Last-Minute Changes to Michigan’s Earned Sick Time Law: What Employers Need to Know
Takeaways
Changes to eliminate, modify or clarify certain provisions of the Michigan ESTA were signed by the governor on 2/21/25 and became effective immediately. The law requires most Michigan employers to permit employees to accrue and use paid earned sick time annually.
Under the amended ESTA, paid earned sick time begins to accrue as of 2/21/25. Small businesses have until 10/1/25 to start providing 40 hours of sick time and may cap usage at 40 hours in one year. All other employers may cap usage at 72 hours in one year.
Employers should review the changes and take immediate steps to comply with the amended ESTA.
Article
After the Michigan Supreme Court’s opinion in Mothering Justice v. Attorney General and State of Michigan, No. 165325 (July 31, 2024), Michigan’s Earned Sick Time Act (ESTA), which expanded employee paid sick time rights, was set to take effect on Feb. 21, 2025, late on Feb. 20, 2025, a bill was passed to amend the ESTA. The amended ESTA became effective at 12:02 a.m. on Feb. 21, 2025, and was signed by Governor Gretchen Whitmer later that morning.
The amended ESTA still requires most Michigan employers to permit employees to accrue and use paid earned sick time annually. However, the amended ESTA removes certain rebuttable presumptions that an employer had violated the ESTA and eliminates an employee’s right to file a private cause of action for a violation of the ESTA, all of which were in the previous version of the ESTA.
The amended ESTA also modifies or clarifies certain provisions of the ESTA, and there are key changes employers should be cognizant of to ensure compliance with the amended law.
Key Changes in Amended ESTA
Scope
The definition of “employee” was modified to exclude:
An individual employed by the U.S. government;
An unpaid trainee or unpaid intern;
An individual employed in accordance with the Youth Employment Standards Act; and
An individual who works in accordance with a policy of an employer if: (a) The policy allows the individual to schedule the individual’s own working hours; and (b) 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.
Accrual of Earned Sick Time
Employees must accrue one hour of paid earned sick time for every 30 hours worked, not including hours used as paid time off.
Small employers (defined as an employer with up to 10 employees on payroll during at least 20 calendar workweeks in either the current or preceding calendar year) may cap usage of paid earned sick time at 40 hours in one year.
All other employers may cap usage of paid earned sick time at 72 hours in one year.
Frontloading
As an alternative to the accrual of paid earned sick time, an employer may provide an employee not less than 72 hours of paid earned sick time (40 hours for small employers) at the beginning of the year for immediate use. If earned sick time is frontloaded, employers are not required to:
Allow an employee to carry over any unused paid earned sick time;
Calculate and track an employees’ accrual of paid earned sick time; or
Pay out unused accrued paid earned sick time at the end of the year in which the time was accrued.
“Use-it-or-lose-it” applies if time is frontloaded.
Carryover
Unlike the original ESTA, unlimited carryover of unused paid earned sick time is not required under the amended Act. Under the amended ESTA, employers may cap carryover of unused paid earned sick time at 72 hours (40 hours for small businesses).
Waiting Period
Employees hired after Feb. 21, 2025, can be required to wait 120 days after beginning employment before using accrued paid earned sick time.
Notice Requirements
If the need for paid earned sick time is foreseeable, employers can require up to seven days’ advanced notice.
If unforeseeable, employers may require employees to give notice either:
As soon as practicable; or
In accordance with the employer’s policy on using sick time, if: (a) The employer notifies the employee of their policy in writing after Feb. 21, 2025; and (b) The policy allows employees to provide notice after the employee is aware of the need to use sick time.
Employers can require “reasonable documentation” for paid earned sick time of more than three consecutive days. Employers must give employees not more than 15 days to provide such documentation upon request and are required to pay all out-of-pocket expenses the employee incurs to obtain that documentation.
Unlike the original version of the ESTA, the amended ESTA permits employers to take adverse personnel action if employees use paid earned sick time for a purpose other than one allowed under the Act.
Usage Increments
Paid earned sick time can be used in either one-hour increments or the smallest increment the employer uses for absences.
Rate of Paid Sick Time
Employees using paid earned sick time must be paid at a rate equal to the greater of either the normal hourly or base wage for that employee, or the established minimum wage. Employers are not required to include overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, or gratuities in calculating a normal hourly wage or base wage.
No Payout Upon Separation
Like the original ESTA, the amended ESTA does not require payout of accrued, unused paid earned sick time upon the employee’s separation from employment.
No Retaliation
The amended ESTA prohibits an employer, or any other person, from interfering with, restraining, or denying the exercise of, or the attempt to exercise, any right protected under the ESTA. It also prohibits an employer from taking retaliatory personnel action or discriminating against an employee because the employee has exercised a right under the ESTA.
Removal of Rebuttable Presumption
The amended ESTA removed the rebuttal presumption of a violation of the ESTA if an employer took an adverse personnel action against a person withing 90 days after that person engaged in certain protected activities under the ESTA.
No Private Right of Action
Unlike the original ESTA, the amended ESTA does not provide employees a private cause of action.
Required Posters and Notice
Employers have 30 days from Feb. 21, 2025, to post posters consistent with the amended ESTA and provide written notice to employees as required by the ESTA.
The Department of Labor and Economic Opportunity is required to create and make available to employers notices and posters for employers’ use in complying with the amended ESTA. The Department is required to provide the notices and posters in English, Spanish, and any other language deemed appropriate by the Department. Posters reflecting the amendments to the ESTA, however, are not currently available.
Takeaways
Under the amended ESTA, paid earned sick time begins to accrue as of Feb. 21, 2025. Small businesses have until Oct. 1, 2025, to start providing 40 hours of sick time. New businesses with up to 10 employees have a three-year grace period after forming.
Employers should take immediate steps to comply with the ESTA.
The Top 10 Things Every Employer Should Know About OSHA
In the evolving landscape of workplace safety regulations, it is essential for construction employers to stay well-informed about the Occupational Safety and Health Administration’s (OSHA) protocols and guidelines. Our series, “Top 10 Things Every Employer Should Know About OSHA,” breaks down critical aspects ranging from the rights and responsibilities during OSHA inspections to intricacies of compliance standards and potential citation scenarios. This comprehensive guide aims to empower employers with the knowledge needed to navigate OSHA regulations effectively, ensuring safer work environments and minimizing legal risks.
Here’s a recap of our list of the top 10 things every employer should know about OSHA:
No. 1 – Walkaround Representatives
Employers and employees have the right to have representatives present during an OSHA site inspection.
According to 29 CFR 1903.8(c), employers and employees have the right to authorize a representative to accompany OSHA officials during workplace inspections for the purpose of aiding the inspection (also known as walkaround representatives). OSHA regulations require no specific qualifications for employer representatives or for employee representatives who are employed by the employer. We encourage all employers to have a designated walkaround representative present during OSHA inspections, which could include legal counsel.
No. 2 – Be Present in Manager Interviews
We all know that OSHA has the right to interview folks as part of an investigation. Whether a company representative and the company attorney can also attend an interview depends on the position of the person being interviewed.
If the person to be interviewed is a non-managerial employee, OSHA can conduct the interview in private, outside the presence of the employer or the employer’s representatives. Not so with managerial employees. If OSHA wants to interview a management-level employee, the employer has the right to have a company representative and/or attorney present.
