Key Highlights The U.S. Department of Justice’s Office of Legal Counsel issued an opinion concluding that the Equal Employment Opportunity Commission’s (EEOC) current interpretation of disparate-impact liability under Title VII is unconstitutional because, in DOJ’s view, it allows liability based on disparate effects alone and pressures employers to engage in race-based decision-making. The opinion follows the Administration’s broader effort to limit federal disparate-impact enforcement. The opinion does not amend Title VII or eliminate private or state-law disparate-impact claims. In recent months, some states have taken action to bolster the viability of disparate-impact claims under state law. What Is Changing? On June 9, 2026, DOJ’s Office of Legal Counsel issued an opinion concluding that the EEOC’s disparate-impact guidelines under Title VII violate the Constitution’s Equal Protection Clause. According to the opinion, EEOC’s prior disparate-impact guidance impermissibly pressured employers to engage in racial discrimination by allowing liability based on unequal hiring or promotion outcomes, without regard to the employer’s likely intent. In DOJ’s view, some level of disparities among protected groups is inevitable and the EEOC’s disparate-impact guidance had “the effect of injecting racial considerations into the evaluation of nearly all employment practices.” Importantly, the opinion does not conclude that every form of disparate-impact liability is invalid. Rather, it interprets Title VII disparate-impact liability narrowly, as a tool for identifying employment practices that reflect a significant likelihood of intentional discrimination. In DOJ’s view, the EEOC’s historical approach went too far by treating disproportionate outcomes as sufficient to create liability without sufficient attention to intent, causation, business necessity and alternative practices. DOJ Narrows the Federal Disparate-Impact Framework Disparate-impact liability generally addresses facially neutral employment practices that disproportionately affect members of a protected group. For example, disparate-impact may come into play if an employer used a pre-hiring test to vet job applicants, and one race (or other protected group) passes the test at a rate that creates a statistically significant disparity relative to the pass rates for other races or groups. Even if the test is facially neutral and was adopted for non-discriminatory reasons, disparate impact is a potential avenue for an employee to assert claims against the employer. The new DOJ opinion seeks to narrow disparate-impact liability by reducing the range of circumstances where disparities between groups will be found to result from unlawful discrimination. First, although Title VII disparate-impact already incorporates a business-necessity defense under which the employer can show that the challenged practice is job-related and serves a valid business purpose, the new DOJ opinion emphasizes that the defense should not be treated as a high bar. DOJ opines that the employer need only show that the challenged practice is rational, convenient or helpful in serving a valid business purpose. Second, DOJ’s opinion argues that plaintiffs must satisfy a robust causation requirement by showing that the specific challenged practice caused the alleged disparate impact and that the impact is not the result of other factors that may be societal and not within the employer’s control. Third, plaintiffs must identify an equally effective alternative practice that would cause less disparate impact. State-Law Obligations Remain an Important Unresolved Issue The DOJ opinion creates a potential conflict for employers operating in jurisdictions that recognize disparate-impact liability under state or local law. As we recently reported, New York amended the New York State Human Rights Law to expressly provide that a facially neutral employment practice may violate state law based on its discriminatory effects, even absent proof of discriminatory motive. The New York standard also requires employers to establish job-relatedness and business necessity once a disparate impact is shown and permits an employee to prevail by identifying a less discriminatory alternative. It remains unclear how DOJ’s constitutional analysis will apply to these state-law standards. The opinion is directed at the EEOC’s interpretation and enforcement of federal Title VII; it does not, by itself, repeal or amend state statutes. Employers may have arguments that the same constitutional concerns identified by DOJ with respect to Title VII would also apply to state laws, but it is unclear how receptive courts, particularly in many of the jurisdictions with higher levels of employment regulation, will be to these arguments. In addition, a related Executive Order issued last year on disparate impact directed the Attorney General to determine whether federal authority preempts state laws that impose disparate-impact liability. Employers now face competing risks when neutral practices produce potential racial disparities. On one hand, litigation risk from disparate-impact claims may point toward revising those practices. On the other hand, the DOJ opinion suggests that changes motivated by racial outcomes could be viewed as impermissibly race-conscious. Employers now must walk a tightrope between anti-discrimination standards that appear to be at odds. Why This Matters The DOJ opinion is another development in the federal government’s broader retreat from disparate-impact enforcement and may reduce the likelihood that the EEOC will pursue federal Title VII claims based primarily on statistical disparities arising from neutral employment practices. While a reduction in EEOC disparate-impact liability would be a positive development for employers, there are still risks from private litigants asserting Title VII disparate-impact claims as well as state laws that may be moving in the opposite direction toward a wider scope of application for disparate impact. It remains to be seen whether DOJ’s reasoning will be persuasive in cases not involving the EEOC or those brought under state law. Employers with questions about disparate-impact risk, selection-procedure validation, AI tools, affirmative action plans or state-law compliance should contact their Polsinelli Labor and Employment attorney.

Key Takeaways: The Fourth Circuit held that employees that settled and released their individual claims after the District Court decertified the class and collective actions had waived their claims and, thus, lacked standing to bring an appeal. This decision was made despite the language of the settlement agreement attempting to carve out a right to appeal – emphasizing the importance of well-crafted release language in wage and hour cases. On June 2, 2026, the U.S. Court of Appeals for the Fourth Circuit issued a unanimous decision addressing the question of whether an employee who settled his individual wage and hour claims with his employer has standing to challenge a district court’s decertification of a class and collective action which occurred prior to that settlement. The Court answered in the negative. In Mebane v. GKN Driveline North America, Inc., 4th Cir., No. 25-02191, a three-judge panel in the Fourth Circuit unanimously dismissed an appeal filed by former auto parts workers holding that they lacked standing to bring the appeal. Mebane and another auto worker, Angela Worsham, had sued their employer, GKN, in 2018, alleging that GKN violated both the Fair Labor Standards Act (the “FLSA”) and the North Carolina Wage and Hour Act (the “NCWHA”) by rounding work time and automatically deducting meal breaks. A North Carolina district court initially certified two Rule 23 classes and a FLSA collective, but later decertified them after determining that the alleged claims were too individualized in nature and would require highly specific inquiries into employees’ rounded minutes and meal breaks, as well as GKN’s knowledge of whether employees were working during the automatically deducted period. Following decertification, Mebane and Worsham were permitted to move forward with their individualized wage claims. Each settled their claims with GKN in November 2024, with Mebane settling for $27,000, and Worsham settling for $3,000. Despite having resolved his individual claim against GKN, Mebane filed an appeal, arguing that the North Carolina district court abused its discretion in its decision to decertify the classes and the collective action. In response, GKN argued that Mebane lacked standing to appeal the district court’s decertification order because he had voluntarily settled his wage claims under the FLSA and the NCWHA. The Fourth Circuit agreed. In issuing its opinion, the Fourth Circuit panel found that Mebane lacked standing to appeal the decertification order because he had executed a settlement agreement with GKN wherein he generally waived all remaining claims in his lawsuit. Though his settlement agreement purported to preserve the right to appeal a decertification order by carving out an exception within the waiver, the Fourth Circuit held that this reservation was not enough. Because the waiver included Mebane’s claims under the FLSA and the NCWHA, which were the claims underlying the collective action and the Rule 23 classes, the Fourth Circuit held that Mebane had no remaining interest in his substantive claims to allow him standing to file his appeal. This is consistent with the Fourth Circuit’s previous decision in Rhodes v. E.I. du Pont de Nemours & Co., 636 F.3d 88, 98 (4th Cir. 2011), where it held that it lacked jurisdiction under Article III to decide the issue of whether a district court had abused its discretion in denying request for class certification where the putative class representative had voluntarily dismissed his claims.  The Fourth Circuit’s decision in Mebane is a significant procedural win for employers defending wage-and-hour class and collective actions. The decision clarifies that plaintiffs lose standing to appeal adverse certification rulings in wage and hour cases if they have voluntarily resolved their individual claims, even if they attempt to preserve appellate rights in the settlement agreement. For employers, Mebane reinforces the value of decertification and finality strategies in wage-and-hour class and collective litigation. Employers resolving individual claims after decertification should carefully evaluate release and reservation language, but the decision provides helpful authority that a plaintiff cannot manufacture appellate standing by contract once the underlying individual claims are gone. For questions on how this decision impacts your business, contact your Polsinelli attorney.

Effective July 1, 2026, Tennessee employers will be prohibited from requiring, requesting or enforcing a noncompete agreement against an employee whose annualized compensation is less than $70,000. The new law puts Tennessee within the trend of states across the country regulating the use of noncompete agreements depending on an employee’s earnings. How Annualized Compensation Is Calculated Under the New Law The new law defines annualized compensation as total compensation received from the employer on an annual basis; for hourly employees, annualized compensation must be calculated by multiplying the hourly rate by 40, then multiplying the product by 52. New Standards for Enforcing Noncompete Agreements Helpfully for employers, the new law requires courts to presume reasonable any non-compete restrictions of two years or less in duration (measured from the date employment ends). Anything longer in the employment context is presumed unreasonable, but a court is authorized to judicially modify the restriction to make it reasonable. In the sale of business context, restrictions up to five years are presumed reasonable, so long as the covenant is a “material part” of the deal. Notably, the law does not appear to apply to other common types of restrictive covenants, like non-solicitation or non-disclosure agreements. Effective Date and Impact on Existing Agreements While this law does not apply retroactively to contracts entered before July 1, 2026, it does apply to proceedings occurring and agreements entered into, renewed or amended on or after July 1, 2026—making now a good opportunity for Tennessee employers to review their restrictions. What the New Law Signals for Employers Nationwide This enactment shows that the nationwide trend of increasing regulation of noncompete agreements is reaching jurisdictions that are not typically on the forefront of enacting new employment laws. These laws emphasize the need for employers who rely on noncompetes to protect their business interests to consult with experienced counsel in drafting, implementing and enforcing these agreements. Contact your Polsinelli attorney if you have any questions or need assistance regarding this or other restrictive covenant issues.

Key Takeaways: The Third Circuit held that the FLSA does not provide a cause of action for overtime gap time claims. Despite the ruling, employers may still face liability under state wage payment laws for unpaid straight-time wages. In a significant wage-and-hour decision, the U.S. Court of Appeals for the Third Circuit rejected a key component of a $35.8 million judgment obtained by the U.S. Department of Labor (DOL), holding that the Fair Labor Standards Act (FLSA) does not permit recovery of so-called "overtime gap time." The June 3, 2026 decision in DOL v. Comprehensive Healthcare Management Services LLC marks the first time the Third Circuit has addressed whether employees may recover compensation for non-overtime hours worked during a workweek in which overtime was also worked. The court answered that question with a clear "no," further deepening an existing split among the federal circuits. Understanding Overtime Gap Time “Overtime gap time” refers to unpaid straight-time hours worked in a week where an employee also works more than 40 hours. For example, if an employee works 43 hours in a week but is paid for only 38 hours, two of the five unpaid hours (that fall under 40 hours in the workweek) may constitute “gap time.” Unlike a traditional overtime claim, when an employee is seeking “gap time,” the employee is asking the court for payment for straight-time hours worked that occurred prior to the employee hitting 40 hours in a workweek. The FLSA primarily governs two categories of pay: minimum wages and overtime compensation. The statute does not expressly provide a remedy for overtime gap time. In this case, the DOL argued that the FLSA permits recovery of those unpaid hours when they occur in an overtime workweek. The district court agreed and included overtime gap time damages as part of its award following a bench trial. On appeal, the Third Circuit rejected that interpretation. The Court’s Reasoning Writing for the majority, Chief Judge Michael Chagares concluded that the FLSA’s text requires employers to pay minimum wages and overtime compensation, but does not create a separate cause of action for overtime gap time. According to the court, the statute’s language simply does not support extending FLSA liability to unpaid straight-time hours that do not themselves constitute overtime. The court rejected the DOL's argument that the FLSA's overtime provisions implicitly require payment of all straight-time hours at an employee's regular rate simply because overtime premiums are calculated using that rate. The panel found no statutory basis for that interpretation and declined to defer to the agency’s guidance on the issue. Importantly, the court emphasized that employees are not necessarily left without a remedy. Claims for unpaid straight-time wages may still be available under state wage payment laws or through breach-of-contract actions, depending on the circumstances. A Growing Circuit Split The Third Circuit joins the Second Circuit in holding that overtime gap time claims are not cognizable under the FLSA. The decision deepens an existing circuit split with the Fourth Circuit, which has recognized overtime gap time claims under the FLSA. The U.S. Supreme Court declined to review the Fourth Circuit’s decision in 2022, leaving employers subject to different rules depending on where they operate. Takeaways for Employers For employers operating within the Third Circuit—Pennsylvania, New Jersey, Delaware, and the U.S. Virgin Islands—the decision provides welcome clarity regarding the limits of FLSA liability for overtime gap time claims. The ruling narrows the scope of potential damages in federal wage-and-hour litigation and may limit the DOL's ability to pursue similar theories in future enforcement actions. However, employers should not view the decision as eliminating risk related to unpaid straight-time wages. While the decision narrows one avenue of FLSA liability, it is far from the final word on unpaid, non-overtime straight-time wages. As the federal circuit split persists and state wage laws continue to evolve offering wider remedies, employers remain subject to a patchwork of wage-and-hour obligations that extend well beyond the FLSA. Plaintiffs are likely to continue asserting state-law claims where available bring more complicated hybrid cases seeking a collective action under the FLSA and a class action for state claims under Rule 23. Thus, employers should consider auditing pay practices, timekeeping procedures, and exemption classifications, particularly in industries such as healthcare where wage-and-hour enforcement remains a priority. For questions on how this decision impacts your business, contact your Polsinelli attorney.

