A United States Sovereign Wealth Fund: First Impressions
On February 3, 2025, President Donald Trump issued Executive Order 14196 (the “EO”) directing the Secretary of the Treasury and the Secretary of Commerce, in coordination with the Assistant to the President for Economic Policy, to develop a plan for the establishment of a United States sovereign wealth fund. With the aim of promoting the “the long-term financial health and international leadership of the United States,” Treasury Secretary Scott Bessent called the creation of a US fund an issue “of great strategic importance” that President Trump foresees becoming one of the largest in the world. “The Saudi Arabia fund is on the larger side,” noted President Trump, “but eventually we’ll catch it.”
This GT Advisory analyzes the EO, considers the place of a US sovereign wealth fund within the architecture of the United States Government, and explores the fund’s likely purposes, sources of funding, investment thesis, potential structure, and important governance and other operational considerations.
Click here to read the full GT Advisory.
President Trump Orders Investigation on Effects of Copper Imports on National Security
On Feb. 25, the White House announced it will launch an investigation into the importation of copper under Section 232 of the 1962 Trade Expansion Act.
President Donald Trump signed an Executive Order instructing the U.S. Secretary of Commerce to commence an investigation into the national security impact on the import of copper in all forms. The investigation is to review the effects of imports of copper in all forms on national security, including:
Raw mined copper
Copper concentrates
Refined copper
Copper alloys
Scrap copper
Derivative products
Copper is one of the products the president had promised to impose tariffs on, in addition to aluminum and steel; 25 percent tariffs were announced on Feb. 10 on aluminum and steel).
The Executive Order instructs the Commerce secretary to assess the factors outlined in the federal law that calls for “domestic production for national defense; impact of foreign competition on economic welfare of domestic industries” to include:
(i) the current and projected demand for copper in United States defense, energy, and critical infrastructure sectors;
(ii) the extent to which domestic production, smelting, refining, and recycling can meet demand;
(iii) the role of foreign supply chains, particularly from major exporters, in meeting United States demand;
(iv) the concentration of United States copper imports from a small number of suppliers and the associated risks;
(v) the impact of foreign government subsidies, overcapacity, and predatory trade practices on United States industry competitiveness;
(vi) the economic impact of artificially suppressed copper prices due to dumping and state-sponsored overproduction;
(vii) the potential for export restrictions by foreign nations, including the ability of foreign nations to weaponize their control over refined copper supplies;
(viii) the feasibility of increasing domestic copper mining, smelting, and refining capacity to reduce import reliance; and
(ix) the impact of current trade policies on domestic copper production and whether additional measures, including tariffs or quotas, are necessary to protect national security.
The Executive Order was made pursuant to Section 232 of the Trade Expansion Act, which mandates the investigation must conclude within 270 days.
Far-Reaching Implications
If, after the conclusion of the investigation, tariffs are imposed on copper and its derivative products, it would have far-reaching supply and cost implications. Copper and its derivatives are in a wide variety of everyday products, such as electronic products, wiring, construction items, just to name a few.
“Like our steel and aluminum industries, our great American copper industry has been decimated by global actors attacking our domestic production,” said Commerce Secretary Howard Lutnick.
www.reuters.com/…
McDermott+ Check-Up: February 28, 2025
THIS WEEK’S DOSE
House Passes Budget Resolution. The Senate and House must now align on a unified resolution for the reconciliation process to begin in earnest.
Senate Holds Nomination Hearings for OSTP Director, FTC Commissioner, OMB Deputy Director. Discussion focused on nominees’ views on artificial intelligence, pharmacy benefit managers (PBMs), and the impact of paused federal funding on grants and healthcare programs.
Senate HELP Committee Advances Secretary of Labor Nominee Chavez-DeRemer. Lori Chavez-DeRemer received some bipartisan support, and a full Senate vote is expected next week.
House Energy & Commerce Committee Advances Oversight Plan. The markup turned highly partisan as Republicans put forth an agenda that includes biological threat preparedness and response, substance use, and Medicare and Medicaid operations.
House Energy & Commerce Health Subcommittee Holds Hearing on PBM Reform. Members agreed on the need for PBM reform and referenced work from the 118th Congress.
Senate Aging Committee Examines Opioid Epidemic. Members discussed varying policy approaches to combatting opioid use disorder among seniors.
President Trump Signs Healthcare Price Transparency EO. The executive order (EO) directs agencies to increase enforcement of healthcare price transparency regulations.
Trump Administration Issues Memo Requiring Federal Agencies to Submit RIF Plans. Among a number of directives, the memo directs agencies, including the US Department of Health and Human Services (HHS), to submit phase one of a reduction in force (RIF) plan for their federal workforce by March 13.
HHS Issues Policy Statement on Notice-and-Comment Rulemaking. It remains unclear what scope of rules could be impacted by this statement.
CONGRESS
House Passes Budget Resolution. On February 25, the House voted 217 – 215 to advance its version of a budget resolution to outline the reconciliation process. In a dramatic display of how quickly things can change, the vote was initially cancelled because of ongoing opposition from Reps. Burchett (R-TN), Davidson (R-OH), Spartz (R-IN), and Massie (R-KY) due to concerns that the resolution did not include enough spending cuts. With only a one-seat margin, Republicans couldn’t proceed with that much opposition. However, three of the representatives were convinced to change their votes moments after the vote had been cancelled, and the vote proceeded. Ultimately, all Democrats voted no, and Rep. Massie was the sole Republican to join them.
The resolution would enable a single reconciliation bill to tackle immigration, energy, defense, and temporary extension of tax cuts from the first Trump administration. The resolution directs the House Energy & Commerce Committee to find at least $880 billion in savings, which could include significant Medicaid cuts.
The House vote follows the Senate’s vote last week to advance its version of a “skinny” budget resolution that did not include tax policy and would therefore include less healthcare savings. With two options for how to proceed on reconciliation, the House and Senate now must negotiate a unified budget resolution and pass it through both bodies in order for the reconciliation process to begin. Those budget negotiations will proceed mostly behind the scenes, as Congress must turn its attention to funding government before the March 14 deadline.
Senate Holds Nomination Hearings for OSTP Director, FTC Commissioner, OMB Deputy Director. The Senate Committee on Commerce, Science, and Transportation held a nomination hearing for Michael Kratsios to serve as the director of the Office of Science and Technology Policy (OSTP) and for Mark Meador to serve as a commissioner for the Federal Trade Commission (FTC). Members questioned Meador about FTC investigations into PBMs and consolidation, and Meador noted his intent to ensure competition in the healthcare industry. Members questioned Kratsios about guardrails for artificial intelligence, and he expressed his view that artificial intelligence can make a positive impact on healthcare.
