New York’s Highest Court Defers to Tax Tribunal, Finds Sales Tax Exception for Information Service Providers Does Not Apply
A recent decision by the State of New York Court of Appeals (New York’s highest court), issued over a fiery and well-reasoned dissent, calls into question the continued viability of what has historically been an important exception to New York’s imposition of sales tax on otherwise broadly defined so-called “information services.” In the Matter of Dynamic Logic Inc., v. Tax Appeals Tribunal of the State of New York et al., 2025 NY Slip Op 02262 (N.Y. Apr. 17, 2025). New York’s current sales tax scheme, as enacted by the New York Legislature, is a tax on tangible property and a limited number of enumerated services mostly connected to the sale of tangible property. It may be time for the Legislature to step in to defend the sales tax scheme it has enacted, otherwise the state taxing authorities, with an assist from the courts, will continue to reinterpret New York’s sales tax scheme into a broad-based tax on services.
While an “information service” is broadly defined in New York as the service of “furnishing information” and includes “the services of collecting, compiling or analyzing information of any kind or nature and furnishing reports thereof to other persons,” New York law also provides for an exception to taxability when the information service involves “the furnishing of information which is personal or individual in nature and which is not or may not be substantially incorporated in reports furnished to other persons….” NY Tax Law § 1105(c)(1).
Dynamic Logic Inc. (“Dynamic”) offers solutions to help its clients measure the effectiveness of their advertising campaigns and, specifically, at issue in the case was a solution offered by Dynamic known as AdIndex. Dynamic identified individuals who had been exposed to the client’s advertisements and then would survey those individuals along with a control group. The final deliverable was a report that Dynamic created for its client that included “survey data collected, an analysis of the ‘story’ the data tells, as well as client-specific ‘insights,’ ‘implications,’ ‘next steps,’ and ‘recommendations’ gleaned from the data.” One component of the report was a comparison of the client’s data “to broader market data” contained in a database maintained by Dynamic. Data collected for clients as part of the AdIndex solution would later be incorporated into the database where it would be “aggregated and anonymized” and become a part of the “broader market data” for use in future AdIndex reports.
On appeal, the parties agreed that the information at issue in the AdIndex reports was “personal or individual in nature,” but the Department of Taxation and Finance (“Department”) took the position, and the Tax Tribunal agreed, that the exception nonetheless did not apply because the information “was substantially incorporated into reports furnished to other people.”
The Court of Appeals first adopted a highly deferential standard of review stating that its job was only to determine whether the Tribunal’s decision was “rational” and “supported by substantial evidence.” The Court next found that the Tribunal’s decision had been “rational” because “every AdIndex report contains benchmark data, which, in turn, contains a meaningful amount of data generated from prior AdIndex reports.” While the Court acknowledged that the benchmark data was “a relatively small portion of each subsequent report[,] that reincorporation is qualitatively important to the analytical value of the report rendering it ‘substantial.’”
A powerful dissenting opinion found that the plain meaning of the exception, supported by the Department’s own regulation and its examples, “looks to whether the end product is substantially incorporated into reports furnished to others.” Here, there was never an instance where an AdIndex report for one client was substantially incorporated into the AdIndex report for another client. The dissent observed that by finding aggregated and anonymized background data is “substantially incorporated” into subsequent AdIndex reports because that background data adds “qualitative value” to the subsequent AdIndex reports, the Court’s interpretation “judicially nullifies the exclusion created by the [L]egislature.”
The Legislature should take note!
Washington Governor Signs Bill Making Key Changes to Equal Pay and Opportunities Act
On May 20, 2025, Washington Governor Bob Ferguson signed a bill into law that will provide employers with a cure period for job postings that do not include pay information, allow employers to advertise a fixed amount of pay instead of a wage scale or wage range, and make other substantial changes to the state’s Equal Pay and Opportunities Act (EPOA).
Quick Hits
Washington Governor Ferguson signed legislation amending the pay transparency requirements of the EPOA.
The amended EPOA provides employers a cure period of five business days after receiving notice of a defective posting to change a posting to comply with the pay transparency requirements.
The new law will also allow employers to advertise a single fixed pay amount in job postings instead of a pay range, in certain circumstances.
The law also limits remedies for affected job applicants, allowing them to seek either administrative remedies or statutory damages in a private civil action.
Washington Substitute Senate Bill (SSB) 5408 amends the pay and benefit information in job positions required by the EPOA, provisions that have led to hundreds of class action lawsuits since summer 2023. The law will take effect on July 27, 2025.
The signing comes after Washington lawmakers passed SSB 5408 with amendments in April 2025, updating the pay transparency provisions in Revised Code of Washington (RCW) 49.58.110.
Specifically, RCW 49.58.110 requires employers with fifteen or more employees to affirmatively disclose in each job posting the salary range or wage scale offered for the position, in addition to a general description of all benefits and other compensation offered for the position.
SSB 5408 updates the law to allow Washington employers to list a fixed pay amount instead of a wage range if only one amount is offered, including for internal transfers. In addition, the law will exempt job postings that are “digitally replicated and published without an employer’s consent” from the pay equity requirements.
The law will also allow employers five business days to correct noncompliant job postings after receiving a written notice and avoid penalties from the effective date of July 27, 2025, through July 27, 2027.
SSB 5408 further defines and clarifies two separate remedies. Job applicants affected by an allegedly noncompliant job posting will be able to either seek administrative remedies, including civil penalties up to $1,000 and statutory damages between $100 and $5,000 per violation, or pursue a private civil action to recover “statutory damages of no less than $100 and no more than $5,000 per violation, plus reasonable attorneys’ fees and costs.” The remedies are exclusive of each other.
Enforcing English Proficiency: Employers of Commercial Drivers Face New FMCSA Guidance
Takeaways
DOT inspectors will enforce new guidance for English language proficiency among commercial motor vehicle drivers beginning 06.25.25.
Drivers who do not speak and understand English sufficiently will be placed out-of-service.
Planning and thoughtful, timely communication with your drivers is the key to compliance, uninterrupted customer service, and driver retention.
