U.S. District Judge Upholds Federal Preemption Over Minnesota State Drug Testing Law
The U.S. District Court for the District of Minnesota recently sided with a natural gas distribution company in a lawsuit by an employee in a safety-sensitive position who alleged his discharge following a failed random drug test violated the Minnesota Drug and Alcohol Testing in the Workplace Act (DATWA). The court found federal statutes and U.S. Department of Transportation (DOT) drug and alcohol regulations for safety-sensitive positions preempted the state law.
Quick Hits
The U.S. District Court for the District of Minnesota ruled in favor of a natural gas distribution company that discharged an employee who failed a random drug test.
The court found that federal laws, including the Natural Gas Pipeline Safety Act, the Hazardous Liquids Pipeline Safety Act, and DOT drug and alcohol testing regulations preempted DATWA’s employment protections regarding drug testing.
The decision underscores the significance of federal preemption in workplace drug testing, emphasizing the necessity for employers to align their policies with federal regulations when conflicts arise with state laws.
U.S. District Judge Nancy Brasel granted summary judgment for Minnesota Energy Resources Corporation (MERC) in a lawsuit by a discharged employee who alleged the company violated DATWA. The employee, who worked as a gas distribution system designer, alleged the company violated DATWA in part by requiring the employee to submit to a random drug test and failing to provide him with required notices.
However, the court found that it was impossible for the company to comply with both the federal DOT regulations, which require random drug testing and immediate removal after positive results, and Minnesota’s DATWA, which provides employment protections regarding employer drug tests. Thus, the court ruled that the federal regulations preempt DATWA and dismissed the employee’s claims.
Background
The lawsuit was brought by an employee who was discharged after he tested positive for tetrahydrocannabinol, the primary psychoactive compound in marijuana or cannabis, in a random employer drug test.
The company is subject to the DOT regulations for companies transporting hazardous materials, which require employers to maintain a drug and alcohol testing program. The employer maintained a drug and alcohol testing policy that required employees in safety-sensitive positions who perform “covered functions” to submit to random drug testing.
Following his discharge, the employee and his union filed a grievance. An arbitrator determined that the employee was subject to random drug testing under federal law and that the company acted with just cause in discharging him for failing the drug test. The arbitrator did not address whether the employee was in a safety-sensitive position under DATWA or adjudicate any of the DATWA claims.
The employee then filed a lawsuit against the company, alleging he was not supposed to be subject to random testing and that the employer had failed to provide the required notices under DATWA. Specifically, the employee alleged the company violated DATWA by: (1) requiring him to submit to a random drug test, (2) failing to inform him of his rights in writing, (3) failing to offer counseling or rehabilitation before discharging him, and (4) disclosing his positive test result to a federal agency without a confirmatory test.
Federal Preemption
The district court found that the federal DOT regulations expressly preempt the employee’s DATWA claims because complying with both DATWA and the applicable federal regulations would be impossible or impede the execution of federal drug testing procedures.
DATWA includes many employment protections for employees regarding drug testing. The law requires employers to inform employees in writing of their rights to testing and to a confirmatory test, prohibits employers from discharging employees without first providing them with an opportunity to participate in a counseling or rehabilitation program, and restricts the disclosure of a positive test result.
Also, DATWA contains a preemption clause that exempts employees who are subject to drug and alcohol testing under “federal regulations that specifically preempt state regulation of [such] testing with respect to those employees.”
On the other hand, the applicable DOT regulations state that they preempt state or local requirements where compliance with both “is not possible.” The regulations also require mandatory random drug testing for employees in safety-sensitive positions, require immediate removal from such positions upon a positive test result, require the medical review officer (not the employer) to take certain actions, and further outline specific procedures for notifying employees of positive test results.
“DOT regulations expressly preempt DATWA because compliance with both federal regulations and DATWA is either impossible or an obstacle to the accomplishment and execution of DOT requirements,” the court said.
Alternatively, the court further determined that the company had met the burden of showing that the federal regulations preempt DATWA under a theory of conflict preemption for the same reasons.
Next Steps
The court’s decision in favor of the employer highlights the importance of federal preemption in workplace drug testing. Employers must adhere to federal regulations, which can override state laws when there is a conflict. This ruling serves as a critical reminder for employers to ensure their drug testing policies comply with federal standards, particularly for employees in safety-sensitive positions.
Supreme Court Stays Orders Reinstating NLRB, MSPB Members, Pending Appeal
On May 22, 2025, the Supreme Court of the United States accepted the Trump administration’s argument to keep former National Labor Relations Board (NLRB) member Gwynne Wilcox and former Merit Systems Protection Board (MSPB) member Cathy Harris off their respective boards during the pendency of their consolidated legal action alleging that President Donald Trump unlawfully removed them without cause.
Quick Hits
The Supreme Court has granted a stay of orders from the District Court for the District of Columbia enjoining the president’s removal of NLRB member Gwynne Wilcox and MSPB member Cathy Harris pending the disposition of an appeal in the U.S. Court of Appeals for the District of Columbia Circuit.
The stay, which will remain in effect until the Supreme Court rules on the issue, has the effect of preventing the NLRB from having the quorum needed to issue decisions for the foreseeable future.
The Supreme Court granted the government’s emergency application to stay two district court orders that had reinstated Wilcox and Harris as members of the NLRB and MSPB, respectively. The Supreme Court stated that the stay would remain in effect through the appeal in the U.S. Court of Appeals for the District of Columbia Circuit and until the Supreme Court rules on the issue, if a writ of certiorari is timely sought.
“Should certiorari be denied, this stay shall terminate automatically,” the Court stated. “In the event certiorari is granted, the stay shall terminate upon the sending down of the judgment of this Court.”
The stay ruling comes after an en banc decision by the U.S. Court of Appeals for the D.C. Circuit voided a decision by a three-judge D.C. Circuit panel and revived the two district court orders reinstating Wilcox and Harris. The Trump administration then sought emergency relief from the Supreme Court, and Chief Justice John Roberts granted a temporary stay.
By statute, the president is prohibited from removing NRLB and MSPB members except for cause. However, the Trump administration has argued that provisions limiting the president’s removal power are unconstitutional and infringe the president’s authority as the executive.
“The stay reflects our judgment that the Government is likely to show that both the NLRB and MSPB exercise considerable executive power,” the Supreme Court stated. “But we do not ultimately decide in this posture whether the NLRB or MSPB falls within such a recognized exception; that question is better left for resolution after full briefing and argument.
“The stay also reflects our judgment that the Government faces greater risk of harm from an order allowing a removed officer to continue exercising the executive power than a wrongfully removed officer faces from being unable to perform her statutory duty,” the Court stated.
Justice Elena Kagan issued a dissenting opinion, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, arguing the Court should not “overrule or revise existing law” through an expedited emergency application “with little time, scant briefing, and no argument.”
The dissent pointed to the 1935 decision in Humphrey’s Executor v. United States, in which the Supreme Court upheld restrictions on the president’s authority to remove officers of certain types of independent agencies—in that case, a commissioner of the Federal Trade Commission.
A D.C. Circuit panel is currently considering the consolidated action of Wilcox and Harris challenging their removal. The court heard oral arguments in the case on May 16, 2025.
Next Steps
Though not final, the Supreme Court’s ruling backs President Trump’s near-unprecedented removal of members of independent federal agencies without cause. Notably, the Supreme Court’s stay will remain in effect until it decides the issue, as litigation remains ongoing.