No. 3 – Employees Have Rights When It Comes to OSHA Interviews
Although OSHA has the right to conduct private, one-on-one interviews with a company’s non-managerial employees, those same employees have rights too. Read the full article for details and things to consider.
No. 4 – OSHA Must Issue a Citation Within Six Months
OSHA has a time limit on issuing citations. It must issue a citation within six months of the occurrence of any violation. The only exception to this rule is where the employer has concealed the violative condition or misled OSHA. If such a situation occurs, OSHA must issue the citation within six months from the date that OSHA learns, or should have known, of the condition.
So, the moral of the story is just because it’s been a couple months since an OSHA inspection does not mean OSHA has decided not to issue a citation. You can check on the status of OSHA’s investigation by reviewing the OSHA establishment search page to see whether OSHA has closed its inspection or not.
No 5. – OSHA Can Issue Citations for Unsafe Work Conditions That Have Not Resulted in an Employee Injury
Most frequently, employers do not hear from OSHA unless there is a reported workplace injury. When a reported workplace injury occurs, OSHA performs a walkthrough inspection of the worksite and may ultimately issue a citation for hazardous conditions OSHA believes may have caused or contributed to the incident. However, OSHA is not limited to issuing citations for hazardous conditions that may have caused or contributed to a workplace injury. Rather, OSHA can cite employers for any and all hazardous conditions to which workers may have been exposed regardless of whether the cited condition was in any way related to the incident.
No 6. – But No One Was There? OSHA Can Still Cite for Unsafe Work Conditions Where Workers Were Not Exposed
We often hear, “OSHA can’t cite me because I didn’t employ the injured worker.” Unfortunately, this statement is often untrue.
Under OSHA’s Multi-Employer Doctrine, if you are an employer on a worksite where other companies are also performing work (e.g., construction sites and oil/gas well sites), you can be subject to citation for workplace hazards to which other companies’ employees are exposed. OSHA created the Multi-Employer Doctrine in recognition that there are many circumstances in which multiple employers will be working on a single worksite at the same time thereby affecting the working conditions to which all workers are exposed.
No. 7 – OSHA Can Issue Citations for Unsafe Work Conditions That Do Not Violate Any Specific OSHA Standard
Many employers have a false notion that OSHA can’t issue a citation if there is no specific standard violated.
The reality is, however, that OSHA has a catchall/gap filler provision that allows it to cite an employer even if no specific standard was violated: the “General Duty Clause,” Section 5(a)(1) of the Occupational Safety and Health Act. OSHA can cite employers for violations of the General Duty Clause if a recognized serious hazard exists in the workplace and the employer doesn’t take reasonable steps to prevent or abate the hazard. The General Duty Clause is used only where there is no standard that applies to the particular hazard.
No. 8 – Employers Have 15 Working Days to Contest a Citation but Have the Option to Negotiate a Settlement with OSHA Before That Deadline
What happens if OSHA issues a citation and you do not agree with any or all of it? You have 15 working days from the date you receive the citation to contest in writing the citation, proposed penalty, and/or the abatement date. Read the full article to learn more about your options and how to reach a favorable settlement.
No. 9 – The Particulars on OSHA Violations: How Much Notice Is Enough?
Just what does an OSHA citation have to include? Section 9(a) of the Occupational Safety and Health Act requires that citations “describe with particularity the nature of the violation, including a reference to the provision of the Act, standard, rule, regulation, or order alleged to have been violated.”
This statutory mandate is designed to ensure that OSHA properly informs employers of alleged violations so they can correct hazards promptly and avoid unnecessary litigation. However, the Occupational Safety and Health Review Commission and the courts have consistently interpreted this requirement to mean that citations need only provide employers with “fair notice” of the violation. In other words, as long as an employer is put on notice that a particular condition may violate OSHA standards, additional specifics can be obtained through discovery. As a result, OSHA often issues citations with broad language rather than granular detail.
No. 10 – Unlocking the Secrets of OSHA Inspections Through FOIA Requests
Did you know that you can request files from OSHA? Under the Freedom of Information Act (FOIA), employers, employees, and third parties have the right to request documents from OSHA’s inspection files. These records provide valuable insight into the evidence and reasoning behind OSHA’s decisions, including citations issued during site inspections. They can also be critical in legal proceedings, including lawsuits related to workplace safety.
A Deepened Divide: Appellate Court Joins False Claims Act Circuit Split in Favor of Health Care Defendants
On February 18, 2025, the United States Court of Appeals for the First Circuit issued its opinion in United States v. Regeneron Pharmaceuticals Inc., finding that, in Anti-Kickback Statute (AKS) cases, the government must show a claim would not have been submitted “but for” the AKS violation to establish False Claims Act (FCA) liability.1
This appeal stemmed from allegations that Regeneron Pharmaceuticals induced prescriptions of Eylea, an ophthalmological drug, by covering copayments for certain recipients of the drug. The government contended that the funding of copayments constituted kickbacks and therefore resulted in false claims made to Medicare in violation of the FCA. At issue for the First Circuit was the interpretation of “resulting from” in the 2010 amendment to the AKS, which provides that a “claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].”2 The Court ultimately decided that “statutory history provides no reason to deviate from the ordinary course, in which we treat ‘resulting from’ as requiring but-for causation” and that this interpretation would not render it difficult for the government to establish liability. 3
The First Circuit’s ruling is favorable for health care providers, as it sets a higher bar for the government to prove causation in FCA cases involving AKS violations. Nevertheless, the decision deepens a circuit split regarding the causation requirements of FCA claims arising from AKS violations. While this decision aligns the First Circuit with the Sixth and Eighth Circuits, the decision contrasts with the Third Circuit, which requires only a demonstration of a link “between the alleged kickbacks and the medical care received . . .”4 This circuit split will continue to persist until the Supreme Court addresses the issue. However, the timing of such a decision is uncertain, especially after the Supreme Court declined to hear a related appeal from the Sixth Circuit in 2023.5
As courts continue to take on this issue, health care providers and FCA litigants should closely monitor developments in this area, particularly if they operate in jurisdictions without controlling case law. Understanding the applicable causation standard is crucial for navigating FCA litigation effectively and staying informed will be key to managing potential risks and liabilities as the legal landscape evolves.
[1] United States v. Regeneron Pharmaceuticals Inc., No. 23-2086, 2025 WL 520466 (1st Cir. Feb. 18, 2025).
[2] See 42 U.S.C. § 1320a-7b(g).
[3] Regeneron Pharmaceuticals Inc., 2025 WL 520466, at *8-9.
[4] United States ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89, 93 (3d Cir. 2018).
[5] United States, ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023), cert. denied, No. 23-139, 2023 WL 6378570 (Oct. 2, 2023).
Risk Bearing Entity Requirements: New Jersey and New York
This blog reviews the regulatory requirements that apply to risk bearing entities (RBE) in New Jersey and New York. New Jersey and New York demonstrate distinct approaches to the registration and regulation of RBEs and provider network activities. This blog is part of Foley & Lardner’s RBE Series (see our Introduction posted November 18, 2024).
A variety of RBE reimbursement models that incorporate financial risk can trigger a requirement for Organized Delivery System (ODS) licensure in New Jersey and/or Independent Practice Association approval requirements in New York. Specifically, as generally noted in our Introduction, these models could include traditional or global capitation structures (e.g., financial responsibility for health care services delivered), bundles and episodic structures or other alternative payment models (e.g., financial responsibility for health care services for health conditions or treatments), shared savings, gain sharing, and other upside or downside risk structures (e.g., financial responsibility for total cost of care or achievement of medical loss ratios).