The Senate Homeland Security & Governmental Affairs Committee held a nomination hearing for Dan Bishop to serve as deputy director of the Office of Management and Budget (OMB). Discussion predominately focused on border security and federal workforce cuts. Health-related topics included the impact of paused federal grant funding on rural hospital operations, federal funding of abortions, and transparency of federally funded research. Bishop will next testify before the Senate Budget Committee on March 5, and both committees must vote on his nomination before it heads to the Senate floor.
Senate HELP Committee Advances Secretary of Labor Nominee Chavez-DeRemer. In a 14 – 9 vote, the Senate Health, Education, Labor, and Pensions (HELP) Committee advanced the nomination of Lori Chavez-DeRemer as secretary of labor to the full Senate. Sens. Hassan (D-NH), Hickenlooper (D-CO), and Kaine (D-VA) voted yes, and Sen. Paul (R-KY) joined the remaining Democrats to vote no. Chavez-DeRemer previously represented Oregon’s fifth district in the House, and Sen. Paul expressed concern about her cosponsorship of a bill that would have made unionization easier. The US Department of Labor shares jurisdiction over certain healthcare issues with HHS, including the Affordable Care Act, the Health Insurance Portability and Accountability Act, and employer-sponsored insurance. A vote is expected next week on the Senate floor, where Chavez-DeRemer could continue to receive bipartisan support.
House Energy & Commerce Committee Advances Oversight Plan. During the markup, members discussed the committee’s oversight and authorization plan for the 119th Congress. Each House committee must submit such a plan to the House Administration and Oversight and Government Reform Committees by March 1. The plan states that the Energy & Commerce Committee will conduct oversight of federal agencies’ efforts on biological threat preparedness and response, ensure cost transparency in Medicare and Medicaid, examine the cost of chronic diseases, and examine government cybersecurity initiatives.
The markup became quite contentious, with Democrats offering numerous amendments that would require the committee to study the impact of any cuts to Medicaid and federal research funding, examine layoffs at HHS, and assess the US Food and Drug Administration’s leadership on vaccine development and safety. All amendments offered by Democrats were rejected along party lines.
House Energy & Commerce Health Subcommittee Holds Hearing on PBM Reform. There was strong bipartisan support during the hearing for PBM reform. However, Democrats expressed frustration that such policies were already fully debated in the 118th Congress and included in the December 2024 bipartisan healthcare package that was ultimately dropped from the year-end continuing resolution. Republicans indicated that they would like to investigate fraud and abuse within the drug supply chain and examine the PBM rebate model, and they noted concern about how PBMs harm independent pharmacies. Democrats also referenced the $880 billion in savings directed at the Energy & Commerce Committee in the House budget resolution, noting their concern over any cuts to Medicaid.
Senate Aging Committee Examines the Opioid Epidemic. The hearing focused on opioid use disorder’s impact on older Americans and featured a panel of local law enforcement and elected officials, caregivers, and subject matter experts. Witnesses recommended a variety of policy solutions, including taking a stronger law enforcement approach against drug dealers, increasing access to treatments such as medication-assisted therapy, and eliminating the Medicaid inmate exclusion. Democrats noted that decreasing Medicaid funding would impact access to and coverage of substance use disorder treatment, while Republicans focused on strengthening border security to prevent opioid use disorder.
ADMINISTRATION
President Trump Issues Healthcare Price Transparency EO. The EO, Making America Healthy Again by Empowering Patients with Clear, Accurate, and Actionable Healthcare Pricing Information, aims to build on the first Trump administration’s efforts to increase the transparency of healthcare prices. It specifically references a 2019 Trump EO and subsequent regulations that required hospitals and plans to publicly disclose negotiated prices. The Biden administration expanded on those regulations, but there have been reports of hospital non-compliance.
Differing from previous hospital price transparency requirements, the 2025 EO states that prices should be “actual prices” and not estimates. This EO directs the US Departments of the Treasury, Labor, and HHS to “rapidly implement and enforce” healthcare price transparency regulations within 90 days, including by:
Requiring disclosure of prices of items and services, not estimates;
Issuing updated guidance or proposed regulatory action to ensure pricing information is standardized and comparable across hospitals and plans; and
Issuing guidance or proposed regulatory action to update enforcement policies designed to ensure compliance.
A fact sheet can be found here.
Trump Administration Issues Memo Requiring Agencies to Submit Federal RIF Plans. The memo comes in response to President Trump’s February 13 EO, “Implementing the President’s ‘Department of Government Efficiency’ Workforce Optimization Initiative.” The memo directs federal agencies to initiate large-scale RIFs and submit an agency RIF and reorganization plan (ARRP) as phase one of the initiative by March 13. The memo notes that ARRPs should seek to achieve:
Better service for the American people;
Increased productivity;
A significant reduction in the number of full-time-equivalent positions;
A reduced real estate footprint; and
A reduced budget outline.
Phase two of the initiative will focus on creating more productive, efficient agency operations. Agencies must submit a phase two plan by April 14, with implementation by September 30. Agencies or components that provide direct services to citizens (such as Social Security, Medicare, and veteran’s healthcare, according to the memo) are not to implement any proposed ARRPs until the OMB and Office of Personnel Management certify that the plans will have a positive effect on the delivery of such services.
HHS Issues Policy Statement on Notice-and-Comment Rulemaking. The Administrative Procedure Act (APA) exempts certain rules from formal notice-and-comment rulemaking, including rules regarding “public property, loans, grants, benefits, or contracts.” Despite this exemption, past guidance (known as the Richardson Waiver) encouraged greater public participation and directed government agencies to still use the more formal rulemaking process for this category of rules. HHS issued a new policy statement on February 28, stating that it will rescind the Richardson Waiver, and “matters relating to agency management or personnel or to public property, loans, grants, benefits, or contracts, are exempt from the notice and comment procedures of 5 U.S.C. 553, except as otherwise required by law. Agencies and offices of the Department have discretion to apply notice and comment procedures to these matters but are not required to do so, except as otherwise required by law.” The scope of the rules that could be impacted by this change are not easily defined, even under caselaw, and would need to be reconciled against other statutes and legal requirements that may still require notice-and-comment rulemaking.
QUICK HITS
Senate Judiciary Committee Advances the HALT Fentanyl Act with Bipartisan Vote. The HALT Fentanyl Act, S. 331, would permanently classify fentanyl-related substances as schedule I controlled substances, align penalties for offenses involving these substances with those for fentanyl analogues, establish a new registration process for certain research, and make other changes to research registration requirements. The legislation, which passed the House with bipartisan support in early February, advanced from the committee by a vote of 16 – 6.