In the meantime, the NLRB lacks the quorum required to issue decisions, hampering its ability to revise or reverse some of the employee-friendly decisions issued during the Biden administration. At least until the president appoints, and the U.S. Senate confirms, one or more new Board members, the Supreme Court’s stay seems to ensure that the NLRB will remain without a quorum for the foreseeable future.
Remote Employee Solidifies Manufacturer’s Right to Apportion Income
A plethora of case law, state guidance, and practitioner musings are devoted to discussions of what income of a multistate taxpayer is subject to apportionment and the fairness of various apportionment methods. Much less discussion centers on whether a taxpayer with only one brick-and-mortar location has a right to apportion its income. A recent decision of the Michigan Tax Tribunal addresses this fundamental question. Vidon Plastics Inc v. City of Lapeer, MTT Docket No. 23-002017 (Apr. 17, 2025).
The Facts: Vidon Plastics Inc. (“Vidon”), a Michigan manufacturing corporation, operates its sole manufacturing plant in Lapeer, Michigan. On its Lapeer Corporation Income Tax returns, Vidon reported 100% of its property and payroll as being in Lapeer. However, Vidon reported 0% of its sales to Lapeer because all of its sales of tangible personal property were shipped to customers located outside of the City.
The City rejected Vidon’s apportionment of its sales because Vidon’s only physical location is within the City. Vidon appealed the City’s rejection to the Lapeer Income Tax Board of Review, which agreed with the City’s position. Vidon appealed to the Michigan Tax Tribunal.
The Law: Cities in Michigan are authorized to levy an income tax “on such part of the taxable net profits as is earned by [a] corporation as a result of work done, services rendered and other business activities conducted in the city[.]” A corporation is entitled to apportion net profit outside of a Michigan city where it is located when its entire net profit is “not derived from business activities exclusively within the city.” Though not defined in the law, the Tribunal determined that the term “business activity” warrants a “broad and liberal interpretation” and, thus, includes “the enterprise, profession, or undertaking of any nature conducted or ordinarily conducted for profit or gain by any person.”
In 2018, the Lapeer City Commission approved Regulation 18.1, which provides that a corporation is not entitled to apportion its net profit if it “has no regularly maintained and established out-of-city location and engages in no out-of-city business activity,” even if it fills orders by shipment to out-of-city destinations.
The Decision: Vidon asserted its right to apportion was established by several aspects of its business. Finding the burden rested with Vidon to establish its right to apportion by a preponderance of the evidence, the Tribunal examined each of Vidon’s purported out-of-City activities.
First, the Tribunal concluded that Vidon failed to establish that it conducted business outside of Lapeer via ownership of inventory in Texas. For inventory shipped free-on-board by carrier to the Texas warehouse, the Tribunal found that title transferred from Vidon to its customer when the inventory was given to the carrier because Vidon presented no evidence that title transferred at any other point. For consignment stock, the Tribunal applied provisions of the Uniform Commercial Code to determine that although the parties contracted that title did not pass until the purchaser withdrew inventory from the warehouse, this retention of title by the seller to goods shipped to a buyer merely created a security interest in the property—not the reservation of title in the property by Vidon.
Second, the Tribunal concluded that Vidon’s sale of goods destined outside of the City did not constitute business activity outside of the City. Though the Tribunal noted that such sales would not be counted in the numerator of the Lapeer sales factor for apportionment purposes, the Tribunal concluded that this does not mean that Vidon “conducted business activity outside the [C]ity[.]”
Next, finding that Vidon’s Lapeer-based employees and Vidon’s Illinois-based independent contractor do nothing outside of the City other than solicit orders of tangible personal property, the Tribunal found no evidence that their conduct constitutes business activity outside of the City.[1]
Finally, the Tribunal analyzed the conduct of a Vidon employee who primarily worked from his home in Ann Arbor. Reviewing the nature of the Ann Arbor employee’s activities, the Tribunal found that the employee’s activities included not just sales activities, but “things in addition to sales” including helping with strategic planning. Based on the location and type of work done by the Ann Arbor employee, the Tribunal found that Vidon established its “right to apportion its income.”
The Takeaway: Setting aside any discussions of constitutional law, this case serves as an important reminder that even a business with only one physical location may have a statutory right to apportion its income when the business engages in activities outside of its home jurisdiction. To substantiate its right to apportion, a business should think holistically about its activities—especially those of remote and/or travelling employees. Apportionment is a right—use it, don’t lose it!
[1] The Tribunal relied on MCL 141.605(a) for the proposition that a person is not doing business based on the solicitation of orders outside the City for sales of tangible personal property, which orders are sent inside the City for approval or rejection and, if approved, are filled by shipment or delivery from a point inside the City. This Michigan law seems to parallel Public Law 86-272, a federal law that generally prohibits a jurisdiction from imposing a net income tax where the taxpayer’s activities within the jurisdiction are limited to the solicitation of orders of tangible personal property, activities ancillary to solicitation, or de minimis activity.
A Tie Goes to the Runner, a Common Law Extravaganza, and the Administration Gets a Break – SCOTUS Today
Today, an evenly divided 4–4 U.S. Supreme Court, with Justice Barrett having recused herself, decided in Oklahoma Statewide Charter School Board v. Drummond to leave in place the holding of the Oklahoma Supreme Court blocking an effort in that state to create the nation’s first faith-based charter school.
This tie leaves open the question of whether states with taxpayer-funded charter school programs are constitutionally required to incorporate religious institutions. The one-line per curiam order gives no indication of how the Justices voted in the case, although the Chief Justice’s questioning during the oral argument—noting that governmental oversight of a charter school is a far greater connection to religion than merely appropriating money from which the school benefits—suggests that he joined the three jurisprudential liberals.
Justice Barrett’s recusal is attributed to her friendship with an advisor to the Catholic school at the center of the case, and leaves open the question of whether she would participate in a future case raising the establishment issue. Note that both the Chief Justice and Justice Barrett are practicing Catholics. We have some evidence of what the Chief Justice thinks with respect to the involvement of government in religious schools, but we don’t yet know Justice Barrett’s view.
Kousisis v. United States, on the other hand, was anything but a tie. All the Justices agreed (though Justices Thomas, Gorsuch, and Sotomayor concurred in whole or in part) with the opinion of Justice Barrett that a defendant who induces a victim to enter into a transaction under materially false pretenses may be convicted of federal wire fraud even if the defendant did not seek to cause, and did not cause, economic loss to the victim. Here, the petitioners gained a Pennsylvania public painting contract by falsely representing that they would work with a qualified disadvantaged business. This lie, however, did not cost the Commonwealth of Pennsylvania anything extra. The Supreme Court held that to prove wire fraud, the crime charged, a defendant must be shown to have “engaged in deception and had money or property as an object of his fraud.” However, it doesn’t follow that a federal fraud conviction cannot stand unless the defendant sought to cause the victim net pecuniary loss.
In a tour-de-force analysis of statute, precedent, and, particularly, common law, Justice Barrett explained that, besides the fact that the statute in question does not mention economic loss, the essence of actionable fraudulent-inducement theory is that a victim who might not have suffered any monetary loss is nevertheless injured by getting something other than what he or she has bargained for. In this case, the Commonwealth lost the benefit of achieving its policy aim of the inclusion of disadvantaged businesses. This theory is consistent with the statutory text, the Court’s precedents, and, most of all, a lengthy common law history.
The Barrett majority opinion and Gorsuch concurrence are particularly well written. Both ought to be taught in law schools with respect to the sources of law as well as judicial process and decision-making.