Key Highlights The EEOC has submitted a rulemaking item for White House regulatory review that would rescind its 1979 Interpretive Rule, “Affirmative Action Appropriate Under Title VII of the Civil Rights Act of 1964.” The 1979 rule currently provides the EEOC’s framework for when employers may adopt voluntary affirmative action plans under Title VII, including where a reasonable self-analysis identifies adverse impact, the effects of prior discrimination or artificially limited labor pools. A rescission would not, by itself, change Title VII or erase Supreme Court precedent allowing certain voluntary affirmative action plans, but it would remove a longstanding EEOC framework and allowing increased scrutiny of diversity, equity and inclusion (DEI) programs that consider race, sex, national origin or other protected characteristics in employment decisions. What Is Changing? The EEOC has moved to rescind its 1979 Interpretive Rule, codified at 29 C.F.R. Part 1608, which has long provided guidance on when voluntary affirmative action may be appropriate under Title VII. The agency’s release does not provide much detail, but the practical issue for employers is clear: the EEOC is looking to withdraw a rule that has served as a roadmap for evaluating voluntary affirmative action plans. The proposed rescission reflects the EEOC’s broader shift toward increased scrutiny of employment practices that expressly consider race, sex or other protected characteristics, particularly in the context of DEI-related initiatives. Part 1608 Currently Gives Employers a Framework for Voluntary Affirmative Action Plan Under the current rule, voluntary affirmative action may be appropriate where an employer’s self-analysis identifies actual or potential adverse impact, the continuing effects of prior discriminatory practices or artificially limited applicant or promotion pools. The rule provides that an affirmative action plan should include three elements: a reasonable self-analysis, a reasonable basis for concluding that action is appropriate and reasonable action in relation to the problem identified. The rule also has a reliance component. It identifies itself as a “written interpretation and opinion” of the EEOC under Section 713(b)(1) of Title VII, which allows employers to argue that actions taken in good-faith reliance on the rule are protected even if that interpretation is later modified or rescinded. Rescission Would Remove the EEOC’s Agency-Endorsed Framework, Not Rewrite Title VII A rescission would not automatically make all voluntary affirmative action unlawful. In United Steelworkers v. Weber, the Supreme Court upheld a private employer’s voluntary affirmative action plan where the plan was designed to address a manifest racial imbalance in traditionally segregated job categories, did not unnecessarily trammel the interests of white employees and was temporary. The Court later applied similar principles in Johnson v. Transportation Agency, upholding a plan that considered sex as one factor in a promotion decision where women were underrepresented in a traditionally segregated job category and the plan was moderate, flexible and case-by-case. Although the Supreme Court’s decision in Students for Fair Admissions v. Harvard addressed higher education admissions rather than employment practices under Title VII, the decision has significantly influenced the broader legal and enforcement landscape surrounding DEI initiatives. Since SFFA, employers have faced increased scrutiny of programs that expressly consider protected characteristics, including through litigation challenges, agency investigations and employee complaints. Even so, losing Part 1608 would matter. Employers would no longer have the same EEOC-endorsed rule to rely on when defending future race-, sex- or national-origin-conscious employment decisions or any voluntary affirmative action programs, disparity analysis or adverse impact analysis. The move also fits within the EEOC’s broader stated focus on “rooting out unlawful DEI-motivated race and sex discrimination.” Employers Should Review Programs that Consider Protected Characteristics Employers should not treat every EEO, DEI, outreach, mentoring, recruiting or pipeline program the same. Programs that expand opportunity without using protected characteristics as a selection factor generally present different risks than programs that reserve slots, apply preferences, set quotas or otherwise tie employment decisions to race, sex, national origin or another protected trait. Employers should identify any programs that rely on Part 1608 or otherwise consider or provide opportunity based on protected characteristics in hiring, promotion, internships, fellowships, leadership development, training access, compensation, layoffs or other employment opportunities. For any such program, employers should review whether it is supported by a current self-analysis, whether it is focused on one race or sex or all, whether goals are aspirational rather than mandatory, whether the program is tied to identified barriers or imbalances, whether the employer can clearly articulate and document the program’s factual and legal justifications, whether the program is applied consistently in practice and whether it includes limits, review points and an endpoint. Programs lacking documented support or clear limiting principles or that are narrowly focused on certain races or ethnicities may face greater scrutiny in the current enforcement environment. Why This Matters Rescission of the 1979 rule would not end lawful equal employment opportunity efforts, and it would not repeal Weber or Johnson. But voluntary affirmative action plans have always required careful structuring to fit within Title VII’s nondiscrimination requirements. The anticipated elimination of Part 1608, together with other EEOC developments reflecting a more “color-blind” approach to Title VII enforcement, would only heighten the need for employers that maintain these programs to carefully assess the factual and legal justifications for them, how they are applied in practice and whether they remain appropriately limited. In the current enforcement environment, employers should expect greater scrutiny of programs that use protected characteristics in employment decisions and should review those programs now, before a charge, complaint or litigation challenge forces that review on a less favorable timeline. Employers with questions about voluntary affirmative action plans, DEI-related employment programs or how to assess risk in light of the EEOC’s anticipated rescission should contact their Polsinelli Labor and Employment attorney.

Key Highlights The U.S. Supreme Court unanimously held that the FAA’s transportation worker exemption may cover last-mile delivery drivers who deliver goods that originated out of state. The exemption can apply even when the driver’s own route is entirely intrastate. The ruling may narrow the enforceability of arbitration agreements for employers in logistics, delivery, retail and e-commerce operations. It is likely to increase challenges by workers tied to interstate supply chains. Employers should review arbitration agreements covering drivers, couriers and delivery personnel in light of the Court’s continuous-movement analysis. They should also assess whether affected worker groups may require alternative dispute resolution provisions under state law. In Flowers Foods, Inc. v. Brock, the United States Supreme Court issued a significant decision that will impact employers who utilize arbitration agreements for delivery drivers. In a unanimous ruling, the Court held that the Federal Arbitration Act’s (“FAA”) transportation worker exemption can extend to delivery drivers who deliver goods originating out of state, even if their involvement is purely intrastate. The decision continues the Court’s recent trend of closely examining the scope of the FAA’s transportation worker exemption and may have substantial implications for employers in the logistics, delivery, retail and e-commerce sectors. Background The FAA generally requires courts to enforce valid arbitration agreements. Section 1 of the FAA, however, exempts certain “workers engaged in foreign or interstate commerce” from coverage under the statute (the “Section 1 Exemption”). The question decided by the Court was whether workers who complete the final leg of a delivery of goods intrastate, often referred to as “last-mile” drivers, are subject to the Section 1 Exemption of the FAA when the goods they deliver originated out of state. The worker at issue was an independent distributor who delivered goods from a warehouse in Colorado to retail outlets within Colorado. The goods, however, were shipped to the warehouse from out of state.  The Supreme Court’s Decision The Supreme Court concluded that the exemption may apply to last-mile delivery drivers if their work constitutes a direct part of the continuous interstate movement of goods. The Court thus declined to adopt a brightline rule that a worker must move interstate or even interact with a vehicle that moved across state lines, to fall within the Section 1 Exemption. Rather than looking at whether the worker personally engages in interstate movement, the Court explained that the relevant inquiry should be focused on the journey of the goods themselves to determine whether they are moving in a continuous interstate stream. Still, for the Section 1 Exemption to apply, the worker must play a direct, active and necessary role in that continuous interstate movement of the goods. What the Decision Means for Employers The ruling is likely to increase litigation over the scope of the Section 1 Exemption and may limit the effectiveness of arbitration agreements for certain categories of transportation workers involved in distribution and delivery operations. Employers that rely on arbitration agreements should be cognizant of the fact that workers who themselves do not cross state lines can still fall within the Section 1 Exemption. Industries potentially affected include: Package and parcel delivery services; E-commerce fulfillment and distribution operations; Retail delivery networks; Food and beverage distribution companies; and Third-party logistics providers. The decision may also encourage transportation workers to challenge arbitration agreements in wage-and-hour, discrimination and other employment-related disputes where the workers are connected to interstate supply chains. Steps Employers Should Consider In light of the Court’s ruling, employers should consider: Reviewing arbitration agreements applicable to drivers, couriers and delivery personnel; Assessing whether particular worker groups may qualify for the Section 1 Exemption; Evaluating alternative dispute resolution provisions under applicable state law; and Reexamining litigation strategies in pending matters involving transportation-related employees. Because the Court’s analysis focused heavily on the worker’s role within the broader movement of goods, future litigation will likely center on how closely particular job duties are tied to interstate commerce and the cross-state movement of goods. Employers should expect continued judicial scrutiny of arbitration programs involving transportation workers. Looking Ahead The Supreme Court’s decision represents another important development in the evolving landscape of employment arbitration. As businesses continue to rely on increasingly complex supply chains and delivery networks, courts will likely face additional questions regarding which workers fall within the Section 1 Exemption. Employers should work closely with counsel to evaluate arbitration agreements and workforce classifications to ensure dispute resolution programs remain enforceable and aligned with current legal developments. Contact your Polsinelli attorney for further guidance regarding the implications of this decision and other employment-related matters.

Key Highlights The Ninth Circuit affirmed a district court’s refusal to compel arbitration where an employer rolled out mandatory arbitration agreements during a pending wage-and-hour class action. The court emphasized that Rule 23(d) gives district courts broad authority to regulate communications with putative class members and protect the integrity of class proceedings. Employers considering arbitration agreements during active class litigation should carefully vet the timing, manner and messaging of any rollout to avoid communications that could be viewed as coercive or discouraging class participation. An employer’s arbitration rollout strategy matters just as much as the agreement itself.  Earlier this year, the Ninth Circuit issued an important decision that serves as a cautionary reminder that employers who wish to roll out arbitration agreements during a pending wage and hour class action must do so with careful consideration.  Otherwise, its efforts may prove futile.  How the Employer Introduced the Arbitration Agreement Avery v. TEKsystems, Inc., 165 F.4th 1219 (9th Cir. 2026) involved a putative class of recruiters who alleged that their employer, a professional staffing agency, had misclassified them as exempt and failed to pay them overtime or provide breaks.  After nearly two years of litigation and after class certification briefing, the employer rolled out a new, mandatory arbitration agreement applicable to class members and subsequently moved to compel arbitration against class members. After the district court denied the motion, the employer appealed. Why the Ninth Circuit Refused to Compel Arbitration The arbitration agreement was rolled out in two stages.  First, the employer sent an email to all employees attaching its mandatory arbitration agreement with a class-action waiver and an FAQ which provided additional commentary on class actions, including the company’s position that arbitration was “more efficient and cost effective.” Second, the employer sent another email to putative class members with a “Notice of Opt Out” form which provided that if employees wished to remain a part of the putative class, they could opt out of the arbitration agreement.  Rule 23(d) Gives Courts Broad Authority Over Class Communications The Ninth Circuit affirmed the denial and held that district courts have broad authority under Federal Rule of Civil Procedure 23(d) to protect the integrity of class proceedings and regulate putative class communications. Importantly, the court rejected the employer’s argument that the Federal Arbitration Act (“FAA”) required enforcement of the agreements, emphasizing that the district court’s ruling did not target arbitration itself, but rather the employer’s conduct in procuring the agreements. Key Takeaway for Employers Rolling out new arbitration agreements mid-litigation of a class action is not unlawful, but it does carry legal risks and therefore must be carefully vetted to maximize enforceability. Businesses considering new arbitration agreements should work closely with counsel to evaluate not only the substance of the agreements, but also the timing, manner and messaging of the rollout.  Even an otherwise enforceable arbitration agreement may not survive judicial scrutiny if implemented during active class litigation through communications that are anything less than clear, neutral, and free from language that could discourage class participation or effectively pressure employees to opt out. For assistance navigating employee arbitration agreements, contact your Polsinelli Labor & Employment attorney.

Key Takeaways: The U.S. Department of Labor has rescinded the 2024 rule that sought to expand overtime eligibility by raising the salary threshold for white-collar exemptions under the Fair Labor Standards Act. The DOL is reinstating the 2019 overtime salary threshold from the first Trump Administration: $684 per week ($35,568 annually). The Department of Labor (“DOL”) is putting things in reverse once again. On May 13, 2026, the DOL’s rescinded the 2024 Biden-era overtime rule, which substantially increased the salary thresholds for the Fair Labor Standards Act’s (“FLSA”) white-collar exemptions. Restoring the Trump-Era 2019 Threshold The FLSA generally requires employers to pay overtime to employees who work more than 40 hours per week. But under the White Collar Exemption, or Section 13(a)(1) of the FLSA, bona fide executive, administrative, and professional employees with certain duties and whose salaries exceed a given threshold are exempt from overtime requirements. The DOL’s Biden-era 2024 rule sought to raise the minimum salary threshold for executive, administrative, and professional employees from $684 per week to $844 per week beginning July 1, 2024, with a second increase scheduled for January 1, 2025, to $1,128 per week. The rule also increased the highly compensated employee threshold and included automatic updates every three years. In November 2024, the U.S. District Court for the Eastern District of Texas vacated the rule nationwide, holding in State of Texas v. U.S. Department of Labor that the DOL exceeded its authority by placing too much emphasis on salary level over employee duties. The court held that the sweeping increase effectively supplanted the duties test Congress intended to govern exempt status determinations. This lawsuit was one of several successful legal challenges to the 2024 rule. Notably, although the Biden Administration appealed those decisions to the Fifth Circuit, the current DOL recently dropped both appeals. The decision echoes prior judicial skepticism toward aggressive salary threshold increases. In 2017, another Texas federal court invalidated the Obama administration’s proposed overtime rule in Nevada v. U.S. Department of Labor for similar reasons. Immediate Impact on Employers The May 13, 2026 rescission means the DOL’s 2024 salary increases are officially no longer enforceable, and the salary threshold reverts to the prior level of $684 per week. The reinstatement of the 2019 threshold is effective immediately, and no notice or comment period will be available. Employers should remember that exempt status is not determined by salary alone. Rather, whether an employee qualifies as exempt still requires satisfaction of both the salary basis and duties tests. This reversion of the FLSA’s salary threshold does not supersede higher minimum salary thresholds for exempt employees set by individual states. Because of this, employers are urged to monitor state wage and hour laws to ensure that their exempt employees are receiving a salary that   equals or exceeds the higher of the federal or applicable state requirement – particularly for those organizations operating in multiple jurisdictions. For guidance on how this rule affects your business, contact your Polsinelli attorney.

Key Highlights The EEOC has submitted a proposed rule that could eliminate several federal EEO reporting requirements, including the EEO-1 Component 1 Report, but no changes are currently in effect. Employers should continue preparing for 2025 EEO-1 reporting obligations because the proposal is still under review and the EEOC must complete additional regulatory steps before any reporting requirements can be rescinded. Even if federal EEO reporting requirements change, employers may still have state and local workforce reporting obligations, including California’s annual pay and demographic reporting requirements for covered employers. On May 14, 2026, the U.S. Equal Employment Opportunity Commission submitted a proposed rule to the Office of Information and Regulatory Affairs (OIRA) titled “Rescission of EEO-1, EEO-2, EEO-3, EEO-4, EEO-5 and Reporting Requirement Under Title VII, the ADA, GINA and the PWFA.” The OIRA entry identifies the proposal as an economically significant proposed rule currently under regulatory review. Simply put, the EEOC appears to be considering whether to eliminate or substantially reduce several federal equal employment opportunity reporting requirements, including the EEO-1 Component 1 Report. That report currently requires covered private employers with 100 or more employees to submit annual workforce demographic data by job category, race, ethnicity and sex. Current regulations still require covered employers to file the EEO-1 each year and retain a copy of the most recent report. Employers should not assume the 2025 EEO-1 filing is canceled. The proposal must still move through additional administrative steps before it can change existing obligations. OIRA review is an initial step in the regulatory process. If the proposal moves forward, the EEOC would likely need to publish proposed regulatory text, allow for public comment and address related information collection requirements before any rescission could take effect. At this point, the EEOC has not yet issued any instructions or guidance for the 2025 EEO-1. In recent years, this report was due in June. For now, employers should continue preparing as though an EEO-1 filing may be required. Recent EEO-1 reporting periods have generally required employers to use a workforce snapshot from a pay period in October, November or December. Employers should also remember that a change to federal EEO reporting would not necessarily eliminate other workforce reporting obligations. Several states and localities impose their own reporting, pay data or recordkeeping requirements. California, for example, separately requires covered private employers with 100 or more payroll employees and covered private client employers with 100 or more labor contractor employees, to report pay, demographic and other workforce data annually to the California Civil Rights Department. What Employers Should Do Now While the proposal is pending, employers should consider taking the following steps: Continue collecting and validating EEO-1 data. Monitor EEOC, OIRA and Federal Register developments. Avoid deleting or changing demographic data practices without legal review. Confirm whether state or local workforce reporting requirements apply. Preserve existing EEO-1 data consistent with applicable law. This is a significant development, but not yet a rule change. Until the EEOC issues formal guidance or completes the required administrative process, employers should continue preparing for current reporting and recordkeeping obligations. Polsinelli’s Labor and Employment team will continue to monitor developments and provide updates as additional guidance becomes available. Please contact your Polsinelli Labor and Employment attorney with any questions.

