What Every Multinational Company Should Know About … Customs Enforcement and False Claims Act Risks (Part III)
Our previous article on What Every Multinational Company Should Know About … Customs Enforcement and False Claims Act Risks (Part I) outlined how import-related risks have substantially increased given the combination of the new high-tariff environment, the heightened ability of Customs (and the general public) to data mine import-related data, and the Department of Justice’s (DOJ) stated focus on using the False Claims Act (FCA). In Part II, we laid out how to prepare for the most common False Claims Act (FCA) risks arising from submitting false Form 7501 entry summary information. We now complete the series on “Customs Enforcement and False Claims Act Risks” with Part III, which focuses on preparing for the most common FCA risks arising from improper management of import operations.
Risks Arising from Knowing Failures to Correct Errors
If importers discover a systematic error, the position of Customs is clear: The importer is under an obligation not only to correct the error for future entries but also to use measures like post-summary corrections to update prior entries. This is demonstrated by a DOJ settlement in which an importer paid over $22 million to settle allegations that it “made no effort to right its wrongs even after acknowledging internally that it had underpaid millions of dollars of duties owed.” This type of knowing error is exactly the type of conduct that can expose importers to reverse FCA liability.
Customs Compliance Response
Apply Current Knowledge to Unliquidated Entries. Because liquidation takes (approximately) 314 days after entry, Customs grants a 300-day post-summary corrections period to correct most entry-related information. If you discover an error, Customs requires not only that the error be corrected going forward but also that any non-liquidated entries be corrected as well.
Consider Making a Voluntary Prior Disclosure. If an importer initiates a voluntary disclosure before Customs begins its own investigation, then Customs may not pursue penalties, assuming the voluntary disclosure is full and accurate, and the importer pays back any tariffs and interest due. This is an especially important advantage for the new Trump tariffs, since many of them direct that Customs should impose maximum penalties for failure to pay all of the new tariffs, without taking into account traditional Customs mitigating factors. Filing a voluntary self-disclosure before Customs initiates an administrative investigation avoids any Customs administrative penalties (provided the importer follows through with a thorough and accurate disclosure). While a self-disclosure is not a free pass to avoid FCA liability, it can reduce the multiplier and penalties assessed in settlement negotiations.
Risks from Failing to Follow Form 28 and 29 Corrections for Prior Entries
Customs commonly issues Form 28 Requests for Information and Form 29 Notices of Action that target a handful of entries (or even a single entry) where it has questions about the accuracy of submitted entry information. If this results in Customs issuing a correction, then the importer is required to correct not only the entry but also any other entries covered by the reasoning. Failure to do so was one of the key elements of the $22.8 million settlement noted above, where DOJ emphasized that although the importer had received Form 29 Notices of Action, it took two years to correct its ongoing entries (and never corrected prior entries).
Customs Compliance Response
Set Up ACE Notifications. Importers should set themselves up with ACE access so that they directly are receiving copies of Form 28 Requests for Information, Form 29 Notices of Action, and other communications from Customs rather than relying on customs brokers to provide such information. This will ensure that the importer is aware of all potential corrections to its Form 7501 Entry Summary information and can timely respond to any Customs inquiries.
Follow Through on Implementing Conforming Changes. When Customs issues a correction to a single entry or set of entries, the importer is required to identify all analogous entries and correct them for any unliquidated entries, because they are not final. Customs also has the authority to open an inquiry into liquidated entries under Section 1592 if the importer does not file a voluntary disclosure.
Risks Arising from Failure to Notice Red Flags from Suppliers
Under Customs regulations, the importer of record has the sole responsibility to pay all tariffs due. There is, however, no such restriction under the FCA, which means that multinationals that receive imported goods from suppliers can still be liable for FCA claims. For example, an importer of garments from China paid $1 million to settle allegations that it “repeatedly ignored warning signs that its business partner, which imported garments from China, was engaged in a scheme to underpay customs duties owed on the imported garments it sold to” the importer. Thus, even though the customer was not the importer of record, it settled on the basis it had accepted “responsibility for its failure to take action in response to multiple warning signs that [the importers of record] were undervaluing their imported goods and therefore paying less in import duties than they should have been paying.”
Moreover, in 2016, both the importer and manufacturer of clothing goods agreed to pay $13.375 million to settle claims that they conspired to underpay customs duties using invoices that misrepresented the value of the goods at issue. That same year, a U.S. defense contractor agreed to pay $6 million to settle allegations that it used Chinese-imported ultrafine magnesium in flares manufactured and sold to the U.S. Army, in violation of its contract with the military. Though it was the importer who allegedly misrepresented the country of origin, DOJ alleged that the contractor conspired with the importer to sell the nonconforming goods to the government.
Customs Compliance Response
Monitor Business Partners for Red Flags. In a high-tariff environment, there are more incentives than ever for importers to take steps to try to minimize their tariff liabilities. Educate personnel in Procurement, Accounting, and other relevant areas of the company to be alert to potential underpayments by suppliers, which also is useful for situations where business partners might provide incorrect information where your company acts as the importer of record. Simply put, know your business partners well.
Risks Arising From Avoiding Customs Penalties
In general, any situation in which an importer takes steps to avoid Customs penalties can lead to a potential FCA penalty. Examples include failing to mark the country of origin (10% Customs penalty), providing false or misleading information on entry documents (as we covered in Part II), failing to maintain required records, or noncompliance with forced labor regulations. By way of example, the Third Circuit found that failure to notify Customs of marking violations can support an FCA allegation. 839 F.3d 242 (3rd Cir. 2016), cert. denied, 138 S.Ct. 107 (2017). Illustrating this risk, an importer paid $765,000 to settle allegations that it had failed to mark imported pharmaceutical products with the appropriate COO and thus violated the FCA by “knowingly avoiding the marking duties owed to the United States for those imports.”
Another example includes a $1.9 million DOJ settlement in which an importer agreed to settle allegations that it falsely labeled tools it imported as “made in Germany” when the tools were, in fact, made in China. According to DOJ, if the products had been described as Chinese products, the importer would have been required to pay a 25% tariff on the goods. Thus, by allegedly falsely describing the tools as “German,” the importer avoided paying these tariffs.
