California Civil Rights Department Releases 2025 Pay Data Reporting Guidance—Adding New Race/Ethnicity Category
The California Civil Rights Department (CRD) recently released updated guidance for the 2024 pay data reporting cycle. The updated guidance makes significant changes to the race/ethnicity categories while leaving most other aspects of the prior year reporting process in place.
Quick Hits
California’s updated guidance adds a new racial/ethnicity category for the 2024 reports—”Middle Eastern or North African” (MENA).
The deadline for filing the 2024 California pay reports is May 14, 2025, and the platform opened for new filings on February 3, 2025.
California requires covered employers to file payroll employee reports for their own employees and requires covered employers to file labor contractor employee reports for their labor contractor employees.
California law mandates that private employers with one hundred or more employees, including those hired through labor contractors, must annually submit a pay data report to CRD, detailing employee pay, demographics, and other workforce data, including mean and median hourly wages broken down by race, ethnicity, and gender for each job category. Failure to comply can result in penalties of up to $100 per employee for the first offense and $200 per employee for subsequent violations.
Changes to Race/Ethnicity Categories
For the 2024 reporting cycle, CRD has added “Middle Eastern or North African” (MENA) as a new race/ethnicity category. This change is based on action taken by the U.S. Office of Management and Budget (OMB) to revise the Statistical Policy Directive No. 15 on race and ethnicity data standards. The newly published California Pay Data Reporting Handbook defines this category as “Individuals with origins in any of the original peoples of the Middle East or North Africa, including, for example, Lebanese, Iranian, Egyptian, Syrian, Iraqi, and Israeli.” Another change for the 2024 reporting cycle is that the former “Two or More Races” category has been changed to “Multiracial and/or Multiethnic.” A minor change has been made to remove the word “Other” from the “Native Hawaiian or Other Pacific Islander” category so that it is now “Native Hawaiian or Pacific Islander.” The 2024 reporting materials provide an updated race/ethnicity/sex codes incorporating these changes.
CRD directs employers to report employees in the new MENA category if this information is available. If that information is not available, employers may continue reporting these employees following prior guidance based on the U.S. Equal Employment Opportunity Commission’s (EEOC) instructions for reporting race/ethnicity on the EEO-1 survey. For instance, if an employer has self-ID information for employees where MENA was an available category, the employer may use that information to show which employees have identified under this category. On the other hand, if that information is not available, the employer is free to use the 2023 EEO-1 guidance with respect to these employees. Under the 2023 EEO-1 guidance, individuals with Middle Eastern and/or North African origins are under the “White” race/ethnicity category. This guidance means that employers that collected self-ID information under the prior EEO-1 guidance may continue to report using that self-ID information and do not have to gather new self-ID information to complete the 2024 reports.
Many Things Remain the Same
Outside of the changes to race/ethnicity categories, many of the reporting standards from 2023 remain in place for 2024, including the following:
CRD did not update its guidance as to which workers are labor contractor employees who must be included in the 2024 reports. There was some hope that CRD would provide additional information to help employers understand this requirement. However, the provided information seems to be nearly identical to the guidance in last year’s frequently asked questions (FAQs).
The twelve pay bands used in 2023 remain the same for 2024. Each reported employee’s 2024 W-2 wages are used to place that employee in one of these twelve pay bands for reporting purposes.
Client employers are encouraged to report to CRD labor contractors who do not supply all necessary reporting data but are not required to do so. Just as with the 2023 reporting cycle, the FAQs state that client employers “should” email CRD to report such labor contractors who do not provide all required reporting information. CRD tells client employers to provide names, addresses, and FEINs/SEINs of the labor contractors as well as documentation of the effort to obtain the required information in these emails.
The 2024 reports continue the requirement to provide the same information on remote workers required for the 2023 reports, including identifying which employees work remotely and which remote employees live in and outside California.
The 2024 guidance reinforces the point that labor contractors must provide data showing the client employer establishment where their labor contractor employees are assigned to perform work and that labor contractors should not provide data showing their own establishments. This has been a point of confusion since the labor contractor employee reporting began.