The federal contracting landscape for diversity, equity and inclusion (DEI) initiatives is shifting rapidly. On March 26, 2026, President Trump issued Executive Order 14398, directing federal agencies to prohibit “racially discriminatory DEI activities” in federal contracts and across the entire supply chain. To that effect, within 30 days of the EO, federal agencies are directed to incorporate a specific clause in their federal contracts. Read the full update here.

Key Highlights On April 22, 2026, Virginia approved a statewide paid family and medical leave (PFML) program, joining several other states across the nation that have enacted such programs. The new program will be administered by the Virginia Employment Commission (VEC), funded through payroll contributions beginning April 1, 2028, and will begin paying benefits on December 1, 2028. For Virginia employers, the larger story may be that this is not simply federal Family and Medical Leave Act (FMLA) with wage replacement added. Virginia’s PFML program differs from its federal counterpart in who is covered, which relationships and reasons qualify, how benefits are funded, and when job-restoration rights attach. Virginia’s New PFML Program Creates a Separate State Leave Framework The new law establishes a state-administered insurance program through the VEC. Under the statute, the VEC must establish and administer the program by January 1, 2028, begin collecting contributions on April 1, 2028, and begin receiving claims and paying benefits on December 1, 2028. The law also permits employers to apply to satisfy their obligations through an approved private plan if that plan provides benefits equal to or greater than those required by the statute. As enacted, Virginia PFML will provide up to 12 weeks of paid leave in a benefit year for the birth, adoption, or foster placement of a child, the employee’s own serious health condition, care for a family member with a serious health condition, qualifying military family needs, and care for a covered service member. The law also provides up to four weeks of paid leave to seek defined “safety services” for the employee or a family member. Weekly benefits are set at 80% of average weekly wages, subject to a statutory minimum and maximum, and the law expressly allows intermittent or reduced-schedule leave. PFML leave that also qualifies as leave under the FMLA runs concurrently with FMLA leave, so the employee receives only a total of 12 weeks per year for leave qualifying under both laws. The PFML statute allows employers to require that PFML be used concurrently with any “disability or family care leave” the employer provides, but it is unclear whether this would permit the employer to require the employee to use PFML concurrently with PTO or general paid sick leave, as is commonly required under employer leave policies. Virginia Joins Other States in Expanding Its PFML Program Beyond FMLA Because Virginia historically has not imposed paid leave obligations on private employers, the familiar statutory reference point for Virginia employers has been the federal FMLA. Virginia’s new program, however, does not just mirror the federal scheme; instead, it goes well beyond FMLA’s leave entitlements. 1. Virginia PFML Reaches a Broader Pool of Workers than FMLA FMLA coverage applies to private employers with 50 or more employees and only to employees who have worked for the employer for at least 12 months, worked at least 1,250 hours in the prior 12 months, and work at a site with 50 employees within 75 miles. Virginia officials, by contrast, describe the new PFML benefit as being widely available to nearly all workers in the Commonwealth, and the statute itself makes benefits available to “covered individual[s]” which generally means a worker who satisfies Virginia’s unemployment-law monetary eligibility criteria. On the employer side, the statute also borrows from Virginia’s unemployment-law, which generally reaches an employing unit that paid $1,500 or more in wages in a calendar quarter or had at least one individual in employment for part of a day in each of 20 different weeks in the current or preceding year. These unemployment benefit thresholds for employee and employer coverage are extremely minimal and will be met by the vast majority of employees and employers. 2. Virginia’s Covered Relationships and Qualifying Reasons also Exceed Those Under FMLA The new Virginia PFML law also provides more reasons for employees to take leave than federal FMLA. PFML not only covers the FMLA-qualifying reasons, but adds a new category of “safety services” related to domestic violence, harassment, sexual assault, or stalking for which an employee can take extended paid leave. In addition, while FMLA allows employees to take leave to care for only very close relatives (a child, parent, or spouse), PFML expands the leave entitlement to allow extended paid leave for an employee to care for more attenuated relations. 3. Unlike Many Other States Virginia Merges Benefit Eligibility and Job Protection One critical way in which Virginia PFML is broader than both FMLA and other state PFL laws is in its provision of job protection. In most states with similar PFL laws, paid leave and job protection are separated to balance employer and employee interests. An employee might be entitled to paid leave under the broader state program but is only entitled to restoration to their position if they meet FMLA’s requirements for tenure, employer size, etc…, or fit within the requirements of other specific laws like the Americans with Disabilities Act, Pregnant Workers Fairness Act, or state analogues. Virginia PFML, on the other hand, provides job protection and restoration rights for all employees who meet the relatively short 120-day tenure requirement with their current employer before taking leave. Why This Matters Virginia PFML adds more than a new leave right. It also adds a new payroll tax, notice requirements, and administrative system. Although employers have a two (2) year lead time before PFML begins to actively operate, the time will soon come for employers to review their leave policies to ensure that PFML leave is coordinated to work alongside the employer’s other leave requirements, and that all leave policies are in line with the new law’s requirements. Employers can consult their Polsinelli Labor and Employment attorney with any questions.

Key Takeaways: The DOL has proposed a new multi-factor standard addressing vertical and horizontal joint employer status under the FLSA, FMLA and MSAWPA. The proposal could redraw wage-and-hour liability boundaries by expanding when multiple entities share responsibility. The Department of Labor strikes again. To help address circuit splits and compliance challenges on April 22, 2026, the DOL proposed a new rule attempting to establish a more uniform standard to determine whether joint employment exists under the Fair Labor Standards Act (FLSA), Family and Medical Leave Act (FMLA) and Migrant and Seasonal Agricultural Worker Protection Act (MSAWPA). Horizonal versus Vertical Joint Employment Joint employment is when a worker is considered employed by two or more entities such that each may be liable for compliance with the FLSA. Prior administrations have taken markedly different approaches—ranging from broader, worker-friendly interpretations to narrower, control-based frameworks—when determining whether joint employment exists, leaving employers navigating conflicting guidance. The DOL’s current proposal aims to resolve that inconsistency by creating separate tests for “vertical” and “horizontal” joint employment. Vertical joint employment exists when a worker has a direct employment relationship with one employer but is controlled by another. Horizontal joint employment exists when an individual works for two or more related employers that jointly control the work. The DOL’s proposed rule clarifies that horizontal joint employment would exist when separate entities are sufficiently related when it comes to the employment of a specific employee. “Sufficiently related,” for purposes of determining whether horizontal joint employment exists, does not require a formal affiliation but instead turns on whether the entities operate as part of a common business. The DOL will consider factors such as common ownership, overlapping management, shared operations, and coordination over employees in making this determination. In practice, the more the entities function as an integrated enterprise—rather than truly independent businesses—the more likely they are to be deemed sufficiently related and joint employers. Importantly, ordinary business relationships—such as franchising or vendor sharing—without involvement in the employee’s terms and conditions of employment would not, standing alone, establish joint employment. The Proposed Standard The proposed test for determining whether vertical joint employment exists is whether the potential joint employer: (1) hires or fires the employee (2) substantially supervises and controls the employee's schedule or conditions of employment (3) determines the employee's rate and method of pay (4) maintains the worker's employment records If the four factors unanimously point towards one finding or another, there would be a "substantial likelihood" that there is or is not joint employment. If the factors yield different conclusions, they are weighed holistically, and additional relevant factors may be considered. In practice, this signals a return to a control-based—but still flexible—analysis. Notably, the proposal excludes certain factors relevant in the independent contractor analysis—such as opportunity for profit/loss, investment, and special skills—confirming they are not relevant in determining whether joint employment exists. Where the FLSA and FMLA Converge The proposed rule could have a meaningful impact on FMLA coverage, particularly for employers near the 50-employee threshold. An employer is subject to the FMLA if it employs 50 or more employees within a 75-mile radius for at least 20 workweeks in the current or preceding calendar year. If the proposed rule results in a broader or more functional interpretation of joint employment, it could increase the likelihood that: A business is deemed a joint employer alongside a staffing agency, franchisee/franchisor, or subcontractor, and The workers in those relationships are aggregated when determining FMLA coverage. For some employers, this may be the most immediate compliance risk—not liability for wages, but newly triggered leave obligations. What Employers Should Know For employers, one of the most significant implications of the proposal is its potential to redraw liability boundaries. Businesses that have structured operations to minimize direct employment relationships—by outsourcing functions or relying on third-party labor providers—may face renewed scrutiny if they retain meaningful control over working conditions. Even “hands off” influence, if functionally significant, may favor a joint employment finding. In anticipation of the new rule, employers may consider: Reviewing contracts with staffing agencies and subcontractors to clarify independence Auditing the degree of control exercised over non-direct employees Assessing whether existing practices could be construed as indicative of joint employment Tracking state laws on joint employment to determine how different jurisdictional factors may converge Evaluating potential FMLA liability by recalculating employee counts, reviewing contracts and operational control over non-direct employees, and coordinating with staffing agencies on leave responsibilities and compliance protocols. While the DOL’s proposed rule likely won’t take effect until July, the takeaway is clear: if your business touches the work, it may own the risk. As the DOL continues to edge toward uniformity, the most successful organizations will be the ones that treat compliance as part of their business model moving forward. For questions about the proposal and its effects on employers, contact your Polsinelli attorney.

Key Highlights Effective April 18, 2026, New York State now generally prohibits employers from requesting or using consumer credit history for employment purposes, subject to limited statutory exemptions. The statute defines “consumer credit history” broadly enough to reach credit reports, credit scores and certain information obtained directly from an applicant or employee. New York City employers remain subject to the City’s more protective local regime because the state law expressly preserves local laws that afford greater protection. What Changed on April 18, 2026? New York employers face a significant statewide change in recruiting and other employment decision-making practices. Effective April 18, 2026, amendments to New York’s Fair Credit Reporting Act now make it an unlawful discriminatory practice for employers, labor organizations, employment agencies and their agents to request or use the consumer credit history of an applicant or employee for employment purposes, or otherwise discriminate on that basis with respect to hiring, compensation or the terms, conditions or privileges of employment. The statute also changes what may be furnished for employment purposes by requiring employment reports to exclude information bearing on a person’s creditworthiness, credit standing, credit capacity or credit history unless an exemption applies. 1. The law reaches more than hiring. The new restriction is not limited to pre-employment screening. Under the statute, “employment purposes” includes evaluating an individual for employment, promotion, reassignment or retention, and the operative ban also reaches compensation and other terms, conditions and privileges of employment. For employers that have historically used credit information in internal mobility or role-based screening, that broader reach is particularly notable. 2. “Consumer credit history” is defined broadly. The law does not target only traditional credit reports. It also covers credit scores and information obtained directly from the individual about credit accounts, late or missed payments, charged-off debt, collections, credit limits, prior inquiries, bankruptcies, judgments or liens. In practical terms, the definition reaches not only vendor-supplied reports, but also certain questions directed to applicants or employees themselves. 3. The exemptions are narrow and role-specific. The statute contains a limited set of exemptions, including roles where use of credit history is required by state or federal law or by a self-regulatory organization; peace and police officers and certain law-enforcement roles; positions subject to background investigation by a state agency; positions requiring bonding or security clearance; certain non-clerical roles with regular access to trade secrets, intelligence information or national security information; positions with signatory or fiduciary authority over at least $10,000; and positions with regular duties that allow the employee to modify digital security systems designed to prevent unauthorized access to networks or databases. 4. New York City employers still have an added compliance layer. The statewide law expressly preserves local laws that provide greater protection, which leaves New York City employers with an additional layer of compliance. City guidance continues to construe exemptions narrowly, notes that the City law applies when an employer has four or more employees or one or more domestic workers and contemplates notice and five-year recordkeeping when an employer invokes an exemption. That same guidance also describes the $10,000 funds exemption and the digital-security exemption as generally executive-level, rather than blanket exemptions for finance or IT roles. Why This Matters By extending New York City’s existing credit-check restrictions statewide, the NYFCRA expands the issues that can arise in recruiting, background-check administration and role-based exemption analysis. The April 18 effective date places renewed attention on application materials, interview practices, vendor instructions and exemption analyses—particularly in New York City, where the local law continues to add its own notice, recordkeeping and interpretive overlay. This law also joins New York State’s Article 23-A framework and New York City’s Fair Chance Act as another highly granular regulation of the pre-hire and onboarding process. Employers should review their onboarding and recruiting processes to ensure compliance with the Empire State’s increasingly technical hiring requirements and consult their Polsinelli Labor and Employment attorney with any questions.

