles and Best Practices provided recommendations for developing, using, and assessing AI Systems in the workplace, including that employers: allow workers “genuine input in the design, development, testing, training, use, and oversight of AI systems”; establish “clear governance systems, procedures, human oversight, and evaluation processes for AI Systems for use in the workplace”; disclose the use of AI Systems to workers and job candidates; and ensure their use of AI Systems does not “violate or undermine workers’ right to organize, health and safety rights, wage and hour rights, and anti-discrimination and anti-retaliation protections.” State and Local Laws In light of the federal shift towards deregulation of AI Systems, employers should anticipate that more states and localities will fill the void by adopting their own legislation and regulations covering the use of AI Systems in the workplace, as three have already done (New York City, Colorado, and Illinois). A common thread in current state and local legislation of the use of AI Systems in employment is the need for employers to provide employees and applicants with notices or disclosures about the use of AI Systems and, in some cases, perform and publish assessments or audits of the AI Systems for discriminatory impact. NYC Local Law 144 First among laws specifically regulating the use of AI Systems in the workplace was New York City’s Local Law 144 (effective January 1, 2023). The ordinance provides that it is unlawful for employers and employment agencies to use an “automated employment decision tool” (AEDT) to “screen a candidate or employee for an employment decision” within the city—unless the tool has been subjected to a “bias audit” within one year before use and information about the bias audit and tool are published on the employer’s or employment agency’s website prior to use. N.Y.C. Admin. Code § 28-871(a). In addition, employers and employment agencies must also provide prior notice to employees and candidates that an AEDT will be used in connection with the employment decision, the job qualifications or characteristics that the AEDT will use, and other information. Id. § 28-871(b). Colorado Anti-Discrimination in AI Law In 2024, Colorado became the first state to enact legislation comprehensively addressing “algorithmic discrimination” against consumers (including employees) residing in the state. Colorado’s Anti-Discrimination in AI statute (CADAI) takes effect on February 1, 2026. Among other things, the CADAI requires a “deployer” of a “high-risk artificial intelligence system” to “use reasonable care to protect consumers from any known or reasonably foreseeable risks of algorithmic discrimination,” which consists of “unlawful differential treatment or impact” based on a consumer’s protected characteristics caused by the use of an AI system. C.R.S. §§ 6-1-1701(1), -1703(1). “High-risk artificial intelligence systems” are ones that make, or are a substantial factor in making, “consequential decisions.” Id. § 6-1-1701(9)(a). The term “consequential decision” is defined broadly and includes a decision that has a material effect on a consumer’s “employment or an employment opportunity.” Id. § 6-1-1701(3). In addition to establishing a standard of care, the CADAI generally requires deployers of high-risk artificial intelligence systems to complete “impact assessments” at least annually and within 90 days of any “intentional and substantial” modification of the system. § 6-1-1703(3). Impact assessments must include certain disclosures, including: a statement of the “purpose, intended use cases, and deployment context of, and benefits afforded by, the high-risk artificial intelligence system”; an analysis of whether the system “poses any known or reasonably foreseeable risks of algorithmic discrimination” and the steps taken to mitigate those risks; a description of the categories of data inputs for the system and the system’s outputs; and information regarding the deployer’s evaluation and monitoring of the system. Id. Further, the CADAI imposes additional requirements on deployers of high-risk artificial intelligence systems, including to prepare “a risk management policy and program” governing the use of the system, publish information about the high-risk artificial intelligence systems used by the deployer, and provide disclosures to consumers when a high-risk artificial intelligence system is used to make or be a substantial factor in making a consequential decision concerning the consumer. Id. § 6-1-1703(2), (4), and (5). Illinois Human Rights Act Amendment Several months after Colorado passed the CADAI, Illinois enacted its own legislation amending the Illinois Human Rights Act (IHRA) in August 2024, which takes effect on January 1, 2026. Under the amended IHRA, it is a civil rights violation for an employer to “use artificial intelligence that has the effect of subjecting employees to discrimination on the basis of protected classes” or “use zip codes as a proxy for protected classes” with respect to “recruitment, hiring, promotion, renewal of employment, selection for training or apprenticeship, discharge, discipline, tenure, or the terms, privileges, or conditions of employment.” 775 ILCS 5/2-102(L). It is also a civil rights violation for an employer to “fail to provide notice to an employee that the employer is using artificial intelligence” for the purposes described in the previous provision. Id. Unlike Local Law 144 and the CADAI, the amended IHRA does not require employers to conduct bias audits or impact assessments for AI Systems used in making employment decisions or establish governance procedures for the use of AI Systems. Practice Suggestions Moving forward, employers should expect an increasingly patchwork set of state and local laws specifically covering the use of AI Systems in employment, in addition to the existing federal, state, and local employment laws that still apply to employers’ use of AI Systems. While AI-specific employment laws impose different requirements, employers would be prudent to consider implementing policies and practices that address the common legal requirements applicable to the use of AI Systems in employment, including: establishing governance structures that ensure human oversight of AI Systems and significant employment decisions; assessing the organization’s use of AI Systems (including by identifying the systems in use and sources of data, evaluating AI vendors, and performing regular audits or assessments to evaluate the systems for disparate treatment or impact); and providing notice and training to workers on the use and purpose of AI Systems (including notice that employees and applicants may request reasonable accommodations for disabilities). Of course, employers should keep a close watch on legislative and regulatory developments affecting their use of AI Systems in the workplace. [1] January 31, 2023 Testimony to EEOC of ReNika Moore, Director of the American Civil Liberty Union’s Racial Justice Program, available at https://www.eeoc.gov/meetings/meeting-january-31-2023-navigating-employment-discrimination-ai-and-automated-systems-new/moore#_ftnref79 (last visited January 28, 2025). [2] https://www.whitehouse.gov/presidential-actions/2025/01/initial-rescissions-of-harmful-executive-orders-and-actions/ (last visited January 28, 2025). Reprinted with permission from the February 5, 2025 edition of the NEW YORK LAW JOURNAL © 2024 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or asset-and-logo-licensing@alm.com.

