COOKIE CUTTER SOLUTION? Senate Bill 690’s “Commercial Business Purpose Exemption” Could Crumble CIPA Lawsuits!
California Senate Bill 690 (“SB 690”) aims to amend CIPA by creating a broad exemption for the use of online tracking technologies if employed for a “commercial business purpose.” This means that companies could deploy cookies, pixels, chatbots, and session replay software to collect and analyze user data – even if it captures personal communications – without facing CIPA lawsuits.
As all of you CIPAWorld dwellers know, in recent years, CIPA has become one of the most aggressively litigated privacy laws in the nation, especially since the infamous CIPA / TCPA catastrophe. Since Javier’s massive expansion of CIPA, thousands of high-profile lawsuits and arbitration demands have been filed against companies allegedly surreptitiously intercepting or “wiretapping” consumer communications through technologies such as session replay software, chatbots, cookies, and pixel trackers – tools that assist legitimate businesses to capture keystrokes, chat transcripts, and browsing behaviors to better a consumer’s journey on its website (or you know even comply with the Telephone Consumer Protection Act). And along with CIPA’s $5,000 PER violation private right of action, it’s no surprise Plaintiff’s attorneys have been filing lawsuits en masse.
But perhaps not for much longer.
SB 690 was introduced by Democratic Senator Anna Caballero, and is rapidly emerging as the most important and controversial privacy legislation of 2025 as it makes it way through the state legislature. SB 690 proposes to amend the heavily litigated CIPA by carving out an exemption for the use of tracking technologies – including cookies, pixels chatbots, and session replay tools – when deployed for a legitimate “commercial business purpose.”
Specifically, SB 690:
Exempts a commercial business purpose from the general prohibition against eavesdropping or recording a confidential communication.
Specifies that the civil action, as authorized under current law for a person who has been injured by a violation of CIPA, does not apply to the processing of personal information for a commercial business purpose.
Specifies that a trap and trace device does not include a device or process that is used in a manner consistent with a commercial business purpose.
Specifies that a pen register does not include a device or process used in a manner consistent with a commercial business purpose.
Defines a “commercial business purpose” to mean the processing of personal information either performed to further a business purpose or subject to a consumer’s opt-out rights.
Makes its provisions retroactive and applicable to any case pending as of January 1, 2026. (Notably, when the bill was first introduced, the proposed exemption was explicitly retroactive and would have applied to any legal action pending as of January 1, 2026. This crucial provision would have impacted hundreds of active lawsuits currently making their way through California courts and tribunals, with plaintiffs in those cases seeing their claims effectively neutralized. However, this retroactivity drew sharp criticism from privacy advocates and plaintiffs’ attorneys, who argued that it amounts to a giveaway to corporate defendants and could deprive consumers of remedies for past privacy violations. Following a third reading of the Bill on May 29, 2025, the Senate removed the retroactive provision and ordered the amended bill to a second reading.)
The “commercial business purpose” phrase is defined in alignment with the California Consumer Privacy Act (“CCPA”) to harmonize CIPA with existing state data privacy standards. A “commercial purpose” is defined as the processing of personal information either performed to further a business purpose or subject to a consumer’s opt-out rights. SB 690 also proposes excluding any device that is used in a manner that is “consistent with a commercial business purpose” from the definitions of a pen register and trap and trace device. If passed, the use of online tracking technologies – that are currently under scrutiny – would likely fall under the “commercial purpose” exemption.
Proponents of the bill have argued that the CCPA already regulates how businesses collect, use, and share consumers data (including for website analytics and advertising) and creates opt-out rights, making additional protections under CIPA superfluous and unduly burdensome. If a business uses tracking tools in a manner consistent with the CCPA’s requirements then, under SB 690, they would not be considered in violation of CIPA.
“[SB 690] stops the abusive lawsuits against California businesses and nonprofits under the California Invasion of Privacy Act (CIPA) for standard online business activities that are already regulated by the California Consumer Privacy Act (CCPA).”
– Senator Caballero in a Press Release introducing the bill.
Supporters of the bill note that CIPA’s private right of action is being abused far beyond its original purpose when the law was enacted in 1967:
“Beyond regulatory inconsistency, the unchecked barrage of CIPA lawsuits has done nothing to protect consumer privacy. Instead, these demand letters and lawsuits have created significant costs for California businesses, particularly small and mid-sized businesses – and non-profits – that lack the resources to defend against these claims. Trial lawyers have targeted businesses for using common digital tools such as chatbots—tools that are widely used to enhance user experience and do not constitute unlawful wiretapping or eavesdropping as originally intended under CIPA.
Trial lawyers have sued over 1,500 businesses since 2022, and have sent thousands more demand letters.”
While those in opposition – including of course the NCLC – argue that legislative history makes it clear they were concerned about the future of surveillance and wanting lasting privacy protections for Californians:
“When passed in 1967, CIPA was designed as a forward-looking protection against the full spectrum of technological intrusions into private life. The legislative history demonstrates a clear intention to address and regulate the growing threat of electronic surveillance. These concerns are consistent with the now ubiquitous and invasive commercial practices of internet-based tracking, profiling, and data commodification. CIPA was intended to be robust, technology-neutral, and protective of Californians’ right to control their private communications, regardless of the surveillance medium. The argument advanced by SB 690—that CIPA was intended to be limited to traditional wiretaps—is contradicted by the legislative record, which reveals a sophisticated understanding of, and alarm at, the ever increasing sophistication of private surveillance systems that propelled their vision past the 1960s and into the future.”
Opponents of the bill also argue that the CCPA was never meant to replace privacy laws like the CIPA and that the CCPA works on an opt-out basis but doesn’t let consumers file private lawsuits for most privacy violations – only for data breaches. CIPA, on the other hand, gives consumers the right to take business to court when their “conversations” are being “intercepted” or “recorded” without consent. The bill would take away privacy protections and give tech companies and businesses the right to secretly monitor and record conversations between consumers and business in real time – by claiming to act for a “commercial purpose,” they argue.
SB 690 is now advancing toward a full Senate vote and must be passed out of the California Senate this week – by June 6, 2025, to remain viable this session. Interestingly, it has received unanimous bipartisan support in Senate votes until now.
This could really be a big win for business using everyday common website tools – many tools that are just normal parts of running a website or improving customer experience and were not intended to be covered by a statute that was enacted back in 1967. SB 690 could drastically reduce CIPA risk for companies – and even potentially shape precedent for other states that have similar privacy statutes as California.
