USCIS Updates Child Status Protection Act Age Calculation Policy – Considerations for Employers and Employees
U.S. Citizenship and Immigration Services (USCIS) announced on Aug. 8, 2025, that it is updating its guidance on Child Status Protection Act (CSPA) age calculations. The new guidance applies to adjustment of status (AOS) applications and related CSPA age calculation requests filed on or after Aug. 15, 2025, while AOS applications pending before that date will continue to be processed under the Feb. 14, 2023, policy. This change modifies the methodology for determining when a visa “becomes available” for CSPA calculations, potentially affecting families currently in the employment-based green card process.
Key Takeaways
USCIS is updating its methodology to use Final Action Dates (Chart A) for CSPA age calculations, changing from the Dates for Filing approach implemented in February 2023.
Applications filed before Aug. 15, 2025, will continue to be processed under the previous policy.
Employment-based families should review their situations if eligible under current visa bulletin dates.
The change creates consistency between USCIS and Department of State (DOS) processes.
Understanding the Child Status Protection Act
The CSPA is crucial to understand for employment-based immigration. The Immigration and Nationality Act (INA) defines a child as someone who is both unmarried and under 21 years old. If someone applies for lawful permanent resident status as a child but turns 21 before being approved, that person can no longer be considered a child for immigration purposes – a situation commonly referred to as “aging out.”
The Child Status Protection Act was enacted in 2002 to keep immigrant families intact despite lengthy family-based and employment-based waiting times. It seeks to ensure that sons and daughters can immigrate to the United States together with their parents by “freezing” a child’s age using a mathematical formula.
The CSPA Formula
For employment-based preference categories, the CSPA age calculation works as follows:
CSPA Age = Age when visa becomes available minus time the I-140 petition was pending.
If an applicant is 21 years and four months old when USCIS considers an immigrant visa available, and the petition was pending for six months, the applicant’s CSPA age would be calculated as: 21 years and four months – six months = 20 years and 10 months.
The critical question has always been: When exactly does a visa “become available?”
The Policy Evolution: A Timeline of Changes
Pre-2023: Final Action Dates Era
In 2018, USCIS determined that it would use the Final Action Dates chart for the CSPA age calculation while allowing beneficiaries to file their AOS applications using the Dates for Filing chart. This meant that though a noncitizen paid the fee and filed their application based on the Dates for Filing chart, ultimately, they might age out and not be eligible for AOS because their CSPA age calculation was based on the later occurring Final Action Dates chart.
February 2023: Policy Modification
USCIS updated this policy on Feb. 14, 2023. The agency modified its interpretation to consider an immigrant visa becoming available for the CSPA age calculation at the same time it considered a visa immediately available for accepting and processing the AOS application.
Under USCIS’s new guidance, “age at time of visa availability” could be calculated as of the date when both: the immigrant petition on which the AOS is based has been approved, and the applicant’s priority date became “current” for filing an AOS application under the Dates for Filing chart.
August 2025: Parity Between USCIS and DOS
USCIS is updating the Policy Manual to clarify that a visa becomes available for the purposes of CSPA age calculation based on the Final Action Dates chart of the DOS Visa Bulletin. This policy update ensures both USCIS and DOS use the Final Action Dates chart in the Visa Bulletin to determine when a visa becomes available for the purposes of CSPA age calculation.
Employer Considerations
Short-Term Considerations
1. Review Current Beneficiaries
Identify employees with pending I-140 petitions who have children approaching age 21;
Calculate CSPA ages for dependent children using both the current (Dates for Filing) and new (Final Action Dates) methodologies; and
Prioritize cases where children may age out under the new policy.
2. Evaluate Filing Timing
For employees eligible to file AOS applications under current visa bulletin dates, consider timing implications; and
Applications pending with USCIS before Aug. 15, 2025, will continue to be processed under the Feb. 14, 2023, methodology.
3. Communication Strategy
Proactively communicate with affected employees about the policy change;
Provide clear timelines and explain the potential impact on their families; and
Consider hosting information sessions with immigration counsel.
Long-Term Considerations
1. Strategic Planning
Factor CSPA implications into decisions about which employees to sponsor for green cards;
Consider the timing of I-140 filings, as the pending time directly impacts CSPA calculations;
Evaluate whether to pursue premium processing to reduce petition pending times.
2. Documentation and Tracking
Maintain detailed records of I-140 filing and approval dates;
Track visa bulletin movements more closely; and
Monitor which chart USCIS designates each month for AOS filing eligibility.
Employee Considerations
Employees With Children Approaching Age 21
Short-Term Considerations
Calculate the child’s CSPA age under both scenarios;
Check current visa bulletin dates – if eligible to file I-485 now, consider doing so before Aug. 15, 2025;
Consult with immigration counsel to understand your specific situation.
Key Requirements
To benefit from CSPA as an employment-based preference applicant, employees must seek to acquire lawful permanent resident status within one year of a visa becoming available for filing an AOS application. This is referred to as the “sought to acquire” requirement.
Understanding the Potential Impact
Scenario 1: A child’s CSPA age remains under 21 under both methodologies.
Scenario 2: A child’s case may benefit from grandfathering if filed before Aug. 15, 2025.
Scenario 3: A child’s CSPA age calculation may differ under the new methodology if filed after the deadline.
The ‘Extraordinary Circumstances’ Provision
The updated policy clarifies that USCIS considers an alien to have satisfied the “sought to acquire” requirement if they demonstrate extraordinary circumstances for failing to seek lawful permanent resident status within one year of when a visa becomes available. This may provide flexibility for cases affected by the policy changes.
The Broader Immigration Context
Policy Alignment Considerations
The Feb. 14, 2023, policy resulted in inconsistent treatment of aliens who applied for AOS in the United States versus aliens outside the United States who applied for an immigrant visa with DOS. The current change aims to create consistency across the immigration system.
The DOS Foreign Affairs Manual, which governs consular processing cases and guides consular officer’s visa adjudications abroad, uses the Final Action Dates chart for CSPA age calculations. This new policy brings USCIS methodology into alignment with existing DOS practices.
Immigration Practitioner Advocacy
Some immigration practitioners have advocated for USCIS to use the “Dates for Filing” chart to determine applicants’ age at the time of visa availability for CSPA age calculation purposes, arguing this approach would avoid age outs.
However, the new USCIS policy takes the opposite approach – requiring use of the Final Action Dates chart for CSPA calculations. This represents a rejection of the practitioner-advocated position in favor of prioritizing consistency between USCIS and DOS processes.
Practical Examples: Understanding the Policy Differences
To understand the real-world impact of this policy change, let’s examine hypothetical scenarios that illustrate how CSPA age calculations differ between the methodologies:
Example 1: Grandfathered Application (Filed Before Aug. 15, 2025)
Facts: Maria’s employer filed her I-140 in January 2024. Her son was 20 years, eight months old when the I-140 was approved after six months of pending time.
Under February 2023 Policy (which still applies to Maria):
Visa became available under Dates for Filing chart in March 2024;
Son’s CSPA age: 20 years, eight months – six months = 20 years, two months.
Result: Son qualifies as a child and may be included as a derivative.
If the same case was filed after Aug. 15, 2025:
Must wait for Final Action Dates chart to show current.
If Final Action Dates become current four months later (July 2024);
Son’s CSPA age: 21 years – six months = 20 years, six months.
Result: Son still qualifies, but the margin for protection is smaller.
Outcome: Maria would benefit from filing before the deadline, securing the more protective calculation method.
Example 2: New Policy Application (Filed After Aug. 15, 2025)
Facts: John’s I-140 was approved in September 2025 after eight months of pending time. His daughter was 21 years, two months old at I-140 approval.
Under February 2023 Policy (no longer available for new filings):
If Dates for Filing chart were current in September 2025;
Daughter’s CSPA age: 21 years, two months – eight months = 20 years, six months.
Hypothetical Result: Daughter would qualify as a child.
Under New August 2025 Policy (applies to John):
Must wait for Final Action Dates chart to become current.
If Final Action Dates do not become current until January 2026 (four months later);
Daughter’s age at Final Action Date availability: 21 years, six months;
Daughter’s CSPA age: 21 years, six months – eight months = 20 years, 10 months.
Actual Result: Daughter still qualifies, but with less margin for error.
Outcome: The timing difference between the charts affects the CSPA calculation, though in this case the daughter would still qualify.
Example 3: Case Where Policy Change Matters Most
Facts: Sarah’s I-140 is approved in October 2025 after four months of pending time. Her son is 21 years, one month old at approval. The current priority date is close to becoming current, but there’s a significant gap between the Dates for Filing and Final Action Dates charts.
Under February 2023 Policy (no longer available):
Dates for Filing chart becomes current in October 2025.
Son’s CSPA age: 21 years, one month – four months = 20 years, nine months.
Hypothetical Result: Son would qualify as a child.
Under New August 2025 Policy (applies to Sarah):
Final Action Dates do not become current until March 2026 (five months later).
Son’s age at Final Action Date availability: 21 years, six months.
Son’s CSPA age: 21 years, six months – four months = 21 years, two months.
Actual Result: Son ages out and cannot be included as a derivative.
Outcome: This illustrates the most significant impact – cases where the timing difference between charts determines whether a child qualifies for protection.
Example 4: Understanding Chart Differences
Background
To understand why this matters, consider that in a typical month, the Dates for Filing chart might show “Current” for certain categories, while the Final Action Dates chart might be several months or even years behind.
Real Scenario: EB-2 India category in a hypothetical month:
Dates for Filing Chart: Current (allows filing immediately)
Final Action Dates Chart: Dec. 15, 2020 (requires waiting for priority date)
For an applicant with a 2019 priority date:
Old Policy: Could calculate CSPA age immediately upon I-140 approval.
New Policy: Must wait for Final Action Date to become current.
Impact: Child might age beyond protection during the waiting period.
Key Takeaway from Examples
The most significant impact occurs when there are substantial gaps between the Dates for Filing and Final Action Dates charts. Families filing after Aug. 15, 2025, may wish to factor in these timing differences when assessing their children’s CSPA protection. The policy change affects not just the calculation method, but also when the beneficial age-freezing effect occurs.
Conclusion
This policy update represents a modification in USCIS’s approach to CSPA age calculations, aligning the methodology with DOS practices. The grandfathering provision maintains current processing methodology for pending cases, while families with children approaching age 21 should review their specific circumstances to understand potential impacts.
The implementation timeline provides a transition period for families currently eligible to file adjustment applications. Understanding the implications of this methodology change is important for employment-based families navigating the green card process.