In the United States a complex interplay of federal, state, and local statutes, rules, and regulations has always shaped employment law.  Politics and elections also play an important role in influencing the enactment and enforcement of the nation’s employment laws.  With the imminent shift from the administrations of Joseph Biden to Donald Trump, employers can expect a new direction and a raft of changes to the federal government’s approach to labor and employment law and regulatory policies.  These changes undoubtedly will significantly impact the American workplace.  Unlike most changes in administration, employers can look to their actual experiences during President-elect Trump’s first term to anticipate the direction a second Trump administration might take.  President-elect Trump will likely revisit some of the labor policies he promoted during his previous tenure but will also pursue new initiatives aligned with pronouncements and economic policies he raised during the campaign.  Below, we explore some of the potential changes we expect in the enforcement of federal employment laws from the second Trump administration. Revisiting the Regulatory Rollback During Donald Trump’s first term, his administration pursued a broad deregulatory agenda.  Agencies such as the Department of Labor (DOL), the Equal Employment Opportunity Commission (EEOC), and the National Labor Relations Board (NLRB) scaled back or revised Obama-era regulations.  Trump likely will build on this agenda, further rolling back regulations he sees as burdensome to businesses. Key Focus Areas: Overtime Rule Changes: The first Trump administration scaled back Obama-era efforts to expand the availability of overtime pay.  We expect to see efforts to limit such expansions of coverage of overtime laws, or even the introduction of rollbacks. Joint Employer Standard: Trump’s NLRB previously narrowed the criteria for determining joint employer liability, favoring businesses like franchisors.  Watch for a Trump-appointed Board to solidify these changes, limiting the liability of parent companies for franchisees’ employment practices. Independent Contractor Rules: During the first Trump term, the DOL issued rules making it easier for companies to classify workers as independent contractors rather than employees, limiting access to benefits like overtime and unemployment insurance.  Biden reversed many of these changes by executive action.  Watch for new, second-wave Trump regulators to reinstate the earlier rules to expand independent contractor classification and facilitate gig economy business models. Labor Relations: Favoring Employers Over Unions President Biden touted himself the “most pro-union President in history.”  President-elect Trump will not likely try to wrest that title away.  The first Trump administration’s stance toward labor unions and collective bargaining was sometimes adversarial, reflecting a preference for reducing union influence in the workplace.  President Biden tried to bolster unions and signed an executive order promoting unionization and collective bargaining rights for federal employees.  These included restoring protections rolled back during the first Trump administration and encouraging federal agencies to actively engage with unions.  Trump’s campaign appeals to union and non-union working-class workers could signal some softening of his earlier adversarial stance.  On the other hand, we could see a return to initiatives that seek to tilt the balance in favor of employers. Potential Changes: Restrictions on Union Elections: The Trump NLRB could continue adopting rules that make it harder for workers to organize, such as requiring more disclosure from unions or restricting access to employer premises during organizing campaigns. Right-to-Work Expansion: Although traditionally a state-level issue, President-elect Trump has historically supported national right-to-work legislation, which prevents mandatory union dues as a condition of employment.  Renewed momentum for this legislation could emerge. Bargaining Obligations: Rules governing employers’ obligations during collective bargaining could be softened, limiting unions’ leverage in negotiations. Federal Procurement and Labor Preferences: President Biden issued executive orders promoting union workers and union-made products.  The Trump Administration likely may modify or rescind these preferences. Workplace Safety and OSHA Oversight The Trump administration’s previous approach to workplace safety focused on reducing penalties and inspections, favoring instead cooperative partnerships with employers, as opposed to punitive measures.  A second Trump term will likely reduce enforcement activities by the Occupational Safety and Health Administration (OSHA). Key Predictions: Reduced Inspections: Expect fewer workplace inspections, particularly in low-violation industries, as OSHA continues to prioritize voluntary compliance over enforcement. Softened COVID-19 Standards: Although the pandemic has ended, lingering workplace safety concerns related to infectious diseases remain a focus.  President-elect Trump seems likely to reverse some stricter workplace health standards adopted by the Biden administration. Deregulation in High-Risk Industries: Industries like construction, manufacturing, and energy could see reduced compliance burdens as OSHA revises or eliminates standards perceived as costly or unnecessary. Equal Employment Opportunity: A Narrower Scope Previously in President-elect Trump’s first term, the EEOC adopted a more conservative approach to enforcement of civil rights laws.  