New Reference Resources
CRD has issued additional resources to help filers for the 2024 reporting cycle. For the first time, CRD has issued a 2024 California Pay Data Reporting Handbook. For prior reporting years, CRD had issued FAQs and other guidance, but before this year, it had not provided a handbook. The handbook is twenty-three pages long and organized into sections, starting with a discussion of which employers must file reports, moving to how the filing will be made, and covering other reporting requirements. Unlike the FAQs, which can sometimes be more challenging to follow, the handbook’s organization provides a more user-friendly guide to the pay data filing process. However, the FAQs may still need to be consulted, as they include additional details that could be important to filers.
Another change for the 2024 reporting cycle is that the instructions for completing the reporting templates for the payroll employee and labor contractor employee reports are no longer included as a tab in each template. Instead, the instructions are now found in separate ten-page-long documents. These instructions provide more details than the instruction tabs from prior year reporting cycles. Both sets of instructions include an overview section, step-by-step instructions, and a section discussing single-establishment and multiple-establishment reporting before providing a discussion of each column in the template. This discussion provides important information on the data being requested, the type of data accepted, and character limits. These updated instruction sets, as well as the handbook, are nice additions to CRD’s user resources.
To the extent that they have not yet done so, now may be a good time for employers to assess their preparations to file the 2024 California payroll employee and labor contractor employee pay data reports.
Beltway Buzz, February 7, 2025
NLRB: New Acting GC; Former Member Challenges Removal. There is a lot going on at the National Labor Relations Board (NLRB) these days. In fact, the Board may find itself embroiled in a case involving the constitutional powers of the presidency. Again.
General Counsel Musical Chairs. President Donald Trump removed Jessica Rutter from her position as acting general counsel at the Board and replaced her with William B. Cowen, who has served as regional director in the Board’s Los Angeles Regional Office (Region 21) since 2016. Cowen has held various positions at the Board over the years, including a stint as a Board member in 2002.
Former Member Wilcox Challenges Her Removal. Former NLRB member Gwynne Wilcox has filed a lawsuit challenging her removal from the Board. Wilcox claims that her termination was unlawful, as the National Labor Relations Act allows the president to remove Board members only “upon notice and hearing, for neglect of duty or malfeasance in office, but for no other cause.” Wilcox claims that she was never provided a hearing and that the email she received notifying her of her removal failed to identify any neglect of duty or malfeasance. Wilcox seeks a court order reinstating her to her position on the Board. The lawsuit likely sets up a protracted legal challenge testing the president’s constitutional power to remove officials from multimember boards and commissions, such as the NLRB and the U.S. Equal Employment Opportunity Commission (EEOC).
Board Operations Update. As the Buzz noted last week, with only Chair Marvin Kaplan and Member David Prouty remaining, the Board lacks an operating quorum. To address stakeholder concerns about the situation, the Board released a statement noting that field offices “will continue their normal operations of processing unfair labor practice cases and representation cases” and that “all representation cases may continue to be processed.”
EEOC Update. The EEOC still lacks a quorum and a Senate-confirmed general counsel, but there is now some clarity.
After removing EEOC General Counsel Karla Gilbride, President Trump appointed Andrew Rogers as acting general counsel. Rogers previously served as EEOC Chair Andrea Lucas’s chief counsel. As such, there is likely to be substantial alignment between the general counsel’s office—which oversees the enforcement at the EECO—and the commissioner’s office.
Like the NLRB, the Commission lacks a quorum (only Chair Andrea Lucas and Commissioner Kalpana Kotagal remain), which places limitations on its policy-making agenda. Accordingly, this week the Commission released a series of frequently asked questions (FAQs) addressing “The State of the EEOC.” The FAQs note, “The lack of a quorum of Commissioners does not impact the intake, processing, investigation, or resolution of charges of discrimination, nor does it impact the issuance of notices of right to sue.” On the other hand, the FAQs are clear that the lack of a quorum prohibits the Commission from engaging in rulemaking, issuing new policies, or rescinding guidance documents.
DHS Terminates TPS for Venezuela. On February 5, 2025, Secretary of Homeland Security Kristi Noem published a notice in the Federal Register that terminates the October 3, 2023, designation of Venezuela for Temporary Protected Status (TPS), effective April 7, 2025. A second group of Venezuelan nationals who have protection through a separate TPS designation that expires on September 10, 2025, are not affected by this action. Federal law provides that there is no judicial review of “any determination of the [Secretary] with respect to the designation, or termination or extension of a designation, of a foreign state” for TPS.