As immigration policies continue to evolve, this change highlights the importance of staying informed about policy developments and understanding how procedural modifications may affect family immigration cases. Given the complexity of CSPA calculations and their impact on family unity, affected individuals should carefully review their circumstances and consider consultation with qualified immigration counsel.
Remote Work Compliance Considerations for H-1B, E-3, and H-1B1 Employees
Navigating Immigration and Employment Law Requirements in the Remote Work Era
The shift toward remote and hybrid work arrangements has created compliance challenges for U.S. employers sponsoring foreign workers under H-1B, E-3, and H-1B1 classifications. While remote work offers flexibility and expanded talent pools, it introduces complex legal obligations that, if overlooked, may result in substantial penalties and backpay awards, as well as possibly jeopardizing employees’ immigration status.
The Fundamental Requirement: Every Work Location Must Be Covered
Under U.S. Department of Labor (DOL) regulations, every location where an H-1B, E-3, or H-1B1 employee performs work must be listed on a Labor Condition Application (LCA) and covered by the underlying petition. This includes the employee’s home office when working remotely.
When an employee works from home, their residence becomes a “worksite” for immigration and labor law purposes. This means:
The home address must be listed as a worksite on the LCA
The prevailing wage determination must account for the geographic location of the home office
Public Access File requirements apply to the home location
LCA posting obligations are triggered
The Growing Challenge: Unreported Address Changes
A compliance gap may emerge if employees relocate during their H-1B validity period without informing their employer’s immigration team. This seemingly minor oversight may create cascading compliance complications.
When Employees Move Within the Same Metropolitan Statistical Area (MSA)
If an employee relocates within the same MSA as originally listed on their LCA:
Required Action: The employer must post a notice in two conspicuous places at the employee’s new residence, where they work remotely, for 10 business days and update the respective Public Access File.
Common Failure: HR teams update payroll records and internal systems but fail to notify immigration counsel, resulting in a lack of required postings at the new location and outdated, deficient Public Access File documentation.
Consequences:
DOL violations and potential civil fines
Wage and hour compliance deficiencies
Exposure to whistleblower complaints
Potential backpay obligations
When Employees Move Outside the Original MSA
If an employee relocates outside the MSA covered by their current LCA:
Required Action: File an amended H-1B petition with a new LCA covering the new geographic area before the employee begins work at the new location.
Common Failure: Employees relocate and continue working without the employer’s knowledge, creating an immediate status violation.
Consequences:
Employee is violating the terms of their H-1B status
Difficulty obtaining future extensions or renewals
Potential bars to future immigration benefits
Employer exposure to willful violator status
Potentially significant monetary penalties and backpay awards
Wage and Hour Compliance Risks
The DOL’s enforcement focus on prevailing wage compliance makes unreported address changes particularly precarious. Key risks include:
Prevailing Wage Violations
Different geographic areas have different prevailing wage rates that may differ greatly
Failure to obtain a new LCA containing a prevailing wage determination for the new location may result in underpayment
Backpay calculations may extend across multiple years
Record-Keeping Deficiencies
Public Access Files must be maintained and cover each worksite, including home office locations
Missing documentation for home office locations creates automatic violations
DOL and Fraud Detection and National Security (FDNS) audits often focus on remote work arrangements, including in-person visits
Case Study: The Hidden Costs of Poor Communication
Consider the following real-world scenario that illustrates the consequences of inadequate address change procedures:
The Situation: Sarah, a software engineer in H-1B status, was initially hired to work in Dallas, Texas, with a Level 4 prevailing wage determination of $156,998 annually. Her employer’s remote work policy allowed employees to work from home, and her LCA properly listed her Dallas residence as a worksite.
The Move: One year into her three-year H-1B validity period, Sarah relocated to San Francisco to be closer to family. She promptly informed HR and payroll of her address change, and her W-2 forms began reflecting California state taxes. However, the payroll team failed to notify the company’s immigration team about the relocation.
The Compliance Failure: Sarah’s move from Dallas to San Francisco represented a change to a different MSA with a substantially higher prevailing wage, approximately $213,512 for a Level 4 software engineer position in the San Francisco area, an annual difference of $56,514. Under DOL regulations, this required:
Filing a new LCA with the higher prevailing wage determination
Filing an amended H-1B petition before Sarah started working from her San Francisco residence
Adjusting Sarah’s salary to meet the new required wage (the higher of actual wage and prevailing wage level)
None of these steps were taken because the company’s immigration team was unaware of the move.
The Discovery: Two years later, when Sarah’s employer filed her H-1B extension petition, U.S. Citizenship and Immigration Services (USCIS) issued a Request for Evidence (RFE). USCIS had cross-referenced Sarah’s petition against her California state tax records and identified the discrepancy between her approved work location (Dallas) and her actual work location (San Francisco).
The Consequences: The RFE created multiple serious problems:
Immediate Status Risk: Sarah’s continued work in San Francisco without proper LCA coverage violates the terms of her H-1B status
Wage Violations: Sarah had been underpaid by approximately $56,514 annually for two years relative to the San Francisco prevailing wage
Extension Jeopardy: The extension petition faced potential denial due to the compliance violations
Backpay Exposure: The employer faced potential liability of $113,028 in prevailing wage underpayments
Future Petition Risk: The violation could impact Sarah’s ability to obtain future H-1B extensions or to adjust status to permanent residence
The Resolution Costs: To address the violation, the employer had to:
Engage specialized immigration counsel for RFE response preparation
File corrective amended petitions and LCAs
Pay prevailing wage backpay to Sarah
Implement enhanced compliance procedures company-wide
Face increased scrutiny from authorities on its immigration program
This case demonstrates how a simple communication breakdown can escalate into a six-figure compliance problem with lasting immigration consequences.
How These Violations Are Discovered
The increasing sophistication of government enforcement mechanisms means that address change violations are more likely to be detected than ever before. Employers should be aware of the following discovery methods:
FDNS Site Visits
The FDNS unit conducts unannounced site visits to verify petition information. During these visits, inspecting officers may discover that employees have relocated to new addresses without proper LCA amendments or H-1B petition updates. FDNS officers are specifically trained to identify compliance gaps and will document any discrepancies between approved work locations and actual employee residences.
USCIS Cross-Referencing During Petition Adjudication
As demonstrated in the software engineer case study above, USCIS increasingly cross-references employee state tax filings against residential addresses on record during the adjudication of new H-1B filings, including amendments and extensions. This data matching has become more sophisticated and systematic, making it more likely that geographic discrepancies will be identified during routine petition processing.
Biometric RFEs and Address Verification
USCIS is issuing RFEs requiring H-1B employees to complete biometrics appointments across multiple petition types, but mostly on H-1B petitions and I-140 immigrant petitions, even though these cases do not typically require biometric collection. During these appointments, USCIS captures current address information and cross-references it against the approved petition locations. This enforcement mechanism allows USCIS to identify address changes that were never reported to immigration authorities, creating an additional layer of compliance verification that employers may not be unprepared for.
The expansion of biometric RFEs to I-140 immigrant petitions demonstrates that USCIS is using address verification as a compliance tool across the entire immigration continuum. Employees who may have had compliant H-1B petitions initially but developed violations during the validity period may find their permanent residence applications jeopardized when USCIS discovers unreported address changes during I-140 adjudication.
ICE I-9 Audits
During Form I-9 compliance audits, Immigration and Customs Enforcement (ICE) may identify H-1B deficiencies when reviewing employee documentation. While this discovery method is currently less common, employers should anticipate increased scrutiny as compliance enforcement becomes stricter and more integrated across agencies. ICE auditors are trained to spot immigration status violations that may not be immediately apparent from I-9 documentation alone.
Employee Self-Reporting
H-1B employees who become aware of prevailing wage requirements may file complaints when they realize they are being underpaid due to their employer’s failure to update LCAs for new work locations. These complaints may trigger DOL wage and hour investigations and result in significant penalties. Educated employees increasingly understand their rights and may seek legal counsel when they suspect wage violations.
Department of State Referrals
During consular visa interviews for visa renewals or family member applications, consular officers may identify discrepancies between an employee’s stated residential address and the work location listed on their H-1B petition. While currently uncommon, this discovery method may become more frequent as consular officers receive enhanced training on H-1B compliance issues and as information sharing between agencies improves.
H-1B Change of Employer Petition Complications
Another discovery method involves H-1B change of employer petitions (portability cases). When an employee transfers to a new employer, USCIS may identify prior compliance violations during the adjudication process by cross-referencing the employee’s state tax filings against the previous employer’s H-1B petition.
The Problem for New Employers: This situation creates an impossible burden for new employers because they typically do not have access to the prior employer’s complete H-1B petition file. The new employer cannot reasonably identify potential compliance issues before filing their change of employer petition, yet they may face petition denials or RFEs based on the prior employer’s failures.
Heightened Risk During Grace Periods: This issue is particularly acute for employees in the 60-day grace period following termination. USCIS has significantly increased its use of Notices to Appear (NTAs) for individuals found to be no longer maintaining legal status. When a compliance violation from a prior employer is discovered during a change of employer petition, it may trigger NTA issuance even if:
The current employee had little to no control over the prior employer’s compliance failures
The new employer performed reasonable due diligence but could not access the relevant information
The violation may have occurred years earlier and remained undetected
Practical Implications:
New employers may unknowingly inherit compliance problems caused by an employee’s prior employer
Employees face increased risk of removal proceedings for violations beyond their control
The traditional assumption that change of employer petitions are routine filings no longer holds
Employers should consider enhancing due diligence and vetting processes despite limited access to prior petition information
Risk to Prior Employers: The compliance violations don’t disappear when an employee changes employers. Former employers remain exposed to liability when H-1B deficiencies are discovered during change of employer adjudications. Once a former employee learns that their previous H-1B petition was deficient due to an unreported address change with a higher prevailing wage, they may pursue backpay claims against their former employer. These claims can extend back several years and involve substantial amounts, particularly when the wage differential between geographic areas is significant. The former employer cannot cure the violation since the employee has already departed, leaving them fully exposed to the financial consequences of their compliance failure.
Whistleblower Reports
Current or former employees, competitors, or other third parties may report suspected violations to DOL or USCIS. The anonymous nature of many reporting mechanisms makes this an ongoing risk for noncompliant employers.
The key takeaway is that these violations are no longer hidden in administrative silos. Government agencies are increasingly sharing information and using sophisticated data matching techniques that make discovery more likely and more systematic than in the past.
