2025 Review of AI and Employment Law in California
California started 2025 with significant activity around artificial intelligence (AI) in the workplace. Legislators and state agencies introduced new bills and regulations to regulate AI-driven hiring and management tools, and a high-profile lawsuit is testing the boundaries of liability for AI vendors.
Legislative Developments in 2025
State lawmakers unveiled proposals to address the use of AI in employment decisions. Notable bills introduced in early 2025 include:
SB 7 – “No Robo Bosses Act”
Senate Bill (SB) 7 aims to strictly regulate employers’ use of “automated decision systems” (ADS) in hiring, promotions, discipline, or termination. Key provisions of SB 7 would:
Require employers to give at least 30 days’ prior written notice to employees, applicants, and contractors before using an ADS and disclose all such tools in use.
Mandate human oversight by prohibiting reliance primarily on AI for employment decisions such as hiring or firing. Employers would need to involve a human in final decisions.
Ban certain AI practices, including tools that infer protected characteristics, perform predictive behavioral analysis on employees, retaliate against workers for exercising legal rights, or set pay based on individualized data in a discriminatory way.
Give workers rights to access and correct data used by an ADS and to appeal AI-driven decisions to a human reviewer. SB 7 also includes anti-retaliation clauses and enforcement provisions.
AB 1018 – Automated Decisions Safety Act
Assembly Bill (AB) 1018 would broadly regulate development and deployment of AI/ADS in “consequential” decisions, including employment, and possibly allow employees to opt out of the use of a covered ADS. This bill places comprehensive compliance obligations on both employers and AI vendors—requiring bias audits, data retention policies, and detailed impact assessments before using AI-driven hiring tools. It aims to prevent algorithmic bias across all business sectors.
AB 1221 and AB 1331 – Workplace Surveillance Limits
Both AB 1221 and AB 1331 target electronic monitoring and surveillance technologies in the workplace. AB 1221 would obligate employers to provide 30 days’ notice to employees who will be monitored by workplace surveillance tools. These tools include facial, gait, or emotion recognition technology, all of which typically rely on AI algorithms. AB 1221 also describes procedures and requirements for any analyzing vendor’s storage and usage of data collected by such a tool. AB 1331 more broadly restricts employers’ use of tracking tools—from video/audio recording and keystroke monitoring to GPS and biometric trackers—particularly during off-duty hours or in private areas.
Agency and Regulatory Guidance
CRD – Final Regulations on Automated Decision Systems
On 21 March 2025, California’s Civil Rights Council (part of the Civil Rights Department (CRD)) adopted final regulations titled “Employment Regulations Regarding Automated-Decision Systems.” These rules, which could take effect as early as 1 July 2025, once approved by the Office of Administrative Law, explicitly apply existing anti-discrimination law (the Fair Employment and Housing Act (FEHA)) to AI tools.
Key requirements in the new CRD regulations include:
Bias Testing and Record-Keeping
Employers using automated tools may bear a higher burden to demonstrate they have tested for and mitigated bias. A lack of evidence of such efforts can be held against the employer. Employers must also retain records of their AI-driven decisions and data (e.g., job applications, ADS data) for at least four years.
Third-Party Liability
The definition of “employer’s agent” under FEHA now explicitly encompasses third-party AI vendors or software providers if they perform functions on behalf of the employer. This means an AI vendor’s actions (screening or ranking applicants, for example) can legally be attributed to the employer—a critical point aligning with recent caselaw (see Mobley lawsuit below).
Job-Related Criteria
If an employer uses AI to screen candidates, the criteria must be job-related and consistent with business necessity, and no less-discriminatory alternative can exist. This mirrors disparate-impact legal tests, applied now to algorithms.
Broad Coverage of Tools
The regulations define “Automated-Decision System” expansively to include any computational process that assists or replaces human decision-making about employment benefits, which covers resume-scanning software, video interview analytics, predictive performance tools, etc.
Once in effect, California will be among the first jurisdictions with detailed rules governing AI in hiring and employment. The CRD’s move signals that using AI is not a legal shield and that employers remain responsible for outcomes and must ensure their AI tools are fair and compliant.
AI Litigation
Mobley v. Workday, Inc., currently pending in the US District Court for the Northern District of California, illustrates the litigation risks of using AI in hiring. In Mobley, a job applicant alleged that Workday’s AI-driven recruitment screening tools disproportionately rejected older, Black, and disabled applicants, including himself, in violation of anti-discrimination laws. In late 2024, Judge Rita Lin allowed the lawsuit to proceed, finding the plaintiff stated a plausible disparate impact claim and that Workday could potentially be held liable as an “agent” of its client employers. This ruling suggests that an AI vendor might be directly liable for discrimination if its algorithm, acting as a delegated hiring function, unlawfully screens out protected groups.
