Employment Law This Week – Episode 390 – Independent Contractor Rule, EEO-1 Reporting, and New York Labor Law Amendment [Video, Podcast]
This week, we’re covering the U.S. Department of Labor’s (DOL’s) decision to halt enforcement of the Biden-era independent contractor rule, the upcoming EEO-1 reporting season (starting on May 20), and New York State’s new labor law amendment, reducing damages for first-time frequency-of-pay violations.
DOL Halts Enforcement of Independent Contractor Rule
The DOL will no longer enforce the Biden-era independent contractor rule, which sought to tighten the criteria under which a hired worker can be considered an independent contractor for purposes of the Fair Labor Standards Act. The agency will now revert to the less stringent “economic realities” test.
EEO-1 Reporting Begins Soon
The proposed 2024 EEO-1 Component 1 data collection season is scheduled to begin on May 20, with a deadline to file by June 24. As expected, Component 2 pay data collection will not be required this year or in the coming years.
New York Amends Labor Law to Limit Damages in Frequency-of-Pay Lawsuits
New York Governor Kathy Hochul signed into law a budget bill that includes an amendment to the New York Labor Law that dramatically limits the relief employees can seek for first-time violations of frequency-of-pay provisions.
Beneficial Owner Disclosure Under the New York LLC Transparency Act
After a rollercoaster of activity related to the federal Corporate Transparency Act (CTA), the US Treasury Department (Treasury) announced on March 2 that it will not enforce any penalties or fines associated with beneficial ownership information reporting for US reporting companies.
See “Treasury Department Announces Suspension of Enforcement of Corporate Transparency Act Against U.S. Citizens and Domestic Reporting Companies” press release here.
In response, the Financial Crimes Enforcement Network (FinCEN) issued an interim final rule that revised the definition of “reporting company” to include only foreign entities (see 31 C.F.R. § 1010.380(c)(1), effective March 26). For those limited liability companies (LLCs) formed or authorized to do business in New York, however, the New York LLC Transparency Act (NY LLC Act) is still forthcoming and will require reporting similar in certain respects to what would have been required for such companies under the CTA.
On March 1, 2024, New York Governor Kathy Hochul signed into law the New York Senate Bill 8059, thereby amending the NY LLC Act originally passed on December 23, 2023 (New York Senate Bill 8059, signed by Governor Hochul subject to chapter amendment).[1] The NY LLC Act requires LLCs formed or authorized to do business in New York, to report their beneficial owners and company applicants to the New York Department of State. The following is a brief summary of some of the key provisions of the NY LLC Act, and the significant effect that has been produced as a result of the changes in certain federal CTA definitions to which the NY LLC Act is anchored.
Definitions
Many key terms under the NY LLC Act are defined by reference to the definitions under the CTA, such as “beneficial owner” (31 U.S.C. § 5336(a)(3)), “reporting company” (31 U.S.C. § 5336(a)(11)), “exempt company” (31 U.S.C. § 5336(a)(11)(B)), and “applicant” (31 U.S.C. § 5336(a)(2)). However, with respect to the definition of reporting company, under the NY LLC Act, a reporting company means only LLCs formed or authorized to do business in New York.
As noted above, FinCEN issued an interim final rule revising the definition of “reporting company” to include only entities that were formed under the laws of a foreign country. If the NY LLC Act is not also amended to undo the effect of the revisions issued by FinCEN, the NY LLC Act would appear to only apply to foreign (i.e., non-US) formed LLCs that are authorized to do business in New York and would not apply to LLCs formed in New York or in any other US state. Accordingly, the NY LLC Act will likely also need revisions, at least to its definition provisions.
Initial Beneficial Ownership Disclosure
As noted above, each reporting company is required to file a beneficial ownership disclosure with the New York Department of State. The disclosure must identify each beneficial owner of the reporting company and each applicant with respect to the reporting company. The information required to be disclosed follows: (a) full legal name, (b) date of birth, (c) current home or business street address, and (d) a unique identifying number from an acceptable identification document such as (i) an unexpired passport, (ii) an unexpired state driver’s license, or (iii) an unexpired identification card or document issued by a state or local government agency.
All beneficial ownership disclosures shall be submitted electronically as prescribed by the New York Department of State. As of the date of this article, there is no program on the New York Department of State’s website for the submission of the beneficial ownership disclosures. The NY LLC Act explicitly allows for such disclosures to be signed electronically.
Exempt Companies
An LLC formed or authorized to do business in New York will be exempt from having to file the beneficial ownership disclosure if it meets one of the 23 exemptions (or 24 exemptions, considering the interim final rule under the CTA) enumerated under the CTA (31 U.S.C. § 5336(a)(11)(B)), such as, securities reporting issuers, banks, credit unions, securities brokers or dealers, venture capital fund advisers, accounting firms, tax-exempt entities, and large operating companies. Each exempt company is required to electronically file an attestation indicating the specific exemption claimed and the facts on which the exemption is based. In addition, the attesting company is required to file an annual statement with respect to its exempt status, as will be further described below.
Date of Initial Reporting with the New York Department of State
Companies Formed Prior to January 1, 2026
Each reporting company formed or authorized to do business in New York before January 1, 2026 (the effective date) of the NY LLC Act must file its beneficial ownership disclosure with the New York Department of State no later than January 1, 2027. Each exempt company formed or authorized to do business before the effective date of the NY LLC Act must file its attestation of exemption with the New York Department of State no later than January 1, 2027.
Companies Formed on or After January 1, 2026
Each reporting company formed or authorized to do business in New York after the effective date must file the beneficial ownership disclosure no later than 30 days after the initial filing of articles of organization or application for authority to do business in New York. Similarly, each exempt company formed or authorized to do business in New York after the effective date must file the attestation of exemption no later than 30 days after the initial filing of articles of organization or application for authority to do business in New York.
Annual Reporting
Next, after the reporting company has filed its initial beneficial ownership disclosure or attestation of exemption, as the case may be, it is required to electronically file a statement annually confirming or updating the following; (1) their beneficial ownership disclosure information; (2) the street address of its principal executive office; (3) status as an exempt company, if applicable, and (4) such other information as may be designated by the New York Department of State.
Failure to File
If a reporting company fails to file the beneficial ownership disclosure, attestation of exemption or annual statement, as the case may be, for a period exceeding 30 days, the reporting company will be shown as past due on the records of the Department of State. If the reporting company fails to file the requested information for a period of two years, it will be shown as delinquent on the records of the Department of State. Further, the NY LLC Act authorizes the attorney general to assess a fine of up to $500 for each day the company is past due and/or delinquent. In addition, the New York Attorney General can bring an action to suspend, cancel, or dissolve any delinquent company.