Customs Compliance Response
Confirm Consistent Marking. Ensure the COO for marking decisions is made in accordance with the correct legal regime, by following the rules of free trade agreements like the USMCA (even in situations where special tariffs may require the use of substantial transformation principles for determining the amount of other tariffs due). Ensure marking is made either directly on the product or, where allowed, on a relevant container or other acceptable fashion to ensure it remains intact for the ultimate purchaser.
Maintain Required Records. Customs regulations require that, subject to certain exceptions, records must be kept for five years from the date of the activity which required creation of the record. Importers should ensure that they are complying with Customs recordkeeping requirements and that their employees are familiar with recordkeeping requirements. The FCA also requires that documents supporting claims — and the claims documentation itself — be true and accurate.
Conduct a Supply Chain Integrity Check and Continuous Monitoring. Complying with labor and transparency requirements is integral to tariff management. Importers should know every step in their supply chains and conduct integrity checks or audits of their suppliers. This can help ensure your company stays informed of new developments to comply with laws — especially in the areas of forced labor, human trafficking, environmental regulations, and modern slavery — and thus avoid potential FCA liability pertaining to these types of regulations. Importers also should implement systems to regularly monitor their suppliers’ performance and compliance, and continuously evaluate their supply chain for new potential risks that might arise. For further guidance on how to best monitor your supply chain, check out our white paper on Managing Supply Chain Integrity Risks.
Between the new Trump tariffs, increased Customs attention to tariff underpayments, newly announced DOJ emphasis on tariff payments, and the greater visibility of Customs into importing data, the potential for Customs FCA actions is greater than ever. As demonstrated throughout this three-part series, DOJ has a rich history of using a wide variety of issues to support FCA actions. DOJ’s announced attention to concentrate on Customs compliance and the full payment of tariffs means that future customs-related FCA cases will build on a foundation of existing cases. These previous cases have already given DOJ and whistleblowers the chance to test out a multitude of the factual and legal theories discussed throughout this series, with both DOJ and relators likely to be incentivized by the potential for significantly higher recoveries and the apparent increased enforcement flexibility resulting from the new tariff regime.
Thus, under the Trump administration’s trade agenda, multinationals should expect heightened scrutiny of imports and DOJ’s increased use of the FCA to bring customs-related actions. It is therefore more critical than ever for importers to assess and revamp their Customs compliance programs to address these new risks. Proactively addressing compliance issues, strengthening internal controls, and documenting decision-making processes can reduce exposure and better position multinationals to respond effectively if Customs scrutiny arises. In an environment with increased potential for enforcement and where corresponding penalties are steep, early preparation is both a risk management strategy and a competitive advantage.
Navigating Bankruptcy Claims Trading
Bankruptcy claims trading is an essential area of finance and law, where investors buy and sell the right to receive payments from a company undergoing bankruptcy. Understanding the intricacies of this market is crucial for legal professionals, accountants, and financial advisors who deal with distressed assets, whether for clients or as investors themselves. This article will explore the core concepts of bankruptcy claims trading, the risks involved, and the legal frameworks that govern this process.
What Is a Bankruptcy Claim?
At its core, a bankruptcy claim is the right to be paid as part of a bankruptcy case
Bankruptcy claims are classified based on priority. These categories include:
Secured Claims: Claims backed by collateral like a mortgage on property. These creditors have the first right to payment because they hold a security interest in the debtor’s assets.
Unsecured Claims: These claims are not tied to any specific asset, and they are paid after secured creditors. Examples include vendor debts or employee wages.
Equity Claims: These represent ownership interests in the company. These creditors (shareholders) are the last in line to be paid after all debts are settled.
A key distinction in claims is whether they are ‘allowed’ or ‘disallowed.’
An allowed claim is one that has been recognized by the bankruptcy court, and thus, is valid in the bankruptcy process.
A disallowed claim may be challenged by the debtor or other parties, often due to the claimant’s failure to provide sufficient evidence or because the claim is considered invalid.
Types of Claims Traded
The types of claims traded most often are general unsecured claims. These can include:
Vendor Claims: Claims filed by businesses that have provided goods or services to the debtor but have not been paid.
Customer Claims: Claims filed by individuals or businesses who are owed refunds or are involved in disputes over purchased goods or services.
Employee Claims: Claims from employees seeking unpaid wages or benefits.
While secured claims are typically handled by specialized brokers and are not as common in claims trading, they can still be part of large transactions, especially when a major corporation files for bankruptcy.
Who Buys and Sells Bankruptcy Claims?
Bankruptcy claims are often bought and sold by sophisticated investors, including hedge funds, distressed debt investors, and large financial institutions. The buying and selling of claims primarily occurs in the market for general unsecured claims, such as vendor debts, employee claims, and customer claims. These claims can be bought at a discount with the expectation that they will pay out a portion of the total claims pool.
David Karp, a partner at Schulte Roth & Zabel, highlights that although secured debt like bank loans or bonds often receives attention from specialized traders, most bankruptcy claims traded are general unsecured claims. These claims are typically valued by investors who view them as potential investments with the possibility of a high return if the bankruptcy estate is solvent or if the debtor’s assets are restructured successfully.
On the seller’s side, companies or individuals may choose to sell claims to raise immediate capital, especially when facing liquidity issues. Selling a claim allows the creditor to secure cash now, at a discounted price, without waiting for the lengthy bankruptcy process to unfold.
The Dynamics of Case Risk
One of the key risks associated with bankruptcy claims trading is case risk. Case risk refers to the overall risk that a bankruptcy proceeding might result in a low recovery for creditors. If the debtor’s assets are insufficient to cover the total claims, creditors may receive only a small fraction of what they are owed, or in some cases, nothing at all.
Stephen Rutenberg, a partner with Polsinelli, notes that when buying a claim, investors are more concerned with case risk than the specific details of any individual claim. Case risk involves assessing the financial health of the debtor and estimating how much creditors will receive during the bankruptcy process. In some cases, the debtor may not have sufficient assets to pay creditors at all, leading to a complete loss for the claimholder.
On the seller’s side, claim risk refers to the possibility that the debtor or other creditors may challenge the validity of a claim. This could happen if the claim is disputed or if it is considered to be part of a preference payment, which occurs when a debtor pays a creditor within a certain period before filing for bankruptcy. Those payments could be reversed in such cases, and the creditor would have to return the money.