Businesses that employ drivers of commercial motor vehicles who operate in interstate commerce (CMV drivers) have some work to do before June 25, 2025. That is when CMV drivers who cannot speak and understand English sufficiently to meet the Department of Transportation (DOT) English language proficiency qualification standard (ELP Standard) will start being taken out-of-service. Here is what you need to know to prepare for the shift in enforcement to ensure continued timely service to customers and to retain drivers.
On April 28, 2025, President Donald Trump issued Executive Order 14286, directing the secretary of transportation and the Federal Motor Carrier Safety Administration (FMCSA) to take certain steps to ensure CMV drivers can meet the ELP Standard set forth in 49 CFR § 391.11(b)(2) and to place drivers out-of-service (OOS) if they cannot do so.
On May 20, 2025, Transportation Secretary Sean Duffy announced issuance of new guidance to enforce the ELP Standard. The guidance is explained in the FMCSA’s May 20, 2025, Internal Agency Enforcement Policy (New FMCSA Policy). The publicly available policy is redacted, perhaps to avoid sharing details that could potentially risk enforcement efforts. The New FMCSA Policy rescinds the more lenient 2016 policy. It outlines the steps below that inspectors should begin taking to enforce the ELP Standard.
New FMCSA Policy:
Step 1: Assessment of Ability to Respond to Official Inquiries
FMCSA personnel will initiate all roadside inspections in English.
The driver will be told to respond in English. Tools like interpreters, I-Speak cards, cue cards, smart phone applications and On-Call Telephone Interpretation Services cannot be used, as they may conceal a driver’s inability to communicate in English.
If it appears the driver may not understand the inspector’s initial instructions, the inspector will conduct an ELP assessment. The ELP assessment will consist of a driver interview and a highway traffic sign recognition assessment.
If the inspector determines the driver is unable to respond to official inquiries in English sufficiently, the driver will be cited for a violation of 49 CFR § 391.11(b)(2).
Step 2: Assessment of Ability to Understand Road Signs
If the driver responds to the inspector sufficiently in English, the inspector will conduct a Highway Traffic Sign Assessment to include highway traffic signs that conform to the Federal Highway Administration’s Manual on Uniform Traffic Control Devices for Streets and Highways (MUTCD) and electronic-display changeable (a.k.a. “dynamic”) message signs the driver may encounter while operating a commercial motor vehicle.
Step 3: Documentation and Consequences of Failure to Pass the ELP Assessment
If the inspector cites the driver for a violation of the ELP Standard, the inspector must document all evidence to support the violation including the driver’s responses or lack thereof.
The inspector will place the driver immediately out-of-service once a violation of the ELP Standard is incorporated into the North American Standard Out-of-Service Criteria, which has already been approved and will become effective June 25, 2025.
The inspector will, when warranted, initiate an action to disqualify the driver from operating commercial motor vehicles in interstate commerce.
Step 4: Conducting the Remainder of the Inspection If the Driver Passes the ELP Assessment
If the inspector determines that the driver meets the ELP Standard, the inspector may elect to conduct the remainder of the inspection using the communication methods and techniques best suited to facilitate the safe and effective completion of the inspection.
Applicability Of the Policy:
The New FMCSA Policy applies to all FMCSA enforcement personnel conducting inspections of motor carriers and drivers in the U.S., except in Puerto Rico, Guam, the Northern Mariana Islands, or American Samoa.
When performing inspections of CMV drivers in the border commercial zones along the U.S.-Mexico border, FMCSA enforcement personnel should cite drivers for violations, but should not place the driver out-of-service or initiate an action to disqualify them from driving in interstate commerce.
Drivers with hearing impairments who have obtained exemptions from the DOT hearing standard shall not be deemed unqualified and placed out-of- service if they are unable to communicate orally in English.
Implementation and Future Changes:
The policy is effective immediately, and FMCSA inspectors are required to implement it for all CMV drivers operating in the U.S.
The Commercial Vehicle Safety Alliance (CVSA) has already voted to incorporate violations of 49 CFR § 391.11(b)(2) into the OOS criteria, effective June 25, 2025.
As part of its regulation scheme, the DOT is reviewing state security procedures in their issuance of Commercial Drivers Licenses.
On May 20, 2025, Transportation Secretary Sean Duffy is reported to have stated that the Department will be reviewing non-domiciled CDLs and improving upon the verification protocols for both domestic and international credentials.
Next Steps for Employers
Planning and thoughtful, timely communication with your drivers is the key to compliance, uninterrupted customer service, and driver retention.
Beltway Buzz, May 23, 2025
The Beltway Buzz™ is a weekly update summarizing labor and employment news from inside the Beltway and clarifying how what’s happening in Washington, D.C., could impact your business.
SCOTUS: Wilcox to Remain Off NLRB. On May 22, 2025, the Supreme Court of the United States issued a decision blocking NLRB Board Member Gwynne Wilcox’s reinstatement to the NLRB while her challenge makes its way through the courts. The stay will remain effective through the appeals stage and until the Supreme Court declines to review the case or issues a decision on the merits.
House Passes Massive Tax Passage. Lawmakers in the U.S. House of Representatives this week passed a far-reaching tax and spending package by a narrow 215–214 vote. The bill would extend provisions of the 2017 Tax Cuts and Jobs Act, provide additional funding for national security and immigration enforcement, roll back green energy tax incentives, and add Medicaid work requirements. On the labor and employment policy front, the bill includes provisions to allow deductions for income earned as tips or overtime pay. Now it is the U.S. Senate’s turn, where some Republicans have expressed some skepticism about the bill, so any final legislation that the U.S. Congress may pass will likely be different than what the House passed this week.
Senate Says “Yes” to “No Tax on Tips.” In a surprise move, the U.S. Senate this week passed the No Tax on Tips Act (S.129). Democratic Senator Jacky Rosen (NV), a cosponsor of the bill, asked that the bill be passed via the Senate’s unanimous consent mechanism, and no one objected. Passage of a bill this significant in this manner is unusual. Here are the details:
The bill would allow individuals a 100 percent tax deduction on income from qualified tips, up to $25,000.