Finally, the Supreme Court has just issued an order with respect to presidential power over the tenure of members of multi-member federal agencies, holding as follows:
The Government has applied for a stay of orders from the District Court for the District of Columbia enjoining the President’s removal of a member of the National Labor Relations Board (NLRB) and a member of the Merit Systems Protection Board (MSPB), respectively. The President is prohibited by statute from removing these officers except for cause, and no qualifying cause was given. See 29 U. S. C. §153(a); 5 U. S. C. §1202(d). The application for stay presented to THE CHIEF JUSTICE and by him referred to the Court is granted. Because the Constitution vests the executive power in the President, see Art. II, §1, cl. 1, he may remove without cause executive officers who exercise that power on his behalf, subject to narrow exceptions recognized by our precedents, see Seila Law LLC v. Consumer Financial Protection Bureau, 591 U. S. 197, 215−218 (2020). The stay reflects our judgment that the Government is likely to show that both the NLRB and MSPB exercise considerable executive power. But we do not ultimately decide in this posture whether the NLRB or MSPB falls within such a recognized exception.”
Not only does this order presage the result with respect to the NLRB and MSPB, but it opens for examination whether the Federal Reserve Board should be treated similarly. The government has argued that the Federal Reserve is an exceptional agency, toward which the president’s power should be limited. The question now is whether the government will stick by this concession.
Getting Too Personal? Illinois Court Says Family Medical History is Genetic Information
On May 15, 2025, a district court in Illinois denied a motion by defendant Hospital Sisters Health System and Saint Francis (HSHS) to dismiss a class action claim brought against the hospital system under the Illinois Genetic Information Privacy Act (GIPA).
GIPA regulates the use, disclosure, and acquisition of genetic information and has adopted the same definition of genetic information as provided in the federal Health Insurance Portability and Accountability Act (HIPAA):
(i) the individual’s genetic tests; (ii) the genetic tests of family members of the individual; (iii) the manifestation of a disease or disorder in family members of such individual; or (iv) any request for, or receipt of, genetic services, or participation in clinical research which includes generic services, by the individual or any family member of the individual.
GIPA prohibits employers from soliciting or requesting genetic testing or genetic information of a person or their family members as a condition of employment. GIPA also prohibits employers from changing the terms, conditions, or privileges of employment or terminating the employment of any person due to a person or their family member’s genetic testing or information.
In this case, the plaintiff filed their complaint in December 2024, which states that the hospital system requires potential employees to submit a pre-employment medical examination that an HSHS employee conducts. This examination allegedly entails job applicants being required to disclose information concerning their family medical histories. The plaintiff alleges that she was a job applicant with HSHS and that she, too, was required to submit a medical examination that asked questions about her family’s medical history. These questions reportedly included inquiries on family history of heart disease, asthma, or psychological conditions in the plaintiff’s family.
In its motion to dismiss filed in February 2025, HSHS argued that the generic family medical history questions included in its medical examination are routine medical questions that do not constitute genetic information as protected by GIPA. The court was unconvinced, holding that “these questions involved[d] a clear report of the manifestation of a disease or disorder in a family which is clearly specified in GIPA through its adaptation of HIPAA’s definitions.” In addition, to support its holding, the court noted that the federal Genetic Information Nondiscrimination Act (GINA), which is also incorporated into GIPA, defines the term “family medical history” as “information about the manifestation of disease or disorder” in family members.
Though GIPA litigation has not yet risen to the level of litigation regarding Illinois’ Biometric Information Privacy Act (BIPA), several courts in 2024 have noted that GIPA should apply broadly. In Taylor v. Union Pacific Railroad Co., No. 23-CV-16404, 2024 WL 3425751, (N.D. Ill. July 16, 2024), the court held that GIPA plaintiffs have lenient standing requirements, concluding that BIPA’s definition of “aggrieved persons” – which encompasses individuals who sustained no actual injury beyond a violation of their rights under the statute – applies to GIPA, as well. In McKnight v. United Airlines, Inc., No. 23-CV-16118, 2024 WL 3426807, at *1 (N.D. Ill. July 16, 2024), the court found that individuals outside of Illinois may nonetheless initiate GIPA litigation if the underlying activity “occurred primarily substantially in Illinois” and that GIPA has a five-year statute of limitations.
Employers with ties to Illinois should note that GIPA may apply to them. Any questions about a job applicant’s family medical history may be considered genetic information under the act—even if these questions are intended to be routine health inquiries—and could give rise to a GIPA claim. Pre-employment exams should be structured carefully to avoid running afoul of GIPA and potential class action risks.
No Credit Where It Isn’t Due: The Importance of Preemption and Inventorship in Patent Law
Mr. Storms, an individual with significant experience with Bitcoin mining, is the founder and sole employee of BearBox LLC. Mr. McNamara and Dr. Cline co-founded Lancium in November 2017 with the intention of co-locating flexible datacenters (e.g., Bitcoin miners) at wind centers to exploit the highly variable power output of windfarms.
Lancium intended to exploit the power output of flexible datacenters by “ramping down” and selling power to the electrical grid when energy prices are high. Conversely, when energy prices were low flexible datacenters would “ramp up.” These concepts were disclosed by Lancium in February 2018 in International Publication No. WO 2019/139632, entitled “Method and System for Dynamic Power Delivery to a Flexible Datacenter Using Unutilized Energy Sources.” This application names McNamara and Cline as inventors, and has a priority date of January 2018.
In 2019, Lancium began to develop internally its own software to control cryptocurrency miners, which it monitored at least one windfarm with by May 2019. Lancium also worked with various companies to design and manufacture portable mining containers.
Around this same time (late 2018 to early 2019) BearBox began to design, build, and test the BearBox system that allowed a remote user to control an individual relay to turn on and off Bitcoin miners. By May 7, 2019, Mr. Storms developed source code that could control a mining site based on various economic conditions, such as the cost of electricity.
On May 3, 2019, Mr. Storms met Lancium for cocktails and dinner at a cryptocurrency conference, where Mr. Storms and Mr. McNamara discussed the Bear Box system. The two exchanged numbers, but never met in person again. On May 8, 2019, after a few exchanged text messages, Mr. McNamara asked Mr. Storms for BearBox design specifications. Mr. Storms responded the by an email with the following attachments: (1) a one-page BearBox Product Specification Sheet; (2) an annotated diagram of BearBox’s Automatic Miner Management System; (3) specification sheets on fans and other hardware components; and (4) a data file modeling a simulation of the BearBox system. Mr. McNamara credibly testified that he spent no more than three minutes reviewing the attachments before considering the price of the BearBox system too high compared to other solicited manufacturers.
On October 28, 2019, Lancium filed U.S. Provisional App. No. 62/927,119 ( the ’119 application), which ultimately issued as the ’433 patent, entitled, “Method and Systems for Adjusting Power Consumption Based on a Fixed-Duration Power Option Agreement.” The ’433 patent relates to a set of computing systems that are configured to perform computational operations using power from a power grid; and a control system that monitors a set of conditions and receives power option data based, in part, on a power option agreement, and McNamara and Cline are the named inventors.
BearBox brought a lawsuit against Lancium asserting, inter alia, claims of sole or joint inventorship of the ’433 patent and conversion under Louisiana state law. Lancium succeeded on summary judgment that federal patent law preempted the conversion claim as pled.
Lancium was denied summary judgment on inventorship, but in the interim, the district court struck a supplemental report from BearBox’s technical expert. The district court determined BearBox had acted in bad faith when it served the report three weeks before the start of trial, and five months after the close of expert discovery, without seeking leave of court or Lancium’s consent, as required by the district court’s scheduling order.
Following a three day bench trial, the district court concluded that BearBox had not met its burden under the inventorship claim by clear and convincing evidence. BearBox appealed the district court decision.
