Labor & Employment

CFPB Shifts Supervision and Enforcement Priorities; Staff Reduction Stayed by Court

On April 16, the CFPB released an internal memo outlining major shifts in its supervision and enforcement priorities, signaling a retreat from several areas of regulatory activity. The next day, the Bureau issued formal reduction-in-force (RIF) notices to numerous employees, notifying them of termination effective June 16.
The supervision memo directs a significant reallocation of the Bureau’s focus and resources. Examinations are to be reduced by 50%, with an emphasis on collaborative resolutions, consumer remediation, and avoiding duplicative oversight. The CFPB will shift attention back to depository institutions, moving away from nonbanks that have increasingly been subject to Bureau exams in recent years. Enforcement will prioritize matters involving tangible consumer harm, particularly in areas of mortgage servicing, data furnishing under the FCRA, and debt collection under the FDCPA. The memo explicitly deprioritizes supervision of student lending, digital payments, remittances, and peer-to-peer platforms, and restricts the Bureau’s use of statistical evidence to support fair lending cases, limiting such actions to those involving intentional discrimination and identifiable victims.
The RIF notices cite structural realignment and policy shifts as the basis for the cuts and inform employees that the decision does not reflect performance or conduct. Following the issuance of the RIF notices, plaintiffs in ongoing litigation against the CFPB filed an emergency motion, arguing that the RIF appeared to violate an existing preliminary injunction. After an emergency hearing on April 18, Judge Amy Berman Jackson of the D.C. District Court ordered the CFPB to suspend its reduction-in-force and maintain employees’ access to the agency’s systems while legal proceedings continue, raising concerns that allowing the layoffs to move forward could permanently damage the Bureau’s ability to meet its legal obligations. The court set a follow-up hearing for April 28.
Putting It Into Practice: The current administration’s push to downsize the CFPB continues. While paused for the moment, a Bureau of only 200 employees will have a dramatic impact on the enforcement of the country’s federal financial services laws.
Listen to this post

Federal Judge Blocks Key DEI Executive Order Provisions

On April 14, 2025, the U.S. District Court for the Northern District of Illinois issued a preliminary injunction preventing the U.S. Department of Labor (“DOL”) from enforcing a certification provision and termination clause included in the executive orders titled Ending Illegal Discrimination and Restoring Merit-Based Opportunity (“EO 14173”) and Ending Radical and Wasteful Government DEI Programs and Preferencing (“EO 14151”).
The ruling prevents the DOL from enforcing the provision in EO 14173 requiring federal contractors and grantees to certify that they do not operate “illegal” DEI programs that violate any federal anti-discrimination laws. The ruling also enjoins the DOL from terminating a federal grant issued to the plaintiff based on language in EO 14151, which requires agencies to terminate all “equity-related” grants.
Background
Plaintiff, Chicago Women in Trades (“CWIT”), provides programming and training to prepare women across the country for jobs in skilled trades such as electric work, plumbing and carpentry. CWIT receives approximately 40% of its annual budget from federal funding and specifically, a Women in Apprenticeship and Nontraditional Occupations (“WANTO”) grant from the DOL Women’s Bureau. On February 26, 2025, CWIT sued President Trump, the DOL, and several other federal agencies and agency heads, claiming the following provisions of EOs 14173 and 14151 violate the First Amendment, Fifth Amendment, constitutional spending powers held by Congress and the separation of powers principle:

The “Certification Provision” (EO 14173 § 3(b)(iv)), which orders each agency to include certifications in every contract or grant award that the contractor or grantee does not operate illegal DEI programs and that compliance with federal anti-discrimination laws is “material to the government’s payment decisions for purposes of” the False Claims Act;
The “Termination Provision” (EO 14151 § 2(b)(i)), which orders each “agency, department, or commission head” to “terminate, to the maximum extent allowed by law, all ‘equity-related’ grants or contracts.”