Individuals claiming the tip deduction must be employed “in an occupation which traditionally and customarily received tips,” as set forth in a pending list to be published by the secretary of the treasury.
The deduction is available to individuals earning $160,000 or less in 2025, with this amount being adjusted for inflation going forward.
Language in the Senate-passed No Tax on Tips Act is similar in concept to the provisions included in the tax package described above. However, there are some significant differences in the details. It is unclear at this time how this will be resolved, but some form of “no tax on tips” has a very good chance of being enacted in this Congress.
2024 EEO-1 Data Collection Opens, With Warning From Acting Chair. The U.S. Equal Employment Opportunity Commission’s (EEOC) 2024 EEO-1 Component 1 data collection opened this week (May 20, 2025) with covered employers having until June 24, 2025, to file. In a statement accompanying the announcement of the opening of the data collection, EEOC Acting Chair Andrea Lucas wrote, “Your company or organization may not use information about your employees’ race/ethnicity or sex—including demographic data you collect and report in EEO-1 Component 1 reports—to facilitate unlawful employment discrimination based on race, sex, or other protected characteristics in violation of Title VII.
House Committee Examines “Modern Workers.” On May 20, 2025, the House Committee on Education and the Workforce’s Subcommittee on Workforce Protections held a hearing entitled “Empowering the Modern Worker.” The hearing focused on the benefits of worker flexibility, practical problems associated with the “ABC” worker classification test (as embodied in California’s A.B. 5), and the value of portable benefits, as set forth in the Modern Worker Empowerment Act (H.R. 1319). The hearing follows on the heels of a March 25, 2025, hearing about the application of the Fair Labor Standards Act to the modern workplace.
DOL, MSHRC Nominees on the Move. On May 22, 2025, the Senate Health, Education, Labor, and Pensions (HELP) Committee advanced the following nominations en bloc by a party-line vote of 12–11:
Julie Hocker to serve as assistant secretary of labor and head the U.S. Department of Labor’s (DOL) Office of Disability Employment Policy
Marco Rajkovich to serve as a commissioner of the Mine Safety and Health Review Commission (MSHRC)
Wayne Palmer to serve as assistant secretary of labor for mine safety and health, leading the DOL’s Mine Safety and Health Administration
Henry Mack III to serve as assistant secretary of labor, leading the DOL’s Employment and Training Administration
The nominations now move to the Senate floor.
NLRB Acting GC Issues New Guidance on Settlement Agreements. On May 16, 2025, National Labor Relations Board (NLRB) Acting General Counsel William B. Cowen issued a memorandum entitled, “Seeking Remedial Relief in Settlement Agreements.” The memorandum follows on Cowen’s rescission of various memoranda issued by his predecessor that instructed NLRB regional offices to expand the scope of remedies in settlement agreements (e.g., reimbursement of car loan payments, letters of apology, etc.). Cowen’s latest memo provides regional directors with more discretion in approving settlement agreements, and it reminds them that they should seek make-whole relief in settlement agreements, but “should be mindful of not allowing our remedial enthusiasm to distract us from achieving a prompt and fair resolution of disputed matters.”
SCOTUS Permits Cancelation of Venezuela TPS. In an 8–1 order issued this week, the Supreme Court stayed a March 31, 2025, decision by a federal court to preliminarily block the U.S. Department of Homeland Security’s (DHS) January 28, 2025, notice of termination of the 2021 and 2023 Temporary Protected Status (TPS) designations for Venezuela. While both the Supreme Court’s order and U.S. Citizenship and Immigration Services’ (USCIS) TPS website are unclear as to the ruling’s impact on stakeholders, it appears that applicable dates for termination of the 2023 TPS designation reverts to April 7, 2025, while the 2021 TPS designation will remain in effect until September 10, 2025. Because the Supreme Court’s decision only concerns the lower court’s grant of a preliminary injunction, the underlying legal challenge to the TPS termination decision will continue.
Administration Pauses Enforcement of Mental Health Parity Regs. Last week, at the request of the U.S. Departments of Health and Human Services, Labor, and the Treasury, the U.S. District Court for the District of Columbia stayed a lawsuit challenging 2024 changes to regulations implementing provisions of the Mental Health Parity and Addiction Equity Act (MHPAEA). As a result, the departments issued a statement noting that they will not enforce the 2024 regulatory changes and will “reconsider the 2024 Final Rule, including whether to issue a notice of proposed rulemaking rescinding or modifying the regulation through notice and comment rulemaking.”
Memorial Day. This weekend, the Buzz will take time to remember the brave men and women who died in service to our country. We wrote about the cultural and legislative origins of Memorial Day several years ago.
Multistate Compliance Roundup: State Laws Will Take Effect July 1, 2025
A number of employment-related laws recently passed in various states that impact the workplace will take effect on July 1, 2025.
Quick Hits
New state laws will impact minimum wage, leaves of absence, restrictive covenants, child labor, and other workplace issues.
These laws will take effect on July 1, 2025.
Here is a roundup briefly summarizing the new state laws:
Alaska Ballot Measure 1 increases the minimum wage to $13.00 per hour, establishes paid sick leave, and prohibits employers from holding mandatory meetings to share political or religious opinions. Employers will be required to provide one hour of paid sick leave per thirty hours worked.
In California, Los Angeles County passed a Fair Workweek Ordinance, which includes predictive scheduling provisions. It requires employers to provide advance notice of schedule changes, premium pay for schedule changes, and rest time between shifts. It applies to retail businesses that have at least 300 employees worldwide. In addition, California’s minimum wage will increase to $17.81 per hour.
Indiana Senate Bill 409 requires employers to give workers time off to attend a school attendance conference or case conference meeting for their child. The time off can be unpaid.
Kansas Senate Bill (SB) 241 clarifies that certain nonsolicitation agreements with business owners and employees are presumptively enforceable and not a restraint on trade.
In New Hampshire, employers with six or more employees will be required to provide nursing mothers with a reasonable break time and a private, non-bathroom space to express milk for up to one year after their child’s birth. The law mandates an unpaid break of approximately thirty minutes for every three hours of work.