On 6 February 2025, the plaintiff moved to expand the lawsuit into a nationwide class action on behalf of millions of job seekers over age 40 who applied through Workday’s systems since 2020 and were never hired. The amended complaint added several additional named plaintiffs (all over 40) who claim that after collectively submitting thousands of applications via Workday-powered hiring portals, they were rejected—sometimes within minutes and at odd hours, suggestive of automated processing. They argue that a class of older applicants were uniformly impacted by the same algorithmic practices. On 16 May 2025, Judge Lin preliminarily certified a nationwide class of over-40 applicants under the Age Discrimination in Employment Act, a ruling that highlights the expansive exposure these tools could create if applied unlawfully. Mobley marks one of the first major legal tests of algorithmic bias in employment and remains the nation’s most high-profile challenge of AI-driven employment decisions.
Conclusion
California is moving toward a comprehensive framework where automated hiring and management tools are held to the same standards as human decision-makers. Employers in California should closely track these developments: pending bills could soon impose new duties (notice, audits, bias mitigation) if enacted, and the CRD’s regulations will make algorithmic bias expressly unlawful under FEHA. Meanwhile, real-world litigation is already underway, warning that both employers and AI vendors can be held accountable when technology produces discriminatory outcomes.
The tone of regulatory guidance is clear that embracing innovation must not sacrifice fairness and compliance. Legal professionals, human resources leaders, and in-house counsel should proactively assess any AI tools used in recruitment or workforce management. This includes consulting the new CRD rules, conducting bias audits, and ensuring there is a “human in the loop” for important decisions. California’s 2025 developments signal that the intersection of AI and employment law will only grow in importance, with the state continuing to refine how centuries-old workplace protections apply to cutting-edge technology.
2025 Texas Legislative Update: Issues Affecting Texas Homeowners’ Associations and Condominium Owners’ Associations
Another biennial legislative session means more changes for property owners’ associations (POAs), affecting both homeowners’ associations (HOAs) and condominium owners’ associations (COAs).
Changes for both Homeowners’ Associations and Condominium Owners’ Associations
House Bill 621 – Events Involving Political Candidates in/on Common FacilitiesHB 621 adds Sections 202.013 to the Texas Property Code. Under HB 621, a POA may not adopt or enforce a restriction that prohibits an owner or resident from inviting governmental officials and candidates for election to address or meet with POA members, residents, or their invitees in the association’s common areas. A POA may impose requirements that would otherwise apply to any other gathering, including rental fees, deposits, reservations, and occupancy limits. An area that is closed due to designated season use or only available for POA meetings (member meetings, board meetings, or committee meetings). In addition, HB 621 does not apply to POAs that qualify for tax exempt status under Section 501(c)(3) of the Internal Revenue Code of 1986. The Act takes effect on September 1, 2025.
House Bill 517 – Suspension of Enforcement Action for Brown Grass and VegetationHB 517 adds Sections 202.008 to the Texas Property Code. Under HB 517, a POA must suspend enforcement of any restriction that requires an owner to plant or install grass or turf or maintain green vegetation or turf for any period of time that a property is under a residential watering restriction. The suspension shall also apply for the 60-day period after watering restrictions are lifted. The Act takes effect on September 1, 2025.
HB 431 – Solar Roof TilesHB 431 amends Section 202.010 to add “solar roof tiles” to the definition of “solar energy device. The Act is effective immediately.
Changes Applicable to Homeowners’ Associations
Senate Bill 711 – Architectural Review AuthorityFour years ago, SB 1588 added Section 209.00505 (pertaining to an HOAs architectural review process) to the Texas Property Code. Under Section 209.00505, an HOA with over 40 lots must: (1) separate directors from architectural review committee (ARC) members; (2) for any ARC denial, include a written response providing information about the reason(s) for the denial; and (3) offer a hearing before the board.
SB 711 adds Sections 209.00506 and 209.00507 to the Texas Property Code. Section 209.00506 replaces Section 209.00505(c), which pertains to ARC participation eligibility. Under SB 711, as of September 1, 2025, an HOA must incorporate an ARC member solicitation process similar to the process used to solicit candidates for election to the board. Now, an HOA must provide notice of an ARC vacancy at least 10 days before the selection date. The HOA must first select ARC members from those who timely notified the HOA of their interest to serve on the ARC. If a vacancy exists after the candidates are appointed or elected to the ARC, the HOA may then appoint any person, including a person who would otherwise be disqualified. Specifically, the HOA may then appoint a director, a director’s spouse, or a person residing in a director’s household to serve on the ARC.
SB 711 – Security Fencing RestrictionsSB 711 supplements Section 202.023 of the Texas Property Code. Under SB 711, an HOA may now impose additional restrictions on security fencing. At present, a POA may regulate the type of fencing an owner may install for security purposes. SB 711 expands the restrictions an HOA can imposes on security fencing. Specifically, an HOA may now prohibit fencing that would obstruct a license area, a sidewalk installed for public use, or a drainage easement/area. An HOA may also prohibit the installation of fencing in front of the front-most building line of a dwelling unless the fencing: (1) is/was installed before September 1, 2025; (2) is installed at a home where the residential address is exempt from public disclosure; or (3) is installed after an owner provides the HOA with documents from a law enforcement agency explaining the need for enhanced security measures at the home. For any driveway gate, an HOA may prohibit installation of the gate within 10 feet from the right-of-way if a driveway intersects with a laned roadway.