Key Highlights Menopause protections are emerging at the state level, led by Rhode Island, which became the first state to explicitly prohibit menopause discrimination and require workplace accommodations — highlighting a growing shift in employment law. A significant gap exists in federal law, leaving employees to rely on overlapping protections (sex, age, disability), which creates uncertainty and legal risk for both workers and employers. Employers should prepare proactively, as more states are likely to follow and menopause-related claims are already gaining traction—making it important to consider accommodations and policy updates now. This just in: menopause has entered the legal spotlight. For decades, menopause has existed in a legal gray area, widely experienced but largely invisible in workplace policy. States are now incorporating menopause protections into existing anti-discrimination laws, clarifying workplace law and expectations. In 2025, Rhode Island led the charge by becoming the first state to explicitly cover menopause when it amended its Fair Employment Practices Act to prohibit menopause discrimination and require reasonable accommodations. This approach offers a framework for states looking to fill gaps left by federal law. The Federal Gap Federal anti-discrimination laws — like Title VII, the Americans with Disabilities Act, and the Age Discrimination in Employment Act — do not recognize menopause as a distinct protected category. Instead, employees must rely on overlapping protections — sex, age or disability discrimination — to bring claims. The gray area creates uncertainty for both employees and employers. Rhode Island’s approach cuts through that confusion by declaring menopause its own protected category and treating it as such. By incorporating menopause into an existing pregnancy accommodation framework, the state requires employers to engage in the interactive process and provide reasonable accommodations absent undue hardship. Why Menopause Matters Menopause is not niche — it affects millions of women in the workforce. Common symptoms include hot flashes, fatigue, sleep disruption, headaches, as well as difficulty concentrating, memory lapses and “brain fog.” Managing these physical changes in the workplace is no easy feat. The symptoms of menopause can affect focus, productivity, attendance and comfort — especially in environments with rigid schedules or high cognitive demands. Studies show that menopause often pushes women into early retirement, causing employers to lose valuable contributors, skills, experience, and knowledge prematurely. Put simply: menopause is a workplace issue, not just a personal one. The Expansion Playbook Rhode Island’s law did not reinvent the wheel. Instead, it built onto an existing pregnancy accommodation framework. Folding menopause into an established legal framework may become the dominant model nationwide. It allows legislatures to build upon familiar laws while extending protections to a historically overlooked condition. Momentum Beyond Rhode Island Although Rhode Island is currently the only state with explicit menopause protections, it is unlikely to remain an outlier. The issue is gaining traction in state legislatures, where broader menopause-related initiatives — from insurance coverage to provider training — have been introduced across multiple jurisdictions. For example, New York, California and Virginia are reviewing proposed bills to expand legal protections for people experiencing menopause in the workplace. Historically, the most impactful employment laws have followed a certain trajectory: one state moves first, the rest follow. Menopause protections will likely follow suit. Implications for Employers Employers around the country — listen up! Even if you do not have employees in Rhode Island, this isn’t something to ignore. Courts and agencies are already more receptive to menopause-related claims under existing laws, particularly when symptoms overlap with recognized disabilities or sex-based issues. As state laws begin to diverge, employers operating across multiple jurisdictions may face a growing patchwork of legal obligations. Policies that suffice in one state may fall short in another. Forward-looking employers may consider adopting menopause-related accommodations proactively — such as flexible scheduling, temperature adjustments or modified break policies — rather than waiting for legal mandates. A New Frontier in Workplace Law The explicit expansion of anti-discrimination statutes to cover menopause reflects a broader evolution in employment law: explicitly recognizing under-addressed health conditions. Menopause may represent the next frontier in workplace protections — one that sits at the intersection of sex, age and disability and challenges traditional categories of discrimination law. In the end, this is not a singular issue — it is a workforce reality. People navigating menopause are often at the height of their careers, managing teams and holding institutional knowledge that companies cannot easily replace. State moves to close the gap reflect a growing recognition that when women are supported, organizations succeed. For questions about this evolving legal trend, please contact your Polsinelli attorney.

Key Highlights The Equal Employment Opportunity Commission has held Title VII permits federal agencies to maintain single-sex bathrooms/locker rooms and exclude transgender employees from opposite-sex facilities. While the decision applies only to the federal sector, it provides a roadmap for how the EEOC may analyze bathroom/locker room issues post-Bostock. Six years after the Supreme Court’s 2020 decision in Bostock v. Clayton County reshaped Title VII, the EEOC has addressed an unanswered question from that decision: whether Title VII requires a federal agency to allow a transgender employee to use bathrooms and locker rooms consistent with the employee’s gender identity. Selina S. v. Daniel Driscoll, Secretary, Department of the Army, EEOC Appeal No. 2025003976 (Feb. 26, 2026). Inside the EEOC’s Holding The case involves a civilian employed by the U.S. Army who had used male-designated restrooms and locker rooms without issue. In 2025, the complainant informed management that he identified as a woman and requested access to female-designated facilities. The agency denied the request based on guidance requiring sex-based designation of “intimate spaces.” The EEOC framed the appeal as presenting an issue not “authoritatively addressed” — whether Title VII’s prohibition on discrimination “because of sex” extends to access to sex-designated bathrooms and locker rooms. The analysis relied heavily on Bostock, which held that firing (or refusing to hire) someone “simply for being . . . transgender” is discrimination “because of . . . sex” under Title VII. Bostock, however, left open the question of access to “bathrooms, locker rooms, or anything else of the kind.” Using that framing, the EEOC treated restroom and locker room access as a distinct issue. The EEOC concluded that Title VII permits federal agencies to maintain single-sex bathrooms and similar intimate spaces and to exclude employees from opposite-sex facilities. Exclusion from intimate spaces by itself, the Commission clarified, does not state a plausible Title VII claim. Applying what it characterized as an “equal treatment” approach, the EEOC reasoned that a policy separating bathrooms by biological sex does not constitute unlawful discrimination if applied equally to all employees, regardless of transgender status. According to the majority, men and women are not similarly situated in intimate spaces, and sex-based separation in those contexts reflects privacy interests and biological distinctions rather than discriminatory animus. Given the decision arises in the federal administrative context, judicial review is possible. Federal courts are not required to adopt the EEOC’s interpretation. We anticipate continued litigation in this area is likely, given Bostock’s unsettled scope. Why This Matters While the decision does not apply to private-sector employers, it provides insight into how the EEOC may approach facility-access claims. The decision distinguishes between adverse employment actions based on transgender status — squarely addressed in Bostock— and access to sex-designated intimate spaces, which Bostock did not resolve. Additionally, the ruling does not provide a safe harbor for employers’ decisions concerning employees’ access to intimate spaces. Federal courts remain divided on Bostock’s reach, and many state and local laws expressly require that employees be permitted to access facilities consistent with their gender identity. Employers operating across jurisdictions might consider evaluating whether a uniform nationwide policy creates compliance risk in particular states or municipalities. Workplace safety guidance and other regulatory considerations may also intersect with facility-access policies. For federal contractors and subcontractors, the practical impact may be more immediate. Contractors often operate on federal property and alongside federal employees. Contractors operating on federal property may face operational and employee-relations challenges if agency rules governing facility access differ from internal policies. Contractors might consider reviewing site-specific access protocols, assessing alignment between employee handbooks and federal worksite rules and reviewing supervisor training on addressing related employee concerns. Looking Ahead The contours of Title VII’s application to bathroom and locker room access remain unsettled. Continued litigation is likely, and further judicial clarification may follow. Polsinelli attorneys will continue to monitor developments in light of evolving federal, state and local requirements. Employers with questions about the EEOC’s decision or compliance considerations should consult their Polsinelli Labor and Employment attorney.

Key Highlights Washington to Ban Most Noncompetes: ESHB 1155 renders nearly all noncompetition agreements void and unenforceable effective June 30, 2027. The law provides an expanded definition that targets both traditional noncompetes and contractual workarounds, and it will apply to all covered agreements, not just those executed after the effective date. Narrow Path for Permissible Restrictions: Employers may still use limited nonsolicitation, confidentiality and trade secret protections, but these must be carefully tailored to comply with the law’s stricter standards. Immediate Action Required to Mitigate Risk: Employers should begin auditing agreements, revising templates and preparing required notices now, as the law introduces new compliance obligations and significant litigation exposure for violations. Governor Ferguson signed ESHB 1155 on March 23, banning the use of noncompete agreements between businesses and workers. With this new law, Washington State joins the growing list of states prohibiting or sharply limiting the use of noncompetition agreements.    The Ban The law makes all noncompetition agreements void and unenforceable once the law takes effect, which is expected to be June 30, 2027, regardless of when they were signed. The bill also broadens what qualifies as a noncompetition covenant. In addition to traditional noncompetes, the definition includes certain agreements between performers and venues or intermediaries that restrict lawful performance, as well as provisions requiring a worker to return, repay or forfeit compensation or benefits because the worker engages in a lawful business or profession. In practical terms, this means courts will closely review compensation and benefits arrangements for provisions that may function as a penalty on post-employment competition. For example, clawback terms, forfeiture-for-competition provisions in bonus or equity plans, retention payments that must be repaid only if the worker joins or starts a competing business, and similar disincentives may now be treated as noncompetition covenants if they are triggered by the worker’s decision to engage in lawful competitive work. Permissible Activity Some restrictions remain permissible: Nonsolicitation clauses are permitted but must be “narrowly construed.” Such clauses may bar solicitation of coworkers or customers the worker developed a relationship with for up to 18 months. However, nonsolicitation clauses cannot restrict a former employee accepting or doing business with customers. The sale of business carveout from the previous law remains intact. Specifically, a noncompetition covenant does not include one “entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest,” but only if the signer is dealing with an ownership interest representing 1% or more of the business. Confidentiality, trade secret, invention‑assignment provisions, certain sale‑of‑business covenants and limited educational‑expense repayment clauses remain valid. The Notice Requirement For employers that currently use noncompetes, notice is not just a formality — it’s a central compliance obligation. By October 1, 2027, employers must make reasonable efforts to provide written notice to all current and former employees and independent contractors whose noncompetition covenants would otherwise still be in effect, advising them that those covenants are void and unenforceable. The bill does not define “reasonable efforts” to notify employees. To avoid the risks associated with that uncertainty, employers might consider documenting efforts to locate and contact workers, and immediately start identifying contracts that might be subject to this requirement. What Employers Using Noncompetes Can Do Now Review of Existing Agreements: Review employment agreements, contractor forms, separation agreements, equity documents, bonus plans, clawback provisions and other compensation-related terms for provisions that may violate the new law. Review nonsolicitation clauses carefully to ensure they do not run afoul of new restrictions to create an unlawful noncompetition restriction. Assess any repayment or forfeiture provisions that could penalize a worker for engaging in a lawful occupation. Evaluate Enforcement Plans:Evaluate offboarding documents and talking points for language that could be inconsistent with the new statute. Develop training for HR, recruiting and in-house legal teams based on the law and any revisions to the company’s documents. Develop a Notice Plan:Identify affected current and former workers, confirm contact information and document reasonable efforts to deliver written notice. Enforcement and Litigation Exposure The bill authorizes enforcement by the attorney general and private suits by aggrieved persons. If a court or arbitrator finds a violation, the violator must pay the greater of actual damages or a $5,000 statutory penalty, plus attorneys’ fees, expenses and costs. Taken together, these remedies significantly increase litigation risk, particularly for employers using standardized agreements across large workforces or a contractor population. Importantly, the law’s new definitions, rules, remedies and displacement provision, which makes this chapter the controlling framework over conflicting state laws governing worker competition, apply to cases filed on or after June 30, 2027, even if the underlying conduct or agreement predates that date. Proceedings already pending before then continue under the prior version of the statute. Conclusion Employers can begin preparing for the effective date of the new legislation now by gathering agreements, reviewing templates and building a notice process ahead of the effective date. For guidance on noncompetes, nonsolicitation clauses or other restrictive covenant issues, contact your Polsinelli attorney.

Key Takeaways The New Jersey Supreme Court ruled that employers cannot evade state wage obligations based on a worker’s undocumented status in violation of federal immigration law. Employers who knowingly hire or retain undocumented workers must still comply with state wage obligations, regardless of conflicting federal law or alternative compensation agreements. The decision increases legal exposure for employers violating state wage laws based on immigration status. In Lopez v. Marimac LLC, the New Jersey Supreme Court closed the door on a long-debated defense in wage disputes: an employee’s undocumented status. On March 19, 2026, the Court clarified the relationship between immigration status and state wage-and-hour compliance, holding that employers cannot use undocumented status to avoid paying wages. The case arises from an undocumented worker hired in 2015 by the owner of a realty company. After learning of the worker’s immigration status, the employer stopped paying wages and instead offered rent-free housing, claiming that paying formal wages would be “against the law.” Tension Between Federal and State Law The IRCA prohibits employers from hiring or continuing to employ individuals not authorized to work in the United States. These prohibitions apply even after an employer becomes aware of a worker’s unauthorized status. Notably, the statute does not expressly prohibit paying wages for work already performed. The New Jersey Supreme Court’s ruling affirms an impactful proposition: immigration status does not excuse noncompliance with state wage laws. The Court focused on the plain language of the New Jersey Wage Payment Law (WPL) and Wage and Hour Law (WHL), neither of which expressly excludes undocumented workers from their purview. Instead, employers who violate the IRCA must still pay workers for work performed, regardless of immigration status or alternative barter agreements. The Court reasoned that finding otherwise—that federal law preempts state wage and hour protections—would “incentivize employers to hire undocumented immigrants and pay reduced wages.” Enabling this practice would undermine the IRCA’s core objective of preventing the hiring of undocumented immigrants. Expanding Worker Protections in New Jersey The decision aligns with New Jersey’s broader policy trend toward strengthening protections for immigrant workers. For example, New Jersey continues to actively enforce wage-and-hour laws through initiatives like its “Workplace Accountability in Labor List,” which publicly identifies employers with outstanding wage liabilities. Against this backdrop, the Court’s ruling aligns with a consistent policy direction: ensuring that all workers—regardless of status—are covered by baseline employment protections. Implications for Employers The decision underscores the risks of employing undocumented workers while failing to comply with state wage laws. Employers should note several practical implications of the decision, including: Increased Litigation Risk: Undocumented workers may be more likely to bring wage claims using the rationale of Lopez not only in New Jersey, but also in other states. Elimination of a Common Defense Strategy: Arguments that wage obligations do not apply due to a worker’s unauthorized status are unlikely to succeed in New Jersey courts. Compliance is Status-Neutral: Pay requirements, overtime calculations, and recordkeeping requirements apply to all employees, regardless of work authorization status in New Jersey. Heightened Enforcement Exposure: Violations involving undocumented workers may attract additional scrutiny from regulators. Next Steps for Employers Given this recent ruling, it is recommended that employers operating in New Jersey: Conduct wage-and-hour audits to ensure compliance across all employee categories Review policies and training to eliminate any status-based pay disparities Strengthen documentation and payroll practices Consult counsel when addressing workforce compliance issues involving immigration considerations. For questions and assistance regarding this decision and its impact on employers, please contact your Polsinelli attorney. 