Oregon will increase its minimum wage to $15.05 per hour.
In Vermont, H. 704 requires employers with five or more employees to include wage ranges in job advertisements. Another law, H. 259, requires hospitals to develop and implement a security plan for preventing workplace violence and establish a workplace violence incident reporting system.
In Virginia, employers will be prohibited from entering into a noncompete agreement with any employee who earns less than $76,081 annually or is entitled to overtime compensation under the federal Fair Labor Standards Act.
Washington, D.C., will raise its minimum wage to $18.00 per hour. The minimum wage for tipped employees will increase to $12.00 per hour.
Washington State’s paid sick leave law will be expanded to include time off for immigration-related proceedings, starting on July 27, 2025.
In West Virginia, Senate Bill 427 eliminates the requirement that fourteen- and fifteen-year-olds obtain a work permit as a condition of employment. Instead, an employer seeking to hire a teenager must obtain an age certificate verifying the child’s age from the state Division of Labor and the written consent of the child’s parent or guardian.
Next Steps
Employers will need to comply with new laws taking effect in states in which they operate.
McDermott+ Check-Up: May 23, 2025
THIS WEEK’S DOSE
House Passes Reconciliation Package. The package now moves to the Senate, where substantive changes, including in healthcare, will likely be made.
HHS Secretary Kennedy, FDA Commissioner Makary Testify at Senate Appropriations Committee. The officials testified in separate hearings on the Trump administration’s fiscal year 2026 skinny budget request.
House Oversight Committee Examines IRA. The hearing focused on how the Inflation Reduction Act (IRA) has impacted healthcare innovation and prices.
HHS Releases MAHA Commission Report. The report explores four factors contributing to high rates of childhood chronic diseases and recommends 10 research initiatives.
HHS Begins Implementing Most-Favored-Nation EO. This quick action follows last week’s executive order (EO).
CMS Announces Plans to Increase MA Auditing. The announcement echoes the administration’s focus on addressing waste, fraud, and abuse.
Agencies Issue Guidance, RFIs on Healthcare Price Transparency. The actions across multiple federal agencies are in line with a February 2025 EO.
CONGRESS
House Passes Reconciliation Package. Here’s the play-by-play on how it happened. Regrouping after last week’s failure to advance the bill, the House Budget Committee advanced House Republicans’ reconciliation package late on May 18, 2025. The committee combined, without amending, the 11 committee prints that individual committees advanced over the past few weeks into a singular piece of legislation. The final vote to advance the package to the House Rules Committee was 17 – 16. All yes votes were Republicans, and all no votes were Democrats. Four hardline conservatives, Reps. Norman (R-SC), Roy (R-TX), Brecheen (R-OK), and Clyde (R-GA), who previously voted to stall the package in committee, voted present. Their present vote allowed the package to move to the Rules Committee while showing their continued strong reservations about the bill. They specifically urged House leaders to make changes that would expedite Medicaid work requirements, enact more cuts to Medicaid, and enact additional tax changes. Meanwhile, a key group of moderate Republicans from blue states continued to push for changes to the state and local tax (SALT) deduction provisions as a condition of their votes on the House floor.
The House Rules Committee met on May 21, 2025, in a marathon session to finalize the package and prepare it for a floor vote. While the Rules Committee was meeting, moderates and hardliners continued to urge Republican leadership to add provisions they support. Moderates reached a deal with Speaker Johnson to increase the SALT cap, prompting hardliners and members of the House Freedom Caucus to increase their push for more cuts to Medicaid. President Trump then met with the House Freedom Caucus and sent a statement of administration policy urging Republicans to support the package, stating that “failure to pass this bill would be the ultimate betrayal.”
Late on May 21, a manager’s amendment was released that included an increase in the SALT cap and modifications to other provisions, including health policies, to appease Freedom Caucus members. Changes included:
Expediting the Medicaid work requirement implementation from 2029 to December 31, 2026.
Expanding the ban on Medicaid funding for gender-affirming care from minors only to all Medicaid enrollees.
Providing non-expansion states more flexibility to implement state directed payments up to 110% of the Medicare cap.
After debating most of the night, the House passed the One Big Beautiful Bill Act in the early morning of May 22, 2025, by a 215 – 214 vote. Reps. Massie (R-KY) and Davidson (R-OH) joined Democrats in voting no. Rep. Harris (R-MD), chair of the House Freedom Caucus, voted present. Two Republicans, Reps. Garbarino (R-NY) and Schweikert (R-AZ), did not vote.
Now that the House has met Speaker Johnson’s goal of passage by Memorial Day, the bill moves to the Senate. Speaker Johnson stated that he wants the bill on President Trump’s desk by July 4, 2025. However, he no longer controls the timeline – the Senate does. And, if reports to date are accurate, the Senate will make changes to key provisions.
On May 20, 2025, the Congressional Budget Office (CBO) released a preliminary cost estimate for the reconciliation package as it was reported from the House Budget Committee, including scores for each provision. The CBO analysis does not reflect changes made after the bill passed out of the Budget Committee, nor does it incorporate all of the interactive effects across titles. CBO estimates that:
As a result of the Energy and Commerce Committee health provisions, 8.6 million individuals would become uninsured.
As a result of the Ways and Means Committee health provisions, 2.1 million individuals would become uninsured.
At the request of Democrats, CBO also released a letter with a preliminary distributional analysis finding that the reconciliation package will cause a decrease in household resources for the lowest 10% of the income distribution and an increase in household resources for the highest 10% of the income distribution.
HHS Secretary Kennedy, FDA Commissioner Makary Testify at Senate Appropriations Committee. US Department of Health and Human Services (HHS) Secretary Kennedy continued his string of congressional appearances by testifying in front of the Senate Appropriations Labor, Health and Human Services, Education, and Related Agencies Subcommittee. Questioning focused on the FY 2026 skinny budget request and HHS research funding. Republicans emphasized the importance of maintaining clinical trials and ensuring transparency in research funding and discussed the need to improve care delivery in rural communities. Democrats meanwhile pressed Secretary Kennedy on when a full budget will be released and expressed concern over reductions in National Institutes of Health (NIH) funding and the implications for Alzheimer’s disease, cancer, and rare disease research.