White House Publishes Executive Orders Aimed at Accelerating Nuclear Energy
On May 23, 2025, President Donald Trump signed four executive orders aimed at launching a “renaissance” for the U.S. nuclear energy sector. The orders announce objectives of deploying 300 GW of new nuclear energy capacity by 2050 (a fourfold increase over current levels) and having 10 large reactors under construction in the United States by 2030. To achieve these objectives, the White House is calling for reforms to the Nuclear Regulatory Commission (“NRC”), the build-out of a domestic nuclear fuel supply chain, construction of reactors on military installations, and export promotion for U.S. nuclear technologies.
Reforming the NRC
The Ordering the Reform of the Nuclear Regulatory Commission executive order criticizes the NRC for “throttling nuclear power development” by implementing multi-year licensing processes characterized by excessive risk aversion. The order and an accompanying fact sheet build on recently-enacted legislation—the Accelerating Deployment of Versatile Advanced Nuclear Energy Act of 2024, P.L. L. 118-67 (the “ADVANCE Act”)—which directed the NRC to revise its mission statement to ensure that its regulations not only ensure safety but also account for the societal benefits of nuclear energy.
The White House directive calls for a reorganization of the NRC, including reductions in force; however, the order recognizes that certain functions, such as new reactor licensing, may increase in size. The White House also directs the NRC to streamline and expedite its licensing processes in various ways, including by adopting an 18-month deadline for a final agency decision on applications to construct and operate any type of new reactor, establishing a process for high-volume licensing of microreactors and modular reactors, and eliminating “non-essential or obsolete” rules.
Additionally, the order directs the NRC to reconsider its reliance on the linear no-threshold (“LNT”) model for radiation exposure, and the “as low as reasonably achievable” (“ALARA”) standard, which is predicated on the LNT model. According to the order, the LNT and ALARA policies exemplify the NRC’s extreme risk aversion and represent a major obstacle to licensing new reactors. As part of its reconsideration, the NRC must consider adopting “determinate radiation limits,” in consultation with the Environmental Protection Agency and other agencies. Such reconsideration might lead the NRC to align its standards with the quantified “ample margin of safety” hazardous air pollution standard codified by Congress in the 1990 Clean Air Act amendments, which applies to radiation exposure from reactors.
The NRC may face pressure to address these new directives in its ongoing rulemaking to establish a risk-informed, technology-inclusive regulatory framework for advanced reactors (the so-called “Part 53” rulemaking).
Building a Domestic Fuel Supply Chain
The Reinvigorating the Nuclear Industrial Base executive order addresses a vulnerability in the U.S. nuclear sector: its dependence on imports of foreign sources of enriched uranium, particularly from Russia.
To address this import dependence, the order directs the Department of Energy (“DOE”) and the Department of Defense to make excess uranium from federal stockpiles available for commercial use where feasible. It also calls for the immediate development of domestic capabilities for uranium conversion, enrichment, and fuel fabrication—including for advanced reactor fuels such as high-assay low-enriched uranium (“HALEU”). HALEU is essential for several next-generation types of reactors.
The order also directs the DOE to prioritize the facilitation of 5 GW of power uprates to existing reactors, have construction underway on 10 new large reactors by 2030, and make resources available for restarting closed nuclear power plants.
Additionally, the White House seeks to expand the industry workforce by instructing the Secretaries of Labor and Education to establish ways of increasing participation in nuclear energy-related education and career pathways.
Deploying Reactors for (and by) the National Security Apparatus
The Deploying Advanced Nuclear Reactor Technologies for National Security order focuses on utilizing nuclear energy for national security purposes. The order calls on the Departments of Defense and Energy to utilize government sites for the development of advanced reactors.
Under the order, the Secretary of the Army is tasked with commencing operation of a reactor on a domestic military base or installation no later than September 30, 2028.
The order also establishes a 90-day deadline for the Secretary of Energy to designate DOE sites for the use and deployment of advanced reactors—with a special emphasis on powering AI infrastructure.
Finally, the order instructs the Secretary of State to implement several policies to promote exports of U.S. nuclear technologies, including “aggressively” pursuing at least 20 new agreements with other countries by January 3, 2029.
Leveraging DOE Authorities to Build “Test Reactors”
The order titled Reforming Nuclear Reactor Testing at the Department of Energy instructs the DOE to accelerate development of new reactors through pilot programs and streamlining environmental reviews. The order specifically asserts that advanced reactors that are not used for commercial electricity generation are collectively for “research purposes” and can be licensed by DOE rather than the NRC. The DOE is required to set up an expedited licensing and permitting process that will enable these “qualified test reactors” to be safely operational within 2 years of application submission and is charged with approving at least three reactors with the goal of achieving criticality in each by mid-2026.
Conclusions
The executive orders come at a time when the United States is grappling with increasing electricity demand driven by electrification, AI workloads, and the growing need for reliable, clean baseload energy. Nuclear reactors offer reliability and density, capable of supporting 24/7 operations with carbon-free power. Advanced reactors hold the promise of safer and more modular designs.
To achieve the ambitious capacity growth objectives, the executive orders seek to cut regulatory red tape and leverage various federal streamlining authorities. It remains to be seen whether simultaneous, mandatory cuts of experienced staff at the regulatory agencies will impede these goals. Furthermore, funding is a key part of the puzzle for the nuclear sector, particularly for advanced reactors. In this area, developers may have concerns about recent developments in Congress. The recently passed House budget reconciliation bill significantly diminishes the DOE Loan Programs Office, which has been a key source of financing. The House bill also limits the availability of clean electricity tax credits for advanced reactors. The bill would confine tax credit eligibility to reactors for which construction commences no later the end of 2028. This is a modest reprieve from earlier, far more restrictive versions of the bill. However, developers of advanced reactors may struggle to assemble the workforce, components, and financing to break ground by that date. In addition, the House bill does not spare owners of existing reactors; it would phase out the 45U tax credit at the end of 2031.
Oregon Federal Judge Strikes Down State Law Requiring Labor Peace Agreements for Cannabis Licensure and Certification – OLCC Will No Longer Enforce State Requirement
On Tuesday May 20, 2025, U.S. District Judge for the District of Oregon, Michael H. Simon issued a decision in Casala LLC, d/b/a Bubble’s Hash and Rec Rehab Consulting LLC, d/b/a Ascend Dispensary v. Tina Kotek, in her official capacity as Governor of the State of Oregon, et al., Case No. 3:25-cv-244-SI (D.Or. May 20, 2025), striking down Oregon’s United for Cannabis Workers Act and holding that the law is preempted by the National Labor Relations Act (“NLRA”) in violation of the Supremacy Clause and the First Amendment of the United States Constitution.