Senate Bill 2629 – Voting MethodsPreviously, an HOA was required to provide, at a minimum, the right to vote by absentee ballot or by proxy. Under SB 2629, an HOA electronic voting has been added, such that an HOA must provide an owner with one of the following voting methods: (1) electronic ballot; (2) absentee ballot; or (3) by proxy.
Changes Applicable to Condominium Owners’ Associations
Senate Bill 711 – Websites, Management Certificates, TREC Filing, and Resale Certificates
Website [At Least 60 Units or Under Contract With a COA Manager] – A COA must now maintain a website that allows owners to access current versions of the association’s recorded dedicatory instruments. The website may be managed by the COA or the property manager. The Act takes effect on September 1, 2025.
Management Certificates – Additional Disclosures – A COA management certificate must now include: (1) any declaration amendments; (2) additional contact information for the management company, including a phone number and email address; (3) the web address where the association’s dedicatory instruments are available; and (4) any fees associated with the transfer of an interest in a unit. If there is a change in any required information, an amended management certificate must be recorded within 30 days of the association receiving notice of the change. If a management certificate is not timely recorded, unit owners are not liable for interest on delinquent assessments or attorney’s fees for collections during the period of noncompliance. The Act takes effect on September 1, 2025.
TREC Filing Requirement – A COA must file its management certificate with the Texas Real Estate Commission (TREC) within seven days after the is certificate recorded with the county clerk. If a management certificate is not timely filed with TREC, unit owners are not liable for interest on delinquent assessments or attorney’s fees for collections during the period of noncompliance. The Act takes effect on September 1, 2025; however, if a COA has recorded a compliant management certificate before September 1, 2025, the COA is not required to file the management certificate until March 1, 2025. The Act takes effect on September 1, 2025.
Resale Certificate Fee Cap – The fee for condominium association resale certificates is capped at $375. The Act takes effect on September 1, 2025.
Senate Bill 2629 – Meetings and Voting
Electronic and Telephonic Meetings – COA meetings (member meetings and board meetings) may now be held by any method of communication, including electronic and telephonic means, as per Section 6.002 of the Business Organizations Code.
Companion Bills in U.S. Congress Would Expand OSHA Coverage for Public Employees
A bill introduced in the U.S. Senate on May 21, 2025, seeks to significantly expand the scope of the Occupational Safety and Health Act of 1970 (OSH Act) by extending its protections to public employees at the federal, state, and local levels. The bill, titled the “Public Service Worker Protection Act” (PSWPA), would amend the OSH Act to include employees of the United States, states, and political subdivisions of states within its definition of “employer,” thereby affording public-sector workers the same occupational safety and health protections currently available to private-sector employees. Companion legislation (H.R. 3139) was introduced in the U.S. House of Representatives earlier in May.
Quick Hits
The legislation would amend Section 3(5) of the OSH Act to explicitly include public employees, covering federal, state, and local government workers.
The amendment would take effect ninety days after the PSWPA’s enactment for most public employees.
For federal OSHA workplaces of states or political subdivisions, the amendment would take effect thirty-six months after the PSWPA’s enactment.
The legislation clarifies that it does not alter the application of Section 18 of the OSH Act, which governs state plans.
Currently, the OSH Act generally excludes public-sector employees from its coverage, unless they are employed in states with plans approved by the Occupational Safety and Health Administration (OSHA) that extend protections to public workers. This exclusion explains why, particularly in federal OSHA states, state and local government workers are often observed not wearing personal protective equipment (PPE) required by OSHA or engaging in what would be prohibited conduct if they were covered by OSHA. The proposed amendment would strike the existing exclusionary language in Section 3(5) and replace it with language that includes the United States, states, and political subdivisions as employers under the OSH Act.
The PSWPA provides for a phased implementation. For most public employees, the expanded coverage would become effective ninety days after the date of enactment. However, for workplaces in states or political subdivisions that are in federal OSHA states, the effective date is extended to thirty-six months post-enactment, allowing additional time for compliance and potential development of state plans.
The legislation includes a rule of construction stating that nothing in the PSWPA should be interpreted to affect the application of Section 18 of the OSH Act. Section 18 allows states to operate their own occupational safety and health programs, provided they are at least as effective as the federal program and are approved by OSHA.
If enacted, the PSWPA would represent a significant expansion of federal workplace safety protections, bringing millions of public-sector employees under the OSH Act’s regulatory framework. Public employers, particularly those in federal OSHA states, may want to monitor the progress of this legislation and begin assessing potential compliance obligations.