Later in the week, US Food and Drug Administration (FDA) Commissioner Makary testified in front of the Senate Appropriations Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Subcommittee. Republicans expressed concern about the FDA’s decision to loosen safety requirements for mifepristone, questioned Makary on the FDA’s artificial intelligence policies, and discussed the FDA’s work on improving infant safety. Appropriations Committee Chair Collins (R-ME) expressed concern about recent FDA staffing changes and the impact they could have on regulatory review. Democrats emphasized the importance of congressional collaboration and the expertise available within the committee to improve the FDA’s processes, particularly for diabetes treatments and COVID-19 boosters. Commissioner Makary emphasized that the goal of the FY 2026 budget is to rebuild the gold standard science at the FDA.
House Oversight Committee Examines IRA. The hearing was a joint Economic Growth, Energy Policy, and Regulatory Affairs Subcommittee and Health Care and Financial Services Subcommittee meeting. Republicans stated that the IRA has increased energy and healthcare costs for consumers and the federal government. Democrats focused on ongoing reconciliation efforts, stating their concern about any cuts to Medicaid and the expiration of the enhanced advanced premium tax credits. They stated that the IRA has improved healthcare access and created jobs.
ADMINISTRATION
HHS Releases MAHA Commission Report. A February 2025 EO created the President’s Make America Healthy Again (MAHA) Commission and directed the release of this report. The report explores four causes of increased rates of childhood chronic diseases: an increase in consumption of ultra-processed foods, chemicals in the environment, childhood behaviors in the digital age, and overmedicalization of children. The report does not include specific proposals and alludes to release of a strategy in August 2025. The report recommends 10 research initiatives, including research on long-term drug safety, the effects of whole foods compared to ultra-processed foods, and expansion of the NIH-Centers for Medicare & Medicaid Services (CMS) autism data initiative. There are 14 members of the MAHA Commission, including FDA Commissioner Makary and NIH Director Bhattacharya. The EO directed that the Centers for Disease Control and Prevention director also hold a position on the commission, but a director has not yet been sworn in.
HHS Begins Implementing Most-Favored-Nation EO. The EO, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” was signed on May 12, 2025, and included a directive that HHS bring pharmaceutical drug prices in line with prices in comparable developed nations within 30 days. In a press release this week, HHS announced that it expects manufacturers to commit to aligning US prices for brand name products, without a generic or biosimilar, with the lowest price in a peer country that has a gross domestic product (GDP) per capita that is at least 60% of the US GDP per capita. As directed in the EO, if drug manufacturers don’t voluntarily comply, HHS will develop rulemaking to impose most-favored-nation pricing. With limited reason for voluntarily compliance, we anticipate additional rulemaking to follow. US Customs and Border Protection later released a statement reminding pharmaceutical companies that declaring incorrect values on import or export documentation is a trade evasion.
CMS Announces Plans to Increase MA Auditing. CMS intends to increase auditing of risk adjustment diagnoses submitted by Medicare Advantage (MA) plans. CMS says it will audit all eligible MA contracts annually moving forward and will invest additional resources to complete ongoing audits of contracts for payment years 2018 through 2024. To accomplish this, CMS outlines three actions it will take:
Enhancing technology to flag unsupported diagnoses and review medical records.
Increasing the number of medical coders working to verify flagged diagnoses from 40 to 2,000 by September 2025.
Moving from audits of about 60 contracts each year to audits of all contracts, and increasing the number of records audited in a contract.
CMS intends to collaborate with the HHS Office of Inspector General (OIG) to recover uncollected overpayments from audits conducted by the OIG.
Agencies Issue Guidance, RFIs on Healthcare Price Transparency. HHS and the US Departments of Labor and the Treasury jointly issued a request for information (RFI) to inform potential future rulemaking or guidance on prescription drug price transparency requirements for insurance plans. Previously, as part of its Transparency in Coverage final rule, HHS sought to implement transparency requirements for prescription drugs but ultimately deferred enforcement because of legal challenges. In this RFI, HHS requests comments on issues related to compliance with, and implementation of, the prescription drug machine-readable file disclosure requirements. Comments are due 30 days after publication of the RFI in the Federal Register. The agencies also updated frequently asked questions regarding implementation of schema version 2.0 transparency in coverage requirements for certain provisions of the Affordable Care Act.
Separately, CMS released new guidance and an RFI on hospital price transparency. The agency expects that for most contracting scenarios, hospitals’ payer-specific negotiated charges can be expressed as a dollar amount, not an estimate. The RFI seeks comment on whether and how CMS can improve hospital price transparency compliance and enforcement processes to ensure pricing information in the machine-readable file is accurate and complete. Comments are due by July 21, 2025.
QUICK HITS
FDA Modifies State and Tribal Drug Importation Request Process. The FDA will now allow states and tribes to submit a draft Section 804 importation program proposal and receive FDA feedback before final submission to assist them in importing prescription drugs from Canada. The action was a directive in the April 2025 EO “Lowering Drug Prices by Once Again Putting Americans First.”
FTC Sends Warning Letters to Drug Companies Alleging Anticompetition. The Federal Trade Commission (FTC) alleged that more than 200 patent listings for brand name drugs in the FDA’s Orange Book are inappropriate and therefore limit competition by delaying generic market entry. This is the third round of FTC patent disputes, following previous challenges in 2023 and 2024.
Senators Welch, Baldwin Host Forum with Former Biden HHS Officials. The forum focused on the impact of the Trump administration’s restructuring of HHS and included former FDA, NIH, and CMS officials.
BIPARTISAN LEGISLATION SPOTLIGHT
Senators Marshall (R-KS) and Warner (D-VA) and Representatives DelBene (D-WA), Kelly (R-PA), Bera (D-CA), and Joyce (R-PA) reintroduced the Improving Seniors’ Timely Access to Care Act. The legislation would codify most provisions from the 2024 CMS Interoperability and Prior Authorization Final Rule to streamline the MA prior authorization process and increase transparency. The legislation passed the House unanimously in 2022. Read the press release and legislation here.