CWIT sought a declaration that the Certification Provision and Termination Provision are unlawful and unconstitutional, and preliminary and permanent injunctions enjoining the Defendants, other than President Trump, from enforcing those sections of the EOs that are found to be unlawful and unconstitutional.
Court’s Opinion and Reasoning
District Judge Matthew F. Kennelly issued a nationwide injunction enjoining the DOL’s use of the Certification Provision and enjoining the DOL from terminating the WANTO grant based on the Termination Provision in EO 14151.
As to the Certification Provision, the Court found the government’s argument that the certification is permissible because it simply requires the grantee to certify that it is not breaking the law, unavailing. The Court instead found that the language was unclear and left the meaning of illegal DEI programs up “to the grantee’s imagination” by not defining what DEI is or what makes a DEI program “violate Federal anti-discrimination laws.” The Court noted that the Certification Provision applies to all federal grantees and contractors and that there is a critical urgency to protect grantees and contractors from irreparable injury to their free-speech rights.
The ruling therefore held that CWIT is likely to succeed on the merits in showing that the Certification Provision violates First Amendment rights. The Court also found that the nature of the First Amendment right at stake supported a broad preliminary injunction, not only limited to CWIT, as every contract and grant offered by an agency would likely contain the provision. The Court did, however, limit the injunction to the DOL, noting that CWIT had “demonstrated a risk of imminent harm with regards only to DOL,” and “it is hard to see – and CWIT does not suggest – a basis upon which it would seek grants from agencies other than DOL.”
On the issue of the Termination Provision, the Court similarly found that CWIT showed sufficiently imminent injury as CWIT’s grants were directly targeted by the provision. However, the Court found that, unlike the Certification Provision, “there is likely a low risk that other grantees who risk termination or are terminated will not challenge enforcement of this provision against them.” Therefore, the Court declined to extend the injunction and limited its reach to enjoining the DOJ from terminating CWIT’s WANTO grant.
On April 16, 2025, the DOJ filed a Preliminary Injunction Compliance Status Report confirming its compliance with the Court’s preliminary injunction order and attaching an email that was sent to agency heads in the DOJ and other relevant parties including the Court’s order.
Other cases involving challenges to the EOs discussed in this article include: Nat’l Ass’n of Diversity Offs. in Higher Educ. v. Trump, F. Supp. 3d, No. 25 C 333 ABA, 2025 WL 573764 (D. Md. Feb. 21, 2025); Nat’l Urban League v. Trump, No. 25 C 471 (D.D.C.); and S.F. AIDS Found. v. Trump, No. 25 C 1824 (N.D. Cal.). Other Proskauer articles on this topic include: Federal Court Issues Partial Preliminary Injunction Halting Enforcement of DEI-Related EOs, Fourth Circuit Temporarily Allows DEI-Related EOs to Continue, EEOC and DOJ Release Guidance on DEI and Workplace Discrimination, President Trump Issues Sweeping Executive Orders Aimed at DEI.

Sunsetting of COVID-19 Paid Emergency Leave Law

Beginning July 31, 2025, New York employers will no longer be required to provide separate leave for COVID-19 quarantines and isolations. This marks a significant shift in pandemic-related employment policies for businesses in the Empire State.
New York’s COVID-19 Paid Emergency Leave (“PEL”) was originally enacted in March 2020, during the height of the COVID-19 outbreak. PEL requires employers provide up to fourteen (14) days of protected, paid leave to employees who are subject to a mandatory or precautionary order of isolation or quarantine due to COVID-19, and who cannot work remotely. PEL is limited exclusively to COVID-19, and its paid leave benefits are separate from and additional to other paid sick and safe leave benefits—including New York State’s Paid Sick and Safe Leave law, New York City’s Earned Sick and Safe Time law, and New York’s Paid Family Leave law.
When enacted, PEL did not contain an expiration date; nor was one provided in subsequent guidance. But on April 24, 2024, Governor Hochul signed the 2024-2025 New York State Budget. This Budget includes a provision sunsetting PEL—a measure many employers and legislators believed was long overdue. Indeed, while numerous other jurisdictions passed similar COVID-19 leave laws, New York’s PEL is the last such statute remaining in effect.
With the impending repeal of PEL, employers are reminded to remain compliant with other paid sick and safe leave benefits. Serious COVID-19 cases or other illnesses may still trigger obligations under various protected leave and medical accommodation laws, such as the federal Family and Medical Leave Act, the Americans with Disabilities Act, the New York Human Rights Law, and the New York City Human Rights Law.
Listen to this post

Trump Administration Issues Executive Order Aimed at Eliminating Disparate Impact Liability Under Anti-Discrimination Laws

On April 23, 2025, the White House issued an Executive Order (“EO”) entitled “Restoring Equality of Opportunity and Meritocracy,” which aims to “eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.”
First recognized under Title VII of the Civil Rights Act of 1964 (“Title VII”) by the U.S. Supreme Court in Griggs v. Duke Power Co. (1971), disparate impact liability provides that a policy or practice that is facially neutral and applied without discriminatory intent may nevertheless give rise to a claim of discrimination if it has an adverse effect on a protected class, such as a particular race or gender. Disparate impact liability has also been recognized under fair housing laws and in other contexts.
The EO characterizes disparate impact liability as creating “a near insurmountable presumption of unlawful discrimination . . . where there are any differences in outcomes in certain circumstances among different races, sexes, or similar groups, even if there is no facially discriminatory policy or practice or discriminatory intent involved, and even if everyone has an equal opportunity to succeed.” The EO further states that disparate impact liability “all but requires individuals and businesses to consider race and engage in racial balancing to avoid potentially crippling legal liability” and “is wholly inconsistent with the Constitution.”
To that end, the EO, among other things:

directs all executive departments and agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability,” including but not limited to Title VII;
orders the Attorney General, within 30 days of the EO, to report to the President “(i) all existing regulations, guidance, rules, or orders that impose disparate-impact liability or similar requirements, and detail agency steps for their amendment or repeal, as appropriate under applicable law; and (ii) other laws or decisions, including at the State level, that impose disparate-impact liability and any appropriate measures to address any constitutional or other legal infirmities”;
orders the Attorney General and the Chair of the EEOC, within 45 days, to “assess all pending investigations, civil suits, or positions taken in ongoing matters under every Federal civil rights law within their respective jurisdictions . . . that rely on a theory of disparate-impact liability, and [] take appropriate action” consistent with the EO;
orders all agencies, within 90 days, to “evaluate existing consent judgments and permanent injunctions that rely on theories of disparate-impact liability and take appropriate action” consistent with the EO;
orders the Attorney General, in coordination with other agencies, to “determine whether any Federal authorities preempt State laws, regulations, policies, or practices that impose disparate-impact liability based on a federally protected characteristic such as race, sex, or age, or whether such laws, regulations, policies, or practices have constitutional infirmities that warrant Federal action, and [] take appropriate measures” consistent with the EO; and
orders the Attorney General to initiate action to repeal or amend regulations contemplating disparate impact liability under Title VI of the Civil Rights Act of 1964, which prohibits race, color, and national origin discrimination in programs and activities receiving federal financial assistance.