Beyond Geography: Wage Level Classification Risks
While geographic-based prevailing wage violations represent a significant compliance risk, employers face additional exposure from incorrectly classifying the job classification and the wage level for H-1B positions. This issue, compounded with the address change problem, may create further liability.
The Four-Level System Challenge
The prevailing wage system classifies positions into four levels based on experience, education, and job complexity:
Level 1: Entry-level positions requiring basic understanding
Level 2: Qualified positions requiring sound understanding
Level 3: Experienced positions requiring good understanding
Level 4: Fully competent positions requiring excellent understanding
Common Misclassification Scenarios
Many employers face two distinct types of classification errors that may result in significant compliance violations:
Wage Level Misclassification
Employers may under-classify positions to reduce labor costs, selecting Level 1 or Level 2 wages when the position actually requires Level 3 or Level 4 compensation.
Job Classification Misclassification
Beyond wage levels, employers often select incorrect job classifications entirely. The duties and responsibilities of different positions carry substantially different prevailing wages, even within similar fields. For example:
Similar but Distinct Classifications:
A “Systems Analyst” classification carries a lower prevailing wage than a “Software Engineer” classification, despite overlapping responsibilities
“Computer Programmer” wages differ significantly from “Software Developer” wages
“Database Administrator” and “Computer Systems Analyst” have different wage requirements
Bachelor’s Degree Requirement Violations: The H-1B category fundamentally requires that the proposed U.S. assignment necessitate at least a bachelor’s-level education. Selecting job classifications that require only an associate’s degree creates an immediate compliance concern. For example, selecting “Computer Network Support Specialists” for an employee performing bachelor’s-level work, even though DOL data indicates the position requires an associate’s degree, may result in:
Denial of the H-1B petition for failing to meet specialty occupation requirements
Significant backpay awards if the misclassification is discovered during employment
Potential willful violator findings if the pattern is systemic
Review of an employer’s entire immigration program
These job classification errors may create several compounding problems.
Compounding Geographic Issues: When an employee moves to a higher-wage area and the employer has made both wage level and job classification errors, the underpayment exposure multiplies. An employee initially classified as a Level 1 “Computer Network Support Specialist” in Dallas who should have been a Level 4 “Software Engineer,” then moves to San Francisco, faces a triple violation (geographic change, incorrect wage level, and incorrect job classification) potentially creating enormous backpay liability.
Audit Vulnerability: DOL audits specifically examine whether both the job classification and wage level selection match the actual job requirements. Auditors review:
Job descriptions and actual duties performed against standard occupational classifications
Required qualifications versus employee credentials and degree requirements
Supervision levels and decision-making authority
Comparison with similar positions at the employer and industry standards
Systematic Violations: Unlike address changes that affect individual employees, both job classification and wage level misclassification often reflect company-wide practices, potentially affecting multiple H-1B employees simultaneously and creating backpay exposure across entire departments or job categories.
Civil Penalty Exposure
Wage level violations carry the same penalty structure as geographic wage violations under 20 CFR 655.810 (2025 penalty amounts as adjusted by Federal Register, Vol. 90, No. 8, Jan. 10, 2025):
Willful Violations: Up to $67,367 per violation plus backpay
Substantial Failure: Up to $9,624 per violation plus backpay
Technical Violations: Up to $2,364 per violation plus backpay
When combined with multi-year underpayments across multiple employees, these penalties can reach seven figures for employers with systematic misclassification practices.
Program Debarment
For employers with systemic, widespread violations, the DOL can impose the most severe penalty available: debarment from the H-1B program under INA § 212(n)(2). This sanction prohibits an employer from filing any H-1B petitions for up to three years.
Debarment Requirements: Under DOL Fact Sheet #62S, debarment requires formal enforcement proceedings with specific findings:
A finding of violation must be entered in either a DOL proceeding under INA §212(n)(2) or a Department of Justice proceeding under INA §212(n)(5)
The agency must find that the employer committed either a willful failure or misrepresentation of material fact involving at least two Labor Condition Application attestations
The violation must have occurred after Oct. 21, 1998
Additional Consequences:
Debarred employers are subject to random DOL investigations for up to five years from the date of willful violator determination
Complete prohibition on filing new H-1B petitions during the debarment period
Business Impact: For technology companies, consulting firms, health care organizations, and other employers that rely heavily on H-1B workers, debarment can be business-threatening. The consequences include:
Complete inability to hire new international talent
Loss of competitive advantage in global talent acquisition
Potential departure of existing H-1B employees who cannot obtain extensions
Damage to employer brand and reputation in international markets
Disruption of long-term business planning and growth strategies
No Workarounds: Unlike monetary penalties that can be paid, debarment cannot be cured through compliance efforts during the prohibition period. Employers facing debarment must demonstrate extraordinary circumstances to avoid or reduce the sanction period.
Inadequate documentation makes it difficult to defend wage level selections during audits and increases the likelihood of violations being classified as “willful” rather than technical.
Additional Compliance Considerations for Employers
Establish Clear Policies
Require employees to report any address changes immediately
Include address change obligations in employment agreements and handbook policies
Create specific procedures for remote work approvals
Implement Monitoring Systems
Regular audits of employee addresses across HR, payroll, and immigration systems
Quarterly compliance reviews to identify discrepancies
Technology solutions to flag address changes automatically
Coordinate Across Departments
Ensure HR, payroll, immigration, and legal teams communicate regularly
Designate a point person responsible for address change compliance
Create checklists and workflows for processing address changes
Proactive LCA Management
File LCAs for anticipated remote work locations before employees relocate
Consider broader geographic coverage in initial LCA filings where appropriate
Maintain updated prevailing wage determinations for common relocation areas
Employee Education
Train employees on their reporting obligations
Explain the serious consequences of unreported moves
Provide clear instructions on how to report address changes
Immediate Actions
Employers should consider taking the following steps to help address potential compliance gaps:
Conduct an Audit: Review current employee addresses across all systems to identify discrepancies
Implement Reporting Procedures: Establish clear processes for employees to report address changes
Update Policies: Revise employment agreements and handbooks to include specific address change obligations
Train Teams: Educate HR, payroll, and management on immigration compliance requirements for remote work
Engage Immigration Counsel: Work with experienced immigration attorneys to assess current compliance and develop remediation strategies where necessary
Conclusion
The intersection of remote work flexibility and immigration compliance creates challenges for U.S. employers. While remote work offers benefits, it also comes with legal obligations. Employers who proactively address these compliance requirements may avoid costly penalties while maintaining the flexibility that makes them competitive in today’s talent market.
A strategy for maintaining compliance is treating address changes as immigration events requiring immediate attention, not merely administrative updates. By implementing robust monitoring and reporting systems, employers may be able to harness the benefits of remote work while complying with their immigration and labor law obligations.
This article provides general guidance on immigration compliance matters. Employers should consult with experienced immigration counsel to address specific situations and ensure compliance with current regulations.
European Court of Justice Upholds Decision Annulling Harmonized Classification and Labeling of Titanium Dioxide
On August 1, 2025, the European Court of Justice (ECJ) issued a judgment upholding the 2022 decision of the General Court annulling the 2019 harmonized classification and labeling of titanium dioxide as a carcinogenic substance by inhalation in certain powder forms. As reported in our December 6, 2022, memorandum, the court annulled the European Commission’s (EC) decision to classify titanium dioxide as a suspected human carcinogen. The French government and the EC appealed the decision, arguing that the court exceeded the limits of permissible judicial review of an EC decision and that the court incorrectly interpreted the concept of “intrinsic properties” as it appears in the Classification, Labeling, and Packaging (CLP) Regulation.
Background
In 2016, the competent French authority submitted a proposal to the European Chemicals Agency (ECHA) to classify titanium dioxide as a category 1B carcinogenic substance (carcinogenic to humans). In 2017, ECHA’s Committee for Risk Assessment (RAC) adopted an opinion classifying titanium dioxide as a category 2 carcinogen (suspected human carcinogen), including the hazard statement “H 351 (inhalation).” On the basis of RAC’s Opinion, the EC adopted Regulation 2020/217, implementing the harmonized classification and labeling of titanium dioxide, recognizing that the substance was suspected of being carcinogenic to humans, by inhalation, in powder form containing one percent or more of particles of a diameter equal to or less than ten micrometers (µm). The transition period for adoption of these changes ended October 1, 2021. The applicants, in their capacity as manufacturers, importers, downstream users, or suppliers of titanium dioxide, brought actions before the General Court for the partial annulment of Regulation 2020/217.
The General Court held that the requirement to base the classification of a carcinogenic substance on reliable and acceptable studies was not satisfied. According to the press release, in recognizing that the results of a scientific study on which it based its opinion on the classification and labeling of titanium dioxide were sufficiently reliable, relevant, and adequate for assessing the carcinogenic potential of that substance, RAC committed “a manifest error of assessment.”
ECJ Judgment
According to ECJ’s August 1, 2025, press release, the ECJ “upholds the judgment of the General Court and the annulment of the contested classification of titanium dioxide as a carcinogen.” In its judgment, the ECJ notes that although the lower court erred in finding that “it was for it to assess the appropriateness of the choice of the standard density value of titanium dioxide particles used by the RAC for the purposes of applying the Morrow calculation, it did not err in law in holding that the RAC had failed to take into account all the relevant factors in order to calculate the lung overload for the purposes of the assessment of the Heinrich study by means of that calculation.” The press release states that according to the ECJ, “even though the General Court exceeded the limits of its judicial review, the annulment of the contested classification and labelling is nevertheless justified.” The lower court “was fully entitled to hold that the RAC had failed to take into account all the relevant factors for the purposes of assessing the scientific study in question.”
As reported in our March 11, 2025, blog item, the European Union (EU) Advocate General (EU AG) recommended in February 2025 that the ECJ overturn the lower court’s decision. EU AGs are responsible for presenting, with complete impartiality and independence, opinions in assigned cases, and their opinions are non-binding.
Beltway Buzz, August 8, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
Congress: See You in September. Things will be a bit quieter in Washington, D.C., in the coming weeks, as members of the U.S. Congress are currently home for the August recess. Lawmakers are expected to return to Capitol Hill on September 2, 2025. Upon their return, Republicans will focus on confirming President Donald Trump’s executive and judicial branch nominees. Additionally, Congress will need to work on legislation to fund the federal government beyond the current September 30, 2025, deadline. In other words, readers should prepare for multiple Buzz updates relating to continuing resolutions and potential government shutdowns.