NEXT WEEK’S DIAGNOSIS
After the House passed the reconciliation package, both chambers left town for the Memorial Day recess. The Senate will return on June 2, 2025, and the House on June 3, 2025. The next step in the reconciliation process is Senate consideration. The Senate is likely to make substantive changes to the House-passed package to appease more moderate Republican Senators, and Democrats will likely raise Byrd rule challenges to strike certain lines or provisions that are extraneous to the CBO score of that policy.
Recent Rulings Against Trump Administration Funding Freezes
Shortly after taking office, President Trump froze funding already allocated to various parties, citing the Administration’s disapproval of issues including climate change and social equity. Additionally, executive agencies removed content discussing climate change from websites.
Unsurprisingly, these actions have been challenged in court. Parties whose funding was frozen sued on the grounds that the freezes violated statutes including the Administrative Procedure Act (APA) or their constitutional right to free speech. While cases remain pending in courts across the country, initial decisions show a pattern of courts rejecting the initial funding freezes and agencies agreeing to restore website content.
Below, we break down three recent decisions in The Sustainability Institute v. Trump, Woonasquatucket River Watershed Council v. US Department of Agriculture (USDA), and Northeast Organic Farming Association of New York v. USDA.
Background
Shortly after his inauguration, President Trump signed several orders that froze or terminated congressionally appropriated funds under the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA). The orders are Unleashing American Energy, Ending Radical and Wasteful Government DEI Programs and Preferencing, andImplementing the President’s “Department of Government Efficiency” Cost Efficiency Initiative(previously discussed here, here, and here). In addition, agencies ordered their staff to take down climate-related webpages from their sites.
Below, we discuss three cases where courts ruled against agencies who terminated funding or took down websites on the grounds that the actions violated the APA and First Amendment.
The Sustainability Institute v. Trump
The Sustainability Institute v. Trump involves a challenge in South Carolina federal court by nonprofit groups and local governments to a freeze to federal climate funding by agencies including the US Environmental Protection Agency (EPA), USDA, and the US Departments of Energy (DOE) and Transportation (DOT). The funding was appropriated by US Congress and contractually awarded to municipalities and nonprofits before the Trump Administration sought to freeze it.
The challengers alleged:
That the freeze orders violate the APA by terminating funding with no process or notice.
That denying funding violates the separation of powers principle of the US Constitution and the executive’s duty under Article II, Section 2 of the Constitution to “faithfully execute[]” the laws of the United States by failing to distribute funds appropriated by Congress.
That EPA violated their First Amendment right to free speech by engaging in viewpoint discrimination by ordering nonprofits to remove disfavored language from grants and threatening to revoke federal funding for groups that draw attention to climate change or equity issues.
In response, the government argued, without evidence, that termination decisions were supported by reasoning made on an individualized grant by grant basis, rather than because they were funded by the IRA and IIJA, and therefore were justified.
In April, the court ordered the five agencies to produce all documents from January 20 to present, relating to the freeze, pause, and/or termination of any of the grants identified by the plaintiffs in their motion for expedited discovery. EPA and other agencies responded by releasing over 130,000 pages of documents containing internal EPA emails, spreadsheets, and other materials pertaining to the freezes. Even with these productions, the plaintiffs argued there was no evidence that EPA and other agencies made grant-specific determinations to terminate funding.
Following these productions, the government conceded that, at least for this case, it would “not contest[] the merits of a majority of plaintiffs’ APA claims” that grant decisions were not made on an individualized basis as required, but they maintain the admission is “for purposes of this case only.” On May 20, the court entered judgment in favor of the plaintiffs on the APA claims, granted the plaintiffs’ request for a preliminary injunction, and denied staying injunctive relief requiring the funding to be reissued.
Woonasquatucket River Watershed Council v. USDA
In Woonasquatucket River Watershed Council v. USDA, a court reached a similar holding. This case involves a challenge by several nonprofit organizations to the freezing of funding appropriated under the IRA and IIJA. Last month, the court issued a nationwide preliminary injunction, ordering five federal agencies — DOE, US Department of Housing and Urban Development, USDA, US Department of the Interior, and EPA — to “take immediate steps to resume the processing, disbursement, and payment of already-awarded funding appropriated under” the IRA and IIJA, and prohibited those agencies from “freezing, halting, or pausing on a non-individualized basis the processing and payment” of such funding.
When EPA argued that it should be allowed to continue its freeze on nearly 800 IRA grants that had been terminated or had terminations pending, the court ordered that the grants be unfrozen before sending termination notices, and urged EPA to expedite the termination process for the grants it believes it can legally revoke. The case is now on appeal to the US Court of Appeals for the First Circuit.
Northeast Organic Farming Association of New York et al. v. USDA
Northeast Organic Farming Association of New Yorkalso reached a similar outcome. In that case, several nonprofits sued the USDA seeking to enjoin the government from erasing webpages focused on climate change. The plaintiffs’ complaint alleges that USDA violated the APA when it took down government websites containing climate content, including statutorily required climate-related policies, guides, datasets, and other resources, without advance notice or reasoned decision-making.
The USDA originally argued that the environmental groups had failed to show that relief was warranted and that the removals should stand because it was in the public’s interest to have government websites that reflect the current presidential Administration’s priorities. However, USDA recently reversed course and committed to restore climate change-focused webpages that were taken offline. Going forward, USDA stated that it would restore required websites and that it was committed “to complying with any applicable statutory requirements in connection with any future publication or posting decisions regarding the removed content, including, as applicable, the adequate-notice and equitable-access provisions of the Paperwork Reduction Act and the reading room provisions of [the Freedom of Information Act].” The parties are expected to submit a joint status report in early June.