The EO also orders the Attorney General and the Chair of the EEOC to “jointly formulate and issue guidance or technical assistance to employers regarding appropriate methods to promote equal access to employment regardless of whether an applicant has a college education, where appropriate.”
Takeaways
This EO is the latest evidence of shifting enforcement priorities by the federal agencies tasked with enforcing civil rights laws, including the EEOC. The ultimate scope of the EO’s impact remains to be seen, particularly as it relates to the potential for preemption of disparate impact liability under state or local anti-discrimination laws. Congress has the authority to amend any federal statutes to specifically address a disparate impact theory of liability, and the courts will continue to have the ultimate say on whether and to what extent such a theory is cognizable under particular statutes. We anticipate further updates in this area and will continue to monitor and report on these updates.

Beltway Buzz, April 25, 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.

Congress Out, Agenda Delayed. The U.S. Congress is currently in the second week of its spring break recess and will return to Washington, D.C., on April 28, 2025. Upon returning, Republican leaders are expected to move forward with their budget reconciliation package that is expected to address military spending, energy production, taxes, and immigration. The Buzz will also be monitoring potential U.S. Senate confirmation hearings for individuals nominated to lead labor and employment–related agencies. President Donald Trump has nominated individuals to lead the U.S. Department of Labor’s (DOL) Occupational Safety and Health Administration and Wage and Hour Division, as well as the General Counsel’s office of the National Labor Relations Board, but those nominees have not yet had their Senate confirmation hearings.
Executive Order Seeks to Limit Use of Disparate-Impact Liability. On April 23, 2025, President Trump issued an executive order (EO) titled “Restoring Equality of Opportunity and Meritocracy.” The EO states, “It is the policy of the United States to eliminate the use of disparate-impact liability in all contexts to the maximum degree possible.” Currently, employers may be held liable under a disparate-impact theory of discrimination if an otherwise neutral employment policy or practice results in an adverse impact on a protected class. The EO directs all federal agencies to “deprioritize enforcement of all statutes and regulations to the extent they include disparate-impact liability” and further instructs the attorney general and the chair of the U.S. Equal Employment Opportunity Commission to review all current legal matters that rely on a theory of disparate-impact liability, and to “take appropriate action with respect to such matters consistent with the policy of th[e] order.” T. Scott Kelly, Nonnie L. Shivers, and Zachary V. Zagger have the details.
Disparate-impact liability in employment discrimination cases was first established by the Supreme Court of the United States in 1971 and codified by Congress in the Civil Rights Act of 1991. In February 2025, U.S. Attorney General Pam Bondi issued a memorandum instructing U.S. Department of Justice (DOJ) officials to deemphasize disparate-impact theories of liability.
Senate HELP Committee Chair Outlines Independent Contractor Proposals. Senator Bill Cassidy (R-LA), chairman of the Senate Committee on Health, Education, Labor, and Pensions, has released a white paper advocating for various legislative proposals related to independent contractors. The white paper, titled, “Portable Benefits: Paving the Way Toward a Better Deal for Independent Workers,” builds on Cassidy’s 2024 “request for information seeking feedback from stakeholders on ways to remove federal legal and regulatory barriers to portable benefits for independent workers.” Among the proposals advanced in the paper are a single statutory test for determining employment status, as well as legislation that would allow employers to provide health and retirement benefits to workers without those benefits triggering employment status. (The Buzz recently detailed bills in the U.S. House of Representatives that address these issues.)
Immigration Policy Update. Recent developments in the immigration policy arena include the following:

The U.S. District Court for the District of Massachusetts issued an order blocking the Trump administration’s rescission of Cuba, Haiti, Nicaragua, and Venezuela (CHNV) humanitarian parole program. Emphasizing the need for a case-by-case review prior to revoking grants of parole, the judge ruled that the “categorical termination of existing grants of parole was arbitrary and capricious.” Amanda M. Mullane and Daniela Medrano Sullivan have the details.
Secretary of State Marco Rubio announced sweeping changes to the operational structure of the U.S. Department of State. While the Bureau of Consular Affairs—the subagency within the State Department responsible for issuing visas—does not appear to be impacted at this early stage, the Buzz will continue to monitor the situation as it develops.

DOL Staff Exit. Workers at the DOL are leaving, either pursuant to deferred-resignation offers from the new administration or involuntary reductions in force.

Deferred Resignations. Almost 20 percent of the DOL’s employees will reportedly leave their positions in September 2025 after accepting deferred-resignation offers.
OFCCP Continues to Shrink. According to media reports, most employees in the Office of Federal Contract Compliance Programs’ (OFCCP) enforcement division’s national office and five of its six regional offices have been placed on administrative leave in advance of planned reductions in force at the agency. (Employees in the Southwest and Rocky Mountain Region—often referred to by practitioners as “SWARM”—were not impacted.) The action follows on the heels of a February 2025 DOL memo indicating that 90 percent of OFCCP employees would eventually be removed from their positions. A group of Democratic senators and representatives wrote a letter to Secretary of Labor Lori Chavez-DeRemer, warning that the dramatic reduction in staff at OFCCP would leave veterans and individuals with disabilities vulnerable to discrimination.