Shortly after Oregon’s United for Cannabis Workers Act took effect, two cannabis employers Bubble’s Hash and Ascend Dispensary (collectively, “Plaintiffs”), filed suit for declaratory and injunctive relief, and sought a permanent injunction to enjoin the Oregon Governor, Oregon Attorney General, Chair of the Oregon Liquor and Cannabis Commission (“OLCC”), and Executive Director of the OLCC (collectively, “Defendants”), from enforcing the United for Cannabis Workers Act against them.
Plaintiffs alleged that the law: (1) was preempted by the NLRA and its enforcement would be in violation of the Supremacy Clause of the United States Constitution; (2) was void for vagueness in violation of the Due Process Clause of the United States Constitution; (3) abridged Plaintiffs’ freedom of speech in violation of the First Amendment, as made applicable to the States by the Fourteenth Amendment; (4) infringed on Plaintiffs’ right to equal protection in violation of the Fourteenth Amendment; and (5) disrupts Plaintiffs’ contractual arrangements in violation of the Contract Clause of the United States Constitution.
Following hearing argument on the merits, the Court granted Plaintiffs’ requested declaratory and permanent injunctive relief, concluding that the law was preempted by the NLRA, violated the Supremacy Clause and violated Plaintiffs’ First Amendment rights, and that the requirements for permanent injunctive relief were satisfied. With this decision, the Oregon District Court became the first U.S. District Court to strike down a state law that required cannabis employers to enter into labor peace agreements in order to receive or renew a license to sell cannabis.
On May 29, the OLCC issued the following statement concerning Judge Simon’s May 20 decision: “Earlier this month, a federal judge issued a ruling barring the enforcement of Ballot Measure 119. Given this ruling and in consultation with the Oregon Department of Justice, the OLCC will no longer require labor peace agreements as part of cannabis license application and license renewals.”
United for Cannabis Workers Act
The United for Cannabis Workers Act was passed by an initiative approved by Oregon voters in November 2024 as Ballot Measure 119 (“Measure 119”) and took effect December 5, 2024. Measure 119 requires businesses licensed to sell or process cannabis to enter into labor peace agreements with labor organizations or sign an attestation affirming that the business has entered into such agreement. The businesses must submit such agreements or attestations with their applications for a license, certification of renewal of a license, or certification to dispense cannabis. Oregon law defines a “labor peace agreement” (“LPA”) as “an agreement under which, at a minimum, an applicant or licensee agrees to remain neutral with respect to a bona fide labor organization’s representatives communicating with the employees of the applicant or the licensee about the rights afforded to such employees.
Plaintiffs had both been unable to enter into LPAs at the time of filing.
The District Court’s Decision
As an initial issue, the Court determined that the NLRA likely applied to cannabis businesses and does not limit its jurisdiction to “lawful commerce” or “legal substance” as some other federal laws do. Judge Simon pointed out that the National Labor Relations Board (“NLRB”) has issued advisory memoranda back to 2013 which stated that the medical marijuana industry is within the NLRB’s jurisdiction if the business meets the NLRA’s jurisdictional monetary requirements.
The Court determined that Measure 119 is preempted by the NLRA under Garmon preemption because it does not distinguish between permissible employer speech and threatening or coercive speech and thus impermissibly conditions a state license on an employer “refraining from conduct protected by federal labor law,” which “chills one side of the ‘robust debate which has been protected under the NLRA.’” In other words, Measure 119 chills an employer’s right to speech under section 8(c).
In terms of Machinist preemption, the Court held that by seeking to regulate and forbid certain truthful, non-deceptive, non-coercive speech about unionization and by conditioning license renewal on signing an LPA, Measure 119 sought to regulate the relationship between unions and employers, upsetting the balance Congress struck in passing the NLRA. Thus, it is preempted under Machinist preemption.
With respect to the First Amendment, the Court determined that because Measure 119 requires Plaintiffs to remain neutral with respect to labor organization’s representatives communicating with employees of the applicant or licensee and does not limit its restrictions to only threatening, coercive, false, or misleading speech, it violates Plaintiffs’ First Amendment rights to free speech.
Other States With Similar Labor Peace Agreement Requirements
While not binding on other courts outside of Oregon, given that the decision is the first to strike down a law that requires LPAs for licensure, the decision is likely to be utilized by cannabis businesses in other states with similar requirements, such as California, Rhode Island, New York, New Jersey, Connecticut, and Delaware, among others.[1]
The decision acknowledged and Defendants cited to a recent decision analyzing the California version of Measure 119, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) Ctrl Alt Destroy v. Elliott, 2025 WL 790963 at *7 n.8 (S.D. Cal. Mar 12, 2025) which held that Garmon preemption did not apply because of the local responsibility exception. Judge Simon rejected this conclusion of Ctrl Alt Destroy, pointing out that Measure 119 and MAUCRSA regulate only labor relations of cannabis businesses and do not regulate the sale or use of cannabis. Similarly, Judge Simon rejected the conclusion from the Ctrl Alt Destroy decision on Machinists preemption. Judge Simon reasoned that Machinists preemption seeks to protect balancing only in the labor relations context, not to regulation of the underlying market. Thus, Measure 119 regulates an area that Congress intended to leave to the free play of economic forces.
Takeaways
The OLCC will no longer require labor peace agreements as part of cannabis license application and license renewals in Oregon.
Employers seeking to challenge similar state LPA licensure requirements in other states are encouraged to speak with experienced labor counsel to discuss their options. We will continue to monitor similar challenges as they are filed, and provide additional updates.
FOOTNOTES
[1] Additionally, states including Illinois and Pennsylvania grant preferential treatment to businesses with LPAs when applying for licensure.
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House-Passed Budget Bill – the One Big Beautiful Bill Act – Includes Major Changes to Medicaid
On Thursday, May 22,2025, the U.S. House of Representatives narrowly passed the One Big Beautiful Bill Act, a budget reconciliation bill introduced by House Republicans, by a 215-214 vote. The bill extends key provisions of the 2017 Tax Cuts and Jobs Act, currently set to expire at the end of 2025, and allocates additional funding for defense and other federal priorities. It also includes reductions in government spending and revised eligibility requirements for several federal aid programs.
Among the provisions, the bill includes over $700 billion in proposed changes to Medicaid, the joint federal-state program that provides health insurance to low-income individuals and families, as well as certain people with disabilities and limited financial resources. These changes are intended to reduce federal outlays and are projected to significantly impact both Medicaid beneficiaries and the healthcare providers who serve them.