Valuing Bankruptcy Claims
Valuing bankruptcy claims is a complex process that requires a deep understanding of the debtor’s financial situation and the legal landscape surrounding the bankruptcy case. The value of a claim depends on several factors, including the type of claim, the debtor’s assets, and the likelihood that the claim will be paid in full.
In general, claims with higher priority (like secured claims) are more likely to be paid in full, while unsecured claims may receive only a fraction of the value. For example, if a company has $10 million in assets but owes $15 million in liabilities, unsecured creditors may only receive a portion of their claim, if anything, depending on how the court divides the debtor’s assets among the creditors.
A fundamental concept in bankruptcy is the bar date, the deadline by which creditors must file their claims with the bankruptcy court. After the bar date, no additional claims will be accepted unless there is a valid reason for the delay.
Stephen Rutenberg highlights that bankruptcy claims’ value also fluctuates based on market conditions and the case’s specific circumstances. For example, creditors may receive full payment if a company’s reorganization plan is approved. However, if the company is liquidated, creditors may only recover a portion of their claims.
Additionally, claims can be complicated by subordination. Subordinated claims are treated as junior to other claims, meaning they are paid only after other creditors’ claims have been satisfied. Secured creditors will always be paid first, followed by unsecured creditors.
The Legal Framework: Assignments vs. Sales
The legal structure of a transaction when buying or selling a bankruptcy claim is crucial. In some cases, the transaction is structured as an assignment of the claim, while in other cases, it is a sale.
An assignment of a claim simply involves transferring the rights to the claim from one party to another. This type of transaction can sometimes involve fewer legal hurdles, but it does not necessarily transfer the risk associated with the claim.
In a sale of a claim, the seller agrees to transfer both the claim and the associated risk of collection to the buyer. According to Matt Christensen, managing partner of Johnson May, the distinction between a sale and an assignment is primarily a legal formality. From a bankruptcy court’s perspective, the risk associated with the claim remains the same regardless of whether it’s a sale or assignment. However, the transaction’s contractual provisions, such as representations, warranties, and indemnifications, can differ based on whether it is a sale or an assignment.
For example, in a sale, the seller may have to provide a warranty that the claim is legitimate or indemnify the buyer if the claim is later disputed. These legal provisions help shift the risk of claim disputes from the buyer to the seller.
Risk Allocation and Documentation
A point of contention in bankruptcy claims trading is risk allocation. As Rutenberg explains, most sellers in a claims transaction retain some degree of risk, even if the claim has been sold or assigned. This residual risk can arise from the potential for a claim objection or issues related to the claim’s validity.
Buyers and sellers often negotiate terms in sophisticated transactions to protect themselves from unforeseen liabilities. This is typically done through the inclusion of representations and warranties in the contract. These legal terms outline the seller’s responsibilities and ensure the buyer understands the risks.
Conclusion
Bankruptcy claims trading is a complex, high-risk area that requires a thorough understanding of bankruptcy law, financial analysis, and legal procedures. As a financial professional or legal advisor, understanding the dynamics of case risk, claim risk, and claim valuation is crucial to successfully navigating the market.
Whether as a buyer, seller, or legal advisor, seeking guidance from experienced counsel and performing detailed due diligence is vital to mitigating risk and ensuring the transaction aligns with your financial objectives.
To learn more about this topic view Advanced Bankruptcy Transactions / Bankruptcy Claims Trading. The quoted remarks referenced in this article were made either during this webinar or shortly thereafter during post-webinar interviews with the panelists. Readers may also be interested in reading more on claims trading.
This article was originally published here.
©2025. DailyDACTM, LLC d/b/a/ Financial PoiseTM. This article is subject to the disclaimers found here.
2024 EEO-1 Component 1 Report Filing Now Open
Key Takeaways
The U.S. Equal Employment Opportunity Commission 2024 EEO-1 Component 1 Report filing opened on May 20, 2025, with a submission deadline of June 24, 2025, and no extensions being granted.
Employers must select a workforce snapshot from October 1, 2024, to December 31, 2024.
Filing is mandatory for private employers with 100 or more employees, federal contractors with 50 or more employees and certain affiliated private employers.
As anticipated, 2024 EEO-1 Component 1 Report filing officially opened May 20, 2025, on the EEO-1 Data Collection website. The EEOC has expressed that, as part of cost savings, the filing period for EEO-1 data will be shorter than in the past. Specifically, employers will have a deadline for submission of June 24, 2025. It is important to note that no extensions will be granted this year, making timely compliance essential.
In addition to the shorter time period for submission, there are additional changes to the 2024 EEO-1 reporting as discussed here.
Filing Requirements
The EEO-1 Report is a mandatory annual data collection that requires certain employers to submit demographic workforce data, including data by race/ethnicity, sex and job categories. The following entities are required to file:
Private employers with 100 or more employees;
Federal contractors with 50 or more employees; and
Private employers with fewer than 100 employees who are affiliated through centralized control or ownership with other entities, totaling 100 or more employees.
To complete their report, employers must select a workforce snapshot from any pay period between October 1, 2024, and December 31, 2024, for both full-time and part-time employees.
Maryland Delays Start of Paid Family and Medical Leave Program
Hold your horses—Maryland just added a few more furlongs to its race toward a paid family leave.
On May 6, 2025, Governor Wes Moore signed House Bill 102 (“the Amendment”), which again pushes back the start date for Maryland’s Family and Medical Leave Insurance Program (FAMLI). This latest delay came as no surprise, given Maryland Department of Labor’s (MDOL) proposal earlier this year to extend the FAMLI implementation dates, because of the “high degree of instability and uncertainty for Maryland employers and workers” created by recent federal actions.
Dates to Begin Contributions and Use Leave Benefits
As we previously discussed, FAMLI will be funded through contributions from employees and employers with 15 or more employees. Although the Amendment does not alter FAMLI’s funding model, the required payroll deductions, previously scheduled to start on July 1, 2025, will now begin on January 1, 2027. The Maryland Secretary of Labor also now has until March 1, 2026, to set the contribution rates for 2027, and then until November 1st to designate the contribution rate for each subsequent calendar.