Lucas Confirmed. Shortly before heading home for recess, the U.S. Senate confirmed the nomination of Andrea Lucas, on a 52–45 party-line vote, for another term on the U.S. Equal Employment Opportunity Commission. Currently serving as acting chair of the Commission, Lucas’s new term will expire on July 1, 2030. As a reminder, President Trump has nominated Brittany Panuccio to fill one of the three vacancies on the Commission. Panuccio’s nomination awaits a vote on the Senate floor, and her confirmation would restore a functioning quorum to the Commission.
DOJ Issues Memo on DEI and Discrimination. On July 29, 2025, Attorney General Pam Bondi issued a memorandum to all federal agencies, titled, “Guidance for Recipients of Federal Funding Regarding Unlawful Discrimination.” While the guidance is directed toward public and private entities receiving federal funds, it may be helpful to all employers as it provides insights into the administration’s views on workplace discrimination relating to diversity, equity, and inclusion (DEI). The guidance contains “non-binding suggestions to help entities comply with federal antidiscrimination laws and avoid legal pitfalls.” It focuses on four areas that the U.S. Department of Justice (DOJ) states are unlawful: granting preferential treatment based on protected characteristics (e.g., scholarships, internships, mentorships, etc., exclusively available to a specific racial group); use of proxies or neutral criteria that serve as substitutes for consideration or protected characteristics (e.g., recruitment strategies that focus on a specific geographic areas or institutions, primarily because of their racial composition rather than other legitimate factors); segregation based on protected characteristics (e.g., race-based training sessions, mandating representation of specific groups in candidate pools); and training programs that promote discrimination or hostile environments (e.g., race-based training or training that stereotypes individuals based on protected characteristics).
NLRB Acting GC Clarifies Deferral Policy. On August 7, 2025, William Cowen, acting general counsel for the National Labor Relations Board (NLRB), issued a memorandum to the Board’s regional offices, titled, “Guidance for Deferring Unfair Labor Practice Cases.” Cowen writes, “At a time when we face decreasing staffing levels and a steady case intake, it is imperative that we maximize and streamline our deferral program to avoid protracted investigation and litigation of disputes that can be (and often are) resolved through the negotiated contractual grievance machinery.” Accordingly, the memo clarifies that regional offices should defer cases when “the initial evidence demonstrate that there is a reasonable chance that the parties can either resolve the dispute or, at the very least, set it to rest, using their contractual grievance-arbitration procedure.” The guidance further eschews quarterly status checks, inquiring about the status of the grievance, in favor of requiring the parties to file biannual status reports on March 15 and September 15.
Bipartisan Bill Would Discourage “Offshoring” of Call Centers. Senators Reuben Gallego (D-AZ) and Jim Justice (R-WV) have introduced the “Keep Call Centers in America Act of 2025” (S. 2495). The bill loosely borrows from the Worker Adjustment and Retraining Notification (WARN) Act by requiring employers to provide notice to the secretary of labor within at least 120 days before relocating a call center or contracting call center work outside of the United States. Employers that fail to provide this notice can be fined up to $10,000 for each day of violation. In turn, the secretary of labor would publish a list of call centers that have been offshored, and employers appearing on the list would be ineligible for federal grants or loans for up to five years after appearing on the list. Federal contracts will require all call center work performed in connection with that contract or subcontract to be performed in the United States.
OFCCP Sets New Veteran Hiring Benchmark. What is left of the Office of Federal Contract Compliance Programs (OFCCP) has set its annual Veteran Hiring Benchmark at 5.1 percent, effective July 30, 2025. The new benchmark is down—barely—from the 5.2 percent mark that took effect on March 31, 2024. Although the administration has rescinded Executive Order 11246 and has proposed, through its fiscal year (FY) 2026 budget justification, the transfer of enforcement of the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) to the U.S. Department of Labor’s Veterans’ Employment and Training Service, covered federal contractors are still required to establish written affirmative action plans under VEVRAA.
Lincoln, What Were You Thinkin’? Don’t like paying income taxes? Blame President Lincoln. This week in 1861, President Abraham Lincoln signed into law the Revenue Act of 1861, which instituted the United States’ first national income tax. In need of revenue to fund the Civil War, Congress passed the act to implement a flat 3 percent tax on incomes above $800 (about $29,000 today). The law wasn’t terribly successful, mainly because there was no effective way for the government to collect the taxes. Accordingly, the law was replaced by the Revenue Act of 1862, which instituted a progressive income tax of 3 percent on income over $600 and 5 percent on income over $10,000. Importantly, to facilitate the collection of taxes, the 1862 law established within the U.S. Department of the Treasury the “Office of the Commissioner of Internal Revenue,” a precursor to the Internal Revenue Service. A third law, the Revenue Act of 1864, added another tax bracket and expired in 1873. But all that money generated from income taxes proved too tempting for Congress, so they eventually passed the Wilson-Gorman Tariff Act of 1894, which reinstituted a 2 percent national income tax, but was ruled unconstitutional by the Supreme Court of the United States in Pollock v. Farmers’ Loan & Trust Company (1895). Finally, the Sixteenth Amendment of the U.S. Constitution, ratified in 1913, overruled Pollock and allows for the collection of income tax.
The Buzz will be on hiatus next week but will return on August 22, 2025.
Tax-Loss Harvesting Part III: Investment Strategies
Taxpayers invest to make money and hope to earn a decent return on their investments. Tax-loss harvesting can be used as part of a taxpayer’s overall investment strategy without affecting investment returns, while offsetting tax otherwise due on capital gains.[1] In this part of the series, I look into some popular investment strategies that are often combined with tax-loss harvesting methods.
First, what is meant by “standalone loss harvesting”?
“Standalone loss harvesting” is when a taxpayer sells loss assets to “mop up” tax otherwise due on capital gains but ignores the reinvestment of sales proceeds. Without reinvestment, however, a taxpayer’s portfolio will shrink over time to the point when no securities are left from which the taxpayer can harvest losses.
For these reasons, it is unusual for a taxpayer to engage in standalone loss harvesting. Taxpayers typically reinvest their sales proceeds in accordance with their preferred investment strategies. Two of the most common strategies are “direct indexing” and “long-short portfolios.” These investment techniques support taxpayers who buy securities to replace those they sell from their portfolios, while allowing them to continue to track a specific designated benchmark index (either a public or custom index).
Explain the popular investment strategies taxpayers use in combination with tax-loss harvesting approaches?
The investment strategies available to taxpayers are varied and extensive. For purposes of our discussion, I will focus on four strategies that can be followed separately or combined. First, a taxpayer can invest in a passive fund where the taxpayer simply holds an investment in that fund. Second, a taxpayer can hold, in their own account, a securities portfolio that consists of shares of stock that replicate a broad-based index. Third, a taxpayer can engage in what is referred to as a long-short strategy where the taxpayer holds both a long portfolio and a short portfolio. And fourth, a taxpayer can combine a long-short portfolio and an investment in a passive fund that replicates a broad-based stock index. Each of these approaches have advantages and disadvantages, which I discuss below.
Passive Fund
As a starting point, a taxpayer can invest in a passive fund that replicates a broad-based stock index. This passive investment exposes the taxpayer to general market risk. The taxpayer has no decision-making authority with respect to the stocks held in the fund. The only decision is whether, where, and when to keep or sell the shares in the fund. There is no direct connection between a passive fund investment and tax-loss harvesting, but a taxpayer who sells fund shares can use the capital gain or loss as part of a tax-loss harvesting strategy.
Direct Indexing
A popular variation on passive fund investing is direct indexing. With direct indexing, a taxpayer holds an actively managed securities portfolio that replicates a broad-based stock index or a custom mix of securities. The portfolio is structured to hold enough stocks to track the designated index, but unlike holding shares in a passive fund, taxpayers can control when to buy, sell, or otherwise dispose of individual stocks. The taxpayer has the flexibility to sell gain stocks and mop up the tax on capital gains by selling loss stock. Short-term losses can be used to mop up short-term gains, and long-term losses can be used to mop up long-term gains. When stocks are sold, new stocks are purchased and added to the portfolio, so the portfolio continues to track the specified index.
Long-Short Strategy
Another common investment strategy involves setting up two different portfolios: one long portfolio and one short portfolio. Referred to as the “long-short strategy,” these two portfolios allow a taxpayer to benefit from either a rising or declining market.
Long-Short Portfolio with Passive Direct Index Fund
A related strategy combines long-short portfolios with a passive investment in a broad-based index fund. The taxpayer can benefit from market movements (by holding the index fund) which tracks general market trends. The taxpayer can also benefit from the long-short managed portfolios that provide the taxpayer with a “market-neutral position.”
So, let’s get into some of the details now.
What is direct indexing?
In direct indexing, a taxpayer establishes a “benchmark portfolio,” a diversified portfolio that tracks a custom or benchmark index, such as the S&P 500 or the Russell 1000 (benchmark index). When the taxpayer holds a benchmark index portfolio, the portfolio is exposed to market fluctuations so that portfolio movements basically track general market trends, or those of the particular industry, sector, geographic region, or other factors that the portfolio is modeled after.[2]
The taxpayer sells securities from the benchmark portfolio to generate gains and harvest losses. To ensure that the portfolio continues to track the benchmark index, the taxpayer typically buys another security or securities included in the benchmark index to replace those securities sold. Buying the same security sold at a loss can trigger the wash sales rule, so taxpayers avoid reacquiring substantially identical securities. The wash sales rule was addressed in Part II of this series.
What is a long-short strategy?
With a long-short strategy, the taxpayer establishes two separate investment portfolios: a long portfolio and a short portfolio. The long portfolio holds securities that the taxpayer hopes will benefit from a rising market. The short portfolio holds short positions that the taxpayer hopes will benefit from a declining market. If a taxpayer has a market-neutral strategy, holding the two portfolios in a market-neutral position protects the taxpayer from market movements, regardless of whether the market goes up or down. In other words, such a long-short strategy would establish a market-neutral position. When taxpayers also want to track an index, such as the S&P 500, this portfolio would not be market neutral.
Who invented long-short portfolios?
The first long-short equity fund is said to have been formed in 1949 by Alfred Winslow Jones. His objective was to “hedge investors from downside market swings by shorting certain stocks he expected to perform relatively poorly.”[3] Jones reportedly said, that with long and short portfolios, the taxpayer could “buy more good stocks without taking as much risk as someone who merely buys.”[4]
The long-short market-neutral position means that the portfolios generates investment returns whether the market moves up or down. This is because being both long and short reduces the taxpayer’s sensitivity to market volatility. As a result, long-short strategies “historically generate higher risk-adjusted returns with lower volatility” than simply holding only long positions in the equity markets.[5]
How are long-short portfolios structured?
