California Civil Rights Council Finalizes Regulations Aimed to Curb Employment Discrimination in the Use of AI Tools
Recently, the California Civil Rights Council, which is the arm of the California Civil Rights Department that is responsible for promulgating regulations, voted to approve final “Employment Regulations Regarding Automated-Decision Systems” (“Regulations”). The Regulations attempt to curb discriminatory practices that can arise when using AI tools in the workplace. If they are approved by the Office of Administrative Law, the Regulations will become effective on July 1, 2025. The Regulations have undergone several revisions since they were initially proposed in May 2024, and their adoption would make California one of the first states to implement anti-discrimination regulations pertaining to automated-decision technology.
The updated Regulations define “Automated-Decision Systems” (ADS) as “[a] computational process that makes decisions or facilitates human decision making regarding an employment benefit,” that “may be derived from and/or use artificial intelligence, machine-learning, algorithms, statistics, and/or other data processing techniques.” Examples of functions that ADS can perform include resume screening, computer-based assessments, and analysis of applicant or employee data from third parties.
Both employers and “agents” are covered under the Regulations. Agents are defined as “any person acting on behalf of an employer, directly or indirectly, to exercise a function traditionally exercised by the employer or any other FEHA-regulated activity . . . .” Such functions could include applicant recruiting and screening, hiring, or decisions pertaining to leaves of absence or benefits.
The Regulations provide that it is unlawful for a covered entity to use an ADS that discriminates against an applicant, employee, or a class of applicants or employees based on a protected characteristic, but also indicates that discrimination based on accent, English proficiency, height, or weight is prohibited. In defending against claims of such discrimination, the employer can point to any due diligence performed by the company, such as anti-bias testing. Lack of testing is also relevant to determine liability. Under the new Regulations, covered entities must retain personnel records and ADS data for four years.
Given the intense focus on the use of AI in employment in recent years, employers across the country who use AI tools should ensure that they understand how these tools work and whether they have been properly tested for bias. Employers should review their policies to ensure that the use of AI is adequately covered. Prudent employers will also review contracts with any third parties (such as AI developers or any consultants) to determine whether they are protected against liability arising from AI-related discrimination claims.
Disparate Impact Liability Under Fire
On Wednesday, April 23, 2025, President Trump signed EO 14281, titled Restoring Equality of Opportunity and Meritocracy (EO), stating a new Trump Administration policy “to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible . . . .”
We, along with several of our colleagues, already explained this EO, but this shift in federal policy – barely noticed by most people amidst myriad controversies, memes, and crypto schemes, as well as a number of other executive orders – is important enough to warrant further consideration by anyone who manages workplaces and those of us who advise employers about civil rights laws. As a cover story in the Sunday, May 11, 2025 issue of the New York Times observed, the EO’s directive to curtail the use of disparate impact liability is part of a larger effort to “purge the consideration of diversity, equity and inclusion, or D.E.I., from the federal government and every facet of American life. . . .” and focuses on “the nation’s bedrock civil rights law.”
The Genesis of Disparate Impact Liability
In 1971, the Supreme Court of the United States (SCOTUS) recognized in Griggs v. Duke Power Co. that Title VII of the Civil Rights Act of 1964 “proscribes not only overt discrimination but also practices that are fair in form, but discriminatory in operation.” Thus, in the first case in which SCOTUS addressed such a Title VII claim on the merits, the Court approved disparate impact as a theory of liability under Title VII; i.e., that a plaintiff can establish a prima facie case of discrimination by showing that a facially neutral employment policy disproportionately excluded members of a protected class at a statistically relevant level.
Two years after the Supreme Court held in Wards Cove Packing Co. v. Atonio that employers defending a disparate impact claim need only “produce evidence of a legitimate business justification” for the policy in question, Congress amended Title VII with the Civil Rights Act of 1991 (CRA). The CRA requires defendants to prove that a neutral employment policy with a statistically significant adverse impact on a protected class was job related and consistent with business necessity, a more difficult standard to meet than the standard set in Wards Cove. See 42 U.S.C. § 2000(e)-2 (k), the statutory provision on “Burden of proof in disparate impact cases” that Congress created and President George H.W. Bush approved.
In 2009, in Ricci v. DeStefano, a divided SCOTUS addressed whether an employer that engages in “disparate treatment” can justify doing so to avoid “disparate impact” liability. The majority held that an employer may do so only if it can prove its reasoning under a “strong-basis-in evidence” standard.
Concurring with the majority, Justice Scalia amplified the argument that the disparate impact provisions in Title VII are at odds with the Constitution’s equal protection clause. This viewpoint has won favor in certain corners of legal scholarship. See, for example, a Harvard Journal of Law & Public Policy discussion of disparate impact by Pacific Legal Foundation Fellow Alison Slomin, and an article posted by the Federalist Society asking whether the disparate impact doctrine is unconstitutionally vague.
The Actual Impact of “Disparate Impact”
The EO takes such arguments even further, calling disparate-impact liability “a near insurmountable presumption of unlawful discrimination [that] exists where there are any differences in outcomes in certain circumstances among different races, sexes, or similar groups, even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed.” Case law, however, indicates that establishing this “near insurmountable presumption” is not so easy.
Title VII requires an employer to prove the business necessity for a policy in question only after a plaintiff has met the burden of proving that a disparate impact exists to a statistically significant degree. And — as Mark Twain said — “There are three kinds of lies: lies, damned lies and statistics.”
A good statistics expert for the defense can stop a disparate impact claim in its tracks by identifying statistical fallacies in a plaintiff’s alleged statistical proof of disparate impact. A plaintiff must also demonstrate that the policy in question caused the disparity, which is no easy task.
Further, a mere finding of disparate impact does not mean that the plaintiff wins the lawsuit. Rather, establishing the existence of a statistically significant disparate impact establishes only a prima facie case of discrimination, not liability under Title VII (or any other anti-discrimination statute).