Issues
Did the district court err in holding BearBox’s claim for conversion, under Louisiana state law, as pled is preempted by federal patent law?
Did the district court err in deciding to strike BearBox’s expert’s supplemental report in toto?
Did the district court err in holding that BearBox failed to provide clear and convincing evidence that Mr. Storms should be named a sole or joint inventor?
Holding
No, the district court properly held that federal patent law preempted the state law conversion claim as pled by BearBox.
No, the district court properly excluded BearBox’s expert’s supplemental report.
No, the district court properly held that BearBox failed to provide clear and convincing evidence that Mr. Storms should be named a sole or joint inventor.
Reasoning
Preemption of Conversion Claim
The Federal Circuit reviewed de novo the district court’s grant of summary judgment as is required under the law of the regional circuit, the Third Circuit. However, for the question of whether federal patent law preempts a state law claim Federal Circuit law governs.
While there are three types of preemption: explicit, field, or conflict preemption; only conflict preemption was implicated by BearBox’s claim. Conflict preemption occurs “when a state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” BearBox v. Lancium, 2023-1922, 12 (Fed. Cir. 2025) (quoting Ultra-Precision Mfg., Ltd. v. Ford Motor Co., 411 F.3d 1369, 1377 (Fed. Cir. 2005)). While there are several congressional objectives for federal patent law, “public disclosure and use . . . is the centerpiece of federal patent policy.” BearBox, 23-1922 at 12 (quoting Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 157 (1989)). Thus, any state law that “substantially interferes with the enjoyment of an unpatented utilitarian or design conception which has been freely disclosed by its author to the public” is preempted as contravening the ultimate goal of federal patent law. Id.
Under Louisiana state law, conversion is “an act in derogation of the plaintiff’s possessory rights and any wrongful exercise or assumption of authority over another’s goods, depriving him of the possession, permanently or for an indefinite time.” BearBox, 23-1922 at 13 (quoting Bihm v. Deca Sys., Inc., 226 So. 3d 466, 478 (La. App. 1 Cir. 2017)). A Louisiana conversion cause of action is not necessarily preempted by federal patent law, as a it may cover a range of conduct not implicating federal patent law. Id. at 13. Additionally, BearBox’s claim was not based on acts of patent infringement or a determination of inventorship, but rather on conversion of documents and information. Id. at 13. However, under Federal Circuit law, a preemption analysis is not a “mechanical compar[ison]” of the required elements of the state law claim with the objectives embodied in the federal law. Id. Instead, the analysis is whether the state law as pled “stands as an obstacle to the accomplishment of the full purposes and objectives of Congress.” Id. (quoting Ultra Precision, 411 F.3d at 1378).
Under this analysis the Federal Circuit affirmed the district court’s determination that BearBox’s conversion claim was preempted by federal patent law. BearBox’s claim, as pled, was “essentially an inventorship cause of action and patent infringement cause of action” that sought patent-like protection for ideas that are unprotected under federal law. BearBox, 23-1922, at 14. The Federal Circuit held the conversion claim “reads like a patent infringement cause of action.” BearBox, 23-1922 at 14. Even the damages sought by BearBox for the use, sale, and monetization of the technology it alleged it owns and invented, were patent-like damages. BearBox’s proposed damages were a “repackaged form of a royalty payment,” instead of the proper measure of damages under a Louisiana conversion claim, which is the return of the property or the value of the property at the time of the conversion. BearBox, 23-1922at 15-16.
Furthermore, federal patent law generally precludes a plaintiff from recovering damages from a defendant’s making, using, offering to sell, or selling an “unpatented discovery after the plaintiff makes the discovery available to the public.” BearBox, 23-1922 at 16 (quoting Ultra-Precision, 411 F.3d at 1380). Here, BearBox’s technology was not patented and was freely shared with others. Thus, allowing BearBox’s claim to proceed would potentially allow it to “recover lost profits or a reasonable royalty from its competitor . . . [for] alleged use of technical information that ‘otherwise remain[s] unprotected as a matter of federal law.’” BearBox, at 16-17 (quoting Bonito Boats, 489 U.S. at 156).
Exclusion of Expert Report
BearBox argued the district court’s decision to strike the supplemental expert report in toto was an abuse of discretion for three reasons: (1) the untimely supplemental report was justified; (2) the supplemental report did not offer new opinions; and (3) the district court incorrectly determined the Pennypack factors weighed in favor of exclusion. BearBox, 23-1922 at 17. The Federal Circuit reviewed the district court’s evidentiary rulings for abuse of discretion.
BearBox first asserted that its expert’s supplemental report, although untimely, was justified because Lancium raised a new claim construction dispute for the first time after the close of discovery. BearBox, 23-1922 at 17-18. The Federal Circuit, however, viewed this assertion as a mischaracterization of the record. While the district adopted Lancium’s construction after the close of discovery, the adopted constructions were raised before and were not new to either BearBox or its expert. The Federal Circuit agreed that BearBox should have addressed Lancium’s proposed constructions in its expert reports.
Next, BearBox asserted that the district court erred in concluding its expert’s report offered new opinions. BearBox, 23-1922 at 19-20. The Federal Circuit saw no error in the determination that the opinions in the Supplemental Report were “beyond mere elaboration or clarification.” Id. at 19. Furthermore, the portions of the prior expert reports BearBox pointed to as support for its claim construction did not overcome or otherwise rectify its expert’s “clearly contradictory testimony.” Id.
Lastly, the Federal Circuit took up BearBox’s contention that even if the supplemental report contained new opinions, striking the report was an “extreme sanction, not normally warranted absent a showing of willful deception or flagrant disregard of court orders.” BearBox, 23-1922 at 20 (internal citations omitted). The Federal Circuit reviewed the district court’s Pennypack factor analysis forabuse of discretion in excluding the evidence. BearBox, 23-1922 at 20-21. The Pennypack factors are:
(1) “the prejudice or surprise in fact of the party against whom the excluded witnesses would have testified” or the excluded evidence would have been offered; (2) “the ability of that party to cure the prejudice”; (3) the extent to which allowing such witnesses or evidence would “disrupt the orderly and efficient trial of the case or of other cases in the court”; (4) any “bad faith or willfulness in failing to comply with the court’s order”; and (5) the importance of the excluded evidence.
BearBox, 23-1922 at 20-21 (quoting ZF Meritor, 696 F.3d at 298 (quoting Meyers v. Pennypack Woods Home Ownership Assn., 559 F.2d 894, 904–05 (3d Cir. 1977))).
For factors (1) and (2), the Federal Circuit reiterated that “the supplemental report offered new legal theories and opinions related to BearBox’s alleged conception and communication of the subject matter of the ’433 patent.” BearBox, 23-1922 at 21. Additionally, the new theories, if allowed, would have unfairly prejudiced Lancium because it was months after the close of discovery and only a few weeks before trial. While allowing Lancium’s expert to respondcould have cured some of the prejudice, given the strained schedule and quickly approaching trial, the Federal Circuit agreed that Lancium had “no meaningful opportunity” to sufficiently cure the prejudice. Id.
Similarly, for factor (3), the Federal Circuit saw no error in the conclusion that the risk of prejudice to Lancium was uncurable in light of the strained schedule and quickly approaching trial, and BearBox presented no evidence to demonstrate that the district court’s determination for this factor was erroneous. Id. at 22.
For factor (4), the Federal Circuit pointed to the district court’s scheduling order that stated that “after discovery no other expert reports [would] be permitted without either the consent of all parties or leave of the court.” BearBox, 23-1922 at 22. Since BearBox did not seek either Lancium’s consent or leave from the district court, the Federal Circuit saw no error in the determination that BearBox’s disregard of the scheduling order indicated bad faith and weighed in favor of exclusion of the report. Id.