With the revision of the definition of reporting company under the CTA to eliminate domestic US reporting companies from its scope, the fate of the NY LLC Act should be closely monitored. As noted above, the NY LLC Act specifically incorporates by reference certain definitions under the CTA. In light of the revisions made under the interim final rule issued by FinCEN, the New York Legislature may potentially be inclined to review these definitions and make changes to the NY LLC Act to counteract the effect of FinCEN’s interim final rule as it pertains to domestic (i.e., non-foreign) LLCs.
[1] New York Senate Bill 995-B (enacted December 22, 2023), as amended by Chapter Amendment on March 1, 2024 (Senate Bill 8059/Assembly Bill 8544).
New York State Bill Would Ban Employer Inquiries About Salary Expectations
A bill in the New York State Legislature would prevent employers from questioning job seekers about their salary expectations and permit job seekers to ask about employee benefits offered with the position.
Quick Hits
A bill in the New York State Assembly would prohibit employers from inquiring about applicants’ salary expectations.
The bill also would prohibit employers from refusing to interview, hire, or promote workers based on their stated salary expectations.
New York law already prohibits employers from asking for an applicant’s salary history.
The bill, 2025-A1289, would also prohibit employers from relying on pay expectations that the applicant voluntarily shares in determining whether to offer employment and how much to pay the individual. Many states have enacted similar laws in recent years, aiming to promote pay equity and close the gender and racial wage gaps.
The bill is currently in committee in the New York State Assembly.
The bill builds upon the existing New York salary history ban, which took effect in 2020, and which prohibits employers from asking applicants about their salary history. The bill would further restrict pre-offer compensation discussions by prohibiting inquiries into applicants’ salary expectations, the theory being that this further enhances pay equity and potential biases in the hiring process.
The bill would bar employers from requiring applicants to submit their salary expectations as a condition for securing an interview, being hired, or being promoted. Employers would also be prohibited from refusing to interview, hire, or promote a worker based on their stated salary expectations.
There are two clauses in 2025-A1289 that may seem at odds and cause confusion: one allows job applicants to voluntarily share their salary expectations, including for the purpose of negotiating their wages or salary; and the other prohibits employers from relying on that information when determining the compensation ultimately offered. While applicants retain the right to advocate for themselves, employers must ensure compensation decisions are based on objective, articulable, job-related factors, and not influenced by what applicants say they hope to earn. If the bill is enacted with those two clauses intact, employers may want to tread carefully, such as by listening respectfully, but building offers based on, for example, standardized pay structures and market data, and not applicants’ pay expectations.
Under 2025-A1289, employers would also be required to provide employment benefits information when requested. Unfortunately, the bill does not define “employment benefits.” Presumably, benefits such as health insurance, 401(k) plans, stock purchase plans, and commission structures would be included. It is less clear if other benefits, such as paid time off, discretionary bonuses, flexible work schedules, employee assistance plans, and tuition reimbursement, are included as employee benefits.
The bill would create a private right of action for an applicant or employee to bring a civil lawsuit for a violation by an employer. If successful, plaintiffs may be entitled to compensatory damages, potential injunctive relief and reasonable attorney’s fees.
Next Steps
If 2025-A1289 passes the state legislature and is signed by the governor, it would take effect nineteen days after it becomes law. The legislative session is scheduled to end on June 13, 2025.
Employers in New York must comply with current state law prohibiting questions about salary history. Additionally, some employers may need to confirm compliance with similar local laws, such as those in New York City, Ithaca, Albany County, Suffolk County, and Westchester County, and even laws of other states, if a position is remote.
Employers may want to be prepared to comply with the bill, if enacted, including by reviewing interview protocols, training hiring managers and recruiters, updating job descriptions, and generally ensuring that compensation and other employment decisions are based on objective, lawful criteria.
Leah J. Shepherd contributed to this article
New Executive Order and Proposed Legislation on Reporting Foreign Gifts and Contracts in Higher Education
On April 23, 2025, the Administration issued an Executive Order entitled “Transparency Regarding Foreign Influence at American Universities” along with an accompanying fact sheet. The Executive Order instructs the Secretary of Education to employ robust enforcement of Section 117 of the Higher Education Act of 1965, through both the reversal and rescindment of certain actions taken by the prior administration and through audits and investigations into institutions of higher education. Additionally, the Secretary of Education is tasked with ensuring timely and complete disclosures of foreign funding by institutions of higher education. The Executive Order represents a continuation of the Administration’s focus on higher education and, in particular, its focus on foreign influence, national security, and academic integrity.
The Executive Order does not change the relevant law—Section 117 of the Higher Education Act. Section 117 requires, among other things, that institutions of higher education receiving federal financial assistance report gifts received from, or contracts entered into with, foreign sources, where the value of those gifts or contracts, when considered alone or in combination with all other gifts from or contracts with the foreign source during a particular calendar year, is $250,000 or more. Additional disclosure requirements are imposed for restricted or conditional gifts or contracts. The ultimate penalty for failing to comply with Section 117 is that colleges and universities can lose their access to federal student aid dollars for their students.
The teeth of the Executive Order are in its third section, in which the Secretary of Education and heads of other agencies are instructed not to provide federal grant funds to institutions of higher education found to be non-compliant with the strictures of Section 117 and other applicable foreign funding disclosure requirements. However, Section 117 specifically enumerates its own methods of enforcement. The Attorney General, at the request of the Secretary of Education, may bring a civil action to request that a court compel the institution to comply with the requirements of Section 117. And where the institution knowingly or willfully does not comply with Section 117, it is required to pay to the Treasury of the United States the full costs of obtaining compliance, including those relating to investigation and/or enforcement. Nothing in the text of Section 117 allows the Secretary of Education, or another agency head, to suspend or eliminate federal funding.
In response to the Executive Order, the Secretary of Education, Linda McMahon, announced on April 25 that the U.S. Department of Education’s Office of General Counsel would re-assume enforcement of Section 117, replacing the Office of Federal Student Aid. In addition, the U.S. Department of Education initiated a Notice of Investigation and Records Request into the University of California, Berkeley’s compliance with Section 117. The investigation appears to stem from a 2023 media report that Berkeley failed to properly disclose hundreds of millions of dollars in funding from a foreign government. The Department of Education stated that “Berkeley’s responses revealed a fundamental misunderstanding” regarding its reporting obligations. The U.S. Department of Education has also initiated an investigation into Harvard University’s compliance with Section 117.