If a disparate impact plaintiff establishes a prima facie case, the burden of persuasion then shifts to the defendant to prove that the policy is job related and consistent with business necessity. The defendant’s burden can be simplified to one inquiry: whether the policy concerns an essential job function. For example, is it an essential function of a lifeguard to be able to swim?
Indeed, scholars have argued that disparate impact liability has proven to be a fairly limited tool for plaintiffs claiming discrimination.
Seeking a “Colorblind” Meritocracy, But What About Other Protected Classes?
The EO asserts that disparate-impact liability “all but requires individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability” and concludes that disparate-impact liability is unconstitutional. The disparate impact theory, however, is not limited just to race. The EO does not mention that the disparate impact theory is available in other Title VII cases based on sex, national origin, color and religion. To a lesser extent, it can apply to cases brought under the Age Discrimination in Employment Act (ADEA) and the Americans with Disabilities Act (ADA), too. However, an employer’s burden to defend against an ADEA claim is only to establish a reasonable factor other than age. Further, because of the detailed factual showing required in ADA cases, disparate impact ADA claims are not often available.
The EO also declares that treating people as individuals “encourages meritocracy and a colorblind society” as opposed to “race- or sex-based favoritism.” Notably, while Title VII makes it illegal to discriminate against any individuals on the basis of a protected class, the first sentence of the EO states that equal treatment of all citizens is a bedrock principle of the United States.
Under Title VII, it is illegal for employers to discriminate against any individual based on race, color, religion, sex, or national origin. The Equal Employment Opportunity Commission (EEOC) issued Enforcement Guidance on National Origin Discrimination in 2016, along with a Q&A that notes that Title VII’s “protection against national origin discrimination extends to all employees and applicants for employment in the United States, regardless of their place of birth, authorization to work, citizenship, or immigration status.” When the EEOC has a quorum of Trump appointees, that Guidance may be reconsidered, although a change to the statute will still require an act of Congress.
What it All Means, in Practice
Title VII as amended (including the Civil Rights Act of 1991) is still the law of the land, and the laws of many states may permit or require that adverse impact analyses be performed in certain circumstances. It thus still makes good sense to continue utilizing adverse impact analyses as a risk mitigation tool, under the privileged guidance of counsel.
In addition, with the EO’s overt message on federal government enforcement policy with respect to Title VII (and, for that matter, Title VI), employers should be able to rely on the EO to stop a federal government investigation that centers on an employment practice or policy allegedly causing a disparate impact in violation of Title VII. For example, employers now should be able to convince the EEOC to dismiss a race charge of discrimination as to a facially neutral policy or practice attacked only under a disparate impact theory.
Moreover, while the EO does mention the word “age,” it does not mention “disability” and does not cite to either the ADEA, 29 U.S.C. § 621, et seq., or the ADA, 42 U.S.C. § 12101, et seq. It seems likely that, given the EO’s clear position as to the disparate impact theory of discrimination, this Administration will also not continue an investigation or litigation premised on a disparate impact theory in violation of these laws. Accordingly, employers may likewise be able to get the EEOC or the U.S. Department of Justice to stop investigations of such claims.
Many of the (thus far) 147 executive orders issued since January 20, 2025, have been challenged in court; as of May 7, 2025, at least 228 actions have been filed, many resulting in preliminary injunctions blocking all or parts of these actions. It is unclear whether this EO will also garner a lawsuit, or if Congress will propose legislation to amend Title VII, or if the Administration will try to persuade the Supreme Court to agree with its declaration regarding the constitutionality of disparate impact theory. There is much to keep an eye on.
Compliance with Meet and Confer Obligations Under the Federal Rules
In Wilbert v. Pyramid Healthcare, Inc., d/b/a Silvermist Recovery Center, et al., the plaintiff filed suit alleging pregnancy-based discrimination and harassment, culminating in her termination. According to the court, the parties never agreed on how to handle the discovery of electronically stored information (ESI) in connection with the litigation. For purposes of this blog post, the parties were before the court on a motion to compel filed by the plaintiff.
In this decision, the district judge provided an in-depth discussion of parties’ meet-and-confer obligations prior to filing a motion.
First, the court cited Rule 26’s requirements of relevance and proportionality: “Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.”[1] The court then referred to Federal Rule of Evidence 401 on relevance, explaining that information is relevant if “it has any tendency to make a fact more or less probable than it would be without the evidence” and “the fact is of consequence in determining the action.” The court also noted that Rule 37 provides the procedural mechanism for adjudicating discovery disputes and returned to Rule 26’s limitations on accessibility and duplicative discovery before addressing the requirement that parties meet and confer in planning for discovery.
As part of this planning discussion, the court emphasized the topics the parties “must discuss,” which include:
preserving discoverable information;
developing a joint proposed discovery plan, where counsel must engage in good faith to agree on the plan; and
submitting to the court a written report outlining the plan.
The discovery plan, according to the court, must state the parties’ views and proposals on several topics listed in Rule 26(f), including issues related to the disclosure, discovery, or preservation of ESI, as well as the forms in which ESI should be produced. The court highlighted that the Federal Rules empower it to order parties to meet and confer in person and permit it to require a party or its attorney to pay the other party’s reasonable expenses if they fail to participate in the process in good faith.
Case Analysis
After detailing the applicable rules, the court analyzed whether the plaintiff complied with those rules. As a preliminary matter the court noted that “[f]rom the inception of this action, Counsel for the parties could not agree on the scope and methodology of ESI discovery.” While counsel participated in a Rule 26(f) conference, plaintiff’s counsel proposed a 30-page “mandatory” discovery plan that imposed extensive ESI protocol requirements far exceeding the district court’s checklist for meet-and-confer sessions. The court observed that plaintiff’s counsel framed elements of the proposed ESI plan in an argumentative and non-negotiable manner, suggesting an unwillingness to cooperate during the required conferral process.