The Buzz will keep tabs on how staff reductions at the DOL in general, and OFCCP specifically, will impact the department’s regulatory and enforcement agendas.
Remember the Maine! On April 25, 1898, Congress declared war on Spain. The Cuban War of Independence, the rise of sensationalistic “yellow journalism,” U.S. self-interest, and the February 15, 1898, explosion of the USS Maine in Havana Harbor all contributed to a series of congressional actions that culminated in a declaration of war. The declaration read:
A bill declaring that war exists between the United States of America and the Kingdom of Spain.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, first. That war be, and the same is hereby, declared to exist, and that war has existed since the twenty-first day of April, A.D. 1898, including said day, between the United States of America and the Kingdom of Spain.
Second. That the President of the United States be, and he hereby is, directed and empowered to use the entire land and naval forces of the United States, and to call into the actual service of the United States the militia of the several States, to such extent as may be necessary to carry this act into effect.
Approved, April 25, 1898.

The war ended several months later with the signing of the Treaty of Paris on December 10, 1898, and resulted in the United States’ acquisition of Puerto Rico, Guam, and the Philippines.

Expanded Definition of ‘Low-Wage’ Employees in Virginia Non-Compete Ban: Employers Need to Act Now

Takeaways

Effective 07.01.25, a new amendment to Virginia’s non-compete law expands the definition of “low-wage” employees to include employees classified as non-exempt under the FLSA.
The new definition will not apply retroactively to existing agreements.
Employers should audit their employee classifications and policies that contain non-compete provisions.

Disappearing Act: Latest Executive Order Takes Aim at Disparate Impact Liability

On April 23, 2025, President Trump signed an executive order aimed at eliminating enforcement of “disparate impact” discrimination claims, asserting that the disparate impact liability theory—used by courts for over five decades—violates the U.S. Constitution, “by requiring race-oriented policies and practices to rebalance outcomes along racial lines.” The executive order, titled “Restoring Equality of Opportunity and Meritocracy,” broadly addresses federal civil rights laws, including Title VII of the Civil Rights Act, by:

Revoking certain presidential actions that approve the disparate impact theory of liability.
Ordering all federal agencies to “deprioritize enforcement of all statutes and regulations” that “impose” disparate impact liability (notably including by its terms “other laws or decisions, including at the State level, that impose disparate impact liability”).
Directing the U.S. attorney general to repeal or amend Title VI regulations that contemplate disparate impact liability (Title VI of the Civil Rights Act of 1964 protects every person in the U.S. from discrimination based on race, color, or national origin in programs or activities receiving federal financial assistance).
Requiring the U.S. attorney general and the chair of the EEOC to review all pending investigations and suits under federal civil rights law that rely on a theory of disparate impact liability, and “take appropriate action with respect to such matters consistent with the policy” of the executive order (i.e. ceasing enforcement of a disparate impact claims for liability.
Instructing the U.S. attorney general and chair of the EEOC to formulate and issue guidance to employers regarding ways to promote equal access to employment.

Notably, the executive order cannot and does not change or supersede state or federal law or Supreme Court precedent and does not affect how individual employees can assert claims against employers. However, the executive order does indicate the federal government’s enforcement priorities in employment cases, at least for the foreseeable future.
What’s Changed
Under the current statutory and common law framework, in addition to direct discrimination claims, employers can be held liable for facially neutral policies that have a discriminatory impact on individuals based on a protected characteristic such as their race or gender. Under such disparate impact theory of liability, courts are asked to consider the effects of a policy—not the intent—and review policies that disproportionately impact protected groups.
For example, if an employer requires a certain level of education to be eligible for a job, and that requirement disproportionately impacts employees in a protected class, then such requirement may be said to have a disparate impact on the affected individuals, even though the employer may not have been motivated to discriminate against any protected class on the basis of race, color, religion, sex, or national origin.
Under the new executive order, President Trump has directed enforcement arms of the executive branch to stop using disparate impact as a basis for pursuing discrimination claims, because, as the executive order argues, disparate impact liability itself contravenes the principles of equality and meritocracy as they relate to ensuring a “colorblind society.”
How the Executive Order Impacts Employers
At least for the next several years of the Trump administration, employers can expect that the EEOC and other federal agencies will quickly terminate all enforcement efforts relating to disparate impact theories of discrimination.
This means that if an employer is currently under investigation or is being sued based on a disparate impact claim, all investigations or prosecution efforts will cease. Additionally, while employees can still bring disparate impact claims under state and federal law, such claims may be more difficult to prove in the face of disappearing and amended rules and regulations (albeit applicable statutes and state and federal case law on point remains untouched by the EO).
Furthermore, employers should be on the lookout for additional guidance from the Office of the Attorney General and the EEOC regarding enforcement activities.