This Executive Order is not the only effort being taken by the federal government on foreign financial contributions to educational institutions. On March 27, 2025, the House of Representatives passed the Defending Education Transparency and Ending Rogue Regimes Engaging in Nefarious Transactions Act (the “DETERRENT Act”) by a vote of 241-169, with bipartisan support. The DETERRENT Act would, among things, lower the present reporting trigger of Section 117 from $250,000 to $50,000. Additionally, the Act would require institutions of higher education to disclose gifts of any amount received from a foreign country or entity of concern, where foreign country of concern means, for present purposes, China, Russia, Iran, and North Korea. And the Act would prohibit institutions of higher education from entering into contracts with foreign countries or entities of concern, absent a waiver.
While it is unclear whether the Administration has the power to withhold federal funding from institutions that fail to comply with the reporting obligations of Section 117, the DETERRENT Act would allow for the imposition of substantial fines. Specifically, the DETERRENT Act calls for mandatory fines against institutions against whom a civil action has been brought and who have been compelled to comply with the requirements of Section 117. These fines vary depending on whether an institution is a first-time offender, the severity of the violation, and which provision has been violated. For instance, a first-time, knowing or willful violation of the newly-proposed Section 117—largely mirroring the current statutory framework—would result in a fine, the greater of $50,000 or the monetary value of the gift or contract that is the subject of the institution’s failure to comply. A first-time violation of the newly-proposed Section 117A—prohibiting institutions from entering into contracts with foreign countries or entities of concern without a waiver—would result in a fine in an amount that is not less than 5% and not more than 10% of the total amount of federal funds received by the institution under the Higher Education Act for the most recent fiscal year. These fines could amount to millions of dollars, a far cry from current penalties for non-compliance.
Institutions of higher education should keep apprised of the DETERRENT Act’s progress through the Senate and the Department of Education’s Section 117 investigations into Berkeley and Harvard.
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.
New Entity Governance Legislation Passed by Texas Legislature
Two significant bills affecting the governance of corporations and other entities were recently passed by the Texas Legislature and have been sent to Governor Abbott for his signature.
These bills are intended to attract more entities to move to and be formed in Texas, thereby enhancing the growth of business in Texas.
New Entity Governance Provisions
Senate Bill 29 (“SB 29”) by Sen. Bryan Hughes (House sponsor was Rep. Morgan Meyer) has garnered some nationwide publicity and notoriety. The low bill number for this bill indicates that it is supported by leadership in the Legislature. Under a provision in this bill, SB 29 will become immediately effective when signed by Governor Abbott because the bill was approved by at least a two-thirds vote in each of the House and Senate.
SB 29 contains a host of new entity governance provisions that apply to Texas entities. This is a lengthy bill, so a complete summary of the bill’s provisions is beyond the scope of this Client Alert. Some highlights of SB 29 are summarized below:
Authorizes a domestic entity to include in its governing documents a waiver of jury trial concerning internal entity claims (that is, claims involving the internal affairs of the entity);
Entity governing documents can specify an exclusive court forum and venue for internal entity claims;
Shareholder records inspection rights are severely limited for a publicly traded corporation if the requesting shareholder has any pending litigation or derivative proceeding with the corporation;
Authorizes a novel procedure for advance court determination of independence and disinterested status of directors in the context of shareholder derivative actions or conflict of interest transactions;
The officers and directors of a Texas corporation that has voting shares listed on a national securities exchanges or that has included in its governing documents an affirmative election to be governed by this new provision will be entitled to a presumption that they acted in good faith, on an informed basis, in furtherance of the corporation’s interests and in obedience to the law and the corporation’s governing documents, which could be viewed as a codification of a version of the so-called “business judgment rule” for corporations; and somewhat similar provisions are added for limited liability companies and limited partnerships as well;
Authorizes a publicly traded Texas corporation (or an electing Texas corporation with more than 500 shareholders) to establish in its governing documents an ownership threshold for shareholder derivative actions, with the threshold not to exceed three percent of its outstanding shares;
Eliminates awards of attorney fees to a plaintiff for a settlement in a derivative proceeding on behalf of Texas corporations, LLCs or limited partnerships based only on amending disclosures to owners; and
Clarifies existing Texas law by authorizing a Texas limited partnership or LLC to eliminate the duties of members, partners, managers and officers in its governing documents.
Restrictions on Shareholder Proposals
Senate Bill 1057 (“SB 1057”) by Sen. Tan Parker (House sponsor was Rep. Morgan Meyer) has been passed and would be available to any “nationally listed corporation.” A “nationally listed corporation” is a newly defined phrase that means a corporation that:
has a class of equity securities registered under Section 12(b) of the Securities Exchange Act of 1934;
is admitted to listing on a national securities exchange; and
either (A) has its principal office in Texas or (B) is admitted to listing on a stock exchange that has its principal office in Texas and has received approval by the Texas Securities Commissioner to act as a securities exchange under provisions of Subchapter C of Texas Government Code Chapter 4005.
A nationally listed corporation may opt into the new provisions by amending its governing documents and providing notice of the opt-in amendment to shareholders in any proxy statement prior to the effectiveness of the amendment. SB 1057 would prohibit any shareholder of a nationally listed corporation that has opted into the provision from submitting a proposal for consideration at a meeting of shareholders unless the shareholder (or group of shareholders):
owns at least the lesser of $1 million of market value of voting shares or 3% of the corporation’s voting shares;
has owned and continues to own those shares for at least six months prior to and through the shareholders meeting; and
solicits holders of at least 67% of the voting shares to vote on the
Director nominations and ancillary procedural resolutions would not be subject to this ownership threshold.
A corporation that opts into this provision must include in any proxy statement provided to shareholders specific information about the process by which a shareholder (or group of shareholders) may submit a proposal on a matter requiring shareholder approval, including information as to how shareholders may contact other shareholders for the purpose of satisfying the ownership requirements in these new provisions.
While SB 1057 requires a corporation that opts into the new provision to provide notice of the opt-in amendment to shareholders in any proxy statement prior to the effectiveness of the amendment to the governing documents, it does not require shareholder approval of such amendment . Under Texas law, bylaws are considered to be one of the “governing documents” of a corporation but can generally be amended by unilateral action of the board of directors without shareholder approval unless prohibited by the existing provisions of its bylaws or certificate of formation. In addition, the new provisions are not clear as to whether they apply to a non-Texas corporation that meets the definition of “nationally listed corporation.” The Bill Analysis prepared by the Senate Business & Commerce Committee clearly states that the bill applies to corporations formed under Texas law, but the bill itself does not expressly state that requirement, although it does include the requirement that the corporation’s principal office must be in Texas or that it be listed on a Texas-based stock exchange.