New Jersey
New Jersey classifies an organization that contracts with a carrier to provide, or arrange to provide, health care services or benefits under the carrier’s benefits plans as an ODS.[1] A “carrier” includes insurers, hospital service corporations, medical service corporations, health service corporations, and health maintenance organizations. An ODS often convenes licensed health care providers into a provider network to support its contracts with carriers. An ODS is either certified or licensed depending on whether it assumes financial risk from a carrier. An ODS that assumes financial risk must be licensed. Otherwise, an ODS that will not be compensated on the assumption of financial risk (such as a provider network of licensed health care providers utilizing fee-for-service reimbursement), or is determined to assume de minimus risk, must be certified.[2]
An ODS may include preferred provider organizations, physician hospital organizations, or independent practice associations.[3] However, organizations that only contract to provide pharmaceutical services, case management services, or employee assistance plan services may not require a license or certification. In addition, ODSs are defined to exclude licensed health care facilities and providers.[4]
To apply for ODS licensure or certification, an organization must submit an application to the New Jersey Department of Banking and Insurance on prescribed forms together with copies of organizational documents, standard contract forms, and with respect to licensure applications only, financial information.[5] Unlike a certified ODS, a licensed ODS must comply with risk-based capital, liquidity, minimum net worth, and minimum statutory deposit requirements; and meet other financial standards and ongoing reporting and disclosure obligations commonly applicable to state-licensed insurance companies.[6]
Whether certified or licensed, an ODS must meet minimum standards to perform functions under contracts with carriers.[7] The standards are similar to those carriers would have to comply with if performing such function themselves.
New York
New York classifies an organization that convenes licensed health care providers into a provider network for the provision of health care services through contracts with “managed care organizations” (MCO) and/or workers compensation preferred provider organizations or their participants as an Independent Practice Association (IPA).[8] MCOs include a health maintenance organization or other person or entity arranging, providing, or offering comprehensive health service plans to individuals or groups.
Prior to corporate formation or operation, IPAs must receive approval from the New York State Department of Health (Department of Health). The Department of Health requires the submission of certain information, such as contact, organizational, and operational information of the proposed IPA. A checklist of the IPA formation requirements is found here.[9] Notably, the certificate of incorporation or articles of organizations of the IPA must include “Independent Practice Association” or “IPA” in its name, contain express powers and purposes permitting provider network activities, and include prescribed authorizing language and prohibited activities, and related sign-offs from the New York State Departments of Education and Financial Services.[10] Further, some IPA requirements that are specific to MCO engagements are shouldered by MCOs.[11]
An IPA that intends to engage in risk-sharing in New York must demonstrate to the Department of Health and the Department of Financial Services (which houses the Superintendent of Insurance) that the IPA is financially responsible and capable to assume risk. The review of whether the IPA is financially responsible and capable includes an evaluation of proposed risk sharing and insurance, stoploss, reserves, or other arrangements to satisfy obligations to MCOs, participating provider, and enrollees.[12] Risk-sharing means “the contractual assumption of liability by the health care provider or IPA by means of a capitation arrangement or other mechanism whereby the provider or IPA assumes financial risk from the MCO for the delivery of specified health care services to enrollees of the MCO”.
Conclusion
New Jersey ODS licensure or certification and New York IPA approval requirements have become increasingly important as RBEs have moved beyond their early beginnings as a means for independent physician practices to band together to negotiate access to payor contracts. They have now become major players in network development and supporting delegated payor functions.
The regulatory frameworks for RBE operations differ from state to state, and their applicability can vary based on specific offerings, services, and relationships of RBEs. We recommend careful review of RBE operations and relationships against applicable requirements of operating states.
Awareness of these requirements is crucial for RBEs, as well as downstream and upstream contracting entities that may be indirectly subject to regulations. For example, the terms of provider agreements of an ODS must meet specific requirements in New Jersey,[13] and MCOs in New York are not permitted to contract with an IPA that has not been approved by the New York State Departments of Health, Education, and Financial Services.[14]
[1] N.J. Stat. § 17:48H-1.
[2] N.J. Stat. § 17:48H-1; N.J. Admin. Code § 11:22-4.3(c).
[3] See N.J. Stat. § 17:48H-1.
[4] See N.J. Admin. Code § 11:22-4.2.
[5] N.J. Stat. §§ 17:48H-2, 17:48H-3, 17:48H-11, 17:48H-12; N.J. Admin. Code §§ 11:22-4.4, 11:22-4.5.
[6] See, e.g.,N.J. Admin. Code §§ 11:22-4.8, 11:22-4.9.
[7] N.J. § 17:48H-33 (certified and licensed ODS are subject to carrier standards in N.J. Stat. § 26:2S-1 et seq.)
[8] 10 NYCRR § 98-1.2.
[9] https://www.health.ny.gov/health_care/managed_care/hmoipa/ipa_formation_requirements.htm (last accessed Jan. 12, 2025).
[10] 10 NYCRR § 98-1.5(b)(6)(vii).
[11] See, e.g., 10 NYCRR § 98-1.18.
[12] 10 NYCRR ss. 98.1-2, 98.1-4.
[13] See N.J. Admin. Code §§ 11:24B-5.1-11:24B-5.7.
[14] See 10 NYCRR § 98-1.5(b)(6)(vii).
Michigan Makes Significant Revisions to Earned Sick Time Act
Late on Thursday, February 20, 2025, the Michigan legislature passed amendments to the Earned Sick Time Act (ESTA) that was otherwise set to take effect by court order the next day. The amendments were signed into law by Governor Gretchen Whitmer on Friday, February 21, 2025. Had the legislature and governor not acted, some very onerous provisions of the law would have gone into effect. The amendments which are effective immediately update the Michigan sick leave law as follows:
Accrual basis. The accrual rate under the amended ESTA remains one (1) hour of sick leave for every 30 hours worked. There is no cap on accrual, but employers may cap usage at 72 hours per year. The amendments changed the law’s carryover provisions to allow employers to limit the amount of carryover to 72 hours for large employers (with over ten employees). For small employers, the accrual basis has also changed. Under the prior version of the law, small employers would have been required to provide up to 40 hours of paid leave and 32 hours of unpaid leave. The amendments no longer require 32 hours of unpaid leave. Small employers still must provide accrual of sick leave at the same rate (one (1) hour for every 30 hours worked) but may cap accrual of sick leave at 40 hours of paid leave.
Front loading. Under the prior version of the law, frontloading was not contemplated, and the state’s guidance advised that, even if employer’s frontloaded paid sick leave, it must still reconcile with the amount the employee would have accrued and must carry over any unused sick leave year to year. Under the amended version now in effect, an employer may choose to frontload 72 hours of sick leave at the start of the benefit year. If frontloading, the employer is not required to carryover, track accrual, or pay out sick leave at the end of the year. Small businesses may front load 40 hours of sick leave.
For part-time employees, employers may frontload the amount of sick leave the employees would be expected to accrue under the one (1) hour of sick leave for every 30 hours worked method. In order to take advantage of this, the employer must provide notice to the employee of the expected number of hours, and the employer must provide extra time if the actual time worked is higher than predicted.