The long portfolio is typically constructed using “low risk, high quality stocks across a highly diversified long-short global equity portfolio of large and small cap stocks.”[6] The short portfolio is typically constructed using borrowed securities that the taxpayer believes will decrease in value. The borrowed securities in the short portfolio, referred to as “short positions,”[7] typically “are riskier and lower quality”[8] securities than those included in the long portfolio.
The long and short portfolios are not equal in size. To provide the taxpayer with a net “long” market exposure, the long portfolio is generally larger than the short portfolio.[9] A taxpayer with a larger long portfolio is likely to be less sensitive (than equal long-short portfolios) to market movements and better able to withstand a declining market.
How is the short portfolio funded with short positions?
To sell securities short, the taxpayer borrows securities from a securities dealer and uses them to cover the short position by delivering them to a buyer. The taxpayer/borrower then enters into a loan agreement with the securities dealer/lender to return the borrowed shares (delivered to the buyer) at the end of the loan period, paying the lender a fee to borrow the securities plus the value of any dividends received on the borrowed shares (referred to as “in lieu of payments”) while the loan is outstanding. At the end of the loan period, the taxpayer/borrower closes out the short positions by purchasing securities in the open market and repays the loan.
If the taxpayer purchases the securities at a price that is lower than the price the taxpayer initially paid to the lender to borrow the securities,[10] the taxpayer profits from the transaction. If the market value of the borrowed securities has declined in value, the taxpayer/borrower will close out the loan with cheaper securities. Buying cheaper securities allows the taxpayer to generate a profit.[11] If, on the other hand, the market value increases, the taxpayer delivers more expensive securities to the lender, to close out the loan, generating a loss.
What are some benefits of holding long-short portfolios?
Long-short portfolios allow the taxpayer to (1) profit from appreciation in both portfolios; (2) harvest tax losses to apply against gains to optimize net after-tax returns; (3) acquire replacement securities that track the benchmark index; and (4) (properly structured) avoid application of the wash sales rule.
First, when the taxpayer combines tax-loss harvesting with both a long and a short portfolio, the taxpayer levers up, and the leverage increases standard deviation (from the mean), which increases the likelihood that the portfolios might overperform or underperform against the benchmark index.
Second, because the taxpayer holds more positions, holding a long-short portfolio increases the taxpayer’s opportunities to generate more capital gains and losses (which in turn creates more opportunities to loss-harvest losses).[12]
And third, a taxpayer with long and short portfolios can isolate the gains or losses on the portfolio securities from the portfolio’s overall sensitivity to general market movements. Isolating gains and losses on portfolio securities is referred to as “alpha,” while the portfolio’s sensitivity to overall market movements is referred to as “beta.” Holding both a long and a short portfolio—each of which tracks the same benchmark index but with different stocks—provides alpha. Depending on the taxpayer’s investment strategy, the strategy can—but need not—remove beta from the taxpayer’s portfolio.
Explain what you mean by alpha and beta?
“Alpha” and “beta” are the names given to two key investment metrics used to evaluate an investment’s performance and risk profile.
Alpha refers to returns (positive or negative) from the securities in the taxpayer’s investment portfolio when compared to a benchmark index such as the S&P 500. Alpha shows whether an investment is outperforming (positive alpha), or underperforming (negative alpha) compared to the designated benchmark. It is used to assess whether an investment adds value beyond those that would be available if the taxpayer were a passive investor benefiting from or hurting from general market movements. It is an important metric in evaluating whether actively managed funds are performing better than the market as a whole.
Beta refers to portfolio-wide volatility that results from overall market movements. Beta measures how sensitive the investment is to changes in market movements. It helps taxpayers assess risks and manage the volatility of their portfolio in relation to their risk profile. Because beta is based on historical market data, it is not a useful metric in assessing the future performance of the investment. A beta of 1, for example, shows that the investment moves with the market; a beta of less than 1 indicates lower volatility for the investment; and a beta of more than 1 shows the investment has higher volatility than the market as a whole.
Alpha shows how well an investment performs against benchmark expectations. Beta refers to how much the investment fluctuates when compared to market movements. Alpha measures excess returns while beta measures market sensitivities. These metrics are used to evaluate whether an investment meets the taxpayer’s goals for risks and returns.
What is “tax alpha”?
“Alpha” is a measure of portfolio-related performance. Similarly, “tax alpha” is a measure of tax efficiency in how the taxpayer’s investments perform. That is, whether the taxpayer’s after-tax return is improved (or reduced) when they use tax-efficient strategies in conjunction with their portfolio management strategies. In other words, tax alpha is a measure of the extra benefits accrued by an investor who is aware of the tax consequences of their trading decisions.
Can tax alpha be increased through tax-loss harvesting?
Yes. In fact, the desire to increase tax alpha is the raison d’être of tax-loss harvesting. Harvesting tax losses allows taxpayers to sell their depreciated securities to offset capital gains from appreciated securities. Tax alpha can also be increased, for example, when taxpayers hold capital assets for the long-term holding period; which, in turn, can reduce taxable income and increase after-tax returns.
Is there a “tax beta”?
No. As a measure of market volatility in a portfolio—it allows taxpayers to evaluate the additional risks they take on with a given investment—and as such can be used to evaluate tax-loss harvesting opportunities.
Tracking portfolio beta in conjunction with tax alpha can aid taxpayers in understanding the ways in which their investments fluctuate, and thus help them to understand the combined effect of their portfolio management and tax-efficiency strategies.
Digging deeper into this concept; combining long-short portfolios with tax-loss harvesting can provide taxpayers with opportunities to harvest more losses while deferring tax on more gains. It is possible that long-short strategies could result in positive tax alpha because taxpayers may be able to defer short-term gains on long positions until such time as these qualify as long-term gains for tax purposes.[13] This, in turn, could create an additional tax alpha opportunity on a specific investment in different tax years. It is possible that taxpayers who seek to maximize returns might hold portfolios with different securities than those that they might otherwise hold to minimize risk.
As a practical matter, AQR Capital Management (an investment advisory firm that writes about “tax-aware” investing) suggests that a portfolio that focuses on taxes might not be that different from a portfolio that is constructed without a specific tax focus.[14]
You mentioned an investment strategy that adds a passive direct index fund to long-short portfolios. What about that?
According to AQR, a taxpayer can receive additional tax benefits by adding a passive direct index fund to active long-short portfolios. This investment strategy takes alpha and beta into consideration. As AQR notes, “The turnover of a traditional active strategy causes capital gain realizations on both the active and market components of the strategy returns.”[15] On the other hand, AQR also notes that a “strategy that separates alpha from beta is aimed at the active exposures and enables the deferral of capital gain realizations on the passive market exposure.”[16]
Do the tax-loss harvesting opportunities decline over time?
Maybe. Depending on the taxpayer’s investment strategy, the pool of securities from which to harvest tax losses can decline over time. If a taxpayer simply harvests losses without also replacing the securities, available loss securities decline over time so that the taxpayer ultimately runs out of loss securities to sell.
A taxpayer engaged in direct indexing typically has more tax losses in the early years of the investment strategy than in later years. As was noted in The Tax Alpha Insider blog, “Tax alpha starts with a bang especially in volatile years and compounds but ultimately decays as the portfolio basis resets lower and lower following each harvested loss.”[17] This is because a taxpayer typically replaces loss securities with other benchmark securities at a higher tax basis. After all, the taxpayer is anticipating that the overall value of the benchmark index securities they hold in their long portfolio will increase over time. At a future date, a direct indexing taxpayer is likely to hold mostly gain positions.
As a result, a taxpayer who combines tax-loss harvesting with long-short portfolios, as compared to a direct indexing portfolio, is arguably more likely to benefit from tax-loss harvesting over time. Holding both a long and a short portfolio gives the taxpayer more opportunities to generate losses on the front end so that their ability to harvest losses might not decline over time. Decreasing leverage quickly can become difficult, however, because of gains that build up in the short portfolio.
What are some costs and risks associated with tax-loss harvesting and investing?
Some of the following observations on costs and risks are inherent in investing generally; they do not relate to a tax-loss harvesting strategy specifically.
All securities transactions have transaction costs. Obviously, when a taxpayer holds actively managed accounts, they will incur more costs than when they hold passive investments in, say, a broad-based index fund.[18] Direct indexing and long-short portfolios are actively managed portfolios, so they incur management and trading fees, as well as the costs associated with the leverage itself. Direct indexing involves less trading than a long-short portfolio so their associated trading-related fees will be lower than those associated with long-short strategies. Index funds, as passive investments, have minimal transaction costs compared to direct indexing and long-short portfolios.
When a taxpayer’s investment strategy includes short positions, this increases the taxpayer’s overall risk profile. In addition, leverage increases the amount of deviation from the benchmark index, up or down.
Taxpayers with short portfolios enter into short sales, borrowing securities to cover their short positions. They have obligations to return the borrowed securities to their lenders at the end of the loan period. They incur short sale fees and make substitute dividend payments (“in lieu of” payments) to their lenders equal to the amount of any dividends they received on the borrowed securities while the loan is outstanding. If the taxpayer is shorting in one portfolio, they can unintentionally be causing constructive sales, straddles or wash sales in other portfolios—possibly undoing some of the purported tax efficiencies.
Given the additional leverage in long-short portfolios, a taxpayer’s market risks increase. For example, long-short portfolios are likely to generate more capital losses than they would if the taxpayer were simply engaged in direct indexing. Long-short portfolios can underperform or overperform direct indexing[19] because holding both portfolios allows the taxpayer to hold more investment positions.
[1] All investment strategies carry some degree of risk. Taxpayers need to be prudent and stay well-informed on all their options, the credentials of their professional advisors, and all aspects of related laws in their jurisdiction.
[2] Matt Levine, “You Want Some Stocks That Go Down,” Bloomberg, (Oct. 28, 2024).
[3] AQR, Capital Management, “Building A Better Long-Short Equity Portfolio,” (Jul. 2013).
[4] Institutional Investor (Aug. 1968), as reported in “Building A Better Long-Short Equity Portfolio,” AQR Capital Management LLC, (Jul. 2023).
[5] “Building A Better Long/Short Equity Portfolio,” Gabriel Feghali, Jacques A. Friedman and Daniel Villalon, AQR Capital Management LLC, (Jul 1, 2013).