NC Legislature Considers Comprehensive Hemp Regulation: What Businesses Need to Know
Three significant bills, Senate Bill 535, Senate Bill 265, and House Bill 607, have been introduced during the 2025 North Carolina legislative session, each of which could fundamentally reshape the state’s regulatory landscape for hemp-derived products.
At Ward and Smith, we are closely monitoring these developments to help our clients with the potential impacts on their businesses. Below is an overview of what stakeholders in the hemp industry need to know about this proposed legislation.
Overview of Proposed Legislation
Senate Bill 535 (“S535”): “Regulate Hemp-Derived Beverages” focuses on nonalcoholic hemp-derived beverages. The bill amends the definition of “alcoholic beverage” to exclude hemp-derived beverages and also amends the definition of “malt beverage” to include hemp-derived beverages. This creates a regulatory framework for these products under the existing ABC system while maintaining their nonalcoholic status. One offshoot to consider, especially for product manufacturers who subcontract out their wholesaling to third parties, is that this law (if adopted) would seemingly subject nonalcoholic hemp-derived beverage products to our state’s beer franchise wholesale laws.
Senate Bill 265 (“S265”): “Protecting Our Community Act” establishes a comprehensive regulatory framework for hemp-derived consumable products more broadly, utilizing the Alcohol Law Enforcement (ALE) Division but placing regulatory authority with the Department of Revenue and creating extensive licensing requirements, testing standards, and sales restrictions. This bill also explicitly prohibits hemp products from school grounds.
House Bill 607 (“H607”): “Regulate Hemp Consumable Products” parallels S265 in scope but designates the ALE Division of the Department of Public Safety as the regulatory and enforcement authority and includes even more detailed testing requirements.
Regulatory Authority
Perhaps the biggest difference among these bills is the designated regulatory authority.
S535 grants regulatory authority to the North Carolina ABC Commission, placing hemp-derived beverages within a similar scheme as alcoholic beverages. This approach utilizes existing alcohol regulatory mechanisms for hemp-derived products.
S265 designates the North Carolina Department of Revenue as the primary regulatory authority for all hemp-derived consumable products, suggesting a taxation and commercial licensing approach to regulation.
H607 appoints the ALE Division as the regulatory authority, emphasizing law enforcement aspects of regulation and compliance for hemp-derived consumable products.
These differences indicate that legislators are still determining who is best positioned to regulate hemp products in our state. For those in the industry, the designated authority would substantially impact the regulatory relationship, compliance processes, and enforcement dynamics they would face.
Definitions and Product Categories
Each bill defines hemp-derived products, but with some variations:
S535 introduces “hemp-derived beverages” as nonalcoholic beverages containing hemp that may contain concentrations of hemp-derived cannabinoids. It amends the definition of “malt beverage” to include hemp-derived beverages, creating a pathway for distribution through existing alcohol beverage channels.
S265 and H607 both define “hemp-derived consumable products” more broadly as products intended for human ingestion or inhalation containing no more than 0.3% delta-9 THC but potentially higher concentrations of other cannabinoids. Both exclude topical applications and seeds or seed-derived ingredients generally recognized as safe by the FDA.
All three bills define “hemp-derived cannabinoid” similarly, encompassing various phytocannabinoids found in hemp (including delta-9 THC, delta-8 THC, delta-10 THC, CBD, and numerous others), as well as synthetic cannabinoids derived from hemp.
Licensing Requirements and Fees
The comprehensive bills (S265 and H607) establish licensing requirements and fee structures:
Manufacturers would face a $15,000 license fee, though this would be reduced to $1,000 if the applicant’s gross income was less than $100,000 in the prior year.
Distributors would pay $2,500, reduced to $750 for those with gross income under $100,000.
Retailers would be charged $250 per location or website, with a $5,000 cap for entities with more than 25 locations or websites.
Qualifications for licensure include being at least 21 years old, having no felony convictions related to controlled substances within 10 years, consenting to inspection, and being current on state tax obligations.
S535 doesn’t establish a separate licensing scheme but would likely require hemp-derived beverage businesses to obtain proper commercial and retail ABC permits, similar to those currently required in our state for alcoholic beverage producers, wholesalers, and retailers today.
Testing Requirements
Testing requirements are another significant variation between the bills:
H607 contains exceptionally detailed testing requirements, listing 100 specific substances with precise maximum thresholds for each. This creates the most stringent testing requirements of the three bills.
S265 requires testing for cannabinoids, heavy metals, mycotoxins, pesticides, residual solvents, and other controlled substances identified by the ALE Division, but doesn’t specify detailed thresholds like in H607.
S535 grants the ABC Commission authority to set standards and testing requirements for hemp-derived beverages, but doesn’t specify particular substances or thresholds.
These differences would significantly impact manufacturing processes, quality control costs, and potentially product formulations, with H607 creating the most extensive burden.
Product Restrictions
All three bills establish restrictions on product content, packaging, and marketing:
Age restrictions are consistent across all three bills, prohibiting sales to anyone under 21 years old and requiring age verification.
S265 and H607 include packaging and labeling requirements (child-resistant packaging, warning statements, ingredient disclosure, cannabinoid content labeling) and prohibit marketing that appeals to persons under 21.
Potency limits differ between the comprehensive bills. S265 allows up to 75mg of specified cannabinoids per serving for non-liquid products and 25mg for liquid products, while H607 is more restrictive at 25mg for non-liquid and 10mg (with a 100mg package maximum) for liquid products.
Enforcement and Penalties
S265 and H607 establish civil and criminal penalty frameworks for violations, with escalating consequences for repeat offenses:
First violations typically result in civil penalties of no more than $500.
Subsequent violations increase the financial penalties and can lead to license suspension or revocation.
Criminal penalties are established for certain repeat violations, typically constituting Class A1 misdemeanors and potentially Class H felonies for multiple offenses.
Looking Forward
It is currently uncertain whether any of these bills will advance during this legislative session. However, they provide valuable insight into how members of the North Carolina General Assembly are approaching the regulation of the state’s hemp industry.