Energy & Commerce Committee Privacy Working Group Issues RFI. The newly formed working group is exploring the potential creation of a federal comprehensive data privacy and security framework. The request for information (RFI) focuses on artificial intelligence, data security, enforcement, and existing privacy frameworks. Responses are due by April 7.
MACPAC Holds February 2025 Meeting. The Medicaid and CHIP Payment and Access Commission (MACPAC) meeting included discussion on transitions of care for children and youth with special healthcare needs, hospital supplemental and directed payments, self-directed home- and community-based services, access to opioid use disorder medications, Section 1115 substance use disorder demonstrations, prior authorization, healthcare for children in foster care, and access to residential care for children and youth with behavioral health needs.
CMS Announces Medicare Drug Price Negotiation Program Public Engagement Events. The events, held from April 16 to 30, will allow patients, clinicians, caregivers, and consumer and patient organizations to share input for the second cycle of Medicare drug price negotiations. More information can be found here. Read about the drug selection process in an infographic here.
Congressional Democrats Raise Concerns Over HHS Layoffs. Senate Finance Committee Ranking Member Wyden (D-OR) and Senate HELP Committee Ranking Member Sanders (I-VT) sent a letter to HHS expressing concern over the layoffs of probationary employees working on organ transplantation modernization efforts. House Energy & Commerce Committee Ranking Member Pallone (D-NJ) and Health Subcommittee Ranking Member DeGette (D-CO) raised concerns over the impact of layoffs at the Centers for Disease Control and Prevention, National Institutes of Health (NIH), and Food and Drug Administration (FDA).
HHS OIG Report Finds Increased Medicare Part D Spending for Weight Loss Drugs. From 2019 to 2023, spending increased by 364% for 10 medications, including anti-obesity medications such as Ozempic, that are covered as type 2 diabetes treatments. The report follows a proposed rule from the Biden administration that would allow Medicare Part D to cover certain anti-obesity medications for weight loss purposes; it remains unclear whether the policy will be finalized under the current administration.
NEXT WEEK’S DIAGNOSIS
Congress will be in session next week. With a budget resolution passed in both chambers and next steps in flux, discussion will likely shift to funding the government, which must be addressed by March 14 in order to avoid a government shutdown. The Senate will continue to hold nomination hearings. On March 5, the Senate HELP Committee will hold its hearing for NIH director nominee Jay Bhattacharya, and the Senate Budget Committee will hold its hearing for OMB deputy director nominee Dan Bishop. On March 6, Senate HELP will hold its hearing for FDA commissioner nominee Martin Makary. President Trump will give the joint address of his second term to Congress on March 4. The Medicare Payment Advisory Commission will meet March 6 and 7.
President Trump’s “America First” Investment Policy Memorandum
On February 21, 2025, President Trump issued a National Security Presidential Memorandum titled “America First Investment Policy,” outlining several key strategies aimed at enhancing U.S. national and economic security through investment policy. This memorandum directs several agencies and executive departments, including the U.S. Department of the Treasury, the U.S. Department of Commerce, the Committee on Foreign Investment in the United States (“CFIUS”), the Federal Bureau of Investigation, and the Securities and Exchange Commission to take specific actions to encourage investment from allies and to protect America’s national security interests from foreign adversaries, with a particular focus on the People’s Republic of China (“PRC”).
The White House released an accompanying fact sheet outlining its reasons for issuing the memorandum.
While the memorandum does not implement any immediately effective regulatory changes, it establishes an important framework and plan of action that investors should anticipate eventually coming into effect.
Encouraging Allied Investment
The memorandum encourages foreign direct investment from allied nations by proposing a “fast-track” review process for investments from specified “allied and partner” countries. This is intended to facilitate investments in advanced technology and other strategic areas while ensuring these investors do not partner with U.S. adversaries. Along these lines, the memorandum provides that restrictions on foreign investors’ access to U.S. assets “will ease in proportion to their verifiable distance and independence from the predatory investment and technology-acquisition practices of the PRC” and other adversaries. The United States will also expedite environmental reviews for investments exceeding one billion dollars.
Restricting Inbound Investment Linked to Adversaries
The United States “will use all necessary legal instruments,” including CFIUS, to block PRC-affiliated investments in strategic sectors like technology, critical infrastructure, healthcare, agriculture, energy, and raw materials. This may result in CFIUS expanding its scrutiny of “covered transactions” with PRC links, potentially lowering thresholds for review and increasing mandatory filings for PRC-linked entities (although certain measures could require congressional action). The memorandum also provides that the Trump administration will consult with Congress regarding expansion of CFIUS review to cover “greenfield” and farmland investments, which are currently beyond CFIUS’s authority to review.
The memorandum also directs CFIUS to cease using mitigation agreements for U.S. investments from foreign adversaries, and describes these agreements as “overly bureaucratic, complex, and open-ended.” Any mitigation agreements “should consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.” The memorandum emphasizes that the United States should direct administrative resources toward facilitating investments from key partner countries.
Restricting Outbound Investment Linked to Adversaries
The memorandum also mentions potential new restrictions on U.S. outbound investments to China in sensitive technologies like semiconductors, artificial intelligence (“AI”), biotechnology, quantum, hypersonics, aerospace, advanced manufacturing, and directed energy, and states that the United States will use all necessary legal instruments to further deter U.S. persons from investing in the PRC’s military-industrial sector. It also indicates that sanctions may be imposed under the International Emergency Economic Powers Act to address threats swiftly. The memorandum further states that the Trump administration will consider applying restrictions on various types of outbound investment, including private equity, venture capital, greenfield investments, corporate expansions, and investments in publicly traded securities, from sources such as pension funds, university endowments, and limited partner investors. Last, the memorandum notes that the Trump administration is reviewing Executive Order 14105 on outbound investment, issued by President Biden in August 2023, to assess whether it sufficiently addresses national security threats.
Passive Investments
The President’s memorandum emphasizes that the United States will continue to encourage “passive investments” from all foreign persons and entities, including non-controlling stakes and shares with no voting, board, or other governance rights and that do not confer any managerial influence, substantive decision-making, or access to sensitive technology or information.
Protecting U.S. Investors
Relevant agencies must review existing auditing standards for foreign companies on U.S. exchanges (e.g., under the Holding Foreign Companies Accountable Act), scrutinize variable interest entities often used by foreign adversary firms, and tighten fiduciary standards to exclude adversary-linked companies from pension plans.
Key Takeaways
The “America First Investment Policy” encourages the realignment and prioritization of investment flows between the United States and allied nations, provided that investors have “verifiable distance” from the PRC. As implementation unfolds, investors and businesses will need to navigate this evolving landscape with agility.