Is An LLC’s Membership List A Trade Secret?
Yesterday’s post considered one of several matters raised on appeal in Perry v. Stuart, 2025 WL 1501935. The case involves a former member’s demand for inspection of records of a California limited liability company. Another issue raised in the appeal was whether the trial court erred in its finding that the LLC’s member list must be redacted prior to production because it is a trade secret.
The California Revised Uniform Limited Liability Company Act requires an LLC to keep, among other things, a current list of the full name and last known business or residence address of each member and of each transferee set forth in alphabetical order, together with the contribution and the share in profits and losses of each member and transferee. Cal. Corp. Code § 17701.13(d)(1). The RULLCA further provides that each member, manager, and transferee has the right, upon reasonable request, for purposes reasonably related to the interest of that person as a member, manager, or transferee, to inspect and copy during normal business hours any of the records required to be maintained pursuant to Section 17701.13. Cal. Corp. Code § 17704.10(b)(1).
The courts found that the membership list was a protectible trade secret, as defined under Section 3426.1 of the California Civil Code. Thus, the question was which code prevailed. The Court of Appeal concluded that the Civil Code took precedence as the more specific statute and thus the trial court had not erred in ordering the redaction of the membership list. The Court did not articulate why the Civil Code statute was more specific other than to note that trade secrets are a subset of business information. However, it is certainly arguable that membership list is an even smaller subset of business information and that the RULLCA provision is even more specific (i.e., detailing the exact information to be maintained) than the general Civil Code definition.
Montana and Indiana Pass Laws Targeting Cultured Meat Products
On May 1, Montana Governor Greg Gianforte signed HB401, which bans the sale, distribution, and manufacture of “cell-cultured edible products.” HB 401 defines the term “cell-cultured edible product” as “the concept of meat, including but not limited to muscle cells, fat cells, connective tissue, blood, and other components produced via cell culture, rather than from a whole slaughtered animal.” Violations of the ban are punishable by a fine of up to $250, imprisonment for not more than 3 months, or both. Mont. Code § 50-31-506.
On May 6, Indiana Governor Mike Braun signed HB 1425, which begins a two-year moratorium on the sale and manufacture of “cultivated meat products,” which are defined as “animal protein grown in a facility from extracted animal stem cells and arranged in a similar structure as animal tissues to replicate the sensory and nutritional profiles of meat products.” The moratorium will be in force from July 1, 2025 to June 30, 2027. Following the temporary ban, cultivated meat products may be sold within the state, but they must be advertised, labeled, and sold in a manner that clearly indicates that the product is a cultivated meat product. In particular, the words “this is an imitation meat product” must be on the package. Violations of the ban are punishable by fines of up to $10,000.
As previously reported, Alabama, Florida, and Mississippi have also enacted bans on the sale or manufacture of lab-grown meat.
New Jersey Legislature Again Considers Banning Noncompetes
As has become an almost annual tradition, New Jersey legislators have proposed bills that would severely limit noncompete agreements. With the Federal Trade Commission (FTC) no longer seeking to ban noncompetes, the battle has returned to states, and New Jersey is on the front line—and this could be the year a New Jersey noncompete bill passes.
Quick Hits
New Jersey legislators have introduced Senate Bill No. 4385 (S4385) (introduced in the Assembly as Assembly Bill No. 5708), which would prohibit most noncompete agreements and void current ones, except for senior executives under specific conditions.
S4385 requires employers to notify employees within thirty days of its passage that their noncompete agreements are no longer enforceable.
Another proposed bill, Senate Bill No. 4386 (S4386), aims to ban noncompetes that restrict employees from engaging in any lawful profession post-employment and prohibit employers from requiring repayment of training or immigration costs.
S4385 would prohibit noncompete agreements except under limited circumstances. Notably, S4385 is retroactive and would void the enforcement of current noncompete agreements. There is a limited carve-out that the bill would not ban retroactive enforcement against “Senior Executives.” If the bill goes into effect, employers would have to notify employees within thirty days of its passage that their noncompete agreements are no longer enforceable. No poach agreements would also be outlawed.
The definition of a noncompete would be: “any agreement arising out of an existing or anticipated employment relationship between an employer and a worker, including an agreement regarding severance pay, to establish a term or condition of employment that prohibits the worker from, penalizes a worker for, or functions to prevent or hinder in any way, the worker from seeking or accepting work with a different employer after the employment relationship ends, or operating a business after the employment relationship ends.” The question, of course, becomes, would a nonsolicit or even a nondisclosure agreement still be enforceable, since either type of agreement may arguably hinder an employee from accepting employment with a different employer or starting his or her own business.
“Senior executive” is defined as “a worker who is in a policy-making position with an employer and is paid total compensation of not less than $151,164 during the year immediately preceding the end of employment, or not less than $151,164 when annualized if the worker was employed during only part of the preceding year.” Here the issue will be that many job categories that employers have traditionally had legitimate needs for noncompetes, such as salespeople, may not be considered in a “policy-making position.”