Key Medicaid Measures
The One Big Beautiful Bill Act proposes to achieve these savings through several policy changes. The estimated budget impact of each change over the next decade, as calculated by the nonpartisan Congressional Budget Office (CBO) and published here, is listed in parentheses below.
Community Engagement Requirements. Beginning in 2026, able-bodied adults would be required to complete 80 hours per month of work, volunteering and/or attending school to maintain eligibility for Medicaid, with certain exemptions (e.g., pregnant women and the elderly) (~$280B, which estimate was based on these requirements going into effect in 2029).
Increased Frequency of Eligibility Redeterminations. States would be required reverify Medicaid eligibility for expansion populations every six months, rather than annually (~$53.2B).
Moratorium and Limits on Provider Taxes. The bill would prohibit states from creating new provider taxes or expanding existing ones, and would restrict how provider taxes can be used to finance Medicaid. (~$123.9B combined).
Enrollment Streamlining Moratoriums. The bill would pause implementation of certain rules designed to streamline enrollment in Medicaid, the Medicare Shared Savings Program, the Children’s Health Insurance Program (CHIP), and the Basic Health Program (~$167.3B combined).
Enhanced Verification Standards. New address and documentation verification requirements would apply for Medicaid enrollment (~$17.4B).
Cost Sharing Requirements. States would be required to implement new cost-sharing charges for low-income individuals just above the poverty line ($16,000 per year for an individual) when they seek care. (~$13B).
Anticipated Impact on Coverage and Providers
Medicaid and CHIP currently provide health coverage for nearly 80 million people, making them the largest source of insurance coverage in the United States. According to earlier CBO estimates of a previous version of the bill, approximately 7.6 million people could lose coverage. The House-passed version would likely result in additional losses, given that certain provisions, such as the work requirements, would take effect earlier than previously modeled.
These coverage reductions could also affect healthcare providers, particularly those that serve communities with high Medicaid enrollment, as they may see changes in patient volumes.
What’s Next?
The bill now moves to the U.S. Senate, where it is expected to undergo further debate and potential revisions. While some senators have called for additional spending reductions, others, across the political spectrum, have raised concerns about the scale of the Medicaid-related changes. Republican leadership has expressed an intent to move the bill forward with the goal of delivering it to President Trump’s desk by July 4th.
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Oregon Expands Consumer Privacy Law to Include Auto Manufacturers—and Possibly Their Dealerships
“Our cars know how fast you’re driving, where you’re going, how long you stay there. They know where we work, they know whether we stop for a drink on the way home, whether we worship on the weekends, and what we do on our lunch hours.” OR Representative David Gomberg
The Oregon Legislature recently enacted House Bill 3875, amending the Oregon Consumer Privacy Act (OCPA) effective September 28. 2025, to broaden its scope to include motor vehicle manufacturers and their affiliates that control or process personal data from a consumer’s use of a vehicle or its components.
While this expansion is clear in its application to vehicle manufacturers, it raises important questions for automobile dealerships, particularly those “affiliated”—formally or informally—with manufacturers. Dealerships should consider whether they may now be subject to the full scope of Oregon’s privacy law. Of course, they may be subject directly to the OCPA in their own right.
The Amendment: HB 3875
HB 3875 modifies ORS 646A.572 to extend the OCPA’s privacy obligations to:
“A motor vehicle manufacturer or an affiliate of the motor vehicle manufacturer that controls or processes personal data obtained from a consumer’s use of a motor vehicle or a vehicle’s technologies or components.”
Who Counts as an “Affiliate”?
To determine whether a dealership is subject to these new obligations, one must examine the OCPA’s definition of affiliate:
“Affiliate” means a person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with another person such that:
(a) The person owns or has the power to vote more than 50 percent of the outstanding shares of any voting class of the other person’s securities;
(b) The person has the power to elect or influence the election of a majority of the directors, members or managers of the other person;
(c) The person has the power to direct the management of another person; or
(d) The person is subject to another person’s exercise of the powers described in paragraph (a), (b) or (c) of this subsection.
This definition introduces some ambiguity for dealerships. Many dealerships operate as independent businesses, even if they sell only one manufacturer’s vehicles and display that brand prominently. While they may be contractually tied to a manufacturer, they may not meet the legal standard of being controlled by or under common control with that manufacturer as described in the definition.
However, certain dealership groups—particularly those owned or operated by manufacturers or holding companies—may clearly fall within the definition of “affiliate.”
Dealerships should evaluate their corporate structure and agreements with manufacturers to determine whether this definition might apply to them.
Why This Matters
Entities subject to the OCPA must comply with a range of privacy requirements, including:
Providing transparent privacy notices
Obtaining consumer consent for data collection and sharing under certain circumstances
Offering consumer rights such as access, correction, deletion, and data portability
Implementing reasonable data security measures
These obligations extend to any personal data collected through vehicle technologies, such as navigation systems, driver behavior analytics, location data, and mobile app integrations.
Federal Context: FTC Enforcement
Dealerships should also remain aware of federal obligations. Under the Gramm-Leach-Bliley Act (GLBA), auto dealers engaged in leasing or financing must follow privacy and safeguard rules enforced by the Federal Trade Commission (FTC).
The FTC has published detailed guidance for auto dealers, including:
FAQs on the Privacy Rule for Auto Dealers
Safeguards Rule updates for information security programs
What Dealerships Should Do Now
Even if a dealership is not legally an “affiliate” under the OCPA or subject to a similar state comprehensive privacy law, the trend toward regulating vehicle-generated data suggests it’s time to proactively review data practices. Dealerships should:
Conduct a data inventory to identify what personal data is collected, especially from connected vehicle systems.
Update privacy notices and practices in accordance with state and federal law.
Review contracts with manufacturers and vendors for data-sharing provisions and compliance obligations.
Train staff on new privacy responsibilities and how to respond to consumer data requests.
Minnesota Employment Legislative Update 2025, Part III: Regular Session Ends in Stalemate and Stagnation
On May 19, 2025, the Minnesota Legislature’s regular session adjourned without completing the two-year budget, leaving a long list of outstanding bills in limbo. The Minnesota Legislature will now enter a special session to tackle unfinished business. Despite the regular session’s anti-climactic ending, state lawmakers managed to pass a handful of bills that have been signed by Governor Tim Walz and will create new obligations for employers.
Quick Hits
Minnesota’s regular legislative session adjourned on May 19, 2025, but a special session is expected to convene soon to complete remaining budgetary matters.
Governor Walz signed the Brady Aune and Joseph Anderson Safety Act, imposing new requirements on employers with commercial scuba divers.
The legislature amended Minnesota’s medical cannabis law, among other laws, which creates new obligations for employers.