Anti-DEI Bill Introduced. This week, Senator Eric Schmitt (R-MO) and Representative Michael Cloud (R-TX) reintroduced the Dismantle DEI Act. In many ways, the bill mirrors some of the executive actions we have seen President Trump take with regard to diversity, equity, and inclusion (DEI). For example, the bill would eliminate DEI offices, training, grants, and programs within the federal government. Unlike the executive orders, which can be repealed, the bill would codify these provisions into federal law. The bill would also prohibit the federal government from contracting with entities that engage in “a prohibited diversity, equity or inclusion practice.” The bill could serve as the subject for hearings and press conferences on Capitol Hill, but is unlikely to pass the U.S. Senate as long as the legislative filibuster is intact.
From the Super Bowl to Capitol Hill. Like many Americans, our federal lawmakers will tune in to watch the Super Bowl this Sunday. But having played in a Super Bowl forty-four years ago, Representative Burgess Owens (R-UT) probably has a particular interest in the big game. These days, Congressman Owens serves on the House Committee on Education and the Workforce, and the Buzz has discussed his proposed legislation that would require increased transparency from union salts. But on January 25, 1981, the future Utah lawmaker—who spent ten seasons playing professional football—won Super Bowl XV as a member of the Oakland Raiders. Of course, the MVP of that Super Bowl was Raider quarterback Jim Plunkett, who threw three touchdown passes.
SECURE Act 2.0 Mandatory Automatic Enrollment Requirements for New Retirement Plans Guidance Released
One of the hallmarks of the SECURE 2.0 Act of 2022 (SECURE Act 2.0) legislation was to increase participation in retirement plans. On January 10, 2025, the Treasury Department and the IRS came one step closer when they announced the issuance of proposed regulations requiring automatic enrollment for new Code Section 401(k) and 403(b) retirement plans (Proposed Regulations). As background, the SECURE Act 2.0 added Code Section 414A, which provides that a retirement plan will not be qualified unless it satisfies certain automatic enrollment requirements under Code Section 414(w). These requirements:
Require automatic enrollment of employees with elective deferral contributions of at least 3% and no more than 10% in the first year of participation (with 1% increases between 10-15%)
Permit participants to withdraw their automatic elective deferrals within 90 days of their first elective deferral contributions being made
If no investment election is made, permit the automatic elective deferrals to be invested in qualified default investment alternatives (QDIAs)
The legislation, as originally enacted, provides that the automatic enrollment requirements do not apply to 1) retirement plans established before December 29, 2022; 2) retirement plans that have been in existence for less than three years; 3) governmental plans; 4) SIMPLE 401(k) plans; and 5) retirement plans with fewer than 10 employees. The Proposed Regulations provide additional regulatory guidance and clarification on issues such as eligibility for the automatic enrollment feature, contribution requirements, permissive withdrawals and investment requirements. The Proposed Regulations also incorporate previous IRS automatic enrollment guidance issued last year (provided in Notice 2024-2) with some modifications.
Highlights From the Proposed Regulations
Eligibility – Provides that an employer cannot exclude groups of employees, and the automatic enrollment requirements must apply to all employees eligible to elect to participate in the plan. However, an employer can exclude employees who already have an election on file (whether an election to contribute or to opt out) on the date the plan is required to comply with the automatic enrollment requirements.
Contribution limits – Clarifies how an employee’s “initial period” is determined for purposes of initial contributions. The initial period begins on the date the employee is first eligible to participate in the plan and ends on the last day of the following plan year. This is important for the application of the automatic escalation rule that requires the plan to automatically increase an auto-enrolled participant’s contribution percentage by one percentage point (up to 10%) each plan year following the employee’s initial period.
Plan mergers and spinoff – Generally, incorporates guidance provided in Notice 2024-2 regarding the application of the automatic enrollment requirement to plans that are the result of mergers but expands the guidance to address mergers involving multiple employer plans; incorporates the guidance in Notice 2024-2 regarding spinoffs. Importantly, the merger of two plans established prior to December 29, 2022, into one plan will not create a new plan subject to the automatic enrollment requirements.
New and small business – Provides that the automatic enrollment requirements should start on the first day of the first plan year that begins after the employer has been in existence for three years. Further, the 10-employee requirement is determined by the Consolidated Omnibus Budget Reconciliation Act (COBRA) regulations under Q&A-5, Treasury Regulation Section 54,4980B-2.