These issues—including the overbreadth of the requests, the scope of custodians, and search report requirements—were discussed during a case management conference. The court issued an order requiring counsel to confer meaningfully on the issues. However, the parties failed to resolve the issues and, months later, submitted a joint letter to the court. Subsequently, the court granted plaintiff’s counsel leave to file the motion to compel (“Motion”) but required counsel to include a certification of conferral and specify the factual basis for each claim and discovery issue, supported by affidavits or declarations.
Although plaintiff’s counsel filed the motion, he failed to comply with the court’s order by omitting the required factual support and specificity for each discovery issue.
Court Findings
As a preliminary matter, the Court noted the plaintiff’s Motion failed to satisfy its order in “certain material respects.” Notably absent from the Motion were affidavits or unsworn declarations substantiating each factual assertion. The court further determined that the Motion failed on the merits for several reasons.
Overbreadth of Requests and Custodians: The court found the plaintiff’s requests overly broad and criticized plaintiff’s counsel for failing to explain the relevance of the proposed custodians. Defense counsel had attempted to confer, but plaintiff’s counsel either ignored their overtures or imposed “egregious barriers to doing so.” As such, the Motion failed to meet the burden of demonstrating relevance and was denied.
Hit Reports: Plaintiff’s counsel insisted defendants generate “hit reports” on all search terms before determining their relevance. The court rejected this approach, calling it “backwards and inappropriate” in a straightforward, non-document-intensive employment discrimination case. The court noted that counsel had chosen to ignore its observations and persisted in demanding that defendants expend significant time, effort, and resources to search the computers and phones of a wide swath of custodians (whether relevant or not) for an extensive list of search terms (whether relevant or not) overly an overly broad time period (whether relevant or not). Counsel relied on the apparent authority of his own ESI Plan, which emphatically but erroneously stated: “Without a hit report, generated by software, there is no accepted methodology to certify that a competent search was done. Furthermore, there is no possibility to reasonably meet and confer on any objections that defense counsel may have, i.e., if defense counsel objects that a search term would generate overly broad results, then we must refer to a hit report.”
The court further found that the proposed temporal search period and search terms had not been established as relevant and offered no credible explanation for why emails and texts sent or received prior to plaintiff’s pregnancy should be included in the search or ESI. In essence, the court determined that counsel had failed to identify an appropriate time period and scope of discovery that aligned with the allegations in the complaint. Plaintiff’s counsel had also defied the court’s order regarding the scope of the matter. As a result, the court found that the unsupported Motion did not satisfy that burden under Rule 37[2] and, in denying the motion, stated:
“The Court is also of the view that [counsel’s] self-proclaimed “mandatory” approach to ESI discovery in employment cases not only contravenes several provisions of the Federal Rules of Civil Procedure and this District’s Local Rules, but [his] unilateral imposition of such ESI protocols in all such cases also defies the requirement that even relevant discovery must be:… proportional to the needs of the case, considering the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the party’s resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.”
The court emphasized that, in this case, plaintiff’s counsel has ignored his duty to refrain from discovery efforts that were unreasonable, unduly burdensome, or expensive in light of the proportionality factors.
The court also took issue with plaintiff’s counsel’s (Attorney Ward’s) behavior, noting:
The conferral obligation is not a bargaining chip to be offered in exchange for a concession on a disputed discovery process or requested item. Conferral is expected for all discovery planning and dispute resolution and is a precondition to seeking court intervention. A party may also not impose unreasonable conditions or barriers on their willingness to meet and confer. Here, Defense Counsel contends that Attorney Ward insisted that he would only meet in person to confer if Defense Counsel acquiesced to his demand that such meeting be recorded. Such obdurate behavior in this case lacks justification, defies the bounds of expected professional behavior, and was seemingly deployed to harass Defense Counsel and thwart any meaningful and constructive attempts at resolving the parties’ disputes.”
As a result of Ward’s behavior, defense counsel refused to meet in person under the proposed conditions and continued conferral efforts in writing. Despite this, Attorney Ward affixed a certificate of meet and confer to his motion, as required by Rule 37(a).[3] The court found that Attorney Ward did not satisfy his obligation to confer in good faith and ordered him to show cause why he and his law firm should not be sanctioned for (1) failing to participate in good faith in developing and submitting a proposed discovery plan as required by Rule 26(f) and all related court rules, and (2) misrepresenting to the court that he had satisfied his conferral obligations in good faith before filing the motion to compel as required by Rule 37.
Conclusion This decision by Judge Hardy serves as a strong reminder of the standard of cooperation and good faith expected of every party and counsel to facilitate discovery. Parties have an obligation to participate in the meet-and-confer process and to be cooperative and collaborative during the process. Adversaries—and courts alike—have little patience for delay tactics, failures to disclose timely information relevant to discovery, and misstatements of fact.
[1] For determining proportionality, courts consider “the importance of the issues at stake in the action, the amount in controversy, the parties’ relative access to relevant information, the parties’ resources, the importance of the discovery in resolving the issues, and whether the burden or expense of the proposed discovery outweighs its likely benefit.” Id. “The parties and the court have the collective responsibility to consider the proportionality of all discovery and consider it in resolving discovery disputes.” Fed. R. Civ. P. 26(b)(1).
[2] Rule 37 governs motions to compel discovery. According to the court, the moving party bears the initial burden to prove that the requested discovery falls within the scope of discovery as defined by Rule 26(b)(1). If the moving party meets this initial burden, the burden then shifts to the opposing party to demonstrate that the requested discovery (i) does not fall within the scope of discovery contemplated by Rule 26(b)(1), or (ii) is not sufficiently relevant to justify the burden of producing the information.
[3] In addition to citing a number of local rules relevant to discovery issues, District Judge Hardy pointed to the presiding judicial officer’s published practices and procedures for the proposition that no discovery motions are to be filed until after the parties jointly contact chambers to request an informal conference, except in the cases of emergency, as certified by counsel. Counsel is also required, under the presiding judicial officer’s practices and procedures, to file a certification “that the movant has discussed the matter with all other parties and to expressly indicate whether the opposing party consents to or opposes the motion and whether such party intends to file a response.”