Other significant proposed bills aimed at amending existing labor and employment laws failed to make it to Governor Walz’s desk for approval.
Brady Aune and Joseph Anderson Safety Act
A new statute, Minn. Stat. § 182.679, titled the “Brady Aune and Joseph Anderson Safety Act,” applies to “persons who are conducting self-contained underwater breathing apparatus (scuba) diving at a place of employment while making improvements to the land, including the removal of aquatic plants” took effect May 2, 2025. Under this new statute, which is included in the Minnesota Occupational Safety and Health Act (Minn. Stat. § 182), employers:
may not allow an individual to scuba dive unless the individual has an acceptable open-water scuba diver certificate;
must require certain equipment when an individual is scuba diving;
must ensure that a standby diver is available while a diver is in the water; and
must ensure all individuals scuba diving or serving as standby divers are trained in CPR and first aid.
An employer may be cited by the commissioner of labor and industry for violations under this statute.
Amendments to Minnesota’s Medical Cannabis Law
Minnesota’s medical cannabis law (Minn. Stat. § 342.57) went into effect on March 1, 2025, and prohibits employers from discriminating against a person in hiring, termination of employment, or any term or condition of employment if the discrimination was based on the person’s enrollment in a cannabis registry program. It also prohibits employers from taking adverse action against an employee for a positive drug test for cannabis components or metabolites, unless the employee used, possessed, sold, transported, or was impaired by medical cannabis flower or a medical cannabinoid product on work premises, during working hours, or while using an employer’s vehicle, equipment, or machinery. These protections apply unless compliance would violate federal or state laws or regulations or cause an employer to lose a monetary or licensing-related benefit under federal law or regulations.
Senate File (SF) 2370 / House File (HF) 1615 amended Minnesota’s medical cannabis law in several ways, including:
expanding the protection of this bill to cover employees who are enrolled in a Tribal medical cannabis program. Thus, an employer may not take any adverse action against an employee based on the employee’s enrollment in this type of program;
requiring an employer to notify employees at least fourteen days before the employer takes an adverse employment action due to the specific federal law or regulation the employer believes would be violated if it does not take the action and the monetary or licensing-related benefit the employer would lose if it does not take the action;
prohibiting employers from retaliating against an employee for asserting the employee’s rights or seeking remedies under the Minn. Stat. §§ 342.57 or 152.32;
increasing the civil penalty for violating Minn. Stat. §§ 342.57, subds. 3, 4, or 5 from $100 to $1,000.
giving employees the option to seek injunctive relief to prevent or end a violation of Minn. Stat. §§ 342.57, subds. 3 to 6a.
Governor Walz signed the bill on May 23, 2025, and it took effect the following day.
Amendments to Wage Theft and Whistleblower Laws
On May 23, 2025, Governor Walz also signed bills that amended Minnesota’s wage theft and whistleblower statutes.
Wage Theft: SF 1417 / HF 2432 amends Minn. Stat. § 388.23 to give the county attorney (or deputy attorney if authorized by the county attorney in writing) the authority to subpoena and require the production of records of an employer or business entity that is the subject of or has information related to a wage theft investigation, including: accounting and financial records (such as books, registers, payrolls, banking records, credit card records, securities records, and records of money transfers); records required to be kept pursuant to section 177.30, paragraph (a); and other records that relate to the wages or other income paid, hours worked, and other conditions of employment or of work performed by independent contractors, and records of any payments to contractors, and records of workers’ compensation insurance.
SF 1417 / HF 2432 will go into effect on August 1, 2025.
Whistleblowers: SF 3045 / HF 2783: Amends Minn. Stat. § 181.931 (Minnesota’s whistleblower law) to add definitions of “fraud,” “misuse,” and “personal gain”:
“Fraud” means an intentional or deceptive act, or failure to act, to gain an unlawful benefit.
“Misuse” means the improper use of authority or position for personal gain or to cause harm to others, including the improper use of public resources or programs contrary to their intended purpose.
“Personal gain” means a benefit to a person; a person’s spouse, parent, child, or other legal dependent; or an in-law of the person or the person’s child.
SF 3045 / HF 2783 will go into effect on July 1, 2025.
Looking Ahead
Several omnibus bills include provisions that, if enacted, would amend Minnesota’s meal and rest break law, add employer unemployment insurance fraud penalties, make “political activity” a new protected characteristic under the Minnesota Human Rights Act, revise Minnesota Paid Family and Medical Leave and Earned Sick and Safe Time laws, and create valid circumstances for noncompete agreements. However, when the regular session ended, these bills were stranded in the legislative pipeline, awaiting potential revival in the special session.
The legislature has until July 1, 2025, to enact the rest of its budget to avoid a government shutdown, and Governor Walz is expected to call the special session soon after Memorial Day. With a track record of embedding labor and employment laws into lengthy budget bills, employers may want to prepare for any developments from the special session.
Find the previous parts of this series here: Part I & Part II
New Jersey’s Tightened Pay Transparency Requirements Take Effect June 1, 2025
Employers looking to hire workers in New Jersey will need to comply with the state’s new pay transparency requirements under a state law set to take effect on June 1, 2025. The law, which was signed by Governor Phil Murphy in November 2024, will require employers to disclose compensation and benefits in job postings and notices for promotion opportunities.
Quick Hits
New Jersey’s new pay transparency law takes effect on June 1, 2025.
The law will require employers to provide salary or wage information or a salary range in job postings and to make reasonable efforts to inform existing employees of promotional opportunities in their departments.
Specifically, Senate Bill 2310 (S2310) will require employers to provide the “hourly wage or salary, or a range of the hourly wage or salary” in postings for new jobs or transfer opportunities. Employers will also be required to make “reasonable efforts” to “announce, post, or otherwise make known” any promotion opportunity advertised either internally or externally to all employees in “affected department[s].” Promotions are defined as positions where there is a “change in job title and an increase in compensation.”
Covered employers that fail to comply with the new pay transparency requirements may face civil penalties of $300 for a first violation and $600 for each subsequent violation. While each violation will be considered a “separate violation,” S2310 makes clear that an employer may only be fined once for each noncompliant posting, even if that posting is distributed on multiple platforms.
Next Steps
The New Jersey law comes as a growing list of states and jurisdictions have enacted new pay transparency laws across the United States. If they have not already, covered employers may want to review their job postings and procedures for publishing job openings.
More information on S2310 is available here. Additionally, the New Jersey Department of Labor and Workforce Development (NJDOL) has published additional guidance on complying with the law on its website here.