During that time, the Commission focused on individual claims over systemic investigations, and scaled back aggressive enforcement of workplace discrimination laws.  A second Trump term likely will return to similar trends in this direction. Expected Developments: Limiting Expansive Interpretations of Discrimination: The EEOC could restrict interpretations of Title VII of the Civil Rights Act that were intended to expand protections of workers from workplace discrimination. Focus on Mediation and Settlements: The new Trump EEOC might shift resources toward resolving individual claims through mediation rather than pursuing investigations or broader systemic cases. Reduced Data Collection: Expect requirements for businesses to report detailed workforce demographic data (e.g., EEO-1 Component 2) to be scaled back or even eliminated. Federal DEIA Initiatives: President Biden issued several orders directing federal agencies to prioritize diversity, equity, inclusion, and accessibility (DEIA) in hiring, promotions, and workplace culture.  President-elect Trump’s prior executive orders sought to limit training and programs which took into account protected classifications, or which focused on “critical race theory.”  We anticipate a return to the earlier approach, with President-elect Trump rescinding President Biden’s DEIA initiatives. Wage and Hour Policies: Business-Friendly Adjustments President-elect Trump’s first administration took steps to provide employers greater flexibility in complying with wage and hour laws, particularly the Fair Labor Standards Act (FLSA).  A second term likely will build on these efforts. Likely Areas of Reform: Flexible Work Arrangements: President-elect Trump’s previous administration signaled interest in modernizing the FLSA to accommodate remote work and flexible schedules.  Watch for renewed emphasis on policies that allow employers more leeway in structuring work hours. Wage Transparency Rules: Employers may see reduced requirements regarding the disclosure or pay scales or wage disparities, reversing trends under the Biden administration. Tip Policies: Revisions to tip pooling rules, allowing a broader range of employees to share in tip pools, may be enacted. Minimum Wage for Federal Contractors: President-elect Trump may abandon or reverse President Biden’s Executive Order mandating a $15 minimum wage for federal contractors, which was recently enjoined by the Ninth Circuit Court of Appeals. Immigration and Employment Law A more restrictive immigration policy is sure to play a prominent role in the next Trump administration’s approach to the workplace.  This will be particularly true for industries that rely on foreign labor, such as agriculture, technology, and hospitality.  President-elect Trump has promised to pursue stricter immigration policies, which will impact hiring practices and workforce availability. Potential Policy Directions: H-1B Visa Restrictions: The new administration likely will tighten the eligibility criteria for high-skilled foreign workers and impose heightened scrutiny of employers using the H-1B visa program. E-Verify Expansion: The Trump administration will likely seek to expand the use of E-Verify, an electronic system for verifying employment eligibility, but which is currently mandatory only for federal and some state government contractors. Crackdowns on Unauthorized Work: Expect increased workplace investigations, audits and penalties for employers found hiring undocumented Paid Leave and Workplace Benefits The first Trump administration was less aggressive than President Obama in promoting paid leave or workplace benefits reforms.  While President-elect Trump and his surrogates expressed support for parental leave during his campaign, it remains to be seen if that will translate into legislative action on the issue.  The second Trump term seems more likely to emphasize voluntary, market-driven solutions over federal mandates. Key Expectations: Parental Leave Incentives: Instead of mandating paid leave, President-elect Trump will be more likely to use tax incentives or other voluntary measures to encourage employers to offer such benefits. Opposition to Federal Mandates: Similarly, efforts to expand federally mandated sick leave, family leave, or healthcare benefits will probably stall under President-elect Trump’s leadership. Federal Judiciary and Employment Law President-elect Trump’s lasting impact on employment law could extend beyond executive actions to reach the federal judiciary.  His first administration appointed over 230 federal judges, including three Supreme Court justices, many of whom share a conservative interpretation of employment and administrative law.  A second Trump term will likely further entrench this legacy. Implications: Pro-Business Judicial Rulings: Judges appointed by President-elect Trump will likely be sympathetic to employer concerns in disputes over arbitration agreements, wage claims, or discrimination lawsuits. Judicial Appointments: Additional Trump appointments could shape the legal landscape for decades, reinforcing a business-friendly interpretation of employment statutes. Conclusion:  An Employer-Friendly Agenda with Broader Implications The second Trump administration will likely deepen the deregulatory trends of the first, to prioritize business flexibility and minimize government influence and oversight.  