Cross-Border Catch-Up: Understanding Chile’s Karin Law on Harassment and Violence [Podcast]
In this episode of our Cross-Border Catch-Up podcast series, Goli Rahimi (Chicago) and Lina Fernandez (Boston) discuss Chile’s new Karin Law, officially known as Law Number 21.647, and break down the law’s key provisions and its implications for employers. Lina and Goli explain how this comprehensive legislation aims to prevent and address workplace harassment and violence by establishing clear definitions, procedures, and preventive measures to promote safer and more respectful work environments. They also outline the responsibilities of employers to create internal protocols, educate employees on how to report misconduct, and investigate complaints in a timely manner.
Colorado Legislature Fails to Amend Recent Artificial Intelligence Act
In 2024, Colorado passedthe first comprehensive state-level law in the U.S. regulating the use of artificial intelligence, the Artificial Intelligence Act (the Act). It imposed strict requirements on developers and users of “high-risk” AI systems, particularly in sectors like employment, housing, finance, and healthcare. The Act drew criticism for its complexity, breadth, and potential to stifle innovation.
In early 2025, lawmakers introduced Senate Bill (SB) 25-318 as a response to growing concerns from the tech industry, employers, and even Governor Jared Polis, who reluctantly signed the Act into law last year.
SB25-318 aimed to soften and clarify some of the more burdensome aspects of the original legislation before its compliance deadline of February 1, 2026.
Amendments proposed under SB 25-318 included:
An exception to the definition of “developer” if the person offers an AI system with open model weights and meets specified conditions.
Exemptions for specified technologies.
Elimination of the duty of a developer or deployer to use reasonable care to protect consumers from known or reasonably foreseeable risks of algorithmic discrimination and the requirement to notify the state attorney general of such risk.
An exemption from specified disclosure requirements for developers if they meet certain financial and operational criteria.
Despite its intention to strike a balance between innovation and regulation, SB25-318 was voted down 5-2 by the Senate Business, Labor, and Technology Committee on May 5, 2025.
With SB25-318 dead, the original Act remains intact, and the next step is for the Colorado Attorney General to issue rules and/or guidance. As it now stands, businesses and developers operating in Colorado must prepare for full compliance by early 2026 unless this date is otherwise extended.
Use of AI in Recruitment and Hiring – Considerations for EU and US Companies
1. Use of AI in Recruitment and Hiring
AI is transforming the recruitment landscape across the globe, making processes such as resume screening and candidate engagement more efficient by:
using keyword searches to automatically rank and eliminate candidates from a pool of applicants with minimal human oversight;
performing recruitment tasks via chatbots that interact with candidates;
formulating skills and aptitude tests; and
analyzing video interviews to assess a candidate’s suitability for a particular position.
In addition to maximizing efficiency, AI may also be used to make automated, substantive decisions related to recruitment, hiring, and performance through the use of predictive analytics that forecast a candidate’s success in a specific role.
2. Regulation of AI Use in the European Union and United States
The European Union has taken a united approach to AI regulation, and all EU member states are currently governed by the EU Regulation on Artificial Intelligence (EU AI Regulation), which took effect on Aug. 1, 2024. The EU AI Regulation’s scope applies to all providers and deployers based in the EU, as well as those that place an AI system on the EU market or use the results of an AI system in the EU. Parties located outside the EU should therefore be aware that the EU AI Regulation may apply to them, as well.
The EU AI Regulation categorizes AI systems into different risk categories, with the applicable rules becoming stricter as the risk to health, safety, and fundamental rights increases (for example, “minimal” regulation for spam filters; “limited” regulation for chatbots; “high” regulation for use in recruitment; and “unacceptable” use of AI for social scoring and facial recognition). HR tools are considered high-risk AI systems if they (1) are used for recruiting or selecting candidates; and/or (2) provide the basis for HR employment-related decisions, e.g., promoting or terminating employment or monitoring and evaluating performance and behavior.
As of Feb. 2, 2025, the EU AI Regulation requires companies to eliminate “unacceptable” AI systems (as defined by the law) and to thoroughly and comprehensively train all employees using AI systems with respect to compliant AI use under the regulation.
In contrast to the EU, the United States does not currently have uniform AI regulations on a federal level. Though the Biden administration had tasked government agencies such as the Department of Labor and the Equal Employment Opportunity Commission with monitoring the use of AI tools and issuing guidance to enhance compliance with anti-discrimination and privacy laws, in January 2025, President Trump expressed his support for deregulation, issuing an executive order entitled “Removing Barriers to American Leadership in Artificial Intelligence Issues.” Federal agencies have since removed all previously issued guidance on AI use.
In response to the executive order advocating for AI deregulation, regulations governing the use of AI have been introduced and passed on the state level. However, legislation passed does not always become legally binding. For example, in February 2025, the Virginia legislature passed the High-Risk Artificial Intelligence Developer and Deployer Act, which would have required companies creating or using “high-risk” AI systems in employment as well as other areas to implement safeguards against “algorithmic discrimination” for such systems. However, the governor vetoed the Act on March 24, 2025, and so the Act does not currently apply.
3. AI Use May Trigger Other Legal Violations
Aside from complying with laws such as the EU AI Regulation, which specifically regulates the use of AI, companies using AI in their recruiting and hiring processes should be careful such use does not trigger a violation of other laws. For example:
Bias and Discrimination: Algorithms used by AI in recruitment and hiring may inadvertently perpetuate bias, leading to discrimination against candidates based on race, gender, age, or other protected characteristics. Discrimination is prohibited in the EU under Council Directive 2000/78/EC, which bans discrimination in employment, education, and public safety, as well in the United States via more than one hundred federal, state, and local anti-discrimination laws.