Notably, the Amendment does not establish an exact date on which employees can use paid family leave benefits. Instead, the Amendment only directs the Secretary of Labor to announce when the benefits will be available, provided the announcement is not later than January 3, 2028. Previously, benefits were supposed to begin January 1, 2026.
Finally, the minimum and maximum weekly benefit amounts remain unchanged for 2027 and 2028 at $50 and $1,000 respectively. Starting in 2029, however, FAMLI’s maximum weekly benefit amount will be tied to the Consumer Price Index to account for inflation.
Addition of the “Anchor Date”
The Amendment also added the term “Anchor Date,” which is defined as the earlier of the date on which a covered individual completes their FAMLI benefit application or the date the leave began. The state will use the Anchor Date as the new reference point for calculating (i) when an employee is eligible for paid family leave benefits; (ii) the covered employee’s average weekly wage, which is used to calculate the amount in benefits they receive; and (iii) their eligibility for increases in weekly benefits under the Program.
To qualify as a “covered employee” under the amended law, an individual must have worked at least 680 hours over the four completed calendar quarters immediately prior to the Anchor Date. Previously, employees needed only to work at least 680 hours in the four most recently completed calendar quarters before the date the leave began. Additionally, a covered employee’s average weekly wage will be calculated based on the total wages the employee received in the highest of the four completed calendar quarters that immediately precede the Anchor Date.
Finally, any increases to FAMLI’s weekly benefit amount will only apply to paid family leave applications with an Anchor Date that occurs on or after the date the increase becomes effective, except in certain cases where paid family leave benefits are paid intermittently.
Looking Ahead
The Maryland Department of Labor is in the process of developing regulations to help implement FAMLI and has already updated its website to reflect the new dates discussed here. We will continue to keep you updated as circumstances evolve.
EEOC Acting Director Warns No ‘Diversity Exception’ to Title VII in Announcing EEO-1 Reporting Period Opening
On May 20, 2025, the U.S. Equal Employment Opportunity Commission (EEOC) opened the platform for employers to submit EEO-1 reports. In doing so, EEOC Acting Director Andrea Lucas warned employers not to use the data to take employment actions and reinforced earlier technical assistance that diversity, equity, or inclusion (DEI) practices that result in different treatment based on race, sex, or another protected characteristic can be unlawful discrimination.
Quick Hits
The EEOC has opened the 2024 EEO-1 Component 1 reporting period, emphasizing that employers must not use the reported demographic data to justify discriminatory employment practices based on race, sex, or other protected characteristics.
EEOC Acting Director Andrea Lucas warned employers that there is no “diversity exception” to Title VII of the Civil Rights Act, even if the data suggests employer policies may have a disparate impact on certain groups.
The warning potentially complicates employers’ evaluation of their compliance with equal opportunity and antidiscrimination laws and regulations.
Current EEOC regulations require private employers with one hundred or more employees, and federal contractors with fifty or more employees that meet certain criteria to submit annual EEO-1 Component 1 reports with demographic data on their employees, including race/ethnicity, sex, and EEO job categories.
The EEOC states EEO-1 data is used in a variety of ways, including enforcement, self-assessment by employers, and research. Some employers have thus looked at their EEO-1 data and potential employment disparities to gain insights into their workforce demographics and evaluate their compliance with equal opportunity and anti-discrimination laws and regulations, including Title VII of the Civil Rights Act of 1964.
However, in announcing the platform’s opening, EEOC Acting Director Lucas warned employers that their “obligations under [Title VII] not to take any employment actions based on, or motivated in whole or in part by, an employee’s race, sex, or other protected characteristics.”
Specifically, Acting Director Lucas told employers that they may not use any potential race or sex disparities revealed in their employment data as a basis for implementing hiring or promotion policies that might give preferences to job candidates or employees based on sex, race, ethnicity, or other protected characteristics.
“Your company or organization may not use information about your employees’ race/ethnicity or sex—including demographic data you collect and report in EEO-1 Component 1 reports—to facilitate unlawful employment discrimination based on race, sex, or other protected characteristics in violation of Title VII,” Acting Director Lucas stated.
“There is no ‘diversity’ exception to Title VII’s requirements,” she added.
Disparate Impact
Acting Director Lucas pointed to President Donald Trump’s April 23, 2025, EO 14281, “Restoring Equality of Opportunity and Meritocracy,” which calls for an end to liability for unlawful discrimination based on disparate impact, under which employers may be held liable for neutral employment policies or practices that have a substantial adverse impact on a protected group, such as race or sex. Specifically, the EO directed federal agencies like the EEOC to deprioritize enforcement of disparate impact claims.
The acting director said that under her leadership, the EEOC will follow and enforce the EEOC and will prioritize remedying intentional discrimination claims. She reiterated that employers may not use information collected as part of an EEO-1 report to treat employees differently based on any protected characteristic.
“[T]he fact that a neutral employment policy or practice has an unequal outcome on employees of a particular race or sex—that is, has a ‘disparate impact’ based on race or sex—does not justify your company or organization treating any of your employees differently based on their race or sex. As noted above, you must not use the information collected and reported in your organization’s EEO-1 Component 1 report to justify treating employees differently based on their race, sex, or other protected characteristic.”
Next Steps
The EEOC announced that the 2024 EEO-1 Component 1 data collection filing platform is now open until June 24, 2025, at 11:00 p.m. (EDT), which the EEOC will not extend, and the platform will close. This means covered employees will need to promptly prepare and file their reports by the deadline to maintain compliance.
The EEOC acting director’s warnings are in line with recent EEOC guidance issued under her leadership and policy directives from the Trump administration. Since taking office in January 2025, President Trump has issued a series of EOs, which are facing numerous legal challenges, seeking to eliminate unlawful DEI programs in employment and revoking federal contractors’ affirmative action program mandates, largely stripping authority from the Office of Federal Contract Compliance Programs (OFCCP).
At the same time, the EEOC acting director’s warnings to employers could complicate employers’ efforts to maintain antidiscrimination compliance and evaluate potential risk for unlawful discrimination claims.
Employee Complaint Rights: Update on Executive Order 13496 Compliance
Executive Order (E.O.) 13496, signed on January 30, 2009, mandates that certain government contractors and subcontractors post notices informing their employees of their rights under federal labor laws. This executive order applies to all government contracts, except for collective bargaining agreements and contracts for purchases under the Simplified Acquisition Threshold.