For factor (5), the Federal Circuit reviewed the district court’s analysis, which it noted was assessed in two different ways. See BearBox, 23-1922 at 22-23. First, the district court compared BearBox’s expert opening and reply reports to the supplemental report at issue, and concluded the supplemental report “went beyond mere elaboration or clarification.” Id. at 22. Alternatively, the district court assumed the supplemental report did not contain new opinions. Id. at 23. Nevertheless, the district court found it could not reasonably conclude that the exclusion of the supplemental report would harm BearBox. Id. Thus, under either analysis the Federal Circuit viewed the district court as doubtful of the supplemental report’s importance and saw no error in either analysis.
The Federal Circuit ultimately determined, noting the considerable discretion of district courts in expert discovery and case management matters, that there was no abuse of discretion in excluding BearBox’s supplemental report.
Inventorship
For inventorship, BearBox did not challenge the district court’s factual findings or credibility determinations, rather it contended that the district court erred by: (1) excluding Mr. Storms’ testimony as hearsay; (2) analyzing individual claim elements (rather than a combination) by comparing them to Mr. Storms’ corroborating documents; and (3) applying the rule of reason by evaluating documents in isolation.
A district court may correct inventorship under 35 U.S.C. § 256 when it determines that an inventor has been erroneously omitted from a patent. BearBox, 23-1922 at 24. Inventorship is determined on a claim-by-claim basis and the issuance of a patent creates a presumption that the named inventors are the true and only inventors. Id. Any party seeking to correct inventorship of a patent must show by clear and convincing evidence that a joint inventor “contributed significantly to the conception . . . or reduction to practice of at least one claim,” and the “contribution” must arise out of some joint behavior of the inventors. Id. at 25 (internal citations omitted). Furthermore, an alleged joint inventor’s testimony is insufficient to establish inventorship and must be corroborated by further evidence. Id.
To determine whether an alleged co-inventor’s testimony has been sufficiently corroborated a rule of reason is applied by the district court. BearBox, 23-1922 at 24 (quoting Blue Gentian, LLC v. Tristar Prod., Inc., 70 F.4th 1351, 1357 (Fed. Cir. 2023)). The rule of reason requires the district court to examine all pertinent evidence to “determine whether the inventor’s [testimony] is credible.” BearBox, 23-1922 at 24 (quoting Blue Gentian, 70 F.4th at 1358). Since inventorship is a question of law based on underlying facts, a district court’s inventorship determination is reviewed de novo and the underlying fact findings are reviewed for clear error. BearBox, 23-1922 at 24-25 (citing In re VerHoef, 888 F.3d 1362, 1365 (Fed. Cir. 2018); and Dana-Farber Cancer Inst., 964 F.3d at 1370 (Fed. Cir. 2020)).
With respect to the ’433 patent, the only information shared by Mr. Storms with Lancium was his May 2019 email containing the four attachments, which the district court held were insufficient to establish that Mr. Storms’ inventorship. As a result, the Federal Circuit affirmed that BearBox had failed to prove by clear and convincing evidence that Mr. Storms had either conceived of, or communicated prior to Lancium’s independent conception, the subject matter of any claim of the ’433. BearBox, 23-1922 at 25.
BearBox also contended that the district court improperly excluded, as hearsay, Mr. Storms’ testimony about statements he made to Mr. McNamara at the May 2019 dinner. The Federal Circuit acknowledged some merit in BearBox’s contention but held that BearBox did not properly preserve its claim of error for appellate review. BearBox, 23-1922 at 27. Specifically, when the district court ruled that Mr. Storms’ testimony was hearsay, BearBox’s counsel made no offer of proof as to what Mr. Storm’s response would have been had he been permitted to answer the question. Id. Therefore, the Federal Circuit could not determine that there was prejudicial error in excluding Mr. Storms’ testimony as hearsay. Id.
BearBox’s next contention was that the district court failed to consider claim elements in combination and only focused on individual elements when it evaluated whether Storms conceived of the claimed inventions. BearBox, 23-1922 at 27-28. The only case BearBox cited in support of this argument that addressed inventorship was Blue Gentian. Id. The Federal Circuit, however, noted that in Blue Gentian it did not adopt a general criticism of limitation-by-limitation analysis. Id. Thus, Blue Gentian could not support a determination that the district court erred in adopting a limitation-by-limitation approach.
Lastly, BearBox contended that the district court erred by “referenc[ing] the Rule of Reason” but “not address[ing] whether, under the Rule of Reason, the totality of the evidence, including circumstantial evidence supports the credibility of the inventors’ story.” BearBox, 23-1922 at 28 (internal quotations omitted). BearBox asserted that two of the district court’s fact findings were inconsistent, and thus, improperly evaluated. First was the finding that “through late 2018 into early 2019, Storms began to design, build, and test a system . . . that allowed a remote user to control individual relays so that miners could be turned on or off.” Id. The alleged conflicting finding was “BearBox did not otherwise proffer evidence establishing that the BearBox System could individually control the system of 272 miners.” Id. The Federal Circuit held the that the later fact finding was taken out of context. For that finding of fact, the district court found, based on a credibility determination regarding competing expert testimony, that Mr. Storms’ “Source Code ‘only ever instructs . . . all the relays of the PDUs to turn on or off.” Id. at 29 (emphasis added). Additionally, the district court found, which BearBox did not mention on appeal, that “even if Storms’ Email did meet [the claim element at issue] of the ’433 patent, the Court finds as a matter of fact that Storms did not communicate [this element] prior to [Lancium’s] independent conception.” BearBox, 23-1922 at 29. Finding the remaining arguments unpersuasive, the Federal Circuit affirmed the district court’s dismissal of the state law conversion claim, exclusion of the supplemental expert report, and denial of the claim that Mr. Storms was either a sole or joint inventor of the ’433 patent.
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How Will the EEOC’s Investigation of Anti-American Bias and Antisemitism Impact Organizations?
The U.S. Equal Employment Opportunity Commission (EEOC) has made numerous changes in 2025 with respect to both personnel and priorities. On January 21, 2025, Acting Chair Andrea Lucas announced that one of the priorities of the EEOC’s compliance, investigations, and litigation is protecting employees from religious bias and harassment, including widespread campus antisemitism. Then, on February 19, 2025, Lucas announced, “The EEOC is putting employers and other covered entities on notice: if you are part of the pipeline contributing to our immigration crisis or abusing our legal immigration system via illegal preferences against American workers, you must stop… The EEOC is here to protect all workers from unlawful national origin discrimination, including American workers.” It is common for the EEOC to announce priorities in its investigations. It is believed by the current administration that the shift in the EEOC’s focus will help deter illegal migration, abuse of legal immigration programs, and anti-American discrimination through increasing enforcement of antidiscrimination laws against employers that prefer non-American workers.
If EEOC nominee Florida Assistant U.S. Attorney Brittany Bull is confirmed by the Senate, the EEOC likely will be able to move forward with enforcement of these new priorities.
EEOC Enforcement Priorities under the New Administration
The EEOC is tasked with administration and enforcement of civil rights laws against workplace discrimination. Pursuant to Title VII of the Civil Rights Act of 1964, as amended, the EEOC is comprised of five commissioners, including a chair, all of whom are political nominees. There must be at least three commissioners to have a quorum.