Waiting period. Employers can now require new employees to wait 120 days before they are permitted to use sick leave (rather than 90); accrual or front loading is still required at the start of employment.
Combining sick leave with a PTO policy. The amendments make clear that sick leave can be added to a PTO policy so long as the PTO policy provides at least the same amount of leave as the ESTA. The amendments clarify that PTO time can be used for sick leave purposes or any purpose and that employers are not required to provide additional sick leave if an employee uses PTO for another purpose.
Rate of pay. The amended ESTA states that sick leave should be paid at the “normal hourly wage or base rate” but not less than minimum wage. Overtime pay, holiday pay, bonuses, commissions, supplemental pay, piece-rate pay, tips, and gratuities do not need to be included in the normal hourly wage/base rate.
Notice requirements. If the need to use sick leave is foreseeable, the employer may require seven days’ notice. If the need for leave is not foreseeable, the employer may require the employee to give notice in either of the following ways: (1) as soon as practicable; or (2) in accordance with the company’s policy regarding use of sick leave as long as (i) on the date of hire, or effective date of the law or when the policy takes effect, the employer provides the written policy to employees; and (ii) the notice requirement allows the employee to provide notice after the employee is aware of the need for use of sick time.
An employer cannot deny the use of leave for not following the notice policy if the employer (1) did not provide a written policy; or (2) the employer made changes to the policy and did not provide notice of the policy change within five days of the change.
Discipline. Employers can discipline employees for abuse of the sick leave policy or failure to follow the notice provisions.
There is no private right of action for employees. Like Michigan’s prior sick leave statute, in effect since 2018, all complaints must go through the Michigan Department of Labor and Economic Opportunity. In addition, the rebuttable presumption of violation of the law, which would have otherwise come into effect on February 21, 2025, was also removed by these amendments.
Collective Bargaining Agreements. If a collective bargaining agreement is in effect and conflicts with the ESTA, the amended act applies beginning on the stated expiration date in the collective bargaining agreement (notwithstanding any statement in the agreement that it continues in force until a future date or event or the execution of a new collective bargaining agreement). In other words, in the event of a conflict, any collective bargaining agreement that is in effect controls — until the expiration of the contract, at which time the provisions of the amended sick leave law will take effect.
Increments of usage. The amendments permit the employer to choose either (1) one-hour increments or (2) the smallest increment the employer uses to account for absences of uses of other time. The key difference here from the prior version of the ESTA is the employer choice for increment and that it is what the “employer” uses for absences, whereas the original ESTA mandated that the smaller of one hour or the smallest increment the employer’s payroll system should be used to account for absences.
Doctor’s notes. Like the original ESTA, documentation may still only be requested of any employee after more than three consecutive sick days are used. However, the amendments added the requirement that requested documentation must be supplied by the employee within 15 days. The requirement to pay the out-of-pocket costs for obtaining a doctor’s note remains.
Notice to employees. Employers have 30 days to provide employees with written notice to each employee of the sick leave policy and this new law. Small employers have until October 1, 2025, to implement the changes.
Exemptions.
Nonprofit agencies are exempt from the ESTA.
The following types of employees are not entitled to sick leave: employees of the U.S. government; any employee who (1) sets his or her own schedule and (2) faces no punishment for not meeting a minimum amount of hours; unpaid trainees/interns; and minors.
The changes mark a significant departure from the Michigan sick leave requirements that have been in place since 2018 and the Earned Sick Time Act that would have otherwise taken effect on Friday, February 21, 2025. It is likely that employees are also tracking these changes and will ask questions regarding how policy change affect their ability to take sick leave and PTO generally. Employers should review their policies and ensure compliance with the provisions of the new law.
Healthcare Preview for the Week of: February 24, 2025 [Podcast]
Can the House Pass a Budget Resolution This Week?
The House is back from recess, so both chambers of Congress are in session this week (although the House is out again on Friday).
With 18 days left to pass a budget before the March 14, 2025, deadline, the focus this week is on whether the House can pass a budget resolution. There may be a budget resolution vote on Tuesday evening, but this timing could shift if Republicans are not able to get enough support. House Republicans have a 218 – 215 majority, meaning they can only afford to lose one vote.
President Trump has endorsed having “one big, beautiful bill” that includes a permanent extension of the 2017 tax cuts, as opposed to the Senate’s approach of two separate reconciliation bills.
On February 13, 2025, the House Budget Committee approved a budget seeking at least $880 billion in mandatory spending cuts to programs overseen by the House Energy and Commerce Committee. The Medicaid program is a likely target to provide a significant portion of those savings. Some Republicans have started to raise concerns about the level of potential funding cuts to Medicaid because of the impact such cuts would have on constituents and providers in their districts and across their states.
Outside of budget discussions, the House Energy and Commerce Health Subcommittee will hold a hearing on pharmacy benefit managers. The Senate will hold hearings for several of President Trump’s cabinet nominees, including nominees for deputy secretary of the US Department of Homeland Security, deputy director of the Office of Management and Budget, director of the Office of Science and Technology Policy, and federal trade commissioner. Senate committees will also hold hearings on combatting the opioid epidemic and the HALT Fentanyl Act.
The Medicaid and CHIP Payment and Access Committee also meets this week and will cover topics such as state supplemental and directed payments, substance use disorder, and the prior authorization process.
Today’s Podcast
In this week’s Healthcare Preview podcast, Debbie Curtis and Rodney Whitlock join Maddie News to discuss the status of the reconciliation process in the House, including the debate on Medicaid, and the looming March 14 government funding deadline.
Medicaid in the Crosshairs What Restructuring Could Mean for States, Providers, and Beneficiaries
As budget negotiations heat up in Washington, Medicaid has emerged as a key target for cost-cutting measures. With policymakers looking to trim federal spending while maintaining commitments to Social Security and Medicare, Medicaid is one of the few major programs left on the table. Proposals floating around Capitol Hill include everything from block grants and per capita caps to stricter eligibility requirements and reductions in federal matching rates. These potential changes could fundamentally alter the structure of Medicaid, shifting more financial responsibility to states and reshaping access to care for millions of Americans.
Waivers: A Policy Battleground
One of the most immediate levers for Medicaid reform lies in the use of Section 1115 waivers, which allow states to test innovative ways to deliver and finance care. Historically, waivers have been used to expand coverage, integrate social determinants of health into Medicaid, and experiment with new payment models. Under the Biden administration, states received waivers for initiatives like continuous eligibility for young children, health-related social needs interventions, and pre-release Medicaid coverage for individuals exiting incarceration. Many of these waivers are now under review, and the current administration may opt to roll them back, cutting off funding for programs designed to improve access and reduce health disparities.
At the same time, some states are eyeing waivers as a vehicle for more restrictive Medicaid policies, including work requirements and premium obligations for low-income enrollees. These policies, which were a hallmark of the first Trump administration, could return in full force, despite previous legal challenges. While work requirements are often framed as a way to encourage self-sufficiency, past attempts have led to significant coverage losses due to administrative complexity and reporting barriers. Georgia remains the only state actively implementing work requirements today, but other states could quickly follow suit if federal leadership signals support for these policies.
Federal Financing: More State Burden, Fewer Federal Dollars
The core structure of Medicaid financing—a federal-state matching system—has long provided states with a reliable source of funding for healthcare. However, a range of proposals could shift more of the financial burden to states.