Quick Hits
E.O. 13496 requires government contractors and subcontractors to post notices informing employees of their rights under federal labor laws.
The DOL is seeking an extension of the current approval to collect information related to E.O. 13496 to ensure its enforcement through the complaint procedure.
OFCCP remains the primary enforcement body for complaints under E.O. 13496 despite significant staff reductions.
Under the regulatory provisions of E.O. 13496 (29 C.F.R. Part 471), contractors and subcontractors are required to post notices detailing employees’ rights under the National Labor Relations Act (NLRA). These notices must include information on activities that are illegal under the Act, a general description of the remedies available to employees, and contact information for further assistance. The U.S. Department of Labor (DOL) estimates that it will annually continue to receive approximately ten complaints alleging failures to comply with the notice posting requirements of E.O. 13496.
The National Labor Relations Board’s (NLRB) 2011 rule required private-sector employers to post similar notices to employees advising them of their rights under the NLRA. But in June 2013, the Fourth Circuit Court of Appeals stated the agency had exceeded its authority when making such a requirement, agreeing with an earlier D.C. Circuit decision. A second chance at such notices was taken in 2023, when former NLRB General Counsel Jennifer Abruzzo suggested that employers distribute “Know Your Rights” cards to educate employees of their rights.
Now, the DOL is seeking an extension of the approval to collect information related to E.O. 13496. According to the DOL, “An extension is necessary because if this information collection is not conducted, E.O. 13496 could not be enforced through the complaint procedure.” The information collection request was last approved in 2022.
The Office of Labor-Management Standards (OLMS) administers the enforcement provisions of E.O. 13496, while the Office of Federal Contract Compliance Programs (OFCCP) handles compliance evaluations and investigations. The Federal Register notice continues to designate OFCCP as the primary enforcement body for complaints under E.O. 13496, even though the Trump administration has reduced OFCCP’s staff by approximately 90 percent.
The notice-and-comment deadline is July 15, 2025. Comments on this renewal request will be summarized and included in the request for Office of Management and Budget (OMB) approval. The DOL seeks authorization for this information collection for three years.
The Changing Landscape of Unmarried Parents
One in four parents living with a child in the United States today are unmarried.
Of these, 35% of all unmarried parents are living with a partner. In the event the relationship goes south, do unmarried fathers have rights to their child?
In North Carolina, parental rights and responsibilities do not automatically vest for unmarried fathers as they do for married parents. If parties are married at the time of the child’s conception or birth, the husband is presumed to be the father of the child. Conception is presumed to have occurred ten lunar months, or 280 days, prior to the child’s birth. If a child is born out of wedlock, however, by default, the mother is granted sole legal and physical custody. A mother may threaten to leave the state, be unfit, prevent the father from visiting the child, or fail to seek guidance on major decisions impacting him/her. So, what is a father to do?
Establishing Paternity is the First Step
If you are an unmarried father seeking custodial rights, the first step is to establish paternity. Paternity can be established voluntarily, often at the hospital when the child is born, through an Affidavit of Parentage, or later through court-ordered genetic testing.
Once paternity is established, the father may petition the court for custody or visitation, which can encompass decision-making authority. In North Carolina, custody decisions are based on the “best interests of the child” standard. For unwed fathers, courts typically consider:
The father’s relationship with the child
His ability to co-parent effectively
His ability to provide a stable environment, and
His motivation in seeking custody.
Jurisdiction Issues in Custody Cases
If the parties do not live in the same state at the time the child is born, there may be a jurisdictional issue. Custody cases must be filed in the child’s “home state,” which is the state where the child has lived for the six months before the case is filed.
In North Carolina, you may file a custody case in the county in which the child resides or is physically present or in a county where the parent resides.
Tips to Strengthen Your Custody Case in North Carolina
To bolster your custody case, do not delay in establishing paternity, either through an Affidavit of Paternity or a motion for paternity testing.
For a court to consider best interests, the court will assess whether your living arrangement is stable and suitable for a minor child. Be prepared to illustrate that you can tend to their physical and emotional needs.
Stay involved in the child’s life, such as attending medical appointments, extracurricular events, birthday parties, and the like. Avoid negativity. Attempt respectful communication with the minor child’s mother.
Remember that acts of domestic violence are relevant to custodial disputes when courts make findings as to the best interests of a child. Keep records of your efforts to be involved and engaged with the minor child.
FAQ in North Carolina Custody Cases
Can I file for custody even if the mother and I were never in a relationship?
Yes. Your relationship with the mother is not a determining factor.
Do courts favor mothers over fathers in custodial disputes?
No. The tender years presumption has been abolished in North Carolina. G.S. § 50-13.2(a) states that between the parents, whether natural or adoptive, no presumption shall apply as to who will better promote the interest and welfare of the child.
What is the difference between establishing paternity and legitimizing a child?
North Carolina law specifically states, “the establishment of paternity shall not have the effect of legitimation.” G.S. 49-14. If a child is legitimized, he or she is entitled to inherit from his or her mother and father intestate. It also imposes upon the father and mother all the parental privileges and rights, as well as all of the obligations which parents owe to their lawful issue.
A child born out of wedlock may be legitimated if his or her mother and “reputed father” marry one another at any time after the child is born. G.S. 49-12. No court action is required. The child will be recognized as the legitimate child of his or her parents who married after the child’s birth. Otherwise, a child must be legitimized through a special proceeding. In contrast, paternity establishes the duty of support and of custodial rights of a minor child.
Once paternity is established, will a father be responsible for child support?
Yes, both the father and mother shall be primarily liable for the support of a minor child. If you are uncertain that you may be the biological father of a child, seek a paternity test before signing an Affidavit of Paternity.
Conclusion
Navigating custody issues as an unmarried parent can be complex and emotionally challenging, but you don’t have to do it alone.
Judge Rules Shareholders Can Pursue Derivative Claim Following A “Conversion”
A year ago, I posited the question whether a derivative suit can survive a conversion. See Can A Derivative Suit Survive Conversion? I raised that question in reference to Palkon v. Maffei, 2024 WL 678204 (Del. Ch. Feb. 20, 2024), in which the plaintiffs unsuccessfully sought to enjoin the proposed conversions of TripAdvisor, Inc. and Liberty TripAdvisor Holdings, Inc. into Nevada corporations.