High-Level Overview of Certain Provisions Impacting Renewable Energy Incentives in “The One, Big, Beautiful Bill” Draft Legislation
Yesterday, the House Ways and Means Committee released a package of tax provisions (the “Bill”) (which may be found here) that includes claw backs of certain provisions of the Inflation Reduction Act. Note that this Bill is a draft only, has not been passed by the House or the Senate (or any committee thereof), or signed by the President, all of which would need to occur before the Bill becomes law. The provisions described below are therefore subject to change and may not become law at all. However, the Bill provides some insight on how House Republicans are thinking about amending current energy-related tax credits.
The Bill includes accelerated phaseouts for the clean electricity investment credit under Section 48E, the clean electricity production credit under Section 45Y, and the advanced manufacturing production tax credit under Section 45X. For the credits available under Sections 48E and 45Y (which this year replaced the old ITC and PTC, respectively), the phaseout would begin for otherwise eligible projects that are placed in service starting in 2029, which is at least a few years before these credits are set to phase out under current law. In the Bill, these credits would phase down to 80% of the current credit level for projects placed in service in 2029, 60% for those placed in service in 2030, 40% for those placed in service in 2031, and 0% for those placed in service in 2032 and beyond. For the Section 45X advanced manufacturing production tax credit, the phaseout in the draft Bill would begin one year earlier than under current law, except that the Bill would make ineligible any wind energy components sold after December 31, 2027. Separately, the Bill would terminate the Section 45V clean hydrogen production tax credit for facilities on which construction does not begin by December 31, 2025.
The Bill would also repeal transferability for the clean electricity investment credit under Section 48E, the clean electricity production credit under Section 45Y, and the advanced manufacturing production tax credit under Section 45X under Section 6418, as well as other credits, but that repeal would not take effect for several years.
Finally, the Bill contains new restrictions on energy tax credits apparently aimed at limiting certain foreign entities from taking advantage of the value of these credits.
New York’s 2025–26 Budget Includes Immediate Labor Law Reforms, Important Changes to Pay Frequency Laws
New York’s governor and state legislature have finally stumbled to completion of this year’s budget negotiations and enacted legislation as part of the 2025–26 state budget, which includes significant amendments to the New York Labor Law (NYLL).
Quick Hits
The 2025–26 New York state budget includes significant amendments to the New York Labor Law, impacting wage-and-hour enforcement, liquidated damages, and child labor penalties.
The amendments bring long-awaited clarity to New York pay frequency claims, including interest-only damages for a first violation.
The amendments grant the New York State Department of Labor (NYSDOL) enhanced enforcement powers, including the ability to impose a 15 percent surcharge on unsatisfied wage judgments and allow employees to enforce wage orders directly.
The budget also mandates a comprehensive overhaul of minor employment certification and recordkeeping, centralizing the process under the NYSDOL, effective May 9, 2027.
The amendments to the NYLL are now law, effective immediately, and apply to pending and future actions unless otherwise specified. The legislation significantly recalibrates wage-and-hour enforcement, modifies liquidated damages, expands enforcement powers, and increases penalties for child labor violations. Moreover, the legislation overhauls employment certification and recordkeeping for minors, though these changes take effect in two years (on May 9, 2027).
The NYLL was modified to expressly acknowledge a private right of action for violations of NYLL § 191(1)(a)—which requires employers to pay “manual workers” on a weekly basis. The Labor Law has also been amended to narrow the potential liquidated damages exposure that currently accompanies the requirement that “manual workers” be paid on a weekly basis—a hot-button issue that has spawned a wave of class action litigation against employers who pay “manual workers” on a biweekly basis rather than every week.
The NYLL was also amended to dramatically expand the New York State Department of Labor’s (NYSDOL) enforcement toolkit by giving the labor commissioner “quasi-sheriff” powers, authorizing the NYSDOL to impose an additional 15 percent penalty on unsatisfied wage judgments, and—most notably—allowing employees themselves to step into the shoes of the labor commissioner to docket and execute collection action on wage orders directly. The amendments also include significant increases to civil penalties for child labor violations.
Finally, the budget includes a comprehensive overhaul of the minor employment certification process. Under the new provisions of the NYLL, minor employment certifications will be centralized under the NYSDOL, which must develop and implement a new electronic database system for child labor certification. While this major overhaul was long overdue, it will become effective in two years (May 9, 2027).
Modifications to NYLL § 198(1-a)
NYLL § 198(1-a) now provides the following:
Liquidated damages for most underpayment violations remain capped at 100 percent of the total amount of wages found to be due, and up to 300 percent for willful violations of NYLL § 194 (requiring equal pay based on gender).
For violations of the pay frequency requirement under NYLL § 191(1)(a) (requiring weekly wage payment to “manual workers”), where the employer paid wages on a regular payday at least semi-monthly:
For a first-time violation, if the employer had a good-faith basis for its pay practice, liquidated damages are limited to no more than 100 percent of the lost interest on the delayed wages (not the late wages themselves), calculated daily at the rate set by Banking Law § 14-a (currently 16 percent per annum).
For repeat violations (after a final, unappealed order for the same violation covering employees performing the same work), liquidated damages are 100 percent of the total amount of late wages found to be due (along with interest on that amount).
These changes are now in effect and apply to all pending and future cases.
Modifications to NYLL §§ 218–219 (Civil Penalties)
Modifications to §§ 218–219 of the NYLL include the following, and are now in effect and apply to future cases:
The NYSDOL commissioner may file wage orders with the county clerk, which immediately become liens with a civil judgment’s full force and effect.
The commissioner is authorized to add a 15 percent surcharge to any outstanding amount when filing a wage order.
The commissioner has all the powers of a sheriff under Article 25 of the Civil Practice Law and Rules to levy and sell an employer’s assets, but without the customary marshal or sheriff fees.
At an employee’s request, the commissioner must assign the wage, supplement, interest, and liquidated damages portion of the order to the employee, who may then docket and enforce the order personally, including levying property and garnishing bank accounts.
These provisions also apply to wage supplement claims (e.g., vacation pay, expense reimbursement).
Increased Civil Penalties for Child Labor Violations (NYLL § 141)
The maximum civil penalties for violations of child labor laws have been significantly increased:
Up to $10,000 for a first violation.
$2,000–$25,000 for a second violation.
$10,000–$55,000 for a third or subsequent violation.
For violations involving serious injury or death of a minor, penalties range from $3,000–$30,000 for a first violation, $6,000–$75,000 for a second, and $30,000–$175,000 for a third or subsequent violation.