One-Two Punch Delivered to Department of Education on DEI

Separate District Courts Take Divergent Routes to Temporarily Bar Enforcement of the Dear Colleague Letter on DEI in Education
On April 24, 2025, the U.S. District Courts for the District of New Hampshire and the District of Maryland issued separate orders blocking enforcement of all, or large portions of, the Dear Colleague Letter (“DCL”) issued by the Department of Education (“DOE”) on February 14, 2025. The DCL related to the viability of various “DEI” programs in the wake of last year’s Supreme Court decision in Students for Fair Admissions v. Harvard.
After the DCL, the DOE also issued a February 28, 2025, Frequently Asked Questions document About Racial Preferences and Stereotypes under Title VI of the Civil Rights Act (the “FAQ”) and later created the End DEI Portal pursuant to the DCL. Further, on April 3, 2025, the DOE issued a compliance certification requirement (the “Certification Requirement”), mandating state and local education agencies certify adherence to Title VI of the Civil Rights Act of 1964 and the 2023 Supreme Court ruling in Students for Fair Admissions v. Harvard. Certification is reportedly an imposed condition for receiving federal financial assistance.
In the New Hampshire case, NEA, et al v. U.S. Dept. of Education, the court preliminarily enjoined the enforcement or implementation of the DCL, the February 28 FAQ, the End DEI Portal, and the Certification Requirement. The Court found that the plaintiffs had a high likelihood of establishing that the DCL, FAQs, and Portal are facially unconstitutional due to their vagueness, and thus enjoined enforcement of these documents and the Certification Requirement until further action of the court. The injunction, however, only limits enforcement as to the plaintiffs in the case, the NEA, NEA New Hampshire and the Center for Black Educator Development as well their respective affiliates. Thus, the order is not a nationwide injunction.
In the second case, AFT v. U.S. Department of Labor, the Maryland federal court took a different path to a similar end. The court preliminarily held that in issuing the DCL, DOE failed to comply with the federal Administrative Procedure Act, and as a result, the DCL was presumptively invalid. Rather than enjoin enforcement, as the New Hampshire court had done, the Maryland court held that a nationwide stay of the DCL was the appropriate remedy under the APA. The court declined to stay the FAQs or the Portal, however, finding neither to be a final agency action. Similarly, the court did not stay the Certification Requirement, holding it was not identified or raised in the Amended Complaint, but cryptically ruled “Insofar as the Court considers the Certification Requirement as an implementation of the Letter, it would of course be improper for the government to initiate enforcement based on a stayed policy, through certification or otherwise.” The stay, nevertheless, effectively precludes enforcement of the DCL nationally against any party.
Significantly, the court explained that only those aspects of the DCL that represented a change from pre-existing law were stayed, and that the stay would also preclude enforcement based on the FAQs to the extent they were based on changes made in the DCL. This will leave room for argument about which portions of the DCL are “new” law and which are merely declarative of prior law.
As a practical matter, the two decisions give educational institutions (particularly those who employ or contract or work with members or affiliates of the NEA) some breathing room to assess how to respond to the administration’s focus on DEI efforts in educational programming. While the issue is unlikely to go away entirely, enforcement of the penalties and the Certification Requirement have been kicked down the road for now.

PBMs Score a Win in Federal Court Against State Regulation

A recent federal court decision has the potential to tip the balance in an ongoing series of skirmishes over state regulation of pharmacy benefit managers (PBMs).
In McKee Foods Corp. v. BFP Inc. d/b/a/ Thrifty Med Plus Pharmacy, the US District Court for the Eastern District of Tennessee declared that an “any willing pharmacy” requirement in Tennessee was preempted by the federal Employee Retirement Income Security Act of 1974 (ERISA), as amended. On one side, self-funded group health plans argue that ERISA allows them to comply with a single set of rules nationwide, rather than having to navigate a patchwork of different, overlapping, and sometimes conflicting state laws. On the other side are the states, which have a legitimate interest in ensuring prescription drug reimbursements are fair and reasonable and their citizens are protected from fraudulent, abusive, or misleading PBM practices. However, states have routinely misread a 2020 Supreme Court decision, Rutledge v. Pharmaceutical Care Management Association, to support extensive interference with the design and operation of employer-sponsored group health plans in a manner that may be preempted by ERISA.

In Depth

Enacted in 1974, ERISA made the regulation of employee benefit plans principally a matter of federal concern. The law broadly and generally preempts – or renders inoperative – state laws that “relate to” employee benefit plans. According to the Supreme Court’s Rutledge decision, ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan covered by ERISA.” To “relate to” an ERISA plan, a law must either have a “connection with” or “reference to” such a plan.

“Connection with” preemption arises when either a law requires providers to structure benefit plans in particular ways, or acute (albeit indirect) economic effects of the state law force an ERISA plan to adopt a certain scheme of substantive coverage.
“Reference to” preemption arises in a different set of circumstances, namely where a state’s law acts immediately and exclusively upon ERISA plans or where the existence of ERISA plans is essential to the law’s operation.