[6] “Building A Better Long/Short Equity Portfolio,” Gabriel Feghali, Jacques A. Friedman and Daniel Villalon, AQR Capital Management LLC, (Jul 1, 2013).
[7] “A short, or a short position, is created when a trader sells a security first with the intention of repurchasing it or covering it later at a lower price. A trader may decide to short a security when they believe that the price of that security is likely to decrease in the near future,” available at https://www.investopedia.com/terms/s/short.asp
[8] “AQR Delphi Long-Short Equity: A Defensive and Diversifying Strategy,” AQR Capital Management, LLC, (2022, Q4).
[9] “AQR Long-Short Equity Fund, Seeking Equity-Like Returns with Less Volatility,” AQR Capital Management, LLC, (n.d.)
[10] For a discussion of short sales, see Kramer and Mowbray, Financial Products: Taxation, Regulation and Design (2025), available at https://shoptax.wolterskluwer.com/en/financial-pr-tax-reg-dsgn-2025.html.
[11] SEC v. Hwang, 692 F. Supp. 3d 362. (2d. Cir. Sept. 19, 2023). See also, Overstock.com, Inc., v. Gradient Analytics, Inc., 151 Cal. App. 4th 688. (May 30, 2007).
[12] AQR, “Tax-Aware: Loss Harvesting or Gain Deferral? A Surprising Source of Tax Benefits Of Tax-Aware Long-Short Strategies,”(2024, Summer).
[13] AQR, “Tax Aware: Looking Under the Hood of Long/Short Tax-Aware Strategies,” (Oct. 27, 2023).
[14] AQR, “Tax Aware: Looking Under the Hood of Long/Short Tax-Aware Strategies,” (Oct. 27, 2023).
[15] AQR, Tax Aware: The Tax Benefits of Separating Alpha from Beta,” (May 14, 2018).
[16] AQR, Tax Aware: The Tax Benefits of Separating Alpha from Beta,” (May 14, 2018).
[17] AQR, “Tax-Aware Long-Short Delivers, The Tax Alpha Insider, Issue 9 (June 2, 2024).
[18] AQR, Making VPFs Work Harder For You (Mar 1, 2024).
[19] AQR, Tax-Aware: Beyond Direct Indexing: Dynamic Direct Long-Short Investing (May 3, 2023).
Court Rules Pension Fund’s Position Was Not ‘So Baseless’ as to Mandate an Award of Attorneys’ Fees
Takeaways
Employers who are pursued by multiemployer pension plans for withdrawal liability often face an uphill battle to recoup the attorneys’ fees for defending such claims.
Steelcase is a good reminder of the judicial reluctance to award attorneys’ fees against a multiemployer pension plan.
ERISA is widely regarded as a remedial statute. As a result, employers who are pursued by multiemployer pension plans for withdrawal liability face an uphill battle when trying to recoup attorneys’ fees (often substantial) incurred in defending such claims. A recent case aptly illustrates this.
Central States, Southeast and Southwest Areas Pension Fund v. Steelcase Inc., No. 24-cv-663 (N.D. Ill. July 31, 2025), is the most recent case in a multiyear saga involving Central States’ practice of calculating withdrawal liability payments using (despite seemingly incontrovertible statutory language to the contrary) post-2014 contribution rate increases. Numerous employers (including several represented by the author) have successfully argued that this practice unlawfully inflated their withdrawal liability payments. Steelcase was one such employer. After prevailing in arbitration over the unlawful practice, Steelcase filed an action in federal district court seeking to enforce the victorious arbitration award.
After Central States suffered a nearly unanimous string of arbitration and district court defeats on this “high contribution rate” issue and while Steelcase’s federal action was pending, the U.S. Court of Appeals for the Seventh Circuit conclusively resolved the issue in Event Media v. Central States, Southeast and Southwest Areas Pension Fund, 135 F. 4th 529 (7th Cir. 2025). In Event Media, the Seventh Circuit held that Central States’ interpretation “ignores the language of the statute.”
After Event Media was issued, Central States conceded that it should have excluded the post-2014 contribution rate increases when calculating Steelcase’s withdrawal liability payments. This resulted in a substantial reduction in Steelcase’s withdrawal liability payments (approximately $2.8 million over the 20-year payment period). Steelcase then filed a motion seeking an award of attorneys’ fees.
Under the applicable standard governing an award of fees in the underlying arbitration, an arbitrator may require a party who contests an arbitration in bad faith to pay the reasonable attorneys’ fees of the other party. Steelcase asserted bad faith on what it described as the Fund’s “opportunistic” and “nonsensical” statutory interpretation. District Court Judge Thomas Durkin disagreed.
While describing the Fund’s position as “undoubtedly weak,” Judge Durkin noted the two arbitration awards in the Fund’s favor (subsequently rejected in federal court) as well as a lack of controlling precedent. Judge Durkin concluded that the legal positions taken by the Fund were not “so baseless that they call out for an award of attorneys’ fees.”
Steelcase further argued that legal fees were recoupable under Federal Rule of Civil Procedure 11. Judge Durkin again sided with the Fund, citing the absence of binding precedent and an issue that the Seventh Circuit described in Event Media as one of first impression. Judge Durkin concluded, “[T]he fact that several arbitrators and district court judges had agreed that the Fund’s statutory interpretation was wrong did not render the Fund’s argument frivolous.” He accordingly denied the employer’s motion for attorneys’ fees.
Steelcase clearly illustrates the obstacles faced by an employer (even one who by any measure was the prevailing party) seeking to recoup attorneys’ fees from a multiemployer pension plan. Numerous arbitrations and district court opinions (including several involving employers represented by the author) had found Central States’ interpretation “simply contrary to the plain language of the statute” prior to the Seventh Circuit ultimately confirming this overwhelming body of case law against Central States. Nonetheless, the district court in Steelcase denied the motion for attorneys’ fees. One could argue that Steelcase principally turned on the absence of binding precedent, and that Steelcase would likely have been decided differently if the underlying events had taken place post-Event Media. One could further surmise that Central States may well change their “high contribution rate” policy at some point. At the end of the day, Steelcase is a good reminder of the judicial reluctance to award attorneys’ fees against a multiemployer pension plan.
Breastfeeding at Work Redefined: Puerto Rico’s New Code Ushers in Major Changes
Takeaways
The groundbreaking Lactation/Breastfeeding Code, signed into law 08.01.25, repeals Law 427-2000 and replaces it entirely, along with multiple other lactation-related laws.
Employees, regardless of whether part-time or full-time, are now entitled to no less than one paid hour per workday to breastfeed their child or express breastmilk, for a minimum of 12 months after returning from maternity leave.
Employers must notify all employees of their rights under the new code.
Puerto Rico has enacted a groundbreaking Lactation/Breastfeeding Code that consolidates in one statute the rights of breastfeeding employees and the responsibilities of employers across the Island.
Signed into law on August 1, 2025, through Senate Bill 476, the “Código de Lactancia de Puerto Rico” (“Code”), repeals Law 427-2000, which was amended earlier this summer. The new Code establishes, for the first time, a comprehensive public policy in favor of breastfeeding and consolidates workplace protections under a single statute.
The new Code goes beyond mere reorganization. It broadens employee entitlements, strengthens employer obligations, and introduces enhanced enforcement mechanisms — including potential civil and criminal liability for noncompliance.
A New Era of Breastfeeding Protections in Puerto Rico
The Code establishes a modernized and comprehensive framework for addressing lactation in the context of maternal and child health. It sets forth breastfeeding as a matter of public policy, acknowledges the individual’s right to choose to breastfeed, and addresses lactation in the workplace.
The Code includes interpretive mandates to guide its application. It provides that all provisions of the Code, its implementing regulations, and any complementary laws must be interpreted in the manner most favorable to the lactating mother.
To promote clarity and consistency in application, the statute includes an entire article dedicated to definitions, setting out 16 defined terms — some of which are newly introduced, while others expand on prior definitions. These include terms such as “lactating mother,” “extraction of breast milk,” “lactation room,” “full-time and part-time work,” “hygienic,” and “safe space.” These definitions are essential for interpreting the law uniformly across both the public and private sectors.
Expanded Workplace Obligations
The Code establishes obligations for both public and private employers to provide working mothers with the opportunity to breastfeed their child or express milk during a reasonable period each workday. While the period must be reasonable based on the employee’s needs, it sets a statutory minimum: the time allowed for this purpose must not be less than one hour per day and must be treated as time worked — meaning it cannot result in any reduction in pay.
This represents a notable expansion from the prior framework under Law 427-2000, as under the new Code, protections expressly expand part-time employees’ rights, who are now also entitled to no less than one paid hour per workday for lactation purposes.
Unlike the prior Law No. 427-2000, which required the presentation of a medical certificate, the Code explicitly states the use of lactation breaks cannot be conditioned on the presentation of a medical certificate. Additionally, the right to use this time applies for at least 12 months following an employee’s return from maternity leave, with the possibility of further extension by employer policy or mutual agreement.
Finally, the Code reiterates the prohibition of retaliation against employees for exercising their rights, including any form of discipline, demotion, negative evaluations, shift changes, or termination based on the use of lactation time.
Infrastructure and Policy Updates
Every employer is now expressly required to provide a dedicated lactation space that meets specific minimum standards. This space must:
Not be a restroom; and
Be equipped with a locking door, seating, electric outlets, refrigeration for limited use of storing breastmilk, and access to water.
These requirements also apply to government buildings, public schools, the University of Puerto Rico, malls, airports, and service centers with significant foot traffic. Private institutions of post-secondary education are also covered.
Existing employer policies should be reviewed and updated accordingly and be clearly communicated to all employees.
Application to Unionized Private-Sector Employees
The Code explicitly allows collective bargaining agreements in the private sector to expand upon the rights it establishes. However, no collective bargaining agreement may reduce or waive the minimum rights and protections established under the Code. This preserves unions’ ability to improve conditions for their members while safeguarding the baseline rights afforded by statute.
Enforcement and Penalties
The Code significantly strengthens enforcement compared to Act 427-2000 by introducing administrative, civil, and criminal penalties for violations. The Office of the Women’s Advocate and the Department of Labor now share authority to investigate and prosecute noncompliance, with regulations to be issued outlining procedures and fines.
Coordination with Federal Law: The PUMP Act and PWFA
In addition to the requirements imposed by Puerto Rico’s new Code, employers must ensure compliance with federal workplace protections, particularly the Providing Urgent Maternal Protections for Nursing Mothers Act and the Pregnant Workers Fairness Act.