Multiple employer plans – Clarifies that if an employer adopts a multiple employer plan, the automatic enrollment requirements apply to the employer as if it adopted a single employer plan (i.e., they apply if adopted after December 29, 2022) regardless of when the multiple employer plan was adopted. This would not affect the employers who adopted the multiple employer plan on or before December 29, 2022.
The Proposed Regulations will not take effect until the first plan year beginning six months after the issuance of final regulations. However, the change in presidential administration (and related changes within the administrative agencies) casts uncertainty on whether these regulations will be finalized without further modifications or withdrawn all together. A plan sponsor should proceed in good faith to apply these rules until they are final.
New Executive Orders May Contradict Federal Collective Bargaining Agreements
During his first two weeks in office, President Donald Trump issued several executive orders that may conflict with provisions embedded in federal union contracts and that have led to lawsuits challenging the actions.
Quick Hits
A number of new executive orders may contradict the terms of federal policies and union contracts, especially on issues like telework and diversity, equity, and inclusion (DEI).
Unions have responded by suing to block the executive actions that would end job protections for certain federal employees.
On January 20, 2025, President Trump issued an executive order to reclassify thousands of federal employees as at-will workers, in a category called “Schedule Policy/Career.” At-will employment would make it easier to discharge federal government employees, who will no longer be in the “competitive service” category and benefit from associated job protections.
Also on January 20, President Trump also released an executive order that directs all federal agencies to end remote work arrangements and require employees to return to the workplace full-time “as soon as practicable.” In some cases, this contravenes telework benefits provided in collective bargaining agreements. Prior to the executive order, more than half of federal employees were eligible to telework, according to a report from the U.S. Office of Personnel Management (OPM).
Another January 20 executive order halts all diversity, equity, and inclusion (DEI) programs, policies, and offices in the federal government. It directs OPM to review and revise all federal employment practices, union contracts, and training programs to comply with this new policy. It also instructs the U.S. attorney general to scrutinize private-sector DEI programs.
Furthermore, another January 20 executive order states that the federal government will recognize only two genders: male and female. It rejects the transgender and nonbinary categories. It rescinds previous guidance from the U.S. Equal Employment Opportunity Commission (EEOC) under the Biden administration, which held that LGBTQ employees are legally protected from harassment and discrimination under Title VII of the Civil Rights Act of 1964.
The EEOC’s new acting chair, Andrea Lucas, recently announced a policy shift on enforcement of antidiscrimination laws. She opposes the position that unlawful harassment under Title VII includes the “denial of access to a bathroom or other sex-segregated facility consistent with [an] individual’s gender identity” and the “repeated and intentional use of a name or pronoun inconsistent with [an] individual’s known gender identity.”
Some union contracts have clauses protecting LGBTQ workers from harassment, discrimination, and retaliation. Likewise, some union contracts guarantee workers access to restrooms that align with their gender identity, and require management to use an employee’s preferred name and pronouns.
Finally, on January 31, 2025, President Trump released an executive order nullifying collective bargaining agreements that were finalized with federal agencies during the last month of the Biden administration. The status of those recently ratified union contracts remains uncertain.
Next Steps
Depending on their written terms, some provisions in union contracts governing the employment of federal workers may no longer be enforceable based on the Trump administration’s executive orders related to telework, DEI, and protections for LGBTQ workers. The new executive orders that conflict with written union contract language call into question whether the directives are enforceable without collective bargaining.
Even though unions have filed lawsuits to challenge the new executive orders, the outcomes of those lawsuits remain uncertain.
Supreme Court Holds FLSA Exemptions Do Not Require Heightened Evidence Standards
The U. S. Supreme Court unanimously decided in E.M.D. Sales, Inc. v. Carrera that the standard of “preponderance of the evidence” is to be used in cases where an employer claims an employee is exempt from overtime eligibility under the Fair Labor Standards Act (FLSA).
As explained in a September 2024 GT Alert, the plaintiffs in the case were sales representatives who alleged their employer, a food products distributor, failed to pay them overtime under the FLSA. The employer argued that based on a preponderance of the evidence, the employees qualified as outside salespeople and were thus exempt from FLSA overtime requirements. The Fourth Circuit found in the employees’ favor, holding that under Fourth Circuit precedent, the employer was required to prove applicability of the FLSA exemption by “clear and convincing evidence,” a higher standard than preponderance, and had failed to do so. The Fourth Circuit’s decision was an outlier among the circuits, which otherwise employ the “preponderance of the evidence” standard.