One option is reducing the enhanced federal match for the Affordable Care Act expansion population, which currently stands at 90%. Rolling it back to standard Medicaid match rates would force expansion states to pick up a larger share of the tab, potentially leading some to scale back or even withdraw from expansion altogether.
Another major consideration is the reduction or elimination of provider taxes and intergovernmental transfers, which many states rely on to fund Medicaid. Provider taxes currently help states generate the non-federal share of Medicaid dollars, but restrictions on these financing tools could leave states scrambling to fill budget gaps. Without new revenue sources, states may have no choice but to cut provider rates, reduce optional benefits, or impose enrollment caps.
The Ripple Effect on Providers and Beneficiaries
The impact of Medicaid restructuring would extend beyond state governments. Providers—particularly safety-net hospitals, nursing homes, and home care agencies—could see sharp reductions in reimbursement, making it harder to sustain services for Medicaid populations. Proposals to limit state-directed payments and disproportionate share hospital funds could further destabilize facilities that serve a high percentage of low-income patients.
For Medicaid beneficiaries, the stakes are even higher. Changes in eligibility criteria, enrollment procedures, or benefit packages could leave millions without coverage. Older adults and individuals with disabilities who rely on Medicaid for long-term care may face significant barriers if states scale back HCBS funding, tighten income requirements, or impose cost-sharing mechanisms.
What Comes Next?
Medicaid is at a crossroads. As policymakers weigh different restructuring options, stakeholders across the healthcare landscape—including states, providers, and advocacy groups—must be prepared to engage. The decisions made in the coming months could redefine Medicaid’s role in the healthcare system, reshaping everything from eligibility and benefits to how care is financed and delivered.
For those invested in the future of Medicaid, now is the time to track policy developments, understand the implications of potential changes, and advocate for solutions that preserve access while ensuring financial sustainability. The outcome of this debate will determine whether Medicaid continues to serve as a safety net for millions—or whether its role is significantly diminished in the name of fiscal restraint.
Federal Court Concludes States Have Standing to Challenge EEOC’s Pregnant Workers Fairness Act Rule (US)
The U.S. Court of Appeals for the Eighth Circuit ruled on February 20, 2025, in Tennessee v. Equal Employment Opportunity Commission, that seventeen (17) State attorneys general have standing to challenge the EEOC’s Final Rule interpreting the Pregnant Workers Fairness Act (the “PWFA” or “the Act”). In the first federal appellate court decision to consider the issue, the Eighth Circuit panel held that the plaintiff-States have a sound jurisprudential basis to challenge the Final Rule because the States “are the object of the EEOC’s regulatory action.”
Congress enacted the PWFA in 2023. The Act requires covered employers to provide employees or applicants with reasonable accommodation to known limitations related to, affected by or arising out of “pregnancy, childbirth, or related medical conditions,” unless the accommodation will cause the employer undue hardship. 42 U.S.C. § 2000gg(4). Critical to understanding this employer obligation is the embedded term “related medical conditions,” which Congress left undefined, choosing instead to delegate to the Equal Employment Opportunity Commission (EEOC) the responsibility to “provide examples of reasonable accommodations addressing known limitations related to pregnancy, childbirth, or related medical conditions.” 42 U.S.C. § 2000gg-3(a).
In April 2024, after notice-and-comment rulemaking, the EEOC issued regulations broadly defining what constitutes “limitations related to, affected by, or arising out of pregnancy, childbirth or related medical conditions,” including within its examples, among others, lactation, miscarriage, stillbirth and “having or choosing not to have an abortion.” 29 C.F.R. Part 1636 & app. A. Numerous religious organizations voiced dissent to the EEOC’s broad definition of limitations related to pregnancy and childbirth. Even within the EEOC, there was vocal disagreement about the proposed regulations. Andrea Lucas—who at the time was an EEOC Commissioner but who, on January 20, 2025, was designated by President Trump as the Acting Chair of the EEOC shortly before he terminated two of the three Democratic Commissioners on the five-seat EEOC—vociferously objected to the agency’s broad interpretation of the phrase “pregnancy, childbirth, or related medical conditions,” claiming the phrase conflated accommodations to pregnancy and childbirth with accommodations to the female sex, including female biology and reproduction. Over Ms. Lucas’s objection, the EEOC’s Final Rule issued, with the broad definition of pregnancy-related limitations intact.
Less than one week after the Final Rule took effect, seventeen State Attorneys General, all hailing from Republican states, challenged the Final Rule on behalf of State employers, contending the EEOC exceeded its authority under the PWFA when it included abortions within the scope of pregnancy “related medical conditions.” At oral argument, the States conceded there may be some situations when a State employer should reasonably accommodate an employee obtaining an abortion, such as in the case of an incomplete miscarriage, ectopic pregnancy or when pregnancy-related medical conditions (such as diabetes) imminently threaten the health of the pregnant employee. However, the States objected, the Final Rule also purports to require accommodation for elective abortions “prompted exclusively by the woman’s choice, where no ‘physical or mental condition related to, affected by, or arising out of pregnancy, childbirth, or related medical conditions…’ exists, but where getting the abortion creates some limitations on the employee’s ability to do her job.” The States argued that, in many jurisdictions they represented, elective abortions—indeed, almost all abortions—are illegal; therefore, a regulation requiring accommodation for an illegal medical procedure created a non-speculative injury to the State-employers. The EEOC retorted that the States’ request to enjoin the regulation was unwarranted and the States lacked standing to bring the case because the States’ asserted injuries were purely speculative, both with respect to any individual accommodation and the overall cost of compliance with the regulation.
The federal court for the Eastern District of Arkansas agreed with the EEOC and held, on June 14, 2024, that the States lacked standing to challenge the Final Rule. The district court held the Plaintiff-States had not asserted a redressable injury-in-fact, pointing specifically to the EEOC’s inability to bring enforcement actions against State employers and the vagary around the compliance costs the States argued they would bear implementing the regulation. On appeal, however, the Eighth Circuit Court of Appeals reversed, concluding that “[t]he imposition of a regulatory burden itself causes injury.” The appellate court reasoned:
Covered entities must comply with the Rule, and we presume that the States will follow the law as long as the Rule is in effect. An employer cannot meet its obligations under the Rule without taking steps to ensure that its employees know their rights and obligations under the Rule. As a practical matter, the Rule requires immediate action by the States to conform to the Rule, and this action produces an injury in fact.
The case now returns to the district court to hear the States’ arguments on the merits. Should the States prevail on the merits, the Final Rule is likely to be substantially revised. Although EEOC Acting Chair Lucas lacks the authority unilaterally to rescind or modify the Final Rule, she has indicated that the EEOC will reconsider portions of the Final Rule that are “unsupported by the law” once a quorum is re-established. We will continue to monitor and update with developments.
President Trump Executive Order on Supervision of ‘Independent’ Agencies
Amidst a blitz of executive action, on February 18, President Donald Trump signed an executive order entitled “Ensuring Accountability for all Agencies” (Executive Order) exerting more direct control over “independent regulatory agencies.” President Trump cited the “often-considerable authority” of these independent regulatory agencies as the rationale for needing this additional supervision and control. Furthermore, due to perceived congressional inaction, the Executive Order, coupled with previous ones,[1] forms another part of President Trump’s deregulatory agenda and his efforts to have the executive speak with one voice.