Bipartisan Bill Would Expand Biofuels and Biobased Manufacturing Innovation
On May 7, 2025, Representatives Nikki Budzinski (D-IL) and Zach Nunn (R-IA) introduced the Agricultural Biorefinery Innovation and Opportunity Act (Ag BIO Act) (H.R. 3253), a bipartisan bill that would support the biofuel economy. According to Budzinski’s May 8, 2025, press release, the bill would update the U.S. Department of Agriculture’s (USDA) Section 9003 program to expand access to grants, streamline loan guarantees, and provide $100 million in mandatory funding over five years. The press release states that the bill would strengthen the USDA Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program by:
Providing $100 million in mandatory funding through fiscal year 2030;
Updating the loan guarantee program to include year-round applications and waive feasibility studies for proven technologies;
Establishing a new competitive grant program to help build and expand biorefineries focused on producing ultra-low-carbon and zero-carbon bioethanol, renewable chemicals, and other advanced bioproducts;
Creating a priority scoring system for grant applications that evaluates environmental impact, rural economic development, scalability, and contributions to domestic energy security; and
Ensuring a 60/40 federal cost-sharing model to encourage private investment in materials, research, and development of new bioproducts.
Nevada Legislature Approves Amendments To The State’s Corporate Law
In prior posts, I have discussed some the changes that AB 239 would make to Nevada’s corporate law. See Nevada Bill Would Expressly Allow Directors To Approve Documents In “Preliminary Form”, In More Bad News For Delaware, Nevada Legislature Proposes To Allow Jettisoning Jury Trials For “Internal Actions”, and Nevada Bill Would Impose A Duty That Directors Be Informed. Last week, I testified in my individual capacity in support of the bill before the Senate Judiciary Committee. On Wednesday of this week, the Senate approved the bill on a 21-0 vote. Assuming the Governor signs the bill into law, it will be another setback for Delaware. For more information about AB 239, See Professor Benjamin Edward’s post here.
AB 239 will also set the table for a future constitutional amendment allowing for the creation of an appointed business court in Nevada. The Assembly approved AJR 8 which proposes a constitutional amendment to require the legislature, to the extent money is available, to establish a business court which, if established, will have exclusive original jurisdiction to hear disputes involving shareholder rights, mergers and acquisitions, fiduciary duties, receiverships involving business entities and other commercial or contractual disputes between business entities and any other business disputes of a similar nature in which equitable or declaratory relief is sought. However, the process for amendment Nevada’s constitution is cumbersome and that means that the amendment is several years in the future, even if approved by the legislature this year.
Unpacking EPA’s PFAS Announcement: Addressing Contamination with Ambiguity Ahead
The U.S. Environmental Protection Agency (EPA) announced a comprehensive set of actions to address per- and polyfluoroalkyl substances (PFAS) contamination on April 28, 2025, with a focus on preventing PFAS from entering drinking water systems, holding polluters accountable, and protecting passive receivers. According to EPA Administrator Lee Zeldin, this announcement represents the initial phase of a strategy aimed at tackling PFAS contamination throughout the Trump Administration. Despite the announcement’s emphasis on enforcement, significant questions remain regarding the EPA’s commitment to existing core PFAS regulation.
EPA Announcement in Context
During the Biden administration, EPA launched several significant initiatives to combat PFAS contamination, recognizing the chemicals’ persistence in the environment and harmful health effects. Key efforts included the 2021 “PFAS Roadmap,” which outlined a strategy for research, regulation, and cleanup, as well as the implementation of new reporting requirements under the Toxic Substances Control Act (TSCA) in 2024.[1] These rules mandated that companies disclose details about PFAS manufacturing, use, and disposal dating back to 2011. Additional actions under the Emergency Planning and Community Right-to-Know Act (EPCRA) expanded annual PFAS reporting requirements to include lower concentration thresholds, while a separate rule designated two PFAS chemicals as hazardous under CERCLA, prioritizing them for cleanup and enforcement.[2]
Although the tone of EPA’s most recent announcement suggests the new administration will build upon these initiatives, it notably omits a commitment to maintaining or defending several of the core regulations previously adopted. Nevertheless, the announcement did outline a new set of actions that sheds light on EPA’s evolving strategy for addressing PFAS.
Key Actions
The EPA announcement outlined a multi-pronged strategy to strengthen scientific understanding, fulfill statutory obligations, and build partnerships to address PFAS contamination. Below are some of the key actions:
Strengthening the Science: To enhance scientific coordination, the agency will appoint a dedicated PFAS lead, implement a testing strategy under TSCA, expand data collection on air emissions, and begin annually updating its PFAS Destruction and Disposal Guidance. EPA also plans to accelerate method development to close key measurement and data gaps.
Fulfilling Statutory Obligations and Enhancing Communication: To meet statutory mandates and improve communication, the EPA will propose new effluent limitations for PFAS manufacturers and metal finishers, explore enhanced enforcement through RCRA, and continue implementing the Safe Drinking Water Act and TSCA to prevent further contamination. The agency also announced a commitment to updating the Toxic Release Inventory (TRI) and addressing compliance issues, while working with Congress and industry to create a liability framework that protects passive receivers.
Building Partnerships: Finally, the EPA emphasized collaboration with states and tribes to support cleanup, risk assessment, and enforcement, and pledged to finalize its biosolids risk assessment based on public input.
Takeaways and Looking Forward
EPA’s announcement suggests that the Trump administration is advancing actions that align with the general goals established during the Biden administration, and will not be rolling back federal restrictions on PFAS entirely. In announcing this plan, EPA Administrator Zeldin stated that this would be “the first, not the last” Trump administration decision regarding PFAS.
Consistent with this statement, on May 13, 2025, EPA published an interim rule extending the deadline for PFAS reporting requirements under TSCA Section 8(a)(7) and announced that it would be reviewing the regulation in light of Executive Order 14219.[3] In addition, on May 14, 2025, EPA announced that it would rescind drinking water regulations that limit certain PFAS in drinking water, and will extend the compliance period for others. EPA has not announced any action with respect to PFAS listed as hazardous substances subject to federal remediation requirements, but has stepped back from its defense of those regulations against industry challenges.[4]
Entities likely to be affected by PFAS regulation, or that are currently subject to reporting requirements or use restrictions, should closely monitor federal as well as state actions and decisions related to PFAS.