For U.S. companies, the memorandum could unlock significant opportunities and challenges. Firms in strategic sectors like semiconductors, AI, and biotechnology may benefit from increased allied investment and expedited project approvals, boosting domestic innovation and jobs. However, a broader range of transactions (such as greenfield transactions) may be subject to CFIUS review, and if a foreign investor has ties to the PRC that CFIUS considers concerning, it could face heightened scrutiny. (Notably, this already takes place, to an extent.)
For foreign investors, the impact hinges on their origin and affiliations. Investors based in allied countries (e.g., Japan, EU member states) without troubling PRC ties stand to gain from the fast-track process, potentially increasing their U.S. market presence if they comply with anti-adversary stipulations. Conversely, PRC-linked firms face heightened barriers. Investors interested in taking advantage of the fast-track process, once implemented, should consider how to best position themselves for fast-track treatment, including through any appropriate adjustments to operations and third-party relationships with China or other foreign adversaries.
The LWDA: There’s a New Sheriff in Town
In a sharply worded notice, the Labor & Workforce Development Agency (LWDA) recently demanded that a plaintiff-side law firm amend over 100 Private Attorneys General Act (PAGA) notices it had filed. The LWDA warned that failure to amend would risk a finding that they are insufficient to satisfy PAGA’s administrative notice requirement.
Before an allegedly “aggrieved” employee can commence a PAGA lawsuit, the employee must give written notice to the LWDA and the employer of the specific labor code provisions alleged to have been violated, including the facts and theories to support the alleged violations. This pre-litigation notice obligation has been described as an “administrative exhaustion” requirement.
The LWDA’s letter explains that a PAGA notice must include sufficient factual detail to apprise both the LWDA and the employer of the nature of the violations alleged. The purpose of this requirement is twofold. First, the LWDA needs enough specifics to intelligently assess the seriousness of the alleged violations and determine whether to devote government resources to an investigation. Second, the employer receiving the notice needs enough information to understand the nature of the violations, so it may decide whether to “fold or fight.” Importantly, none of this is new—this has always been the standard.
According to the LWDA, the PAGA notices this law firm filed, which the LWDA characterized as “boilerplate,” generally failed to demonstrate any applicability or relevance to a particular claimant, or their unique circumstances in terms of their employment with their current or former employee in any specific case. The LWDA commented that, based on a sampling of the notices, they appeared to be a “template form” prepared without regard to any individual claimant’s particular experiences or employment with their respective employer.
The LWDA then directed the law firm to amend over 100 notices it had filed. The LWDA commented that absent amendment, the notices appeared insufficient to satisfy PAGA’s administrative notice requirements. The LWDA directed that the amended notices set forth specific violations each particular claimant personally suffered and describe the particular facts and theories supporting the specific violations in each case.
While the LWDA pointed to the PAGA reforms enacted last year as evidence of a legislative intent to increase its oversight of PAGA matters, one has to wonder whether a trial court ruling about which we wrote last year, Whose Case Is It Anyway? Trial Court Orders State of California to Pay Court Costs in PAGA Action, might have also inspired the LWDA. In that case, an Alameda Superior Court judge awarded costs to a victorious employer in a PAGA matter and against the LWDA. That matter is now on appeal.
With the LWDA seemingly becoming more involved in reviewing PAGA filings, it remains to be seen how this may impact PAGA litigation in California.
President Trump Signs New Executive Order: “Implementing the President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative”—What Federal Contractors Need to Know
On February 26, 2025, President Trump signed an Executive Order (“EO”) that states that it “commences a transformation in Federal spending on contracts, grants, and loans to ensure Government spending is transparent and Government employees are accountable to the American public.” Here’s what government contractors need to know.
Who Does the EO Apply To?
The EO is primarily directed at Agency Heads and contemplates that each Agency Head will work closely with its Department of Government Efficiency (“DOGE”) Team Lead on a number of activities intended to reduce federal spending and root out fraud, waste, and abuse. (On January 20, 2025, President Trump signed EO 14158 establishing DOGE and requiring each agency to have a DOGE Team Lead to “advise their respective Agency Heads on implementing the President’s DOGE Agenda.”).
Are All Federal Contracts and Grants Covered by This New EO?
No. The EO only applies to “covered contracts and grants,” which is defined as “discretionary spending through Federal contracts, grants, loans, and related instruments, but excludes direct assistance to individuals; expenditures related to immigration enforcement, law enforcement, the military, public safety, and the intelligence community; and other critical, acute, or emergency spending, as determined by the relevant Agency Head. Notification shall be made to the agency’s DOGE Team Lead.”
The EO specifically excludes contracts and grants directly related to the enforcement of Federal criminal or immigration law; U.S. Customs and Border Protection and U.S. Immigration and Customs Enforcement; the Uniformed Services, as defined in 20 C.F.R. 404.1330; classified information or classified systems; and “any other covered grant or contract, agency component, or real property that the relevant Agency Head exempts in writing from all or part of this order, in consultation with the agency’s DOGE Team Lead and the Director of OMB.”
What Does the EO Require Agency Heads to Do?
Build agency-specific centralized systems to record payments to all contractors and grantees. The EO does not direct how this must be done or set a deadline for completion. Presumably building these systems will require the issuance of new contracts, and the EO notes that “implementation is subject to the availability of appropriations.” The EO contemplates that these systems will “seamlessly record every payment issued by the agency” and include brief, written justifications for each payment, submitted by the agency employee who approved the payment. The EO also contemplates that “[t]o the maximum extent permitted by law, and to the maximum extent deemed practicable by the Agency Head,” these payment justifications “shall be posted publicly.” The planned systems will seemingly differ from existing databases such as the Federal Procurement Data System (“FPDS”), which tracks contract actions (e.g., modifications and awards), in that the new systems will track individual payments. Making this directive a reality, even assuming the availability of appropriations, will be a complex undertaking to connect and achieve interoperability among existing government software systems. The EO states that DOGE Team Leads will submit monthly reports to the DOGE Administrator about contracting activities, including “all payment justifications” reported in each agency’s centralized payment system.
Review, with the DOGE Team Lead, all existing “covered contracts and grants” within 30 days to identify opportunities to terminate or modify covered contracts and grants “to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of [the Trump] Administration.”
Review, with the DOGE Team Lead, contracting policies, procedures, and personnel within 30 days. The EO does not specify criteria to guide these reviews. Once these reviews are completed, but prior to entering into new contracts, Agency Heads and their DOGE Team Leads must issue guidance on signing new contracts or modifying existing contracts—topics already covered in existing acquisition regulations—“to promote Government efficiency and the policies of [the Trump] Administration.” Prior to issuing such guidance, agency heads may approve new contracts on a case-by-case basis.