Overhaul of Minor Employment Certification and Recordkeeping
The budget agreement also includes the following changes to the state requirements for minor employment certification and recordkeeping:
The NYSDOL, in consultation with the New York Department of Education, will create and maintain a confidential database for the employment of minors.
Employers hiring minors under eighteen years of age will be required to register in the database, providing detailed information about the business and the minors employed.
Employers will be required to file employment certificates or permits electronically or physically at the place of employment, accessible to authorized persons.
Minors will be required to register in the database and update their employment certificate or permit for each employer.
Employment certificates and permits will be issued electronically within the database.
The labor commissioner, rather than school officials, will be responsible for issuing and revoking employment certificates and permits.
Employers will be required to destroy any physical or electronic copies of a minor’s employment certificate upon termination of employment.
Temporary service employers will be required to keep employment certificates on file and provide copies to each establishment where a minor is assigned.
The modifications regarding minor employment incorporate necessary changes to the State Education Law (to remove responsibility for issuing employment certificates from local school officials).
These modifications will go into effect in two years (May 9, 2027).
Overview of the New York Labor Law Amendments
The wage-and-hour component of the budget legislation (found in Part U of the ELFA Bill) strikes a new balance between employer certainty and employee recoverability. By simultaneously softening damages for technical pay-frequency missteps and arming workers with streamlined collection mechanisms, lawmakers appear intent on reducing litigation volume while ensuring that bona fide wage theft is swiftly remedied.
Limiting Liquidated Damages for Frequency-of-Pay Violations
Under current law, an employer that pays manual workers on a biweekly basis—even where the correct amount is ultimately paid—may be liable for liquidated damages equal to 100 percent of the late-paid wages (plus 9 percent statutory interest and attorneys’ fees). The First Department’s 2019 decision in Vega v. CM & Associates Construction Management, LLC, upended many employers over a century-long belief that NYLL § 191(1)(a) did not provide for a private right of action, spurning enormous class-action litigation (and potential exposure) for what many employers view as a technical timing infraction. A competing decision issued in 2024 by New York’s Second Appellate Department in Grant v. Global Aircraft Dispatch, Inc., resulted in a split among the state’s appellate divisions, creating further uncertainty in this legal landscape. This judicial split has now been resolved, with the legislature clarifying that employees can assert a cause of action for violating NYLL § 191(1)(a).
The NYLL has also been modified as follows:
Preserves the commissioner’s and courts’ ability to award up to 100 percent liquidated damages for most underpayment violations, and up to 300 percent for willful equal-pay violations; but
Carves out frequency-of-pay cases where the employee was, in fact, paid on a regular payday on a semimonthly or faster cadence.
For a first-time violation, where the employer had a “good-faith basis” for believing its pay practice was lawful, liquidated damages would be limited to interest only, calculated daily at the rate established by Banking Law § 14-a 16 percent) per annum); and
Employers with a prior, final, and unappealed order for the same violation (covering employees who perform “the same work”) to 100 percent liquidated damages on the underlying wages for subsequent infractions.
By tethering first-offense damages to lost interest rather than duplicating principal wages, the law seeks to curtail outsized settlements in pay frequency cases while preserving meaningful deterrence for repeat violators. These changes went into effect on May 9, 2025, and apply to pending actions and any future litigated frequency-of-pay cases.
Expanding NYSDOL and Employee Enforcement Powers
The amendment to NYLL §§ 218-219 (found in Part V of the Education, Labor and Family Assistance (ELFA) Bill) allows the labor commissioner to repurpose long-standing tax-collection tools for wage enforcement, including the following.
Automatic Judgment Liens. Once an order to comply is issued by the NYSDOL (or a final decision rendered by the Industrial Board of Appeals) and is docketed with a county clerk, it “shall have the full force and effect of a judgment.” The lien attaches immediately to the employer’s real and personal property.
15 percent) “Non-Payment” Surcharge. If the employer fails to satisfy the order to comply before filing, the labor commissioner may unilaterally increase the amount due by 15 percent).
Sheriff-Style Levy Authority. Whether executed through county sheriffs or NYSDOL personnel, the labor commissioner may impose a levy on and sell an employer’s assets as if executing on a court judgment—without paying the customary marshal or sheriff fees.
Mandatory Assignment to Employees. Upon request, the labor commissioner must assign to the employee “without consideration or liability” the order’s wage, supplement, interest, and liquidated-damages portion. The employee may docket and enforce the order personally, including levying property and garnishing bank accounts, all under the Civil Practice Law and Rules.
Parallel Provisions for Unpaid Wage Supplements. Identical language appears in amended NYLL § 219, which governs wage-supplement claims (e.g., vacation pay, expense reimbursement).
In effect, these amendments reduce agency workload while incentivizing employers to resolve wage matters promptly.
Increased Civil Penalties for Child Labor Violations
The maximum civil penalties for violations of child labor laws have been significantly increased. For a first violation, the penalty is up to $10,000; for a second violation, $2,000–$25,000; and for a third or subsequent violation, $10,000–$55,000. Where a violation involves serious injury or death of a minor, penalties range from $3,000–$30,000 for a first violation, $6,000–$75,000 for a second, and $30,000–$175,000 for a third or subsequent violation.
Overhaul of Minor Employment Certification and Recordkeeping
The amendment to the provisions of the NYLL and State Education Law (found in Part X of the ELFA Bill) requires the NYSDOL, in consultation with the Department of Education, to create and maintain a confidential database for the employment of minors.
Employers hiring minors under eighteen years of age must register in the database, providing detailed information about the business and the minors employed. Employers must file employment certificates or permits electronically or physically at the place of employment, accessible to authorized persons. Minors must register in the database and update their employment certificate or permit for each employer. Employment certificates and permits are now issued electronically within the database.
Rather than school officials, the labor commissioner will become responsible for issuing and revoking employment certificates and permits. Employers must destroy any physical or electronic copies of a minor’s employment certificate upon termination of employment. Temporary service employers must keep employment certificates on file and provide copies to each establishment where a minor is assigned.
Several sections of the Education Law relating to minor employment certification, procedures, and recordkeeping have been repealed or amended to align with the new NYLL requirements, since the process for issuing, revoking, and maintaining employment certificates will be centralized under the NYSDOL. These changes to the employment of minors will go into effect in two years (on May 9, 2027).