Key Takeaways The Illinois Supreme Court Expands the Boundaries of Compensable Hours: The Illinois Supreme Court held that the Illinois Minimum Wage Law (IMWL) does not automatically incorporate federal Portal-to-Portal Act limitations. Rather, the statute requires compensation for off-the-clock work activities. Impact on Compensability: Employer-mandated pre- and post-shift activities may be compensable under Illinois law, even if not compensable under federal law. Effect on Employers: The decision increases potential wage-and-hour exposure for Illinois employers, particularly for off-the-clock activities such as screenings and security checks. Employers should review timekeeping and pay practices to ensure compliance with Illinois-specific requirements. To exclude or not to exclude off-the-clock activities, that is now a pressing question for Illinois employers. On March 19, 2026, the Illinois Supreme Court issued a significant decision clarifying the scope of compensable work under the Illinois Minimum Wage Law (IMWL), with potentially far-reaching implications for employers operating in the state. The ruling arises from litigation involving Amazon warehouse employees who sought compensation for time spent undergoing mandatory pre-shift COVID-19 screenings. The central legal question—certified to the Court by the Seventh Circuit—was whether Illinois law incorporates the federal Portal-to-Portal Act (PPA), which excludes certain “preliminary” and “postliminary” activities from compensable time. A Departure from Federal Limitations Under federal law, the PPA does not require employers to compensate pre- or post-work activities, unless those activities are “integral and indispensable” to the employee’s principal duties. Courts have historically applied this framework to exclude time spent in security screenings or similar activities. The Illinois Supreme Court, however, has now made clear that the IMWL does not incorporate the Portal-to-Portal Act’s categorical exclusions and instead requires an independent analysis under Illinois law. The Court focused on the plain language of the IMWL and the Illinois Department of Labor’s “hours worked” definition, noting that—unlike federal law—neither explicitly excludes “preliminary” or “postliminary” activities. Absent clear legislative intent, the Court declined to read those limitations into the statute. During oral argument, Amazon warned that an expansive interpretation could create liability for routine workplace activities “ranging from walking from their cars, to waiting for an elevator,” to undergoing security procedures. While the Court did not adopt that sweeping formulation outright, the decision leaves open the possibility that Illinois courts will take a more employee-favorable approach than federal law. Notably, the Court did not determine whether the specific activities at issue were compensable, leaving that determination to the Seventh Circuit on remand. A Broader Trend in Illinois Wage Law The ruling is consistent with a recent trend in Illinois Supreme Court jurisprudence interpreting the IMWL expansively. For example, in Mercado v. S&C Electric Co., the Court held that non-discretionary bonuses must be included in the “regular rate of pay” for overtime calculations, rejecting narrower interpretations of compensation. Together, these decisions signal a clear judicial preference for applying the plain language of the IMWL without importing federal limitations that could narrow employee protections. Implications for Employers This decision materially increases potential wage-and-hour exposure for Illinois employers. If broadly applied, the ruling could extend compensability to a wide range of pre- and post-shift activities, including: Health and safety screenings Security checks Required on-site waiting time Other employer-mandated activities performed off the clock. What Should Employers Do Now Employers with Illinois operations should take proactive steps in light of this development: Review pay practices: Evaluate whether employees are required to perform activities before clock-in or after clock-out. Assess compensability: Consider whether such activities could now be deemed compensable under Illinois law, even if excluded under federal standards. Update policies and procedures: Ensure timekeeping practices capture all potentially compensable work. Monitor litigation risk: The decision may spur class and collective actions challenging longstanding pay practices, particularly in industries that rely on pre-shift screening or security protocols. The Illinois Supreme Court’s ruling underscores that compliance with federal wage-and-hour law may no longer be sufficient in Illinois. Because the case will return to the Seventh Circuit for a final determination on off-the-clock compensability, changes to the Illinois Supreme Court’s decision may be on the horizon. In the meantime, employers should anticipate increased scrutiny of off-the-clock work and adjust their practices accordingly to mitigate risk. For questions and assistance regarding this decision and its impact on employers, please contact your Polsinelli attorney. 

Key Highlights DOL Clarifies Bonus Treatment Under the FLSA: In Opinion Letter FLSA2026-2 (Jan. 5, 2026), the Department of Labor confirmed that certain performance-based bonuses must be included in the “regular rate of pay” when calculating overtime. Advance Promises Eliminate Discretion: Bonuses are not considered “discretionary” if the employer communicates the criteria and amounts in advance. Once promised, the employer has “abandoned” discretion under the FLSA. Impact on Overtime Calculations: Because the safety and performance bonuses at issue were non-discretionary, they must be included in the regular rate for any workweek in which they are earned—requiring employers to review bonus programs to ensure proper overtime compliance. On January 5, 2026, the U.S. Department of Labor’s  Wage and Hour Division (the “DOL”) issued Opinion Letter FLSA2026-2 addressing the question of whether an employer must include certain bonus payments in the “regular rate of pay” when calculating an employee’s overtime pay under the Fair Labor Standards Act (“FLSA”). Background: The Employer’s Safety and Performance Bonus Plan The DOL’s letter responds to an inquiry from an employee who worked in the waste management industry inquiring whether certain performance-based bonuses were considered “discretionary bonuses” that could be excluded from the “regular rate” for purposes of calculating overtime for   hourly, non-exempt employee drivers of the employer. Specifically, the employer provided certain performance-based bonuses pursuant to a “Safety, Job Duties, and Performance” bonus plan designed to reward an employee’s punctuality, attendance, consistency in completing daily safety tasks, driving safety, compliance with traffic laws, proper attire, and performance efficiency. The amounts of the bonus, as well as the criteria to earn such bonuses, were communicated to the employees as part of a bonus plan prior to any employee meeting the performance requirements. What Qualifies as a “Discretionary” Bonus Under the FLSA? The DOL concluded that the bonus payments were not discretionary. In its letter, the DOL explained that, to be considered an excludable discretionary bonus under the FLSA, the payment must satisfy three conditions: (1) the fact and amount of the payment must be determined at the sole discretion of the employer; (2) the employer’s determination must occur at or near the end of the period when the employee’s work was performed; and (3) the payment must not be made pursuant to any prior contract, agreement, or promise that causes the employee to expect such payments regularly. 29 U.S.C. § 207(e)(3). The DOL reasoned that while the employer technically had initial discretion in deciding whether it would offer the bonus program, and on what terms, it had communicated the criteria for receiving the bonus to its employees well in advance of their performing work. As a result, the fact and amount of the bonus payments were not made at the “sole discretion of the employer at or near the end of the period” in which the work was performed. This is consistent with the FLSA’s regulations, which provide: “If the employer promises in advance to pay a bonus, he has abandoned his discretion with regard to it.” 29 C.F.R. § 778.211(b). DOL’s Conclusion: Bonuses Must Be Included in the Regular Rate Because the bonuses at issue were not discretionary, the DOL concluded that the employer must include the bonus payments in the regular rate of pay in any workweek for which they are earned when calculating overtime for the drivers. Employer Takeaways and Compliance Considerations Employers providing performance-related bonuses should keep the three factors outlined by the DOL in mind and should review their policies and practices to ensure all such bonuses are properly classified as either discretionary or non-discretionary so that the regular rate is properly calculated when paying overtime. For questions and assistance regarding the inclusion of bonus payments or other issues involving the FLSA or wage-and-hour laws, please contact your Polsinelli attorney.

Key Highlights PAGA reforms elevate the importance of proactive compliance: The 2024 amendments reallocate penalties, expand cure opportunities, and give courts more discretion to reduce penalties for good-faith errors—making prompt remediation and well-documented compliance efforts critical in 2026. Wage-and-hour fundamentals continue to drive exposure: Daily overtime rules, regular rate calculations, evolving minimum wage requirements and strict meal and rest period obligations remain the primary sources of liability despite PAGA changes. Operational gaps can create outsized risk: Payroll misconfigurations, off-the-clock work, missed break premiums and delayed final pay can quickly compound across employees and pay periods, leading to significant penalties and litigation risk. California’s wage-and-hour framework is one of the nation’s most complex and vigorously enforced. In 2024, the California legislature enacted significant reforms to the Private Attorneys General Act (PAGA) affecting civil penalties allocations, employers’ ability to cure certain violations and PAGA case management. Those reforms took effect in 2025 and continue to influence statewide risk exposure in 2026. The PAGA Context: Reforms That Matter in 2026 PAGA deputizes employees to pursue civil penalties on behalf of the State of California and other employees for Labor Code violations. Historically, employers faced large PAGA penalties because: PAGA actions do not require class certification; Penalties could accumulate per employee, per pay period; and Procedural requirements and enforcement timing often created settlement pressure. The 2024 reforms recalibrated several parts of this framework as they: Reallocated civil penalties so that 65% now goes to California’s Labor and Workforce Development Agency and 35% to aggrieved employees (subject to certain adjustments); Expanded cure opportunities to give employers the chance to fix certain violations within defined windows and limit penalty exposure; and Adjusted penalty structures to give courts clearer guidance to reduce penalties for isolated and good-faith errors while preserving high penalties for persistent or bad-faith violations. The PAGA reforms might seem procedural. But in practice, they highlight how documented compliance efforts, rapid remediation and coordinated cross-functional responses to notices carry strategic importance for California employers. Wage-and-Hour Fundamentals That Still Drive Risk Even following the PAGA reform, the underlying wage-and-hour requirements of the California Labor Code remain central to most claims. (1) Overtime Pay California’s overtime structure is distinctive: 1.5× the regular rate for hours over 8 in a day or 40 in a week; and 2× the regular rate for hours over 12 in a day Employers with multistate payroll systems often find that other states’ “weekly-only” overtime rules do not meet California’s daily requirements. Misconfigured systems can systematically underpay overtime, and small errors compound quickly across a workforce. Because overtime is based on the regular rate and not necessarily the employee’s base hourly rate, items like nondiscretionary bonuses and differentials can change the overtime calculation—another common source of underpayment when payroll rules are not configured to California’s requirements. (2) Minimum Wage California’s statewide minimum wage is $16.90/hour in 2026, with many cities and counties requiring higher rates. Industry-specific minimum wages, like in fast food and health care, may also apply. Minimum wage exposure often stems from: Off-the-clock work; Unpaid pre- or post-shift tasks; Misapplied meal or rest period premiums; and Pay practices that inadvertently reduce effective hourly rates. Minimum wage violations also interact with exempt status thresholds, which are tied to the state minimum wage. (3) Meal and Rest Periods California requires a: 30-minute off-duty meal break for shifts over five hours; Second 30-minute meal break for shifts over 10 hours (with limited waiver options); and Paid 10-minute rest breaks for every four hours worked. Missed meal or rest breaks trigger premium wages—one additional hour of pay per violation. Additionally, meal and rest period premiums count as wages, so they must appear correctly on wage statements and be paid in the next regular payroll cycle. (4) Off-the-Clock Work Employers must compensate for all time an employee works. Common “off-the-clock” risks include: Pre-shift setup or security checks; Donning/doffing time; After-shift duties; and Remote work outside scheduled hours. Even small increments of unpaid time can push employees into unpaid overtime. (5) Final Pay and Waiting Time Penalties Final pay must be issued immediately upon termination and within three days of voluntary resignation or immediately with proper notice. Delays—even for legitimate administrative reasons—can lead to waiting time penalties that accrue daily for up to 30 days. Why This Matters California’s recent PAGA reforms do not reduce employers’ wage-and-hour obligations; they reinforce the importance of getting compliance right. While the amendments create new cure and penalty-management mechanisms, the underlying requirements governing overtime, minimum wage, meal and rest periods and final pay remain unchanged and continue to drive litigation risk. Employers should reassess payroll systems, break practices, classification decisions and final pay procedures. For more information about the PAGA reforms or California wage-and-hour compliance, contact your Polsinelli Labor and Employment attorney.

Key Takeaways:  DOL Moves to Reinstate Business-Friendly Independent Contractor Standard: The Department of Labor has proposed rescinding the 2024 independent contractor rule and returning to a more flexible “economic reality” test that emphasizes two core factors — control and opportunity for profit or loss — potentially narrowing federal misclassification exposure under the FLSA. NLRB Restores 2020 Joint Employer Rule: The NLRB has formally reinstated the Trump-era standard requiring “substantial direct and immediate control” for joint employer status, limiting liability based solely on indirect or reserved control and reducing bargaining and unfair labor practice exposure for many businesses. Despite the clocks moving forward this week, federal employer classification standards are turning back. The Department of Labor (DOL) and National Labor Relations Board (NLRB) have recently moved to restore Trump-era employment standards that reshape worker classification for businesses across industries. These developments mark a significant shift in federal labor policy with implications for employers navigating classification, franchising, staffing and gig-economy models. DOL Proposes Rescission of 2024 Independent Contractor Rule After abandoning the Biden administration’s 2024 independent contractor test, the DOL announced a proposed rule on Feb. 26, 2026 to replace its current enforcement scheme under the Fair Labor Standards Act (FLSA), which applied a six-factor “totality of the circumstances” economic realities analysis without assigning weight to any particular factor. Under the DOL’s proposal, the independent contractor standard will again be tested by the “economic reality,” focusing on whether an individual is dependent on an employer or in business for themselves. This signals a return to a more flexible, business-friendly analysis. DOL Wage and Hour Division Administrator Andrew Rogers stated: “Generally, if a worker is economically dependent on an employer for work, he or she is an employee. Generally, if a worker is in business for him or herself and isn't dependent on an employer for work, the worker is an independent contractor.” While the 2024 rule weighed six factors equally, the DOL’s proposal will apply a list of five non-exhaustive factors while elevating two to “core factors”: the nature and degree of control; and the worker’s opportunity for profit and loss. The others become less probative “guideposts”: skill required; permanence of the relationship; and integration into the employer’s production process. The intent is to look at the “actual practice” of the parties rather than what may be contractually or theoretically possible. In emphasizing control and opportunity for profit/loss, the DOL appears to be narrowing employers’ misclassification exposure under the FLSA, particularly in industries where workers exercise meaningful entrepreneurial discretion. Although this shift aligns more closely with Supreme Court and federal appellate precedent, employers should not assume that federal enforcement risk will disappear. Private plaintiffs’ attorneys are likely to continue pursuing collective and class actions, and state-law classification standards remain unaffected. Employers should review their current classification practices and prepare to update policies and training. NLRB Reinstates Trump-Era 2020 Joint Employer Standard The NLRB also formally reinstated the 2020 joint employer rule on Feb. 26 after a federal court vacated the Biden-era’s broader definition. Under the rule, joint employer status requires “substantial direct and immediate control” over one or more essential terms and conditions of employment such that it “meaningfully affects matters relating to the employment relationship.” Further, “substantial direct and immediate control” must have a “regular or continuous consequential effect” on employment terms, not control exercised only on a “sporadic, isolated, or de minimis basis.” Reserved or indirect control alone is generally insufficient. Reinstating the 2020 rule is expected to have an outsized impact on franchisors, staffing companies, private equity-backed platforms and businesses operating through layered contracting relationships. By requiring exercised or direct control, the rule will likely meaningfully limit federal bargaining obligations and unfair labor practice exposure tied to another entity’s workforce. Still, contractual language and day-to-day operational practices must align to avoid inadvertently triggering joint employer status. Employers should review current workforce relationships to assess potential obligations for bargaining and unfair labor practice exposure. Companies with pending NLRB matters or organizing activity should evaluate how the reinstated standard may affect strategy, particularly where joint employer allegations were previously asserted. Why This Matters Together, these developments signify the Trump administration’s employer-friendly approach to rulemaking and reflect a narrower federal interpretation of independent contractor and joint employer standards. While both rules may face continued legal scrutiny, employers should use this moment to proactively review independent contractor models, audit franchise and staffing arrangements, align operations with contractual intent and evaluate classification risks under relevant state standards. Polsinelli will continue to report on any DOL and NLRB updates related to these standards. Please contact your Polsinelli attorney for more information.