Recently, U.S. District Court Judge Richard F. Boulware II seemed to answer the question with respect to Nevada corporations:
Before proceeding to the merits, the Court must determine whether Plaintiffs, whose stock was converted from Apcentive to Airborne stock, have standing as current shareholders of Airborne to bring their derivative claims against Harris and Apcentive, given that they are no longer Apcentive shareholders. Because a derivative claim is brought on behalf of the corporation, a former shareholder does not have standing to assert a derivative claim. Cohen v. Mirage Resorts, Inc., 119 62 P.3d 720, 732 (Nev. 2003). The Nevada Supreme Court looks to standards articulated by Delaware courts in determining standing to bring a derivative action. See e.g., In re Amerco Derivative Litig., 252 P.3d 681, 697 (Nev. 2011). Delaware courts maintain that the right to bring a claim for breach of fiduciary duty, including derivatively, is a property right associated with a share of stock and freely assignable. See e.g., Quadrant Structured Prods. Co. v. Vertin, 102 A.3d 155, 179 (Del. Ch. 2014) (collecting cases). Additionally, Plaintiffs have established they were stockholders of Apcentive at the time of the alleged breaches of fiduciary duty by Harris, which is sufficient to establish standing to bring a derivative claim under Delaware law. Id. (citing Rosenthal v. Burry Biscuit Corp., 60 A.2d 106, 110 (Del. Ch. 1948)). The Court thus finds Plaintiffs’ standing to sue Harris arising from their ownership of Apcentive stock survives the conversion of the stock to Airborne shares and arises from their current ownership of Airborne stock.
Tsatas v. Airborne Wireless Network, Inc., 2025 WL 973840, at *18 (D. Nev. Mar. 31, 2025). However, I am not convinced that Judge Boulware actually decided the question. In the opinion, he repeatedly refers to an the conversion of Apcentive’s shares, but he also refers to an exchange. Based on my review of the Nevada Secretary of State’s filings, itv does not appear that Apcentive engaged in either a statutory conversion or a merger. Further, the Form 8-K/A describes the shares as being issued as consideration for the purchase of intellectual property.
2025 Enforcement Trends: Risk Analysis Failures at the Center of HHS’s Multimillion-Dollar HIPAA Penalties
In the first five months of 2025, the U.S. Department of Health and Human Services’ (HHS) Office for Civil Rights (OCR) announced it had entered into ten Health Insurance Portability and Accountability Act (HIPAA) resolution agreements reflecting the settlement of alleged HIPAA violations stemming from data breaches reported to OCR. These settlements span both the Biden and Trump administrations and involve a wide range of covered entities and business associates, from small physician groups to larger hospital authorities and IT service providers. Despite the diversity of organizations and underlying incidents, however, OCR’s enforcement focuses appear strikingly consistent. Each announcement indicates the resolution agreement was intended to cure defects in basic HIPAA Security Rule compliance, with a common emphasis on each organization’s failure to conduct a thorough risk analysis consistent with the HIPAA Security Rule.
Quick Hits
The HIPAA Security Rule requires HIPAA-covered entities and business associates to complete a comprehensive risk analysis, aimed at identifying potential risks and vulnerabilities to the electronic Protected Health Information in their possession.
Since January 1, 2025, the U.S. Department of Health and Human Services’ Office for Civil Rights has announced ten resolution agreements with HIPAA-covered entities and business associates that have highlighted the relevant organization’s failure to adhere to the HIPAA Security Rule’s risk analysis requirements.
Penalties for these violations included civil monetary penalties from $25,000 to $3,000,000, and often included requirements to implement a corrective action plan mandating the completion of a risk analysis.
It is no secret that data breaches have many possible root causes, and this reality is reflected in the resolution agreements announced by HHS in the early months of 2025. Indeed, the nature of the underlying data breaches that prompted HHS’s inquiry into each affected entity’s HIPAA compliance posture varied meaningfully. Several involved ransomware attacks that infiltrated healthcare systems and affected patient data, as was seen in the resolution agreements HHS entered into with a New York neurology practice and a public hospital in Guam. Others were triggered by phishing schemes, such as a California health network where dozens of employee email accounts were compromised, exposing nearly 200,000 individuals’ records. There was also an incident of electronic Protected Health Information (ePHI) being left unsecured on internet-facing servers. In each instance, however, OCR’s investigation revealed that the affected organization had not met a fundamental HIPAA Security Rule requirement: conducting an enterprise-wide risk analysis. Accordingly, in each resolution, the regulator identified the entity’s failure to assess and address vulnerabilities in their systems in this manner as a major compliance gap.
The HIPAA Security Rule requires organizations to “[i]mplement policies and procedures to prevent, detect, contain, and correct security violations.” One of the methodologies required for meeting this standard involves completing a “risk analysis,” or an “accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of electronic protected health information held by the [organization].” The penalties assessed by OCR in 2025 for failing to do this are significant. The monetary fines announced in conjunction with the resolution agreements ranged from as little as $25,000 at the low end to as much as $3 million for a national medical supplier that did not conduct a “compliant risk analysis” and subsequently suffered a major data breach after a phishing incident. Other financial penalties fell in between, with midsized providers and service companies typically agreeing to five- or six-figure fines. Beyond the dollar amounts, however, resolution agreements also included detailed corrective action plans, often requiring several years of close regulatory monitoring and mandating steps like the completion of fulsome risk analyses, implementation of risk management plans, completion of staff training, and regular updates to security policies, all with ongoing HHS involvement and oversight.
These recent OCR actions underscore that performing a HIPAA risk analysis is not an optional or “check-the-box” exercise for covered entities or business associates, but rather is a critical compliance step regulators are focusing on and actively enforcing against. OCR has made risk analyses a focal point of its enforcement initiatives in 2025, signaling to the industry that no organization is too large or too small to be held accountable for this basic requirement. The message for covered entities and business associates is clear: a comprehensive risk analysis is one of the simplest and most effective tools to protect against data breaches, and failing to complete one can directly lead to regulatory scrutiny and meaningful financial consequences.