Noncompetes entered into before the effective date of S4385 would only be viable for senior executives if the following criteria are met:
The employer must provide a written disclosure within thirty days after the effective date of S4385, setting forth the requirements of the law and any revisions to the noncompete agreement that have been made to comply with the bill and any revision must be signed by the employee.
The noncompete must not be broader than necessary to protect the legitimate interests of employers. A noncompete can be presumed necessary if a nondisclosure agreement, nonsolicitation of customers, and/or a nonsolicitation of employees are not sufficient to protect an employer’s interests. Note that this will be a very difficult test for employers to pass.
The noncompete can be no longer than twelve months.
The geographic reach of the noncompete must be limited to the territory where the employee provided services or had a material presence or influence in the two years prior to the termination of employment, and it cannot prohibit the employee from seeking employment outside of New Jersey.
The noncompete shall be limited to the activities and services provided by the employee during the last two years of his or her employment.
The noncompete clause cannot penalize the employee for challenging the validity of the noncompete. This is very important because one of the most effective tools an employer has with a noncompete is an attorneys’ fee provision, but now if the employee challenges the validity of the noncompete—which happens in nearly all noncompete litigation—then that will likely be enough to prevent a court from enforcing the attorneys’ fee provision even if the employer prevails.
No non-New Jersey choice-of-law provision is permitted to attempt to avoid the requirements of S4385.
The noncompete clause shall not restrict an employee from providing service to a customer or client if the employee is not the one who initiates or solicits the customer or client. This would be a huge carve-out and allow employees to claim they did not solicit, but the customer or client simply reached out to them.
The noncompete would be void unless the employer gives the employee notice within ten days of the termination of employment of the employer’s intention to enforce the noncompete. This provision does not apply if the employee was discharged for misconduct.
The employer must pay the employee “garden leave,” including both salary continuation and benefits for the period of the noncompete.
Notably, S4385 does not apply to noncompetes entered into in the sale of a business. Nor does the bill apply to causes of action that accrue prior to the enactment of the bill, meaning any current noncompete litigations are still viable.
The bill also creates a civil cause of action for aggrieved employees, and their potential damages include liquidated damages, compensatory damages, and attorneys’ fees.
Another Senate bill, S4386, would ban noncompetes that prohibit an employee from “engaging in a lawful profession, trade, or business of any kind after the conclusion of the employee’s employment with the employer.” This provision, like the provisions under S4385, would be retroactive. S4386, like S4385, was introduced by Senator Joseph P. Cryan. It is unclear whether S4386 is being viewed as an alternative if S4385 does not pass or is meant to act in tandem with S4385. Notably, S4386 would ban employers from requiring an employee to repay training costs or immigration/visa costs if the employee leaves employment.
With a gubernatorial election in New Jersey this year, there may be a push to pass the legislation before a new governor takes over. Because a number of large New Jersey companies are incorporated in Delaware, switching to a Delaware choice of law provision in noncompete agreements might have been viable, but Delaware has also become less friendly to noncompetes. For now, other than waiting and seeing what happens in the legislature, and potential lobbying efforts, the main thing New Jersey employers may want to consider is whether to bring lawsuits now for violations of noncompetes to preserve the enforcement of existing noncompete agreements, even if S4385 does pass.
New York Department of Health Publishes Material Transactions Reporting Form
In our February 14, 2025, blog post, we detailed a proposed expansion of Article 45-A of New York’s Public Health Law (hereinafter, the Disclosure of Material Transactions Law) included in the proposed Fiscal Year 2026 New York State Executive Budget (FY 26 Executive Budget). The amendment was dropped from the final FY 26 Executive Budget’s Health and Mental Hygiene Article VII Legislation, which was signed into law by Governor Hochul on May 9, 2025. The Memorandum of Support accompanying the proposed legislation touted the amendment as a way to strengthen New York State Department of Health’s (DOH) oversight of material health care transactions, contending that it would allow DOH to gather more quantitative information to assess the transaction’s potential and actual post-closure impact. The legislation would have increased oversight by altering notice and disclosure requirements, permitting DOH to require a full cost and market impact review, and empowering DOH to delay the transaction’s closing to allow for a fulsome cost and market impact review. However, with the rejection of the amendment from the final FY 26 Executive Budget, the Disclosure of Material Transactions Law will remain in effect as it has been since August 1, 2023.