Practical Impact on Employers
These profound modifications to the NYLL create a two-tiered enforcement climate:
Reduced Class-Action Leverage in Pay Frequency Cases. Plaintiffs’ counsel may find it less lucrative to pursue frequency-of-pay class actions now that the maximum liquidated-damages exposure is limited to interest for first-time violators; however, willful or repeat offenders would be liable for 100 percent of liquidated damages and will no longer be able to rely on the current uncertainty in the law to leverage better settlements.
Recordkeeping and Good-Faith Defense. Demonstrating a “good-faith basis” will be critical to avoid wage-doubling damages in first-time pay frequency cases. Employers may want to document reliance on agency guidance, legal opinions, or industry practice.
Strategic Settlement Considerations. Once the NYSDOL issues an order, the prospect of a swift, judgment-like lien may tilt settlement negotiations in the employee’s favor, encouraging earlier resolution.
Heightened Collection Risk on Substantive Wage Claims. Employers that ignore NYSDOL orders could face accelerated enforcement, immediate liens, and asset levies initiated either by the commissioner or directly by employees, now sweetened by a 15 percent) surcharge.
New Requirements for Employment of Minors. Once these changes go into effect on May 9, 2027, employers of minors must register with the NYSDOL’s database and comply with the new electronic recordkeeping and certification requirements.
Next Steps
Employers may want to consider the following steps:
Auditing Pay Frequencies. Employers—particularly those with “manual worker” populations—may want to confirm that pay schedules comply with the requirements set forth in NYLL § 191.
Preparing for Enhanced Post-Order Collection. Consider reviewing asset-protection strategies and ensure prompt payment procedures for NYSDOL orders to avoid the 15 percent surcharge and immediate liens.
Updating Wage and Hour Policies. Consider incorporating the proposed damages framework into internal compliance manuals and manager training, emphasizing the continuing risks for willful or repeat violations.
The enactment of the 2025–26 state budget represents a sweeping overhaul of New York’s wage and hour laws, enforcement mechanisms, and minor employment regulations. Most changes are already in effect and apply to pending and future matters.
“Somebody’s Watching Me” – What You Need to Know About California’s Proposed AI Employee Surveillance Laws
California continues to police artificial intelligence (“AI”) in the workplace. Following proposed rulemaking on the use of AI for significant employment decisions, as we reported here, Assemblymember Isaac Bryan introduced Assembly Bill 1221 (“AB 1221”) this legislative session. The bill aims to regulate workplace surveillance tools, including AI, and use of employee data derived therefrom. Applicable to employers of all sizes, AB 1221 could present significant challenges for businesses.
Key Provisions of AB 1221
If enacted, AB 1221 would regulate workplace surveillance tools and the data they collect. The bill broadly defines a “workplace surveillance tool” to encompass any system or device that actively or passively collects or facilitates the collection of worker data, activities, communications, biometrics and behaviors and includes incremental time-tracking tools, geolocation, and photo-optical systems, among others. The bill has several key provisions that will impact businesses:
Notice: Employers will be required to provide written notice to employees 30 days before using any surveillance tool, detailing the data collected, its purpose, frequency, storage, employment-related decisions, and workers’ rights to access and correct their data.
Data Security: The bill also sets forth robust measures to protect employee data, including required provisions in employer contracts with vendors they engage to analyze or interpret employee data.
Prohibited Technologies: The bill bans the use of facial, gait, neural data collection, and emotional recognition technologies.
No Collection of Protected Characteristics: AB 1221 prohibits employers altogether from using surveillance tools to infer an employee’s immigration status, veteran status, ancestral history, religious or political beliefs, health or reproductive status, history, or plan, emotional or psychological state, neural data, sexual or gender orientation, disability status, criminal record, credit history, or any other status protected under California’s Fair Employment and Housing Act.
Limited Use in Disciplinary Actions: Employers are prohibited from relying exclusively on surveillance tools to make disciplinary decisions; to the extent they wish to rely on surveillance data at all for such decisions, employers must notify workers, allow data correction, and adjust personnel decisions within 24 hours if data challenged by the employee warrants it.
Penalties and Civil Liability: AB 1221 delegates enforcement to the California Labor Commissioner and provides for a $500 civil penalty per employer violation. In addition, AB 1221 would create a separate private right of action for employees, pursuant to which they could obtain damages, injunctive relief, punitive damages, and attorneys’ fees and costs.
Areas of Uncertainty
While AB 1221 aims to establish a framework for workplace surveillance, several aspects of the bill remain ambiguous. For instance, the requirement to provide notice for “significant updates or changes” to surveillance tools is not clearly defined. Additionally, the bill does not specify who is responsible for determining what constitutes an “up-to-date cybersecurity safeguard.”
Also, “injured” employees presumably would be able to recover their “noneconomic” damages for alleged “physical pain and mental suffering” associated with violations of this statute, which is a common remedy sought in employment cases that could substantially increase the liability for employers. These ambiguities could lead to inconsistent enforcement and legal challenges, creating costly uncertainty for employers.
Current Status
As of May 7, 2025, the bill is headed back to the Assembly Appropriations Committee. If passed and signed by Governor Newsom, AB 1221 would establish some of the broadest workplace privacy regulations in the nation. We will continue to monitor its progress.
New York State Senate Bill Would Make Fast-Food Franchisors Jointly and Severally Liable for Certain Labor Law Violations
On April 8, 2025, the New York State Legislature took up Senate Bill S7289, which, if enacted, would amend the New York Labor Law (NYLL) by adding a new article 35-A, otherwise known as the “New York State Fast Food Franchisor Accountability Act,” and impose joint and several liability on fast-food franchisors for certain labor law violations.
Quick Hits
The proposed New York State Fast Food Franchisor Accountability Act would make fast-food restaurant franchisors jointly and severally liable for violations of Chapter 31 of the New York Labor Law, as well as the New York State Human Rights Law and applicable workers’ compensation laws, to the same extent that they may be enforced against fast-food restaurant franchisees.
The proposed act aims to enhance accountability for fast-food restaurant franchisors and further protect workers’ rights in the fast-food industry.
SB S7289 would make fast-food restaurant franchisors responsible for ensuring that their franchisees are compliant with “applicable employment, worker safety, public health and safety laws and orders and any rules or regulations” to the same extent that those laws are enforceable against fast-food restaurant franchisees. In effect, if a fast-food restaurant franchisee became liable for a violation of applicable employment and worker protection laws, the fast-food restaurant franchisor would be “jointly and severally liable for any penalties or fines” in connection with any violation of laws set forth in the act and any regulations or rules related thereto.