Puerto Rico employers should ensure their policies and facilities comply with both local and federal standards, particularly when federal law offers broader protection or covers workers not protected under local law (e.g., interstate employees or remote workers based outside Puerto Rico).
Next Steps for Employers
In light of this major legislative change, employers in Puerto Rico should take prompt action to ensure compliance. Employers should:
Review and revise internal policies, employee handbooks, and collective bargaining agreements to reflect the new Code;
Inspect and, if necessary, upgrade workplace facilities to meet the physical requirements for lactation rooms;
Provide written notice to all employees of their rights under the new law;
Train HR teams, managers, and supervisors to ensure they understand and respect the protections provided by law; and
Consult with legal counsel regarding eligibility for tax incentives.
This significant legislative shift requires immediate attention from employers operating in Puerto Rico.
Civil Rights Enforcement following Columbia’s Settlement with the White House
On July 24, 2025 Columbia University and the White House announced that they had reached a settlement related to Columbia’s alleged violations of Title VI of the Civil Rights Act of 1964, which the administration had used as a basis for, over the past several months, stopping millions of dollars in federal funding to the University. The settlement agreement is wide-ranging: in return for a restoration of federal funding, Columbia has agreed to pay $200 million to the federal government and $21 million to a fund for EEOC claimants, agreed to specific provisions related to hiring, admissions, and student discipline, agreed to a review of its Middle East studies programs for “comprehensive and balanced” content, and agreed to have its adherence to the settlement reviewed by an independent monitor. In a fact sheet, the White House referred to the settlement as “historic.” Observers in higher education, including former Harvard President Lawrence Summers, described it as a “template” for agreements with other universities that are under investigation, and are at risk of–or have already lost–federal funding.[1]
The timing – if not the content – of Columbia’s settlement may be advantageous for colleges and universities seeking to avoid federal investigations and/or federal funding cuts. Institutions on summer break can use the settlement as an opportunity to review their policies and practices, and to consider adjustments that could bring them in line with the administration’s expectations.
In such a review, the following areas of the settlement should be considered and compared with an institution’s existing policies:
Identity-based liaisons for students potentially permitted, at least regarding antisemitism issues. The settlement requires Columbia to have an administrator designated as a “liaison to students concerning antisemitism issues.” As a result, the settlement appears to support outreach to students based on identity, with the goal of creating a pathway for administrators to raise students’ identity-based concerns with University leadership. It is unclear if the administration would support schools maintaining such a liaison for other groups.
Preferences based on protected characteristics are prohibited. The settlement prohibits Columbia from “providing benefits or advantages to individuals on the basis of protected characteristics,” and specifically discusses the elimination of race-based outcomes, such as “quotas” or “diversity targets.” The use of race as a factor in admissions was addressed by the Supreme Court’s 2023 decision in Students for Fair Admission vs. Harvard (SFFA), and the Columbia settlement echoes the administration’s view – expressed in the Department of Education’s February 14, 2025 Dear Colleague Letter – that SFFA’s prohibitions extend to all educational benefits, including scholarships and financial aid and faculty hiring and promotion.
Single-sex housing, bathrooms, and locker rooms must be an option. The settlement requires Columbia to provide women, in particular, with “single-sex housing” upon request and “all-female sports, locker rooms, and showering facilities.” “Female” or “sex” is not defined in the resolution agreement; however, in its January 20 executive order, the administration defined “sex” as an “immutable biological classification” and indicated that whether a person was male or female was determined “at conception.”
International students will continue to be scrutinized. The settlement requires that Columbia review its international student admissions practices and “ensure that international student-applicants are asked questions designed to elicit their reasons for wishing to study in the United States.” It does not indicate the purpose of such a question, or what Columbia should determine based on the applicant’s answer. The settlement also requires Columbia to “take steps to decrease [Columbia’s] financial dependence on international student enrollment” and to provide the federal government, upon request, “with all disciplinary actions involving student visa-holders resulting in expulsions or suspensions” and arrest records of which the University is aware. This disclosure requirement is limited by the University’s obligations under the Family Educational Rights and Privacy Act (FERPA).
Foreign funding will also be scrutinized. The settlement reiterates Columbia’s obligation to report foreign gifts and contracts under Section 117 of the Higher Education Act, and states that the University will “as needed, engage experts on laws and regulations regarding sanctions enforcement, anti-money laundering, and prevention of terrorist financing” to assist them in complying with legal requirements regarding foreign money.
Training on non-discrimination policies should reflect limits on speech. The settlement requires training for all “international and domestic” students on the “the longstanding traditions of American universities” such as “civil discourse” and “values of equality and respect.” Students must agree not to violate non-discrimination policies and Columbia’s training materials should “socialize all students to campus norms and values more broadly.”
Policies must include limitations on protest activities, and measures allowing for the identification of protestors. The settlement requires Columbia to maintain policies that prohibit protests in academic buildings and “other places where academic activities take place”; to require students who are engaged in protests to present University identification to public safety officers upon request; to prohibit “face masks or face coverings” during protests “for the purpose of concealing one’s identity”; and to allow for discipline of student groups in addition to individual students.
Engagement with police expected. The settlement requires Columbia to maintain at least 36 public safety officers “with the ability to remove individuals from campus and/or arrest them when appropriate” and to continue its existing Memorandum of Understanding with the New York City Police Department.
Institutions across the U.S. should review the above-listed aspects of the Columbia settlement while reviewing their own policies and practices this summer.
[1] See What Columbia’s Trump settlement could mean for Harvard, higher ed – NBC New York
NYC Limits Housing Discrimination Based on Criminal Background: Is ‘Criminal History’ History?
Takeaways
The NYC Fair Chance Housing Act prohibits discrimination against prospective and current housing occupants based on criminal history, with certain exceptions.
The prohibition covers most housing providers authorized to sell, rent, or lease housing accommodations.
Providers should consider reviewing their policies and procedures related to the process of requesting and reviewing criminal histories of prospective purchasers, renters, and lessees to ensure compliance with the Act.
Housing providers are required to comply with the New York City Fair Chance Housing Act, Local Law 24, which prohibits discrimination toward prospective and current housing occupants based on criminal history, if they choose to do a background check. Covered providers must ensure they are aware of the Act’s parameters.
Who Is Covered?
Compliance under the Act extends to owners, lessors, lessees, sublessees, assignees, co-op and condo boards, and agents, employees, and real estate brokers of housing agencies authorized to sell, rent, or lease housing accommodations (“Providers”). The Act also applies to prospective purchasers, renters, and lessees of housing accommodations.
Prohibited Considerations
Providers are prohibited from engaging in the following conduct based on criminal history:
Discriminating against any individual in the terms, conditions, or privileges of a sale, rental, or lease;
Refusing to sell, rent, lease, approve the sale, rental, or lease or to deny a housing accommodation;
Representing to any individual that any housing accommodation is not available for inspection, sale, rental, or lease;
Directly or indirectly excluding applicants with a criminal history in advertisements for the purchase, rental, or lease of such a housing accommodation; and
Conducting criminal background checks in connection with a housing accommodation, except as permitted below.
Permitted Considerations
Of course, the Act does not require Providers to completely ignore the potential for a legitimate adverse action based on criminal history. Providers may:
1. Consider “reviewable criminal history” including:
a. Convictions registered on the New York, federal, or other jurisdictional sex offense registries;
b. Misdemeanor convictions where fewer than three years have passed from the date of release from incarceration, or the date of sentencing for an individual who was not sentenced to a period of incarceration; and
c. Felony convictions where fewer than five years have passed from the date of release from incarceration, or the date of sentencing for an individual who was not sentenced to a period of incarceration.
2. Take any lawful action against an individual for acts of physical violence against other residents or other acts that would adversely affect the health, safety, or welfare of other residents; and
3. Make statements, deny housing accommodations, or conduct criminal background checks where required or specifically authorized by applicable laws.
Criminal History Review Process
Providers must give prospective and continuing occupants notice of their intent to conduct criminal background checks, along with a written copy of the city’s Fair Chance Housing Notice.
Providers may conduct criminal background checks only after:
A seller has accepted an offer; or
The Provider has provided the prospective occupant(s) a rental or lease agreement.
Providers may revoke an offer based on a “material” omission, or misrepresentation, or change in qualifications for tenancy that was unknown at the time of the conditional offer.
After providing notice of intent to conduct a criminal background check, but before taking an adverse action based on the results, Providers must provide the individual:
Written copies of any information or records about reviewable criminal history they intend to rely on for the adverse action;
Written copies of any information about the individual’s criminal history received, other than their reviewable criminal history, even if it was not considered; and
Notice that the individual has five business days to identify errors in the criminal history information and submit supplemental information in support of their application.
Additionally, prior to taking any adverse action based on reviewable criminal history, Providers must conduct an individualized assessment of the individual’s reviewable criminal history and any timely information submitted by the individual. This assessment must be memorialized in writing, with the reason for the adverse action, including:
1. A copy of supporting documents that were reviewed; and
2. A written statement of the reason for the adverse action, demonstrating:
a. How the individual’s reviewable criminal history is relevant to a legitimate business interest of the property owner; and
b. How any information submitted in support of such individual’s tenancy was considered by them.
Potential Liability
Providers can be liable for civil penalties for relying on information other than reviewable criminal history. Further, Providers can be liable for third party violations if third parties are used to conduct consumer background check or criminal background checks on their behalf.
Next Steps for Providers
New York City Providers should consider reviewing their policies and procedures related to the process of requesting and reviewing criminal histories of prospective purchasers, renters, and lessees to ensure compliance with the Act. In addition, if Providers are using consumer reporting agencies to run the criminal background checks, they must ensure compliance with the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681, et seq., and any applicable state mini-FCRA laws related to obtaining consent.
Massachusetts Makarevich: ‘Understandable’ Separation Agreement Language Aids Employer in Unpaid Wages Case
Takeaways
For Massachusetts employers, separation agreements that use clear and understandable language are more likely to be enforced. In Makarevich v. USI Ins. Services, a Massachusetts federal district court relied on a clearly worded waiver in a separation agreement to dismiss a former employee’s claims of discrimination and unpaid wages under the Massachusetts Wage Act.
Agreements releasing Massachusetts Wage Act claims are more likely to be enforced if they use clear and understandable language and explicitly refer to the statute.
Employers should consider consulting counsel to review the enforceability of severance or separation agreement templates.