The New York Retail Worker Safety Act: Countdown to Compliance
In February 2025, Governor Hochul signed an amendment to the New York Retail Worker Safety Act extending the effective date of some of its provisions to June 2, 2025. The amendment to the New York Retail Worker Safety Act modified several provisions of the legislation, which has an overall purpose of enhancing the safety and well-being of retail workers in the state, to replace panic buttons with silent response buttons, require such buttons for retailers with 500 or more employees statewide, and change the training requirement for smaller retailers.
The Law and Recent Amendments
The New York Retail Worker Safety Act was first proposed in January 2024, and quickly garnered support in the state legislature. The original version of the act was signed into law by Governor Hochul on September 5, 2024, with an effective date set for March 4, 2025. However, an approval memo from the governor indicated that amendments were forthcoming. These amendments were proposed and signed into law on February 14, 2025, pushing the effective date to June 2, 2025.
Which Employers are Covered Under the Act?
The act applies to all employers with at least ten retail employees. The act defines a “retail employee” as an employee working at a “retail store” for an employer. A “retail store” is any store that sells consumer commodities at retail and which is not primarily engaged in the sale of food for consumption on the premises.
What is “Retail”?
While the basic concept of which employers are covered under the act seems straightforward, a primary concern for employers is determining whether their businesses qualify as “a store that sells consumer commodities at retail” and thereby falls under the law’s definition of a “retail store.” While there is no official guidance to help employers with this question, they can turn to other sources for insight. Employers can refer to their North American Industry Classification System (NAICS) code, where retail trade employers are classified with numbers beginning with 44 or 45. Employers can also look to the dictionary definitions of “commodity” and “retail.” A “commodity” is generally defined as a substance or product that can be traded, bought, or sold. “Retail” is generally defined as the activity of selling goods to the public, usually in small amounts, for their own use. Therefore, if an employer sells a tangible product to the general public as an end user, that employer may be covered under the act. Contrast this to another employer that sells a service or something nonphysical, or that sells products in larger amounts to other businesses or entities for resale.
Prevention Program Requirements
The new law requires employers to develop a written workplace violence prevention program that identifies factors and situations that place retail employees at risk. While much of this is left for the individual employer to determine, the law does provide some examples, including working late hours, exchanging money with the public, working alone, and having uncontrolled access to the workplace. According to the law, a workplace violence program must include prevention methods, a reporting system for incidents, information on resources for victims of workplace violence, and anti-retaliation language.
Training Requirements
The new law requires also employers to implement an interactive training program for their retail employees. According to the law, retailers must train their retail employees upon hire and annually thereafter, while retailers with fewer than 50 retail employees must train their employees once every two years. These trainings must cover various topics including protection from customer/coworker workplace violence, de-escalation tactics, active shooter drills, and emergency procedures. The trainings must also communicate a site-specific list of emergency exits and meeting places.
Silent Response Buttons
When first signed into law, the act required employers to implement panic buttons with which employees could directly and immediately contact law enforcement contact. However, the February 2025 amendment to the law changed this requirement, to replace the panic button requirement with a silent response button requirement. These buttons notify internal staff and quickly request assistance from on-site security officers, managers, or supervisors instead of off-site law enforcement. The goal with this change was to prevent overwhelming law enforcement with false alarms and ensure a more controlled response to potential incidents.
Notice Requirements
The new law requires employers to provide retail employees with a notice about the company’s workplace violence prevention program and information about training requirements. The law requires that this be in English and the employee’s primary language, if it is one of the 12 most common non-English languages spoken in New York State. If the primary language is not among these, the notice can be provided in English.
Next Steps
The New York Retail Worker Safety Act is intended to be a significant step towards ensuring the safety of retail employees. The new law and its amendments include several requirements on employers, including implementing a prevention program, a comprehensive training program, and silence response buttons. As the effective date approaches, retailers may want to be proactive and prepare to comply with the act’s provisions in advance of its June 2 effective date.
Vermont Enacts Law Prohibiting Medical Debt Reporting and Funding Debt Relief Initiative
On May 16, Vermont Governor Phil Scott signed into law S. 27, a medical debt relief measure that prohibits the inclusion of medical debt on consumer credit reports and establishes a state-funded initiative to abolish qualifying medical debt held by Vermont residents.
Under the new law, scheduled to take effect on July 1, 2025, the State Treasurer is authorized to contract with a nonprofit entity to purchases and eliminate medical debts owed by Vermont residents. The legislation appropriates $1 million in FY2026 to support this effort. In addition to abolishing the debts, the contracted nonprofit must coordinate with credit reporting agencies to remove adverse credit information associated with the debt and provide written notice to affected individuals.
To be eligible, debtors must either have household income at or below 400% of the federal poverty level or owe medical debt amounting to at least 5% of their household income. Additionally, the debt must remain outstanding after standard collection efforts have concluded.
The legislation also introduces permanent changes to Vermont’s consumer credit reporting framework, including:
Medical debt reporting banned. Credit reporting agencies are prohibited from reporting or maintaining any information related to medical debt.
Nonprofit exemption for eligibility checks. Tax-exempt organizations may access consumer credit reports when determining eligibility for medical debt abolition.
Healthcare facility restrictions. Large healthcare facilities are prohibited from selling medical debt, except to qualifying nonprofits whose purpose is to cancel the debt.
Expanded notice and disclosure requirements. Updated credit disclosures will include a notice about Vermont’s prohibition on medical debt reporting and permitted nonprofit access.
Putting It Into Practice: Vermont’s new law barring the inclusion of medical debt on credit reports follows the CFPB’s recent repeal of its own rule that would have imposed similar restrictions at the federal level (previously discussed here). While the CFPB continues to roll back rules and guidance issued under prior administrations (a trend we previously discussed here), states are increasingly stepping in to fill the void by expanding consumer protection measures (previously discussed here, and here). Credit reporting agencies and debt collectors should actively monitor state credit reporting laws to ensure continued compliance as regulatory frameworks evolve.
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Reconciliation Bill Provisions Targeting Tax-Exempt Organizations Affect Hospitals
The budget reconciliation bill passed by the House of Representatives on May 22, 2025 (the “Reconciliation Bill”), contains a number of provisions targeting tax-exempt entities. While these provisions do not specifically target or call out hospitals, they may apply to tax-exempt and government hospitals.
Excise Tax on Compensation Expanded
Under current law, tax-exempt organizations and certain government entities are subject to a 21 percent excise tax on employee compensation that exceeds $1 million or that constitutes an excess parachute payment. The excise tax applies to amounts paid to the five highest compensated employees of the organization in the tax year and those who had been in that category since 2017 (“Covered Employees”).