Among other things, the Executive Order requires independent regulatory agencies to submit draft regulations and strategic plans to the president and the Office of Management and Budget (OMB) for review. Additionally, OMB will review independent regulatory agencies’ actions for consistency with the president’s policies and these agencies must establish a White House Liaison to presumably report to the president, although the duties of this position are not defined.
This post sets forth more details on the requirements of the Executive Order, highlights its potential impacts for independent agency regulation and discusses whether the Executive Order could be subject to challenge.
Requirements of the Executive Order
The Executive Order requires all independent regulatory agencies to submit for review all proposed and final significant regulatory actions to the Office of Information and Regulatory Affairs (OIRA) within OMB before publication in the Federal Register. Broadening agencies subjected to regulatory review, the Executive Order references the definition of “independent regulatory agency” from 44 U.S.C. § 3502(5), which includes the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC), among 20 total agencies and a catchall provision to include any other similar agency designated by statute as a federal independent agency or commission.[2] There is a carveout for the Board of Governors of the Federal Reserve System and the Federal Open Market Committee regarding actions related to monetary policy. OIRA currently engages in a limited review of proposed and final rules by independent regulatory agencies. The Executive Order expands the scope of OIRA’s review.
OMB Establishment of Performance Standards and Management Objectives
The Executive Order empowers the director of OMB to provide guidance on the Executive Order’s implementation and how independent regulatory agencies should structure their submissions. The deadline for these agencies to submit their regulatory actions is either 60 days from the Executive Order or upon completion of the OMB guidance.
OMB Review of Independent Regulatory Agencies’ Activities and Spending
Pursuant to the Executive Order, OMB will continually review independent regulatory agencies’ obligations for consistency with the president’s policies and priorities. The review process will enable the president to make possible adjustments to agency operations and regulatory actions. For example, OMB review could be used to steer independent regulatory agencies to prohibit or limit spending on particular activities, functions, or projects to the extent that such prohibition or limitation is consistent with US law.
Additional Coordination and Consultation With the Executive Office of the President
The Executive Order requires independent regulatory agency chairpersons to regularly consult with and coordinate policies and priorities with OMB directors, the White House Domestic Policy Council and the White House National Economic Council. There is no further detail on how often these meetings are expected to occur. Additionally, the Executive Order requires each agency to have a White House Liaison, who will presumably shepherd the communications between the agency and the president.
This requirement is a divergence from precedent as no longer can chairpersons set their own strategic plans; they must submit their agency strategic plans developed pursuant to the Government Performance and Results Act of 1993 to the director of OMB for clearance prior to finalization.
Centralizing All Executive Branch Interpretations of the Law
Under Section 7 of the Executive Order, the president and attorney general will set forth all official executive branch interpretations of the law. Executive branch employees including agency general counsel, when acting in their official capacity, are prohibited from presenting any legal interpretation as the official position of the United States if it conflicts with the legal opinions of the president or the attorney general. This restriction applies to all actions, including issuing regulations, providing guidance and advocating positions in litigation.
This level of coordination and determination already occurs when, for example, a case is pending before the Supreme Court and the Department of Justice seeks the views of independent regulatory agencies in determining the government’s litigation position before the court. The Executive Order suggests that such coordination will potentially expand to include agency positions taken before district and appellate courts, as well as legal positions taken as part of an agency’s rulemaking. It may also slow the pace of regulatory and enforcement action of independent regulatory agencies to account for the additional time to engage with other parts of the executive.
Possible Court Challenge?
Congressional statutes grant the president authority to issue executive orders to help them implement federal laws. Article II of the Constitution prohibits the president from making laws; the president has authority only to enforce and implement laws. When an executive order is written too broadly, it can be found, in certain situations, to be seen as the president exercising legislative powers that are strictly reserved for Congress.
Federal courts have the authority to strike down presidential executive orders for two reasons: (1) where the president lacks authority to issue the order; and (2) the order is prima facie unconstitutional in substance. In the past, executive orders have been challenged via statutory and constitutional grounds.[3] However, federal courts have been cautious to overstep into the powers of another branch.
The Executive Order’s directive regarding independent regulatory agencies is unprecedented because past presidents have explicitly excluded these agencies from similar oversight. For example, President Reagan’s Executive Order 12291 and President Clinton’s Executive Order 12866 both required regulatory review for certain agencies but notably exempted independent regulatory agencies from most of these mandates.[4]
Impact on Independent Regulatory Agencies
Historically, even though the president appoints the commissioners, the CFTC and SEC have operated with some degree of autonomy from the president. This aligns with how independent regulatory agencies were conceived by Congress; to have some protection from direct presidential control. The Executive Order seeks to more directly influence the regulatory agenda of independent agencies.
Indeed, President Trump is asserting broad powers to remove Senate-confirmed members of multimember boards. President Trump has removed members of the National Labor Relations Board (NLRB) and the Equal Employment Opportunity Commission (EEOC). The Supreme Court has recently found that other limitations on the president’s removal power violate the Constitution. In a 2020 case, Seila Law LLC v. CFPB, the Court found that the limitations on the president’s ability to remove the director of the Consumer Financial Protection Bureau (CFPB) violated the Constitution’s separation of powers. In that case, the Court did not explicitly address removal protections for multimember commissions like the CFTC and SEC. Although last year the Supreme Court denied certiorari on a case regarding the Consumer Product Safety Commission (CPSC) that raised these issues, it may get another opportunity based on President Trump’s recent actions. The outcome of such a case could have a significant impact on the president’s ability to directly control independent regulatory agencies.
In the meantime, the Executive Order and the president’s agenda may increase the president’s influence on enforcement actions and investigations, as independent regulatory agencies could give additional weight to broader presidential policies in their decisions to prosecute civil wrongdoing or pursue investigations. This new dynamic may prompt registrants to closely monitor new executive orders to anticipate shifts in enforcement priorities.
As independent regulatory agencies oversee self-regulatory organizations (SROs), such as the SEC and Financial Industry Regulatory Authority (FINRA), changes in agency priorities could affect SRO operations. Although SROs typically focus on technical and operational matters, an independent regulatory agency’s shift to align its policies with the president’s agenda may introduce political considerations into market regulations that were previously apolitical.
An independent regulatory agency’s programs and initiatives that are misaligned with the president’s policies face additional risk under the Executive Order for reduced funding or elimination. As these activities become more visible to the Trump administration, they may face increased scrutiny, potentially impacting budgeting and long-term planning.
Conclusion
The Executive Order’s purpose of expanding presidential oversight over independent regulatory agencies raises several legal questions. The Executive Order contemplates additional interaction between independent regulatory agencies and OMB, with an increased emphasis on implementing the president’s priorities. The Executive Order, along with the anticipated litigation over the president’s removal power, may serve to reshape the relationship between independent regulatory agencies and the president.
Footnotes
[1] UNLEASHING PROSPERITY THROUGH DEREGULATION, The White House (Jan. 31, 2025), https://www.whitehouse.gov/fact-sheets/2025/01/fact-sheet-president-donald-j-trump-launches-massive-10-to-1-deregulation-initiative/.