In its Jan. 15, 2025, decision authored by Justice Kavanaugh, the Supreme Court found no basis for applying the heightened “clear and convincing evidence” standard. The Court instructed that it strays from the presumptive “preponderance of the evidence” standard in civil litigation only in limited circumstances, and held that none of those circumstances existed here. The Court also rejected the employees’ argument that the strong public policy interest in guaranteeing workers’ a fair wage justifies a higher standard of proof. Thus, in cases where employers seek to prove that an employee is exempt under the FLSA, the “preponderance of the evidence” standard will apply.
Fifth Circuit Upholds Minimum Wage Rate for Federal Contractors
The Fifth Circuit Court of Appeals recently found the Biden administration operated within its authority when it raised the minimum wage for federal contractors to $15 per hour in 2022. This represents a relatively rare win for Biden administration policies in the Fifth Circuit, which has jurisdiction in Louisiana, Mississippi, and Texas.
Quick Hits
The Fifth Circuit upheld the Biden administration’s executive order increasing the minimum wage for federal contractors to $15 per hour in 2022.
The Fifth Circuit overturned a lower court’s decision in favor of three states that had challenged the rule.
As of January 1, 2025, the minimum wage for federal contractors is $17.75 per hour.
On February 4, 2025, the Fifth Circuit upheld the Biden administration’s $15 minimum wage for federal contractors. A three-judge panel ruled that this minimum wage rule was permissible under federal law, thereby reversing a previous federal district court ruling.
In February 2022, Louisiana, Mississippi, and Texas sued the federal government to challenge Executive Order 14026, which directed federal agencies to pay federal contractors a minimum wage of $15 per hour. Previously, the minimum wage for federal contractors was $10.95 per hour.
The states argued the executive order violated the Administrative Procedure Act (APA) and the Federal Property and Administrative Services Act of 1949 (FPASA) because it exceeded the president’s statutory authority. The states also claimed the executive order represented an “unconstitutional exercise of Congress’s spending power.”
The executive order states that its purpose is “to promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers.” It noted raising the minimum wage can boost worker morale, enhance productivity, and reduce turnover.
The Fifth Circuit concluded this purpose was essential and consistent with carrying out the provisions of the FPASA. It agreed there was a sufficient link between paying a higher minimum wage and the efficiency of the federal procurement system.
As of January 1, 2025, the minimum wage for federal contractors is $17.75 per hour. Many states have their own minimum wage, and these vary widely.
Next Steps
Employers that have contracts with federal agencies may wish to stay up-to-date on any future changes to the minimum wage rate for federal contractors. Simultaneously, they must comply with state minimum wage laws where their employees perform work. The state minimum wage could be lower or higher than rate for federal contractors.
In some cases, union contracts also may dictate the wages for certain federal contractors.
The challenges of other major Biden-era rules are still pending before the Fifth Circuit, including the appeals of decisions striking down the national noncompete ban and increases in the salary threshold for overtime exemptions. Whether this confirmation of the Biden administration’s authority provides a forecast for future rulings remains to be seen, but it is a notable exception to the court’s tendencies.
China-Based Cotton Companies Added to UFLPA Entity List: What It Means for Apparel
The U.S. Department of Homeland Security (DHS) announced the addition of 37 companies based in the People’s Republic of China (PRC) to the Uyghur Forced Labor Prevention Act (UFLPA) Entity List because of alleged use of forced labor. Of these, 26 operate in the cotton sector.
According to DHS, Huafu Fashion Co., Ltd. and 25 of its subsidiaries were identified as entities involved in cotton production linked to the Xinjiang Uyghur Autonomous Region (XUAR). Huafu operates a vertically integrated supply chain, ranging from cotton cultivation to textile manufacturing. Twenty-two of its subsidiaries are located in the XUAR, with the remaining three in Zhejiang Province.
With a vertically integrated supply chain spanning cotton cultivation, processing, and textile production, these entities present significant compliance risks for apparel companies sourcing from the PRC.
Businesses linked to these entities may face shipment detentions under UFLPA enforcement.