When President Trump was elected, many of those watching the direction of the EEOC did not believe much would change soon in terms of (1) issuance of new guidance, (2) revocation of formerly issued EEOC guidance, and (3) enforcement priorities because, due to the commissioners’ staggered five-year terms, it was believed that the earliest the EEOC could have a Republican majority would be July 2026.
Things have changed, however, since two Democrat EEOC commissioners were fired in January 2025. This was followed by the April 23, 2025, Executive Order “Restoring Equality of Opportunity and Meritocracy,” which announced that the EEOC would look at all pending investigations and lawsuits, including those under Title VII of the Civil Rights Act of 1964, that rely on the theory of disparate-impact liability and would seek “to eliminate the use of disparate-impact liability.” If current commissioner nominee Brittany Bull is confirmed by the Senate, the EEOC will have a Republican majority and a proverbial “green light” on its new enforcement priorities.
These new enforcement priorities, as set forth (above) by Acting Chair Andrea Lucas, include protecting employees from religious bias and harassment, particularly widespread campus antisemitism, and protecting workers from anti-American harassment and discrimination through a shift in focus of Title VII’s prohibition against national origin discrimination.
Lucas’s promise to hold colleges and universities accountable for rising antisemitism is part of a broader goal of many in government to protect Jewish students and employees from discrimination based on religion. For example, on March 18, 2025, Indiana Senator Jim Banks introduced the No Tax Dollars for Encampments Act, requiring colleges and universities to disclose their policies for responding to demonstrations, riots, and strikes. If enacted, this bill would potentially withhold federal funding from universities that do not adequately disclose or comply with policies for addressing civil disturbances.
In addition, on May 19, 2024, the Department of Justice announced that it will use the False Claims Act to identify and investigate recipients of federal funds that it determines allow antisemitism to thrive and promote Diversity, Equity, and Inclusion (DEI) policies. Indeed, the EEOC’s new priorities also include rooting out what it refers to as DEI-based discrimination. Its updated website describes DEI-based discrimination as occurring when DEI initiatives, policies, programs, or practices involve an employer taking an employment action motivated in whole or in part by an applicant’s or employee’s race, sex, or other protected classification. This focus on DEI extends to the religious discrimination context, as a rising number of employees are claiming that being required to comply with DEI-based initiatives violates their religious beliefs.
Religious Bias and Antisemitism
One such pending case involving claimed religious bias connected with DEI is an amended lawsuit filed in Kansas federal court in January 2025, under the caption Sullivan v. United School District 512 (24-cv-2491). In Sullivan, the plaintiff teacher alleges that her employment at the defendant public school system involved her being required to make statements and teach lessons that violate her religious beliefs. Specifically, in 2021, the plaintiff objected, in writing, to the school district’s required DEI training sessions and incorporation of DEI principles into her lesson plans, stating that they were racist, anti-White, and anti-American. The plaintiff was later disciplined for using a student’s incorrect pronouns and allegedly engaging in gender identity discrimination. In addition to alleging violations of Sullivan’s constitutional rights of free speech and free exercise of religion, the Sullivan complaint alleges that defendants violated Title VII and its prohibition against retaliation against individuals who oppose harassment based on race and/or color. How the pending Sullivan case is decided may have an impact on the outcome of several other similar lawsuits alleging violations of Title VII based on religious discrimination and opposition to DEI practices.
Another recent case involving similar issues is Brown v. Alaska Airlines, which was filed in U.S. District Court, Western District of Washington in 2022 (22-cv-668). In Brown, the two plaintiff flight attendants filed suit against Alaska Airlines, alleging that they were discriminated against because of their Christian religion after their employment was terminated for posting comments on the Alaska Airlines internal website, which the airline deemed violated its antidiscrimination and antiharassment policies.
The Brown lawsuit alleged several violations of Title VII, including religious discrimination/ disparate treatment, failure to accommodate religious beliefs, hostile work environment, and retaliation. The district court in Washington ruled in favor of the defendants, finding that they were protecting other employees from hearing offensive ideas, and that the flight attendants’ comments were not protected by Title VII because not all Christians shared their views and that they merely reflected general ethical principles. The plaintiffs have appealed this decision to the U.S. Court of Appeals for the Ninth Circuit (24-3789), where the case is currently pending. A decision on this appeal may signal how courts will review certain Title VII claims.
In addition to such lawsuits, the EEOC has been involved in seeking information about antisemitism. For example, in April 2025, it was revealed that faculty members of Columbia University and Columbia-affiliated Barnard College received text messages from the EEOC asking them to complete a survey inquiring about whether they are Jewish or Israeli. It was reported that on April 15 Columbia had sent an email to its employees advising it had received a subpoena from the EEOC “in connection with an investigation into alleged harassment of Jewish employees at the University from October 7, 2023, to the present.” It is believed that this EEOC investigation at Columbia is ongoing.
Anti-American Discrimination
As noted above, the EEOC is also shifting the focus of its national origin discrimination enforcement to discrimination against Americans. In February 2025, coinciding with Lucas’s press release regarding protection of workers from anti-American discrimination, the EEOC announced a $1.4 million settlement of a lawsuit alleging national origin discrimination against American workers. EEOC v. LeoPalace Guam Corp. (D. Guam) (25-cv-00004). In that case, the Guam-based hotel LeoPalace Guam Corp. was alleged to have discriminated against non-Japanese employees, including many employees of American national origin, in terms of compensation and terms and conditions of employment. In addition to the monetary relief of more than $1.4 million, the settlement involved injunctive relief including compliance monitoring, training, and reinstatement of former employees.
Potential Concerns Going Forward
Employers should be aware of these new enforcement priorities articulated by the EEOC and be ready to defend against such allegations. While these changes reflect a difference of priority at the federal level, it does not impact prior court precedent on existing state and local laws addressing discrimination. These new enforcement priorities also do not alter the existing case law that private individuals may pursue to address liability under Title VII for organizations. What a new EEOC priority may impact going forward is the number of governmental investigations of organizations on addressing anti-American bias and antisemitism. To aide in this effort, employers should consult with counsel about revising policies and procedures to ensure that requests for religious-based accommodations are carefully evaluated and that all workers are subject to the same employment conditions regardless of national origin.
Amendments to New York Labor Law Establish Damages for Weekly Pay Violations
Earlier this month, the Governor of the State of New York, Kathy Hochul, approved amendments that establish the amount of damages recoverable for weekly pay violations. The amendments provide for a fraction of the damages that plaintiffs have been seeking for such violations.
The changes to the law are not just effective immediately, but also retroactive, which means they apply to currently pending claims.
New York’s pay frequency law
New York’s pay frequency law, which can be found at section 191 of the New York Labor Law (NYLL), generally requires private employers to pay a “manual worker” not less frequently than weekly and an “other worker” no less frequently than twice a month.
The rise of court claims alleging violations of the pay frequency law
New York’s pay frequency law has been around for over a century, but only recently started to become a popular claim for plaintiffs to assert in court.
In 2019, a New York intermediate appellate court (from our perspective, mistakenly) tied the pay frequency law (NYLL section 191) to a separate section of the NYLL that provides, in part, for a private right of action and 100 percent liquidated damages for underpaid wages (NYLL section 198). That decision, Vega v. CM & Associates Construction Management, LLC, opened the floodgates to lawsuits in New York federal and state courts for pay frequency claims as plaintiffs looked to Vega to insist they could pursue such claims in court and recover the equivalent of all untimely but paid wages again as damages. In many of these cases, the plaintiffs looked to maximize their potential recoveries by arguing they were manual workers who should have been paid weekly, pointing to any physical movement in which they engaged while working, such as walking.
But Vega was not the last word. Last year, in Grant v. Global Aircraft Dispatch, Inc., another New York intermediate appellate court decided the law does not provide a private right of action for pay frequency claims.