[2] “Independent regulatory agency” includes the following: the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Consumer Product Safety Commission, the Federal Communications Commission, the Federal Deposit Insurance Corporation, the Federal Energy Regulatory Commission, the Federal Housing Finance Agency, the Federal Maritime Commission, the Federal Trade Commission, the Interstate Commerce Commission, the Mine Enforcement Safety and Health Review Commission, the National Labor Relations Board, the Nuclear Regulatory Commission, the Occupational Safety and Health Review Commission, the Postal Regulatory Commission, the Securities and Exchange Commission, the Bureau of Consumer Financial Protection, the Office of Financial Research, Office of the Comptroller of the Currency, and any other similar agency designated by statute as a Federal independent regulatory agency or commission. 44 U.S.C. § 3502(5).
[3] Federal Judicial Center, Judicial Review of Executive Orders, Fed. Jud. Ctr., https://www.fjc.gov/history/administration/judicial-review-executive-orders (last visited Feb. 23, 2025).
[4] President Reagan’s Executive Order 12291 authorized OIRA to review regulatory actions of Cabinet departments and independent agencies, excluding independent regulatory agencies, requiring cost-benefit analyses for major rules. President Clinton’s Executive Order 12866, replacing it in 1993, maintained the exclusion of independent regulatory agencies and narrowed OIRA’s review to specific rule types. See Exec. Order No. 12,291, 3 C.F.R. 127 (1981), reprinted as amended in 5 U.S.C. § 601 app. at 431 (1982) and Exec. Order No. 12,866, 3 C.F.R. 638 (1994), reprinted as amended in 5 U.S.C. § 601 app. at 557 (1994).
Opioids and Common Law Liability for Indirect Economic Harm
Earlier this month, the Law Court weighed in on a hot-button legal issue—the potential liability of opioid manufacturers for the costs of the drug epidemic. In Eastern Maine Medical Center v. Walgreen Company, the Law Court affirmed a decision granting a motion to dismiss hospitals’ claims for negligence, public nuisance, unjust enrichment, fraud and negligent misrepresentation, fraudulent conspiracy, and civil conspiracy. The Court’s opinion reinforced several important principles circumscribing the scope of potential liability for economic harm under the common law.
The basic theory of the complaint was that various opioid sellers (pharmaceutical manufacturing and sales companies, and retail pharmacies and distributors) had created an epidemic of opioid misuse that required the plaintiff hospitals to incur high costs that were only partially reimbursed.
Before reaching the merits of the complaint, the Law Court first addressed Maine Rule of Civil Procedure 8, which requires a “short and plain statement” of a plaintiff’s claim. The complaint was anything but short—it was 509 pages, with over 1,800 paragraphs. Without resolving the case on this basis, the Law Court noted that the complaint was “decidedly not short or plain,” but was instead unnecessarily filled with “eye-watering detail” and repetition that would justify dismissal of the complaint. The Court’s discussion is an important reminder, in an age where complaints are growing (needlessly) ever longer, that Rule 8’s limitations have real teeth.
On the merits, the Court concluded—in an admirably concise opinion—that the hospitals’ theories of liability were insufficient because the hospitals had not directly suffered the harm allegedly caused by the opioid sellers. Instead, they had suffered only indirect and purely economic harm. Importantly, the Court observed that
[A]n actor has no general duty to avoid the unintentional infliction of economic loss on another.
Among the notable limits to economic liability reaffirmed by the Law Court were the following:
Under principles of duty and proximate causation, a hospital cannot assert an independent negligence claim to recover the costs of treating a victim injured by a negligent act.
A claim for fraud, fraudulent concealment, or negligent misrepresentation cannot be maintained absent a good faith allegation of reliance on the misrepresentation.
A public nuisance claim can be maintained by a private plaintiff only if the nuisance “infringe[d] on a right particular to the plaintiff” and “cause[d] injury different in kind from the injury to the public generally”—requirements that are not satisfied when the claim is based on widespread economic injury broadly affecting the public.
Given the increasing prevalence of negligence, fraud, and public nuisance claims for alleged instances of widespread harm, EMMC will provide an important guidepost for both plaintiffs and defendants in cases involving private causes of action. Time will tell whether it will cause such injuries to be addressed primarily through actions by government officials on behalf of the public.
Eighth Circuit Rules States May Challenge PWFA’s Inclusion of Abortion as a ‘Related Medical Condition’
Seventeen Republican-led states can continue their lawsuit challenging parts of the federal Pregnant Workers Fairness Act (PWFA) after the U.S. Court of Appeals for the Eighth Circuit recently ruled the states have standing to sue and remanded the case back to the lower court.
Quick Hits
The U.S. Equal Employment Opportunity Commission (EEOC) published a final rule for implementing the PWFA , which took effect on June 18, 2024. Several legal challenges to the rule’s inclusion of abortion as a “related medical condition” have been filed.
The Eighth Circuit recently revived a case that seventeen states brought to challenge provisions in the PWFA regarding accommodations for employees seeking an abortion after the district court found the states lacked standing.
The case will proceed at the district court level.
Changes in federal policy under the new presidential administration may impact the trajectory of the case.
On February 20, 2025, the U.S. Court of Appeals for the Eighth Circuit ruled that seventeen states—Alabama, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Utah, and West Virginia—had standing to challenge parts of the PWFA related to reasonable accommodations for employees seeking an abortion.
The PWFA requires employers to provide reasonable accommodations for employees with pregnancy-related health conditions, which include miscarriage, stillbirth, and abortion under the final rule. In the lawsuit, the states argued that the EEOC exceeded its authority in how it defined “pregnancy-related health definitions.” The states claimed the PWFA regulations would hinder their ability to regulate abortions and their interests in maintaining a pro-life message in dealing with state employees. The states also argued the PWFA regulations would subject them to economic harm because of compliance costs.
On June 14, 2024, the U.S. District Court for the Eastern District of Arkansas denied the states’ request for a preliminary injunction. It ruled that the states lacked standing because they did not show a likelihood of irreparable harm from the PWFA regulations. The risk of enforcement is speculative because “unlike in situations involving private employers, the EEOC cannot bring enforcement actions against state employers,” the district court stated.
The Eighth Circuit disagreed and found the states are employers under the PWFA and the final rule. They would be required to provide accommodations, change employment practices and policies, and refrain from messaging that would be arguably prohibited under the rule. The court went on to find that the imposition of a regulatory burden action alone causes injury. Therefore, the states had standing.
Next Steps
This case was remanded to the U.S. District Court for the Eastern District of Arkansas. President Donald Trump recently removed two commissioners from the EEOC, and the agency has signaled a change in enforcement policies, and plans to do so when the Commission has a quorum. The agency could issue new regulations for the PWFA or change how it is approaching this case.
In the meantime, private and public employers may wish to review their policies and practices around reasonable accommodations for pregnancy-related conditions, so they continue to adhere to state and federal laws.
“Claims” Under the FCA, §1983 Claim Denials on Failure-to-Exhaust Grounds, and Limits to FSIA’s Expropriation Exception – SCOTUS Today
The U.S. Supreme Court decided three cases today, with one of particular interest to many readers of this blog. So, let’s start with that one.
Wisconsin Bell v. United States ex rel. Heath is a suit brought by a qui tam relator under the federal False Claims Act (FCA), which imposes civil liability on any person who “knowingly presents, or causes to be presented, a false or fraudulent claim” as statutorily defined. 31 U. S. C. §3729(a)(1)(A). The issue presented is a common one in FCA litigation, namely, what is a claim? More precisely, in the context of the case, the question is what level of participation by the government in the actual payment is required to demonstrate an actionable claim by the United States. The answer, which won’t surprise many FCA practitioners, is “not much.”