Citing Kentucky Association of Health Plans, Inc. v. Nichols, the McKee court held that Tennessee’s “any willing pharmacy” law had an impermissible connection with ERISA plans and was therefore preempted. In so holding, the court rejected the state of Tennessee’s reliance on Rutledge. Critically, Rutledge involved a form of cost regulation, not plan structure. By contrast, pharmacy networks – at issue in McKee – are plan structures.
McKee is consistent with the Tenth Circuit Court of Appeals decision in PCMA v. Mulready (now pending before the Supreme Court), which invalided an Oklahoma law compelling PBMs to comply with certain pharmacy network standards. The Tenth Circuit held that ERISA superseded the Oklahoma law because it generally compelled ERISA plans to structure benefits in certain ways. In reaching its decision, the Mulready court reviewed, summarized, and applied more than 20 years of Supreme Court jurisprudence, which can be summed up as follows: States have wide berth to regulate PBM pharmacy reimbursement rates and acquisition costs, but they may not interfere with plan operation and administration, including the design and structure of pharmacy networks.
Currently, fiduciaries and plan sponsors of self-funded group health plans with multistate operations are confronted with myriad conflicting and burdensome state PBM laws, as well as increased private plaintiff activity. Texas, Florida, and Arkansas are posing particular challenges at the moment; other states will likely follow. While MeKee is encouraging, it is of little help in the short run. To break the logjam, action is required, either by the Supreme Court or Congress.

New Law Impacts Massachusetts Employers Obligations on Salary Transparency

The Massachusetts Pay Transparency Act, officially titled the Frances Perkins Workplace Equity Act, was signed into law on July 31, 2024. Set to take effect in stages beginning in 2025, the law imposes new obligations on employers aimed at increasing wage transparency and pay equity across the Commonwealth. For employers operating in Massachusetts, now is the time to understand the law’s requirements and prepare for the changes ahead.
Major Requirements of New Law
The new Massachusetts law introduces two major requirements: wage data reporting and salary range disclosures. Employers with 100 or more employees in Massachusetts are required to submit federally mandated wage data reports—such as EEO-1, EEO-3, and EEO-5—to the Massachusetts Secretary of State starting February 1, 2025. These are not new reports but rather copies of those already submitted to federal agencies. The EEO-4 will be added to the reporting list beginning in 2026. Once submitted, this data will be aggregated and made publicly available by the state.
In addition to wage data reporting, employers with 25 or more employees, including remote workers who report to Massachusetts-based offices, will be required to include salary ranges in job postings starting October 29, 2025. They must also provide salary ranges upon request to current employees, regardless of whether a job is actively posted. These ranges must reflect what the employer “reasonably and in good faith” expects to pay for a given role.
Consequences for Not Following the Law
Enforcement of the salary range provision is under the exclusive jurisdiction of the Attorney General’s Office. Employers found in violation will first receive a warning. Penalties increase with repeated offenses, starting at $500 and rising to as much as $25,000 for persistent non-compliance. Importantly, for the first two years following the law’s effective date, employers will be given two business days to cure any salary range violation after receiving notice from the state. Even though the initial penalties are modest, the public disclosure of wage data and salary ranges introduces broader risks.
Employers should expect employees to take note of posted salary ranges and ask questions—sometimes uncomfortable ones—about pay equity. If a current employee notices a posted range that exceeds their salary for the same role, they may request a raise. Employers should be ready to respond with clear, objective reasoning based on established salary criteria. In cases where an objective explanation is lacking, the prudent response may be to adjust the salary accordingly. These situations underscore the need for internal alignment among HR, management, and legal teams to ensure consistent, fair, and well-documented compensation practices.
Employers Need to Protect Themselves
To mitigate risk and build trust, employers are encouraged to proactively conduct internal pay equity audits. These self-evaluations not only help identify and correct discrepancies but also serve as an affirmative defense under the Massachusetts Equal Pay Act—provided they are documented, reasonable in scope, and completed within the past three years. Employers should make measurable progress toward eliminating wage differentials and maintain records of any changes implemented.
Establishing and maintaining well-defined salary ranges is now a business imperative. Employers should base these ranges on market research, geographic cost of living, and industry benchmarks. They should consider factors such as seniority, performance metrics, production output, geographic location, education, and experience, applying them uniformly across comparable roles. Regular reviews are essential to ensure salary ranges remain aligned with market conditions and internal expectations. Employers must also reassess positions periodically, especially as roles evolve or teams consolidate.
Additional Steps
Transparent communication will be just as important as compliance. Companies should consider sharing internal memorandums when posting new jobs, clarifying how salary ranges are determined, and setting expectations for how employees can move within those ranges. Training managers on how to communicate compensation is critical. A lack of coordination can lead to inconsistent messaging and employee dissatisfaction. To prevent this, employers should implement a centralized oversight process, especially for salary adjustments and raises.
The Massachusetts Pay Transparency Act introduces a more transparent compensation framework, but it also places the burden on employers to manage the cultural and practical challenges that come with greater visibility. By taking early, thoughtful steps—such as conducting pay audits, developing consistent salary ranges, and training leadership—employers can not only comply with the law but also foster a more equitable and engaged workforce.
For further guidance, employers can review the official Attorney General’s Office Guidance on the Wage Transparency Act.

Updating Governing Documents for Law Firm Succession

Creating and updating governance documents, such as operating, partnership, and shareholder agreements, is vital for a founder-owned law firm’s long-term success. These documents define the firm’s structure, decision-making processes, and transition protocols. This guide outlines key areas to address, real-world examples, and actionable steps to help firms navigate generational transitions with confidence.

Mandatory Retirement Age

Including provisions for retirement age within your governing documents can help facilitate orderly transitions and prevent potential conflicts. While mandatory retirement ages may not be suitable for all first-generation firms, having a structured retirement planning process is crucial.
Action Steps:

Require partners to declare retirement intentions upon reaching a set age (e.g., 60)
Create a flexible “retirement window” to allow phased planning.