Build a new technological system—seemingly distinct from the system mentioned above that will track payments—within each agency to centrally record approval for federally funded travel for conferences and other non-essential purposes. Once each agency’s new system is in place, agency employees will be prohibited from federally funded travel for conferences or other non-essential purposes unless the system contains a brief, written justification from the travel approving official. DOGE Team Leads will submit monthly reports to the DOGE Administrator detailing each agency’s justifications for non-essential travel, and these justifications “shall be posted publicly unless prohibited by law or unless the Agency Head grants an exemption from this requirement.”
What Can Contractors Do?
Assess whether your contract arguably falls within any of the stated exclusions, which could be interpreted broadly. For instance, the exclusion for “the military” could arguably cover all Department of Defense contracts. Agency Heads appear to have some degree of discretion to decide whether a contract falls within the stated exclusions. They could leverage the fact that key terms in the exclusion such as “critical” and “acute” are undefined. Moreover, Agency Heads can exempt particular contracts from this EO’s coverage. Confer with counsel regarding planning to request or confirm that relevant Agency Heads will exclude your contract(s) from coverage of this EO.
Carefully monitor prompt payment obligations under existing contracts. Under the Prompt Payment Act, the government is required to pay contractors within 30 days of a properly submitted invoice. For prime contractors that subcontract with small businesses and small business primes, the government should pay within 15 days to “the fullest extent permitted by law.” This is implemented into federal contracts via FAR 52.232-25, FAR 52.232-40, and FAR 52.212-4(i). While interest should accrue and be paid automatically, working with the contracting officer (“CO”) and contracting officer representative (“COR”) can facilitate timely payment without the Prompt Payment Act. This coordination may be even more important to facilitate written payment justifications under the new EO once the new payment system is implemented.
Why President Trump Can’t Just Re-Write the Rules: The EB-5 Program’s Congressional Lock
The EB-5 Immigrant Investor Program, created in 1990 under the Immigration Act, provides a pathway for foreign nationals to obtain U.S. residency through investments in American businesses that generate jobs. Yesterday, President Donald Trump proposed a new immigration initiative, introducing a “gold card” visa that would grant wealthy foreign nationals U.S. residency and a pathway to citizenship in exchange for a $5 million investment. This proposal aims to replace the existing EB-5 Immigrant Investor Program. While this program is subject to scrutiny, it is important to clarify why the president cannot unilaterally modify or terminate it without legislative action from Congress or replace it with other immigrant investment models.
Congressional Authority Over Immigration Law
The U.S. Constitution grants Congress the power to regulate immigration laws, including programs like EB-5 (see Article I, Section 8 of the Constitution), and the Supreme Court has consistently reaffirmed this power (see, e.g., Fiallo v. Bell, 1977). The Immigration and Nationality Act (INA) governs these policies, which includes the structure of visa categories, eligibility criteria, and investment requirements under the EB-5 program. As such, any fundamental changes to the program would require an amendment to the INA, which only Congress can enact. The president’s role in immigration policy, while significant in areas of enforcement and policy interpretation, does not extend to altering or terminating visa programs established by Congress. In 2022, Congress reauthorized EB-5 through 2027 under the EB-5 Reform and Integrity Act (RIA), meaning any attempt to dismantle the program would require new legislation — not an executive order.
Limits on Executive Power
While the president oversees immigration agencies such as U.S. Citizenship and Immigration Services (USCIS), executive authority is confined to administering and enforcing laws as they are written. The president may direct how immigration laws are implemented or prioritize certain enforcement strategies but cannot create new laws or eliminate existing ones. This separation of powers ensures that changes to programs like EB-5 cannot occur at the whim of a single branch of government.
For example, any alterations to investment thresholds, visa allocations, or job creation requirements under the EB-5 Program must be passed through the legislative process, which involves both chambers of Congress. Even if the president disapproves of the program, without Congress enacting legislation to terminate or reform it, the program will remain intact. Moreover, any new visa program, such as the proposed “gold card,” would generally require congressional approval to become law.
Executive Orders vs. Legislative Power
Executive orders and policy memos can shape the way the EB-5 Program is executed, such as altering processing priorities or tightening enforcement measures, but they cannot fundamentally alter or dissolve the program itself. Any attempt by the president to terminate EB-5 without congressional involvement would likely face legal challenges, as it would be considered an overreach of executive power.
Potential Legal Challenges
When faced with challenges to unilateral executive actions regarding immigration policy, courts have historically upheld the principle that significant changes to immigration policy require legislative action. Trump has faced significant legal challenges to his executive orders on immigration, with courts frequently ruling that his actions overstep the authority granted to the executive branch.
Refugee Admissions Suspension – In January 2025, Trump issued an executive order suspending the U.S. refugee resettlement program. This action was challenged by refugee aid organizations, leading to a federal judge in Seattle issuing a preliminary injunction. The judge determined that the executive order likely violated the Refugee Act of 1980, the Administrative Procedure Act, and the Fifth Amendment’s due process clause, emphasizing that the president’s authority has limits and cannot override laws passed by Congress.
Birthright Citizenship – In January 2025, Trump signed an executive order attempting to end birthright citizenship for children born in the U.S. to unauthorized immigrants and certain legal immigrants. This order faced immediate legal challenges, with multiple federal judges issuing preliminary injunctions blocking its enforcement. The courts ruled that the executive order was likely unconstitutional, as it sought to eliminate a fundamental right protected by the 14th Amendment, which grants citizenship to all persons born or naturalized in the United States.
Asylum and Immigration Enforcement – Trump’s executive orders aimed at curbing asylum claims and enhancing immigration enforcement have also encountered legal obstacles. For instance, an executive order suspending the entry of undocumented migrants under any circumstances, citing an “invasion,” has been challenged in court. Critics argue that such actions violate U.S. treaty obligations related to the protection of refugees and overstep the president’s constitutional authority.
These legal challenges underscore the ongoing tension between executive actions and judicial oversight in the realm of immigration policy. The courts have consistently emphasized the need for executive actions to align with constitutional principles and legislative intent, reinforcing the system of checks and balances inherent in the U.S. government. While the president controls immigration enforcement, he cannot override a federal statute. Any executive action targeting EB-5 would likely face immediate legal challenges, as courts have blocked similar overreaches in the past (see also DHS v. Regents of the University of California, 2020).
Prospective EB-5 Investors
For prospective EB-5 projects and investors, it is an excellent time to apply through the EB-5 Program, and many benefits remain in place. Under the Department of State’s upcoming “Visa Bulletin,” all nationalities, including Indian- and Chinese-born nationals, remain current through certain expedited regional center projects and can therefore still take advantage of quick processing times and fast green card issuance.