In Makarevich v. USI Ins. Services, LLC, a Massachusetts federal district court judge dismissed a former employee’s claims of discrimination and unpaid wages under the Massachusetts Wage Act, concluding that she had knowingly waived them by signing a clearly worded Separation Agreement and General Release (“Separation Agreement”) in exchange for certain separation benefits. No. 1:25-cv-10434-JEK (D. Mass. July 14, 2025). Makarevich highlights the importance of using unmistakable language “understandable to the average individual” to ensure the enforceability of a release.
Background
The plaintiff, Ellen Makarevich, worked for USI Insurance Services, LLC, until June 8, 2023. USI offered Makarevich a proposed Separation Agreement on her last day of employment, which she received one week to review. Makarevich signed the Separation Agreement on June 23, 2023 (“Effective Date”) in exchange for separation benefits.
By signing the Separation Agreement, Makarevich agreed to waive her right to bring claims for unpaid wages under the Massachusetts Wage Act, among other claims. In doing so, she expressly affirmed that USI owed her no wages or compensation of any kind as of the date the Separation Agreement was executed.
Despite releasing claims arising from her employment in the Separation Agreement, Makarevich later filed a Charge of Discrimination with the Massachusetts Commission Against Discrimination (MCAD). After the MCAD concluded that she had waived her rights by signing the Separation Agreement and dismissed the Charge, Makarevich filed suit in Middlesex Superior Court, alleging discrimination and unpaid wages for work between March 1, 2022, and Jan. 29, 2025. USI removed the case to the Massachusetts District Court, where USI moved for judgment on the pleadings with respect to Makarevich’s discrimination and unpaid wages claims.
Decision
The district court dismissed with prejudice Makarevich’s claims for discrimination and unpaid wages that predated the Effective Date based on her execution of the Separation Agreement. The court emphasized that, by signing the Separation Agreement, Makarevich affirmed she had read and understood its contents, had ample opportunity to review it, and signed it voluntarily. On Makarevich’s discrimination claims, the court highlighted that she had agreed to “release, waive, and forever discharge” all claims against USI “regarding any matter arising on or before the date of [her] execution of [the] Agreement,” which included, but was not limited to, claims arising under federal and state antidiscrimination laws.
The court similarly concluded that Makarevich had waived her right to pursue unpaid wages predating the Effective Date. It reasoned that Makarevich had expressly acknowledged receiving full compensation as of the date of execution, which included “all wages, commissions, bonuses, sick pay, personal leave pay, severance pay, vacation pay, or any other form of remuneration.” Based on this language, the court deemed the waiver “clear and unmistakable” and “understandable to the average individual,” making it enforceable even without an explicit reference to the Massachusetts Wage Act.
Turning to Makarevich’s post-Effective Date claims, the Court ruled her complaint lacked sufficient factual allegations to support a claim for relief. Based on Ms. Makarevich’s pro se status, the Court allowed her to file an amended complaint for those allegations.
Key Takeaways for Employers
Makarevich serves as an important reminder for employers to carefully review and update their severance and separation agreement templates to ensure enforceability. Specifically, employers should:
Ensure that any release of claims under the Massachusetts Wage Act is clearly and explicitly stated, using language that is easily understandable to the average employee.
Provide employees with adequate time to review proposed agreements in accordance with state and federal law.
Clarify that employees should not execute severance or separation agreements until after their last day of employment, absent unique circumstances.
DOL Resurrects PAID Program: Employers Can Self-Report, Resolve Violations
Takeaways
DOL’s Wage and Hour Division has reinstated its Payroll Audit Independent Determination program, which allows employers to self-audit, voluntarily report, and remedy statutory violations through the agency.
The program has been expanded to include certain potential FMLA leave violations.
Employers considering using PAID to resolve potential violations should consult with counsel to discuss the benefits and risks.
The Department of Labor’s Wage and Hour Division (WHD) has relaunched its voluntary Payroll Audit Independent Determination (PAID) program, the agency announced July 24, 2025. The PAID program is an opportunity for employers to resolve certain statutory violations without litigation. By self-auditing their practices and voluntarily reporting violations to WHD, employers can settle violations quickly, without incurring liquidated damages or civil penalties and can obtain a binding release of certain claims.
Through PAID, employers can settle Fair Labor Standards Act (FLSA) minimum wage and overtime violations. The program has also been expanded to allow employers to resolve and remedy certain potential violations of Family and Medical Leave Act (FMLA) leave requirements. (WHD enforces both statutes.)
WHD first rolled out PAID in April 2018, but the Biden Administration discontinued the program in January 2021.
How PAID Works
To participate in the relaunched PAID process, an employer must start with a mandatory review of WHD compliance assistance materials, then self-audit its pay or FMLA compliance practices to identify potential violations. The employer identifies affected employees, calculates back wages and other remedies owed to them, and reports its findings to WHD.
WHD will review the employer’s report, including the back-wage and remedies calculations, and provide a summary of unpaid wages or other relief due. The employer must pay affected employees within 15 days of receiving WHD’s summary of unpaid wages. For FMLA violations, the employer must make all remedies within 15 days of receiving the WHD summary of remedies due.
Who Can Participate?
There are limits to employers’ use of the PAID program. An employer cannot participate if it is under WHD investigation or in litigation (either a private lawsuit or agency enforcement action) alleging violations of the same pay or leave practices at issue in the proposed self-audit. An employer also cannot use the program if the WHD, a court, or other adjudicating agency found the employer has violated the FMLA or the FLSA’s minimum wage or overtime requirements during the last three years. And an employer cannot use PAID if it participated in the program within the last three years to resolve potential violations from the same practices.
Employers seeking to participate in PAID must inform the WHD of any recent known complaints against it asserting violations of the same practices at issue.
Employees included in the proposed self-audit cannot be subject to prevailing wage requirements under the H-1B, H-2B, or H-2A visa programs; the Davis-Bacon Act or Related Acts; or the Service Contract Act.
More details on participation requirements can be found in the WHD’s Q&A document.
Risks and Benefits
PAID offers employers an incentive to review their compensation and FMLA leave practices to address violations and resolve them efficiently. Use of the program allows employers to provide make-whole relief to employees without the risk of liquidated damages from a lawsuit or civil money penalties from a WHD-initiated audit. The program can help employers that have identified wage and hour violations (or potential violations) resolve those potential claims quickly without the threat and cost of litigation. It also helps employees, who can receive payments for potential violations quickly.
There are important considerations for employers, however:
WHD reviews the backpay calculations that the employer submits but will make its own determination of how much the employer owes.
Employees have the option of rejecting WHD-proposed backpay. They retain the right to file a private suit.
With respect to FMLA compliance, employers should review the full range of remedies that may be required by WHD before participating in the program.
A PAID settlement may not resolve state law claims.
Employers should consult legal counsel when weighing the benefits and risks of participating in the PAID program.
Tariff Update: Reciprocal Tariffs and Other Recent Changes
On August 7, 2025, President Trump’s reciprocal tariffs fully came into effect. The overall U.S. effective tariff rate has now risen to an estimated 18.6%, which is the highest rate since 1934. Several countries continue to negotiate the applied tariff rates.
The Current Reciprocal Tariffs
These reciprocal tariffs are pursuant to the July 31, 2025, Executive Order titled “Further Modifying the Reciprocal Tariff Rates”. That Executive Order builds on the Liberation Day Executive Order, which initially set the reciprocal tariff rates. See our earlier blog on reciprocal tariffs. These current rates were initially expected to take effect August 1, 2025. However, the most recent Executive Order provided one additional week until the reciprocal rates took effect. The Executive Order also further updates the tariff rates for certain countries. As a reminder, these tariffs generally stack on top of other tariffs (other than the Section 232 tariffs).
The table below provides the current reciprocal tariff rates in effect. The global rate remains unaffected; if a country is not listed below, the global 10% tariff baseline applies.
Country
Imposed Reciprocal rate (%)
Afghanistan
15
Algeria
30
Angola
15
Bangladesh
20
Bolivia
15
Bosnia and Herzegovina
30
Botswana
15
Brazil
10
Britain
10
Brunei
25
Cambodia
19
Cameroon
15
Chad
15
China
10
Costa Rica
15
Cote d’Ivoire
15
Dem. Rep. Congo
15
Ecuador
15
Equatorial Guinea
15
Fiji
15
Ghana
15
Guyana
15
Iceland
15
India
25
Indonesia
19
Iraq
35
Israel
15
Japan
15
Jordan
15
Kazakhstan
25
Laos
40
Lesotho
15
Libya
30
Liechtenstein
15
Madagascar
15
Malawi
15
Malaysia
19
Mauritius
15
Moldova
25
Mozambique
15
Myanmar
40
Namibia
15
Nauru
15
New Zealand
15
Nicaragua
18
Nigeria
15
North Macedonia
15
Norway
15
Pakistan
19
Papua New Guinea
15
Philippines
19
South Africa
30
South Korea
15
Sri Lanka
20
Switzerland
39
Syria
41
Taiwan
20
Thailand
19
Trinidad and Tobago
15
Tunisia
25
Turkey
15
Uganda
15
Vanuatu
15
Venezuela
15
Vietnam
20
Zambia
15
Zimbabwe
15
Other Recent Key Tariff Updates
In addition to the reciprocal tariff Executive Order, there have been other notable developments in tariffs over the past week:
Brazil: In addition to the 10% reciprocal rate, imports from Brazil are also subject to an additional 40% tariff for a total of 50%. On July 30, 2025, President Trump issued a separate Executive Order imposing that additional 40% tariff. The Executive Order includes certain exceptions in the annexes.
European Union: The EU-U.S. trade deal has established a ceiling rate of 15% on most EU imports. To confirm, that ceiling does not appear to limit the tariffs imposed under some Section 232 investigations, so steel, aluminum, and copper remain subject to the 50% Section 232 tariff rate. However, autos and auto parts, pharmaceuticals, and semiconductors will be subject to a ceiling rate of 15%.
United Kingdom: The UK has secured a 10% tariff rate. The General Terms of the UK-U.S. Economic Prosperity Deal also require the U.S. to negotiate “significantly preferential treatment” after the results of forthcoming Section 232 investigations.
China: China’s tariff rate is set to increase from 10% to 34% on August 12, 2025 as part of the expiration of a temporary suspension.
Canada: Effective for imports made as of August 1, 2025, Trump issued an Executive Order raising the tariff rate for Canadian imports from 25% to 35%.
Mexico: The tariff on imports from Mexico was set to increase to 30% on August 1, 2025, but that increased rate has been delayed for 90 days to allow for more negotiations.