Data Security and Ownership: Companies that enter the personal data of potential candidates into an AI system have certain legal obligations with respect to maintaining the security of such data, as well as considerations with respect to the ownership of such data. Such obligations are governed by the EU General Data Protection Regulation (GDPR), which took effect on May 25, 2018. In the United States, more than 20 jurisdictions have passed laws imposing obligations on employers that use AI to collect and process candidate and employee data.
Invasion of Privacy: Employers that collect candidate and/or employee data via AI tools may inadvertently be invading the privacy of such candidates and employees, and should be mindful of applicable privacy laws, which may require the company to obtain consent from the candidate or employee prior to running certain searches.
4. Penalties for Non-Compliance
An EU employer that violates the above discrimination, data security, and privacy laws risks significant (yet lower than U.S.) damage awards, as well as high administrative penalties from agencies such as the European AI Office and national data protection authorities.
Damages claims for individual breaches can vary significantly between jurisdictions, and EU member states retain national autonomy in determining award sums. However, European Court of Justice (ECJ) landmark judgments emphasize the importance of issuing awards that correspond to the nature and extent of the EU-protected rights violated.
Certain European nations, such as Estonia, Hungary, Ireland, Sweden, Austria, and Finland, have established statutory or customary upper limits on awardable damages to employees in the event a company fails to comply with applicable anti-discrimination regulations, with such damages ranging from the payment of EUR 500 to 104 weeks’ pay. In contrast, in Poland, Germany, and the Netherlands, damages are not formally limited, although in practice the awards are relatively low compared to the United States. The national laws of some European countries, such as UK, provide for punitive damages, which would further increase the sum of damages awarded.
In addition to the above, administrative fines for data security and privacy law violations under GDPR may reach up to the higher of EUR 20,000,000, or 4% of a company’s annual worldwide turnover for the preceding financial year.
Under the EU AI Regulation, both an EU employer and a non-EU employer using the results of an AI system in the EU can be fined up to the higher of EUR 35,000,000 or 7% of a company’s annual worldwide turnover for the preceding financial year. In the United States, penalties range depending on the jurisdiction. In New York City, for example, an employer may incur a fine of up to $500 for a first violation, and between $500 and $1,500 per day for each subsequent or continuing violation.
5. Considerations for Employers
To minimize exposure, employers should consider taking the following steps:
For the EU (including non-EU companies subject to EU laws as provided above):
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Eliminate AI use deemed to be “unacceptable” under the EU AI Regulation.
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Train employees to use AI in accordance with the EU AI Regulation, applicable data security and privacy laws, and company policies.
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Prepare for additional new requirements scheduled to take effect in August 2026.
For the United States:
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Inform candidates when using AI in recruiting and hiring and obtain informed written consent from a candidate prior to using AI for processing sensitive data.
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Provide an alternate method of screening should the candidate decline the use of AI.
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Use AI systems (including testing procedures) that provide clear parameters that can later be verified.
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Conduct periodic independent bias testing of AI systems and recruitment tools.
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Include human oversight in the decision-making process.
Thilo Ullrich and Dorothee von Einem also contributed to this article.
Disparate-Impact Liability Gets Cancelled: Trump Executive Order Seeks to Eradicate Disparate-Impact Liability From Federal (And State) Law
On April 23, 2025, President Donald Trump issued an executive order titled “Restoring Equality of Opportunity and Meritocracy” (“the EO”).
The EO, by its own terms, seeks to “to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible” through several avenues, including eliminating enforcement at the federal level and advocating for preemption at the state level.
Disparate-impact liability is a legal theory by which facially neutral policies or practices may nonetheless violate antidiscrimination laws if they disproportionately affect members of protected classes. Disparate impact claims are typically raised in the context of reductions-in-force and challenges to hiring criteria.
Recognized initially by the U.S. Supreme Court in the 1971 case Griggs v. Duke Power Co., 401 U.S. 424 (1971), disparate-impact liability was later codified into Title VII of the Civil Rights Act by Congress in 1991. Although disparate-impact liability usually centers on federal law and authorities, many states have also codified versions of disparate-impact liability throughout state statutes and regulations.
The EO represents a significant shift in federal enforcement priorities, directing all federal agencies to “deprioritize enforcement of all statutes and regulations” that include disparate-impact liability. For employers, this most acutely signals that the Equal Employment Opportunity Commission (EEOC), among other federal agencies, will no longer pursue enforcement of disparate impact liability in administrative proceedings.
Beyond federal enforcement priorities, the EO seeks to lay the groundwork for preemption of state-law disparate-impact protections. Specifically, the EO instructs the Attorney General and all federal agencies to “determine whether any Federal authorities preempt State laws, regulations, policies or practices that impose disparate-impact liability” based on federally protected characteristics. (In doing so, the EO also explicitly telegraphs the Trump administration’s interest in designating the lack of a college education as a protected trait for equal employment purposes.) Accordingly, the EO’s stated interest in preemption could potentially pave the way for more to challenges to state-level disparate-impact protections.
However, employees can still bring private lawsuits alleging disparate impact claims under both federal and state law, barring further developments in federal case law or statutes.[1] In other words, employers would be ill-advised to eliminate disparate impact analyses when conducting reductions-in-force or considering applicant testing or similar broad-scale hiring criteria.
Ultimately, the law surrounding disparate-impact liability promises to continually change in the months and years ahead. Employers should keep an eye on these developments and consult with counsel if they have questions as to their compliance with federal and state law.
[1] Notwithstanding the EO’s stated changes to federal enforcement and the current administration’s appetite for preemption, employees must still allege disparate-impact claims in their EEOC charge in order to exhaust administrative remedies under federal law — even if the EEOC ceases to investigate or enforce disparate-impact claims. In other words, an employee’s failure to assert disparate-impact claims at the EEOC level could result in dismissal of those disparate-impact claims later on for failure to exhaust administrative remedies. Additionally, employees may continue to assert state-law claims (as applicable), notwithstanding the EO’s demonstrated appetite for federal preemption of state laws on disparate-impact liability. However, employers challenging such state-law disparate-impact claims may take the EO’s invitation and make a preemption argument against such claims — which may then lead to further developments in the case law in this area.