Breaking Down UFLPA Enforcement: Apparel and Textiles in Focus
In December 2024, U.S. Customs and Border Protection (CBP) processed more than 2.8 million entry summaries with a combined value exceeding $290 billion.
During the same period, CBP targeted 1,404 entries, valued at over $18.7 million, for suspected links to forced labor in supply chains. These efforts encompass goods subject to both UFLPA and Withhold Release Orders (WROs).
The apparel, footwear, and textiles sector UFLPA enforcement statistics:
Total shipments: 1,996 (up from 1,963 in December 2024)
Shipments denied: 1,274 (63.8%)
Shipments released: 649 (32.5%)
Shipments pending: 73
Total shipment value: $90.42 million
With nearly 2,000 shipments detained, the apparel and textile sector remains a critical target of CBP’s enforcement efforts. For the apparel and textile industry—known for its complex, global supply chains—this means increased compliance requirements and potential shipment detentions. Importers face significant risks, including delays, penalties, and reputational damage if they cannot demonstrate that their products are free of forced labor. As UFLPA enforcement intensifies, apparel and textile importers are encouraged to partner with compliance experts to navigate these complex regulations effectively.
This largest-ever batch of additions reinforces that we are implementing the full force of this law, making impactful updates to the UFLPA Entity List, and enhancing U.S. Customs and Border Protection’s enforcement capabilities.
www.dhs.gov/…
Ohio Lawmakers Introduce Bipartisan Bill to Ban Noncompete Agreements
Ohio could become the latest state to join the growing list of jurisdictions to ban or significantly restrict the use of noncompete agreements in employment under bipartisan legislation introduced by a pair of state lawmakers.
Quick Hits
Ohio state senators have introduced bipartisan legislation to ban noncompete agreements that restrict workers post-employment and provide them with the right to take legal action against employers.
The proposed bill would void any noncompete agreements entered into or modified after the bill’s effective date.
If passed, Ohio would join the growing number of states implementing restrictions on noncompete agreements, following a broader trend.
On February 5, 2025, Ohio state Senators Bill Blessing (R-Colerain Township) and Bill DeMora (D-Columbus) filed Senate Bill (SB) 11, which would prohibit employers from entering into or attempting to enter into a noncompete agreement with a worker or “prospective worker.” The cosponsorship signals the possibility of bipartisan support for the measure.
Ohio is currently one of fewer than a dozen states without legislation on noncompetes, such as prohibiting them, requiring notice, limiting them to high-wage earners, or other similar limitations.
Instead, the enforceability of noncompetes in Ohio remains governed by the 1975 Ohio Supreme Court case Raimonde v. VanVlerah, which sets forth factors for a court to consider as to whether a restrictive covenant is reasonable and based upon a protectable business interest.
SB 11
As introduced, SB 11 would prohibit employers from enforcing agreements that prohibit or penalize workers for seeking or accepting work or operating a business after the conclusion of the relationship between the employer and worker. Such prohibited restrictions include an agreement that:
“the worker will not work for another employer for a specified period of time, not work in a specified geographic area, or not work for another employer in a capacity similar to the worker’s work for the employer”;
“requires the worker to pay for lost profits, lost goodwill, or liquidated damages because the worker terminates the work relationship”;
“imposes a fee or cost on a worker for terminating the work relationship”;
requires a worker who terminates his or her employment to reimburse the employer for expenses incurred for training, orientation, evaluation, or other services to improve the workers’ performance; and
the worker will not work for another employer for a specified period of time, not work in a specified geographical area, or not work for another employer in a capacity similar to the worker’s work for the employer.
Such agreements would be void if entered into, modified, or extended after the effective date of the bill.
Employers would be prohibited from requiring claims for violations of the noncompete ban outside of the state or depriving claimants of state legal protection for disputes arising in the state. However, that choice of law restriction would not apply to workers who are represented by legal counsel and choose a venue or forum to adjudicate the claim, or choose the law to be applied.
SB 11 would further provide workers with a right of action to bring civil claims against employers for violations to seek damages, including costs, attorneys’ fees, actual damages, punitive damages up to $5,000, and injunctive relief. Workers would also be able to file complaints with the attorney general or the director of commerce, who will investigate and may bring actions on behalf of the worker.