Conclusion
The EB-5 Program is part of the broader immigration framework established by Congress. While the president can influence the administration of the program, any effort to modify or terminate it requires the action of Congress. The legislative process ensures that significant changes to immigration programs, such as EB-5, are subject to debate and oversight, preserving the balance of powers as outlined by the U.S. Constitution. While the president can propose new immigration policies, the creation of a new visa program like the “gold card” would require congressional approval to ensure its legality and alignment with existing immigration laws. Without such legislative action, the president cannot unilaterally enact the proposed “gold card” visa program.
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Commission Releases Its Awaited Omnibus Sustainability Package Triggering a New Legislative Process
The European Commission published on 26 February 2025 its awaited Omnibus simplification package proposing the amendment of several pieces of sustainability and ESG-related legislations adopted under the previous Commission mandate (the EU Green Deal).
The proposals, which were announced by Ursula Von der Leyen in November 2024, include:
A proposal for a Directive amending implementation and transposition deadlines of the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD)
A proposal for a Directive amending the scope and requirements of the CSRD and CSDDD
A proposal for a Regulation (not yet published) amending the Carbon Border Adjustment Mechanism (CBAM) Regulation (see available Annex)
A draft amendment to the EU Taxonomy Delegated Acts, open for public consultation until 26 March 2025
The issuance of the proposals triggers the start of a legislative process that is expected to lead to substantial debates and possible dissentions between the European Parliament and the Council.
Corporate Sustainability Reporting Directive
On the CSRD, the proposal noticeably includes a narrower scope of application (beyond 1,000 employees), a postponement of reporting obligation by two years for companies not yet subject to reporting, voluntary taxonomy reporting and reliance on partial alignment (under some conditions). If the double-materiality assessment is retained, the Commission commits to simplified European Sustainability Reporting Standards (ESRS) and to abandon sectoral ESRS.
Corporate Sustainability Due Diligence Directive
The transposition of the CSDDD and the applicability of its obligations are postponed by one year (respectively 2027 and 2028), while the Commission should issue guidance by 2026. The scope of due diligence is proposed to be limited to Tier 1 suppliers, unless there is “plausible” information of adverse impacts beyond in the supply chain.
Importantly, the amended CSDDD would preclude more stringent requirements by Member States (relying on so-called maximum harmonization) leaving it up to them to rule on civil liability and the amount of penalties for breach of CSDDD obligations rather than this being established by the directive.
The choice of a separate proposal addressing the postponement of deadlines may ensure a swift adoption of the proposed postponements, ahead of the application of the concerned reporting and due diligence requirements under the CSRD and CSDDD.
Amendments on the substance of the text on the other hand are expected to face more hurdles, due to important disagreements between the European Parliament and the Council and within their members.
Contentious points notably include:
For the CSRD, the reduction of the scope of the reporting (companies subject to reporting & value chain information reported)
For the CSDDD, restriction of the scope of the due diligence assessment to tier 1 (direct) supplies and removal of civil liability provisions
On the same day, another package on investments was also released with an aim of simplification and increased efficiency
Those proposals open a hybrid momentum where companies need to continue working on complying with their existing or forthcoming obligations under the existing legislations, while factoring the likeliness of important amendments in the coming months. Recent examples of legislative processes at the EU level have shown that the outcome of those processes are uncertain, although the Commission has in the present case sought to anticipate the position of the co-legislators, i.e. the European Parliament and the Council.
Combining the public policy, compliance and legal expertise of our various practice groups on those topics, we can support in helping you understand these changing regulations.
The Trump Administration: Developments in Environmental Policy
From the outset, key goals of the incoming Trump Administration have been: supporting fossil fuel development, ending incentives for renewable energy and energy transition, removing “burdensome” environmental regulations and policies, and stepping back action on climate change and environmental justice initiatives. In his first week in office, President Trump rescinded several Biden Administration executive orders regarding action on climate change and environmental justice and issued executive orders seeking to boost fossil fuel development rather than renewable energy. Actions have continued in these particular areas indicating that the Trump Administration’s focus and goals remain consistent.
On February 4, 2025, new EPA Administrator Lee Zeldin announced the EPA’s “Powering the Great American Comeback” Initiative. The announcement outlined five key pillars, all of which focus on the EPA’s role of supporting American industry consistent with Trump’s campaign goals and reiterated by Administrator Lee Zeldin in his confirmation hearing. The five pillars are:
Clean Air, Land, and Water for Every American;
Restore American Energy Dominance;
Permitting Reform, Cooperative Federalism, and Cross-Agency Partnership;
Make the United States the Artificial Intelligence Capital of the World; and
Protecting and Bringing Back American Auto Jobs.
These goals highlight the Trump Administration’s goals of having the EPA take a supporting role in American industry and fossil fuel growth while working with states and across agencies to find efficiencies.
Another important action taken by the Trump Administration is a January 30 memo that temporarily froze all federally driven environmental litigation to allow for review and potential reconsideration by the new administration. In addition, an EPA spokesperson said in an email that there is a hold on new (not yet effective) and pending (not yet published) regulations, and that, “most major decisions are undergoing a quick review process to ensure transparency and accountability to the American people.” For companies dealing with the EPA on the resolution of ongoing matters, whether in litigation or on compliance matters, this will likely lead to delays, if it has not already.
President Trump’s day one executive order “Unleashing American Energy” targeted climate action taken by the Biden Administration, barred agencies from using methodologies such as the social cost of carbon in their environmental analyses, and ordered that the disbursement of funds appropriated through the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA) be paused, and ending the electric vehicle subsidy specifically. Funds from IRA and IIJA programs remain frozen despite court orders lifting the freeze from U.S. District Court Judges Loren AliKhan and John McConnell. Both judges have now ruled that the Trump Administration has defied the courts’ early orders lifting the spending freeze, but the issue remains unresolved. Companies and projects relying on IRA and IIJA grants, funds, or incentives should continue to watch this space as the legal considerations continue to play out over the upcoming months.
Consistent with general federal employee cuts and the Trump Administration’s goals, the administration has placed 168 employees in the EPA’s Office of Environmental Justice and External Civil Rights on leave and called for the elimination of any office or position involving environmental justice. President Trump also rescinded a number of President Biden’s environmental justice executive orders on January 24, including the rescission of EO 14096 which incorporated environmental justice into all executive branch decision making, and EO 14008 which, amongst other things, established the Climate & Economic Justice Screening Tool to help to identify disadvantaged communities.
Consistent with the Trump Administration’s disagreement with the Biden Administration’s stance towards climate action and environmental justice, the climate change sections of several government websites have been taken offline, including the White House’s climate change page and climate change section on the Department of State website. In addition, the EPA’s EJScreen tool, a tool to map community vulnerabilities and identify areas experiencing disproportionate exposure to environmental hazards and impacts, has also been taken offline. Companies and organizations relying on climate and environmental justice data for their sustainability work or when conducting due diligence on new projects will need to find alternatives. A number of universities and projects like the Public Environmental Data Project have worked to keep this data available to the public.