Example:
A law firm implemented a policy requiring partners to declare their retirement timeline upon reaching 60. A founding partner, unsure of exactly when and how to retire, created a retirement window with specific action steps keyed to the attainment of certain milestones over a 7-year period.

Return of Capital and Net Asset Interests

Retiring partners are typically owed a return of fixed capital and undistributed earnings. A clearly defined payout schedule protects the firm’s financial health during transitions.
Action Steps:

Define how and when capital will be returned to retiring partners.

Develop a recapitalization plan for new and remaining equity owners.

Establish a valuation process for Accounts Receivable (AR) and Work in Progress (WIP) interests.

Limit ownership in billing assets for future equity owners.

Create a payout schedule for AR and WIP, net of any related debt.

Example:
A mid-sized law firm faced financial difficulties due to ambiguous capital return policies and the challenge of replacing the capital owed to a retiring equity owner by the remaining equity owners. By updating its agreement with an extended payout schedule, the firm maintained financial stability while honoring its commitments.

. Post-Retirement Liability Obligations

Firms must address post-retirement liabilities, such as lease and debt guarantees, which are critical to protect both retiring partners and the firm. Clear policies governing these obligations should be included in the governance documents.
Action Steps:

Review and revise lease and debt guarantee policies.
Clearly define the conditions for releasing continuing guarantees.

Clearly define when obligations are released.

Establish contingency plans for unresolved liabilities.

Example:
A small law firm with younger, less established equity owners wanted to release the retiring founding equity owner from the line of credit. The firm’s bank was initially uncomfortable with a complete release. The retiring equity owner agreed to back the line of credit through the buyout period.

Post-Retirement Compensation

Providing post-retirement compensation options ensures fairness and clarity. This may include stipends or a share of the generated fees.
Action Steps:

Establish clear post-retirement compensation policies.
Limit the payment period to maintain financial balance.
Address post-retirement competition and its impact on retirement compensation.

Example:
A law firm offered a two-year stipend to retiring partners, conditional on full retirement. If they started a private practice or joined another firm post-retirement, the firm could void future payments.

Transfer of Equity Interests & Capital Requirements

An orderly transfer of equity interests ensures the firm’s longevity and growth. Clear policies for new and lateral partner equity are essential.
Action Steps:

Set equity contribution standards for new and lateral partners.
Use a common formula (e.g., ownership percentage or compensation basis) to equalize capital contributions.
Implement a vesting or buy-in process to ensure commitment.

Example:
A law firm needed a process to admit new equity owners. Without prior experience, they found it challenging to determine the timing and basis for ownership transfers. They adopted a three-year vesting approach and updated their governance documents with new owner admission policies. This provided clarity and eased the onboarding of future partners.

Firm Valuation Provisions

Valuing the firm is one of the most challenging yet vital elements of transition planning. Most firms begin with book value (e.g., AR and WIP), though this rarely reflects intangible assets such as the firm’s reputation,, systems and processes, people, brand equity and even the cost of starting a new firm. Difficult as it is, law firms should address this issue well in advance of founder retirements.
Action Steps:

Define a valuation approach for firm assets.
Define how this value is allocated to equity interests.

Example:
A group of founding equity owners nearing retirement decided to value the firm for sale to senior attorneys. Despite some contentious discussions, they agreed to value the firm based on book value plus a percentage of collected income post-retirement. Starting the process 5 years before any retirements allowed new equity owners time to adjust and plan.

Common Pitfalls to Avoid

No required planning or declaration age for retirement
Unclear capital return and payout policies.
Inadequate management of post-retirement liabilities.
Undefined post-retirement compensation plans.
Lack of clear equity transfer procedures.
Inaccurate valuation of firm assets.

Conclusion
Modernizing governing documents is a foundational step for law firms preparing for generational transitions. By addressing key areas such as retirement provisions, capital management, equity transfers, compensation, and firm valuation, firms establish a solid foundation for future growth and adaptability.

More Arrested Developments: Wisconsin Supreme Court Holds ‘Arrest Record’ Encompasses Noncriminal Civil Violations

The Supreme Court of Wisconsin recently provided significant guidance resolving uncertainty about the scope of the Wisconsin Fair Employment Act’s (WFEA) prohibition against discrimination based on an employee’s or applicant’s arrest record. The court held that “arrest record” includes noncriminal offenses, such as municipal theft, reversing the Wisconsin Court of Appeals. As a result, adverse employment actions based on an individual’s arrest record for a civil offense may now form the basis of a claim of unlawful discrimination.

Quick Hits

The Wisconsin Supreme Court interpreted the phrase “any … other offense” in the WFEA to include noncriminal offenses.
The court’s interpretation is the final chapter in extended, seesaw litigation resulting from a school district’s decision to fire two employees who allegedly stole scrap metal from the district, pocketing the money they received from recycling the stolen material.
The district elected to dismiss the brothers after they were cited by the police for municipal theft (a noncriminal offense).
Relying on its expansive interpretation of the term “other offense,” the court determined that the district’s decision to fire the employees was based on “arrest record,” in violation of the WFEA.