Though the proposed amendment to Article 45-A did not make the cut, the first half of 2025 has certainly not been devoid of developments for the Disclosure of Material Transactions Law. In fact, DOH has taken proactive steps to guide stakeholders, their legal counsel, and the public toward deeper understanding of and compliance with the Disclosure of Material Transactions Law. First, nearly a year and a half after the Disclosure of Material Transactions Law took effect, DOH published long-awaited Public Health Law Article 54-A, Material Transactions Frequently Asked Questions. Just over a month later, DOH published an electronic Material Transactions Reporting Form to be used for submitting notice of a material health care transaction. Until publication of the Material Transactions Reporting Form, parties to a “material transaction” had submitted such notice via email to DOH. Now, according to the DOH website, email submissions will no longer be accepted, and effective immediately, all new notices must be reported using the Material Transactions Reporting Form at least 30 days prior to the proposed transaction’s closing.
The Material Transactions Reporting Form formalizes and expands the categories of information that health care entities involved in a “material transaction” are required to submit to DOH. Health care entities are strongly encouraged to download the cover sheet to the Material Transactions Reporting Form and the PDF of the Material Transactions Reporting Form Questions to further understand the requirements. Critically, DOH notes that the PDF of the Material Transactions Reporting Form Questions is intended as guidance only and that parties cannot complete the paper form and submit it to DOH in lieu of electronic submission. The Material Transactions Reporting Form requires submission of the following information, which we note is not a comprehensive summary of the form’s requirements:
Parties to Material Transaction: The form requires disclosure of each party’s legal name, address, jurisdiction of incorporation, principal jurisdiction of business, and all other jurisdictions where the entity conducts business. Additionally, the form requires disclosure of any instance where an officer, director, manager, partner, owner, trustee, or member of a party has been (1) charged, pled guilty, or been convicted of a criminal offense, (b) party to a civil action involving dishonesty, breach of trust, or a financial dispute, or (c) charged with wrongdoing by any government agency or authority.
Pre-Closing Organizational Chart: The form requires identification of all persons known to control, to be controlled by, or under common control with, each party, and further must include voting percentages for each person listed. As detailed in our previous posts, “control” includes the right to direct or cause the direction of the management or administrative functions of a health care entity whether by voting rights or contract.
Post-Closing Organizational Chart: Parties must disclose a post-closing organizational chart demonstrating the surviving entity and its interrelationships after the closing of the material transaction. Information regarding the transaction and the surviving entity’s finances, including the purchase price and projected annual revenue for three years, as well as applicable prior material transaction history must also be disclosed.
Financial Statements: Parties must submit financial statements for the last two fiscal years, including balance sheets, income statements, and cash flow statements, along with projected financial statements for the surviving entity dated one day after closing.
Impact of Material Transaction: Parties must respond to several questions aimed at determining the material transaction’s impact on cost, quality, access, health equity, and competition in New York during the five years following the closing date. Further, DOH asks parties to provide statistics regarding current and anticipated service to Medicaid beneficiaries, uninsured patients, and “historically underserved populations or groups.”
NY’s decision not to pursue the proposed amendment may signal a win for health care investors and other stakeholders, particularly in a time where other states are increasing their regulation of health care transactions, whether through notice or pre-closing approval requirements. While the abandonment of the proposed amendment to the Disclosure of Material Transactions Law reflects New York’s current reluctance to adopt a more comprehensive review and approval framework for health care transactions, the release of the Material Transactions Reporting Form underscores New York’s commitment to systematically capturing detailed information about material transactions within the state. DOH has only received 2 additional notices of material transactions in 2025, bringing the total number of notices received since the law’s enactment to 11. Parties contemplating entering a material transactions in New York should consider how it will provide all documentation and information required, particularly those documents that require future projections.
US House of Representatives Advance Unprecedented 10-Year Moratorium on State AI Laws
The US House of Representatives has advanced a proposal that would prohibit states from enforcing any AI-related laws for a decade. While facing significant procedural hurdles in the Senate, this represents the most aggressive federal attempt yet to preempt state-level AI regulation.
Proposed Moratorium Framework
On May 22, 2025, the House of Representatives narrowly passed a budget reconciliation bill containing a provision that would ban states from enforcing AI laws for ten years. This followed the May 14, 2025, House Energy and Commerce Committee vote of 29-24 along party lines to advance the budget reconciliation bill containing sweeping AI preemption language. The provision, titled “Moratorium,” states, with limited exceptions, that “no State or political subdivision thereof may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act.”
Scope of Impact
The moratorium would effectively prohibit state enforcement of regulations addressing:
Algorithmic bias in employment or housing decisions;
AI-generated deepfakes in political campaigns;
Automated decision-making in healthcare or insurance;
AI surveillance systems;
Transparency requirements for AI use in consumer applications; and
Data protection measures specific to AI systems.
Limited Exceptions
The proposal includes narrow exceptions for state laws that:
Remove legal impediments to AI deployment;
Streamline licensing, permitting, or zoning procedures;
Impose requirements mandated by federal law;
Apply generally applicable standards equally to AI and non-AI systems; and
Impose reasonable, cost-based fees treating AI systems comparably to other technologies.