In light of this enforcement focus, healthcare organizations and companies that provide services to healthcare organizations will be well served to proactively prioritize regular risk analyses and security improvements. Ensuring that all ePHI is accounted for and safeguarded—before an incident happens—is not only a straightforward compliance task, but also a central enforcement focus.
June 2025 Visa Bulletin Shows Advancement for EB-2 and EB-3 Worldwide and China
The June 2025 Visa Bulletin shows some advancement in the EB-2 and EB-3 categories for all countries except for India. In addition, U.S. Citizenship and Immigration Services (USCIS) will accept employment-based adjustment-of-status applications from foreign nationals with a priority date that is earlier than the final action dates listed in the June 2025 Visa Bulletin.
Quick Hits
The June 2025 Visa Bulletin shows some forward movement for EB-2 and EB-3 for all countries of chargeability except India.
The June 2025 Visa Bulletin shows no change for all employment-based final action dates for India from the May 2025 Visa Bulletin.
USCIS will honor final action dates for I-485 adjustment-of-status applications filed in June 2025.
Employment-based
All ChargeabilityAreas ExceptThose Listed
CHINA-mainlandborn
INDIA
MEXICO
PHILIPPINES
1st
C
08NOV22
15FEB22
C
C
2nd
15OCT23
01DEC20
01JAN13
15OCT23
15OCT23
3rd
08FEB23
22NOV20
15APR13
08FEB23
08FEB23
Other Workers
22JUN21
01APR17
15APR13
22JUN21
22JUN21
4th
U
U
U
U
U
Certain Religious Workers
U
U
U
U
U
5th Unreserved(including C5, T5, I5, R5, NU, RU)
C
22JAN14
01MAY19
C
C
5th Set Aside:Rural (20%, including NR, RR)
C
C
C
C
C
5th Set Aside:High Unemployment (10%, including NH, RH)
C
C
C
C
C
5th Set Aside:Infrastructure (2%, including RI)
C
C
C
C
C
Source: U.S. Department of State, June 2025 Visa Bulletin, Final Action Dates Chart
Key Takeaways
According to the June 2025 Visa Bulletin:
EB-1: India remains at February 15, 2022, and China remains at November 8, 2022 (with no change from the May 2025 Visa Bulletin).
EB-2: India remains at January 1, 2013, while China advances by two months to December 1, 2020. All other countries advance by almost four months to October 15, 2023.
EB-3 Professionals and Skilled Workers: India remains at April 15, 2013, and China advances by three weeks to November 22, 2020. All other countries advance by five weeks to February 8, 2023.
EU Pay Transparency Directive: Updates on Implementation Across Member States
The European Union’s pay transparency directive (Directive (EU) 2023/970), adopted in June 2023, is landmark legislation aimed at addressing pay discrimination and closing the gender pay gap across the European Union. With a deadline of June 2026 for transposition, member states are currently transposing the directive into national law.
Quick Hits
Under the EU pay transparency directive (Directive (EU) 2023/970), employers are subject to requirements, such as upholding the principle of “work of equal value,” reporting on gender pay gap statistics, and making pay information available to job applicants during recruitment and employees upon request.
Each EU member state can choose to implement compliance requirements beyond the directive’s existing requirements.
Belgium, Sweden, Poland, Ireland, the Netherlands, and Finland have so far led the way, and other EU countries are expected to publish draft proposals during 2025.
As detailed in our previous article, “Preparing for the EU’s Pay Transparency Directive,” the directive calls for a review of current employer practices to ensure ongoing compliance.
Key Updates From Member States
Belgium
Belgium became the first EU member state to transpose the directive into national law. The Fédération Wallonie-Bruxelles, which is mainly applicable to public sector employers in the French Community of Belgium, was signed into law on 12 September 2024 and has been effective since 1 January 2025. The decree does not apply universally to all Belgian employers, and the directive will continue to be transposed across Belgium, although the timeframe for implementation is still unknown.
Key provisions go beyond the directive’s minimum requirements:
Pay information or salary ranges at the recruitment stage must be presented in a format that is accessible for individuals with disabilities.
Job titles used in recruitment must be nondiscriminatory.
Gender pay gap reporting must include a fair assessment of pay progression for employees who take family-related leave.
Sweden
The Swedish government shared an investigation for the transposition of the directive on 29 May 2024, which is currently under review. The directive introduces stricter pay transparency and gender pay gap reporting requirements for employers than the existing Swedish Discrimination Act, including:
Providing pay information to job applicants. Employers would be required to disclose the relevant provisions of their collective agreements as well as the salary range to candidates before interviews.
Ensuring pay information, such as salary and pay progression, is easily accessible. Employees would also be entitled to request pay information through employee representatives or gender equality bodies rather than directly from the employer. Under Swedish law, all companies with twenty-five or more employees in Sweden have employee representatives on their board of directors, which would enable this provision to operate effectively.
Including specific content requirements for gender pay reports. This includes how pay has been determined; this requirement has already been implied in the directive, but the Swedish proposal specifically addresses this requirement.
Gender pay gap reporting would have to include a comparison of pay progression for employees who take parental leave compared with employees who do work of equal value but do not take parental leave.
Sweden would maintain current pay reporting requirements under the Swedish Discrimination Act for employers with ten or more employees.
Poland
Poland’s progress on transposing the directive is at the draft legislation stage. Originally initiated by members of Parliament on 5 December 2024, a new version of the draft was presented by a parliamentary committee on 1 April 2025. On 9 May 2025, the Polish parliament (Sejm) passed a draft amending the Labour Code. The draft largely aligns with the directive but currently does not state provisions for gender pay gap reporting obligations and is limited to the recruitment stage. The draft will now progress to the Senate for further review, and, after the legislative process is completed, the act will take effect within six months from the date of promulgation.
In its current form, the draft includes the following obligations:
Providing applicants with information on the starting salary or its range (based on objective and neutral criteria) and, where applicable, the relevant provisions of collective agreements or remuneration regulations throughout the recruitment process, including in the job advertisement.
Using gender-neutral language in job advertisements and gender-neutral job titles, as well as conducting the recruitment processes in a non-discriminatory manner.
A prohibition on asking questions regarding salary history.