Hospitals exempt from taxation under section 501(a) of the Internal Revenue Code of 1986 (the “Code”) and, in some cases, those owned by state or local governments are subject to this excise tax. However, compensation paid to licensed medical professionals for the performance of medical services does not count towards the $1 million trigger of the excise tax. Only the portion of a medical professional’s compensation for other services, such as research, teaching, or administrative or governance duties, are considered compensation for this purpose. Compensation paid by entities related to the tax-exempt or government entity, such as a for-profit or tax-exempt subsidiary or other affiliate, is included for this purpose.
Section 112020 of the Reconciliation Bill expands the scope of the excise tax by broadening the definition of Covered Employee to include all employees and former employees – not only those who are or have been one of the five most highly compensated. Tax-exempt and government hospitals entities and medical facilities affiliated with large hospital systems may be affected if they have large numbers of highly paid executives.
Tiered Increase on Private Foundation Investment Earnings
Hospitals, particularly those reliant on financial support from private foundations, also should be aware of the proposed increase in the tax on private foundation net investment income – as the increase will, potentially, leave private foundations with fewer assets to distribute to tax-exempt hospitals and other charities. Tax-exempt private foundations are currently subject to an excise tax of 1.39 percent on net investment income. Section 112022 of the Reconciliation Bill would increase the tax rate for private foundations with assets of $50 million or more. The increased rates will be tiered as follows:
2.78% if assets exceed $50 million but are less than $250 million;
5% if assets exceed $250 million but are less than $5 billion; and
10% if assets reach $5 billion.
Assets of related entities generally are included for this purposes — though assets will not be taken into account with respect to more than one private foundation. (The Reconciliation Bill does not address how assets will be divided when the aggregated group of related entities includes more than one private foundation.) Further, assets of related organizations that are not intended or available for the use or benefit of the private foundation are not taken into account unless the related organization is controlled by the private foundation. Notably, asset valuation would take on greater significance under a tiered system where a single dollar could double a private foundation’s tax rate. While the Reconciliation Bill states that asset value will be based on fair market value as of the close of the taxable year, numerous questions related to this calculation not addressed which may be problematic given that, if passed, this provisions will apply to taxable years beginning after the date of the enactment.
Parking and Transportation Benefits Included in UBTI
The Tax Cuts and Jobs Act, adopted in 2018, imposed the unrelated business income tax on parking and qualified transportation benefits provided to employees by tax-exempt employers. The provision was repealed retroactively the following year due to the complexity of calculating the amount to be included as unrelated business taxable income (“UBTI”) and uncertainty and confusion surrounding the application of the tax generally.
Section 112024 of the Reconciliation Bill would restore the requirement that tax-exempt organizations treat amounts paid and costs incurred to provide parking and qualified transportation benefits (defined in Code sections 132(f) and 132(f)(5)(C) respectively) as UBTI. Reinstating this requirement would increase the taxable income of tax-exempt hospitals and require them to update their accounting systems and administrative procedures to ensure compliance. As currently drafted, the provision does not address or resolve the complexities that led to its repeal in 2019.
Foley Automotive Update- May 29, 2025
Trump Administration Trade and Tariff Policies
Foley & Lardner provided an overview for multinational companies regarding the most common False Claims Act risks that may arise from improper management of import operations.
A May 28 ruling from the U.S. Court of International Trade suspended a significant portion of the Trump administration’s tariffs, after the panel determined the executive branch had wrongfully invoked an emergency law to justify the levies. The Trump administration has requested a stay and appealed the ruling.
The Department of Commerce on May 20 issued the “procedures for submission of documentation related to automobile tariffs,” for automobile importers to comply with the process of identifying the amount of U.S. content in each model imported into the United States. The agency stated there were roughly 200 repeat importers of subject automobiles in 2024. The notice indicated there are 13 OEMs with automobile operations in Canada and Mexico, with production spanning 54 vehicle model lines.
The Commerce Department on May 20 announced preliminary determinations that active anode material produced in China is unfairly subsidized by the Chinese government, which could lead to anti-subsidy duties on imports. The agency expects to issue final determinations in countervailing duty (CVD) investigations later this year. Active anode material is a key component in lithium-ion batteries.
China began issuing a limited number of export licenses for certain rare earth magnets, following weeks of uncertainty after the nation imposed trade restrictions over certain rare earth minerals and magnets in early April. The magnets are essential for a range of auto components.
Section 232 tariffs will not help the United States diversify its sources of critical minerals and reduce its reliance on China, according to a recent letter from the National Association of Manufacturers to the Commerce Department. The NAM suggested policymakers should instead pursue permitting reforms, secure favorable trade and investment terms with international allies, and enact strategic incentives to enhance domestic production. China mines roughly 70% of the world’s rare earths, and the nation has a 90% share for the processing of rare earths mined worldwide.
President Trump on May 25 stated the U.S. will delay implementation of a 50% tariff on goods from the European Union from June 1 until July 9, 2025.
Automotive Key Developments
In a May 29 Society of Automotive Analysts Coffee Break webinar, Ann Marie Uetz of Foley & Lardner and Steven Wybo of Riveron provided an overview of the mounting risk of EV programs and the resulting key takeaways for automotive suppliers.
Crain’s Detroit provided an update regarding the status of several ongoing legal disputes between Stellantis and certain suppliers.
MEMA survey data found three-quarters of automotive suppliers expect worse financial performances in 2025 than previously anticipated. In addition, more than half of the trade group’s members are concerned about sub-tier supplier financial distress resulting from higher tariff-related costs, as well as the potential for North American production volumes to fall as low as 13.9 million to 14.3 million this year.
U.S. new light-vehicles sales are projected to reach a SAAR of 15.6 million units in May, according to a joint forecast from J.D. Power and GlobalData. The analysis estimates “approximately 149,000 extra vehicles were sold” in March and April ahead of the expectation for higher prices due to tariffs, and the “re-timed sales will present a headwind to the industry sales pace for the balance of this year.”
The National Highway Traffic Safety Administration submitted its interpretive rule, “Resetting the Corporate Average Fuel Economy Program,” to the White House for review. The Environmental Protection Agency is pursuing parallel vehicle emissions rules.
The U.S. Senate on May 22 approved three House-passed Congressional Review Act resolutions to revoke EPA-granted waivers that allowed California to impose vehicle emissions standards that were stricter than federal regulations.