State and Industry Response
A bipartisan group of 40 state attorneys general, including Republicans from Ohio, Tennessee, Arkansas, Utah and Virginia have opposed the measure, calling it “sweeping and wholly destructive of reasonable state efforts to prevent known harms associated with AI.”
Affected State Legislation
The moratorium would also impact numerous existing state AI laws such as:
Illinois Artificial Intelligence Video Interview Act requiring disclosure of AI use in hiring;
California SB-1001 requiring disclosure of chatbots in political campaigns;
New York City Local Law 144 addressing algorithmic accountability in employment; and
Maryland House Bill 1202 establishing AI bias auditing requirements.
Industry Perspective
Major technology companies have advocated for unified federal approaches, with OpenAI CEO Sam Altman testifying that a “patchwork” of AI regulations “would be quite burdensome and significantly impair our ability to do what we need to do.”
Procedural and Constitutional Challenges
Senate Hurdles
The moratorium faces significant obstacles in the Senate, where the “Byrd Rule” requires that budget reconciliation provisions focus primarily on budgetary rather than policy matters.
Also, some Senate Republicans are expressing skepticism about a proposed moratorium on state AI governance, arguing that states need to maintain their ability to protect consumers until Congress passes comprehensive federal legislation. Senator Marsha Blackburn (R-Tenn.) gave voice to this position by pointing to Tennessee’s recent law protecting artists from unauthorized AI use of their voices and images, asserting that states cannot halt such protective measures while awaiting federal action that would preempt state laws.
Constitutional Considerations
The proposal also raises several constitutional questions regarding Commerce Clause authority, Tenth Amendment state police powers, and due process requirements for AI systems affecting citizens.
Bipartisan House Task Force
Relatedly, the Bipartisan House Task Force Report on AI published during the 118th Congress previewed challenges with preemption: “Preemption of state AI laws by federal legislation is a tool that Congress could use to accomplish various objectives. However, federal preemption presents complex legal and policy issues that should be considered.”
Business Implications
Regulatory Uncertainty
Organizations should expect continued tension between federal and state authorities over AI governance, regardless of the ultimate outcome of this specific proposal. Even without state AI laws, AI-driven decisions remain subject to existing anti-discrimination laws, including the ADA and Title VII.
Governance Recommendations
Organizations should implement comprehensive AI governance practices including:
Bias audits across AI systems;
Robust human oversight mechanisms;
Documentation of AI decision-making processes; and
Appropriate vendor contract provisions.
International Considerations
The moratorium could also affect US competitiveness by preventing regulatory innovation that might inform international standards and reducing the democratic legitimacy of US AI governance approaches.
Looking Ahead
The proposal represents fundamental tensions between federal coordination and state-level regulatory innovation during a critical period of AI development. Whether this specific measure succeeds or fails, organizations must prepare for ongoing regulatory uncertainty while implementing strong AI governance practices.
The intersection of federal preemption efforts and rapidly evolving AI capabilities suggests continued policy volatility in this area, requiring flexible compliance frameworks that can adapt to changing requirements. Organizations should monitor both federal and state AI legislative developments while maintaining robust internal governance frameworks regardless of regulatory outcomes.
“In an ideal world, Congress would be driving the conversation forward on artificial intelligence, and their failure to lead on AI and other critical technology policy issues—like data privacy and oversight of social media—is forcing states to act,” said Colorado Attorney General Paul Weiser.
coag.gov/…
Maryland Clarifies Overlapping Leave Obligations for Employers
Maryland has amended its parental leave law to clarify that, effective October 1, 2025, employers covered by the federal Family and Medical Leave Act (“FMLA”) are exempt from the Maryland Parental Leave Act (“MPLA”).
The MPLA, codified as Section 3-12 of Maryland’s Labor and Employment Code, requires covered employers to provide eligible employees with up to six weeks of unpaid parental leave for the birth, adoption, or foster placement of a child. The statute applies to Maryland employers with at least 15 but fewer than 50 employees for each “working day during each of 20 or more calendar workweeks in the current or preceding calendar year.” The FMLA, conversely, applies to employers with 50 or more employees and allows qualified employees up to 12 weeks of unpaid leave for qualifying events, which also include birth, adoption or foster placement of a child, among others. Similar to the MPLA, the FMLA measures how many employees a company employs by looking at how many were employed in 20 or more workweeks in the preceding or current year.
The MLPA was intended to apply to smaller employers not covered by the FMLA in order to provide parental leave to employees of such smaller companies. However, there have been occasions of overlap, where both laws apply to companies that change in size. For example, currently, if a Maryland employer has 47 employees for part of the year (or the preceding year) but later expands and exceeds the 50-employee threshold in the same or following year, it may fall under both the MPLA and FMLA. This can create confusion in complying with both laws. To address this overlap, Governor Wes Moore signed SB 785, which amends the definition of “employer” under the MPLA to exclude those covered by the FMLA in the current year, effectively exempting FMLA-covered employers from Maryland’s parental leave requirements.