While such changes may reduce compliance costs for employers, workers may face greater challenges to vindicate employment law protections. Employers will need to navigate these changes carefully, balancing the increase in their regulatory freedom with the need to comply with continuing legal obligations and to attract and retain talent in a competitive labor market.  Workers and labor advocates, meanwhile, may need to look to the courts rather than government agencies as the primary way they may question employer actions and safeguard workplace rights. As with every new administration, the next administration is sure to bring some surprises.  Even with a preview of President-elect Trump’s policies from the recent past, the dynamic legal, political and workplace environments make precise prediction impossible.  As the legal and political landscape evolves, employers should keep abreast of changes and communicate effectively with company leaders and counsel. Reprinted with permission from the December 3, 2024 edition of the NEW YORK LAW JOURNAL © 2024 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. ALMReprints.com – 877-257-3382 – reprints@alm.com.

Following a landmark NLRB ruling last year, the answer is yes. For the last several decades, the process for union recognition of an employer’s workforce was largely unchanged. In 1974, the United States Supreme Court decided Linden Lumber Div., Summer & Co. v. NLRB, which provided the conditions under which employer had to recognize a union. Under the Court’s decision in Linden Lumber, a majority of employees had to elect a union through an election, win which the employer could campaign, before the employer had to recognize and bargain with the union. Since it is an unlawful employment practice for an employer to refuse to bargain with a legitimate union representative, the Court’s decision in Linden Lumber gave employers an important bright line for when their statutory obligation to recognize, and bargain with, a union kicked in. However, in Cemex Construction Materials Pacific, the Board reversed course, and held that there are circumstances where an employer might be required to recognize a union, regardless of whether the Board has conducted a formal election of the union.  Under Cemex, when an employer is presented with a demand for union recognition that the union claims is supported by a majority, the employer must do one of the following: (1) immediately recognize the designated union representative, or (2) file a petition to test the union’s majority status, or the legitimacy of the unit used to measure the majority status. If an employer opts for the latter option, the employer can file a petition that states the grounds for their good-faith belief that the claimed union does not have majority support. After receiving an employer’s petition, the Board will investigate the employer’s claims and may require a Board election if it finds a genuine question of representation. In Cemex, the Board noted that this is a reversal of the typical process, which usually requires unions to petition the Board for certification of a union, not the other way around. Employers that choose to file a petition with the Board should be aware that the Board’s decision provides harsh punishments for employers that are charged with unlawful employment practices (“ULPs”) in the run-up to an election. Historically, if a union purported to receive majority support, and a ULP charge is substantiated before the Board election, the remedy imposed by the Board was either a cease-and-desist order to stop the unlawful misconduct, or an order to re-run the election. As an extreme measure, the Board could issue a remedial bargaining order to force the employer to recognize the union, but only if it was proven that the employer’s action likely precluded a future election from being fair. In practice, this was a heavy burden to satisfy, and the Board rarely issued remedial bargaining orders. In Cemex, the Board overturned this standard, and held that an employer will be subject to a remedial bargaining order if the employer is found to have committed any ULP in the lead up to an election, so long as the violation would warrant the election being put aside. The Board reasoned that a delay in representation amounts to a lack of representation, and that the harsh new standard would better deter employers from committing unlawful employment practices that might prejudice an election. This standard is a pivotal departure from the Board’s past decisions. As Board Member Kaplan noted in his dissent, if a ULP charge is ultimately substantiated after the filing of a petition, “the petition will be dismissed, employees will lose the right to vote in a secret-ballot election, and the employer will be found to have violated [federal law] and ordered to recognize and bargain with the union.” Accordingly, employers that decide to test a union’s majority by filing a petition should act quickly to review their policies and procedures, and train supervisory employees to ensure that no inadvertent practice occurs that could lead to a ULP in the run-up to an election.  As practitioners in this area can confirm, during elections some unions intentionally file speculative ULPs as insurance in the event the union loses the election, so any conduct that could even potentially trigger a ULP should be discussed in-depth with counsel. The Board’s recent decision will certainly add to the pressure employers feel in trying to comply with federal labor laws, especially given the current labor market. Despite that, having a plan for potential workforce unionization can help mitigate the associated risks.