To date, neither the Court of Appeals for the State of New York (which is the highest court in the state) nor the United States Court of Appeals for the Second Circuit (which has jurisdiction over New York federal courts) has weighed-in on whether there is a private right of action for pay frequency violations, and, if so, how to measure damages. New York courts continue to wrestle with these issues.
The May 2025 amendments to the NYLL
On May 9, 2025, Governor Hochul signed off on an amendment to section 198 of the New York Labor Law that adds a new chapter to the pay frequency saga.
As amended, section 198 says liquidated damages are not available for such manual worker/weekly pay violations absent a prior finding or order that the employer committed such violation. The amendments further state that damages for such violations are lost interest of (no more than) 16 percent for each day a payment is late. Accordingly, the amendments should greatly limit the maximum potential recovery for individuals claiming they are manual workers who were not paid weekly. However, the amendments are notable because they do not expressly apply to non-manual workers, which is something of which employers should be aware.
Finally and importantly, the amendments do not address whether there is a private right of action for violations of the pay frequency law in the first place, or expand the coverage of that law beyond employees already covered.
Minneapolis Anti-Discrimination Law Revised: Employment Decisions Based on Body Size, Criminal History to Be Barred
Takeaways
The amended Civil Rights Ordinance newly bars employers from discrimination based on “justice-impacted status,” housing status, and height and weight and applies beginning 08.01.25.
The new law also requires employers to provide religious accommodations and pregnancy-related accommodations.
Minneapolis employers should review and revise their policies and practices to ensure compliance.
The City of Minneapolis recently amended its Civil Rights Ordinance. Among other changes, the amended Ordinance significantly impacts employers by:
Expanding the scope of characteristics subject to its anti-discrimination provisions;
Broadening the types of accommodations employers must provide to employees; and
Revising the City’s process for receiving and resolving complaints under the Ordinance.
The new law will apply to any complaint or charge filed under the Ordinance on or after Aug. 1, 2025.
Expanded Scope of Protected Characteristics
The amended Ordinance prohibits employers from discriminating against an employee or job applicant on the basis of:
Justice-impacted status;
Housing status; or
Height and weight.
“Justice-impacted status” refers to an employee’s or applicant’s prior criminal history, including conviction, arrest, or charging records, and probationary status. Employers must not base employment decisions on these histories unless the histories are reasonably related to the individual’s ability, fitness, or capacity to perform the job duties. To determine if a history is “reasonably related,” employers must consider:
Whether the individual was convicted;
The time elapsed since the offense or conviction;
The nature and gravity of the crime(s);
The individual’s age at the time of the offense;
The individual’s rehabilitation efforts; and
Whether the individual poses an unreasonable risk to property or to the safety and welfare of others.
The Ordinance carves out special exceptions for certain roles, including those involving children or law enforcement.
“Housing status” relates to whether a person has or lacks a fixed, regular, and adequate residence.
“Height and weight” refer to both perceived characteristics (tall/short, thin/fat) and objective measures, such as numerical scores, ratios, and metrics. The amended Ordinance permits an employer to raise an affirmative defense if an individual’s height or weight prevents them from performing the fundamental job duties of the position with or without accommodation.
The amended Ordinance also modifies definitions of preexisting protected characteristics. For example, it expands the definition of “race” to cover traits historically associated with race such as hair texture and hairstyles (including afros, braids, locks, and twists).
Finally, “familial status” includes individuals who care for individuals who cannot manage their own physical health, safety, or self-care or who are unable to receive, evaluate, or communicate their own healthcare decisions.
Additional Types of Accommodations
The amended Ordinance expands the types of accommodations an employer must provide its employees and applicants. Failing to provide these accommodations may constitute evidence of discrimination.
First, employers must provide employees with religious accommodations for sincerely held religious beliefs, unless doing so would impose an “undue hardship” on the employer. The Ordinance redefines “undue hardship” as a significant difficulty or expense for the employer, and this determination requires a case-by-case analysis.
Second, employers must reasonably accommodate pregnancy-related limitations. The Ordinance expressly forbids employers from requiring a pregnant employee to take a leave of absence for their pregnancy-related limitations if another reasonable accommodation would permit the employee to perform their job. However, as with religious accommodations, employers are not required to provide accommodations that cause an undue hardship.
Revised Complaint Procedures
The amended Ordinance updates how the Minneapolis Department of Civil Rights (MDCR) handles charges. Under the changes, when a complainant appeals a finding of no probable cause, the appeal goes to a panel of three individuals — one of whom must be a lawyer. The panel must review the record in the light most favorable to the MDCR’s no probable cause finding and can only overturn the decision if the panel find the ruling was “clearly erroneous.” The panel has 90 days to complete its review and issue findings.
The Ordinance also modifies when MDCR may dismiss charges. While the Department may dismiss charges that are untimely, it will no longer dismiss them based on a lack of evidence or in the interests of justice.
Take it Back – A Federal Court in Texas Vacates Portions of the EEOC’s Sexual Harassment Guidance
Recall that just last year, the EEOC updated its Enforcement Guidance on Harassment in the Workplace for the first time in 30 years. We blogged about it here. Earlier this year, President Trump issued Executive Order 14168 directing the EEOC to rescind portions of the guidance; however, the EEOC took no action because it lacked quorum. Now, in Texas, et al. v. Equal Employment Opportunity Commission, et al., a federal judge in the Northern District of Texas has taken action for the EEOC by vacating portions of the guidance.
The Opinion
In Fall 2024, the state of Texas and the Heritage Foundation challenged the definition of “sex” and the scope of sexual harassment set forth in the guidance, as it relates to sexual orientation and gender identity. The guidance provided, in relevant part, that sex-based harassment included “harassment based on sexual orientation or gender identity, including how that identity is expressed” and gave examples of harassment based on sexual orientation and gender identity. The guidance also provided that outing an individual or the denial of access to a bathroom or other sex-segregated facility is harassing conduct.
The Northern District of Texas disagreed. In the recent opinion, the court held that the guidance “contravenes Title VII’s plain text by expanding the scope of ‘sex’ beyond the biological binary: male and female” and took issue with the guidance’s instruction that “effectively requires employers to provide accommodations to all transgender employees to avoid the threat of litigation[.]” The court held that the Supreme Court’s opinion in Bostock does not cover the expansion of the definition set forth in the guidance and therefore “does not authorize the Guidance’s explanation of Title VII ‘sex’ to include new categories or classes.” The opinion states “the Guidance enters the forbidden realm of substance, moving beyond the plain text of Title VII or binding Supreme Court precedent to create a new unauthorized definition.” The court also pointed out that the guidance expanded an area that the Supreme Court explicitly refused to address in Bostock: “bathrooms, locker rooms, or anything else of the kind.” Ultimately, the court vacated certain portions of the guidance.
The EEOC’s Response
Earlier this week and in response to the order, the EEOC issued a press release indicating that while it cannot rescind or modify the guidance at this time (because there is no quorum), “to assist the public” “it has labeled and shaded the vacated portions.” The edited guidance may be found here.
So, What Do You Do?
While the Northern District of Texas believes the EEOC went too far, other districts and circuits, including the Eleventh Circuit, have held that intentionally and repeatedly misgendering someone could contribute to a hostile work environment. Some states, such as California and Colorado, also have state laws prohibiting discrimination based on sexual orientation and gender identity. So, where do we stand? In murky water.