With a wave of rapid-fire executive orders and the expanding use of artificial intelligence in agency enforcement, 2026 is already shaping up to be a pivotal year in Washington. But beyond the headlines, what do these developments really mean for businesses? In the latest episode of the D.C. Download podcast, Labor & Employment Shareholder Will Vail joins for a timely discussion on what comes next. From implementation challenges and emerging litigation trends to shifting appropriations dynamics, the conversation explores how policy decisions are translating into regulatory action. The episode also offers practical, forward-looking strategies for navigating an increasingly complex and evolving regulatory landscape. Listen to the latest episode here.

Key Highlights New York City’s Earned Safe and Sick Time Act (ESSTA) adds 32 hours of frontloaded unpaid safe/sick time to its existing paid safe/sick time requirements for employers. The ESSTA also expands the permissible uses for both types of leave under the Act to include scenarios tied to caregiving, housing or subsistence proceedings, public disasters and workplace violence. Employers, however, will no longer be required to grant a set number of temporary schedule changes; employees, instead, will enjoy a protected right to request such changes. What Is Changing on February 22, 2026? New York City employers should prepare for significant changes to the City’s ESSTA taking effect February 22, 2026—joining changes to New York state laws affecting disparate impact liability and the use of “stay-or-pay” contracts. The amended ESSTA includes a new bank of 32 hours of unpaid safe/sick time, expanded permissible uses of safe/sick time and a scaling back of obligations under the City’s Temporary Schedule Change Act (TSCA). 1. Employers must provide 32 hours of unpaid safe/sick time in addition to paid ESSTA leave. The ESSTA will require employers to provide employees, upon hire and on the first day of each calendar year, a minimum of 32 hours of unpaid safe/sick time that is immediately available for use. Employers will not, however, be required to carry over unused hours from this unpaid bank to the next calendar year. The Act further contemplates that when an employee needs time off for an ESSTA-covered purpose, the employer generally must provide paid safe/sick time first (if available), unless ESSTA paid time is unavailable or the employee specifically requests to use other leave (e.g., other PTO pursuant to an employer’s vacation policy). One potential issue for employers lies in the Act’s text. It ties the unpaid bank to “upon hire” and “the first day of each calendar year.” With a February 22, 2026, effective date, it is not clear from the statute whether employers must make the unpaid bank available to current employees as of the effective date. Given the short time before the effective date, employers likely will have to make a decision on this point before any additional guidance from the City’s Department of Consumer and Worker Protection becomes available. 2. Employees may now use paid and unpaid safe/sick time for new “covered uses.” ESSTA continues to allow leave for traditional illness/injury, preventive care and care of family members but now expands certain categories and adds new ones, including: Sick Time Additions Leave related to business closure or child school/childcare closure may now include closures tied to a public disaster—not just a public health emergency. Instances in which a public official directs an employee to remain indoors or avoid travel during a public disaster that prevents an individual from reporting for work. Safe Time Additions Circumstances where the employee or a family member is the victim of workplace violence in addition to the existing domestic violence/sexual offense/stalking/human trafficking categories. Certain instances of caregiving for minor children or other care recipients. Legal proceedings or hearings related to subsistence benefits or housing and other related steps necessary to apply for, maintain, or restore benefits or shelter. These expansions overlap with what NYC historically treated as “personal events” under the TSCA’s framework but now more expressly integrates the framework into the ESSTA. 3. The TSCA moves from “must grant” to “right to request” when it comes to temporary schedule requests. Following its effective date, the amendment softens the temporary schedule change regime in the City. Employees remain protected from retaliation for requesting a temporary schedule change, but the law provides that an employer may grant or deny the request, must respond as soon as practicable and may propose an alternative change, which the employee is not required to accept. Employers should keep in mind that independent obligations under federal, state and local accommodation laws remain unchanged, so some schedule adjustments may still be required as reasonable accommodations even where the TSCA request itself is discretionary. Why This Matters These amendments significantly expand the scope and administration of protected leave in New York City. By adding a new unpaid ESSTA leave bank, broadening the reasons that trigger protected absences, and shifting temporary schedule changes to a right-to-request framework, the City increases the risk of missteps in policy drafting, payroll administration and day-to-day management of leave requests. Employers should take time now to evaluate how these changes affect their existing leave, scheduling and reporting practices ahead of the February 22, 2026, effective date. Employers with questions about the amended ESSTA, or who would like assistance assessing or updating their policies and practices in advance of the effective date, should contact their Polsinelli Labor and Employment attorney.

Over two years ago, the Northern District of California issued an order requiring the OFCCP to disclose EEO-1 Type 2 reports to the Center for Investigative Reporting (“CIR”) over the objections of thousands of employers, as previously reported. In the interim, OFCCP did not release the reports for those employers who had objected as they appealed the District Court’s decision to the Ninth Circuit. In 2025, the Ninth Circuit affirmed the District Court’s decision that the EEO-1 reports did not contain “commercial” information that would be protected from disclosure pursuant to an exemption under the Freedom of Information Act (“FOIA”). The case remains pending in the District Court with other issues to be resolved. However, the Ninth Circuit’s decision became final after the OFCCP chose not to seek rehearing of the issue – and the parties filed a stipulated proposal with the District Court regarding the end of the stay of the release of the reports. The District Court granted the stipulation on February 9, 2026, which will allow for the release of the reports from 2016-2020. The District Court has now ordered the following by February 11, 2026: OFCCP shall release the reports of five “bellwether” objecting contractors which were considered in making the determination of whether the reports contained “commercial information.” OFCCP shall provide notice to the additional 4,500+ objecting contractors that their reports will be released on February 25, 2026. Contact your Polsinelli attorney for further guidance regarding the release of the reports, the potential effect of the release on your organization, and other government contractor matters.

The Federal Trade Commission (FTC) has reaffirmed that it will pursue noncompete enforcement through individual cases rather than sweeping rulemaking. In a recent public workshop featuring each of the sitting commissioners and panels of economists and current and former agency attorneys, the FTC stopped short of signaling that it will pursue a new national rule to govern all noncompetition agreements. Instead, the FTC emphasized it will continue to pursue enforcement on a case-by-case basis,1  with a focus on agreements that are overly broad in scope or duration and not narrowly tailored to protect legitimate business purposes. Key Takeaways The FTC indicated it is not pursuing a national rule to ban noncompetition agreements but will continue bringing targeted enforcement actions against agreements it deems overly broad or unjustified. The agency emphasized it views certain noncompetition agreements, particularly those involving lower-wage or non-specialized roles, as anticompetitive and legally suspect, especially when they lack a clear business justification. Employers should review existing noncompete agreements to ensure they are narrowly tailored, reasonable in scope and duration and grounded in a legitimate business interest. Read the full update here.

Key Highlights The U.S. Department of Justice (DOJ) filed a lawsuit against the State of Minnesota challenging its affirmative action hiring program. It alleges that Minnesota’s requirement to consider race, sex and other protected characteristics in public employment decisions violates Title VII of the Civil Rights Act of 1964. The case is poised to test the limits of affirmative action in employment and could become a bellwether for similar policies nationwide and across public and private employers. DOJ Targets Minnesota’s Use of Race and Sex in Public Hiring Minnesota law mandates that state agencies take proactive steps to recruit and hire individuals from historically underrepresented groups, aiming to address workforce disparities. In a complaint filed on Jan.14, 2026, the DOJ asserts that this practice unlawfully favors certain applicants based on protected characteristics. Federal lawyers argue that the mandate amounts to intentional discrimination in violation of Title VII’s ban on making employment decisions because of race, color, religion, sex or national origin. The lawsuit acknowledges past U.S. Supreme Court decisions, such as United Steelworkers v. Weber and Johnson v. Transportation Agency, that permitted limited affirmative action plans to remedy persistent inequality. The DOJ, however, contends that those decades-old precedents are outdated and conflict with both Title VII’s text and the Supreme Court’s 2023 decision ending race-conscious college admissions. By certifying the Minnesota case as one of “general public importance,” the DOJ also seeks a special three-judge panel to hear the matter pursuant to 42 U.S.C. § 2000e-6(b), which would fast-track any appeal directly to the Supreme Court. Broader Implications for Employers and State Diversity Initiatives The Department’s challenge signals increased scrutiny of government-mandated diversity, equity and inclusion initiatives. Many employers have already grown more cautious with voluntary diversity programs following Executive Orders issued in 2025, but they were left with some uncertainty on conflicting obligations between federal and state laws. A ruling against Minnesota could further imperil similar state or local requirements for affirmative action in hiring or contracting. If the Supreme Court ultimately curtails or eliminates affirmative action in the employment context, public-sector workforces and contractor practices nationwide may need to adjust accordingly. Polsinelli Labor and Employment attorneys are closely monitoring this case and will advise clients as appropriate as developments unfold.

Key Highlights Brand ambassadors and influencers can present growing misclassification exposure. Luxury, retail and hospitality brands increasingly rely on short-term, brand-facing talent and when these workers are closely integrated into marketing, customer engagement and brand presentation, they can trigger the same wage-and-hour risks as traditional employees. California’s ABC test presents a high bar for independent contractor models. Prong B, in particular, creates challenges when brand ambassadors, stylists and pop-up personnel perform work tied to core brand functions such as customer experience and brand presentation. Control and brand standards drive risk across jurisdictions. Even outside ABC-test states, factors such as training, scripted interactions, fixed schedules, exclusivity or content approval for influencers can undermine independent-contractor classification, regardless of engagement length. Luxury brands increasingly rely on brand ambassadors, stylists, influencers and pop-up personnel to deliver curated customer experiences and reinforce brand identity. These engagements are often short-term or campaign-based and are frequently classified as independent contractor relationships. As worker-classification standards continue to tighten nationwide, however, that model carries growing legal risk. For luxury, retail and hospitality brands, misclassification claims are no longer confined to traditional retail staffing. Brand-facing marketing talent — often viewed as flexible and external — can present the same exposure as in-store employees when classification rules are not carefully applied. Why Classification Has Become a Pressure Point Misclassification can expose brands to significant liability, including unpaid minimum wages and overtime, missed meal and rest periods, payroll tax exposure, statutory penalties and representative or class actions. These risks are amplified in luxury and hospitality settings, where brand standards, customer experience and messaging consistency are central to the business. Although many brand ambassadors view themselves as independent creatives, classification turns on legal standards — not job titles or worker preferences. California’s ABC Test: A High Bar for Luxury Brands California remains the most challenging jurisdiction for contractor models. Under California Labor Code § 2775, a worker is presumed to be an employee unless the hiring entity establishes all three prongs of the ABC test: The worker is free from the control and direction of the hiring entity in performing the work, both under the contract and in practice; The worker performs work outside the usual course of the hiring entity’s business; and The worker is customarily engaged in an independently established trade or business of the same nature as the work performed. Failure to satisfy any prong results in employee status. For luxury brands, prong B often presents the greatest challenge. Brand ambassadors, stylists and pop-up representatives frequently perform work that goes to the core of the brand’s business: marketing, customer engagement and brand presentation. When the brand experience itself is the product, it becomes challenging to argue that these services fall “outside the usual course” of business. Control and Brand Standards Still Matter Elsewhere Outside California, some brands assume classification risk is lower. That assumption can be misleading. For example: New York does not apply the ABC test for wage-and-hour purposes. Instead, courts apply a common-law “control” test that examines factors such as supervision, scheduling, training and integration into the business. Illinois similarly relies on a right-to-control analysis for most wage claims, though ABC-style tests apply in certain statutory contexts, including unemployment insurance. See 820 ILCS 405/212. In practice, these standards still present meaningful risk for luxury brands. Extensive training, required attendance at brand briefings, fixed schedules, exclusivity requirements or detailed scripts and presentation guidelines can all weigh in favor of employee status, even in jurisdictions without an ABC test. The more control a brand exercises over how ambassadors interact with customers and represent the brand, the harder it becomes to sustain a contractor classification. Influencers and Pop-Up Activations: Added Complexity Influencer marketing and pop-up activations present additional classification challenges. Some influencers operate established businesses with multiple clients, supporting independent-contractor status. Others, however, function more like on-demand brand representatives. Classification risk increases when brands require pre-approval of content, dictate posting schedules, restrict work for competitors or tie compensation to strict compliance with brand directives. Engagement length alone does not eliminate exposure. Even short campaigns can give rise to misclassification claims if the underlying relationship resembles employment. Looking Ahead Luxury, retail and hospitality brands will continue to rely on flexible, brand-forward talent to remain competitive. But as worker-classification standards evolve and enforcement intensifies, contractor models that once seemed routine may no longer be defensible. Addressing classification issues at the outset of a campaign rather than after it concludes can help brands preserve flexibility while reducing legal exposure. Brands with questions about independent contractor classification or campaign staffing strategies should consult their Polsinelli Labor & Employment attorney.

At a Glance Clarified Pay Transparency Requirements Effective Jan. 1, 2026: California employers are now able to publish a good-faith estimate of the salary or hourly wage they reasonably expect to pay a new hire at the time of hire, rather than a general range for the position. Broader Scope for Equal Pay Act Claims: SB 642 expands the definition of “wages” to include nearly all forms of compensation—such as bonuses, equity, benefits, allowances and reimbursements—potentially increasing exposure in pay equity claims and underscoring the importance of reviewing total compensation packages. Longer Statute of Limitations and Expanded Liability Window: The law extends the statute of limitations for Equal Pay Act claims to three years regardless of willfulness, with a six-year look-back period for relief, emphasizing the need for proactive compliance and documentation. Job Posting Requirements Effective January 1, 2026, SB 642, also known as the Pay Equity Enforcement Act, amends pay transparency and pay scale requirements for California employers. The changes clarify the definition of “pay scale” for job posting requirements, broaden the forms of pay considered for assessing Equal Pay Act claims, and extend the statute of limitations to bring civil actions alleging violations of pay reporting statutes. As described in our prior blog post, California requires employers to publish pay scale information on job postings. SB 642 amends California Labor Code § 432.3 to expand the definition of pay scale to a “good faith estimate of the salary or hourly wage range that the employer reasonably expects to pay for the position upon hire.” Previously, “pay scale” was defined to include the salary or wage range that employer expected to pay for the position generally. The amended definition requires disclosure of what an employer reasonably expects to pay the new hire on the date of hire as opposed to an estimate of the position in general. Equal Pay Act Claims Labor Code § 1197.5 prohibits employers from paying employees less wages for performing substantially similar work based on sex. SB 642 broadens the definition of “wages” and “wage rates” under this section. As a result, alleged violations may consider all forms of pay “including but not limited to, salary, overtime pay, bonuses, stock, stock options, profit sharing and bonus plans, life insurance, vacation and holiday pay, cleaning and gasoline allowances, hotel accommodations, reimbursement for travel expenses and benefits.” The law also provides new guidance on when an Equal Pay Act violation may occur, including when: An alleged unlawful compensation decision or other practice is adopted; An individual becomes subject to an alleged unlawful compensation decision or other practice; and An individual is affected by application of an alleged unlawful compensation decision or other practice, including each time wages, benefits or other compensation is paid. SB 642 establishes a statute of limitations of three years after the last date of alleged violation to bring an Equal Pay Act claim, regardless of whether the violation is willful. Previously, the statute of limitations was two years and only three years if the violation was proven willful. The law introduces a look-back period limiting relief to a maximum of six years. Key Takeaways for Employers   The changes to job posting requirements provide relief to employers that provide a “good faith” reasonable estimate in their postings. With the changed definition of “wages” for the purposes of Equal Pay Act claims, employers may wish to review the equity of their pay packages including non-salary compensation to ensure compliance. Employers are advised to consult with counsel on compliance including when new compensation practices are adopted and changed. Polsinelli attorneys will be monitoring new developments in this area and remain prepared to assist employers.