The case itself concerned the Schools and Libraries (E-Rate) Program of the Universal Service Fund, established under the Telecommunications Act of 1996, which subsidizes internet and other telecommunication services for schools and libraries throughout the country. The program is financed by payments by telecommunications carriers into a fund that is administered by a private company, which collects and distributes the money pursuant to regulations set forth by the Federal Communications Commission (FCC). Those regulations require that carriers apply a kind of most-favored-nations rule, limiting them to charging the “lowest corresponding price” that would be charged by the carriers to “similarly situated” non-residential customers. Under this regime, a school pays the carrier a discounted price, and the carrier can get reimbursement for the remainder of the base price from the fund. The school could also pay the full, non-discounted price to the carrier itself and be reimbursed by the fund.
The relator, an auditor of telecommunications bills, asserted that Wisconsin Bell defrauded the E-Rate program out of millions of dollars by consistently overcharging schools above the “lowest corresponding price.” He argued that these violations led to reimbursement rates higher than the program should have paid. His contention is that a request for E-Rate reimbursement qualified as a “claim,” a classification that requires the government to have provided some portion of the money sought. Wisconsin Bell moved to dismiss, arguing that there could be no “claim” here because the money at issue all came from private carriers and was administered completely by a private corporation.
Affirming the U.S. District Court for the Eastern District of Wisconsin, the U.S. Court of Appeals for the Seventh Circuit rejected Wisconsin Bell’s argument, holding that there was a viable claim because the government provided all the money as part of establishing the fund. Less metaphysically, it also held that the government actually provided some “portion” of E-Rate funding by depositing more than $100 million directly from the U.S. Treasury into the fund.
Justice Kagan delivered the unanimous opinion of the Supreme Court, affirming the Seventh Circuit on the narrower ground that “the E-Rate reimbursement requests at issue are ‘claims’ under the FCA because the Government ‘provided’(at a minimum) a ‘portion’ of the money applied for by transferring more than $100 million from the Treasury into the Fund.” It is important to recognize that this amount was quite separate from the funds involved in the core program at issue. Instead, it constituted delinquent contributions collected by the FCC and the U.S. Department of the Treasury, as well as civil settlements and criminal restitution payments made to the U.S. Department of Justice in response to wrongdoing in the program. This nonpassive role by the government was enough to satisfy the Court that the money was sought through an actionable “claim.”
Rather blithely, Justice Kagan analogizes these government transfers to “most Government spending: Money usually comes to the Government from private parties, and it then usually goes out to the broader community to fund programs and activities. That conclusion is enough to enable Heath’s FCA suit to proceed.”
This conclusion suggests that quibbling about what constitutes a “claim,” where government participation in payment is peripheral, is unlikely to provide an effective avenue for defending FCA lawsuits. But wait! Before closing the discussion, we must turn to the concurring opinion of Justice Thomas, who was joined by Justice Kavanaugh and, in part, by Justice Alito. They note that the Court has left open the questions of whether the government actually provides the money that requires private carriers to contribute to the E-Rate program and whether the program’s administrator is an agent of the United States. Thomas’s suggestion, in attempting to reconcile various Circuit Court opinions as to the fund, is that an FCA claim must be based upon a clear nexus with government involvement. Thomas then goes on to describe a range of cases where, although the arrangements at issue might be prescribed by the government, the absence of government money would be fatal to holding that there was a justiciable FCA claim. In other words, the kind of government payments into the fund that we see in the instant case are the likely minimum that the Court would countenance.
Perhaps a bigger storm warning is the additional concurrence of Justice Kavanaugh, joined by Justice Thomas, in noting that today’s opinion is a narrow one. However, the FCA’s qui tam provisions raise substantial questions under Article II of the Constitution. The Court has never ruled squarely as to Article II, though it has upheld qui tam cases as assignments to private parties of claims owned by the government, something like commercial relationships. Two Justices augured that potential unresolved constitutional challenges to the FCA’s qui tam regime necessarily will mean that any competent counsel will raise the point in any future FCA case not brought by the government alone. But note that Justice Alito did not join Kavanaugh’s opinion, though he did in the Thomas concurrence. Nor did any other conservative Justice. It still takes four to grant cert. But the future is a bit hazier, thanks to Justice Kavanaugh.
Justice Kavanaugh finds himself on the opposite side of Justice Thomas in the case of Williams v. Reed. Writing for himself, the Chief Justice, and Justices Sotomayor, Kagan, and Jackson, Justice Kavanaugh ruled in favor of a group of unemployed workers who contended that the Alabama Department of Labor unlawfully delayed processing their state unemployment benefits claims. They had sued in state court under 42 U. S. C. §1983, raising due process and federal statutory arguments, attempting to get their claims processed more quickly. The Alabama Secretary of Labor argued that these claims should be dismissed for lack of jurisdiction because the claimants had not satisfied the state exhaustion of remedies requirements.
Holding against the Secretary, the Court’s majority opined that where a state court’s application of a state exhaustion requirement effectively immunizes state officials from §1983 claims challenging delays in the administrative process, state courts may not deny those §1983 claims on failure-to-exhaust grounds. Citing several analogous precedents, the majority decided what I submit looks like a garden-variety supremacy case. After all, as Kavanaugh notes, the “Court has long held that ‘a state law that immunizes government conduct otherwise subject to suit under §1983 is preempted, even where the federal civil rights litigation takes place in state court.’” See Felder v. Casey, 487 U. S. 131 (1988).
Justice Thomas and his conservative allies didn’t see it that way at all. Quoting himself in dissent in another case, Justice Thomas asserts that “[o]ur federal system gives States ‘plenary authority to decide whether their local courts will have subject-matter jurisdiction over federal causes of action.’ Haywood v. Drown, 556 U. S. 729, 743 (2009) (THOMAS, J., dissenting).” Well, he didn’t persuade a majority then, and he didn’t do so now in this §1983 case.
Finally, in Republic of Hungary v. Simon, a unanimous Court, per Justice Sotomayor, considered the provision of the Foreign Sovereign Immunities Act of 1976 (FSIA) that provides foreign states with presumptive immunity from suit in the United States. 28 U. S. C. §1604. That provision has an expropriation exception that permits claims when “rights in property taken in violation of international law are in issue” and either the property itself or any property “exchanged for” the expropriated property has a commercial nexus to the United States. 28 U. S. C. §1605(a)(3).
The Simon case involved a suit by Jewish survivors of the Hungarian Holocaust and their heirs against Hungary and its national railway, MÁV-csoport, in federal court, seeking damages for property allegedly seized during World War II. They alleged that the expropriated property was liquidated and the proceeds commingled with other government funds that were used in connection with commercial activities in the United States. The lower courts determined that the “commingling theory” satisfied the commercial nexus requirement in §1605(a)(3) and that requiring the plaintiffs to trace the particular funds from the sale of their specific expropriated property to the United States would make the exception a “nullity.”
The Supreme Court didn’t quite agree, holding that alleging the commingling of funds alone cannot satisfy the commercial nexus requirement of the FSIA’s expropriation exception. “Instead, the exception requires plaintiffs to trace either the specific expropriated property itself or ‘any property exchanged for such property’ to the United States (or to the possession of a foreign state instrumentally engaged in United States commercial activity).”
The three cases decided today bring the total decisions of the term to eight. Stay tuned because a torrent might be on the horizon.