The funding freeze has impacted renewable energy and infrastructure projects, and all stakeholders involved in these projects from contractors and construction businesses to renewable energy companies, finance parties, as well as state and local governments and tribes.
Communities and businesses undertaking federally funded environmental projects have also been impacted by the funding freeze, as have farmers who were making use of the USDA’s many grant programs. The USDA made billions of funds available for the Climate-Smart Practices program and other conservation programs like the Environmental Quality Incentives Program, but farms relying on these funds are stuck in limbo until the funding freeze is resolved.
The loss of federal resources for environmental justice will also impact project developers. While disadvantaged communities will suffer from the loss of environmental justice resources, grants, and expertise, the loss of forecasting tools like EJScreen makes it more difficult for developers to make informed decisions about the communities they would like to operate in.
Summary of 2025 Immigration-Related Executive Orders
The Trump administration has issued a number of executive orders since taking office that impact immigration. While these do not directly target employers or address business immigration, they nevertheless may impact employers and their workforce.
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Trump Administration Makes First Round of Cartel Foreign Terrorist Organization Designations with Focus on Mexico and Venezuela
The US State Department has made its first round of designations pursuant to Executive Order 14157, “Designating Cartels and Other Organizations as Foreign Terrorist Organizations and Specially Designated Global Terrorists,” identifying eight international cartels and transnational organizations as Foreign Terrorist Organizations (FTOs) and Specially Designated Global Terrorists (SDGTs).
As Bracewell discussed earlier this month, these designations create criminal exposure for any entity — US or foreign — determined to have provided “material support” to one of these organizations. An entity may be found liable for providing “material support” to one of these organizations if it provides any property (tangible or intangible) or services, including currency, financial services, lodging, personnel and transportation.
To avoid unwittingly doing business with or providing material support to these newly designated FTOs and SGDTs, it is imperative that companies conduct renewed due diligence on their counterparties and supply chains, and reassess their anti-corruption controls and compliance measures.
The newly designated FTOs and SDGTs, and their leadership as alleged by US law enforcement, include:
Tren de Aragua (TdA). Key leadership includes: Hector Rusthenford Guerrero Flores, a/k/a “Niño Guerrero,” [1] Yohan Jose Romero, a/k/a “Johan Petrica,”[2] and Giovanny San Vicente, a/k/a “Giovanni.”[3]
La Mara Salvatrucha (MS-13). Key leadership includes: Edenilson Velasquez Larin, a/k/a “Agresor,” “Saturno,” “Tiny,” “Erick,” and “Paco;” andHugo Diaz Amaya, a/k/a “21” and “Splinter.”[4]
Cártel de Sinaloa. Key leadership includes: Ismael Zambada-Garcia, a/k/a “El Mayo,” and Joaquin Guzman Lopez, son of “El Chapo” Guzman.[5]
Cártel de Jalisco Nueva Generación (CJNG). Key leadership includes: Nemesio Rubén Oseguera Cervantes, a/k/a “El Mencho.”[6]
Cártel del Noreste (CDN). Key leadership includes: Juan Gerardo Trevino-Chavez, a/k/a “Huevo.”[7]
La Nueva Familia Michoacana (LNFM). Key leadership includes: Johnny Hurtado Olascoaga, a/k/a “El Pez,” and Jose Alfredo Hurtado Olascoaga, a/k/a “El Fresa.”[8]
Cártel del Golfo (CDG). Key leadership includes: Jose Alfredo Cardenas-Martinez, a/k/a “El Contador.”[9]
Cártel Unidos (CU).
In addition to international cartels that operate primarily in Mexico, this list includes two transnational organizations mentioned specifically in E.O. 14157: TdA, which originated in Venezuela but is also active in parts of South America, including Chile, Colombia and Peru; and MS-13, which originated in Los Angeles but is also active in Mexico and parts of Central America, including El Salvador, Guatemala and Honduras.
Companies conducting business in the countries listed above should beware of the organizations’ infiltration of legitimate industries. La Nueva Familia Michoacana and Cártel Unidos, for example, are heavily involved in the agricultural landscape of Michoacán, Mexico, particularly in the production of avocados. US law enforcement alleges that the Cártel de Jalisco Nueva Generación ran an elaborate time share fraud scheme that targeted US owners of time shares in Mexico.[10] Many cartels also operate legitimate businesses in order to launder money.
For more information, see “Guiding Your Company Through Trump’s New Latin America Enforcement Policy” or reach out to Bracewell’s government enforcement and investigations team for guidance.
[1] https://www.state.gov/reward-for-information-hector-rusthenford-guerrero-flores
[2] https://www.state.gov/reward-for-information-yohan-jose-romero/
[3] https://www.state.gov/reward-for-information-giovanny-san-vicente/
[4] https://www.justice.gov/usao-edny/pr/two-national-ms-13-gang-leaders-and-other-ms-13-members-and-associates-indicted
[5] https://www.ice.gov/about-ice/hsi/news/hsi-insider/notorious-sinaloa-cartel-leaders-arrested
[6] https://www.state.gov/nemesio-ruben-oseguera-cervantes-el-mencho-2
[7] https://www.ice.gov/news/releases/leader-cartel-del-noreste-arrested-following-ice-hsi-investigation
[8] https://ofac.treasury.gov/media/929446/download?inline
[9] https://www.ice.gov/news/releases/head-gulf-cartel-indicted-following-ice-hsi-federal-partner-assisted-investigation
[10] https://home.treasury.gov/news/press-releases/jy2465
Michigan Legislature Passes Last-Minute Amendments to Earned Sick Time Act, Minimum Wage Laws
Highlights
The Michigan Legislature recently made amendments to the state’s Earned Sick Time Act, which became effective Feb. 21, 2025
Large employers have until March 23, 2025, to comply with the statute’s notice requirements
The legislature also amended the states minimum wage laws, increasing from $10.56 to $12.48. However, the amendment salvages the tipped minimum wage, though it will increase to 50 percent of the minimum wage rate by 2031
The Michigan Legislature recently passed amendments to the Earned Sick Time Act and those amendments were signed into law by Gov. Gretchen Whitmer. Except for delays regarding notice requirements and the application of the law on certain small employers and some other minor changes, the amendments became effective Feb. 21, 2025. Required accruals of earned sick leave for large employers begin on that date. Large employers otherwise now have until March 23, 2025, to comply with the statute’s notice requirements.
Earned Sick Time
Sometimes procrastination pays. In the latest example, many employers across Michigan spent the last several months drafting policies and preparing for the Earned Sick Time Act (ESTA) to become effective following last summer’s Michigan Supreme Court decision in Mothering Justice v. Attorney General, only to wake up on Feb. 21 this year, the planned effective date, to learn many requirements of the law had changed. While the changes are not everything the employer community hoped for, the changes did offer some improvement.