Background
As discussed in our 2024 article addressing prior developments in this case, the Cota brothers worked on the grounds crew for the Oconomowoc Area School District. They were accused of taking the district’s scrap metal to a scrapyard and not remitting to the district the several thousand dollars they received for the scrap.
After an internal investigation was unable to determine which employees were responsible for the alleged theft, the district contacted the Town of Oconomowoc Police Department. The police ultimately cited the Cotas for theft. Approximately a year later, an assistant city attorney told the district he believed he could obtain convictions and that he also believed the case against the Cotas could be settled. He proposed dismissing the citations against the brothers in exchange for a $500 “restitution” payment. The district supported the proposal; however, the Cotas did not agree to the deal and were fired the next day. The municipal citations against the Cotas were later dismissed.
In response, the brothers filed a complaint under the WFEA alleging the district unlawfully fired them because of their arrest records. After an evidentiary hearing, an administrative law judge (ALJ) found that the Cotas failed to establish unlawful discrimination by the district. On appeal by the Cotas, the Labor and Industry Review Commission (LIRC) reversed the ALJ’s decision, concluding that the district did discharge the brothers because of their arrest records. The circuit court then affirmed LIRC’s conclusion. The court of appeals subsequently reversed LIRC, holding that “arrest record” under the WFEA includes only information related to criminal offenses (i.e., not including the municipal offenses the Cotas were cited for). LIRC then petitioned the Wisconsin Supreme Court for review.
Arrest and Conviction Record Discrimination Under the WFEA
Wisconsin is one of a minority of states that prohibit discrimination against employees and applicants because of arrest or conviction records. In sum, the WFEA deems it unlawful for an employer to make employment decisions (including hiring and firing decisions) on the basis of an employee’s arrest or conviction record. Employers risk liability when they, for example, decline to hire an employee due to the contents of a background check or fire an employee when they learn of the employee’s arrest.
Importantly, the WFEA includes an exception—employers may defend an adverse employment decision motivated by arrest or conviction record when a pending arrest or conviction “substantially relates” to the job. In general, an arrest or conviction is “substantially related” to a job when there is some overlap between the circumstances of the job and the circumstances of the offense.
Under the WFEA, an employer may refuse to hire an applicant or suspend an employee based on a pending arrest if the offense is substantially related to the position in question. An employer may also take adverse employment action based on an individual’s conviction record, provided there is a substantial relationship between the crime of conviction and the relevant position. Thus, an employer cannot, in most circumstances, fire an employee based on a pending arrest or an arrest that did not lead to a conviction.
The Court’s Reasoning and Its ‘Strange Results’
The Wisconsin Supreme Court concluded that the ordinary meaning of the phrase “any … other offense” includes violations of both criminal and noncriminal laws. The majority opined that this interpretation of “offense” is consistent with how the word “offense” is used throughout the Wisconsin Statutes. The court’s majority also found that such an interpretation was consistent with the WFEA’s statutory purpose of “protect[ing] by law the rights of all individuals to obtain gainful employment and to enjoy privileges free from employment discrimination because of … arrest record ….”
The majority thus found that LIRC correctly concluded that the Oconomowoc Area School District discharged Gregory and Jeffrey Cota because of their arrest records, in violation of the WFEA.
In a concurring decision, Justice Janet Protasiewicz lamented that the court’s decision, while correctly interpreted, makes for a “strange result.” Justice Protasiewicz wrote that, “[a]s a result of today’s decision, the [Oconomowoc Area School] District may not fire employees who it suspects stole from the District. That is no way to treat the victim of an offense.” Justice Protasiewicz added that if the district had fired the brothers when they suspected them of stealing, instead of going to the police (or had fired the brothers before they were cited by the police), they would not have violated the WFEA. Under these circumstances, the decision could not have been motivated by an arrest record that did not yet exist. “Our statutes should not hamstring employers who are victims that way,” Justice Protasiewicz stated. “An employer should be allowed to take employment action when it is the victim of an offense and suspects an employee did it, even when it relies on information from law enforcement.”
Key Takeaways
The 2024 court of appeals decision in this case narrowed the scope of employer obligations under the WFEA’s arrest record provisions. But this relief was short-lived. Employers doing business in Wisconsin are now confronted with the possibility of a wider array of offenses serving as the basis for arrest record discrimination claims.
Employers may want to note that the definition of “arrest record” under the WFEA includes noncriminal offenses—any information indicating an individual has been questioned, apprehended, or charged with any offense, criminal or noncriminal, may fall under the protection of the WFEA. And employers may also want to note that they have limited options when contending with an employee’s “arrest” by law enforcement. Even if the arrest involves conduct substantially related to the employee’s position (such as was the case with the Cotas’ alleged theft), employers risk liability if they discharge rather than suspend the suspected employee prior to conviction.
Under appropriate circumstances, employers may be well-served to discharge suspected employees prior to police action that may create an arrest record. And as lamented by Justice Protasiewicz, this outcome makes little policy sense and is contrary to the purposes of the WFEA.
While beyond the scope of this article, it is important to note that Wisconsin employers may also lawfully discharge an arrested employee based on their own independent investigation, if they can show that their discharge decision was motivated by the underlying conduct itself and not the fact the employee was arrested (the “Onalaska defense”). Employers may therefore want to conduct thorough internal investigations and document their findings independently of any arrest records—even if it is not possible or advisable to discharge an employee suspected of criminal wrongdoing prior to police action.