The “big, beautiful” tax and budget bill passed by the U.S. House on May 22 would terminate several tax credits for EVs after December 31, 2025, including commercial EVs under Section 45W, consumer credits of up to $7,500 for new EVs under Section 30D and up to $4,000 in consumer credits for used EVs under Section 25E, as well as a credit for charging infrastructure under Section 30C. The bill also included a measure to establish annual registration fees of $250 for electric vehicles and $100 for hybrid vehicles to supplement the Highway Trust Fund.
Companies that collect and store personal data will soon have to comply with a Department of Justice rule that restricts sharing bulk sensitive personal data with persons from China, Russia, Iran, and other countries identified as foreign adversaries. The Data Security Program implemented by the National Security Division (NSD) under Executive Order 14117 took effect April 8, 2025. However, the DOJ will not prioritize enforcement actions between April 8 and July 8, 2025 if a company is “engaging in good faith efforts” towards compliance.
While President Trump expressed approval for a “planned partnership” between Nippon Steel and U.S. Steel, questions remain about the timeline for the proposed $14 billion merger first announced in December 2023. The deal may involve a so-called “golden share,” allowing the U.S. federal government to weigh in on certain company decisions, according to unconfirmed reports.
The University of Michigan predicted U.S. vehicle prices could rise 13.2% on average, or by $6,200 per vehicle, due to tariffs and retaliatory trade policies.
OEMs/Suppliers
Plante Moran’s annual North American Automotive OEM – Supplier Working Relations Index® (WRI®) Study found supplier relationships improved with Toyota, Honda and GM, and declined with Nissan, Ford and Stellantis compared to last year’s study. Toyota gained 18 points for its highest WRI score since 2007, while Stellantis dropped 11 points and remains in last place.
Stellantis named Antonio Filosa as CEO, effective June 23. Filosa currently serves as chief operating officer for the Americas and chief quality officer.
GM will invest $888 million to produce next-generation V-8 engines at its Tonawanda Propulsion plant near Buffalo, NY, representing the largest single investment the automaker has ever made in an engine plant. The automaker canceled a $300 million investment to retool the plant to manufacture EV drive units.
Toyota will revise its supply chain process to provide 52-week forecasts using cloud-based forecasting tools.
Bosch has a goal for North America to represent 20% of its global sales by 2030.
Toyota is reported to be considering a compact pickup truck for the U.S. market to compete with the Ford Maverick and Hyundai Santa Cruz.
Market Trends and Regulatory
Ford will recall over one million vehicles in the U.S. due to a software error that may cause the rearview camera image to delay, freeze, or not display.
Installations of industrial robots in the automotive industry in 2024 rose 11% year-over-year to 13,700 units, and roughly 40% of all new industrial robot installations in 2024 were in automotive, according to preliminary analysis from the International Federation of Robotics. Deployments of automation technologies and robotics are expected to increase at U.S. factories in response to high tariffs and trade uncertainty.
Seventy-six percent of respondents in Kerrigan Advisors’ 2025 OEM Survey believe Chinese carmakers eventually will enter the U.S. market, and 70% are concerned about the impact of Chinese brands’ rising global market share.
New orders for heavy-duty trucks in North America fell 48% year-over-year in April to levels not seen since the onset of the Covid pandemic, according to ACT Research.
Autonomous Technologies and Vehicle Software
The Wall Street Journal provided an exclusive report on allegations that now-defunct San Diego-headquartered autonomous truck developer TuSimple shared sensitive data with various partners in China. The former CEO of TuSimple recently founded Houston-based self-driving truck developer Bot Auto.
Amazon’s Zoox plans to expand testing of its autonomous driving technology in Atlanta. Waymo offers driverless rides in Atlanta in partnership with Uber, and Lyft plans to roll out ride-hail services in the area with May Mobility later this year.
Reuters reports a project between Stellantis and Amazon to develop SmartCockpit in-car software is “winding down” without achieving its goals.
The New York Times provided an assessment of the regulatory and market risks that may complicate the rollout of driverless semi trucks in the U.S.
Swedish driverless truck startup Einride is considering a U.S. IPO.
Electric Vehicles and Low-Emissions Technology
Honda reduced its planned all-electric vehicle investments by over $20 billion as part of an electrification strategy realignment that will target 2.2 million hybrid-electric vehicle (HEV) sales by 2030.
Stellantis will delay production of its 2026 base-model electric Dodge Charger Daytona at its plant in Ontario due to uncertainty over market demand and the impact of tariffs.
Cox Automotive estimated inventory levels for new EVs reached a 99 days’ supply industrywide in April 2025, representing a YOY decline of 20% due to efforts by automakers to adjust production in response to consumer demand. The average transaction price (ATP) for a new EV was $59,255 in April, up 3.7% compared to April 2024.
Nissan is considering a deal to procure EV batteries in the U.S. from a joint venture between Ford and South Korea’s SK On, according to unnamed sources in Bloomberg and The Wall Street Journal.
Chinese EV maker BYD plans to establish a European hub in Hungary, with 2,000 jobs to support vehicle sales, after-sales service, testing and development.
Florida Regulatory Action Highlights Need for Insurers to Use Licensed TPAs
Key Takeaways:
A Florida-based Health Maintenance Organization (HMO) was fined for contracting with a Third-Party Administrator (TPA) that was not licensed in Florida, violating its statutory obligation to ensure competent administration under Florida law.
The HMO entered into a Consent Order with the Florida Office of Insurance Regulation (OIR), was fined $10,000 and agreed that any future violations would be considered willful and could lead to more severe regulatory action.
This case underscores the importance of insurers and HMOs verifying the licensure status of all TPAs before entering into business arrangements.
A licensed HMO domiciled in Florida recently entered into a Consent Order with the OIR for doing business with an unlicensed Insurance Administrator in Florida.
On September 12, 2023, a Delaware incorporated TPA submitted its application to become licensed as an Insurance Administrator to the OIR. As a part of the application process, the TPA submitted an in-force Master Software Service Agreement between itself and the HMO, which disclosed the TPA had been administering business for the HMO in Florida for several years prior to the TPA’s submission of its Insurance Administrator application to the OIR.
The OIR found that the HMO was receiving administrative services for Florida residents from the TPA prior to the TPA becoming licensed as an Insurance Administrator in Florida. Based on this information, the OIR determined the HMO violated Section 626.8817(2), Florida Statutes, which provides that it is the sole responsibility of an HMO to provide for competent administration of its programs. Pursuant to the Consent Order the HMO entered into with the OIR, the OIR assessed the HMO with a $10,000 fine, pursuant to Section 641.25. Florida Statutes and the HMO agreed that any future violations of Section 626.8817(2) would be considered a willful violation and subject to action by the OIR pursuant to all administrative remedies provided by the Florida Insurance Code.