Effective January 1, 2026, numerous state and local government employment laws have taken effect. Below is a non-exhaustive summary of key employment law updates for January 2026. For additional insights, register for the 2026 Employment Law Developments: Key Considerations for Employers webinar here. To navigate each employment law update by state, click here. Please note that the above is a non-exhaustive summary of recent employment law developments. For questions or assistance with employment law compliance in 2026, or to ensure you are informed about the latest updates, please contact your Polsinelli attorney.

Key Highlights New York prohibits arrangements requiring employees to repay or reimburse their employer: The newly enacted Trapped at Work Act bars employers from enforcing agreements that require workers to repay or reimburse training or other costs or payments if they leave employment before a specified period. Ambiguous language creates risk for common compensation practices: Although motivated by controversial training repayment arrangements, many commonplace practices like education stipends, tuition assistance programs, forgivable loans, advanced retention bonuses and certain consulting arrangements may now face challenges. Law applies broadly to workers beyond employees: The Act covers not only employees, but also independent contractors, interns, volunteers, apprentices and other service providers, with only limited statutory exceptions. New York employers are now prohibited from enforcing or requiring so-called “stay-or-pay” contracts that obligate employees to repay money to their employer if they leave employment prior to a stated date.  With the new “Trapped at Work Act,” New York joins other states, including Colorado and California, in protecting employees from requirements to reimburse their employer for employer-provided training. Although the Act and other similar laws have been motivated by criticisms of employer training repayment requirements, the breadth and ambiguity of New York’s new law threaten to go beyond that immediate concern and prohibit or render uncertain many commonplace employee compensation arrangements. The Act prohibits employers from using or enforcing any “employment promissory note,” which is defined as “any instrument, agreement or contract provision that requires a worker to pay the employer, or the employer's agent or assignee, a sum of money if the worker leaves such employment before the passage of a stated period of time,” including any agreement to reimburse training provided by the employer. The scope of the Act is broad, as it applies not only to traditional employees, but also to independent contractors, interns and externs, volunteers, apprentices and sole proprietors providing services. The Act does exclude certain types of agreements from its prohibition, including: Agreements to repay the employer for sums advanced to the employee, other than sums for “training related to the worker’s employment with the employer”; Repayment for property sold or leased to the employee; or Repayments pursuant to a collective bargaining agreement. Although the Act is aimed at controversial arrangements requiring employees to repay their employer for mandatory trainings, it may inadvertently sweep in other commonplace employee compensation frameworks that do not raise similar controversy. These include: Education Stipends: Employers often provide educational or tuition stipends to employees, and it is common to have retention provisions included in such arrangements. It is not clear whether such arrangements would continue to be permissible, given that the funds may not be advanced directly to the employee and the education likely relates to the employee’s position. Forgivable Loans/Advanced Retention Bonuses: Arrangements where funds are fronted to employees, subject to a retention requirement, can potentially fall within the Act’s exceptions, but they must be carefully structured to avoid penalties and enforceability issues. These types of arrangements and bonuses are common in many industries, especially financial services. Liquidated Damages for Consulting Arrangements: Given that the Act applies to independent contractors (even if properly classified as such), it is arguable that a penalty for the contractor’s early termination of the agreement would violate the Act. Even as New York Governor Hochul signed the Act, she noted that its language “was ambiguous in certain respects” and stated that she had agreed with the Legislature to “address these concerns” in the future. Unless and until clarification is provided, however, employers in New York will have to review and carefully modify any agreements that require employees or other workers to repay sums to the employer based on retention considerations.  Failure to do so can lead to the agreement being deemed null and void and subject the employer to fines, ranging from $1,000 to $5,000 for each worker with whom they have a prohibited agreement, as well as liability for attorneys’ fees incurred by the employee in defending against enforcement. For assistance reviewing agreements or other questions relating to this law, be sure to contact your Polsinelli attorney.

Key Highlights: A recent amendment expressly codifies disparate impact liability under the New York State Human Rights Law (NYSHRL) for employment discrimination claims. This comes as the U.S. Equal Employment Opportunity Commission has backed away from disparate impact theories in enforcing federal employment discrimination statutes. The increasing use of Artificial Intelligence (AI) tools in personnel processes and decision-making has the potential to raise disparate impact issues to the extent that AI processes have varying effects on specific groups. New York employers may face increased potential exposure from neutral employment practices, underscoring the importance of proactive review and documentation. New York Governor Kathy Hochul signed Senate Bill S8338 on Dec. 19, 2025, which codifies that a facially neutral employment practice may violate the New York State Human Rights Law (NYSHRL) based on its discriminatory effects, even absent discriminatory intent. While the amendment largely clarifies existing law, it comes at a time when federal enforcement of disparate impact theories has become less certain as the U.S. Equal Employment Opportunity Commission has taken a more restrained approach to pursuing disparate impact claims under federal employment discrimination statutes. Against that backdrop, the amendment underscores the continuing importance of state-law compliance and employer attention to outcome-based employment practices, as well as the purportedly neutral decisions of their AI tools. What the Amendment Does The legislation adds a new subdivision to New York’s Executive Law § 296, providing that, in NYSHRL employment discrimination cases, an unlawful discriminatory practice may be established where an employer uses a policy or practice that actually or predictably results in a disparate impact based on a protected characteristic. The statute makes clear that proof of discriminatory motive is not required. After the employee demonstrates that a particular employment practice causes, or predictably will cause, a disparate impact on a protected class, the employer then bears the burden to establish that the practice is job-related for the position in question and consistent with business necessity. Even if that showing is made, an employee may still prevail by showing the employer’s business necessity could be satisfied by a less discriminatory alternative. The statute also requires that an employer’s justification be supported by evidence and not based on hypothetical or speculative considerations, reinforcing the need for objective validation and documentation of employment criteria. Although disparate impact liability is not a new concept, the amendment injects ambiguity into the analysis by prohibiting policies and practices that “actually or predictably” yield disparate results. This raises the specter of challenges to practices that do not “actually” cause a disparate impact but can be argued to “predictably” do so. Given the litigation climate in New York, this additional language creates another reason for employers to be intentional in assessing the effect, or event "predicted" effect, of personnel practices and policies. Why This Matters Now, Especially as AI Gains Ground in Employment Practices By codifying disparate impact liability, New York has increased scrutiny of ostensibly neutral employment practices — such as hiring criteria, screening tools, promotion standards and compensation structures — that may produce statistically significant disparities. AI tools are often adopted to promote efficiency and consistency and typically would not be viewed as intentionally discriminatory. However, these tools present disparate impact risks to the extent that the data inputs, models or selection criteria underlying those tools have varying effects on specific groups. For example, even in the relatively early phases of AI’s adoption, there have been claims in litigation that an employer’s use of AI training datasets disproportionately composed of one protected group (for example, males) results in an adverse disparate impact to members of other groups (for example, females). The beefed-up disparate impact liability under NYSHRL, combined with New York City’s 2023 regulations on AI use in personnel processes, guide in favor of an intentional approach by employers in using these tools for employment decisions. Looking Ahead This amendment applies to employment discrimination occurring on or after its effective date of Dec. 19, 2025, making proactive compliance efforts particularly important. Employers should consider reviewing key employment practices to assess disparate impact risk, ensure that job-related criteria are well supported, and evaluate whether alternative approaches could achieve business objectives with less discriminatory effect. If you have questions about how this amendment may affect your organization, or would like assistance evaluating existing policies and practices, contact your Polsinelli Labor & Employment attorney.

Key Takeaways FTC to revisit a national non-compete ban: The FTC will host a Jan. 27, 2026 workshop as it restarts efforts to regulate or potentially ban most non-competition agreements nationwide. Renewed effort follows prior rule’s collapse: The workshop comes after the FTC’s 2024 final rule banning non-competes was blocked in court, vacated and ultimately abandoned due to legal and administrative challenges. Future national standard possible: The workshop may signal the first step toward a new FTC rule, despite current non-compete enforceability continuing to vary significantly by state law. The FTC appears poised to renew its years-long effort to address, and potentially ban, most non-competition agreements on a national level. On Jan. 27, 2026, the Federal Trade Commission will host a workshop titled, “Moving Forward: Protecting Workers from Anticompetitive Noncompete Agreements.” The FTC reports that the workshop “will include public statements from FTC Commissioners, victims of unfair and anticompetitive noncompete agreements and leading experts in the field.” The workshop follows years of national attention and contentious litigation regarding the FTC’s prior attempt to impose a national ban on most non-competition agreements. The FTC’s effort started in January 2023, when the FTC proposed a rule to ban most non-competition agreements. In April 2024, the FTC issued a final rule banning most non-competition agreements nationwide effective Sept. 4, 2024, but employer groups quickly filed lawsuits challenging the rule. In August 2024, a Texas district court enjoined the final rule’s enforcement as arbitrary and capricious. The FTC appealed the injunction to the Fifth Circuit but subsequently vacated the final rule and dropped the appeal, citing legal issues and administrative changes. Now, it appears that the FTC is ready to take up the issue again — and the January workshop could be the first step towards issuing another rule that would provide a national standard for addressing non-competition agreements. Currently, the validity and enforceability of non-competition agreements are governed by state law, which varies widely from state to state. The workshop will be held from 1-5 p.m. ET on Jan. 27, 2026, and it will be open to the public. Attendees must register in advance to attend in person at the FTC’s headquarters or attendees may attend via livestream. Polsinelli Restrictive Covenant Attorneys will be in attendance at the workshop. If you currently have or are thinking about implementing non-competition agreements in your workforce, it is important to have an attorney well-versed in non-competition law review your agreements for compliance with all applicable state laws. Please contact your Polsinelli attorney for help reviewing or updating your agreements and broader non-compete strategy.  

Key Highlights Under Section 503 of the Rehabilitation Act (Section 503) (extending protection to individuals with disabilities), the basic coverage threshold increased from $15,000 to $20,000. Under the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) (extending protection based on veteran status), the basic coverage threshold increased from $150,000 to $200,000. Although the Affirmative Action Program (AAP) coverage remains the same for Section 503, the AAP coverage requirements increased accordingly for the VEVRAA and now apply to contractors and subcontractors with at least 50 employees and a single contract of $200,000 or more. On October 1, 2025, the Office of Federal Contract Compliance Programs (OFCCP) increased the jurisdictional thresholds for two key federal contractor laws: Section 503 and the VEVRAA. These higher thresholds affect whether a contractor is covered by each law and, as a result, whether it must maintain written AAPs for individuals with disabilities and protected veterans. The increases result from the Federal Acquisition Regulatory Council’s periodic review and inflationary adjustment of “acquisition-related” thresholds in federal procurement statutes as required by Section 807 of the Ronald Reagan National Defense Authorization Act (41 U.S.C. § 1908). As part of its assistance efforts, the OFCCP has issued a “Jurisdictional Thresholds” infographic and updated its webpage with additional guidance and tools. While federal affirmative action plan requirements for women and minorities have changed significantly in 2025, federal contractors are reminded that affirmative action requirements for individuals with disabilities and veterans remain in effect for covered contractors. If you have questions about how these updated thresholds apply to your organization—or whether your contracts and workforce size trigger written AAP obligations—Polsinelli’s Labor and Employment attorneys are available to assist.

Key Highlights NLRB Poised for a Partisan Shift: With the Senate HELP Committee advancing two of President Trump’s nominees, the NLRB may soon regain a quorum and shift to its first Republican-led majority since 2021 — potentially signaling changes to existing federal labor law. Expanded Remedies Under Thryv Remain in Force — for Now: The NLRB’s Thryv, Inc. decision (2022) broadened employer liability in unfair labor practice cases by requiring compensation for all “direct or foreseeable” harms. Courts Split on the NLRB’s Authority: Federal appellate courts have issued conflicting rulings on the NLRB’s power to award these expanded damages — creating uncertainty until the NLRB or the Supreme Court provides further clarity. Employers Should Prepare for Policy Shifts: A Republican-led majority on the NLRB could narrow Thryv remedies and reexamine key doctrines affecting joint-employer standards, independent-contractor classifications, and union election rules. Employers should monitor developments closely and seek counsel on pending or potential labor disputes. On Oct. 9, 2025, the Senate Health, Education, Labor & Pensions (HELP) Committee advanced two of President Trump’s three pending nominations to the National Labor Relations Board (NLRB). Although the third nominee was tabled following a divided vote, the approvals signal the NLRB may soon regain a quorum and operate under a Republican-led majority for the first time since 2021. Why It Matters Historically, when the NLRB flips partisan control, prior precedent — especially decisions viewed as favorable to labor or broad in scope — often comes under review. Large employers should monitor several key implications: Unfair labor practice liability remains significant under current NLRB law, and U.S. Courts of Appeal have disagreed on whether the NLRB has exceeded its statutory authority. In its December 2022 decision in Thryv, Inc., 372 NLRB No. 22 (Dec. 13, 2022), the NLRB significantly expanded its remedial authority in unfair labor practice cases. The decision clarified that in all cases where a standard make-whole remedy would apply, employers must “compensate affected employees for all direct or foreseeable pecuniary harms . . . suffer[ed] as a result of the [employer’s] unfair labor practice.” The NLRB expressly moved beyond traditional backpay and reinstatement relief to authorize reimbursement of additional costs like out-of-pocket medical expenses and credit card debt. Appellate courts have disagreed on the NLRB’s authority to expand unfair labor practice remedies.Most recently, the Court of Appeals for the Ninth Circuit upheld the NLRB’s use of the Thryv framework in International Union of Operating Engineers, Local 39 v. NLRB. The Ninth Circuit found the NLRB did not exceed its statutory authority in awarding Thryv damages and enforced the NLRB’s remedy order. The Court of Appeals for the Third Circuit took a different tack earlier this year. In its Starbucks-related decision, the Third Circuit held the NLRB’s remedial order for consequential damages exceeded the NLRB’s authority. It reasoned that Congress did not empower the NLRB to award full compensatory damages of that nature. If the NLRB retains a quorum, we expect it to revisit the expanded remedies under Thryv. If the full Senate confirms the two nominees to the NLRB, employers should anticipate that the NLRB will revisit the remedial doctrine set forth in Thryv. While the second Trump administration has indicated an intent to be more labor friendly, a Republican majority may choose to reinstate narrower remedial parameters, limit the “direct or foreseeable” horizon, or otherwise reduce employer exposure. Until such a shift occurs, however, the current Thryv-based standard remains in force and applicable before the NLRB and across circuits that have upheld it. Looking Ahead The HELP Committee’s approvals signal a likely realignment in the months ahead but not an immediate one, as it remains unknown as to when or whether the NLRB will have a quorum. A new NLRB majority may act quickly once seated to revisit recent precedents—not only Thryv, but also rules governing joint-employer status, independent-contractor classifications and union election procedures. The coming months will be a period of heightened uncertainty for employers navigating ongoing unfair labor practice matters. Employers facing organizing activity or unfair labor practice allegations should consult with an experienced member of Polsinelli’s Management-Labor Relations Practice Group to assess how forthcoming NLRB changes may affect exposure, negotiation strategy and overall labor-relations planning.