Ireland
Ireland published the General Scheme of the Equality (Miscellaneous Provisions) Bill 2024 on 15 January 2025. Like Poland, Ireland did not include any details that address the pay reporting requirement under the directive. However, unlike Poland, Ireland already has gender pay reporting in place under the Gender Pay Gap Information Act 2021, which requires employers with a headcount of 150 or more employees (reducing to 50 or more employees from 1 June 2025) to publish information on their gender pay gap annually.
The current draft specifies:
Job advertisements must include the pay rate or range for the job role. This is more stringent than the directive, which allows employer flexibility in providing the information to the applicant in advance of the interview rather than requiring its inclusion in the job posting.
Employers are prohibited from requesting information from job applicants regarding their pay history.
The Netherlands
In March 2025, the Netherlands published its draft proposal, which closely follows the text of the directive. This draft was subject to public consultation; the outcome of which is currently undergoing further review in the Dutch Parliament.
Finland
On 16 May 2025, the Finnish government published its draft proposal, which largely aligns with the directive by specifying the inclusion of pay rates during the recruitment stage, the right of employees to request pay information, and the prohibition on employers from requesting information from job applicants regarding their pay history.
However, the draft goes beyond Finland’s current pay survey reporting obligations and does contain specific nuances on reporting by company size. Under the proposal, gender pay gap reporting would be required for companies with 100 or more employees. This would follow a phased approach with companies with 150 to 249 employees reporting by 2027, and those with 100 to 149 employees by 2031. Fines for noncompliance are proposed to range from €5,000 to €80,000.
What Means Means for Mushrooms and Marijuana: How Might Trump’s Surgeon General Nominee Shift the Conversation for Cannabis and Psychedelics?
Earlier this month, President Trump tapped “physician-turned wellness influencer” Casey Means as his nominee for surgeon general. Means has close ties to Health and Human Services Secretary Robert F. Kennedy Jr., and Trump has touted her “impeccable” Make America Health Again (MAHA) credentials. We’ve written previously on what impact Trump’s second presidency could have on American cannabis and psychedelic policy, but Means’ public statements on cannabis and psychedelics got us pondering on how she may shift the conversation.
We’ll start with the good news for those who are proponents of expanding access to psychedelics. Means has been vocal about her support of psychedelic therapy. In her 2024 book Good Energy: The Surprising Connection Between Metabolism and Limitless Health,Means touted her positive experience with psychedelics. She described her experience and encouraged those that felt so called “to explore intentional, guided psilocybin therapy.” She explained that “[s]trong scientific evidence suggests that this psychedelic therapy can be one of the most meaningful experiences of life for some people” as it had been for her. She states:
If the word psychedelics makes you cringe, I used to be in your position. I spent my childhood and young adult life being extremely judgmental about the use of any type of drug. But I became interested in plant medicine and psychedelics after learning more about their extensive traditional use, analyzing the groundbreaking research… Our brains are profoundly suffering in modern society right now, and I believe that anything that can safely increase neuroplasticity and ground us in more gratitude, awe, connection, and a sense of cosmic safety should be taken very seriously.
She went on to describe her experience on psylocibin as “bask[ing] in the moon’s bright rays… experience[ing] the embodiment of being one with the moon, every star, every atom in the grains of sand I was sitting on, and my mother in an inextricable and unbreakable chain of universal connectedness for which the human concept of ‘death’ was no match.”
She’s also referenced and advocated for the “plant medicine” psilocybin on her blog. In one post she explained that one of the modalities she has gone “deepest in” included “plant medicine (psilocybin).”
But Means’ position on cannabis isn’t as rosy. Means has expressed opposition to marijuana, saying in her book that “people who use cannabis as well as tobacco products should stop these completely” because they will “hurt your mitochondria and vastly diminish your ability to make Good Energy.” She goes on in her book to say:
There has always been suffering in the world, but now we can see exponentially more of it than ever, all at once, on screens we hold in our beds and at the dinner table. In response, modern humans have looked for salvation and coping anywhere we can get a hit of dopamine-fueled ‘pleasure’ and distraction: things like processed sugar, alcohol, soda, refined carbs, vapes, cigarettes, weed, porn, dating apps, email, texts, casual sex, online gambling, video games, Instagram, TikTok, Snapchat, and the relentless novelty of experiences.
She remains critical on her blog as well. It’s not hard to read Means’ statements and assume that anyone using cannabis is doomed to end up like the character in Afroman’s hit 2000’s bop “Because I Got High.”
What this means (pun intended) for proponents of expanded access to cannabis and psychedelics is difficult to say for sure.
As an initial matter, Means still has to be confirmed, and she’s already faced “pushback on multiple fronts.” Means has drawn criticism for not having a current medical license, including from former surgeon generals, as well as questions about whether she should even be eligible to be surgeon general. She’s also received criticism from some in the MAHA camp for not taking a strong enough stance on other issues. In other words, in a political climate where nothing is certain, there is far from any guarantee that Means will be confirmed as the new surgeon general.
If she is confirmed, we think she’ll take the approach we’ve seen many proponents of psychedelics take to advance them as medicine. The political climate is ripe to do so. Bipartisan lawmakers this month asked Trump’s head of the U.S. Department of Veterans Affairs to meet with them “to discuss ways to provide access to psychedelic medicine for military veterans.” At a cabinet meeting, VA Secretary Doug Collins advised Trump that his agency was “opening up the possibility of psychedelic treatment for veterans.” The leader of the MAHA movement, RFK Jr., even discussed the “wonderful experience” he had with LSD when he was younger.
We remain skeptical that even with the confirmation of Means we will see significant psychedelic reform, but we do think it makes it more likely that we would see more science-based reform efforts, focused on scientific and medicinal benefits. We’re less sure about what it may mean for any meaningful cannabis reform. As Marijuana Moment noted on the issue recently, Trump endorsed rescheduling, industry banking access for cannabis businesses, and a Florida legalization ballot initiative, but these issues seem to have taken a backseat for key officials and lawmakers.
So, I guess that brings us back where it all begins. Does Means mean business when it comes to psychedelic or cannabis reform? And even if she does, is there the political interest and will amongst the relevant agencies and Congress to see those changes through? Only time will tell, but we’ll stay on top of it so you don’t have to.