Minnesota Employment Legislative Update 2025, Part II: It’s Déjà Vu—Lengthy Omnibus Bills, Buried Employment Law Changes
Last year’s Minnesota legislative session resulted in a 1,000-page omnibus bill that included significant changes to the state’s labor and employment laws. As this year’s legislative session comes to a close, we predict a range of developments in employment and labor-related laws to emerge in omnibus bills or to be passed last minute due to the existing legislative divide. This means a repeat of lengthy omnibus bills with uncertainty about what will make it to the governor’s desk after the close of session on May 19, 2025.
Quick Hits
Minnesota’s legislative session will conclude with an omnibus bill introducing significant proposed changes to labor and employment laws, with more developments expected by the end of the session on May 19, 2025.
A provision in the omnibus bill would mandate that Minnesota employers provide a thirty-minute meal break for employees working six or more consecutive hours and a fifteen-minute rest break every four hours, with penalties for noncompliance.
SF 3045 / HF 2783 would prohibit employers from retaliating against employees for their political contributions or activities, with violations classified as gross misdemeanors and provisions for civil action.
Omnibus Budget and Policy Bills
Several omnibus bills have emerged that may impact employers. An omnibus bill is a large bill generally made up of numerous smaller bills on the same broad topic. Often, the smaller bills are heard in committee and then laid over for possible inclusion in the omnibus bill rather than passing each bill separately.
Senate File (SF) 1832 / House File (HF) 2440
SF 1832 passed in the Senate and currently sits with the House of Representatives for comparison with HF 2440.
Meal and Rest Breaks
The legislature snuck in a provision to this omnibus bill that would impact Minnesota’s meal and rest break laws. Minnesota meal and rest break statutes are currently vague, stating that employers must provide employees working eight or more hours with “sufficient time” to eat a meal and with “adequate time” to use a restroom every four hours. The omnibus bill would:
allow each employee working six or more consecutive hours a meal break of at least thirty minutes; and
allow each employee a rest break of at least fifteen minutes or enough time to utilize the nearest convenient restroom, whichever is longer, within each four consecutive hours.
If an employer fails to provide said meal and rest breaks, the employer would be liable to the employee for the meal or rest break time that should have been provided at the employee’s regular rate of pay, plus an additional equal amount as liquidated damages. Additionally, the commissioner could assess a penalty of up to $1,000 per employee per day during which meal or rest breaks are not provided as required.
Should this bill pass, employers may want to review their meal and rest break policies and make appropriate changes.
Employer Unemployment Penalties
This provision of the omnibus bill would increase penalties for employers that misrepresent or make false statements to the state’s unemployment insurance program, which is administered by the Minnesota Department of Employment and Economic Development, to 100 percent instead of the current 50 percent of the amount of overpaid benefits to the applicant, the amount of benefits that the applicant would have been entitled to, or the amount of the special assessment.
Commissioner’s Injunctive Relief
This provision of the omnibus bill would grant the commissioner of the Minnesota Department of Labor and Industry the power to not only bring civil actions but also seek an “order enjoining and restraining violations” against employers that violate various labor and employment statutes.
SF 2370 / HF 1615
The Senate passed a version of this omnibus bill, but the House amended it. The revised omnibus bill will be headed back to the Senate.
Namely, a provision of this omnibus bill seeks to strengthen tribal medical cannabis programs, including by expanding the nondiscrimination provisions to include “the person’s status as an individual enrolled in the registry program” or “the person’s status as a Tribal medical cannabis program patient.”
Amongst other provisions, the omnibus bill prohibits retaliation “against a patient” who asserted rights or sought remedies under the law and provides for injunctive relief. If the omnibus bill passes, Minnesota employers would be required to provide “written notice to a patient at least 14 days before […] tak[ing] an [adverse] action.” The written notice would need to cite the specific federal law or regulation the employer believes would be violated if they fail to take action.
SF 3045 / HF 2783
SF 3045 had its third reading and was passed to the House for reading and comparison to HF 2783. Once received by the House, the omnibus bill was amended and passed. However, the Senate did not concur with the House bill amendment and requested a conference committee be convened. On May 5, 2025, both House and Senate conference committees were convened to compromise on the language of the bill. If they reach a compromise, their agreement must be passed by both bodies before it can be sent to the governor.
Notably, SF 3045 / HF 2783, with limited exceptions, would explicitly prohibit employers (defined as a person or entity employing one or more employees) from economic reprisal against individuals due to their political contributions or political activity, “including for becoming a candidate or local candidate for elected public office,” or due to “refusal to communicate with public or local officials to influence a decision about a legislative or administrative action or the official action of a political subdivision.” Violation of this section would be considered a gross misdemeanor, and the statute would provide for a right to bring a civil action for damages, injunctive relief, costs, and attorney fees, and any other just and equitable relief, including reinstatement.
New Bill Signed Into Law
Yesterday, Governor Tim Walz signed HF 688 / SF 1317 into law. This law affords full and equal access to all housing accommodations to individuals actively training service dogs. Previously, these accommodations were available only to individuals with disabilities who had service dogs. The new law would allow individuals training service dogs not to pay extra fees for the dogs in training. These individuals would still be liable for any damage done to the premises by the service dog in training. Notably, this protection would only be limited to service dogs in training under the supervision of an organization accredited by Assistance Dogs International or the International Guide Dog Federation. The law specifies that landlords or boards of homeowners’ associations may require written certification from the supervising organization.
Beltway Buzz, May 9, 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.