While it looks like the Trump administration won’t be championing transgender and gender identity issues, mistreatment in the workplace based on these characteristics could still be an issue in court and under state law. The best practice is to stay vigilant. If employees are complaining about mistreatment of any kind, even mistreatment based on transgender or gender identity issues, address it. Train your workforce, investigate as soon as you hear of alleged misconduct, and ensure that you are not dismissing these complaints as no big deal. We don’t believe we’ve seen the end of this yet and will keep you updated.
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NLRB Releases New Standards for Remedies in Settlements
The National Labor Relations Board (NLRB) recently announced a new policy to loosen the standards for applying remedies in settlement agreements. This policy shift might make it easier and faster for employers to reach settlements with employees and unions.
Quick Hits
The NLRB’s acting general counsel issued a new memo, relaxing requirements for officials to approve settlements related to unfair labor practice allegations.
The memo gives NLRB’s regional directors more discretion in crafting settlement agreements to reduce the pending backlog of cases.
The new policy takes effect immediately.
On May 16, 2025, William B. Cowen, acting general counsel of the NLRB, released a memo to clarify the discretion NLRB regional directors can use to select remedies in settlement agreements related to allegations of unfair labor practices.
In February 2025, Cowen rescinded memoranda from the former NLRB general counsel that called for regional directors to attach certain types of make-whole remedies to certain types of settlements and complaints. “We should be mindful of not allowing our remedial enthusiasm to distract us from achieving a prompt and fair resolution of disputed matters,” he wrote.
While regional directors will maintain the discretion to tailor remedies to the circumstances of each case, the nonmonetary remedies (such as mandates to reinstate workers, post notices, or restart bargaining with a union) should not automatically be sought, and, instead, should be limited to “cases involving widespread, egregious, or severe misconduct,” Cowen wrote in Memo GC 25-06. “In drafting Settlements, the scope of the remedial relief sought should typically be consistent with the remedy that would be ordered by the Board in a case involving similar facts and violations.”
The memo also includes the following instructions:
Regional directors may approve unilateral settlement agreements without prior authorization.
Settlements should strive to make sure employees are made whole for losses they incurred as a result of unlawful actions, but regional directors may approve settlements that provide for “less than 100 percent of the total amount that could be recovered if the region fully prevailed on all allegations in the case.” When doing so, regional directors should consider the nature of the violations alleged, the weight of the evidence, the inherent risks of litigation, and the “extent to which a prompt resolution of a contentious dispute will promote labor peace.”
Nonadmissions language may be considered in certain settlement agreements, but should not be included in settlement agreements involving employers with a history of repeated violations.
Default language, which permits prosecutors to quickly bring a case to the Board if the charged party does not comply with the settlement terms, is not required in every settlement agreement, but it can be used in initial proposed settlement agreements “where appropriate.”
In general, these items aim to remove barriers that may have precluded some settlements in the past.
The latest memo also addresses a 2022 NLRB decision that expanded the remedies recoverable by a successful charging party in unfair labor practice cases. It concluded that the NLRB’s make-whole remedy includes compensating employees for all direct or foreseeable harms or losses suffered as a consequence of labor violations.
To narrow this application, the memo instructs regional directors to “focus on addressing foreseeable harms that are clearly caused by the unfair labor practice.”
Next Steps
Going forward, the acting general counsel’s new memo indicates the NLRB intends to take a more flexible approach to the types of remedies it will seek in settlements between employers and their employees or unions. If more cases are settled, that could help clear the backlog of NLRB cases in the regional offices.
Notably, the NLRB’s regional offices can approve settlements without a Board quorum.
Enforcement of Mental Health Parity Regulations Suspended: Takeaways for Plan Sponsors and Health Insurance Issuers
In January 2025, The ERISA Industry Committee (ERIC) filed a complaint against the US Departments of Labor, Health and Human Services, and the Treasury (the departments) seeking to invalidate the 2024 final regulations under the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) and the Consolidated Appropriations Act, 2021 (CAA). The US Department of Justice recently filed a motion for abeyance in the pending litigation, requesting that the court pause its review of the case and announcing that the Trump administration will stay enforcement of the final regulations to give the government an opportunity to reconsider the rule, “including whether to issue a notice of proposed rulemaking, rescinding or modifying the regulation.” The motion was approved on May 9, 2025.
In Depth
On May 15, 2025, the departments issued a communication titled “Statement of U.S. Departments of Labor, Health and Human Services, and the Treasury Regarding Enforcement of the Final Rule on Requirements Related to the Mental Health Parity and Addiction Equity Act.” The departments’ action is at least partially in response to Executive Order 14219, titled “Ensuring Lawful Governance and Implementing the President’s ‘Department of Government Efficiency’ Deregulatory Initiative,” which directs federal agencies to review regulations to identify those that may impose undue burdens on small businesses or significant costs upon private parties that are not outweighed by public benefits.
The statement is significant, as it advises that the departments “will not enforce the 2024 Final Rule or otherwise pursue enforcement actions, based on a failure to comply that occurs prior to a final decision in the litigation, plus an additional 18 months.” Notably, the relief applies only to those portions of the 2024 Final Rule that are newly added since the 2013 Final Rule. The statement reinstates the 2013 Final Rule, as interpreted by “FAQs About Mental Health and Substance Use Disorder Parity Implementation and the Consolidated Appropriations Act, 2021 Part 45.” The departments also note that MHPAEA’s statutory obligations, as amended by the CAA, continue to apply. In the case of the application of the MHPAEA rules within the jurisdiction of the department of Health and Human Services (i.e., the rules that apply to carriers), the statement encourages states, which are the primary enforcers of MHPAEA, to adopt a similar approach to enforcement.
The statement restores the status quo that was in effect before the adoption of the 2024 Final Rule, with at least three immediate consequences:
The 2024 Final Rule’s “relevant data” requirement is suspended. Thus, compliance with the mental health parity requirements will no longer be tested on outcomes. Rather, the standard that applies temporarily is in the preamble to the 2013 final regulation (i.e., outcomes are not determinative of compliance).
The 2024 Final Rule’s controversial “meaningful benefit” requirement is also suspended. This is the requirement that a plan that provides any benefits for a mental health condition or substance use disorder in any classification of benefits must provide meaningful benefits for that mental health condition or substance use disorder in every classification in which medical/surgical benefits are provided. For this purpose, a plan does not provide meaningful benefits unless it also provides benefits for a core treatment for the mental health condition or substance use disorder in each such classification.
The 2024 Final Rule’s “fiduciary certification” requirement is suspended, at least temporarily. Absent the suspension, the 2024 Final Rule required fiduciaries to certify that they commissioned and reviewed an analysis of their compliance with the MHPAEA nonquantitative treatment limitations (NQTLs) requirements and that they selected and monitored their NQTL vendor.
One important obligation that remains is the requirement to prepare and make available an NQTL comparative analysis. The continued application of the CAA also means that plan sponsors and health insurance issuers must continue with their compliance efforts.
With respect to ongoing plan audits and investigations, the departments offered little insight as to how they may approach review or if their enforcement efforts may change moving forward. The statement notes that “The Departments will also undertake a broader reexamination of each department’s respective enforcement approach under MHPAEA” and that “the Departments may make updates to the subregulatory guidance implementing MHPAEA, including FAQs Part 45,” suggesting that some relief may be forthcoming. Additional guidance on the impact of the departments’ statement on these ongoing audit and enforcement activities would be welcome.
Action Items
Plan sponsors and health insurance issuers should continue to make good-faith efforts to comply with the MHPAEA guidance, as modified by the CAA. This includes, for example, preparation and maintenance of a written NQTL comparative analysis and ongoing review of benefit plans for compliance as applied to the plans’ written terms and operation.