The amendment serves to help employers avoid potential confusion regarding dual leave coverage for their employees if an employer is subject to the FMLA.
Actions for Employers
In light of the recent clarification to Maryland’s parental leave law, employers in the state should confirm their total employee headcount and review their current leave policies in order to ensure compliance with the amended statute.
Washington State Expands Sales Tax, Increases B&O and Capital Gains Taxes
On May 20, Washington Gov. Bob Ferguson signed into law several bills aimed at closing Washington’s projected $16 billion budget gap, which were passed as part of 2025–27 operating budget.
Interested parties closely monitored the signing of these bills, especially SB 5814, which significantly expands Washington’s sales tax. The bill includes advertising services—generally digital—within the tax base, raising concerns from both in-state and out-of-state companies based on the lack of detail provided regarding the sourcing of such services. While the governor did not veto SB 5814, Washington legislators are aware of the concerns and additional action on this issue is expected.
Key Details of the Tax Changes Impacting Businesses and High-Net-Worth Individuals
Business and Occupation (B&O) Tax Changes: HB 2081 includes numerous B&O tax increases and modifies when the B&O investment deduction applies. This latter change was made in response to the Washington Supreme Court’s recent decision in Antio, LLC v. Dep’t of Revenue,1 essentially codifying the department’s position on that deduction. Notable B&O tax increases include:
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A temporary 0.5% surcharge on a business’ taxable income in excess of $250 million beginning Jan. 1, 2026, and continuing through Dec. 31, 2029;
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A permanent rate increase from 0.484% to 0.5% for certain categories of business activity (including manufacturing, wholesaling, and retailing) beginning Jan. 1, 2027;
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A permanent rate increase from 1.75% to 2.1% for the services and other activities category for businesses with over $5 million in annual revenue beginning on Oct. 1, 2025;
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A permanent rate increase from 1.2% to 1.5% for the financial institutions surcharge beginning on Oct. 1, 2025; and
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A permanent rate increase from 1.22% to 7.5% for the advanced computing surcharge as well as an increase to the annual cap of $75 million beginning on Jan. 1, 2026.
Retail Sales Tax: SB 5418 expands the state sales tax to include many personal, business, and professional services, including digital advertising services, IT support, landscaping services, software training, tattoo services, data processing, website development, graphic design, temporary staffing services, and search engine marketing. SB 5418 also makes several modifications to Washington’s digital automated services provisions and provides that services between members of an affiliated group will be exempted. These changes are set to take effect Oct. 1 of this year.
Capital Gains Tax: SB 5813 creates a new capital gains tax top bracket of 9.9% for gains in excess of $1 million, retroactively applying from the beginning of this year (Jan. 1, 2025).
This is not an exhaustive list of all the changes that were made in conjunction with the state budget revisions but does reflect some of the key issues that may impact businesses and high-net-worth individual taxpayers. With the governor signing all of these bills, the Department of Revenue may begin to develop rules and policies on many of these new or expanded programs in the near future. Policy discussions may continue as cleanup legislation, and a special legislative session seems likely.
1 557 P.3d 672 (Wash. 2024).
Temporary Pause on Foreign Student and Exchange Visitor F, M, and J Visa Interviews
According to an internal State Department cable dated May 27, 2025, all consular interviews for the F, M, and J visa applicants are to be temporarily paused. This is only until new vetting procedures are published in the next several business days.
The cable cites Executive Orders 14161 and 14188, known respectively as Protecting the United States from Foreign Terrorists and Other National Security and Public Safety Threats and Additional Measures to Combat Anti-Semitism. The goal is to prepare for expanded social media vetting of all student and exchange visitor (FMJ) visa applicants.
The cable states “effective immediately…consular sections should not add any additional student or exchange visitor (F, M, or J) visa appointment capacity until further guidance is issued, which we anticipate in the coming days.”
The cable says that scheduled appointments can proceed under current guidelines, however if this new vetting policy comes into being soon, all of the existing appointments may be subject to additional vetting.
The cable does leave some opportunity for new appointments. It says that if a consular section desires to seek new appointments for FMJ applicants during this period, the consular section must consult with the Visa Office to do so.
Judge Jay Lobrano Appointed Local Tax Judge at the Board of Tax Appeals
On May 23, 2025, Louisiana Governor Jeff Landry appointed Francis J. (Jay) Lobrano as the Local Tax Judge of the Louisiana Board of Tax Appeals to complete the term of outgoing Local Tax Judge, now Louisiana Supreme Court Justice Cade Cole.
Judge Lobrano has served as the Chairman of the Board since March of 2022, and has served as a member of the Board since April 2016. In his new role, Judge Lobrano will preside over all local tax matters pending at the Board, including sales and use tax disputes between Parish tax administrators and taxpayers, as well as legality challenges involving property tax assessments.
Judge Lobrano will still sit as the Chairman of the full Board, that hears tax matters involving state tax matters.
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