DOL to Rescind 2024 Independent Contractor Regulation? The U.S. Department of Labor (DOL) is backing away from the Biden-era independent contractor regulation finalized in January 2024. More specifically, the DOL’s Wage and Hour Division (WHD) has issued guidance (Field Assistance Bulletin No. 2025-1, “FLSA Independent Contractor Misclassification Enforcement Guidance”) instructing its field staff to “no longer apply the 2024 Rule’s analysis when determining employee versus independent contractor status in FLSA investigations.” The DOL will be taking this position while it reconsiders the 2024 Rule, “including whether to rescind the regulation.” In the meantime, DOL investigators are instructed to rely on Fact Sheet #13: Employment Relationship Under the Fair Labor Standards Act (FLSA). Finally, the guidance notes that “the 2024 Rule remains in effect for purposes of private litigation.” The first Regulatory Agenda of the second Trump administration—expected sometime in June or July of this year—should provide stakeholders with a clearer picture of the DOL’s intentions regarding a potential rescission of the 2024 independent contractor rule.
Bipartisan Paid Family Leave Bill Introduced in House. In January 2024, the Buzz discussed the U.S. House of Representatives’ bipartisan Paid Family Leave Working Group’s four-pillar paid leave framework. This week, Representatives Chrissy Houlahan (D-PA) and Stephanie Bice (R-OK), who co-chair the working group, introduced the More Paid Leave for More Americans Act. The legislation combines two pillars of their framework, the Paid Family Leave Public Partnerships Act and the Interstate Paid Leave Action Network Act. Here is how it would work:
Paid Family Leave Public Partnerships Act. This portion of the bill would offer DOL grants to states that establish paid family leave programs. To be eligible for such grants, states would be required to:
provide eligible employees with at least six weeks of paid leave for the birth or adoption of a child;
provide wage replacement between 50 percent and 67 percent based on employees’ income, with a cap equal to 150 percent of the state’s average weekly wage;
enter into a partnership with a private entity—such as an insurance carrier—to administer the benefits; and
participate in the to-be-created Interstate Paid Leave Action Network (I-PLAN).
Interstate Paid Leave Action Network Act (I-PLAN Act). This aspect of the More Paid Leave for More Americans Act would help states reduce the variances between the programs that have led to the current “patchwork” of paid leave compliance requirements. The I-PLAN would be tasked with establishing an agreement that will “[c]reate a single policy standard with respect to all participating States to facilitate easier compliance with and understanding of paid leave programs across States[.]” In other words, the I-PLAN aspect of the bill will strive to seek uniformity between states on key paid family leave terms such as employee eligibility, family member, intermittent leave, etc.
The More Paid Leave for More Americans Act still has a long way to go before becoming law. But the bipartisan nature of the bill is an optimistic sign for its supporters.
EEOC Personnel News. Recent nominations and hiring decisions shed some light on where the U.S. Equal Employment Opportunity Commission (EEOC) is heading from a policy perspective:
Commissioner Appointment. President Donald Trump nominated Brittany Bull Panuccio to serve on the Commission. Panuccio is currently an assistant U.S. attorney in Florida and previously served as an attorney at the U.S. Department of Education. If confirmed, Panuccio would join Acting Chair Andrea Lucas to form a Republican majority on the Commission. Current Commissioner Kalpana Kotagal is the only Democrat on the Commission. Further, Panuccio’s confirmation would return a functioning quorum to the Commission and would likely allow Acting Chair Lucas to move forward with her regulatory—and subregulatory—agendas. D’Ontae D. Sylvertooth and Sean J. Oliveira have the details.
Chief of Staff. Acting Chair Lucas has selected Shannon Royce as her chief of staff. Royce is an attorney and former president of the Christian Employers Alliance. Lucas has announced that one of her top priorities is “protecting workers from religious bias and harassment.”
Bill Would Provide Tax Break on Overtime Pay. The Buzz has discussed President Trump’s desire to limit the taxes that workers pay on tips and overtime earnings. Bills have already been introduced in the U.S. Congress to address the “no tax on tips” issue. This week, Republican legislators turned to the overtime issue by introducing the Overtime Wages Tax Relief Act. The bill would allow workers to deduct up to $10,000 ($20,000 for those filing jointly) of income derived from working overtime for each taxable year. The deduction begins to phase out when income reaches $100,000 for individuals or $200,000 for married couples. Republicans may try to include this bill in their larger reconciliation tax reform package.
OFCCP Layoffs Arrive. President Trump’s rescission of Executive Order 11246 eliminated the affirmative action requirements for federal contractors, and, in turn, most of the operations of the Office of Federal Contract Compliance Programs (OFCCP). Many OFCCP employees were subsequently offered a deferred resignation option or placed on administrative leave. This week, most of OFCCP’s remaining employees received notice that they would be laid off, effective June 6, 2025. According to reports, this is more than 300 employees (according to its fiscal year 2025 budget justification, OFCCP has about 490 employees). OFCCP will reportedly maintain one regional office in Dallas, Texas.
A Pope-ular Guest. At the Buzz, no news is more significant than labor and employment policy developments. But for the rest of the world—particularly for Catholics—the selection of Chicago-born Cardinal Robert Prevost as Pope Leo XIV was the news of the week. Some American politicians, such as Senators Mark Kelly (D-AZ) and John Hoeven (R-ND), expressed excitement and optimism about the selection of an American-born Pope. But at this early hour, there aren’t any plans to invite the new pontiff to address Congress. Indeed, it is a rare event. On September 24, 2015, Pope Francis delivered an address to a joint session of Congress, the only Pope to ever do so. It was probably no coincidence that three of the most powerful politicians at the time—Vice President Joe Biden, Speaker of the House John Boehner, and House Democratic Leader Nancy Pelosi—were all Catholic.
NYC Employers Reminded to Post Lactation Accommodation Policy
New York City employers are reminded that they are now required to physically and electronically post a copy of their written lactation accommodation policy.