The amendments eliminated some of the most problematic provisions of ESTA, including those creating presumptions of guilt and providing individual rights to bring a lawsuit and recover attorney fees if successful. However, ESTA remains one of the most aggressive paid leave statutes in the country and continues to contain unclarified ambiguities, and the amendments still are applicable (without delay) to most Michigan employers despite only a few hours’ notice.
As a result, despite the amendments effective Feb. 21, 2025, most employers in Michigan still are required to begin accruing for and provide their employees one hour of paid time off, which can be used for ESTA required purposes, for every 30 hours they worked. Salaried staff are still assumed to work 40 hours each week unless their normal workweek is less, in which case they are presumed to accrue time based on their normal workweek. However, the amendments revised the definition of who is an employee to confirm the following individuals are outside ESTA’s requirements:
Those employed by the U.S. government
Unpaid trainees and interns (under a rather strict and ambiguous definition)
Individuals employed in accordance with the Youth Employee Standards Act
An individual who works in accordance with a “self-scheduling policy” if both of the following conditions are met:
The policy allows the individual to schedule the individual’s own working hours and
The policy prohibits the employer from taking adverse personnel action against the individual if the individual does not schedule a minimum number of working hours
The state’s updated FAQs also confirm that, generally, elected public officials, members of public boards and commissions, and other similar holders of public office are not considered employees for ESTA purposes unless the entity treats those individuals as employees.
Small businesses (i.e., those who average 10 or fewer, previously was defined as fewer than 10, employees over any 20 or more calendar weeks in a calendar year) were likely the biggest beneficiaries of the recent amendments. For them, the application of ESTA is postponed until at least Oct. 1, 2025, and the amendments also limit their leave obligations to 40 hours of paid leave in a 12-month period, eliminating the prior requirement that they provide 32 hours of unpaid leave in addition to the paid leave requirements.
Lastly, for small employers who did not employ an employee before Feb. 21, 2022, they are not required to comply with ESTA until three years after the date the employer employs their first employee, which means that some small businesses will not be subject to ESTA until well after the Oct. 1, 2025 deadlines, and new small businesses will have the benefit of a three year grace period before ESTA applies.
In addition to these changes, the amendments also provided the following:
Confirms that all employers may frontload benefits to satisfy ESTA requirements and doing so removes any carryover obligations.
Employers can frontload time for part-time staff based on the hours they are expected to work so long as if the individual works more than the hours expected, they provide additional leave in an amount no less than they would have earned under the normal ESTA accrual rates.
Confirms that an employer is not required to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips or gratuities in the normal hourly wage or base wage upon which paid earned sick time compensation is based.
Caps carryover requirements at 72 hours (40 for small businesses) annually and allows an employer to avoid carryover obligations by paying the employee the value of any unused accrued paid sick time at the end of the year in which it was earned.
Maintains the ability for unforeseeable absences an employer can require employees to provide notice of an absence immediately after the employee becomes aware of the need for paid sick time so long as the employer:
Provides employees with a written copy of the policy requiring notice and setting for the procedures for providing notice of the need for leave (and any changes thereto within five days)
The notice requirement allows the employee to provide notice after they become aware of the need for ESTA qualifying leave
Absent satisfaction of these two requirements, ESTA continues to limit an employer’s ability to require notice of an absence to “as soon as practicable” and:
Allows an employer to require employees to return reasonably required documentation related to absences of more than three consecutive days within 15 days of the employer’s request.
Provides special rules for employers who are subject to a collective bargaining agreement that requires contributions to a multi-employer plan.
Allows an employer to require employees hired after Feb. 21, 2025, to wait up to 120 calendar days to use accrued benefits.
Reduces the period of time an employee can leave and be re-hired without obligating an employer to honor previously accrued benefits from six months to three months, and confirms that it is not required at all if an individual is paid the value of their accrued but unused benefits at the time of transfer or separation.
While employers are still prohibited from awarding attendance points for ESTA related absences, they can now undisputedly discipline employee who uses paid time for purposes other than those provided by ESTA. Not only does this change better allow employers to use a single bank of time, but it opens the door to allow employers to discipline staff who might be tempted to use paid leave fraudulently subject to adequate employer proof.
Confirms that employees covered by a collective bargaining agreement are only exempt from ESTA to the extent the collective bargaining agreement “conflicts with” the statute.
Maintains the requirement that successor employers honor the benefits accrued under predecessor employers, but removes that requirement if employees are paid the value of their accrued but unused benefits at the time of succession.
Confirms that individuals covered by an employment agreement (contract) that conflicts with ESTA and was in place before Dec. 31, 2024, are not subject to ESTA for the period of the agreement (up to three years) so long as the employer notifies the Department of Labor and Economic Opportunity of the existence of the agreement.
Gives employers the option to require employees use paid time off in one-hour increments or smaller increments used by the employer to account for absences.
Confirms that the state is solely responsible for enforcement and that employees must pursue complaints within three years from when they know of an alleged violation.
In addition to the prior civil remedies and fines provided, provides additional liability for civil remedies for any employer failing to provide earned sick time to an employee in an amount not more than eight times the employee’s normal hourly rate.
Minimum Wage and Tip Credit
The Michigan Department of Labor and Economic Opportunity has already updated the English version of the required notice postings, which can also be used for the individual notice required for all employees and new hires. However, the department has not yet completed the Spanish version or other documents related to ESTA. Employers subject to the act must post these notices and provide notice to employees and new hires, in both English and Spanish (as well as any other language spoken by 10 percent or more of its workforce), by March 23, 2025.
In addition to the ESTA amendments, the legislature also passed an amendment to Michigan’s Improved Workforce Opportunity Wage Act. In doing so, the minimum wage still increased from $10.56 an hour to $12.48 an hour on Feb. 21, 2025. However, the tipped minimum wage was retained, though it will increase by 2 percent each year beginning in 2026 until it hits 50 percent of the minimum wage in 2031.
The amendments also added a $2,500 fine for employers who fail to ensure tipped workers get paid at least minimum wages and increases the minimum wage to $13.73 effective Jan. 1, 2026, and $15 effective Jan. 1, 2027. Thereafter, annual increases to the minimum wage rate will occur based on inflation.
Takeaways
While these amendments would appear to finally put an end to the disputes related to ESTA which have occurred since signatures were initially submitted to put the provision on the ballot in 2018, we may not be done yet. Groups supporting the original ballot proposals have already announced plans for statewide referendums restoring the amendments. However, such an effort would require they gather signatures from over 223,000 Michigan voters to qualify for a spot on a future ballot.