FOOTNOTES
[1] PFAS Strategic Roadmap: EPA’s Commitments to Action 2021—2024; TSCA Section 8(a)(7) Reporting and Recordkeeping Requirements for Perfluoroalkyl and Polyfluoroalkyl Substances | US EPA
[2] Addition of Certain PFAS to the TRI by the National Defense Authorization Act | US EPA; Designation of Perfluorooctanoic Acid (PFOA) and Perfluorooctanesulfonic Acid (PFOS) as CERCLA Hazardous Substances | US EPA
[3] Trump Executive Orders Tracker | Sheppard Mullin
[4] See discussion of Chamber of Commerce of the United States of America, et al., v. U.S. Environmental Protection Agency et al., Case No. 24-1193 (D.C. Cir.) in Sheppard’s Environmental YIR: 2024 Regulatory Legacies and Impacts | Real Estate, Land Use & Environmental Law Blog
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Amendments to New York Labor Law Establish Damages for Weekly Pay Violations
Earlier this month, the Governor of the State of New York, Kathy Hochul, approved amendments that establish the amount of damages recoverable for weekly pay violations. The amendments provide for a fraction of the damages that plaintiffs have been seeking for such violations.
The changes to the law are not just effective immediately, but also retroactive, which means they apply to currently pending claims.
New York’s pay frequency law
New York’s pay frequency law, which can be found at section 191 of the New York Labor Law (NYLL), generally requires private employers to pay a “manual worker” not less frequently than weekly and an “other worker” no less frequently than twice a month.
The rise of court claims alleging violations of the pay frequency law
New York’s pay frequency law has been around for over a century, but only recently started to become a popular claim for plaintiffs to assert in court.
In 2019, a New York intermediate appellate court (from our perspective, mistakenly) tied the pay frequency law (NYLL section 191) to a separate section of the NYLL that provides, in part, for a private right of action and 100 percent liquidated damages for underpaid wages (NYLL section 198). That decision, Vega v. CM & Associates Construction Management, LLC, opened the floodgates to lawsuits in New York federal and state courts for pay frequency claims as plaintiffs looked to Vega to insist they could pursue such claims in court and recover the equivalent of all untimely but paid wages again as damages. In many of these cases, the plaintiffs looked to maximize their potential recoveries by arguing they were manual workers who should have been paid weekly, pointing to any physical movement in which they engaged while working, such as walking.
But Vega was not the last word. Last year, in Grant v. Global Aircraft Dispatch, Inc., another New York intermediate appellate court decided the law does not provide a private right of action for pay frequency claims.
To date, neither the Court of Appeals for the State of New York (which is the highest court in the state) nor the United States Court of Appeals for the Second Circuit (which has jurisdiction over New York federal courts) has weighed-in on whether there is a private right of action for pay frequency violations, and, if so, how to measure damages. New York courts continue to wrestle with these issues.
The May 2025 amendments to the NYLL
On May 9, 2025, Governor Hochul signed off on an amendment to section 198 of the New York Labor Law that adds a new chapter to the pay frequency saga.
As amended, section 198 says liquidated damages are not available for such manual worker/weekly pay violations absent a prior finding or order that the employer committed such violation. The amendments further state that damages for such violations are lost interest of (no more than) 16 percent for each day a payment is late. Accordingly, the amendments should greatly limit the maximum potential recovery for individuals claiming they are manual workers who were not paid weekly. However, the amendments are notable because they do not expressly apply to non-manual workers, which is something of which employers should be aware.
Finally and importantly, the amendments do not address whether there is a private right of action for violations of the pay frequency law in the first place, or expand the coverage of that law beyond employees already covered.
Senate Advances Stablecoin Bill
On May 20, the U.S. Senate voted 66-32 to move forward with the Guardrails and Enforcement for Neutral Issuers of United States Stablecoins (GENIUS) Act (the “Act”), pushing the stablecoin bill past a major procedural hurdle. The vote sets the stage for full Senate debate and potential passage of the Act as early as next week.
The GENIUS Act aims to establish a regulatory framework to expedite the integration of stablecoins into the broader banking system by setting up requirements for issuance, backing, and supervision of payment stablecoins. The Act also delineates the authority of state and federal regulators and restricts certain firms from engaging in stablecoin issuance.
Several key provisions from the Act include the following:
Federal and state regulatory roles. Stablecoin issuers may be licensed by state regulators or directly by a federal payment stablecoin regulator, with standards coordinated under the Act. Issuers with over $10 billion in market capitalization fall under federal oversight, while issuers with $10 billion or less in market capitalization would have the option of state regulation by the relevant state banking agency (provided the state regulation satisfies certain federal standards).
Definition of payment stablecoins. The Act defines “payment stablecoin” as a digital asset that maintains a fixed value through backing by fiat currency or other secure reserves. While the Act does not explicitly prohibit interest-bearing stablecoins, recent SEC guidance (previously discussed here) indicates that stablecoins offering yield may be treated as securities—making it likely that, to circumvent regulatory complexity, payment stablecoins will primarily be used as a medium of exchange in practice.
Reserve asset requirements. Issuers must maintain one-to-one reserves in high-quality liquid assets, such as U.S. dollars, Treasury bills, or central bank reserves. Issuers must also avoiding rehypothecation (i.e., the use of reserves for purposes other than backing the stablecoin) and complete monthly certifications attesting to the sufficiency of reserves, among other reserve requirements.
Supervisory authority and enforcement. The Act gives federal banking agencies enforcement authority over permitted payment stablecoin issuers that is analogous to the authority in section 8 of the Federal Deposit Insurance Act over insured depository institutions and their holding companies. The Act authorizes the Federal Reserve, OCC, and FDIC to take enforcement action against payment stablecoin issuers, including – in certain circumstances – those issuers that are subject to regulation by a state banking agency.
Putting It Into Practice: The GENIUS Act would, if enacted, establish the first comprehensive federal framework for governing payment stablecoins. While competing stablecoin proposals such as the STABLE Act (previously discussed here) remain pending, the Senate’s passage of the GENIUS Act represents a significant step toward its codification. Stablecoin issuers and fintech companies should evaluate licensing pathways and reserve management models in anticipation the GENIUS Act’s enactment.
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