As we previously reported, Local Law 109 – which became effective on May 8, 2025 – amends the New York City Human Rights Law’s existing obligations on employers to implement and distribute a written lactation accommodation policy. The amendment requires that employers both distribute the written policy to employees “at the commencement of employment,” as well as make the policy “readily available to employees by, at a minimum, conspicuously posting such policy at an employer’s place of business in an area accessible to employees and electronically on such employer’s intranet, if one exists.”
In addition, the amendment incorporates the recent change to New York State law requiring the first 30 minutes of each lactation break be paid. The amendment requires that a compliant lactation accommodation policy now include a statement that the employer will provide 30 minutes of paid break time for lactation purposes and permit an employee to use existing paid break or meal time for lactation time needed in excess of 30 minutes.
NYC employers should take immediate steps to ensure compliance with these new requirements.
Workplace Strategies Watercooler 2025: The Latest Tips and Trends for Multistate Handbooks [Podcast]
In this installment of our Workplace Strategies Watercooler 2025 podcast series, Dee Anna Hays (shareholder, Tampa) and Lucas Asper (shareholder, Greenville), who are co-chairs of the firm’s Multistate Advice and Counseling Practice Group, join Todd Duffield (shareholder, Atlanta) to discuss the latest tips and trends for multistate handbooks. Dee Anna, Lucas, and Todd touch on various state and local law-specific issues and key topics for employers’ consideration, including revisiting diversity, equity, and inclusion (DEI), leaves of absence, and reasonable accommodation policies. They also stress the importance of understanding employee monitoring and privacy limitations and employee rights to engage in protected activity under the National Labor Relations Act, a protection that extends to all employees, including those not represented by a union.
NY’s Superfund Law Poised for Overhaul: Aligning with CERCLA and Accounting for Environmental Justice
As part of the 2025 Executive Budget, New York’s legislature has passed significant amendments to New York’s Environmental Conservation Law concerning the Inactive Hazardous Waste Disposal Site Remedial Program—commonly referred to as the State Superfund program. It is anticipated that the governor will sign the legislation. The proposed amendments (S.8308-C/A.8808-C) would align New York’s state-level liability framework more closely with core components of federal CERCLA, the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601–9675.
The new law would strengthen enforcement authority and emphasizes environmental justice (EJ) priorities. Notably, it codifies a state analog to CERCLA’s “bona fide prospective purchaser” (BFPP) defense—previously absent from New York statutory law. This legislative package marks a departure from the governor’s initial proposal and signals a broader evolution of the State Superfund program. Property owners, prospective purchasers, and others should carefully assess how these changes affect liability exposure and the steps necessary to qualify for liability protections.
Revising Liability Standards and Introducing New Defenses
The bill broadens the definition of “responsible person,” to include any owner, operator, disposer, arranger, or transporter—excluding only Brownfield Cleanup Program volunteers—as liable for hazardous waste disposal at a site. Without carve-outs, this expansive language would capture “innocent owners” and prospective purchasers of contaminated sites who had no role in the contamination. While the definition aligns with federal CERCLA, the governor’s initial January 2025 proposal did not include CERCLA-style defenses, potentially complicating the sale of contaminated properties. The law, as-passed, now provides for a state BFPP safe harbor. Since 2002, federal CERCLA law has recognized that a party can maintain BFPP status to avoid potential liability for the purchase of a contaminated site so long as certain statutory criteria are met. New York’s version would extend similar protections to good-faith buyers who conduct “all appropriate inquiries” and fulfill continuing care obligations. This marks a significant improvement over New York’s vague common law “innocent owner” defense, which was largely derived from Navigation Law oil spill cases, offering greater clarity for purchasers navigating contaminated site transactions.
Shifts in Enforcement and Procedural Architecture
The new legislation also rejects an earlier proposal authorizing the DEC commissioner to issue unilateral cleanup orders, akin to EPA’s power under CERCLA § 106. Instead, the bill introduces a summary abatement mechanism modeled on NY ECL § 71-301, under which the commissioner may issue an order finding an imminent danger to health or welfare of the people or environment. If a party fails to comply or refuses to enter a remedial program the DEC may refer the matter to the attorney general for injunctive relief or cost recovery. Orders may be challenged administratively and, if upheld, via an Article 78 proceeding. The legislation leaves unchanged the DEC’s ability to issue notices of potential liability, pursue consent orders, or undertake cleanups and seek cost recovery through litigation. The bill also raises civil penalties significantly—to $65,000 to $125,000 per day for continuing violations—bringing them closer to federal levels.
Environmental Justice Considerations
The bill enhances the role of local governments in identifying potential inactive hazardous waste sites, particularly within disadvantaged communities (DACs). DEC must now consider these referrals in prioritizing state-funded cleanups. The statute directs state Superfund dollars—not voluntary cleanup incentives—to Class 1 and 2 sites located in DACs, marking a policy shift that favors direct state remediation in EJ areas. Again, tying into developments at the federal level that have mostly abandoned prior administrations’ focus on DACs, New York law now expressly compels the prioritization of cleanups in DACs, giving the state primacy in the protection of these communities.
GT Insights
This bill marks a significant step toward aligning New York’s Superfund program with federal CERCLA, particularly by its codifying BFPP protections. Previously, good-faith purchasers had limited options—either enter a Brownfield agreement, BFPP administrative consent order, or litigate under an ill-defined “innocent owner” defense. The new framework would provide clearer, more accessible liability relief. The adoption of established summary abatement authority seeks to balance the need for administrative enforcement tools without overreaching through unilateral orders. The structured abatement referral process, combined with heightened penalties, enhances enforcement while allowing for both administrative and judicial review. This new framework should strengthen the state’s leverage over noncompliant actors without risking over-reliance on heavy-handed unilateral orders in ordinary agency disputes. Finally, the mandated prioritization of Class 1 and 2 cleanups in DACs signals a state-led commitment to EJ—positioning New York as the primary regulator of that space amid inconsistent federal policy.