On Sept. 19, 2025, President Trump signed a Proclamation, Restriction on Entry of Certain Nonimmigrant Workers, requiring a $100,000 payment with any new H-1B petition filed on or after Sept. 21, 2025, including those for the 2026 lottery. While the restriction does not apply to petitions filed before that date, approved petitions, or valid visa holders, questions remain regarding its impact on extensions and transfers. Given the fluid and evolving nature of these changes, employers and visa holders should exercise caution, particularly with international travel, and consult your Polsinelli Immigration counsel or Polsinelli’s Executive Action Working Group with any questions. Read the full update.

Key Highlights End of nationwide ban efforts: The FTC has officially moved to dismiss its appeals and voted to vacate its proposed nationwide non-compete ban, signaling the end of its push for a universal prohibition. Shift to targeted enforcement: While dropping the broad ban, the FTC remains committed to scrutinizing non-competes on a case-by-case basis, particularly in industries like healthcare and staffing where such agreements are prevalent. Immediate employer impact: On Sept. 10, 2025, the FTC sent letters to large healthcare and staffing employers urging a review of non-competes and restrictive agreements, indicating an enforcement focus in those sectors, alongside a broader public inquiry open until Nov. 3, 2025. Guidance for compliance: Commissioner Meador outlined key factors that the FTC will consider when assessing non-competes, including wage and skill level, scope and duration, less restrictive alternatives and market power — making it essential for employers to review and refine their covenants to align with federal scrutiny and evolving state laws. On Sept. 5, 2025, the FTC moved to dismiss its appeals of injunctions blocking the enforcement of the non-compete ban it sought to implement nationwide last year. That same day, the FTC voted 3-1 to take steps to vacate the ban. These moves mark the end of the FTC’s efforts to implement a universal ban on non-competes, following a change in administration and FTC leadership. However, recent FTC actions suggest the agency remains focused on non-compete agreements, especially in the healthcare and staffing industries. Renewed scrutiny: Rather than pursuing a blanket ban, the FTC is pivoting to case-by-case enforcement and targeting covenants that it views as unfair or anticompetitive. On Sept. 10, 2025, the FTC sent letters to several large healthcare employers and staffing firms urging them to conduct a comprehensive review of their employment agreements — including any non-competes or other restrictive agreements — to ensure they are appropriately tailored and comply with the law. These letters suggest the FTC intends to initially direct its scrutiny of non-competes to the healthcare and staffing industries The FTC’s move parallels state-level action in places like Colorado, Texas and Pennsylvania, which have adopted stricter limits on non-competes in health care, as previously reported by Polsinelli. In addition, the FTC has also launched a public inquiry — open until Nov. 3, 2025 — through which the public may submit information that may be used to inform future enforcement actions. Importantly, this public inquiry is not limited to the healthcare or staffing industries, meaning the FTC’s scrutiny may expand to other sectors. FTC provides roadmap to enforcement priority: In announcing the FTC’s intent to revoke the non-compete ban, Commission Meador issued a statement identifying several contextual and legal factors to help evaluate non-compete provisions: Employee wage and skill level; Deployment in a distribution network (for example, non-competes in the franchise context); Independent contractors; Likelihood of free riding (employer investments in training, employee access to confidential information); Availability of less restrictive alternative; Scope and duration; Market power; and Evidence of economic effects. Impact on current non-competes: Employers should carefully review their non-compete covenants to ensure they are carefully drafted and aligned with both federal and state law. The FTC has made it clear that enforcement is coming — just not through a single sweeping rule. Additionally, in light of the factors from Commissioner Meador, employers should consider their overall non-compete strategy, including which workers are required to enter non-competes and whether alternative tools are available to protect their business interests. Please contact your Polsinelli attorney for help reviewing or updating your agreements and broader non-compete strategy.    

On July 28, 2025, the United States Office of Personnel Management (“OPM”) issued a memorandum endorsing federal employees expressing their religious beliefs in the workplace. Specifically, OPM Director Scott Kupor instructed government agencies to “allow personal religious expression by Federal employees to the greatest extent possible unless such expression would impose an undue hardship on business operations.” Although this memorandum does not directly contemplate any new direction for private employers, it raises questions about whether this guidance signals impending changes in the private sector. What Does This Mean for the Federal Workplace? The OPM memorandum directs federal employers to permit religious expression in the workplace to the same extent as other non-religious, private expression. Stated otherwise, the OPM is encouraging federal employees to fully express their religious beliefs. This is a unique policy stance that has not been observed in recent memory. The OPM offered a handful of “categories” to demonstrate what religious conduct should be permitted, including: Display and use of items used for religious purposes or religious icons Expressions by groups of federal employees Conversations between federal employees Expressions among or directed at members of the public Expressions in areas accessible to the public The OPM memorandum clarifies that the “undue hardship” exception remains but avoids discussing it in much detail. Absent evidence to the contrary, it is expected that the OPM will utilize the standard endorsed by the Supreme Court in 2023. Groff v. DeJoy, 143 S. Ct. 2279 (2023). In Groff, the Supreme Court held that “undue hardship is shown when a burden is substantial in the overall context of an employer’s business,” “tak[ing] into account all relevant factors in the case at hand, including the particular accommodations at issue and their practical impact in light of the nature, size and operating cost of an employer.” What Type of Belief Is “Religious” According to the OPM? Notably, the OPM memorandum defers to traditional Title VII analyses for determining what would constitute a “sincerely held religious belief” warranting protection. The EEOC has been abundantly clear that protections are not just reserved for traditional, organized religions such as Christianity, Judaism, Islam, Hinduism or Buddhism, but rather a realm of “moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views.” Further, the Supreme Court has made it clear that it is not a court’s role to determine the reasonableness of an individual’s religious beliefs, and that “religious beliefs need not be acceptable, logical, consistent, or comprehensible to others in order to merit First Amendment protection.” In sum, the best practice for federal employers is to take a broad approach to defining religion in the workplace to avoid any semblance of discriminatory conduct, so long as the expression of these beliefs does not constitute a true “undue hardship.” What About Private Employers? While this memorandum does not apply to private employers, Title VII does. Thus, it raises serious questions about whether the EEOC will follow suit by taking inspiration from the new OPM memorandum. In the past, the EEOC has issued guidance cautioning private-sector supervisors from engaging in religious expression that might reasonably appear coercive due to their supervisory role. The OPM’s memorandum, however, takes a different stance, explaining supervisors should not be treated any differently than non-supervisors on the basis of their workplace roles. It is expected this change of tune will work its way into the private sector sooner rather than later, whether it be through EEOC guidance or private employer policy changes attempting to mimic OPM guidance. Another possibility on the horizon could include whether the federal government issues similar requirements for all federal contractors, which would drastically increase the impact of expansion of religious expression. As with everything in the practice of law between different administrations, time will tell. What Should Private Employers Do Next? As these changes are implemented at the federal level, private employers should take a look in the mirror to see whether their current policies and procedures align with current guidance on religious expression in the workplace. For assistance in reviewing internal policies and procedures on religious expression in the workplace, be sure to contact your Polsinelli attorney.

What You Need to Know: Washington’s new mini-WARN Act applies to smaller employers with 50 or more full-time employees, unlike the federal WARN Act, which only applies to employers with 100 or more employees. The new mini-WARN Act includes a private right of action and penalties for affected employees against employers who violate the requirements. In addition to applying to smaller employers, the mini-WARN Act has broader notice requirements in comparison to the federal WARN Act and excludes specific employees from being part of mass layoffs. On July 27, 2025, Washington State implemented its own version of the Worker Adjustment and Retraining Notification (WARN) Act, officially titled the Securing Timely Notification and Benefits for Laid-Off Employees Act, commonly referred to as a "mini-WARN Act." The mini-WARN Act is a state-level law that complements the federal WARN Act.  Washington joins thirteen other states (California, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, New Hampshire, New Jersey, New York, Tennessee, Vermont and Wisconsin) in implementing mini-WARN Acts. WARN Acts provide protections for employees facing layoffs or business closures. Key Aspects of the Act Notice Requirement: Under the mini-WARN Act, employers must provide at least 60 days' notice before a mass layoff or business closing (business closings can be permanent or temporary). This notice must be given to affected employees, the state, and local government officials and must contain very specific information (including anything required by the federal WARN Act, information regarding the site affected, contact information, specifics regarding the layoff or closure, anticipated dates, names and job titles for those affected, and information regarding relocation of operations/roles). The mini-WARN Act provides some limited exceptions for faltering companies, unforeseeable business circumstances, and natural disasters. The mini-WARN Act also has certain exceptions related to sales of business and mass layoff for specific construction projects. Who is Covered: The mini-WARN Act applies to employers with 50 or more employees in the state of Washington. This is a broader scope than the federal WARN Act, which only covers employers with 100 or more employees. The mini-WARN Act applies to mass layoffs or business closings affecting 50 or more full-time employees, which is similar to the federal WARN Act; however, the “single site of employment” requirement is different in the mini-WARN Act. Under the federal WARN Act, employee counts are based on separations at a single site of employment for both mass layoffs and business closures. Under Washington’s new mini-WARN Act, the “single site of employment” requirement is only applicable to business closings. In other words, the mini-WARN Act will apply to mass layoffs affecting multiple sites if the total layoffs accumulate to 50 or more. Additionally, of note, under the mini-WARN Act, employees are any people employed in the state of Washington by an employer. Employee Protections: By providing 60 days’ notice of a job loss, the mini-WARN Act aims to give employees time to prepare for job loss, seek new employment, or pursue retraining opportunities. The mini-WARN Act also protects employees currently on leave under Washington Paid Family and Medical Leave law by preventing an employer from including such an employee in a mass layoff. Penalties for Non-Compliance: Employers who fail to comply with the notice requirements may face penalties, including up to 60 days of back pay and benefits for each day of violation for each affected employee, $500 per day in penalties, and attorneys’ fees. Employers should familiarize themselves with the new requirements to navigate this evolving landscape effectively. As the mini-WARN Act takes effect, it is crucial for businesses to review their policies and procedures to ensure compliance, especially prior to layoffs, closures, and reductions in work. For questions and assistance regarding the Washington mini-WARN Act, other state mini-WARN Acts, or the federal WARN Act, please contact your Polsinelli attorney. 

On July 17, 2025, President Trump announced his selection of two choices for the National Labor Relations Board (NLRB). The President tapped Scott Mayer and James Murphy to fill those seats. If confirmed, Mayer and Murphy would fill two seats that have been vacant since President Trump returned to the White House. Mayer currently serves as Boeing’s Chief Labor Counsel and has been in that role since 2022. Murphy is a longtime NLRB official who first clerked for the NLRB in 1974 and most recently served as Chief Counsel to Marvin Kaplan, chair of the NLRB. Both bring strong management-side credentials to the table. Subject to Senate confirmation, Mayer and Murphy filling two of the three vacant seats will provide the NLRB with a quorum and enable it to issue decisions, engage in rulemaking, and fulfill its statutory duties. The NLRB has lacked a quorum since President Trump’s controversial termination of former member Gwynne Wilcox. Those in opposition to their nomination argue that, procedurally, they should not be confirmed until the validity of the termination of Wilcox is resolved by the federal courts. For questions regarding these nominations, the anticipated impact of the NLRB regaining a quorum, or other labor-related issues, please contact a member of Polsinelli’s Management-Labor Relations Practice Group.

What you need to know: DOL will no longer seek liquidated (double) damages in pre-litigation FLSA settlements, limiting recovery to unpaid wages. Liquidated damages still apply in court cases, so employers remain at risk in litigation. Early in the Biden administration, the Wage and Hour Division of the Department of Labor (“WHD”) issued Field Assistance Bulletin No. 2021-2 reversing practices adopted during the first Trump administration and returning to a more vigorous pursuit of liquidated damages from employers in pre-litigation investigations regarding potential violations of the Fair Labor Standards Act (“FLSA”). Now, just a few months into the second Trump administration, the WHD has reversed course again. Pursuant to Field Assistance Bulletin No. 2025-3, FAB No. 2021-2 is rescinded and the WHD will limit all pre-litigation administrative settlements to the recovery of unpaid wages or overtime compensation. It will no longer request any liquidated damages in pre-litigation investigations or resolutions. Liquidated damages are essentially “double damages,” requiring an employer that is liable for minimum wage or overtime compensation violations pay a second amount equal to the unpaid wages. In explaining this new approach, the WHD noted that Congress had “authorized” liquidated damages “only in judicial proceedings – not administrative matters” under the FLSA’s Section 216(c), which allows the DOL to “supervise the payment” of unpaid wages or overtime compensation to employees. It is the WHD’s opinion that is it “not authorized to seek liquidated as part of any payment it supervises under § 216(c).” The WHD also pointed to Section 260 of the FLSA to support its conclusion, because that Section vests courts – not the Agency – with the authority to evaluate employer’s good faith defenses that might preclude a recovery of liquidated damages. FAB 2025-3 states that “[t]he structure of § 260 reinforces that liquidated damages are a judicial remedy, and not an administrative tool available.” The practice of seeking liquidated damages in pre-litigation investigations and settlements began in 2010 under the Obama administration. While the first Trump administration attempted to rein this practice in to an extent with FAB No. 2020-2, the current stance is more aggressive. Of course, liquidated damages remain available in any litigation involving an FLSA violation – whether that litigation is brought by the WHD/DOL or a private party. For questions and assistance regarding WHD wage-and-hour investigations or other issues involving the FLSA or other wage-and-hour laws, please contact your Polsinelli attorney.