Next Steps
It is too soon to predict whether SB 11 will have momentum, but state-level limitations on restrictive covenants have been trending in the last decade. That trend could continue, particularly after a 2024 Federal Trade Commission (FTC) rule that sought to ban nearly all noncompete agreements in employment was struck down in court. It is unclear whether the Trump administration will continue to pursue the Biden-era ban, leaving it to states to regulate noncompete agreements.
2025 Compliance Guide for Employers in Mexico
Several Mexican employment-related laws will be implemented or amended in 2025, including the approval of the Chair Law (Ley Silla), the recognition of app-based couriers as employees and its derived obligations, the increase in the minimum wage, and the unit of measure used to calculate monetary amounts owed to the government in case of noncompliance.
Quick Hits
The minimum wage for 2025 is MXN $419.88 for the Free Zone of the Northern Border and MXN $278.80 for the rest of the country.
The unit of measure for 2025 is MXN $113.14 daily, MXN $3,439.46 monthly, and MXN $41,273.52 annually.
The Chair Law (Ley Silla) and legislation classifying app-based couriers as employees introduce new obligations for employers and will become enforceable in June 2025.
Obligations to Consider in 2025 for Compliance
Minimum Wage. On December 4, 2024, the National Commission on Minimum Wages (Comisión Nacional de los Salarios Mínimos or CONASAMI) approved a 12 percent increase to the minimum wage which entered into force on January 1, 2025.
Increase to Mexico’s Unit of Measure. On January 10, 2025, the National Institute of Statistics and Geography published in the Official Gazette of the Federation (Diario Oficial de la Federación) the daily, monthly, and annual updated values for the Unit of Measurement and Update (UMA). The UMA is the basis for calculating fines or other state and federal government duties. The new values will be effective on February 1, 2025, and will be as follows:
Daily = MXN $113.14 (approximately USD $5.65)
Monthly = MXN $3,439.46 (approximately USD $171.97)
Annual = MXN $$41,273.52 (approximately USD $2,063.67)
Risk premium update. Every February, employers must file with Mexico’s Social Security Institute (Instituto Mexicano del Seguro Social (IMSS)) an annual report recording all occupational diseases or work-related disability certificates issued to their employees. The report is used to calculate whether the risk premium should be updated (either by increasing or decreasing it).
IMSS electronic mailbox. The IMSS is giving more relevance to its digital mailbox to notify employers of any matter related to employees, payment of quotas, obligations, fines, etc. Although it is not mandatory to activate this portal, employers may want to have it enabled by February 1, 2025.
Profit-sharing payments (PTU). No later than March 31, 2025, all companies must file their annual tax returns. Employees are entitled to receive a prorated portion of the 10 percent of the employer’s fiscal year taxable income and the deadline to pay the portion is May 31, 2025.
Noncompliance with the requirements for PTU payments and/or formalities could result in fines for employers.
Federal and local elections. On Sunday, June 1, 2025, federal elections to select ministers, magistrates, and federal judges will take place, and the states of Durango and Veracruz will additionally elect different municipal positions. Hence, June 1, 2025, pursuant to the Federal Labor Law, will be a mandatory holiday.
Chair Law. On December 19, 2024, Mexico’s “Ley Silla” (Chair Law) was published in the Official Gazette of the Federation. This bill’s main obligations consist of: (i) having enough seats with a backrest for employees’ use, and (ii) avoiding prohibiting employees from taking seated breaks when the nature of the work allows it.
Employers have a 180-day period, as of the publication date, to comply with all the obligations stated in the legislation. Hence, dispositions will become fully enforceable by June 17, 2025.
Classification of app-based couriers as employees. On December 24, 2024, legislation classifying certain app-based couriers as employees was published in the Official Gazette of the Federation. According to the bill, depending on certain characteristics, couriers can be considered employees, and this recognition can lead to several obligations for applicable employers after a 180-day period from the date of publication. Hence, dispositions will become fully enforceable by June 22, 2025.