Overview of the Proposed Fast Food Franchisor Accountability Act
The Fast Food Franchisor Accountability Act would apply to “fast food chain[s],” defined in the legislation as “a set of restaurants consisting of fifty or more establishments nationally that either share a common brand or are characterized by standardized options for decor, marketing, packaging, products, and services” and that operate “fast food restaurant[s],” defined as “any establishment in the state that is part of a fast food chain and that, in its regular business operations, primarily provides food or beverages according to all of the following”:
(a) For immediate consumption, either on or off the premises;
(b) To customers who order or select items and pay before eating;
(c) With items prepared in advance, including items that may be prepared in bulk and kept hot, or with items prepared or heated quickly; and
(d) With limited or no table service. For purposes of this section, “table service” shall not include orders placed by a customer on an electronic device.
Further, a “fast food restaurant franchisor” would mean “a person or entity who grants or has granted a fast food restaurant franchise.” The legislation defines a “fast food restaurant franchisee” as “a person or entity to whom a fast food restaurant franchise is granted.”
If enacted, the act would hold fast-food restaurant franchisors accountable for complying with various employment, worker safety, and public health and safety laws in New York State. These would include the New York State Human Rights Law, applicable workers’ compensation laws, and various laws found in Chapter 31 of the NYLL, such as the New York State Paid Sick Leave Law, New York Prenatal Leave Law, New York Lactation Accommodation Law, and minimum wage and overtime pay requirements. Additionally, the act would apply to emergency executive orders issued by the governor concerning employment standards or worker safety, as well as orders issued by a county or municipality on such matters. If a franchisor’s terms prevent or create substantial barriers to the franchisee’s compliance with these laws, the proposed amendment would allow the franchisee to file an action against the franchisor for monetary or injunctive relief.
The proposed Fast Food Franchisor Accountability Act also provides that a franchisor would not be permitted to waive any part of the act through an agreement or allow the franchisee to indemnify the franchisor for any liability it caused.
Although the act is only a bill and not yet law, fast-food employers with thirty or more fast-food establishments nationally and with operations in New York City are already required to follow New York City’s Fair Workweek Law, which sets forth requirements for predictive scheduling, premium pay, and processes and procedures for discharging employees or reducing their scheduled hours.
Next Steps
Fast-food employers with operations in New York that would be subject to the proposed act may want to review the bill to determine what additional obligations they may face if it is enacted in substantially the same form as currently proposed.
Continued Developments in the Anti-Bribery/Anti-Corruption Sector: A Potential Expansion of the International Anti-Corruption Prosecutorial Taskforce on the Horizon
There have been a number of developments in the anti-bribery/anti-corruption sector following the start of President Trump’s second term. First, on February 5th, Attorney General Pamela Bondi issued a memo titled, “Total Elimination of Cartels and Transnational Criminal Organizations” in which she instructed the Foreign Corrupt Practices Act (FCPA) Unit at DOJ to focus on “investigations related to foreign bribery that facilitate the criminal operations of Cartels” and Transnational Criminal Organizations (TCOs). She also suspended the requirement that the Fraud Section lead investigations involving the FCPA and Foreign Extortion Prevention Act if the investigation is into “foreign bribery associated with Cartels and TCOs.”
That memo was followed by President Trump signing Executive Order 14209 titled, “Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security.” In that order, President Trump noted that FCPA enforcement has been “stretched beyond proper bounds and abused in a manner that harms” the U.S. He further explained that FCPA enforcement compromises the U.S.’s foreign policy goals, “the President’s Article II authority over foreign affairs,” national security, and the ability of the U.S. “and its companies gaining strategic business advantages.” President Trump ordered Attorney General Bondi to revise DOJ guidelines and policies related to the FCPA, require new FCPA investigations and enforcement actions to have Attorney General Bondi’s approval, review pending FCPA investigations and enforcement actions to ensure their compliance with the order, and identify whether any remedial actions are necessary. This order was accompanied by a fact sheet that echoed the points described above.
In response to the federal government’s shift with FCPA enforcement, states have indicated they may step up their bribery enforcement actions. For example, California’s Attorney General Rob Bonta issued a legal advisory “reminding businesses operating in California that it is illegal to make payments to foreign-government officials to obtain or retain business.” Attorney General Bonta explained that FCPA violations can be the basis for actions under California’s Unfair Competition Law. Similarly, the District Attorney for Manhattan shared that his office was exploring methods for taking on various enforcement priorities that the DOJ has indicated it will not be pursuing as heavily as it once did, including domestic bribery and corruption.
Internationally, the UK, France, and Switzerland announced the launch of the International Anti-Corruption Prosecutorial Taskforce. The taskforce includes (1) the UK’s Serious Fraud Office, (2) France’s National Financial Prosecutor’s Office, and (3) the Office of the Attorney General of Switzerland. Among other things, the taskforce announced its commitment to tackling “the significant threat of bribery and corruption and the severe harm that it causes.” The taskforce also noted that it would “invite other like-minded agencies” to join the taskforce’s efforts. To accomplish its goal, the taskforce identified four action items: (1) regularly exchanging “insight and strategy,” (2) “devising proposals for co-operation on cases,” (3) sharing best practices “to make full use of” the taskforce’s “combined expertise,” and (4) “seizing opportunities for operational collaboration.”
Last week, Jean-Francois Bohnert, the head of France’s agency tasked with bringing enforcement actions against, among other things, corruption, mentioned that other countries have contacted the taskforce to discuss their interest in potentially cooperating with the taskforce. Those countries included Germany, Italy, the Netherlands, Spain, and multiple unnamed countries in Latin America.
These developments have led some to question the trajectory of the FCPA enforcement landscape for the duration of the Trump administration. That said, speculation that FCPA enforcement would be relatively non-existent appears to be overstated at this point given that although the federal government has refrained from proceeding with some pending FCPA trials, they have proceeded with others. As for state enforcement actions in this area, it remains to be seen just how robust those actions can be given restrictions such as jurisdictional limitations and limited state resources (which are already stretched in numerous areas currently).
Given these considerations, the International Anti-Corruption Prosecutorial Taskforce is poised to have a significant impact on the anti-bribery/anti-corruption enforcement landscape. If additional countries join (which it appears that at least some number of countries may join or otherwise assist the taskforce), then the taskforce’s impact in this sector will be heightened. It would not be surprising to see the taskforce take on a role similar to the role the federal government held in prior years with respect to anti-bribery/anti-corruption investigations that encompass multiple countries. Companies should thus ensure they continue to maintain robust compliance programs, and properly functioning compliance programs are even more essential for those companies operating overseas.