María José Bladinieres contributed to this article
H-1B Cap Registration to Open on March 7, 2025
USCIS announced that the H-1B Cap initial registration period will open March 7, 2025, at 12:00 PM EST and will close at 12:00 PM EST on March 24, 2025. Employers take note: if you employ or are seeking to employ foreign students or other foreign talent in the U.S., this tiny window of opportunity is the only period in 2025 wherein employers are eligible to register any foreign talent they may seek to sponsor for the H-1B Cap lottery. This is the only method by which employers may sponsor a foreign national who has never held H-1B status previously. The registration will continue to be an electronic process. Over the years the USCIS online registration system has experienced temporary outages and technical glitches so be sure to identify your H-1B Cap population early. Also, remember that the filing fee for the H-1B Cap Registration has increased from $10.00 to $215.00 per applicant registered.
Impactful Changes to Specialty Occupation
The H-1B Rule implemented on January 17, 2025, clarifies the definition of a Specialty Occupation. With the revised definition of specialty occupation criteria, employers may want to review the educational background of an H-1B Cap applicant more carefully than in previous years to ensure it aligns with the offered position.
Previously, the law at 8 CFR 214.2(h)(4)(iii)(1) indicated that one of the criteria for an H-1B petition was that the position normally requires a bachelor’s or higher degree or its equivalent for entry into the particular position.
That provision has been revised and that criteria now requires that a U.S. bachelor’s or higher degree “in a directly related specific specialty, or its equivalent” normally serve as the minimum requirement for entry into the particular “occupation.”
Insightful Analysis
If a company seeks to sponsor a foreign worker for an opened position that may be filled by an applicant with a degree in any subject, then that position may not immediately qualify as a specialty occupation position. Similarly, even if a potential H-1B worker is an amazing candidate, if the candidate has a degree that seems unrelated to the position offered, it could be tougher to gain an approval under those facts. In either of these scenarios, USCIS may issue a tough Request for Evidence (RFE) under those circumstances. Do not be afraid to use the H-1B Cap Registration as a tool in your hiring strategy but do use an experienced immigration practitioner who will issue spot and mitigate risk to maximize chances of success.
DOJ Begins Its Own DEI Enforcement Efforts
Wednesday evening, February 5, 2025, Attorney General Pam Bondi issued a series of memos to various divisions of the Department of Justice (DOJ). One memo asserted that the DOJ will take action to enforce President Trump’s efforts to eliminate illegal diversity, equity, and inclusion (DEI) initiatives, as outlined in Executive Order 14173 (“Ending Illegal Discrimination and Restoring Merit-Based Opportunity”).
This memo, titled “Ending Illegal DEI And DEIA Discrimination And Preferences,” tasks the DOJ’s Civil Rights Division with investigating, eliminating, and penalizing illegal DEI “preferences, mandates, policies, programs, and activities in the private sector and in educational institutions that receive federal funds.” By March 1, 2025, the Civil Rights Division and the Office of Legal Policy are to submit a report containing recommendations to “encourage the private sector to end illegal discrimination and preferences” related to DEI. That report is also supposed to identify the most “egregious and discriminatory DEI and DEIA practitioners in each sector of concern.” One big takeaway from this memo is the implication that some private companies may face criminal penalties for DEI initiatives.
Bondi also directs the DOJ to work with the Department of Education to eliminate DEI programs at universities, based on the Supreme Court’s 2023 decision in Students for Fair Admissions, Inc. v. Fellows of Harvard Coll., 600 U.S. 181 (2023).
Notably, the memo itself does not purport to prohibit educational, cultural, or historical observances that “celebrate diversity, recognize historical contributions, and promote awareness without engaging in exclusion or discrimination.” Examples of these types of observances include Black History Month and International Holocaust Remembrance Day.
This new effort from the DOJ will likely face legal scrutiny in the coming weeks, as federal courts have routinely upheld private employers’ First Amendment right to promote DEI. Employers should stay up to date with the rapidly evolving DEI landscape and consult with legal counsel as they evaluate their practices and initiatives for compliance with federal non-discrimination laws.
2025 Employment Law Updates
Many state and local government employment laws went into effect January 1, 2025. Here is a non-exhaustive list of 2025 employment law updates.
The Worker’s Compensation Time of Hire Notice can be found here.
The Worker’s Compensation Updated Poster can be found here.
Employers should also be aware that numerous hourly minimum wage rate increases are set to take effect in various jurisdictions on January 1, 2025, as previously detailed here.
Again, this is a non-exhaustive list of employment law updates. Contact your Polsinelli attorney if you have any questions or need assistance regarding employment law compliance in 2025, as well as to get up to speed on the latest employment law updates.